Despite suffering from its own illegitimate debt burden, the Irish government voted against moves to assist states in a similar predicament at the UN, writes Éilis Ryan.
In late September 2014, Argentinian president Cristina Fernández de Kirchner issued a statement that the United States was aware of, and potentially supporting, a plan by Argentinian bankers and opposition politicians to overthrow her government, and possibly even assassinate her. In parliament she declared: “If something was to happen to me, nobody should be looking to the east, but to the north after the things that are being done in diplomatic offices.”
Argentina has in the past been the epicentre of United States interest in Latin America. For decades, oppressive dictatorships were supported by the United States, who turned a blind eye to brutality in exchange for access to the country’s resources, a military ally in a contested region, and a friend in the war against communism.
In 2001, in the wake of the country’s economic crisis, Argentinian state debt had risen to unsustainable levels. An estimated 50% of Argentinian debt had been accumulated during the reign of the country’s US-backed military junta, and the Argentinian government sought an orderly restructuring of its debts on grounds of this illegitimacy, and a real inability to pay. In total, holders of 93% of Argentinian debt agreed to reduce the burden to a manageable level. But, so-called ‘vulture funds’, speculators on distressed-securities who had bought up cut-price Argentinian debt during its economic crisis, continue to demand payment. Argentina has refused to service this debt.
Earlier this year, a group of hedge funds won a case demanding that payment. New York judge Thomas Griesa concluded that the vulture funds were owed payment of $1.3bn, and that other bondholders could not be paid until the hedge funds received what they were owed. As a result, interest repayments on Argentinian debt were stalled and Argentina, in spite of its own willingness and capacity to service the large (92%) majority of its debt, was declared to be in default. Kirchner has referred to the actions of the funds as “a type of economic and financial terrorism … that creates poverty, hunger and misery through the sin of speculation.”
Argentina is far from an isolated case. Whilst some success was made in arguing the illegitimacy of debts borne by the world’s very poorest countries, many nations remain saddled with debts built up either through unfair agreements, or illegitimate leadership, with no international mechanism to query their legitimacy. It is an issue that is also the focus of attention of campaigns in Ireland, such as Repudiate the Debt, concerned by the Republic’s saddling with private banking debt in 2008.
It is, then, all the more disappointing to learn that Ireland was one of only eleven countries to vote against a multilateral convention brought before the United Nations’ General Assembly in early October, to create a recognised regulatory framework capable of adjudicating fairly on the restructuring of sovereign debts.
The Irish vote, while denying the legitimacy which a unanimous vote would have granted any new structure, will not prevent the mechanism from going ahead, though like all international mechanisms, its implementation will continue to rest on the political will of the governments who oversee it.
Kirchner’s dramatic statement highlights the political stakes of emerging debates and campaigns around debt. What is noteworthy is the extent of the political backlash against those who, in the most moderate ways, are challenging the global financial status quo.
Cases such as Argentina’s make increasingly vivid the democratic deficit which is being created by the escalation of finance capitalism. Vulture funds epitomise the triumph of capitalism over democracy; their defenders say that the funds are a mechanism to ensure national borrowing is accountable, and that public use of money carefully examined.
However, in reality, democracy, bit by bit, becomes defined not as the strengthening of the State’s accountability to its citizens, but as its subordination, in the name of accountability, to the market.