Iraq and Lebanon should declare bankruptcy
Regional, Analysis, 5/1/2007

There is something improper about a dictator who is not elected by the true will of the people burdening the citizens with problems that are his creation and not theirs.

Iraq, under the former Iraqi president Saddam Hussein, accumulated great debts on the country, supposedly in great part as a result of the war that he or or his neighbor Arab states and even the US encouraged when Iraq fought Iran. These countries were glad to see him as the counterweight to Iran at the time, and Iraq's war was very expensive. Hussein supposedly invaded Kuwait in part, because he felt he was doing the Arab gulf states and especially Kuwait's bidding, after Kuwait had decided to not offer the needed financial support to Iraq after the war.

After Hussein decided to invade Kuwait, the US fought Iraq in the first gulf war, and won, and imposed a very long and severe sanctions on Iraq that stunted its development for years. After this still, and as Iraq was trying to break from the sanctions, the US struck and invaded Iraq again under pretenses, and the results were once again the same. Iraqis suffered the burdens.

As such, it should be abundantly clear that the Iraqi citizens had little choice in these matters, but have born the financial devastating consequences, of forces they could not control, be it Saddam Hussein or the US.

Now that Iraq is suffering greatly, one of the oddest things is that it still has external debts that the country is bound to. In personal law, such as in the US, and before its bankruptcy law was recently changed, it used to be that the bankruptcy law was a great tool to give citizens a chance to start over again, fresh and unburdened, for a second chance. And the burden was laid on the creditor to make sure he or she is taking proper risks with their lending.

I am not aware of any such bankruptcy laws for countries, but there should be one as well. But in such absence, setting precedence should do it. Now that Iraq supposedly have a democratic government, this government should declare bankruptcy and clear its citizens from all financial commitments they had no say in. Not doing so, would be highly irresponsible.

Such acts are usually discouraged by saying that a country reneging on its debts would not be able to get future loans from lenders. That is not likely to be the case, but if that is the case, that would be very healthy for Iraq. Iraq has much wealth, and under such circumstance, the citizens would be forced to keep a closer eye on how the country's wealth is being spent. Furthermore, if the government needs money, let them raise taxes. Raising taxes has one advantage in that it forces citizens into realizing that the government's money is theirs and did not fall from the sky, as is the feeling with foreign loans to governments that go without scrutiny. When citizens pay tax, one would think, that their attention to the affairs of government would increase as well, a very healthy development.

Therefore, Iraq should move swiftly to declare bankruptcy.

Similarly, Lebanon should do the same. Though Lebanon has a democratic and representative government, the government borrows without the direct consent of the people. Such foreign loans are indirect taxation on citizens, without the citizens feeling the effect of direct taxation. Yet they bear the burdens indirectly. In countries without semi-developed democracies, were mostly an oligarchy rules, and something to this effect, a good case can be made that taxation should only be done thru some kind of referendum. These elite governments can borrow foreign loans to keep themselves in power, since they do not know how to generate wealth and development internally.

Lebanon is supposedly up to ears in debts from such loans. But what makes Lebanon's case very compelling for a bankruptcy is that Lebanon has been subjected to wars not of its own making, several times. Israel invaded Lebanon or struck Lebanon severely many times. During these times of war, the US and some others for example, prevented the immediate halt of such strikes on Lebanon that caused enormous economic damage. As a result, Lebanon had to reconstruct, and try to borrow more money. So the logic is, let those who allowed Lebanon to be struck and stood in the way of preventing Israel from striking it carry the cost.

Lebanon should declare bankruptcy.

But beyond this, Lebanon, and Iraq should as well pass laws that foreign loans should not be allowed without referendum from the public. Otherwise, it will not be long before these countries get back into a similar position, as the temptation of politicians to borrow and spend to stay in power is too tempting a force.

But sadly, it is not only Iraq and Lebanon that are in such bad position. Many other counties in the world are as well. And it seems most reasonable that the citizens of such countries should not bear the burdens of their unelected or unrepresentative government. And, let the motto be from now on: lender beware, calculate and bear the risks and rewards yourself.

This is one way citizens as well as nations can preserve to themselves the opportunity to always be able to start fresh again and have a second chance.

By,
Jamil Kazoun

Previous Stories:
  The practice of lending to developing and underdeveloped governments should end   (5/25/2002)

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