Ethics and Debt is a project of the Carnegie Council and the Graduate Program in International Affairs, The New School.


How should governments decide when and how much to borrow? What are the responsibilities of official and private creditors that lend to governments? Who should bear which risks? When debt crises occur, how should they be resolved? What makes processes of debt restructuring, debt cancellation, or the enforcement of debt contracts more or less just, or the outcomes of such processes better or worse?

These are not idle questions. The economic collapse in Argentina, financial crisis in Turkey, and unsustainable debt burdens of many developing countries highlight the urgent problem of deterring excessive indebtedness and dealing with it when it nevertheless occurs. Even without default, high debt levels can limit a sovereign government’s capacity to provide essential services necessary for the well-being of its citizens, and divert resources and energy from the pursuit of long-term development. In addition, after governments default, the mechanisms for managing the restructuring of sovereign debt usually act slowly, do not return the country to debt sustainability and often leave the different classes of creditors as well as the people of the indebted country feeling as if they have been treated unfairly. This in turn can create disincentives for lending and investment that can leave poor countries in a poverty trap and even limit the prospects of wealthy countries. They can also leave the crisis countries dependent on international institutions and the “dialogue” on policy conditionality necessary for their continued support.

There has been growing public recognition of these problems, and increasingly potent popular movements have pressured governments, financial institutions, and the financial community to seek better solutions to the debt crisis. Some of the resulting initiatives, including that for the Heavily Indebted Poor Countries, have sought to define sustainable debt levels for poor countries and design policies to reduce debt to those levels. Some debt relief has resulted from these programs, but rarely enough. Other proposals, such as those for institutional arrangements that would mimic at the global level the legal bankruptcy regimes under national law (albeit without the same enforcement authority), have not moved forward in a world not ready for major change in the international financial architecture. Other proposals have instead pursued a contractual approach to resolving sovereign debt crises, in which new clauses are introduced into bond contracts to enable debts to be restructured more easily and quickly. Still other proposals have sought means of distinguishing between debts for which creditors deserve full repayment from those for which they either lack claims or have weaker claims to recover what they have lent.

The merits of these programs and proposals for dealing with sovereign debt remain hotly disputed. While disagreements about policies and practices to deal with debt are sometimes purely empirical, with advocates of opposing positions differing only on the best means to achieve shared aims, the intensity of the debate concerning debt and the heated rhetoric with which it is often conducted suggest that they may be rooted in deeper disagreements of value. It is not obvious, however, what disagreements of value are at stake in this debate.

Most participants agree that the current situation is morally unacceptable and that “something must be done” to remedy it. But advocates have seldom articulated their underlying justifications for why this situation is unacceptable. They have thus provided little basis for determining whether their chosen policies would constitute progress. And when the rhetoric in a debate surrounding an important practical dilemma is either heated or evasive (and often both), participants may accuse one another of bad faith or naiveté about the facts of the case. They are also likely to invoke principles that support their side of the argument without thinking through their argument’s broader implications—or perhaps purposefully ignoring them. These tendencies make it more difficult to identify correctly the true nature of the disagreements—and hence the evidence and argumentation that could be relevant to resolving them.


  • To generate critical debate among diverse stakeholders on the ethical questions raised by problems of sovereign indebtedness;
  • To identify the principles that are relevant for the ethical assessment of proposed solutions to such problems; and,
  • To explore the policies and institutional arrangements that such principles would likely demand under present conditions.


  • A special issue of Ethics & International Affairs in 2006, and an edited book volume.
  • Policy briefs summarizing the main reform proposals for the policymaking and NGO communities.
  • A course, Ethics and Debt, will be offered at The New School’s Graduate Program in International Affairs in Spring 2006; a model syllabus will be made available to educators everywhere.


These interconnected questions raise some of the broad ethical issues that are relevant to the evaluation of the current debt arrangements, as well as proposed policies and reforms.
  1. Into what kinds of contracts* should sovereign borrowers and creditors be permitted to enter?
  2. Under what circumstances should we deem such contracts to have been entered into legitimately and thus to bind the parties to it?
  3. When (if ever) should a contract that has been legitimately entered into by a sovereign borrower no longer be considered to bind it to repay its creditors on the terms stipulated in it?
  4. What steps should creditors and others be permitted to take in order to enforce contracts that are considered to bind sovereign debtors?
* By “contracts,” we mean broadly “binding agreements,” not any particular kind of contract.

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Christian Barry, Project Director
Editor, Ethics & International Affairs, Carnegie Council

Barry Herman, Project Director
Visiting Senior Fellow, GPIA, The New School

Michael Cohen
Director, Graduate Program in International Affairs, The New School

Lydia Tomitova
Program Associate, Global Social Justice, Carnegie Council

Alys Willman-Navarro
Coordinator, Argentina Observatory, The New School


Frank Fernandez
Senior Vice President, Chief Economist and Director, Research, Securities Industry Association

Jo Marie Griesgraber
Chair, New Rules for Global Finance Coalition, Economic Policy Institute

Sanjay Reddy
Assistant Professor of Economics, Barnard College and SIPA, Columbia University

Arjun Sengupta
Independent Expert of the United Nations Commission on Human Rights

Joseph E. Stiglitz
Executive Director, Initiative for Policy Dialogue, University Professor, Columbia University

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Ethics and Debt: An Interdisciplinary Conference
November 1–2, 2005, The New School, New York, N.Y.

The purpose of the conference was to help close some gaps between theory and practice, and between theorists and practitioners, by integrating rigorous thinking about ethical principles into debates concerning sovereign debt. The papers presented at the conference will be published in a special issue of Ethics & International Affairs in 2006 and in an edited volume.

Agenda  •  Abstracts