Embedded Contracts and a Continuum of Sovereign Debt

What is the relationship of a government to its population as it pertains to sovereign debt? And how does this fit into the larger web of relationships and obligations that make up the international financial arena? These questions are incredibly difficult to think through – beyond the capacity of one author alone. I am therefore grateful to have the company of Yuri Biondi, Barry Herman, Tomoko Ishikawa, and Kunibert Raffer in beginning to consider them. In addressing their thoughtful and thought-provoking comments, I see this response less as an opportunity to answer every potential challenge or differential emphasis. Indeed, the comments by and large extend the analysis of the book in incredibly insightful ways. Instead, I take this brief essay as a chance to identify several themes uniting the responses, and to highlight how these themes raise additional questions for the sovereign debt regime going forward. In particular, the comments suggest the ways in which the issues and actions associated with questions of sovereign legitimacy in the debt market exist not as dichotomies but rather on a continuum. I fully agree with this implicit characterization, and contend that – given that this is the case – challenging the market narrative that supports the repayment of odious debt should help to undermine resistance to reforming the regime for restructuring sovereign debt more generally. In addition, the comments emphasize how sovereign debt can be thought of as embedded in two types of social contract, both of which should shape how we think of appropriate policy responses to the challenges of the contemporary moment.