Chapter 5 focuses on the enforcement of credit contractual agreements and questions the meaning of trust in credit networks. Despite the norms of solidarity, cooperation, and fairness that characterized pre-industrial society, breach of agreement did occur. When lenders and debtors had exhausted all the possibilities available to settle their disagreement, taking the matter to court was often the last resort. The aim was to recover the money owed, but often the emotional and social implications of a lawsuit went beyond the simple economic dimension. Throughout the period, the burden of debt increased rapidly, as well as the number of discontented creditors. The apparent dichotomy is intriguing: on the one hand, financial arrangements were flexible and renegotiable, but on the other, contract enforcement at court was sought after. These lawsuits are rich sources of information for the historian. They highlight the shortcomings and failures of debtors, and the (im)patience of creditors. But above all, they display the dynamics of complex and multiple layers of social and economic relationships. Overall, this chapter reconstructs both transactional and dispute resolution practices in

The Bulgarian National Bank (BNB) was restructured repeatedly between 1926 and 1935, but these restructurings were superficial and incoherent, producing contradictory outcomes. The liberal spirit of the initial 1926-8 reforms dissolved with the onset of the Great Depression. Subsequently, the BNB was endowed with new instruments and tasked with carrying out the interventionist policies adopted in the 1930s, thus paving the way for the bank’s eventual role in the communist planned economy. This chapter focuses on the significance of BNB’s state ownership and on the tight economic conditionality attached to 1926 and 1928 loans sponsored by the League of Nations. By contrasting policies followed in Bulgaria and Greece during the Depression, it challenges Eichengreen’s hypothesis that heavy defaulters and countries leaving the gold exchange standard performed better relative to those that sought to maintain their reputations as decent debtors.

Established at the behest of the League of Nations to help the country secure an new international loan, the Bank of Greece was regarded with a mixture of suspicion and hostility from its very foundation. The onset of the Great Depression tested its commitment to defending the exchange rate against domestic pressure to reflate the economy. Its policy response has been criticized as being ineffectual and even detrimental: the bank is said to have been unduly orthodox and restrictive, not only during but also after the country’s eventual exit from the gold exchange standard. This chapter combines qualitative and quantitative sources to revisit the Bank of Greece’s decisions during the Great Depression. It argues that monetary policy was neither as ineffective nor as restrictive as its critics suggest, thanks to a continued trickle of foreign lending but also to the Bank’s own decision to sterilize foreign exchange outflows. It reappraises Greece’s attempt to maintain the gold standard after sterling’s devaluation, a decision routinely denounced as a policy mistake. Finally, it challenges the notion that Greece constitutes an exception to the rule that countries that shed their ‘golden fetters’ faster recovered earlier.

Chapter 12 is the story of Iraqi reparations imposed after the Gulf War. The rise in Iraqi indebtedness was a consequence of global geopolitical trends in the 1980s, when political lending trumped solvency concerns. It allowed Iraq to obtain financing on terms more favourable than offered by the US government. Reparations were a consequence of the end of the Iran–Iraq War when Iraq invaded Kuwait. Reparations were imposed by a UN Resolution with a direct enforcement mechanism to take money from oil revenues. I use oral history sources to trace how Iraqi debt was restructured after the US invasion in 2003. The restructuring was permeated by politics to inflict harsh terms on creditors at the Paris Club, at a time when creditor-friendly restructurings were the norm. Despite its apparent success, however, in going for a politically expedient deal at the Paris Club, I argue the restructuring missed an opportunity to enshrine a doctrine of odious debt in international law. All debt was written off, except war reparations, which were paid in full through sanctions and war. They proved to be senior to all other debt and did not enter the sovereign debt restructuring.

Chapter 8 looks at the famous case of German World War I reparations. Had Germany defaulted already in 1929, it would have saved two years worth of interest payments and entered autarky at the same time, as market access was by then de facto gone. At this point, the European nations did not have the ability to enforce debt contracts and the United States agreed to a de facto cancellation of reparations. The German sovereign default in the 1930s was on debt issued to pay reparations, but it also had several effects on other state liabilities, with loans offering different kinds of creditor protection. Germany in the 1920s had high levels of reparations, but was able to borrow, because it offered de facto seniority to new loans. Creditors were willing to lend into a large debt stock because they thought they would rank senior to reparations. The German default on its sovereign debt was special because it was allowed by its politically weak creditors, who were unable to enforce debt contracts in the 1930s.

Chapter 9 is the brief story of the lesser-known World War I reparations of Bulgaria and Russia. Both reparations were large in terms of each countrys output but were subsequently negotiated away in political treaties. In the Soviet Unions case, it is one of the examples of how you can repudiate debt completely but under the cost of exiting the global trading system.

Chapter 13 makes the argument that militarily enforcing sovereign debt is akin to a debtors prison for states, based on the cases in the book.

Chapter 3 discusses sovereign debt theory and practice. It goes through the history of sovereign debt and how the current theories of borrowing and lending developed in the 1980s. I argue that countries want to be part of global society, and that means they sometimes repay unsustainable debt. The chapter dives into why countries might default, when they might default, how often countries have defaulted, and what the economic and political costs are. I then describe what happens when countries need to restructure their sovereign debt, both in theory and with a practical guide for the process. Finally, in another technical section, I describe a sovereign debt model. The model explains when countries should have no willingness to repay their debt. It allows me to characterise a set of stylised macroeconomic facts that usually accompany sovereign debt defaults. The default set that comes out of the model states when countries should default. These facts and default set (not part of the technical section) are used in Chapters 6, 8, and 10. Chapter 3 is the last overview chapter; the rest are case studies.

Formal recognition of Liberia’s sovereignty offered the government the opportunity to borrow on international markets that were growing rapidly during the second half of the nineteenth century. However, like other independent countries, Liberia would often find the terms on which it was able to borrow excessively costly, particularly as compared with colonized countries – a gap described in literature on sovereign debt as the "empire effect." Literature on the "empire effect" has thus far neglected any region of Africa outside of South Africa. This chapter focuses on Liberia’s efforts to borrow, beginning with the first loan the government raised in London in 1871. The terms of this loan were such that the government had little choice but to go into default. After renegotiating with its creditors, the Liberian government tried to return to the market but could only do so under what are described in the literature on sovereign debt as “supersanctions,” or infringements on the sovereignty of the borrowing country as a condition of borrowing. Literature on supersanctions has speculated that they replicated formal colonial rule. By comparing Liberia’s experience to that of British colonies in West Africa, this chapter shows that this was not the case: despite supersanctions which eventually extended the reach of foreign officials to include control over Liberia’s finances and its military, investors overseas neverregarded Liberia as a sound investment.

As research over the past few decades, including the studies in this volume, has revealed, there is ample evidence indicating that a vibrant market economy, including highly specialized cash-crop farming, was practiced for sustained periods of time in certain parts of China from the northeastern and southeastern coasts to the Yangzi river delta and valley to the north China plain and the Shanxi plateau between the year 1000 and 1800. This chapter is concerned with the question whether the legal framework of imperial China facilitated or hindered the development of China’s market economy during this period.

Imperial China was largely an agrarian society. Alongside the widespread agricultural activity came the long and winding history of landownership that eventually saw the legal protection of private property rights in land during the Song dynasty (960–1279), which helped regulate economic activity more effectively. The law was highly relevant to the lives of the farming population, as it required the legal establishment of landownership as well as land transfers to family members and non-family members in order to sustain continuity and development in agriculture.

This Chapter examines the duties of indenture trustees appointed under bond indentures. Although their post-default duties generally are subject to a prudent-person standard, indenture trustees have relatively little legal guidance concerning pre-default duties. The rise of activist investors, however, is making it increasingly critical to identify and understand how to perform those duties. This Chapter seeks to provide that understanding.

While earlier chapters have compared urban or rural biases across different countries, in this chapter I make use of a rare confluence of historical conditions in the Turkish case, in which an identical ruler---Turgut Ozal---presided over agricultural price policies under autocratic and democratic institutions.While serving as minister of finance under military rule, Ozal was a fierce critic of costly agricultural support programs that had developed under prior electoral competition between Turkish parties, and successfully removed many of these farm support programs. However, when competing for office following restoration of multiparty elections, Ozal discovered the necessity of winning rural support for electoral success, and subsequently reinstated costly farm subsidies.The Turkish case helps validate the broader expectations of urban or rural bias, within the same country, across differing institions of executive survival, and also demonstrates that the inability of elected leaders to remove costly subsidies was a key factor driving Turkey to default on its sovereign debt.

In concluding the book, while noting that the political salience of food prices may be lessened in the developed world, I also highlight the applicability of my theory of sovereign default to a wider set of issue areas than just food price policy, including politically-sensitive areas such as oil pricing policy as well as costly "entitlement" programs such as Social Security and Medicare.In addition,