Category Archives: National sovereignty

Greek Truth Committee on Public Debt – Preliminary Report (Executive Summary)

Truth Committee on Public Debt

Preliminary report

The Truth Committee on Public Debt (Debt Truth Committee) was established on April 4, 2015, by a decision of the President of the Hellenic Parliament, Ms Zoe Konstantopoulou, who confided the Scientific Coordination of its work to Dr. Eric Toussaint and the cooperation of the Committee with the European Parliament and
other Parliaments and international organizations to MEP Ms Sofia Sakorafa.

Members of the Committee have convened in public and closed sessions, to produce this preliminary report, under the supervision of the scientific coordinator and with the cooperation and input of other members of the Committee, as well as experts and contributors.

The preliminary report chapters were coordinated by:

Bantekas Ilias
Contargyris Thanos
Fattorelli Maria Lucia
Husson Michel
Laskaridis Christina
Marchetos Spyros
Onaran Ozlem
Tombazos Stavros
Vatikiotis Leonidas
Vivien Renaud

With contributions from:
Aktypis Héraclès
Albarracin Daniel
Bonfond Olivier
Borja Diego
Cutillas Sergi
Gonçalves Alves Raphaël
Goutziomitros Fotis
Kasimatis Giorgos
Kazakos Aris
Lumina Cephas
Mitralias Sonia
Saurin Patrick
Sklias Pantelis
Spanou Despoina
Stromblos Nikos
Tzitzikou Sofia

The authors are grateful for the advice and input received from other members of the Truth Committee on Public Debt as well as other experts, who contributed to the Committee’s work during the public sessions and hearings and the closed or informal consultations.

The authors are grateful for the valuable assistance of Arnaoutis Petros Konstantinos, Aronis Charalambos, Bama Claudia, Karageorgiou Louiza, Makrygianni Antigoni and Papaioannou Stavros.

Executive Summary

In June 2015 Greece stands at a crossroads of choosing between furthering the failed macroeconomic adjustment programmes imposed by the creditors or making a real change to break the chains of debt. Five years since the economic adjustment programme began, the country remains deeply cemented in an economic, social, democratic and ecological crisis. The black box of debt has remained closed, and until a few months ago no authority, Greek or international, had sought to bring to light the truth about how and why Greece was subjected to the Troika regime. The debt, in the name of which nothing has been spared, remains the rule through which neoliberal adjustment is imposed, and the deepest and longest recession experienced in Europe during peacetime.

There is an immediate democratic need and social responsibility to address a range of legal, social and economic issues that demand proper consideration. In response, the President of the Hellenic Parliament established the Truth Committee on Public Debt (Debt Truth Committee) in April 2015, mandating the investigation into the creation and the increase of public debt, the way and reasons for which debt was contracted, and the impact that the conditionalities attached to the loans have had on the economy and the population. The Truth Committee has a mandate to raise awareness of issues pertaining to the Greek debt, both domestically and internationally, and to formulate arguments and options concerning the cancellation of the debt.

The research of the Committee presented in this preliminary report sheds light on the fact that the entire adjustment programme, to which Greece has been subjugated, was and remains a politically orientated programme. The technical exercise surrounding macroeconomic variables and debt projections, figures directly relating to people’s lives and livelihoods, has enabled discussions around the debt to remain at a technical level mainly revolving around the argument that the policies imposed on Greece will improve its capacity to pay the debt back. The facts presented in
this report challenge this argument.

All the evidence we present in this report shows that Greece not only does not have the ability to pay this debt, but also should not pay this debt first and foremost because the debt emerging from the Troika’s arrangements is a direct infringement on the fundamental human rights of the residents of Greece. Hence, we came to the conclusion that Greece should not pay this debt because it is illegal, illegitimate, and

It has also come to the understanding of the Committee that the unsustainability of the Greek public debt was evident from the outset to the international creditors, the Greek authorities, and the corporate media. Yet, the Greek authorities, together with some other governments in the EU, conspired against the restructuring of public debt in 2010 in order to protect financial institutions. The corporate media hid the truth from the public by depicting a situation in which the bailout was argued to benefit Greece, whilst spinning a narrative intended to portray the population as deservers of their own wrongdoings.

Bailout funds provided in both programmes of 2010 and 2012 have been externally managed through complicated schemes, preventing any fiscal autonomy. The use of the bailout money is strictly dictated by the creditors, and so, it is revealing that less than 10% of these funds have been destined to the government’s current expenditure.

This preliminary report presents a primary mapping out of the key problems and issues associated with the public debt, and notes key legal violations associated with the contracting of the debt; it also traces out the legal foundations, on which unilateral suspension of the debt payments can be based. The findings are presented in nine chapters structured as follows:

Chapter 1, Debt before the Troika, analyses the growth of the Greek public debt since the 1980s. It concludes that the increase in debt was not due to ex4 cessive public spending, which in fact remained lower than the public spending of other Eurozone countries, but rather due to the payment of extremely high rates of interest to creditors, excessive and unjustified military spending, loss of tax revenues due to illicit capital outflows, state recapitalization of private banks, and the international imbalances created via the flaws in the design of the Monetary Union itself. Adopting
the euro led to a drastic increase of private debt in Greece to which major European private banks as well as the Greek banks were exposed. A growing banking crisis contributed to the Greek sovereign debt crisis. George Papandreou’s government helped to present the elements of a banking crisis as a sovereign debt crisis in 2009 by emphasizing and boosting the public deficit and debt.

Chapter 2, Evolution of Greek public debt during 2010-2015, concludes that the first loan agreement of 2010, aimed primarily to rescue the Greek and other European private banks, and to allow the banks to reduce their exposure to Greek government bonds.

Chapter 3, Greek public debt by creditor in 2015, presents the contentious nature of Greece’s current debt, delineating the loans’ key characteristics, which are further analysed in Chapter 8.

Chapter 4, Debt System Mechanism in Greece reveals the mechanisms devised by the agreements that were implemented since May 2010. They created a substantial amount of new debt to bilateral creditors and the European Financial Stability Fund (EFSF), whilst generating abusive costs thus deepening the crisis further. The mechanisms disclose how the majority of borrowed funds were transferred directly to financial institutions. Rather than benefitting Greece, they have accelerated the privatization process, through the use of financial instruments.

Chapter 5, Conditionalities against sustainability, presents how the creditors imposed intrusive conditionalities attached to the loan agreements, which led directly to the economic unviability and unsustainability of debt. These conditionalities, on which the creditors still insist, have not only contributed to lower GDP as well as higher public borrowing, hence a higher public debt/GDP making Greece’s debt more
unsustainable, but also engineered dramatic changes in the society, and caused a humanitarian crisis. The Greek public debt can be considered as totally unsustainable at present.

Chapter 6, Impact of the “bailout programmes” on human rights, concludes that the measures implemented under the “bailout programmes” have directly affected living conditions of the people and violated human rights, which Greece and its partners are obliged to respect, protect and promote under domestic, regional and international law. The drastic adjustments, imposed on the Greek economy and society as a whole, have brought about a rapid deterioration of living standards, and remain incompatible with social justice, social cohesion, democracy and human rights.

Chapter 7, Legal issues surrounding the MoU and Loan Agreements, argues there has been a breach of human rights obligations on the part of Greece itself and the lenders, that is the Euro Area (Lender) Member States, the European Commission, the European Central Bank, and the International Monetary Fund, who imposed these measures on Greece. All these actors failed to assess the human rights violations as an outcome of the policies they obliged Greece to pursue, and also directly violated the Greek constitution by effectively stripping Greece of most of its sovereign rights. The agreements contain abusive clauses, effectively coercing Greece to surrender significant aspects of its sovereignty. This is imprinted in the choice of the English law as governing law for those agreements, which facilitated
the circumvention of the Greek Constitution and international human rights obligations. Conflicts with human rights and customary obligations, several indications of contracting parties acting in bad faith, which together with the unconscionable character of the agreements, render these agreements invalid.

Chapter 8, Assessment of the Debts as regards illegitimacy, odiousness, illegality, and unsustainability, provides an assessment of the Greek public debt according to the definitions regarding illegitimate, odious, illegal, and unsustainable debt adopted by the Committee.

Chapter 8 concludes that the Greek public debt as of June 2015 is unsustainable, since Greece is currently unable to service its debt without seriously impairing its capacity to fulfill its basic human rights obligations. Furthermore, for each creditor, the report provides evidence of indicative cases of illegal, illegitimate and odious debts.

Debt to the IMF should be considered illegal since its concession breached the IMF’s own statutes, and its conditions breached the Greek Constitution, international customary law, and treaties to which Greece is a party. It is also illegitimate, since conditions included policy prescriptions that infringed human rights obligations. Finally, it is odious since the IMF knew that the imposed measures were undemocratic, ineffective, and would lead to serious violations of socio-economic rights.

Debts to the ECB should be considered illegal since the ECB over-stepped its mandate by imposing the application of macroeconomic adjustment programmes (e.g. labour market deregulation) via its participation in the Troika. Debts to the ECB are also illegitimate and odious, since the principal raison d’etre of the Securities Market Programme (SMP) was to serve the interests of the financial institutions, allowing the major European and Greek private banks to dispose of their Greek bonds.

The EFSF engages in cash-less loans which should be considered illegal because Article 122(2) of the Treaty on the Functioning of the European Union (TFEU) was violated, and further they breach several socio-economic rights and civil liberties. Moreover, the EFSF Framework Agreement 2010 and the Master Financial Assistance Agreement of 2012 contain several abusive clauses revealing clear misconduct on the part of the lender. The EFSF also acts against democratic principles, rendering these particular debts illegitimate and odious.

The bilateral loans should be considered illegal since they violate the procedure provided by the Greek constitution. The loans involved clear misconduct by the lenders, and had conditions that contravened law or public policy. Both EU law and international law were breached in order to sideline human rights in the design of the macroeconomic programmes. The bilateral loans are furthermore illegitimate, since they were not used for the benefit of the population, but merely enabled the private creditors of Greece to be bailed out. Finally, the bilateral loans are odious since the lender states and the European Commission knew of potential violations, but in 2010 and 2012 avoided to assess the human rights impacts of the macroeconomic adjustment and fiscal consolidation that were the conditions for the loans.

The debt to private creditors should be considered illegal because private banks conducted themselves irresponsibly before the Troika came into being, failing to observe due diligence, while some private creditors such as hedge funds also acted in bad faith. Parts of the debts to private banks and hedge funds are illegitimate for the same reasons that they are illegal; furthermore, Greek banks were illegitimately recapitalized by tax-payers. Debts to private banks and hedge funds are odious, since major private creditors were aware that these debts were not incurred in the best interests of the population but rather for their own benefit. The report comes to a close with some practical considerations.

Chapter 9, Legal foundations for repudiation and suspension of the Greek sovereign debt, presents the options concerning the cancellation of debt, and especially the conditions under which a sovereign state can exercise the right to unilateral act of repudiation or suspension of the payment of debt under international law. Several legal arguments permit a State to unilaterally repudiate its illegal, odious, and illegitimate debt. In the Greek case, such a unilateral act may be based on the following arguments: the bad faith of the creditors that pushed Greece to violate national law and international obligations related to human rights; preeminence of human rights over agreements such as those signed by previous governments with creditors or the Troika; coercion; unfair terms flagrantly violating Greek sovereignty and violating the Constitution; and finally, the right recognized in international law for a State to take countermeasures against illegal acts by its creditors, which purposefully damage its fiscal sovereignty, oblige it to assume odious, illegal and illegitimate debt, violate economic self-determination and fundamental human rights. As far as unsustainable debt is concerned, every state is legally entitled to invoke necessity in exceptional situations in order to safeguard those essential interests threatened by a grave and imminent peril. In such a situation, the State may be dispensed from the fulfilment of those international obligations that augment the peril, as is the case with outstanding loan contracts. Finally, states have the right to declare themselves unilaterally insolvent where the servicing of their debt is unsustainable, in which case they commit no wrongful act and hence bear no liability.

People’s dignity is worth more than illegal, illegitimate, odious and unsustainable debt.

Having concluded its preliminary investigation, the Committee considers that Greece has been and still is the victim of an attack premeditated and organized by the International Monetary Fund, the European Central Bank, and the European Commission. This violent, illegal, and immoral mission aimed exclusively at shifting private debt onto the public sector.

Making this preliminary report available to the Greek authorities and the Greek people, the Committee considers to have fulfilled the first part of its mission as defined in the decision of the President of the Hellenic Parliament of 4 April 2015. The Committee hopes that the report will be a useful tool for those who want to exit the destructive logic of austerity and stand up for what is endangered today: human rights, democracy, peoples’ dignity, and the future of generations to come.

In response to those who impose unjust measures, the Greek people might invoke what Thucydides mentioned about the constitution of the Athenian people: “As for the name, it is called a democracy, for the administration is run with a view to the interests of the many, not of the few” (Pericles’ Funeral Oration, in the speech from Thucydides’ History of the Peloponnesian War).

It’s Time to Rethink the Old Notion of Sovereignty

It’s Time to Rethink the Old Notion of Sovereignty

by Jim Hoagland

International Herald Tribune, October 28, 1999

(…) The savage assault on Chechnya brings home the need for a new international consensus. Kofi Annan is trying to forge it.

Three times in the past seven months a national government has gone to war against is population, etching in blood its sovereign “right” to kill as many of its people as it sees fit. Serbia and Indonesia were halted by international outrage and reaction. Kosovo and East Timor were detached from their control and taken over by the United Nations. A doctrine of humanitarian intervention seemed to sink roots.

But Chechnya shows that it is still two steps forward and one back. Russi pursues a rain of death on a defenseless regional capital without important foreign constraint or meaningful criticism.

European and U.S. official reaction makes Chechnya sound as if it were a huge Third World train wreck. The loss of life is “tragic” or “regrettable” but not something that has to be acted upon. (The exception is Germany, where Foreign Minister Joschka Fischer voices genuine outrage). Russia is likely in the short term to conclude that sovereign murder still pays.

But in a 90-minute discussion in his 38th floor suite of offices this week, UN Secretary-General Annan made clear to me that he cannot ignore blood-letting even on the territory of a Security Council permanent member.


He has dispatched an envoy to Moscow to push for a visit to Chechnya by a special UN team. The team would examine the need for humanitarian aid and, Mr. Annan added, “be the eyes and ears of the international community.”


Most of his predecessors would likely have avoided doing anything in this case. But he cascade of atrocity in Rwanda, Kosovo, East Timor and elsewhere has made him a man with a mission. He began to spell it out in a startling speech to the UN General Assembly on Sept. 20 and defined it more fully in our conversation.


States now have to respect “individual sovereignty – the human rights and fundamental freedoms of each and every individual as enshrined in the UN Charter” as well as state sovereignty, Mr. Annan told the General Assembly.  Nothing in the charter precludes “rights beyond borders”. He told me he set out to challenge, “the old consensus”, which is rooted in the Treaty of Westphalia and the United Nations’ own once unshakable acceptance of the doctrine of noninterference in the “internal” affairs of member states.

He smiled when I asked if that made anybody nervous. “Yes. For example China was nervous. India was nervous, and Russia was very nervous…The Russians have been consumed by Chechnya for a long time. I think they feared Kosovo would be seen as a precedent for Chechnya, and other regions in the Caucasus. Before, this concern was theoretical. Now…” His voice trailed off, leaving the obvious unsaid.

Russia of course is nothing like Serbia or Indonesia in power terms. Russia possesses nuclear arms, a Security Council veto and a government that has mostly cooperated with the United Stats and Europe on crucial questions in this decade. There is no risk of the NATO cavalry riding to Chechnya’s rescue or Bill Clinton calling Boris Yeltsin a Hitler.

But Russia is pursuing scorched-earth tactics that resemble the Serbian and Indonesian treatment of their subject peoples. And Mr. Annan is not willing to let realpolitik hand out free passes on humanitarian intervention.

“Today what is internal doesn’t remain internal for very long,” he told me. “We have to examine our willingness to act in some areas of conflict while limiting ourselves to humanitarian palliatives in other crises that ought to shame us into action. We have to find rational guidelines or an understanding of the spectrum on which the choices of intervention exist. We need a new consensus.”

This elegant, but steely Ghanaian diplomat, in his third year as secretary-general, has ordered a staff report on intervention. He stimulated a General Assembly study group on the same subject and hopes to get the Security Council deeply involved in his six-to-twelve month effort to, in effect, modernize sovereignty.

“The founders of the United Nations in 1945 came out of a world war determined to stop conflicts between states.  The time has come for our generation to look at its responsibilities toward civilians who in today’s wars are deliberately targeted.”

Mr. Annan did not add the words “by their own governments,” but he did not have to. The shells falling in Chechnya made the point for him.

The right of existence of the State of Israel and Israel’s territorial integrity

The right of existence of the State of Israel and Israel’s territorial integrity

by Elias Davidsson

(Revision, June 2002)

From time to time one comes across statements by politicians who emphasize the “right of existence of the State of Israel”.  This formula has been used so many times by so many people and accepted without critical insight, as to have become a  cliché.

But do States possess an inherent ‘right to exist’? Are there any legal texts defining such a right? How about the Charter of the United Nations?

The United Nations Charter

The Preamble of the U.N. Charter refers only to human rights and to equal rights of men and women and of nations large and small. The preamble does mention “peoples”,  “mankind”,  “human person” and “nations” as the main subjects for which the United Nations was established. The term “States” is not mentioned in the Preamble.

Article 1 lists the “Purposes” for which the United Nations were established, namely to protect the rights of peoples and nations. States are not mentioned under the Purposes of the United Nations as stakeholders. This was certainly no oversight by the drafters of the U.N. Charter. States are only mentioned in Article 2, the Principles of the United Nations, as possessing  rights and duties by virtue of being members of the Organisation.

States have no inalienable rights

The Charter does not mention in any direct or indirect way the right of existence of the its members. The obligations to respect member states’ territorial integrity and their sovereignty are not based on their inalienate character but follow logically from the declared Purposes of the United Nations, namely to maintain international peace between the nations and peoples [who live in the territories controlled by these states]. Such distinction is fundamental: While Peoples and Nations  possess inalienable rights, as specifically indicated in the Charter, primarily the right to self-determination, states are a historical artifact which serves pragmatic purposes in regulating and securing the civil and political life of human communities, no more and no less. It is true that many communities have established national states (in the modern sense of the word) in order to protect their interests and security. But this need not be the case. Some states are composed of a number of “nations”, while members of some national communities live across several independent states. Moreover in some cases there may exist latent or overt conflicts between the two categories State and Nation/People, as can be seen in the example of ex-Yugoslavia or with the Kurdish problem. The former Federal Republic of Yugoslavia has no inherent right of existence, unless the peoples living within its borders wish it to exist.

The establishment of the State of Israel violated the principle of self-determination

Most states have come into being as nations began to assert their right to self-determination and empires crumbled. Not so the State of Israel. Its establishment was imposed on the people of Palestine by armed force and given some sort of a legal garb by a non-binding recommandation of the General Assembly of the United Nations (Resolution 181 of  29.11.1947), voted against a substantial opposition. The establishment of the State of Israel interfered directly with the inalienable right to self-determination of the indigenous inhabitants of Palestine, whose views were disregarded by the then “international community”. The colonial character of this enterprise was stated explicitely by its chief promoter, Dr. Theodor Herzl, and was not denied by the British Mandatory Power over Palestine, who helped the Zionist movement accomplish its colonial task.

The legality of the cited United Nations recommandation regarding the partition of Palestine and the allocation of more than half of Palestine’s territory to mostly immigrated Jews for the establishment of a Jewish State, is and has been disputed. This is one of the reasons why Israeli governments avoid referring to it. But even if this Resolution had some legality, it would not  necessarily follow that the establishment of the State of Israel was based on an inherent right, for such inherent right does not exist: Neither for the State of Israel nor for any other members of the United Nations. The historical rights of Jews to Palestine, claimed by the Zionist movement, are irrelevant in the context of  international law.

Arabs’ opposition to Israel’s “right of existence”

While it is a requirement under Article 1(2) of the U.N. Charter that the territorial integrity and political independence of any existing state be respected, states are not required to endorse other states’ right of existence. It is moreover disingenious to  expect of people who lost their homeland as a result of another state’s establishment to endorse as legitimate the very act causing their destitution. They are entitled to consider Israel’s establishment as an unjust operation, refuse to bless the hand that had sinned and entitled to struggle for a just redress.

The accusation levelled at Arab states that they still refuse to recognize Israel’s existence is technically inaccurate. Arab  states have formally endorsed U.N. Resolutions concerning the right of the State of Israel to secure borders, which in terms of international law, is all what is required of them.

All Arab states, together with all European, African and Asian states, have endorsed until 1990 the proposal for an International Peace Conference on the Middle East based on Security Council resolutions 242 (1967) and 338 (1973) and the legitimate national rights of the  Palestinian people, primarily the right to self-determination. The position of Arab states vis a vis Israel is therefore fully consistent with the United Nations Charter.

Security Council Resolution 242

Security Council resolution 242 (1967) emphasizes the need  for “every State in the [Middle East] to live in security” and establishes two basic principles for a just and lasting peace in the Middle East, one of which is “Israel’s withdrawal from (the) territories occupied in 1967” and the other the “termination of the all claims or states of belligerency and respect for and acknowledgement of the sovereignty, territorial integrity and political independance of every State in the area and their right to live in peace within secure and recognized boundaries free from threats or acts of force”.

It must be recalled that Security Council resolution 242 (1967) does not consecrate Israel’s right of existence, only its right to integrity and security. Even the United States, Israel’s main ally, would have been at pains to introduce into texts of  international law the concept of the “right of existence” of the State of Israel.

Is the use of force against the State of Israel legitimate ?

The U.N. Charter proscribes any “threats or use of force against the territorial integrity or political independence of  any state” (Article 2). To be able to violate “territorial  integrity”, a state must have a defined territory. To be able to violate the “political independence” of a state, that state must be “politically independent”. The State of Israel however does not fulfill either criteria. Thus Article 2 of the Charter is not applicable to Israel. This may come as a surprise to many readers and will  therefore be substantiated in some detail.

Is Israel a ‘politically independent State’ ?

On 14 May 1948, eve of the announcement of the establishment of the State of Israel, a meeting of the Zionist leadership in Palestine took place. These were the people who were to become the first government of the State  of Israel. At this meeting it was proposed by one delegate that Israel would be declared an “independent and sovereign” state. As the Protocols of the meeting show, this proposal was extensively discussed but finally rejected, as it would have required to give equal status to all inhabitants, Jews and non-Jews. The next day the members of the National Council “representing the Jewish people in  Palestine and the [World] Zionist Movement” proclaimed the  “establishment of the Jewish state in Palestine to be called  Medinat Yisrael (the State of Israel)”[[1]]. Israel’s High Court has since confirmed the view that the State of Israel is not a sovereign state of its inhabitants but belongs to all of the world’s Jews. This has been confirmed by the Israeli Law of Return, which confers automatic Israeli citizenship to any person proving bona fide Jewish descent. As a State belonging, according to its own definition, to a worldwide community of Jews, the State of Israel cannot be considered a “politically independent” of that community.

Does Israel have a defined territory ?

In the meeting, referred to above, the question of borders arose. The relevant discussion was summarized by David Ben-Gurion, who became Israel’s first Prime Minister:

“There was a discussion of this matter in the People’s Executive. There was a proposal to determine borders, and there was opposition to this proposal. We decided to evade (and I choose this word intentionally) the matter … We have left this matter open for developments” (Protocols of Debates, 1948, p.19; Hebrew; emphasis in the original)[[2]].

Ben-Gurion last word (“developments’) proved subsequently to have had a hidden meaning. It seems that Ben-Gurion correctly assessed that Zionist military forces would ultimately conquer territories lying outside the area allocated by Resolution 181 to the incumbent Jewish state. He was therefore loath to restrict a priori  Israel’s borders through a premature declaration. His assessment was proven correct and confirmed in his War Diary (Vol. 1, pp. 210-1) where he wrote:

“The war will give us the land. The concept of ‘ours’ and ‘not ours’ are peace concepts only and in war they lose their whole meaning.”[[3]]

Zionist forces conquered the Western Galilee, the modern part of Jerusalem and other areas allotted to the Arab Palestinian State. But in spite of these territorial gains, Israel refused until today to define these territories as Israel’s permanent acquisitions. There were more “developments” to come, more areas to be conquered and Judaized.

As these lines are written, the State of Israel has not yet defined its ultimate borders and not even declared its ultimate territorial claims. This is no some bureaucratic oversight. The Zionist movement has had, since its inception, far greater territorial ambitions than the area proposed in 1947 by the United Nations to the Jewish state, or for that matter, by the Balfour Declaration of 1917. These ambitions include areas of Lebanon, Syria and, according to extreme claims, of Jordan. Some Zionists, including religious fundamentalists, even dream of wider areas, referring to biblical promises extending to Mesopotamia. Israel has proven its territorial ambitions by its unilateral annexation of East Jerusalem, of the Golan heights and its creeping annexation of all the West Bank, which continues unabated, regardless of changes in government and in agreements made.


[1]  Cited by Uri Davis: Israel – An Apartheid State, Zed Books, London, 1987, p.13-14

[2]  Op. cit. p.14

[3]  Cited by Sheila Miller in a Letter to the Editor published in Jewish Chronicle (London), 18 January 2002

Offshore Finance, Digital Cash, and the Limits of Liberalism

Indiana Journal of Global Legal Studies, Vol.5, Spring 1998

Cyberspatial Sovereignties: Offshore Finance, Digital Cash, and the Limits of Liberalism

Bill Maurer(1)

sovereign (‘sovrin). . .I. sb. 1.

a. One who has supremacy or rank above, or authority over, others; a superior; a ruler, governor, lord, or master (of persons, etc.). Freq. applied to the Deity in relation to created things.(2)

In his answer to his article’s title question, The Internet as a Threat to Sovereignty? Thoughts on the Internet’s Role in Strengthening National and Global Governance,(3) Henry Perritt relies on the liberal theory of international relations, and liberal understandings of state, market, and morality, to argue that the Internet does not necessarily pose a threat to sovereignty, but may in fact bolster it. As Perritt states, "the Internet has the potential to strengthen national and global governance-thus enhancing sovereignty rather than destroying it."(4) From the perspective of national governance, Perritt argues, the Internet can help strengthen the rule of law by providing access to government documents and decisionmaking. From the perspective of global governance, the Internet can help strengthen international law by promoting access to information (from international treaties to on-the-ground reports of human rights and other abuses) and by strengthening global markets and economic interdependence.

My response to Perritt is motivated by two chief concerns. The first has to do with the opposition between liberalism and realism in international relations (IR) theory within which Perritt situates his arguments. Rather than viewing liberalism as the antidote to a realist position, which characterizes IR in terms of anarchy and brute power relations among sovereign states taken to be abstract actors, I propose we view liberal IR theory as part of an ideology that encodes and works to enforce problematic visions of state, sovereignty, market, and morality. Other theoretical trends in IR theory might help us out of the liberalism/realism impasse and throw into question the implicit moral judgments about governance, democracy, and international order at the heart of liberalism.

The second concern has to do specifically with Perritt’s claims about the market. Perritt assumes that the Internet can help reduce transaction costs, making the market more "efficient" and helping more and more people and governments to become market players. Increasing participation in the market means, according to Perritt and other neoliberals, increasing interdependence, which, in turn, means increasing peace among peoples and nations. As Perritt writes, when "states and their citizens become more vested in the smooth operation of global markets, prospects for peaceful settlement of disputes improved because the economic costs of political disruption are too great for any side to bear."(5) He continues: "Under the liberal tradition, it is a positive achievement to reduce the power of the government over the economy and place that power in the hands of private citizens, who will trade and invest internationally, creating economic interdependence that provides a foundation for world peace."(6)

In the sections that follow, I explore two recent specific instances where the Internet has been used as a market–in offshore financial services, or the "tax haven" business that currently underwrites the economies of several small Caribbean states, and the "digital cash" initiatives of several computer and banking firms which promise to "revolutionize" the market itself. This exploration questions the assumption that increasing economic interdependence, facilitated by Internet technology, serves the interests of both "sovereignty" and "world peace." Doing so entails denying "the market" the privileged position it occupies in Perritt’s article, and in much of the writing on globalization from both the left and the right, as a kind of "black box" whose workings are immune to analysis, and which we must at all costs either work to resist, or help to "grow" and "expand", lest we become its hapless victims.

This article is guided by the assumption that "sovereignty", the construct at the heart of Perritt’s article as well as many of the assessments of Internet technology and economic globalization, cannot be taken to have given, self-evident, or stable meanings. Differently positioned persons and governments have different conceptions of sovereignty and put them into play in state and market politics in different ways. Notions of sovereignty also change over time. Thus, I have chosen to head each section of this essay with definitions of sovereign from the Oxford English Dictionary.(7) My aim in doing this is to destabilize the terms of the debate as I throw light on cases where the meanings of sovereign, state, market, and subject, and the moral implications of these meanings, are currently being reformulated and made more complex beyond the limits of liberal theory.

b. A husband in relation to his wife. Obs.(8)

One of the advantages of liberal IR theory compared to realism is its recognition that sovereignty is not a monolithic concept, something that states simply "have", and that they use as a basis of their power in an anarchic world. As Perritt argues, liberalism compels us to put "sovereignty" in "its proper political contexts. . . ."(9) For liberals, this proper context ought to be "democracy", and they argue that one of the main obstacles to the world order envisioned in liberalism is the continued presence of totalitarian, non-democratic states. For liberals, sovereignty should not be the preserve of the sovereign state alone, but must be seen as emanating from the subjects who empower their state to act in the international arena. Thus, liberal IR theory emphasizes the goal of "democratization." Perritt’s vision of "good governance" hinges on this liberal ideal. Another key to good governance, according to liberal theory, is minimal state interference in the affairs of the private market where individuals realize their interests and freely achieve their ends.

Democracy and the free market are equated here: both depend on individuals able to realize their interests without interference from other individuals or state agents. Only in such a context can people make consumer and political choices that reflect their "true" interests. Because, for Perritt, the Internet can enhance democratization by increasing access to and participation in governance, and because it can facilitate market transactions, it can therefore enhance the liberal vision of sovereignty. Only totalitarian states whose sovereignty depends on control over their subjects have anything to fear from the Internet.(10)

Perritt is quite correct to emphasize the political contexts of sovereignty. Liberalism, however, must at the same time be accountable for its own assumptions and moral claims, some of which may not hold up under critical scrutiny. Chief among these, perhaps, is its assumption about the implicit morality of the "free market", which is presumed to exist above and beyond politics or culture, to be truly universal, or at least potentially so, if only states would get out of the business of meddling in the economy. It is no surprise that, in Perritt’s account, the Internet comes to resemble a free market.

There are, however, other trends in IR theory that question the tenets of liberalism and highlight the shared assumptions of liberalism and realism. Alexander Wendt labels these trends "critical IR theory", and they include postmodernism,(11) constructivism,(12) neo-Marxism,(13) feminism,(14) and others.(15) I will not review these different contributions in any depth here. Most useful for my purposes is the theoretical trend called constructivism. Constructivism draws attention to the fact that the sovereigns, subjects, interests, and identities presupposed in liberal and realist IR theory are never given, but are actively constructed, in intersubjective social relationships. The meanings these entities contain, the kinds of actions they are capable of carrying out, and the moral implications of those actions are revealed in specific historical, cultural, and political contexts.(16)

As Wendt argues in an influential article that debates in IR between realists and liberals reveal these parties’ "shared commitment to ‘rationalism.’" Like all social theories, rational choice directs us to ask some questions and not others, treating the identities and interests of the agents as exogenously given and focusing on how the behavior of agents generates outcomes."(17) Both realists and liberals, Wendt continues, "take the self-interested state as the starting point for theory."(18) They also, in the slippage that equates states with individual human persons, take the self-interested individual as the starting point of theory. Following Foucault’s analysis of liberal governmentality,(19) I suggest that we cannot view the kinds of individual persons constructed in modern worlds as separate from the kinds of states they inhabit and construct and which at the same time inhabit and construct their personhood. Any constructivist discussion of the state must also include a constructivist discussion of the human person. This latter approach is something at which anthropology has been very good, and I will return to anthropological discussions of the construction of persons in the next section.

Timothy Mitchell, also following Foucault, argues that the state must be seen as the effect of relations of power that call it into being as having a force all its own. He writes that "[t]he state needs to be analyzed as. . . a structural effect. That is to say, it should be examined not as an actual structure, but as the powerful, metaphysical effect of practices that make such structures appear to exist."(20) For Mitchell, the state is an effect of

detailed processes of spatial organization, temporal arrangement, functional specification, and supervision and surveillance, which create the appearance of a world fundamentally divided into state and society. . . . These processes create the effect of the state not only as an entity set apart from society, but as a distinct dimension of structure, framework, codification, planning, and intentionality.(21)

Just as the state is an effect of specific historical circumstances and relations, so too is sovereignty. Mitchell’s analysis of the state can easily be extended to the sovereign, the market, and the individual person of modern democracies. In the process of such analysis, all of these constructs must be momentarily held apart to demonstrate the contingency and historicity of their linkages (as in the relatively recent historical notion of the "sovereign state", for example). As Wendt writes, "[t]he sovereign state is an ongoing accomplishment of practice, not a once-and-for-all creation of norms that somehow exist apart from practice."(22) This statement compels analysts to recall sovereignty’s original definitions, having to do with God-ordained monarchical power as well as other, not obsolete or hidden definitions like "a husband’s dominion over his wife." As feminist political theorists remind us, of course, the latter is not a definition of sovereignty substantially challenged by liberal theory, but in fact reinforced by it.(23)

I am arguing, thus, that we need to view sovereignty as an effect of practices and a justification for practices that call it forth as an autonomous space of power. As my discussion of offshore finance and digital cash below demonstrates, we need also to view the market as the effect of practices that construct state and sovereignty and that shape and reshape the human subjects who enact such practices. Understanding the co-construction of state, sovereignty, market, and subject throws into relief the moral claims subjects make in any momentary configuration of these power-effects. Such moral claims tend to hide or naturalize the very terms–sovereignty, the market, the rule of law–from which they draw their moral force.

c. A person or thing which excels or surpasses others of the kind. Now rare.(24)

What kind of subject is presupposed by modern, liberal sovereignty? And how might Internet technology unsettle it, or at least expose its fabrication? Authors from across the social sciences have examined the construction of the modern subject as an autonomous individual, consisting of a stable self, rooted in a place or nation, relatively solid and unchangeable, knowing its interests and needs and trying rationally to fulfill them.(25) The subject of liberalism is also sovereign, in the sense of owning itself and having sole control over its actions and thoughts. This is what made the subject of liberalism so unique and radical at its inception during the Enlightenment. Rather than being authored and animated by God, who placed it in relation to other subjects in a great chain of being, the liberal subject self-authors, self-regulates, and self-defines.(26)

The few ethnographic studies of human-computer interactions that now exist seem to suggest that the Internet has the potential to reshape this sovereign subject of modernity by highlighting some of the processes that work to ensure its seeming stability. In doing so, they echo, ironically enough, anthropological discussions of conceptions of personhood in societies radically different from those of the modern West. These conceptions help highlight the contingency and specificity of the kind of modern subjectivities that underlie market, state, and sovereignty under liberalism.

In her ethnography about "constructing identity in the culture of simulation," Sherry Turkle argues that the virtual worlds of the Internet have the potential to reshape notions of mind, self, body, and machine.(27) Turkle begins her investigation with "multiple-user domains" (MUDs), virtual spaces in which people craft alternate personas (human, non-human, and other) and interact with such personas crafted by other people (and, often, computers themselves). As Turkle argues, "MUDs put you in virtual spaces in which you are able to navigate, converse, and build."(28) To Turkle’s informants, their sense of self, in large measure, often derives from their interactions with other virtual persona in MUDs. As one put it, "[p]art of me, a very important part of me, only exists inside PernMUD."(29) People can exist in multiple MUDs at once, through different (or the same) virtual persona. For some of Turkle’s informants, "RL", or "real life", is just one of the many social spaces in which their personas are engaged at any given time. As one related to her:

I split my mind. I’m getting better at it. I can see myself as being two or three or more. And I just turn on one part of my mind and then another when I go from window to window. I’m in some kind of argument in one window and trying to come on to a girl in a MUD in another, and another window might be running a spreadsheet program or some other technical thing for school. . . . And then I get a real-time message [that flashes on the screen as soon as it is sent from another system user], and I’ll guess that’s RL. It’s just one more window. RL is just one more window . . . and it’s not usually my best one.(30)

Turkle’s study suggests that participants in Internet communities are engaged in a deconstruction of some of the dichotomies at the heart of the liberal subject: self/other, mind/body, public/private, male/female, etc. In pulling apart these dichotomies–having experiences on the Internet as a creature of a different gender, or an imaginary gender, crafting multiple "private" lives in the multiple "public" spaces of MUDs, and so forth–participants in Internet communities bring to light the contingency, constructedness, and mutability of the sovereign subject. As another of Turkle’s informants states, "why grant such superior status to the self that has the body when the selves that don’t have bodies are able to have different kinds of experiences?"(31)

In her reflection on subjectivity in the computer age, Allucqu