Award for missing the point: illegitimate debt econometrics
The World Bank’s Economic Policy and Debt Department stumbled into the debate about illegitimate debt with an absurdly wonky approach. Its recent article on ‘Odious debt as a principal-agent problem‘ modeled an economy of two goods – guns and butter. Its game theoretic framework and complex econometric analysis resulted in an equation-packed article that ignored most of the key aspects of the problem.
Out of the mess of mathematics, came a convenient conclusion: that debt audits are the least hopeful avenue to address the problem, while the merits of both loan sanctions and responsible borrowing standards are ambiguous.
Civil society network Eurodad’s Gail Hurley concluded wryly that, “We are not too optimistic about the World Bank’s willingness to seriously tackle the issue of odious and illegitimate debt.”