Academic Commons

Articles

The Roadblock to a Sovereign Bankruptcy Law

Sachs, Jeffrey D.

Bankruptcy law is a necessary feature of a modern economy, and the principles for a bankruptcy apply whether the debtor happens to be a sovereign or not. The essential point is that markets cannot handle situations of extreme financial distress or debtor-creditor workouts in an efficient manner without a sound legal framework. Indeed, Adam Smith himself was a champion of applying bankruptcy processes to insolvent sovereign debtors, arguing that when the situation warranted it, bankruptcy was a sensible alternative to the chaotic ways that sovereign insolvency was otherwise handled. Thus, the fact that the private financial community continues to oppose a sovereign bankruptcy law is quite unconvincing, especially since an enormous number of countries has had a sovereign workout at some point in history.

Subjects

Files

More About This Work

Academic Units
Earth Institute
Published Here
September 30, 2009

Notes

Cato Journal, vol. 23, no. 1 (Spring/Summer 2003), pp. 73-77.

Academic Commons provides global access to research and scholarship produced at Columbia University, Barnard College, Teachers College, Union Theological Seminary and Jewish Theological Seminary. Academic Commons is managed by the Columbia University Libraries.