Barry Herman, Professor of International Affairs at The New School for Social Research and Advisor to the United Nations, Calls for the Creation of a New Mechanism to Combat Sovereign Debt

“The world needs an international mechanism to combat the insolvency crisis of governments,” affirmed Barry Herman, Professor of International Affairs at The New School for Social Research and Advisor to the United Nations during the conference, “How to Resolve the Soveriegn Debt Crisis of the Twenty-First Century,” organized by Global Foundation for Democracy and Development (GFDD) and Fundación Global Democracia y Desarrollo
(FUNGLODE) on Tuesday, July 24 at FUNGLODE Headquarters in Santo Domingo, Dominican Republic.

During the conference, moderated by the Director of the Center for Economic Studies at FUNGLODE, Frederic Emam-Zadé, Herman argued that today’s international financial architecture is defined in part by the absence of an international mechanism that allows countries experiencing sovereign debt crises to obtain opportune and efficient information that will lead to
sustainable public debt and development, while mitigating the immediate effects of debt.

“It would be very useful to have something that serves as a bankruptcy law to combat insolvency in a just, effective and timely manner,” stated Herman.

He explained that in many countries when a corporation goes
bankrupt, the bankruptcy law offers two options for resolving the situation: 1) dissolving the company and distributing the goods to the debtors; or 2) trying to rescue the corporation. However, he emphasized that in the case of sovereign governments, there is neither a bankruptcy court nor a bankruptcy law that exists to remedy the debt crises.

The Advisor to the United Nations argued that discussions to adopt this mechanism received political backing from the
International Monetary Fund during the 2001-2003 period, but was then aborted as a result of the interests of the creditors and sovereign debtors, fearing that the perpetrations would be considered as a means of accessing international capital markets. He maintained that certain governments have continued to lobby for the adoption of such a mechanism, these countries include Germany, Norway and Sweden.

He concluded by calling for the establishment of a distinct authority
that deals with all of the debt at once, and that is credible among debtors and creditors alike.

About Barry Herman
Barry Herman is a Visiting Senior Fellow at the Graduate Program in International Affairs of The New School in New York, where he teaches courses on public finance and sovereign debt, and inclusive finance (financial services for the poor). He completed almost 30 years in the UN Secretariat in December 2005;
his last position was as Senior Advisor on Financing for Development in the Department of Economic and Social Affairs (DESA). He is currently also helping DESA and UNDP draft the MDG Gap Task Force Report, 2012, which synthesizes the work of 34 international agencies that monitor implementation of “goal 8” on fostering the global partnership for development. He serves as Chair of the Advisory Board of a non-governmental organization/think tank “Social Justice
in Global Development”. He was a founding member of the Board of Directors of “Global Integrity,” an independent provider of research and techniques for researchers on government transparency and accountability, from which he retired at the end of 2011. His latest book, co-edited with José Antonio Ocampo and Shari Spiegel, is Overcoming Developing Country Debt Crises (Oxford University Press, 2010).  Before joining the UN, he
taught development and international economics. He holds a PhD from the University of Michigan and an MBA from the University of Chicago.

Related links:
www.socdevjustice.org
www.globalintegrity.org
www.newschool.edu/internationalaffairs/
www.un.org/esa/ffd/