National debt and secession

[El_Machinae]

When we talk about secession (not succession, sorry for the thread title), the apportioning of the nation's debt strikes me as the biggest factor in where I don't actually have any answers. If a province wants to say that the territory under their jurisdiction is now theirs, meh, we live in a progressive world. And obviously any debts owned by the citizens remain intact.

But how would we deal with the national debt? It seems unfair that the remainder now owes more. But it also seems unfair that a province cannot 'opt out' of being saddled with a larger burden of other people's spending.

Any actual theory out there that springs to mind from your own conception of how it should work?

 

[civver_764]

Can't you just do some math based on how much spending goes into that province?

 

[El_Machinae]

Can't you just do some math based on how much spending goes into that province?

I am not sure what you mean. But I must admit I am a bit stymied by the entire question I am proposing. Could you spell it out a bit more, please?

 

[Dachs]

When we talk about succession, the apportioning of the nation's debt strikes me as the biggest factor in where I don't actually have any answers. If a province wants to say that the territory under their jurisdiction is now theirs, meh, we live in a progressive world. And obviously any debts owned by the citizens remain intact.

But how would we deal with the national debt? It seems unfair that the remainder now owes more. But it also seems unfair that a province cannot 'opt out' of being saddled with a larger burden of other people's spending.

Any actual theory out there that springs to mind from your own conception of how it should work?

Depends on how the independence happens, I think.

Usually, if a country fights for independence and wins, international custom is to saddle it with none of the parent country's debt. Seems reasonable. Much of that debt would have been contracted in the course of trying to prevent the new country's independence anyway, and one can hardly expect the new country to pay for, say, the weapons used to kill its own people. That's what happened with South Sudanese independence in 2011. (Unfortunately, gaining independence without debt did not prevent massive overspending on military forces and civil war a few years later.)

Otherwise, it gets a bit messier. I think it's reasonable to suggest that each seceding territorial unit should, in the case of a peaceful and negotiated transition, continue to honor the debts contracted by it as an individual territorial unit, i.e. if Virginia were to secede from the US right now it would have to pay for the Commonwealth of Virginia's debts. The national debt would have to be a matter of negotiation between the parent country and the seceding country, because while much of it was undoubtedly contracted for reasons totally unrelated to the seceding country, some of it was contracted for reasons related to the seceding country. Ideally the seceding country would assume some proportion of the national debt based on these negotiations. I don't think it's possible to get more granular than that: you'd have to deal on a case-by-case basis.

 

[jackelgull]

Depends on how the independence happens, I think.

Usually, if a country fights for independence and wins, international custom is to saddle it with none of the parent country's debt. Seems reasonable. Much of that debt would have been contracted in the course of trying to prevent the new country's independence anyway, and one can hardly expect the new country to pay for, say, the weapons used to kill its own people. That's what happened with South Sudanese independence in 2011. (Unfortunately, gaining independence without debt did not prevent massive overspending on military forces and civil war a few years later.)

From what timeframe are you referring to? I remember France saddled Haiti with massive debt after it won its independence in a bloody struggle and this was in 18th century.

 

[El_Machinae]

That's considered to have been a terrific mistake, though. I'm trying to figure out how it would work, and I don't have any first principles arguments to work with.

 

[Hygro]

The national debt is owed by the country that issued the debt. If a country secedes, it's saying "we aren't that country" and therefore doesn't owe that money.

It would also highly depend on the nature of the debt. If the debt issued by the original country is in the original country's currency, it is better thought of as issued money. The new country might presumably issue its own new currency, and would be particularly bizarre if it laid financial claim to another country's money system.

 

[Evie]

Assuming peaceful secession, it comes down to diplomacy of course.

But personally, it would seem fair to me that, as a general benchmark, a seceding province (region, etc) should inherit a fraction of the debt roughly equivalent to the fraction (actual current value-wise) of the former government's assets (infrastructure, roads, etc) it's also inheriting.

With some potential give and take where the former government may retain partial or full control of some of those assets in return for a reduced share of the debt (in Quebec's case, for example, I could see Canada retaining a degree of control over the Quebec segment of the Saint Lawrence seaway in return for a reduced share of the debt).

ETA: In the North American context, the seceding government should also inherit the debts and treaty obligations resulting from Native land cessions that pertain to the lands the seceding entity claims (their proportional share thereof, if the land cession covers both seceding and non-seceding areas)

 

[FriendlyFire]

Can't you just do some math based on how much spending goes into that province?

Thats right part of the national debt would then be assigned the said new country
Hatti still owes debt from its armed rebellion, and independence war even the US made Hatti debt stick onto it and its hasnt been repaid even today.

 

[Commodore]

If a country secedes, it's saying "we aren't that country" and therefore doesn't owe that money.

That doesn't sit well with me though. If my wife and I have joint debt and then get divorced, I don't just get to say "that's not my debt anymore" and get to wash my hands of it and neither does my wife.

 

[Hygro]

That doesn't sit well with me though. If my wife and I have joint debt and then get divorced, I don't just get to say "that's not my debt anymore" and get to wash my hands of it and neither does my wife.

I didn't know you and your wife formed a corporation. Interesting.

 

[ori]

When we talk about secession (not succession, sorry for the thread title), ...

Moderator Action: corrected thread title

 

[Akka]

I didn't know you and your wife formed a corporation. Interesting.

I wasn't aware a country formed a corporation either. Interesting.

Anyway, if a country split peacefully, it seems fair to me that all debts be shared on a population proportion, and possibly higher if the central state had more heavily invested in the seceding part than in the rest of the country.

 

[Hygro]

That's where a private person can walk away and not personally owe what the legal fiction owes.

 

[Evie]

I don't think population proportion is a good way to go at this - fedral investments and population seldom correlates.

Proportion of total assets value is probably a much closer measure of federal investment.

 

[Hehehe]

I'd divvie it up in proportion to population. It's not perfect, but nothing ever is. Anything more complicated than that is going to be very difficult to calculate, and it is bound to be a topic for endless bickering.

If a province wants to say that the territory under their jurisdiction is now theirs, meh, we live in a progressive world.

An interesting opinion.

What if a lot of Mexicans moved into the US, and they became the majority in Texas or California, for example, do you think they would have the right to secede and join Mexico, if they wanted to? What if a majority of Catalonians want to secede, but a minority doesn't? Can that minority then secede from independent Catalonia and rejoin Spain? Is there a size limit as to how big you have to be in order to secede? Can I declare my house as a sovereign country?

 

[El_Machinae]

It's not so much that I am not answering that question. It's more that I am disregarding it. It's an interesting question, but I'm finding that I don't even have intuitions regarding the national debt. I have intuitions about secession, but not the debt splitting.

 

[EnglishEdward]

As ability to service debt is usually determined by GDP, it would seem logical to me to
apportion debt in proportion of seceding region's GDP to the rest of the country's GDP.

Apportioning debt based on assets is less clearcut. e.g.

"You are declaring independence, Catalonia." Fine here is the aircraft carrier. Sign on the dotted line.
~~~ Why did you give us the old aircraft carrier? So we can assign most of the national debt to you.

"You Scots want 80% of the oil. Fine here is 80% of the UK national debt."

 

[Hygro]

It's not so much that I am answering that question. It's more that I am disregarding it. I'm finding that I don't even have intuitions regarding the national debt

It's a political question negotiated by the players with respect to their power. There's no right answer.

 

[warpus]

Each independence movement is unique, so I don't think it's possible to come up with generic rules that will apply for everyone.

I don't really think that passing on national debt onto a province that is breaking away makes sense either. The province in question might not have had any impact on what money gets spent where federally speaking. So why punish them for the spending decisions of a government they don't control?

Instead make them get their own stuff. Want to use the country they're breaking away from's currency? Nope, sorry. Any nationalized infrastructure in the province declaring independence? Make them buy it. etc.