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No Justice for Argentina

July 30, 2014

One of the undeniable features of Liberal thought is the notion that “law” and “justice” ought to coincide. While any number of people historically wronged by liberal republics (slaves, indigenous peoples, women, immigrants, racial “others”) could scoff at the idea, modernity has long defined itself as the slow march towards a more rational world in which the law makes sense because it is transparently just, where, for instance, everyone enjoys equal protection before the law because this is the only just way of organizing society.

And yet here we stand, July 30, 2014, with the vulture funds on the verge of driving Argentina into default because of a series of court rulings in a US judicial system that is broadly acknowledged to have given up any semblance of fairness after decades of increasingly partisan judicial appointments. Americans know this inherently. When they discuss rulings on the Affordable Care Act, Marriage and Reproductive rights, they invariably note that this or that judge was appointed by a Republican or Democrat. And yes, some have noted that Judge Thomas P. Griesa was appointed by a Republican, few have questioned the insane distortion of justice that has allowed Griesa and others to empower the likes of Paul E. Singer’s NML Capital to sweep in, buy up deeply discounted Argentine debt in 2008, and then demand a full repayment in spite of the fact that over 92 % of bond holders had accepted a 75% discount on those bonds. The unjust nature of American justice is patent to those outside the bubble. The ruling affects not just NML, but all other bondholders, who Griesa decided could not be paid if the holdouts were not paid, and who by law might be entitled to full payment if NML has its way. Argentina’s foreign debt could spike to something in the neighborhood of $50 billion, crippling an already struggling economy and pushing other economies in the region deeper into an emerging recession.

Forget generally accepted principles of bankruptcy and the history of default, in which broadly negotiated debt-restructurings helped both individuals and countries recover from crippling debts. In the new world order an American judge can drive a struggling country over the brink, in the service of a hedge fund that bought the debt on spec.

I am no fan of Cristina Kirschner, who strikes me as one of the more corrupt leaders in Latin America. I also understand that Argentina would not be in this position if the country had not borrowed in the first place. But we have long traditions of trying to solve these issues in ways that in the past at least evoked ideas of justice, of fairness, not just for the debt holders, but for the ordinary citizens who will suffer the most as a result of this battle.

No Justice for them. All they will get is the law.