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Guest Post: Head of World’s Largest Asset Manager Says “Markets Like Totalitarian Governments”

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Washington’s Blog

Blackrock is the world’s largest investment manager.

As Wikipedia notes:

BlackRock is the largest global investment management firm headquartered in New York City. It is one of the most prominent financial institutions in the US. The company acquired Barclays Global Investors in December 2009 under the BlackRock name, making it the largest money manager in the world.

But BlackRock isn’t just the largest money manager … it is also the larges asset manager in the world.

As Wikipeda notes:

As of December 31, 2010, BlackRock’s assets under management total $3.56 trillion across equity, fixed income, alternative investments, real estate, risk management, and advisory strategies. Through BlackRock Solutions, it offers risk management, strategic advisory, and enterprise investment system services to a broad base of clients with portfolios totaling approximately $9 trillion.

And see this and this.

So it is stunning that Blackrock’s Chairman and CEO – Larry Fink – said on Bloomberg TV:

Markets like totalitarian governments.

Investors can determine whether a nation prospers or starves.

Investors can determine the course of nations, including who gets elected and who gets the boot.

No wonder there are so many totalitarian governments in the Middle East, North Africa and around the world.

No wonder totalitarianism has been creeping into America’s politics and economics. See this and this.

Because big investors (or at least big asset managers) like totalitarian governments. If they instead preferred democracy, democracy would flourish.

H/t: Tyler Durden.

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47 comments

  1. Chris

    Investing is about predicting the future totalitarian Governments make predicting the political future so much easier. Plus so much easier to corrupt. Surprised he would state the obvious.

    1. Argue th is

      more importantly,

      It can issue decision by edict. (no regulation, no tax, can move people around. Need to eliminate people or manufacturing error that kills? no problem)

      Wait until the geniuses finally find out how “free market” and “democracy” are actually not compatible at the very core of it all.

      (Buy and bribe the government and manipulating public opinion/flow of information using corporate media are logical outcome of free market. sovereignty and currency flow is not compatible with each other either. As people in DC slowly finds out.)

      1. Tao Jonesing

        Within the neoliberal construct that guides us today, there is nothing incompatible with totalitarian governments and the free market. Indeed, they’re two sides of the same coin.

        Most people thought Hayek’s “The Road to Serfdom” was warning what would happen if the world continued on the path of socialism, but he was actually promising what would happen if the world followed his ideas. The neoliberals don’t like democracy at all.

        1. MyLessThanPrimeBeef

          We have neoliberalism.

          We have neoconservatism.

          I am afraid to find out what’s neodemocracy.

          1. Masonboro

            @ MyLess…. “I am afraid to find out what’s neodemocracy.”

            Reread Dickens.

            Jim

  2. Paul Tioxon

    The Wind of Change – in the Arab World and Beyond

    http://www.iwallerstein.com/the-wind-of-change-in-the-arab-world-and-beyond/

    Of course the markets are not really markets. If you look at the scale of Blackrocks’s business measured in the trillions and BNY Mellon, with $25 TRILLION under some sort of custodial administration, where exactly are the markets, but within a corporate organization structure, a private bureaucracy.

    http://www.bnymellon.com/about/companyprofile.html

  3. RBHoughton

    Actually the comment is progressive. Democracy is like a headless chicken. It lacks the ability to direct itself because its Constitutional basis has been eroded. But even if we made a genuine democracy based on a functioning and respected Constitution and on Primary Assemblies, it would still need someone to direct it.

    Today we have the economic oligarchs in control of direction; yesterday we had the Kings and the Pope doing it. If we really wanted to create a government that put domestic policy foremost and re-cycled wealth around the country, we would have to remove the current incumbents. Their claim to authority rests on their ownership of the country and they have the police, militias and army conditioned to bat for them.

    It seems indisputable that only an economic collapse can introduce the necessary conditions for the sovereignty of the people to triumph.

    1. Lyle

      Except that the two total revolutions in history, France and Russia in the end just exchanged who was in the Elite. In France they chopped off the heads of the old elite and Napolean and his crew came in, then after Waterloo the remnants of the old elite came back, along with some of the Napoleanic elite. In Russia they killed the old elite or exiled them, and a new elite arose that in the end was no better than the old one. Things never get better, never have never will elites are always going to be with us and will always only care for their interests. Any other point of view requires smoking something to maintain.

      1. kievite

        “Except that the two total revolutions in history, France and Russia in the end just exchanged who was in the Elite. “

        The same is true for the evolution of mankind from Rome till present days. In each country the elite (which less politically correct is called oligarchy) dominates the political process and if one elite is weakened, the other take its place. In this sense, unfortunately, democracy is just a nice myth. It exists exclusively within the narrow social strata called elite (or top 1%).

        So the real question is how strong is the grip of the elite and here large historic variations are possible. I would prefer the US oligarchy to the USSR oligarchy any day.

        Another question is how isolated and self-sustained is the elite (social mobility issues). While people mistakenly assume that the USA have substantial vertical mobility, it does has slightly more vertical mobility then say, Great Britain, but definitely less then modern Russia (which substantially changed the composition of the elite after the dissolution of the USSR). It’s funny but in this sense Russia is one of the most democratic counties in the world which manage substantially change its elite twice in one century. Sadly this statement will not be approved by Hilary Clinton or Barack Obama :-)

        Human societies have almost infinite capacity for self-delusion.

      2. eric

        Both the French and Russian revolutions made material improvements in many people’s lives. Of course, lots of bad stuff happened too, but I don’t think you have to be on drugs to think that in both cases there was some improvement overall.

    2. RBHoughton

      Thank you for the constructive comments Lyle and Kievite – excuse me for feeling you are unnecessarily pessimistic.

      The French Revolution offers a good example of what I suspect is the best way of protecting the social contract. To be sure it was nearly destroyed by the neighbours until Napoleon stepped-in, but, once that happened, it worked very well and we are still living with the consequences of his initiatives. He described his government as “a dictatorship over a vast democracy.’

      I know little of the Russian Revolution and cannot comment beyond noting that the errors of Marx have been absurdly overstated and there remains an immense amount of reliable analysis in his work.

      Independence in USA was followed by at least 30 years of responsible government until we Poms destroyed it in 1812. There is a mass of insightful information there to guide us as well.

      The British Revolution in 1688 is irrelevant as it was like the Egyptian one we are witnessing now – one power centre replacing another – which is the point Lyle percipiently makes in respect of Russia too.

      So I focus on France and USA two centuries ago and I am confident that this time our efforts will be successful because of our technological development. The internet has changed the rules. Concealment is no longer an option. Power centers will have to confront publicity for their acts. They will never voluntarily express contrition or shame – they will try to justify the unjustifiable. That’s only one step from their complete failure.

        1. Joe Rebholz

          Human nature is not fixed. It is not determined only by genetics and biological evolution. It is also determined by cultural evolution. The nature of a humn being is determined by that person’s genes and by what he or she has learned from all the other people in his or her group. So change the dominant ideas and beliefs, etc. in humanity and there will be a different human nature.

          In addition, belief in a fixed human nature limits, cuts off, or diminishes reaction to the negative trends we are discussing.

          Belief in a fixed human nature can cause us to give up even before trying to change or replace our poorly functioning systems.

      1. nonclassical

        Folks,

        Read this about internet manipulation. Realize John Rendon
        of “Rendon Group” admitted in the article on the Bushit lies to drive internationally illegal invasion of Iraq, that, “The NEXT time we will have total control of propaganda=information..this time we didn’t”.

        Rendon is referring to recent advent of CIA and FBI huge computer mega-facilities whereby “information warriors” will
        come on forums such as this to contradict information.

        The internet is devolving as we speak. There is a fundamentalist argument over whether truth even exists, outside the hallowed “individual”.

        While most here on this forum are incredibly economically aware, I am not sure whether they are prepared by their education to comprehend Socratesian dialogue on truth in these debates. Having debated Jonah Goldberg on his ridiculous stance on “truth”, it does require enough background to remind opposition that even THEIR claims are subject to the test of truth.

        Point is, it’s about to get a lot muddier, deeper…

        Here’s the article in which Rendon makes his claim:

        http://ics.leeds.ac.uk/papers/vp01.cfm?outfit=pmt&folder=2053&paper=3010

  4. Francois T

    Oh yeah!

    That myth is tougher to kill than a zombie:

    http://www.ritholtz.com/blog/2011/02/the-faulty-economic-model-behind-americas-support-for-dictators-instead-of-democracies

    The argument went—as presented in the writings of Samuel Huntington and Seymour Martin Lipset —that if a poor country became democratic, because of the pressures in a democracy to respond to the interests of the people, they would borrow too much, they would spend the money in ways that did not advance development—arguments that the current president of Mexico is making about his possible successor. These poor decisions would mean that development would not occur; and because people would then be disappointed, they would return to a dictatorship.
    Therefore, the prescription was, get yourself a benign dictator—it was never quite explained how you would make sure you had a dictator that spent the money to develop the country rather than ship it off to a Swiss bank account—wait until that produces development, which produces a middle class, and then, inevitably, the middle class will demand freedom, and you will have a democratic government.
    That proposition was wrong.

    And is still and always will be wrong.

    As for Blackrock, it can’t be surprising they’d say something like that: totalitarians afflict the little people, not the powerful. Those who could demand something from the powerful are “kept in their place”, so their betters can keep accumulating (discreetly, since free press is nary) more wealth.

    After God’s work, we get this preference for dictators.

    What’s next??

  5. Max424

    What a great headline. GW strikes again.

    I could be wrong (I can’t find my link), but I believe it was the take-no-prisoners capitalista David Rubenstein, founder of the ruthless Carlyle Group, that said investing in China was a very smart play because China’s preference for state central planning — and 5 year plans — added a great deal of stability to the outsider’s risk equation.

    It’s all such a joke, isn’t it? It would be hilarious if it wasn’t so tragic.

    Daily watching fraudulent banksters and psychotic gamblers insidiously chatting with obsequious CNBC hosts; listening to Republican free-market poseurs professing their love for small businesses and jobs when they’re actually out to destroy both in the name of Global Corporatism; witnessing a torrent of Liberterians nut jobs — that believe anarchy and apartheid are not only compatible but the perfect symbiotic representation of the ideal society — descend on us like a Biblical plague; and especially knowing that Barrack “Probably Our Last Chance” Obama put the same people in charge of the economy that had just blown up the economy; the only conclusion I can draw is I will never see sanity restored to my corner of the world* in my lifetime.

    * I consider America my corner of the world, for better or worse.

    1. Otter

      “America” is far too large a corner of the world whereforin a natural person to be noticed let along to be effectively influential.

      1. Psychoanalystus

        Right… I guess it takes a much smaller country for one person to have an impact… Something like Russia with Stalin, China with Mao, and the Roman Empire with Julius Cesar…

        Psychoanalystus

  6. CHRIS

    I don’t think their is any question about free markets and democracy. There is on free market even with democracy when the representatives of the people are criminals themselves. The lust for power and money drives politicians and they have no concept of the real world. Our economy is no more a free market than was the Soviet Union in the 1970′s. When our congress sits back and watches banksters collapse our economy and then hand them a key to the federal reserve, leaving homeowners the only party to get no help because the politicians and banksters thought it was convenient to make the middle class suffer the losses so they all could live high off the hog. Jamie Diamon ridiculous muli million dollar salary, V Pandit still in charge of city, the revolving door at wells,

    We have been dooped by the politicians again. what ever hAPPENED TO THE NEW BLOOD coming into congress that would clean up the system and hold the banks accountable?

    Oh sorry forgot we can never believe a bit dither coming out of the mouth’s of those on the hill.

  7. Jessica

    We live in a society that combines the forms of democracy in politics with a an economic structure that is as anti-democratic as the middle ages.
    True democracy means that everyone counts, everyone matters.
    Feudalism means that a few people count and everyone else is just fodder for the adventures of that elite.
    The entire modern era is defined by the struggle between our feudal past and our true-democratic future.
    (This from a science fiction book called Blue Mars by Kim Stanley Robinson. He presents it as the theory of a history of a human-Martian historian writing in the age of true democracy.)

    1. Mark P.

      Neofeudalism is here — or back — with a vengeance.

      I used to see and hear that old quote from the 1930s where FDR fulminated about how he welcomed “the economic royalists’ hatred.” And I used to think “economic royalists” — what a quaint, cumbersome phrase, and whatever had Roosevelt thought that meant?

      Now I understand that FDR — as he said — had dined and grown up with such people, and he diagnosed it exactly right.

      It’s the whole ‘divine right of kings’ deal all over again, where a heirarchy of the wealthy sees itself as ordained — by some Social Darwinist ordering principle, rather than God — to preside over us: the financial industry CEOs on top, then the various levels of the plutocratic pecking order below, and finally on the bottom the masses of us little people, whose only proper function is to be looted so as to feed the accumulation of benifences by our lordly superiors.

      (Of course, calling it neofeudalism is a little unfair to feudalism, since there were periods when feudal noblemen were expected to have some sense of noblesse oblige and of responsibility towards their peasants.)

      http://en.wikipedia.org/wiki/Neofeudalism

      http://www.frontporchrepublic.com/2010/08/neo-feudalism-and-the-invisible-fist/

      http://www.amazon.com/Cornered-Monopoly-Capitalism-Economics-Destruction/dp/0470186380

      1. Jessica

        Alternatively, the elite was always in charge economically but they have shifted from a pattern that worked better for a lot of (1st world) people (high growth rate; lower percentage of elite taking) to a pattern that works worse for especially 1st world people (lower growth rate; less left over for the serfs).

        Actually I think it is some of both. The technological changes of recent decades and the expanded trade possibilities of Pax Americana have disproportionally benefited the elite. Reduced racism and sexism have also left less extraordinary talent among the serfs to organize a rebellion. And academia, which once produced ideas useful for us serfs, has been incorporated as the R&D wing of corporate rule.

      2. Michael H

        Mark P: Neofeudalism is here — or back — with a vengeance.

        Americans are conditioned 24/7 to be slaves, and to accept that reality is whatever a billionaire says it is. Like Egyptians worshiping deceased pharoahs, American are taught to worship their live billionaires. And so, despite its proven failure, time and again, many people are still waiting for trickle-down to work. Still waiting for a few pennies of bailout money to trickle back down…..

        You wonder what the breaking point will be, or is there one? If 10,000 people controlled 99.00 percent of wealth in the USA, would that do it? Perhaps 100 people with 99.9999 percent?

        Things will continue like this, and continue getting worse, until the slaves learn how to revolt.

        1. finlandstation

          slaves? really? i guess those thirty people in front of me last night at costco with their pile high slabs of steaks, smoked salmon and bushel sized boxes of produce, not to mention all of the hd tv’s, and exotic camera phones were just stocking up on provisions needed to sustain them in their captivity. nothing like hyperbole to make an argument.

          1. Pete Peterson

            NOw we’re talking. Show them how it’s done.

            But you forgot to mention those people on food stamps who are always buying lobster, prime rib, and filet mignon.

          2. Michael H

            finlandstation: “i guess those thirty people in front of me last night at costco with their pile high slabs of steaks, smoked salmon and bushel sized boxes of produce….”

            Strange. A caller on talk radio was describing a similar incident at Costco just a couple of weeks ago. On WABC 770 New York City. Supposedly this offered irrefutable proof that trickle down is working, after all. And the context? They were discussing the “budget crisis” and the need for austerity measures. The host, as well as 95 percent of his callers were in complete agreement on the need for austerity measures for the general population.

            As far as I could tell there was no talk of forcing banksters to give back any bailout money. Which is typical.

            And yeah, sometimes I listen to the enemy just to see what they’re plotting next.

            Tempted to call in, point out the obvious: lots of restaurant owners shop at Costco. But then I figured, what’s the point, it’s not like we’re dealing with reality.

  8. attempter

    The post is correct but is actually describing phenomena which could be features of any kind of tyranny.

    What’s truly totalitarian about capitalism/corporatism is:

    1. It refuses to tolerate or coexist with any phenomenon or value other than itself.

    2. It’s intrinsically incapable of accepting any limit on itself or even of conceiving such a limit. It will never stop advancing, violating, and destroying until everything else has been completely wiped out, or until it is completely eradicated.

    This is why reformism and “regulation” can never work. We know for a fact that totalitarian aggression can never be tamed or appeased, only destroyed.

  9. craazyman

    First, there were totalitarian governments long before there were markets.

    More economic lunacy being spouted here, by Mr. Fink. Is every form of economic thinking a form of insanity? It may be. That could be a new theorem. The economic insanity theorem (EIT).

    I mean really. Look at the totalitarian governments of the past 100 years — Soviet Union, Nazi Germany, Communist China, Cuba, etc.

    How did their “markets” do?

    And then look at the so-called democracies — U.S., Western Europe, etc., over the long-term — 50 to 100 years.

    Markets like totalitarian governments? Really? Man on man, the idiot wind is blowing like a hurricane.

    1. rkka

      Well crazyman, in 1992 there were:
      2.65 million Latvians, and the number was growing.
      3.7 million Lithuanians, and the number was growing.
      1.7 million Estonians, and the number was growing.
      10.4 million Byelorussians, and the number was growing.
      52 million Ukrainians, and the number was growing.
      148 million Russians, and the number was growing.

      Now…
      There are 2.2 million Latvians, and deaths exceed births by 1.57:1.
      There are 3.3 million Lithuanians, and deaths exceed births by 1.2:1.
      There are 1.5 million Estonians, and births finally equal deaths.
      9.8 million Byelorussians, and deaths exceed births by 1.27:1
      45.5 million Ukrainians, and deaths exceed births by 1.41:1.
      142 million Russians, and deaths exceed births by 1.13:1.

      I’d say the Soviet economy did better than what has replaced it.

  10. Pete Peterson

    Five, six anti-billionaire comments in a row.

    Ahem, er, where’s my trolls? Boys that would be your cue, say something like “cut social security before there is financial armageddon” or “respect and obey your elected representatives” or “let’s all have a pro-war rally” etc

    Otherwise what am I paying you for?

    1. Jignesh

      I believe you’re looking for Simon Johnson’s blog…it’s down the hall and to the left.

      1. beowulf

        What’s funny about that is Simon Johnson probably does have an office just down the hall…

        The Peterson Institute for International Economics is a private, nonprofit, nonpartisan research institution devoted to the study of international economic policy… Simon Johnson, senior fellow from September 2008, was previously the International Monetary Fund’s Economic Counselor and Director of the Research Department
        http://www.iie.com/staff/author_bio.cfm?author_id=586

  11. Give Sympathize Control

    Since the “market” is a dictator, it should come as no surprise that it prefers totalitarianism. The Invisible Hand is also the Iron Hand.

  12. gizzard

    When I’m in a particularly pessimistic mood I can see that we are headed for a new feudal existence, owned by our corporatist elite and told to be thankful for whatever it is we receive form them. But then I allow the idea to enter my head that that cannot happen, we will not let it happen. I begin to see that maybe the American experiment of the 1940s to mid 1970s was enough. It was enough time for all of us, all over the world, to see that we CAN have a better life for more. We CAN have a middle class that supports families and funds education systems that lift our collective to new heights.

    Forced austerity is a lie and I think, I HOPE, enough of us know this to stop the corporate looters in their tracks. They are winning some battles right now but I really think we will win the war. They are over reaching because its in their nature to try to have it all but they will not get that, NO ONE can have it all. Its a law of nature.

  13. Jim

    Funny. Bloomberg TV seems to mention “New world Order” quite frequently too. Whatever that REALLY means. Charlie Rose, or his guests seem to mention New World Order about every week.

  14. Psychoanalystus

    A number of authors have proposed recently that of the three elements: democracy, sovereign state, and globalization, we can have any 2 in any combination, but not all 3 together. It is now clear that democracy is being sacrificed not only abroad, but also in the United Stated.

    Psychoanalystus

    1. attempter

      The “trilemma” is actually a lie they’re telling, trying to pretend globalization can ever be compatible with either democracy or sovereignty.

      Globalization is on its face the direct abdication of national sovereignty to multinational corporations and their flunkey cadres like the World Bank and IMF.

      Meanwhile the practice of it as enshrined in the WTO etc. is radically anti-democratic, seeking to transfer as much power as possible from the people of a country to adminstrative procedures and secret tribunals.

      Democracy? It’s a fact that the neoliberal agenda has never once won a fair election. Without exception it either rigged the election and/or dissembled its aims.

      No, globalization both by definition and in practice is anti-sovereign and anti-democratic. But the hacks who argue the trilemma want to try to drive wedges between opponents by arguing it can coexist with one or the other.

      This sure is an appropriate subject for a thread on totalitarianism. The globalization bureaucracy is a classic example of it: The unaccountable, secretive administrative rule and the absolute disenfranchisement and exclusion of all values and measures except those dictated by fundamentalist capitalism.

      The Nazi General Government of Poland administrative zone was an early experiment in direct administrative rule dedicated to total extraction. The WTO, CAFTA, NAFTA, SPP etc. are intended to normalize this model.

      The globalist administration is intended to replace all sovereign governments (except insofar as they’ll exist as rump corruption belts for the parasite political parties) as the instruments of direct corporate rule.

      1. Psychoanalystus

        Indeed. These geniuses would have us believe we need to give up on democracy for the privilege of slaving away for the Kochs of the world. The latest book on the topic seems to be “The Globalization Paradox: Democracy and the Future of the World Economy”, by Dani Rodrik.

        Personally, I worry that these on-going revolutions in the Middle East and North Africa will soon be hijacked by the same criminal corporations (e.g., Bechtel, Exxon, OMV, and a deluge of foreign banks) that have stolen (spelled: p-r-i-v-a-t-i-z-a-t-i-o-n) Eastern Europe and Russia after 1989. I hope there are some Arab-speaking authors and activists willing to take the time to inform and defend those nations against the onslaught of disinformation and corruption that Milton Friedman’s “Chicago Boys” are about to unleash upon them.

        Psychoanalystus

        1. Psychoanalystus

          After I posted the above I realized that the Arab nations are in a far better position to protect themselves against the onslaught of neoliberalism aimed at them than the West is. The Arabs have something which just this week our own Hillary Clinton praised. They have Al Jazeera. We have nothing to compare. Of course, we have people like Amy Goodman and her Democracy Now, which deserve praise, but we have nothing of the scale and global influence of Al Jazeera. Perhaps that is why neoliberalism is now coming home to good ole’ U.S. of A. with such a vengeance – perhaps it is not welcomed anywhere else anymore. Perhaps the dumbed down American people are the only nation on Earth uninformed and brainwashed enough to actually embrace and cheer the arrival of neoliberal “cures”.

          To add to the above, I was amazed seeing how these popular Arab revolutions were so quickly labeled the “Facebook revolutions” or the “Tweeter revolutions”, as if not to miss out on the opportunity to steal the due credit from the people who actually started these revolutions in the streets and to give it to these greed-based American corporations. As if dropout cheats like that Facebook prick, Zuckerberg, or whatever his name is, somehow should be associated with these movements. Unbelievable! The shamelessness and spin abilities of this nation are just amazing!

          If any of this credit is to be shared with anybody that might be Al Jazeera, not pathetic American corporations such as Facebook or Tweeter which are in fact causing immense (and well researched) social damage across the world and creating a generation of social misfits and sociopathic narcissists that have lost all touch with reality.

          Psychoanalystus

  15. Jignesh

    Who doesn’t like totalitarian governments?

    I don’t know anyone in business who wouldn’t LOVE to have a government like the Chinese government in the U.S. or Europe. They practice a purer form of capitalism there.

    1. Psychoanalystus

      What do you mean by “purer capitalism”? Could you perhaps be referring to things such as the fact that in recent months the Chinese government has started building medical clinics across China, which will soon provide free access to a doctor to 99% of the Chinese population?

      Funny how that pure capitalist Chinese government didn’t invite Blue Cross and Blue “Shit” to show them how access to doctors is done the capitalist way…

      Psychoanalystus

  16. beowulf

    “Who doesn’t like totalitarian governments?”

    Err, any bondholder who wants their debt repaid. In international law, there’s a jagged little pill called “odious debts”.

    a legal theory which holds that the national debt incurred by a regime for purposes that do not serve the best interests of the nation, should not be enforceable. Such debts are thus considered by this doctrine to be personal debts of the regime that incurred them and not debts of the state. In some respects, the concept is analogous to the invalidity of contracts signed under coercion.
    http://en.wikipedia.org/wiki/Odious_debt

    1. beowulf

      More on odious debt, nice to see Washington and London are on board. :o)

      The United States set the first precedent of odious debt when it seized control of Cuba from Spain. Spain insisted that Cuba repay the loans made to them by Spain. The U.S. repudiated (refused to pay) that debt, arguing that the debt was imposed on Cuba by force of arms and served Spain’s interest rather than Cuba’s, and that the debt therefore ought not be repaid. This precedent was upheld by international law in Great Britain v. Costa Rica (1923) when money was put to use for illegitimate purposes with full knowledge of the lending institution; the resulting debt was annulled.

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