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This chapter looks at the ethical aspects of globalization during the 1990s. It argues that in the way that they have sought to shape globalization, the advanced industrial countries and some of the multilateral institutions that they control have violated some basic ethical norms. Three central issues in the context of global finance are analyzed: the design of debt contracts between developed and developing countries and other aspects of lending behavior; the consequences of excessive debt; and broader issues associated with the global reserve system. Three types of ethical problems are discussed: (1) where markets (or international institutions) take advantage of their “power” and the weaknesses of the developing country to pursue their own interests at the expense of or risk to those in the developing countries; (2) where international financial institutions provide advice that works to the disadvantage of the developing countries; and (3) where the markets, and especially the international financial institutions, have not done as much as they could for the well-being of the developed countries.

This chapter lays out the foundations for a new positive theory of the consumer bankruptcy discharge that better coheres with common normative commitments and more persuasively explains doctrines that centrally define and limit today's right of discharge. It argues that our practices of debt-forgiveness are not about maximizing aggregate welfare, or about protecting individual rights, or about spreading wealth so as to achieve a more just distribution across society. Rather, they are about achieving and expressing personal virtue—not that of creditors or of debtors but of ordinary people, as citizens of a just and wealthy society. In short, the bankruptcy system is about the people, it is not about them; it is an institution required by persons of good character who live in a world of scarce resources with others of variable talents, dispositions, opportunities, and luck. It reflects the aggregation and coordination of the demands of the best “aretaic” theory—the best theory of what it means to be a person possessed of sound moral character within a society of unequally distributed benefits and burdens. When debtors are rightly forgiven, it is under circumstances in which all those to whom their debts are owed ought to forgive their debts, and all those to whom the costs of their default are passed ought to be willing to shoulder those losses.

The final chapter turns to the Strike Debt resistance movement to consider the possibility of democratizing the quasi-sovereign power of capital. Arguing against those who contend that the economy cannot be democratized and call for post-democratic responses to overturn capitalism, Strike Debt is an example of how citizens are cultivating the ability to imagine alternatives to capitalism through debt resistance. Strike Debt’s activities focus on rewiring the associations between debt, guilt, and morality identified by Nietzsche, replacing the shame and pleasure in punishing debtors and overconsumption with taking pleasure in forgiveness and the company of others. Strike Debt models a non-Marxist form of critique that should guide other Leftist movements, because it does not insist upon the necessity of revolutionary transformations. The chapter concludes by noting that Strike Debt’s practices of debt resistance could be strengthened if they were pursued within an institutional framework.

This chapter analyses how China converts its financial power into influence abroad. It argues that the provision of aid, loans, and foreign direct investment is a key tool China uses to project its power. It further asserts that China’s financial resources have a greater impact in less developed states, which by definition are lacking in capital, and in authoritarian regimes, due to the much smaller number of those whose support must be garnered in order to influence policies. It shows how Chinese finance secures influence over foreign state governments by enhancing the resources available for the foreign leader to disburse to the ruling coalition that keeps the leader in power. A stylized “aid game” illustrates the bargaining that occurs between state leaders over such capital imports. It further examines some of the accepted wisdom concerning Chinese “aid”, including the strings attached to what is often termed “no strings attached” aid, as well as whether China’s financial assistance is accurately termed “aid.” It also shows the myriad of channels through which capital inflows from China can be diverted from the projects they are funding in order to help the recipient state leader maintain power, thereby enhancing China’s influence over that leader.

This chapter examines leverage as a major cause of asset price bubbles. It outlines four reasons why the most recent leverage cycle was worse than previous cycles. First, leverage reached levels never seen before in previous cycles. Second, there was a double leverage cycle: in securities on the repo market and in real estate in the mortgage market. Third, credit default swaps (CDSs), which had been absent from previous cycles, played a major role in the financial crisis of the late 2000s. Fourth, extremely high leverage and low prices put a much larger number of people and businesses underwater than in earlier cycles. The chapter initially discusses the relationship between leverage and asset pricing before turning to a discussion of models of collateral and debt forgiveness (or punishment for default). It then suggests that collateral and leverage need to be integrated into macro models, and that by taking collateral seriously the effect on asset prices of new derivatives like CDSs can be properly assessed. Finally, it considers the optimal punishment for default and the adverse effects of debt overhang.

The story of Eveline Herfkens, Hilde F. Johnson, Clare Short and Heidemarie Wieczorek-Zeul, all of whom, with different titles became ministers in charge of development cooperation in the Netherlands, Norway, the UK, and Germany in 1997–8, and what they did together to bridge the gap between rhetoric and reality in the war against global poverty, starts with a short discussion of their background. This is followed by a discussion of the political situation and the different government arrangements that determined development policy in their countries at the time. The last part of the chapter reviews the beginnings of their collaboration which focused on ensuring that the debt relief provided to highly indebted poor countries (HIPCs) in programmes supported by the World Bank and the IMF resulted in actually lifting people out of poverty.