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*Accounting and Finance - New Perspectives on Banking, Financial Statements and Reporting*

"benefits are part of the social contract" ([27], p. 9).

who derive benefit from the Debtor State's social contract.

government for health benefits or education, etc." ([27], p. 9). Guzman and Stiglitz have called these beneficiaries as the State's informal creditors whose

The lack of an option for "State dissolution" should shift an SDR framework towards economic growth rather than the common pool of assets (see [28]) problem in bankruptcy cases. This is a paradigm shift from a static understanding of a limited pool of assets in domestic bankruptcy proceedings to a dynamic one which accounts for the possibility of growth (or conversely, diminution) based on the macroeconomic conditions of the Debtor State. Thus, "inclusive economic growth" within the Debtor State shortens the duration of a sovereign debt crisis and expands the available pool of State assets that may be used to service its debts. The expansion of the State's asset base also prevents the unbounded accumulation of future debts. Such endogenous growth implies a multiplier effect in the economy that increases a Debtor State's tax revenues, consumption, investments and expenditures. In the context of SDR, "inclusive economic growth" ultimately means the increased likelihood of the Debtor State to pay its debts. In this way, it benefits everyone: the Debtor State, the creditors and other stakeholders especially those

The project of fostering "inclusive economic growth" within the Debtor State would be seen in contradistinction to the imposition of austerity measures purportedly to set aside money to pay the State's creditors. Guzman and Stiglitz observes that "austerity policies are normally counterproductive *even from a creditors' perspective*" ([27], p. 8). Austerity measures may, in fact, decrease the State's ability to pay its debts by preventing it from spending money domestically to fix its economy.

There is also a question of social justice involved in prioritizing foreign creditors over the Debtor State's social welfare beneficiaries. Limited State assets are being used to pay wealthy investors (which include the so-called "vulture funds") over the State's citizens who may be invoking rights more closely related to value of human life—*e.g.* rights to public health and a sustainable environment. This arrangement in effect violates a hierarchy of values in international law which upholds the primacy of human life over property. Thus, the U.N. Commission on Human Rights issued a Resolution which "affirms that the exercise of the basic rights of the people of debtor countries to food, housing, clothing, employment, education, health services and a healthy environment cannot be subordinated to the implementation of structural adjustment policies and economic reforms arising from the debt" [29]. The treaty codification of "inclusive economic growth and sustainable development" as part of the principle of sustainability helps SDR move beyond a purely financial framework of sustainability. While it may be desirable to adopt more targeted measures to improve the human rights situation in SDR, an emphasis on the Debtor State's endogenous economic growth also addresses this aspect by improving the collective welfare of the relevant actors involved. In particular, an improved economic situation helps the Debtor State fulfill its social contract with its citizens

As shown above, there are not only efficiency and equity problems in the present

regime of SDR but also fundamental questions of social justice. These problems are serious enough to be simply ignored. The literature in SDR reveals that there is hardly any dispute that reforms are needed to address these problems. There is dispute, however, in the *kind of reforms* needed in SDR which ranges from the

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**5. Conclusion**

through an increased ability to pay.

Maximo Paulino T. Sison III University of the Philippines, Diliman, Quezon City, Philippines

\*Address all correspondence to: mowiesison@gmail.com

© 2019 The Author(s). Licensee IntechOpen. This chapter is distributed under the terms of the Creative Commons Attribution License (http://creativecommons.org/licenses/ by/3.0), which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
