More Than Confidence in Argentina’s Economy Shaken

On the one hand, the Argentinean government is in the wrong for defaulting on its debt obligations and undertaking public policies that put it in such a position.  On the other hand, billionaire Paul Singer shares blame as he refused to accept a 70% reduction on the face value of debt he bought, just as all other Argentinean debt holders did.  Although many argue Singer is just holding true to his principles when it comes to debtors paying their debts, the news coverage of the default has largely skimmed over the broader consequences of Singer’s true intent. 

After Argentina’s 2001 default, Singer and others purchased Argentinean debt for pennies on the dollar from investors desperately looking to recoup some of their losses.  Knowing the debt was worth a fraction of its face value, at best, he then sued the Argentinean government to make an obscene profit.  If Singer were truly acting on principle, he would have filed his lawsuit as a representative in order to help bondholders, who invested in Argentina and were cheated.  Clearly, capitalism is not about being nice or playing fair; it is about making money, so profiteering through litigation is perfectly fine in the eyes of businessmen, or even necessary.  That said, law may be about enforcing the rules that prevent our society from ripping itself apart, but something that is lawful is not necessarily right. 

It is helpful to divide how people are motivated in terms of economic, i.e. the pursuit of one’s interests, social, e.g. in line with community and religious expectations, and emotional incentives.  Where balanced people are motivated by economic, emotional, and social incentives throughout their daily lives, business decisions are based solely on economic motivations.  This, of course, creates a real conflict when the capitalist ambitions of the affluent neglect or damage the interests of a society, which is filled with people who look at the consequences of such harmful decisions in economic, social, and emotional terms.

As such, people see the actions of individuals like Singer as wrong, especially given Singer had intentionally gambled, and lost, on the wellbeing of 42 million people inside Argentina in order to make obscene profits at the expense of desperate bondholders he exploited.  Mr. Singer’s actions are akin to asking a homeless man for his change to buy himself a coffee then suing the restaurant for it being too hot after he purposely spills it on his lap.  This type of profiteering through litigation may be lucrative, legal, and perfectly reasonable under capitalist thinking; however, it is a practice that also undermines the social value of capitalism and law.  Moreover, social institutions like capitalist markets and legal systems only exist, because people support them and have faith they will serve their most important interest s, but business dealings like profiteering through litigation at the expense of millions undermines that faith.