In Defense of Public Debt, Barry Eichengreen, Asmaa El-Ganainy, Rui Esteves and Kris James Mitchener. Oxford University Press, 2021, vii + 305 pages.

Stressing both commonalities and changes of the uses to which sovereign debt was put over time, the authors explain how sovereign debt developed into a safe asset and how it contributed to the development of financial markets, and the economy more generally, serving as an important tool for counter-cyclical spending which limited the incidence of economic depressions. Writing about the most recent spike in indebtedness, they acknowledge that running the sort of large, persistent primary surpluses required to bring down the level of indebtedness generated by Covid are rare, that attempting to raise taxes is challenging when the wealthy and their financial assets can move, and that a burst of inflation that liquidates debt burdens seems unlikely in the current context. Despite the difficulties created by unleashing ‘a tsunami of debt’ (199), the authors are adamant that a failure to act in the face of a national emergency – such as a war, a systemic financial crisis or a pandemic –would rob a government of its legitimacy. Collective Action Clauses (CACs) – provisions specifying that a supermajority of bondholders can change the terms of a bond – are also discussed by the authors.