The Debtor Prisoner’s Dilemma

The emergence of inextinguishable debt replicates other troubling aspects of contemporary life. Governments, businesses, and individuals all face the build-up of other sorts of liabilities in the form of accumulations of information that cannot be deleted. E-mail, Facebook, and Twitter accounts all produce a permanent record that perpetually accompanies users, even when their circumstances change. The legacy of the past continually resurfaces to constrain action in the present.

Just as countries might want to wipe out their debt and start anew, individuals might like to erase their electronic past in a dramatic act of liberation. But that would destroy the useful together with the embarrassing or irrelevant. If a clean start is impossible, the best that can be done is to try to bury the old information with such an inflationary flood of new data that it simply dwindles into insignificance.

The analogue in the world of debt negotiation is that a new start that allows borrowing to begin all over again is also impossible. A cleanup is impossible. That leaves only one solution: pile on new claims to such an extent that old debts appear paltry. Those who cannot forget the past are condemned to inflate it.

Harold James, Professor of History and International Affairs at Princeton University and Professor of History at the European University Institute, Florence, is the author most recently of Krupp: A History of the Legendary German Firm.

Copyright: Project Syndicate, 2012.

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