Can Europe Make It?

Choosing what not to know: Germany, Greece and the value of strategic ignorance

Strategic ignorance of Germany's debt history in Europe serves a rational and self-interested goal for the Troika when it comes to Greece.

Linsey McGoey
15 July 2015

Wolfgang Schäuble at Eurogroup meeting over Greek bailout. Demotix/Jonathan Raa. All rights reserved.It’s become fashionable over recent weeks to suggest that Germans have forgotten their post-war history. The internet is heaving with stories about the 1953 London Debt Accord – the summit where Germany’s creditor nations reached an agreement cancelling more than half of the debt accumulated following the First and Second World Wars.  

Take a recent interview between Thomas Piketty and the German newspaper Die Zeit that’s gone viral on social media. When pressed by Die Zeit’s interviewer, the typically restrained superstar economist bursts out indignantly at the suggestion that it’s only fair for Greece to pay what it owes. ‘When I hear the Germans say that they maintain a very moral stance about debt and strongly believe that debts must be repaid, then I think: what a huge joke!’ Piketty exclaims. ‘Germany is the country that has never repaid its debts. It has no standing to lecture other nations.’

Small but vocal minorities of German economists, such as Heiner Flassbeck, have been making this exact point for years. ‘In Germany, unfortunately, the historical lessons are not even discussed,’ Flassbeck declared in 2013. ‘Nobody knows what happened, really, to Germany, what happened to the Germany reparations payments, that they were cancelled.”

But there’s a problem with this interpretation. It is at the same time both overly patronising to Germans as well as overly charitable.

The language of forgetting – the suggestion that ‘nobody knows’ – presumes that Germans are simply unaware of the past. It suggests their history books gloss this reality; that leading politicians and economists alike have never heard of the 1953 London Debt Accord.

Perhaps the way that the 1953 London treaty has been reported in the press lends some reinforcement to that suggestion. The London Debt Accord was originally called the Agreement on German External Debts. The fact that this longer title has been shortened to its more common moniker – conveniently expunging any mention of Germany at all – has the same rhetoric efforts as our tendency today to label the Eurozone crisis as the ‘Greek debt crisis.’ Our penchant for magnifying Greece’s role conveys the impression that wealthy nations and private stakeholders were entirely blameless. It skirts any attention, for example, to the creative accounting loopholes engineered by stakeholders such as Goldman Sachs to help Syriza’s predecessors in office to mask the scale of Greek debt.

And yet – can we really attribute this impressive spectacle of German amnesia to a mere semantic name change? Is it really plausible to suggest that ‘nobody knows’ Germany had 60 percent of its external debt written off with the stroke of a pen at the 1953 Agreement on German External Debts?

Of course that’s not plausible. Of course many know this history. Most importantly, of course Angela Merkel and Wolfgang Schäuble know it. How could they not?

The problem is not that Germany has forgotten its past. The problem is that Germany is willfully choosing not to remember.

A growing literature in sociology and economics helps to understand why Germany might wish to willfully deny the relevance of lessons from the past. Contrary to seeing ignorance as a passive state, I and other social scientists have written about the ways that ‘strategic ignorance’ can be a valuable political and commercial weapon, helping organisations and their personnel to deflect blame for past mishaps. During controlled experiments, economists have shown that individuals often deploy ‘strategic ignorance’ in order to profit from business transactions that might seem morally repugnant to them if they were informed of the full repercussions of their actions.

Our work on the value of ignorance builds on the notion of ‘rational ignorance,’ a term coined by the political scientist Anthony Downs in the 1950s. As the legal scholar Ilya Somin has described in the Washington Post, rational ignorance is defined as situations where people make rational choices to forgo knowledge that is easily available to them.

Why might Greece’s many creditors wish to carefully cultivate strategic ignorance of Germany’s past debt relief?

The reasons are legion, stemming from a desire to maintain the moral high ground during negotiations, to the danger of admitting openly that debt forgiveness can be one of the surest paths to economic prosperity – just as it was for Germany following the Second World War.

Admitting this reality doesn’t simply run the risk of letting Greece off the hook for its debts. It risks setting a precedent that chills the guardians of the current system of global economic governance. Strategic ignorance is useful not simply for the Troika in Europe, but lenders across the world fearful of the looming worldwide debt crisis that has been simmering since the 2008 financial crisis. Between 2008 and 2012, as the Global Policy Forum reported recently, “External loans to low income countries increased by 75 per cent.” As a result, “Two-thirds of impoverished countries face large increases in the share of government income spent on debt payments over the next ten years.”

The pain felt by these countries is always someone else’s gain. Following World War II, wealthy nations were willing to sacrifice short-term economic profits in the interest of global stability. To suggest that we have simply ‘forgotten’ that history is too generous an assumption. Maybe we really are that myopic. Or maybe collective ignorance is serving a quite rational – and quite self-interested – goal.  

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