And forgive us our debts, as we forgive our debtors.
Matthew 6:12, King James Bible, 1611
In an economic crisis, must a government repay its international debts even if it means cutting programs when citizens need them most? Governments struggled with this dilemma during recent crises in Greece, Argentina, Iceland, and other countries. The question is not only about economics: costs, benefits, credit, reputation. It’s also about morality: the obligation to repay and the obligation to care for citizens.
When emboldened by moral righteousness, people stray far from ordinary considerations like costs, benefits, harm, compromise, and happiness. That’s why in so many cultures moralists condemn, punish, and even execute people for benign offenses such as premarital sex, dancing, homosexuality, eating the wrong animal, believing in the wrong gods, drawing the wrong cartoon, and so on. Human morality seethes with taboos—actions that are forbidden or obligatory, no matter what. And taboos collide to create dilemmas: Should you lie to protect someone you love? Should you take money from the rich to help the poor? Should you kill one person to save five?
We wanted to know how people judge moral dilemmas of international debt. How strong is the moral taboo against defaulting on a debt? To find out, participants read a hypothetical dilemma where a country suffers from an economic crisis and the government cannot repay its international debt unless it cuts government jobs. If the government defaults, then the lender country will have to cut jobs due to the missing funds but not as many as the debtor country. The dilemma is analogous to the trolley problem from moral philosophy, in which someone must decide whether to kill one person to save five people. In this case, the debtor decides whether to default on the debt to save 6,000 jobs at home, while causing 5,000 job losses in the lender country. This means that the debtor stands to lose 1.2 times more jobs than the lender, creating a dilemma between saving more jobs versus meeting the moral obligation to repay. Participants answered what the government should do, and whether each choice is morally wrong and deserves punishment.
We found that 72% of participants opposed default and said the government must repay (Figure 1, 1.2x condition). Thus, we see the signs of a taboo: Participants opposed default even when it would do more good.
To gauge the strength of the taboo, we varied the debtor’s job losses across conditions. The debtor would lose 6,000, 10,000, 25,000, or 100,000 jobs, while holding constant the creditor’s losses at 5,000 jobs. This varies the ratio of damage to the debtor relative to the creditor, such that the debtor’s losses are 1.2x, 2x, 5x, or 20x those of the creditor. We also manipulated whether the government was deciding whether to fully default or to partially default by repaying half of what they owe.
Figure 1. Percentage of participants who opposed default. Judgments are shown by the ratio of potential damage to the debtor relative to the lender and by whether the required default was full or partial. The line at 50% indicates the majority tendency; the percentages statistically differed from 50% except for the 2x/full and 5x/partial conditions.
Most participants still opposed default when the debtor’s job losses were twice the lender. As the debtor’s job losses grew to 5 times and 20 times the lender’s, participants became less opposed. But even when the debtor had 100,000 jobs at stake (20x), 39% of participants said the government must repay (Figure 1). Also, participants were less opposed to default when it was partial. This supports the idea that partially repaying shows the debtor’s good intentions and thus lessens the moral violation. More generally, this fits the idea that taboos depend on the nature of the action, including the intentions behind it, separate from the consequences.
Participants’ moral judgments were different. Most participants judged that defaulting was wrong and punishable with little change as the debtor’s job losses increased. Many of these participants supported default even though they judged it to be morally wrong, presumably because they saw it as the lesser evil. In contrast, participants judged that the partial default is less morally wrong than the full default. These results show more signs of taboo: participants’ moral judgments depended little on the consequences but they did depend on the nature of the action, whether the default was full or partial.
In their comments, participants who opposed default emphasized the moral obligation to repay, using more deontic words: must, have to, need to, promise, commitment, contract, responsibility, agreement, obligation, fulfill, honor, owe, and duty. They wrote: “debts must be repaid,” “they have to honor the agreement,” ” and the debtor “should have to repay its debt no matter what.” Participants who supported default weighed the consequences of each choice, using more comparative words: less, more, better, worse, than, least, few, many, greater, number, and amount. Examples include: “I tried to minimize the job loss,” “I based it on the concept of greater good,” “Better for 5,000 people to lose their jobs than 100,000,” and “I tried to get as few people affected as possible.”
We also look at political ideology by presenting the dilemmas to a national sample of Americans. Conservatives and Republicans were more stiffly opposed to default than liberals and Democrats. Still, most Americans across the political spectrum agreed that defaulting is morally wrong, even those who supported it. This suggests that liberals and conservatives share a moral code on debt, even if they adhere to it differently.
Generally, these experiments illustrate how moral taboos can stand in the way of public welfare when they are at odds with better consequences. Taboos against default, amplified by ideology and partisanship, could thwart policies that would improve the greater good. Under the eye of morality, even economic issues like defaulting on a debt can become a sin to condemn at all costs.