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The Political Economy of Forgiveness: The Necessity of Post-Atrocity Reconciliation Peter J.

Boettke, George Mason University pboettke@gmu.edu Christopher J. Coyne, Hampden Sydney College ccoyne@hsc.edu

Abstract: The turn of the century witnessed the emergence of several new democracies wrestling with the past of oppressive state regimes which committed atrocities on their own citizens. In East and Central Europe, the former Soviet Union, Latin America, South Africa, and the Middle East, new governments and their citizens are figuring out precisely how to balance past and present. In the mid-20th century, Germany and Japan had to negotiate a similar political terrain. Our paper is focused on past injustices perpetrated by totalitarian regimes and using basic economic reasoning we attempt to clear a path for reconciliation and thus hope for a future of peace and prosperity.

JEL Codes: D63; D70; P26

we would be condemned to wander helplessly and without direction in the darkness of each man’s lonely heart . -. we would remain the victims of its consequences forever. forgiving. whose ‘sins’ hang like Damocles’ sword over every new generation. The Human Condition (1958. and the other. Without being bound to the fulfillment of promises.Hannah Arendt. have known what he was doing --. released from the consequences of what we have done. which the future is by definition.” When he concluded his first day of testimony before South Africa’s Truth and Reconciliation Commission he made an appeal to meet with the widows of husbands who had died in a bombing that he had planned. our capacity to act would. 13-15). not unlike the sorcerer’s apprentice who lacked the magic formula to break the spell.is the faculty of forgiving. (Gobodo-Madikizela 2003. Introduction Eugene de Kock was the most notorious operative of the Apartheid regime in South Africa. as it were. would be possible in the relationships between men. islands of security without which not even continuity. The remedy for unpredictability. The two faculties belong together in so far as one of them.. and could not. 212-213) I. She said that she wanted to hold his hand to let him know that there was indeed hopeful future and that he himself could change.of being unable to undo what one has done through one did not.The possible redemption from the predicament of irreversibility --. be confined to one single deed from which we could never recover. Without being forgiven. He was known among the black population he worked so hard to oppress as “Prime Evil. serves to set up in the ocean of uncertainty.. we would never be able to keep our identities. One of the widows described her encounter with the “Prime Evil” afterwards and said that she hoped that he saw her tears not only as tears for her husband but as tears for de Kock himself. 1 . for the chaotic uncertainty of the future. serves to undo the deeds of the past. is contained in the faculty to make and keep promises. let alone durability of any kind. binding oneself through promises. He wanted to apologize to them.

vengeance. Public Lies (1995) this situation forced its population to “live a lie”. but instead address the questions associate with the political economy of the post-totalitarian 2 . to hide true preferences for fear of persecution. Using basic economics to negotiate this balancing act. But yet in many of the newly formed democracies of the late 20th and early 21st century this capacity for forgiveness is an act of profound practicality. To bear the burden of one’s own lie because the regime forced one to live one way and speak another. free worship into a smazidat existence. and reconciliation. Regime shifts from totalitarianism to liberal democracies requires learning to live with one’s enemies and to build a future together. Totalitarian regimes are by definition those that sought to infiltrate and control all walks of life (economic. in addition to the overt violence perpetrated on the population by its own government. free expression. An ethic for the treatment of one’s former enemies must emerge that balances retribution. In this paper we do not address the question of the sustainability or lack of sustainability of such regimes over time. In the former Soviet Union. As Timur Kuran explains in Private Truth. the Communist Party’s reach was felt throughout society driving the free economy. Lives will be intertwined with lives of others who grossly violated human rights or were privy to those who did. for example. we will provide arguments why in post-totalitarian situations the most practical policies are ones that eschew retribution and vengeance and instead focus on reconciliation. political.Such a dramatic act of forgiveness is rare. cultural) and attempts to eradicate the distinction between state and society. to suppress one’s individuality and moral standards to escape oppression from an overzealous regime.

The focus of economic analysis is on the future because it is only the future that can be changed. The past is irreversible. The economy way of thinking. The basic idea behind the concept is that if you have invested in a hopeless investment it doesn’t follow that you should continue to invest reasoning that if you stop now you will lose everything you have invested so far. the question is your future investment decisions. you should redirect your activities to the more promising ventures. Sunk costs. If we take this basic lesson of economics to 3 . but it should be irrelevant from the point of view of making wise decisions.regime. In weighing decisions. How do people who were forced to ‘live a lie’ move forward and what is the policy toward those who compelled them to live that way? II. the chooser must consider the expected stream of benefits from pursuing one course against the expected costs of forgoing another course of action. you will lose. Everything you have already invested in the hopeless investment has been lost. forget about them. At least that is our human predicament until time travel becomes technologically possible. Why? Because nothing you can do now can change what took place. Is it the case that ‘To Forgive Is To Forget’? The first principle taught in basic economics is that of opportunity cost. but what you do now will impact what will take place. in fact. or look for a more promising investment alternative? Obviously. The sentiment is true. are sunk. The future orientation of basic economic analysis is hammered home in those first few weeks when the “sunk-cost fallacy” is introduced. Should you continue to throw money in a hopeless direction. is defined in terms of the persistent and consistent application of opportunity costs. the saying goes.

must figure out how to move forward. What matters for the crucial constitutional moment of regime change. is to focus constitutional craftsmanship on creating rules for future social cooperation rather than addressing past social conflicts. to ignore each other. humility. however. But this does not mean that past events will not influence expectations and perceptions. We have learned not to believe in anything. We have fallen morally ill because we became used to saying one thing and thinking another. The ‘sinner’ cannot forgive himself for his ‘sin’. like the sword of Damocles. Notions such as love. Havel argued that citizens must live in truth. In an act of profound symbolism intended to invoke the politics of forgiveness. he crumbled up the paper and placed it in the small of his back where he could not see the names. The past frames our choices. It must be the aggrieved party that pardons. In his 1990 New Year’s address to the people of Czechoslovakia. when Havel was given the opportunity to look at the names of those who informed on him to the old regime. to care only about ourselves. Havel continually counseled his countrymen in the early period of post-communism that they not forget the consequences of hatred. but that they move on with the task of creating a new liberal regime and cultivating a cosmopolitan attitude in individuals. 4 . friendship. Vaclav Havel said: We live in a contaminated moral environment. Once forgiven the debt is paid. but it cannot be an object of choice. but forgiving is a prelude to moving on and focusing on the future rather than the past.heart and apply it to the post-totalitarian situation. the past injustice is precisely that --past. if unforgiven the debt of past deeds hangs over social relations. or forgiveness have lost their depth and dimensions. but not seek vengeance based on that truth. as Arendt said. Forgiving is not necessarily forgetting. Both parties. compassion.

149-231) argues that a complete principle of distributive justice would have it that the current distribution of resources would be deemed just if (and only if) everyone is entitled to their current holdings. “Whatever arises from a just situation by just steps is itself just. the rectification of past injustice must pass through several utilitarian criteria for actual justice to be served. The sunk-cost point in economics similarly is not that one should forget their past investments.The trick. Robert Nozick in Anarchy. In other words. but to move past those previous decisions and focus instead on more prudent decisions in the present and going forward. But theories of rectification must also be operational and utilitarian considerations must be weighted alongside concerns with justice in acquisition. but to move on from the past injustice and focus on the hopefulness of the future. And. of course. but learning from yesterday’s decisions can help in making better choices today and tomorrow.” (Nozick 1974. Ill-gotten gains are ill-gotten according to theories of rectification. any change to that distribution is deemed just only to the extent that the new distribution that emerges from a previous just distribution by legitimate non-coercive means. State and Utopia (1974. is not to forget the errors of the past as those who do are often condemned to repeat them. III. Does ‘Time Heal All Wounds’? In negotiating between the past and the present in the post-Communist situation (or any post-atrocity situation for that matter) the question of just acquisition cannot be put aside. Decisions today cannot influence the activities of yesterday. 151) 5 .

Financial constraints are not the only problem according to Cowen. in post-atrocity situations were are dealing with past injustices where the distribution of holdings in society were gotten through illegitimate means. As Adam Tebble (2001) has argued. and identify through some tracing process the lost holdings and who currently possesses them. the victim (the owner of the destroyed property) should be made whole --. In order for his theories to work. Legal principles of restitution often stress the ideal that in the face of a criminal destruction of property. even in the best circumstances reconciling Nozick’s theory of entitlement and his theory of rectification is not an easy manner due to the problems that time and ignorance introduce into social theory. Justice would seem to require an accurate time discounting in compensating the victims to make them whole. as he correctly points out. including the time and trouble associated with making the claim. one would have to be able to identify the victims and perpetrators of the unjust act and/ or their descendants. however.the full value of the property should be returned. everyone living today could. If the holdings cannot be established then a just compensation must be offered to victims so that they are no worse off than if the injustice had never taken place. Tyler Cowen (1997 and 2006) has pointed out how the attempt to right past injustice by a straight forward restitution principle using basic compounding techniques can quickly lead to a financial claim that exceeds the current aggregate output of an entire economy.By definition. if they traced back their family history 6 . There seems to be little objection that could be made raised against such a standard if the time frame is relatively short and the ownership rights over physical property is clearly identified. though. But serious problems are introduced by the passage of time.

but in 1989 when the Baltic States wanted independence. when the Hungarians wanted independence. The reason for the accountants is because while Estonia. for example. then the demand for justice must become weaker as a matter of practical public policy.back far enough. the Soviet government had made numerous improvements to the countries infrastructure. Brezhnev sent in the tanks. but what exactly can be done to make the Czech people whole in accordance with the principle of restitution? As a matter of practical policy. Restitution for political atrocity by regimes might make sense if we are talking about a time-frame of a decade. Like much else during the Soviet period. Gorbachev had to send in the accountants. A Russian joke circulated in 1989 which captures an important aspect of the conundrum. Khrushchev sent in the tanks. jokes communicated deep truths that often were missed in official discussions. suffered great injustices first from the Nazi’s and then Communists. Few land titles can withstand critical scrutiny if history is examined with an eye toward just acquisition. must heal these wounds otherwise our preoccupation with righting past injustice will result in bankrupting the future in order to address the past. the joke went. but as we move to decades the call for justice via retribution must become fainter. 7 . when in 1968 the Czechs wanted independence. will find ancestors that were victims of injustice. it appears. Latvia and Lithuania could claim a great injustice from the 1949 deal that turned their countries into part of the Soviet Union. The philosophical quandary of where and when to draw the line on how far back we must trace to speak of justice becomes a question of extreme practical importance. In 1956. Time. The Czech people. it is our argument that as the temporal distance between the act of injustice and the claim made of being wronged lengthens.

that ‘once bitten. Aggressive governments must be muzzled. it is often said. Isn’t it better to ‘Let Sleeping Dogs Lie’? Once we recognize the financial constraint that simple compounding raises for addressing past injustice through restitution. In dealing with dogs. and memory and moral hazard. talent pool and organizational skill. the question from an economic point of view is that the only object of choice are future activities and not those in our past and the implications for public policy. Owners of aggressive dogs often solve this problem by putting muzzles on their dogs when they are out for walks in the neighborhood. Efforts to constrain the aggressive side of the dog is similar to the measures that must be taken to constrain a reforming government. The policy dilemma is represented in figure 1: 8 . As in the first section. we can address other practical issues associated with moving forward. then best to avoid contact in the future. Any model of regime change must address the issues of credibility and commitment. In the post-totalitarian situation.IV. but if the dog bites rather than wags his tail. the reasons for moving forward with minimal attention to the past as an issue of policy (as opposed to an intellectual issue of history and cultural discourse) are numerous and include issues of credibility and legitimacy. twice shy’ a saying intended to communicate that when approaching a strange dog one should first trust.

they will not trust pronouncements about reform. player 1 (the regime) must be muzzled (constrained). In the situation as we have depicted the social game. In totalitarian societies as discussed before individuals were forced to ‘live a lie’ and as a result attempts by the regime to make decisive breaks from the past are viewed as ‘The Big Lie’ (Goldman 1991). the sequentially rational play is for the regime to promise to honor limits on its behavior to elicit trust from player 2 (citizen) and then renege on that promise to aggress. As long as individuals don’t believe the regime. the dominate strategy is to not trust player 1 and realize a payoff of 3 (to the citizen) and of 1 (to the regime). The gains from peaceful social cooperation will go unrealized and the new regime will be unsuccessful in its attempts to establish a new order. So during transition periods the regime is confronted with the dual task of establishing credible commitments to bind 9 . But since player 2 can anticipate this move. The problem of transitional justice compounds this commitment conundrum for regimes.Figure 1 Honor 1 Trust Renege 4 4 1 5 2 1 3 Don’t Trust In order to realize the Trust/Honor payoff.

And by the nature of the system the samizdat culture of dissidents within a totalitarian regime existed in a strange symbiotic relationship with the corrupt official regime. see Figure 2: 10 . However. At first blush. this is seen in the intersection between the official state sector. In addition. legal. Totalitarian regimes. at least in the post-totalitarian situation. the quality of the signal might not be as high as first thought. almost by definition. Party cell. and signaling effectively that the regime’s promise to limits its power is in fact credible. the unofficial planning system. political. In the economic sphere. and the unofficial market system. sought to put their imprint on all aspects of intellectual. in the Soviet Union existed in all state enterprises.itself and limits its power. transitional justice with elaborate revelations of past injustice with appropriate persecution and restitution might appear as the most effective way to signal a break with the old regime. cultural and economic life. for example. a large stock of the human capital in a society is actually tied up in people who populated the ruling regime. given the reasons we have raised already about the financial constraints and the difficulties of clearly separating out just acquisition from unjust as we trace back through time.

the tolkachi. and sold in the underground economy at black market prices to address the chronic shortage problem in the official consumer economy. street level traders all had their human capital tied to the 11 . Everyone was connected to the totalitarian system. Good were ‘stolen’ from the state planning sector. In the totalitarian system this was the experience that individuals had with exchange and production. the official planned sector relies on the unofficial extra-planned system to fix bottlenecks in supply so that the production process could reasonably approximate official output targets (this doesn’t address the issue of output quality and the problems associated with perverse incentives and lack of quality controls).Figure 2 Planned Economy ExtraPlan Black Market In this depiction of the totalitarian economy.g. e. Since there were no alternative supply networks to the state enterprise sector. middle managers. consumer frustrations were addressed in totalitarian economies through the black market. served to work outside the plan to attempt to pick up the slack in the economic management in the production side of the economy.. Enterprise managers. Extra-plan actors.

scientific and intellectual life. That human capital must be redirected toward productive uses. Eradicating those tied to the system indiscriminately will result in a loss of human capital which will be counter-productive to future reform. in order words. What is true of the economic system is also true of political. ‘Capitalist crime’. and certain individuals were criminals. Their desire to demarcate themselves from the old regime may constrain. Human capital resided in individuals who had to work within the system. but not necessarily with the human capital that resides in individuals tied to the system. however. It may be impossible. Obviously some brave dissidents bucked the system explicitly. they do not want to do it in a lawless manner. the signal that will be sent by any movement away liberal principles of limited government is that checks on government power are paper 12 .system. the satisfaction of their desire to punish the agents of the regime. The totalitarian system was unjust. In the language we have been using. cultural. but since all within the system had to maneuver outside of the system all were forced to deal with unjust acquisition. for instance. In addition. to punish what appears to be obvious acts of wrongdoing without introducing retroactive legislation. legal. A break must be made with the past. then rectification measures that violate liberal principles of due process and rule of law must be rejected. thus embracing the lawless practices of the previous regime. 83) has put it: When they set out to deal with the lawless practices of the past. but they all came from within the system. As Jon Elster (2005. if one of the major problems with the totalitarian regime was one of intrusive and aggressive government that violated the rights of its citizens and the desire in the post-totalitarian moment is to establish a government constrained by the rule of law. was part of the ‘living the lie’. but without it there is no possibility that the new system will realize the gains from social cooperation.

Moreover. forgiveness of past injustice if those acts were egregiously unjust may have the same consequences for future behavior that forgiveness of debts may in fact have on the investment behavior of individuals who are so forgiven.to a point where a complete disjoint between the formal and informal will lead to prohibitive enforcement costs. the dominate strategy is again for the individual to play the non-trust strategy and transitional justice so conceived will actually undermine a successful transition. and where a complete dovetailing of the formal and informal will lead to low to 13 . does our argument mean you don’t pay any attention to the past imperfect? We don’t agree with that either --. the enforcement costs of those rules rise accordingly --. A moral hazard in behavior ensues and the situation quickly devolves from the desired path of posttotalitarianism. and practically the necessity of constraining the state must be recognized explicitly and formally written into law and politics. in the post-totalitarian situation the crimes against humanity that result from an aggressive and unconstrained state must be acknowledged explicitly at a cultural and intellectual level. there is a problem of legitimacy and the emotional issues associated with the breaking from the past that must be addressed. Unless those who view themselves as victims of the previous regime are emotionally satisfied that the new regime will address the past injustice they will most likely not view the new regime with the legitimacy it requires. In that case.checks only and not really binding. Finally.the past injustice must be recognized. The formal rules of politics and law must be grounded in the informal rules that govern social intercourse. On the other hand. To the extent the formal rules are divorced from the informal rules.

as we interpret them. there are also serious costs that we have identified when a new regime becomes preoccupied with righting past wrongs. While there are serious questions of legitimacy that must be addressed. If we bring together the different positions we have articulated in this section. and credible commitments. ‘time heals all wounds’. we believe that the old wisdom about letting sleeping dog lie is born out in the posttotalitarian situation. and argue that as a practical matter we must not let demands for retribution bankrupt the future ability of the social system of exchange and production to serve as the basis for peaceful social cooperation. such as The History of the Peloponnesian War. 12-32) We have argued that in the post-totalitarian situation. (Shriver 1995.” was theme often heard in 1989 as the new regimes took control of the governmental machine. 14 . the new regime would do better to focus on the changes that need to be made to the political and legal systems so that a successful transition to a post-totalitarian system can be accomplished. warns us that revenge is the end of political community and with it justice. Better than focusing on the past. and ‘let sleeping dogs lie’. political community will best be served by following the timeless wisdoms of ‘forgive to forget’. Conclusion “We are not them. We connected each of these wisdoms to basic economic arguments. time discounting.non-existent enforcement costs. such as sunk costs. Our conjecture is that the legitimacy of any regime rests in the tight proximity between the formal and informal. Classic literature. V.

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