March 14, 2023 | Reading Time: 3 minutes
Silicon Valley Bank and why we allow the economy to be rigged
The problem isn’t Big Bad Baddies we can clearly see and clearly blame.
The Editorial Board’s Noah Berlatsky is right, I think. It’s good for the US government to help banks to prevent them from hurting the economy, even when the bank is Silicon Valley Bank, which collapsed Friday, and even when most of its depositors are very obscenely rich.
But it’s also good, as Noah said, to help normal people who work, who take care of others, who raise families, and so on, but who also struggle every day. “Bank bailouts happen instantly,” Noah said Monday. “Bailouts for student debt, or medical debt or for children in poverty occur on a much longer, and in many cases infinite, timetable.”
What I want to add to Noah’s piece is this: the economy is rigged.
I don’t mean “rigged” in any way associated with Bernie Sanders, for whom corporations are Big Bad Baddies, or Donald Trump, for whom Jews, immigrants and so on are Big Bad Baddies. I mean “rigged” in the most ordinary sense with nothing to do with dark, malevolent forces.
In America, some people count. Most don’t.
Put another way: In America, somepeople are able to spend all their time making sure mostpeople don’t count as much as they do, and mostpeople, having other things to do, tend to believe somepeople.
So the economy isn’t rigged as much as allowed to be rigged. The solution would be for mostpeople to say to themselves, Yeah, no. The problem isn’t Big Bad Baddies we can clearly see and clearly blame. No, the problem is us. It’s always been us. That’s democracy for you.
Larry Summers is one of those somepeople who’s able to spend his time making sure mostpeople don’t count as much as somepeople.
Noah dug up this item: Amid the housing collapse that led to the Great Recession, Summers, who’d been Barack Obama’s economics advisor, said the government should bailout “too big to fail” banks.
There was no time, he said, to think about whether reckless bankers would become more reckless if they believed the government would bail them out. There was no time, he said, for “moral hazard lectures.”
When it came to forgiving student loans, however, Summers was all concern. We should take time, he said, to consider whether debtors would borrow recklessly if they believed the government would bail them out. Moral of the story: “moral hazard” for thee, but not for me.
Mind you, I’m not thinking about whether “moral hazard” is a thing. Maybe it is. Maybe it isn’t. I’m not thinking about “accountability” and whether it’s universally applied so that “everyone plays by the same rules.” I’m thinking only about the choice we’ve made, which is this:
It’s bad to help normal people escape the consequences of their actions. They must be forced to be accountable for them. But it’s good to help the very obscenely rich escape the consequences of their actions. They must not be forced to be accountable for them.
In America, somepeople count. Mostpeople don’t.
Allowed to be rigged
This choice might be acceptable to mostpeople. After all, mostpeople have things to do. They do not have, as Larry Summers has, the time to think about the moral difference between bailing out this or that. If someone like Summers, who after all was a president’s economics advisor, thinks forgiving student loans is a bad thing, well, it’s bad.
But accepting a choice requires knowing a choice has been made, and that’s where I think mostpeople are in the dark. They don’t know, because they have things to do, that choices are being made for them. They don’t know, because they have things to do, that the arguments they hear from somepeople like Summers are rationalizations of those choices. Mostpeople don’t know why they believe somepeople.
There’s nothing inherently wrong with rationalizing choices. We all do it. It’s a human thing. But rationalizations are beside the point. (One is probably as good as another.) What matters is that Larry Summers and other somepeople want mostpeople to believe them. Once mostpeople do, somepeople then have nothing to fear from democratic politics.
Because mostpeople have allowed the economy to be rigged.
John Stoehr is the editor of the Editorial Board. He writes the daily edition. Find him @johnastoehr.