Ezra Klein posted an interesting interview with Robert Johnson entitled "The bias toward creditors". Johnson makes gives two reasons. First, of course, people with money get disproportionate representation in our political institutions. His second point is more interesting. He says that the financial system is too complex for lawmakers to understand. Further, the consequences of its failure so difficult to predict and frightening, they would prefer to punish debtors with austerity than risk a major banking crisis.
The interview is interesting, and well worth reading. However, the term "creditor bias" got me thinking. There seems to be a more general bias in favor of creditors. As angry as many people are that these big banks got bailed out, the notion of bailing out debtors has gotten a lot of backlash as well.
I think there is an inherent moral bias in favor of the creditor. After all, it was the debtor that borrowed money he subsequently could not repay. Isn't the debtor at fault? We are taught all our lives that repaying our debts is simply the right thing to do. If there were capitalist commandments, this would be near the top.
The creditor vs. debtor argument takes on a moral dimension. The debtor is bad (and therefore the creditor must be good). It applies to people who default on their mortgages, and it applies to debtor nations as well. Greece is having a financial crisis. Therefore it must be bad. Germany does not. It is good.
Greece must be punished with austerity. Never mind that the austerity makes the problem worse. This is about right and wrong. Similarly we mustn't simply give money to the people who can't pay their mortgages. That would be rewarding the evil-doers. Better to give the money directly to the banks. They are the creditors, and therefore good.
It isn't really a very sensible way of looking at the problems, but I'm starting to understand how easy it is to fall into the trap.
