Thursday 23 November 2017

Why the dukes of hazard always win

We should thank the Central Bank for teaching us a lesson

Illustration: Tom Halliday.
Illustration: Tom Halliday.
Brendan O'Connor

Brendan O'Connor

Remember moral hazard? Moral hazard was one of those things we used to talk about a lot back in the very bad times, when the GFC (Global Financial Crisis) had everything teetering on the brink and the future was starting to look a bit Mad Max. You will recall that moral hazard was the notion that people had to be made to pay off all their debts so they would learn their lesson. If you let people borrow too much money, and didn't make them suffer and ruin their lives paying it all back, then, the theory went, they would run off and borrow too much money again. The idea was that we should not reward irresponsible behaviour.

Moral hazard was, you will recall, one of those things that mainly applied to the little people. It did not tend to come into play when it came, for example, to the banks. Banks were allowed to bring the world to the brink of destruction and then they were essentially rewarded for it. The lesson the banks were taught was: "You guys can do absolutely anything you want and we will protect you. You can actually ruin everything, and you will not be made to pay. No matter what you do, we will keep you alive."

You may wonder why I am going over this obvious stuff, this ancient history. These are the great injustices that we all had to digest when capitalism was warped. We are over them now, aren't we? We had a certain period of outrage about the fact that the little guy was the only one who had to live or die by the rules of capitalism, while there was socialism for the losses of the rich. And then we moved on and accepted this new twisted form of capitalism. The great and the good gathered at Davos a few years ago and decided the crash was over and it was time to move on, and since then they've been spinning us a recovery narrative. And of course they praise us for the heroism of our sacrifices.

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