Hating Bankers or Hating Washington?

In his most recent contribution to The Economist (January 6, 2012, p. 60), “Schumpeter” derides “hatred of bankers” as one of “the world’s oldest and most dangerous prejudices”. Arguing that “scorn for moneymen has a long pedigree”—traceable to Jesus’ expulsion of the moneychangers from Jerusalem’s Temple and to Muhammad’s proscription of usury—he rehearses the old saw that “the love of money is the root of all evil” and summarizes popular prejudices connecting anti-banker sentiments to anti-Semitism targeting the Rothschilds, Goldman-Sachs and other leading lights, then and now, of an international “Jewish” conspiracy meant to defraud Gentiles of their wealth. Bernie Madoff, call your office!

“Schumpeter” cites evidence from a survey published in the Boston Review suggesting that 25 percent of non-Jewish Americans blame Jews for the recent financial crisis and the ensuing “Great Recession”. Although it is true that Washington’s policy actions can be understood primarily as benefiting Goldman-Sachs, the home base of the last two U.S. Treasury secretaries and, very likely, the private-sector destination of the current chairman of the Federal Reserve System, one does not need to see the constellation of political forces at work as being shaped by racism.

Those actions can be explained more simply by a public choice model in which policymakers are influenced by the vote motive in a setting wherein voters are rationally ignorant of the impact of macroeconomic policymaking on their own wealth and welfare. Such ignorance is rampant among the members of the Occupy Wall Street and “Occupy fill-in-the-blank” movements. “Demonizing bankers will not solve [the protesters’] problems”, as Schumpeter observes. What will solve those problems is the demonization of Washington, which created today’s problems by supplying incentives for bankers to lend money to borrowers, especially people wanting to fulfill the “American dream” of home ownership, who could not be expected to repay their loans.

Racism is an unfortunate human failing, but not when it is directed at the political class which, in the Keynesian model, is thought to be a benevolent dictator, who knows better than the unwashed masses what is best for them.