Blog 2-The experience of moral confusion

The relationship between a creditor and a debtor has existed for centuries. The idea in which someone should borrow money to make more money is one that has fueled this relationship, and was a principle that can be linked to the economic collapse in the late 2000s.  Moral confusion however is created during times of economic disaster, as to who to protect, the creditors or the debtors. A quote used throughout the article is that “debts have to be paid”, but under what circumstances? Should austerity be imposed on a country just because their dictator made a selfish economic decision and now the rest of the country has to suffer?

These types of questions are created when rough economic times arise. Should it be an obligation for debt to be paid? In my opinion after reading this article it depends on the situation. There should be laws that protect both the lender and the borrower. A lender should be able to receive his original sum, however the borrower should not be exploited to a point in which their lives can be ruined just because a debt is not paid. Dictators in the early 1980s, and 90s, borrowed money from the imf and were forced to pay it back. However after pocketing the money and investing it in banks, these dictators forced their citizens to have to work and receive less benefits from their country just to pay back these corrupt loans.

This led to many people dying in countries in Africa just because medical funding was cut due to these corrupt loans that dictators make. In ancient texts, lenders were always looked upon as evil individuals and if you think about it things really have not changed. These current lenders were the ones that created the whole economic crisis, and should be looked at the same way in my opinion.

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4 responses to “Blog 2-The experience of moral confusion

  1. You’re post really highlights the repercussions of moral hazard. There are far too many individuals around the globe that are given the ability to make financial decisions which can impact millions of people. In times of financial crisis, we must hold these individuals accountable. Their ability to make financial decisions without their own personal assets being in the balance allows them to make such poor investments.

    Alan Greenspan and the rest of the financial moguls associated with the 2008 financial collapse must be held more accountable, and their reputations should be absolutely tarnished. The implementation of TARP should not give these individuals a free pass. Greenspan’s implementation of laissez-faire allowed these financial moguls to make decisions in which they would only benefit, decisions that were not transparent of their real intentions. Greenspan’s economic paradigm based on Alyn Rand truly rejected collectivism, and ethical altruism, creating a “survival of the fittest” mentality amongst corporations and financial institutions. The implementation of ethical egoism, and the rise of capitalism allowed for this financial crisis to truly be fueled, and has left millions of individuals in a horrible economic situation.

    • Have you heard of the expression OPM (pronounced like “opium”), i.e., Other People’s Money? It points to the intoxicating effects of having virtually unrestrained access to other people’s assets.

      Your comment about the reputations of those whose mismanagement brought on the crisis is critical. Many would agree that their reputations *should be* tarnished, that their credibility *should be* destroyed. This gets at the concept of *status*, which Weber conceptualizes as something that’s socially determined — status is (a positive or negative) social estimation of honor.

      Financial and government elites have experienced a loss of status in some places: after Argentina’s financial crisis in 2001, in Greece over the last year, and most recently even in Ireland, I’ve heard. In Greece, such elites have been thoroughly “delegitimized,” to the point that they really can’t go out in public without being berated, taunted, or even physically attacked.

      But what about here in the US? It seems as if many people still view financial elites as “savvy businessmen,” as I believe President Obama put it, who perhaps behaved “unethically,” but not “illegally.” For example, as I understand the Obama administration’s first pick for the new World Bank president was actually Larry Summers! They ended up nominating Dr. Jim Yong Kim, President of Dartmouth, but the switch seems to have more to do with potential objections from non-European countries than with concern about pushback from the US public upset about Summers’ role in financial deregulation.

  2. Sharp post, Shantae. It clearly conveys the moral dilemmas that have long surrounded debt. This statement seems to capture the moral confusion: “A lender should be able to receive his original sum, however the borrower should not be exploited to a point in which their lives can be ruined just because a debt is not paid.” I think that most people would probably agree with both parts of the statement, however incompatible the two principles are. According to the strict logic of economics, it’s not true that all debts *must* be repaid. If repayment were guaranteed, then there’s zero risk in the transaction for the creditor — but the whole justification for (exorbitant) bank profits is premised on risk. If repayment is guaranteed, then there’s nothing to stop banks from making any loan, and there’s nothing to justify their profits — why should they be entitled to make money for nothing?

    As for how we should deal with over-extended borrowers, the idea that debts should be forgiven in cases of extreme exploitation is also compelling on its face — but how can this be measured (exploitation “to a point in which their lives can be ruined just because a debt is not paid”)? Graeber suggests that insofar people are forced to work jobs they hate in order to pay back loans, they aren’t so different from slaves, “renting” themselves rather than outright selling themselves.

  3. I agree, the lender should not have the right to exploit the borrower to the extent that citizens are being negatively effected. When referring to loans given to dictator, I believe both should come to an agreement if the borrower is unable to repay the loan. Perhaps they can find an alternative that can substitute for money, like providing a percentage of the natural resources or maybe they could be bailed out,since it has become a popular tend. But allowing the citizens of a state to be stripped from their basic human rights because of a loan their dictator made, is unjust. They should not have to suffer the consequences from a decision they did not authorize from voting.

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