The public bailout of the Silicon Valley Bank (SVB) demonstrates that over the past 30 years all the right lessons have been learnt by all the wrong people, argues Sean Irving.

My purpose is not to belabour the point that the bailout provides yet another example of socialism for the rich at general expense. Nor is it to detail the manner in which the revolving door between finance and government perpetuates financial practices that continue to constitute a systemic threat to that sector and, thereby, pose an unacceptable risk to society at large.  All of this has been sufficiently covered elsewhere and by now readers of this website will be well aware that all of this is ‘baked in’ to contemporary political economy.  Instead, I wish to draw attention to the useful nature of this episode, and the relationship between finance and tech that underpins it, in allowing us to understand the pathologies at work within these sectors.

Both have been made parts of an apparatus of presentism. While their PR speaks loudly of innovation and enterprise, the ideologically significant sections of these industries, the parts that provide the mythos for the wider industry, are subject to the tyranny of the instant. They are currently structurally unable to think long-term or to help the majority of people plan securely for a better tomorrow – let alone achieve any form of equitable distribution, which, of course, is not their function.

First, the financial aspect. Important for this specific instance is that in 2018 the Trump Administration altered the regulatory framework for Venture Capital Banks such as SVB that loosened capital requirements, meaning the stress-testing put in place by the Dodd Frank Act of 2010 were relaxed.

SVB made much of the fact that it funded tech start-ups. Yet over time it gave less support to individual start-ups directly and more to the venture capitalists that funds such start-ups. These do well when money is cheap and easy to access.

Having fewer reserves, thanks to the Trumps legislation, to weather the storm of a shock therefore left SVB – and there will likely be others – vulnerable to collapse. These are the particulars, but the nature of the shock itself is general.

Venture capital, as well as established business, found it easy to accumulate profit when money was cheap. As interest rates have risen, this self-aggrandising class of ‘entrepreneurs’ and investors have found their schtick is not enough. When real work is required and genuine value has to be found in the market the Übermensch of capital appear much reduced. In this case, arch-libertarians such as Peter Thiel have run to the government to beg for a handout.

It seems, therefore, that today the sole sure way of maintaining economic stability over the long term is to keep interest rates low. Only by this means can an institution like SVB prosper. Yet such low rates indicate the existence of a zombie economy feeding off cheap money. This removes the incentives for companies in the broader economy to invest in pursuit of long-term gains in productivity and it encourages sleights of hands such as share buyback schemes to inflate company stocks.

All of this serves a purpose: it allows huge fortunes to be made, but these accrue to those with the ability to access credit, with funds failing to re-circulate into the real economy. The alternative, however, as we are beginning to see with SVB, is also undesirable. The only likely avenue out of this present might lead us back to some of the worst crises of the past.

With the sector as a whole having had its reputation tarnished, and its practices reined in following the crash of 2008, it has looked to outliers such as SVB, where the old frontier attitude might still be found, for its heroic affects. The most risky and dysfunctional elements therefore serve the most significant ideological function, displaying a bravura that always threatens to creep back into the mainstream institutions.  Risky investment for short term gain retains its allure; the future, as something distinct and meaningful, is forfeit.

Second, to the tech sector. Rarely has so much hot air been exhaled over the benefits of new technologies. The king of American capital for the last 20 years, it has robed itself in the garb of innovation and dynamism.  Yet its reign has undoubtedly been one of wider stagnation and growing social malaise.

Like the cowboys of finance, much of tech has become a bastion of presentism. The majority of investment now goes towards apps that actively undermine our ability to create a better future distinct from our current moment. There is a promotion of precarity – for gig economy workers – all for the marginal benefit of servicing the delivery of takeaways or shopping.

Increasingly, apps are being tailored to service the supposedly bespoke needs of the comfortably off, with things such as party planning and the provision of high-end catering. We are witnessing the emergence of a class structure composed of those for whom tech is always a whip, as they make their next delivery or provide the next round of cocktails; a middle class placed in a position of permanent precarity by the emergence and adoption of Artificial Intelligence, and an upper class for whom tech serves as butler and banker.  Clearly, the implications for the notion of the future as a shared thing are dire.

This, of course, is tragic. Tech, in the hands of a sovereign public rather than billionaire bros and start-up wannabees, could be an unparalleled resource for communication and coordination, even calculation, offering real ways out of the fragmented and increasingly entrenched present.

Far from being buccaneers leading us into the future, tech entrepreneurs are in reality defenders of an economic model antithetical to investment in a truly transformational economy.  Their methods rely on speed and extraction over planning and creation. As in finance, it is increasingly these elements of the sector, rather than more ‘old fashioned’ businesses such as Apple and Microsoft, that provide the heroic sheen – with all the dangerous ideological implications this entails.

While the particulars of the SVB episode rightly outrage, they should not surprise. Where it does, however, serve a useful function is in revealing the sclerotic nature of contemporary capitalism and its inability to innovate in ways that might produce a better future. It is trapped in a zombie present of bailouts and ubersiation; of profits produced only in the fictious realm of the economy. The alternative is for political power to lead the way in reclaiming a shared future that looks to the real economy, and commits to ensuring that the beneficial outcomes are distributed equitably.

Dr Sean Irving is a Senior Research Officer at the School of Philosophy and Art History, University of Essex.

Image: https://flickr.com/photos/196993421@N03/52740131461/ Licence: Attribution-NonCommercial 2.0 Generic (CC BY-NC 2.0)