From Ebenezer Scrooge to Gordon Gecko: Examining Underlying Reasons for Low Confidence in Banks


Tim Hayslip, York University

The last several years have witnessed a polarization in North American politics. Although Canada lacks a leader who combines Donald Trump’s popularity and divisiveness, many have described the trucker convoy that occupied Ottawa as motivated by a similar brand of rightwing populism. To some degree, conservative media is filling this role, promoting interpretations of reality that encourage distrust of ostensibly respectable or democratic institutions. On this ideological level, the influence of the libertarian Austrian School of Economics within conservative intellectual spaces is aiding the growth of the Canadian populist movement by encouraging a lack of confidence in banks. The Austrian School is at least as distrustful of government and supportive of laissez faire economic policies as other conservatives, but they also identify a scapegoat for persistent economic malaise. Austrian economic theory proposes that credit expansion driven by bank loans produces the boom-bust economic cycle. First, credit expands the money supply and raises the prices of goods higher than they would be in the absence of the loans. Next, these artificially raised price signals guide investment decisions in ways that depart from what the market demands, eventually leading to the production of goods lacking adequate market demand. The resultant crisis in which prices fall and many companies go bankrupt “is in fact the process of readjustment, of putting production activities anew in agreement with the given state of the market data” (Hayek, 2012: 560). This theory is repackaged for popular readers by newspapers like the National Post. Its financial section, known as the Financial Post , carries articles that argue central bank interventions have made borrowing funds far too cheap and, in doing so, sustained businesses that ought to have closed their doors. “The danger is that in our desire to help healthy companies survive [the pandemic] we continue to support companies that, unfortunately, have no future... That way lies zombie-land: too many businesses that cannot... increase our living standards” (Kronick and Robson, 2020). Those influenced by the Austrians are likely to attribute the decades of economic malaise the left associates with neoliberalism to central banks manipulating interest rates in order to produce credit expansions that have sustained ‘walking dead zombie’ companies barely able to meet their operating costs, let alone invest in raising tomorrow’s living standards. Of course, there are many reasons why respondents would indicate having a low level of confidence in banks. One need not be influenced by the Austrians to be wary. In this paper I will present my findings from analysis of the World Values Survey. This survey is an enormous undertaking that has surveyed people in over 100 nations over the last 40 years. Early findings indicate that low levels of confidence in banks correlate with other indicators of populist sentiment. Low levels of confidence in the government, the press, labor unions, and universities all correlate with low confidence in banks. Additionally, those who self-identify as on the political right have lower levels of trust in banks which may be somewhat counterintuitive given traditional notions of the left and right. However, the heightened rightwing distrust that I observed is plausibly explained by adherence to the Austrian interpretation, especially if respondents interpreted the term ‘banks’ as inclusive of central banks. References Kronick, J. and Robson, J.. (2020, May 20). Once the crisis is over, we will have to let the zombie firms go. National Post. Von Mises, L. 1949. Human Action . Yale University Press. 

This paper will be presented at the following session: