Woke Is Reactionary: The Small Business Lending Edition

We live in a drastically unequal society.  Everywhere you look you will find injustice, constraint and exploitation.  Being a member of a racial or other minority increases the odds you will end up on the short end, so what should we do about it?  There’s a progressive solution, to change the system so injustice, constraint and exploitation are minimized.  And then there’s the woke solution, to demand benefits targeted to minorities (and women) that will more evenly distribute the injustice, constraint and exploitation that remains.

You can support the woke solution, but please don’t confuse it with progressive social change.

For a current example, look at this recent op-ed in the New York Times by Pamela Shifman and Salamishah Tillet, “How We Spend Tells Us Whose Lives Matter”.  They point out, “only 12 percent of the black and Latino [small business] owners in a survey who applied for aid reported receiving what they had asked for.”  I don’t know how that compares to white/Anglo owners, and no link is provided to the source they relied on.  But let’s assume with them this means minority SB owners have been disadvantaged in the expanded lending program to counter the effects of the coronavirus.  Knowing this country, I wouldn’t be surprised if this were true.

Two reasons are given for the disparity.  First, minority-owned businesses are less likely to have an existing loan relationship with a bank, and private banks are being used to funnel loans authorized by Congress.  Second, these businesses have slimmer reserves and are less able to survive the process of application, review and disbursement.  Again, let’s assume this analysis is correct.

The progressive solution would be to either impose greater obligations on the private banking system or bypass it altogether in administering the program.  If commercial banks are to be deputized to distribute public funds they should be required to do so not just for their existing clients but their share of the applicant pool, and streamlined procedures should be in place to get the money out the door as quickly as possible.  Or perhaps it would have been possible to forego using commercial banks altogether (or in part) and to quickly ramp up a dedicated lending facility operating in conjunction with the Fed or a specialized government agency.  (How much easier all of this would have been if we had a nationwide public banking system already in place.)

And then there’s the woke solution: “providing dedicated funding opportunities for minority and women-owned businesses, and within that funding pool, for women of color-owned businesses.”  So the inadequacies and unfairness of the lending arrangement are OK as long as they don’t disproportionately fall on these groups.  I suppose white business owners locked out of the deal can console themselves with their privilege.

Again, the woke program is a choice some may make; it’s goal is to take the racism and sexism out of exploitation.  Just don’t confuse social justice with a more equally distributed injustice.