The Silicon Valley Bank collapse exposes our system for what it is: neo-feudalism

See update for March 30, 2023, at end of post.


By all accounts, Silicon Valley Bank was a mid-sized bank. Even as it failed, it was not considered “systemically important,”[1] that is, until U.S. authorities decided it was.[2] And yet, its failure ensnares a bank, Credit Suisse, which is “systemically important” half a world away.[3]

Of course, this is why a law, passed, with bipartisan support, and signed under Donald Trump, relieving mid-sized and smaller banks of some of the oversight imposed following the 2008 Financial Crisis[4] has come in for criticism. But to me, the problem is more fundamental.

The very fact you have banks “too big to fail/jail”[5] that can be brought down by large businesses all needing large amounts of cash all at once,[6] in some part because investors have decided their profit margins are insufficiently large (and are in some cases negative),[7] points to a lack of resilience in the system. And that all this happens in some part because banks have been over-invested in long-term bonds that lost value as the Federal Reserve raised interest rates points to the fact that the Federal Reserve raised interest rates in response to inflation.[8]

Rather than attributing blame where it belongs, with supply chain issues,[9] elites blame, entirely too conveniently, a modest narrowing of social inequality in workers’ wages,[10] because workers always must bear the blame and the consequences of inflation.[11]

That ideological misattribution of blame rationalized interest rate increases that have, it turns out, threatened the banking system.[12] But no matter: We’ll bail out depositors and do so, so swiftly that they’ll not be even the slightest bit further inconvenienced.[13]

What matters is a continuing project of reducing workers to serfs.[14]

Sure, call it capitalism. But with wealth and power concentrated in ever fewer hands, leading to systemic threats, some of which we’ve known about since the 2008 Financial Crisis, but refused to meaningfully address,[15] our focus on labor power deprives the emperor of his clothes. This is neo-feudalism.


Update, March 30, 2023: There is further evidence for describing our system as neo-feudal.[16]

The latest round of layoffs in Silicon Valley as a whole is largely tied to revenues and [earnings before interest, taxes, depreciation, and amortization] and keeping profit-seeking investors on Wall Street happy. Amazon’s stock is down 40% since this time last year. Alphabet’s stock is down about 28% over this time period. While Meta’s stock is now rebounding (largely because of laying off more than 25% of its workforce) the stock was decimated at the end of last year, after Meta’s value fell by hundreds of billions of dollars. Wall Street wants to know that these companies are innovating and beating one another in the never-ending tech wars. The math is simple: Work harder, work more, and innovate, or you get fired.[17]

If we had an economic system that actually worked for human beings, the question would not, as it now seems to be in high technology, be how many people we can lay off,[18] but rather, how many people we can employ and employ well.

Beyond that, in accepting an argument that high technology payrolls are bloated, Nick Bilton assumes that Twitter is surviving, simply because it hasn’t completely crashed yet.[19] That’s an astonishingly narrow view as Elon Musk has made the platform a home only for his extremist white Christian nationalist fanboys:[20]

The value that Twitter’s platform produced, by combining valuable streams of qualification and curiosity, is being beaten and wrung out. What’s left has — for months now — felt like an echo-y shell of its former self. And it’s clear that with every freshly destructive decision — whether it’s unbanning the nazis and letting the toxicity rip, turning verification into a pay-to-play megaphone or literally banning journalists — [Elon] Musk has applied his vast wealth to destroying as much of the information network’s value as possible in as short a time as possible; each decision triggering another exodus of expertise as more long-time users give up and depart. . . .

That our system allows wealth to be turned into a weapon to nuke things of broad societal value is one hard lesson we should take away from the wreckage of downed turquoise feathers.

You can say shame on the Twitter board that let it happen. And we probably should. But, technically speaking, their job was to maximize shareholder value; which means to hell with the rest of us.[21]

So whether we speak of the layoffs[22] or of Musk’s demolition of Twitter,[23] the conclusion is surprising only for how increasingly in our faces it is: a raised middle finger for humanity.

  1. [1]Karl Evers-Hillstrom, “Silicon Valley, Signature banks lobbied hard to loosen bank rules,” Hill, March 14, 2023, https://thehill.com/policy/technology/3898389-silicon-valley-signature-banks-lobbied-hard-to-loosen-banking-rules/; Zachary Warmbrodt, “Banks fought to fend off tougher regulation. Then the meltdown came,” Politico, March 12, 2023, https://www.politico.com/news/2023/03/12/banks-regulations-feds-svb-meltdown-00086694
  2. [2]William D. Cohan, “SVB’s Valley of Death,” Puck, March 12, 2023, https://puck.news/svbs-valley-of-death/; Ben Foldy, Rachel Louise Ensign, and Justin Baer, “How Silicon Valley Turned on Silicon Valley Bank,” Wall Street Journal, March 12, 2023, https://www.wsj.com/articles/how-silicon-valley-turned-on-silicon-valley-bank-ee293ac9; Victoria Guida and Sam Sutton, “‘There’s going to be more’: How Washington is bracing for bank fallout,” Politico, March 12, 2023, https://www.politico.com/news/2023/03/12/silicon-valley-bank-fallout-washington-00086662; Jeff Stein et al., “U.S. says ‘all’ deposits at failed bank will be available Monday,” Washington Post, March 12, 2023, https://www.washingtonpost.com/us-policy/2023/03/12/silicon-valley-bank-deposits/; Nick Timiraos, “SVB, Signature Bank Depositors to Get All Their Money as Fed Moves to Stem Crisis,” Wall Street Journal, March 12, 2023, https://www.wsj.com/articles/federal-reserve-rolls-out-emergency-measures-to-prevent-banking-crisis-ba4d7f98
  3. [3]Simon Foy, “Is Credit Suisse, the bad apple of European banking, really ‘too big to fail, too big to be saved’?” Telegraph, March 16, 2023, https://www.telegraph.co.uk/business/2023/03/15/credit-suisse-share-price-bailout/; Nicholas Jasinski, “How SVB Triggered Credit Suisse’s Latest Mess—and Sparked Fears of a Financial Crisis,” Barron’s, March 15, 2023, https://www.barrons.com/articles/credit-suisse-svb-banking-crisis-3faac588; Margot Patrick, Justin Baer, and Dana Cimilluca, “UBS Nears Deal to Take Over Credit Suisse,” Wall Street Journal, March 18, 2023, https://www.wsj.com/articles/ubs-in-talks-to-take-over-credit-suisse-ed932b01; Margot Patrick, Ben Dummett, and Dana Cimilluca, “UBS Offers $1 Billion to Buy Credit Suisse,” Wall Street Journal, March 19, 2023, https://www.wsj.com/articles/ubs-offers-1-billion-to-take-over-credit-suisse-bfac51fa; Brian Swint, “Credit Suisse Stock Surges as Central Bank Loan and Debt Buybacks Tame Panic,” Barron’s, March 16, 2023, https://www.barrons.com/articles/credit-suisse-buy-back-debt-svb-banks-crisis-bf792d0d; Stephen Wilmot, “Panic Abates at Credit Suisse. Now Comes the Hard Part,” Wall Street Journal, March 16, 2023, https://www.wsj.com/articles/panic-abates-at-credit-suisse-now-comes-the-hard-part-2b93c578
  4. [4]Karl Evers-Hillstrom, “Silicon Valley, Signature banks lobbied hard to loosen bank rules,” Hill, March 14, 2023, https://thehill.com/policy/technology/3898389-silicon-valley-signature-banks-lobbied-hard-to-loosen-banking-rules/; Zachary Warmbrodt, “Banks fought to fend off tougher regulation. Then the meltdown came,” Politico, March 12, 2023, https://www.politico.com/news/2023/03/12/banks-regulations-feds-svb-meltdown-00086694
  5. [5]Michael Hudson, J is for Junk Economics (Dresden, Germany: Islet, 2017), 161-162.
  6. [6]Zachary D. Carter, “This Bank Panic Should Not Exist,” Vanity Fair, March 14, 2023, https://www.vanityfair.com/news/2023/03/silicon-valley-bank-run-panic-should-not-exist; Izabella Kaminska, “Bad bonds risk bringing down banks, warns ‘Dr Doom,’” Politico, March 16, 2023, https://www.politico.eu/article/bad-bonds-risk-bringing-down-banks-warns-dr-doom-nouriel-roubini-svb/
  7. [7]Gerrit De Vynck, Caroline O’Donovan, and Naomi Nix, “The age of the Silicon Valley ‘moonshot’ is over,” Washington Post, March 2, 2023, https://www.washingtonpost.com/technology/2023/03/02/big-tech-moonshots-google-meta-amazon/; Bernard Marr, “The Real Reasons For Big Tech Layoffs At Google, Microsoft, Meta, And Amazon,” Forbes, January 30, 2023, https://www.forbes.com/sites/bernardmarr/2023/01/30/the-real-reasons-for-big-tech-layoffs-at-google-microsoft-meta-and-amazon/
  8. [8]Zachary D. Carter, “This Bank Panic Should Not Exist,” Vanity Fair, March 14, 2023, https://www.vanityfair.com/news/2023/03/silicon-valley-bank-run-panic-should-not-exist; William D. Cohan, “SVB’s Valley of Death,” Puck, March 12, 2023, https://puck.news/svbs-valley-of-death/; William D. Cohan, “Two Days in the Valley,” Puck, March 15, 2023, https://puck.news/two-days-in-the-valley/; Izabella Kaminska, “Bad bonds risk bringing down banks, warns ‘Dr Doom,’” Politico, March 16, 2023, https://www.politico.eu/article/bad-bonds-risk-bringing-down-banks-warns-dr-doom-nouriel-roubini-svb/
  9. [9]Craig Austin, “Why are prices so high? Blame the supply chain – and that’s the reason inflation is here to stay,” Conversation, November 10, 2021, https://theconversation.com/why-are-prices-so-high-blame-the-supply-chain-and-thats-the-reason-inflation-is-here-to-stay-169441; Matthew Jinoo Buck, “How America’s Supply Chains Got Railroaded,” American Prospect, February 4, 2022, https://prospect.org/economy/how-americas-supply-chains-got-railroaded/; David Dayen, “Re-Engineering Our Supply Chains,” American Prospect, February 11, 2022, https://prospect.org/economy/re-engineering-our-supply-chains/; David Dayen and Rakeen Mabud, “How We Broke the Supply Chain,” American Prospect, January 31, 2022, https://prospect.org/economy/how-we-broke-the-supply-chain-intro/; Esther Eriksson von Allmen, “Medical Emergency,” American Prospect, February 1, 2022, https://prospect.org/health/medical-emergency-supply-chain/; Jarod Facundo, “Not Even a Superhero Could Fix Global Supply Chains,” American Prospect, February 8, 2022, https://prospect.org/economy/not-even-a-superhero-could-fix-global-supply-chains/; Ella Fanger, “Labor Fight Brews on the Docks,” American Prospect, February 3, 2022, https://prospect.org/labor/labor-fight-brews-on-the-docks/; Gabrielle Gurley, “The Warehouse Space Race,” American Prospect, February 8, 2022, https://prospect.org/economy/warehouse-space-race/; Lee Harris, “Frackers Restrict the Flow and Raise the Price,” American Prospect, February 10, 2022, https://prospect.org/environment/frackers-restrict-the-flow-and-raise-the-price/; Amir Khafagy, “The Hidden Costs of Containerization,” American Prospect, February 2, 2022, https://prospect.org/economy/hidden-costs-of-containerization/; Robert Kuttner, “China: Epicenter of the Supply Chain Crisis,” American Prospect, February 1, 2022, https://prospect.org/economy/china-epicenter-of-the-supply-chain-crisis/; David J. Lynch, “Auto industry already feeling the pinch from Canadian bridge blockade,” Washington Post, February 9, 2022, https://www.washingtonpost.com/business/2022/02/09/canada-truck-bridge-protest-autos/; Harold Meyerson, “Why Trucking Can’t Deliver the Goods,” American Prospect, February 7, 2022, https://prospect.org/economy/why-trucking-cant-deliver-the-goods/; Alexander Sammon, “We Were Warned About the Ports,” American Prospect, February 3, 2022, https://prospect.org/economy/we-were-warned-about-the-ports/
  10. [10]Justin Lahart, “Giving Labor Less of the American Pie,” Wall Street Journal, February 7, 2023, https://www.wsj.com/articles/giving-labor-less-of-the-american-pie-11675792087
  11. [11]Cory Doctorow, “Why the Fed wants to crush workers,” Medium, January 19, 2023, https://doctorow.medium.com/why-the-fed-wants-to-crush-workers-ff086f3b952a; Stephanie Kelton, Deficit Myth (New York: Public Affairs, 2021); Justin Lahart, “Giving Labor Less of the American Pie,” Wall Street Journal, February 7, 2023, https://www.wsj.com/articles/giving-labor-less-of-the-american-pie-11675792087; Brian Merchant, “The real aim of big tech’s layoffs: bringing workers to heel,” Los Angeles Times, January 30, 2023, https://www.latimes.com/business/technology/story/2023-01-30/column-how-big-tech-is-using-mass-layoffs-to-bring-workers-to-heel; Jon Schwarz, “In Confidential Memo, Treasury Secretary Janet Yellen Celebrated Unemployment as a ‘Worker-Discipline Device,’” Intercept, January 24, 2023, https://theintercept.com/2023/01/24/unemployment-inflation-janet-yellen/
  12. [12]Zachary D. Carter, “This Bank Panic Should Not Exist,” Vanity Fair, March 14, 2023, https://www.vanityfair.com/news/2023/03/silicon-valley-bank-run-panic-should-not-exist; Izabella Kaminska, “Bad bonds risk bringing down banks, warns ‘Dr Doom,’” Politico, March 16, 2023, https://www.politico.eu/article/bad-bonds-risk-bringing-down-banks-warns-dr-doom-nouriel-roubini-svb/
  13. [13]Associated Press, “US government: Silicon Valley Bank clients will get funds,” March 12, 2023, https://apnews.com/article/silicon-valley-bank-bailout-yellen-deposits-failure-94f2185742981daf337c4691bbb9ec1e; Adam Cancryn, Ben White, and Victoria Guida, “How Biden saved Silicon Valley startups: Inside the 72 hours that transformed U.S. banking,” Politico, March 13, 2023, https://www.politico.com/news/2023/03/13/the-emergency-bank-rescue-that-almost-didnt-happen-72-hours-00086868; Telis Demos, “Were SVB and Signature Bank Just Bailed Out by the U.S. Government?” Wall Street Journal, March 13, 2023, https://www.wsj.com/articles/were-banks-just-bailed-out-by-the-government-6b0a582f; Jeff Stein, “Is this a bailout and 6 other questions about the SVB collapse,” Washington Post, March 13, 2023, https://www.washingtonpost.com/us-policy/2023/03/13/svb-bank-bailout-fed/; Jeff Stein et al., “U.S. says ‘all’ deposits at failed bank will be available Monday,” Washington Post, March 12, 2023, https://www.washingtonpost.com/us-policy/2023/03/12/silicon-valley-bank-deposits/; Nick Timiraos, “SVB, Signature Bank Depositors to Get All Their Money as Fed Moves to Stem Crisis,” Wall Street Journal, March 12, 2023, https://www.wsj.com/articles/federal-reserve-rolls-out-emergency-measures-to-prevent-banking-crisis-ba4d7f98; Zachary Warmbrodt, “Banks fought to fend off tougher regulation. Then the meltdown came,” Politico, March 12, 2023, https://www.politico.com/news/2023/03/12/banks-regulations-feds-svb-meltdown-00086694
  14. [14]Abha Bhattarai, “Retail workers are quitting at record rates for higher-paying work: ‘My life isn’t worth a dead-end job,’” Washington Post, June 21, 2021, https://www.washingtonpost.com/business/2021/06/21/retail-workers-quitting-jobs/; Eric Levitz, “Letting the Economy Create Jobs for Everyone Is (Sadly) Radical,” New York, June 4, 2021, https://nymag.com/intelligencer/2021/06/biden-full-employment-policy-labor-shortage-inflation.html; Heather Long, “It’s not a ‘labor shortage.’ It’s a great reassessment of work in America,” Washington Post, May 7, 2021, https://www.washingtonpost.com/business/2021/05/07/jobs-report-labor-shortage-analysis/; Helaine Olen, “How to solve the worker shortage? Improve pay and other conditions,” Washington Post, March 10, 2022, https://www.washingtonpost.com/opinions/2022/03/10/worker-shortage-familiar-story-low-pay-poor-conditions/; Robert Reich, “There is no US labor shortage. That’s a myth,” Guardian, January 15, 2023, https://www.theguardian.com/commentisfree/2023/jan/15/there-is-no-us-labor-shortage-thats-a-myth; Eli Rosenberg, “These businesses found a way around the worker shortage: Raising wages to $15 an hour or more,” Washington Post, June 10, 2021, https://www.washingtonpost.com/business/2021/06/10/worker-shortage-raising-wages/; Jon Schwarz, “The Business Class Has Been Fearmongering About Worker Shortages for Centuries,” Intercept, May 7, 2021, https://theintercept.com/2021/05/07/worker-shortage-slavery-capitalism/
  15. [15]John Cassidy, “The Old Policy Issues Behind the New Banking Turmoil,” New Yorker, March 13, 2023, https://www.newyorker.com/news/our-columnists/the-old-policy-issues-behind-the-new-banking-turmoil
  16. [16]David Benfell, “The Silicon Valley Bank collapse exposes our system for what it is: neo-feudalism,” Not Housebroken, March 19, 2023, https://disunitedstates.org/2023/03/19/the-silicon-valley-bank-collapse-exposes-our-system-for-what-it-is-neo-feudalism/
  17. [17]Nick Bilton, “Big Tech Companies Are Testing How Far They Can Slash Staff,” Vanity Fair, March 29, 2023, https://www.vanityfair.com/news/2023/03/big-tech-layoffs-2023-twitter-meta-amazon-google
  18. [18]Nick Bilton, “Big Tech Companies Are Testing How Far They Can Slash Staff,” Vanity Fair, March 29, 2023, https://www.vanityfair.com/news/2023/03/big-tech-layoffs-2023-twitter-meta-amazon-google
  19. [19]Nick Bilton, “Big Tech Companies Are Testing How Far They Can Slash Staff,” Vanity Fair, March 29, 2023, https://www.vanityfair.com/news/2023/03/big-tech-layoffs-2023-twitter-meta-amazon-google
  20. [20]Natasha Lomas, “Twitter is dying,” TechCrunch, March 28, 2023, https://techcrunch.com/2023/03/28/twitter-is-dying/
  21. [21]Natasha Lomas, “Twitter is dying,” TechCrunch, March 28, 2023, https://techcrunch.com/2023/03/28/twitter-is-dying/
  22. [22]Nick Bilton, “Big Tech Companies Are Testing How Far They Can Slash Staff,” Vanity Fair, March 29, 2023, https://www.vanityfair.com/news/2023/03/big-tech-layoffs-2023-twitter-meta-amazon-google
  23. [23]Natasha Lomas, “Twitter is dying,” TechCrunch, March 28, 2023, https://techcrunch.com/2023/03/28/twitter-is-dying/