Five years ago, the demand for the public ownership of the banks was the preserve of a small minority of socialists. Today it follows logically from the exposed venality of the banking system.
There have now been three waves of banking failure in the recent past. Socialists should use these events to argue relentlessly for state ownership and democratic control of the banking system.
First the advent of neoliberalism from the 1970s was premised on the renewed role of finance capital. Finance capital became in Lenin’s words “the typical ruler of the world”. It was “a power that is peculiarly mobile and flexible, peculiarly intertwined at home and internationally, peculiarly devoid of individuality and divorced from the immediate processes of production”.
This was a period in which the banks, unshackled from tight government controls, built the global infrastructure of aggressive takeovers, instantaneous capital movements and gargantuan profits. But even as it boomed, financial hubris was punctuated with moments of meltdown: the stock market crash of 1987; the Asian crisis in 1997; the dot-com bubble. while the economy grew, finance took the credit and got away with abuses.
The second moment was the crash of 2008. The actual collapse of Lehmann and the near collapse of RBS and Lloyds, only averted by the hitherto unthinkable intervention of the state. New light shone on the culture of mismanagement, the arrogance of the gamblers and the impotence of the regulators.
The part-nationalisation of some banks offered a glimpse of another way, except it turned out to be “socialism for the bankers”. Business as usual, the same obscene bonuses while so-called investment banking failed to bolster the recovery of the real economy. Even the chair of the Financial Services Authority described it as “socially useless banking”.
Now we have reached a third stage where the venality of banks, their corruption, their tax evasion and their greed are epitomised by the discredited Barclays. Last year its erstwhile chief executive Bob Diamond collected £17 million in pay and bonuses (plus £5.7 million to cover his tax). In the same year Barclays was ordered to set aside £1 billion to pay customers mis-sold payment protection insurance, ordered to pay £500 million after a tax avoidance scheme was uncovered and now fined £290 million for fixing the Libor inter-bank interest rate.
Barclays is merely symptomatic of the whole banking system. Some 20 banks are reported to be under investigation about fixing Libor. Far from being cut-throat competitors, these bankers have run a rather old-fashioned cartel. They were all in it together over payment protection insurance, and no doubt united in their tax avoidance: after all, only the bankers know exactly how the tax havens, the offshore accounts and the semi-legal money laundering actually function.
From the 1980s the bankers saw themselves as the masters of the universe, and for a while that’s what they appeared to be. They are still at the core of the global capitalist class and much of their power is intact. But the mask has slipped. There is an opportunity to challenge their power. But what is required cannot be confined to a stage-managed inquisition, the punishment of a few scapegoats and a tad more regulation.
No one can trust the government or the courts to take on the banks. The Bureau of Investigative Journalism estimates that under Cameron, 51% of the Tory Party funding is derived from the City, with 27% of it from hedge funds and private equity. Cameron is so defensive of his friends that last Friday he had his bag carriers filibuster a motion promoted by John McDonnell, which would merely give parliament a say over the appointment of the next governor of the Bank of England.
The legal blows and fines may by large compared with the wages of workers on a pay freeze, but the £290 million fine equates to just 4% of Barclays pre-tax profits and far less than the impact of its rate fixing on living standards and economic activity. The interpenetration of finance capital with the British state is summed up by the characters tipped to take over the reins: former top civil servant Gus O’Donnell is apparently in the frame to take over as chair of Barclays.
The Labour leadership are right to call for a wider public inquiry beyond the Libor-fixing, to take in the entire banking system.
Dragging the shady world of banking into the light will diminish the power of the bankers and provide more ammunition for socialists. But Miliband, Balls and their coterie are culpable. Not, as Osborne tried to allege, with a direct link to Libor-fixing. But they did support the neoliberal model, and they were in government while the financial sector proliferated. They endorsed “light touch” financial regulation. They will not seize this opportunity to put the case for public ownership on the political agenda.
What do socialists say is the answer? We cannot confine our case to trite calls for investigation, prosecution and punishment of individual bankers, though we want all these things. The structures of ownership and control have to be challenged.
It is not enough to talk about the separation of retail from investment banking, or of “breaking up” the big banks. The problem with the banks is not their size; it is the absence of conscious planning for social needs and lack of democratic control. Parcelling up the banking system into smaller fragments will simply result in a melee of competition between the smaller units and the eventual amalgamation of what is left, reproducing the same structures that exist today.
What’s needed was well summed up in Workers’ Liberty’s “workers’ plan” four years ago:
“We need a single, unified banking, pensions and mortgage service organised to protect the jobs, savings, pensions and homes of working-class people, and whose resources can be used for a rational programme of investment to meet social needs. We demand the sacking of the bank bosses and the amalgamation of the various financial institutions under the control of their workers and representatives of savers, pensioners, mortgage-holders and so on.”
A century ago the Marxist Rudolf Hilferding wrote in his book Finance Capital that “Even today, taking possession of six large Berlin banks would mean taking possession of the most important spheres of large-scale industry”. He pointed to the intimate links between the banking system and the branches of production such as energy, manufacturing, construction and transport. Hilferding was guilty of an exaggerated rhetorical flourish.
But his insight was sound: socialising finance capital and bringing it under democratic control greatly facilitates the task of overthrowing capitalism. The labour movement should make public ownership and control of the banks central to its agitation.