Nationalising banks might look
like a good idea, especially if you think that private sector banks caused the
worldwide economic crisis and that state ownership would eliminate the risk of
it happening again. It would look even more attractive if you think that
popular pressure on the state doing the nationalising would make sure that, in
future, banks, or important parts of the financial system, would then benefit
the national economy. This article explains why this view not only misunderstands
what is really at stake but how it is a ‘reform’ proposal that can only endorse
the capitalist system of power and control.
I do not claim that this
proposal is at the forefront of most people’s minds, but it does come up in
discussions and was also raised in questions on a lecture I gave at the
Institute of Contemporary Arts on 6 October. Given time limitations, I
preferred to respond to other questions from the audience in the Q&A
session at the ICA and left to one side the question of calling for bank
nationalisation. It would have taken more than a minute or two to respond
adequately because it raises a number of different points. In the following
paragraphs I will set out the key issues. Later this week, I will cover these
points, and many others, in another lecture on the crisis (29 October, at the
Marx Memorial Library, 37a Clerkenwell Green, London EC1R 0DU,
7pm).
---
Two views underpin the
‘nationalise banks’ proposal. First is the notion that there is a national
economy that can be managed in a progressive way. Second is the idea that the
capitalist state can be forced to do it by popular pressure.
Proponents of nationalisation
are aware that, in the wake of the crisis, many capitalist governments have
already put some institutions into state ownership, even in the home of liberal
financial regulation, the US and the UK. In the US, this was called putting
important financial companies into ‘conservatorship’ to avoid the politically
charged term. In the UK, the term ‘nationalisation’ was also avoided, and the
government made a special effort for the largest affected banks, RBS and
Lloyds, to keep a portion of their shares in private hands. However, not
embarrassed by the capitalist state having upstaged their demands, proponents
of nationalisation would argue that the state could have forced these banks,
and others, to redirect their lending policies to boost domestic industry,
investment, employment and the economy in general.
A belief in the benefits of
nationalisation is more than simply naïve. It reflects the view that the
capitalist state is like a weapon that can be taken from the hands of the
capitalists and used against them in favour of the mass of people. So the
state, with its laws, institutions, multi-layered backing and means of applying
influence and force can be redirected in a progressive way, rather than
remaining a capitalist machine churning out policies that reflect capitalist
class power. Proponents of such a view avoid the key distinction between taking
power away from the capitalist class and advocating reform policies within a
framework that keeps the capitalist class in place. This is why, when reform
proposals fail – when they are rejected by capitalist markets as unworkable –
the reforms are junked and the reformers are either kicked out of office or
capitulate to the demands of the market. Worse than this, such a political
stance always has the logic of demanding that the state do something for
the mass of people. It is not a demand for social resources to be put into things
that people need and organising people to do this. It is a plaintive call for
the capitalist state to deliver on its ‘obligations’, ones that it does
not have except in the imaginations of the reformers.
Then there is the question of
the role of finance and banks in the capitalist system. What is called a
‘financial crisis’ is the outward expression of a more serious and fundamental
problem. Recent decades have seen a boom in financial transactions, new
‘financial instruments’ such as derivatives, and massive loans and debts
worldwide. Especially in the 2001-2007 period, these helped boost global
demand, output, employment and ‘prosperity’, especially in richer countries.
However, these things ran well beyond the production of value and profit in the
world economy. The bubble then burst when US mortgage defaults hit financial
markets. The impact was so big because these financial markets had become
inflated worldwide. Essentially, this boiled down to a problem of capitalist
profit versus the huge level of debt and the ability to pay off this debt, or
not – with the problem then of taking the losses. The following chart from a
recent report from the Bank for International Settlements illustrates that the
debt problems have not gone away, and were even worse at end-2014 compared to the size
of the global economy than in 2007.
Core Debt in Non-Financial Sectors, % GDP
All this has not that much to do
with banks. Yes, banks played a part in the process of credit creation and
financial excess. Yes, the banks were bailed out with ‘taxpayers’ money’. Yes,
most people would prefer to see senior bankers in jail or under a bus, rather
than retiring on huge pensions. But financial power in the modern world is not
confined to banks, and is certainly not constrained within national boundaries.
Financial securities are issued
by and traded by banks, but the securities are mainly issued on behalf of the
many industrial and commercial companies that are otherwise seen as the good
guys versus the ‘bad bankers’. As Marxist theory shows, and as common sense
would endorse, value is created by productive workers. From this value, profits
are derived, and commercial capitalists and financiers share in these profits.
They are all directly concerned with and benefit from the exploitation of
workers. Furthermore, the major capitalist corporations operate
internationally, backed by their states, and the ones from the powerful
countries can use their financial leverage, though mergers with and
acquisitions of other companies, to increase their economic power in the world
market. This also has little to do with banks: all kinds of financial and
non-financial company are involved in this process. One study showed, using
data for 2007, that just 50 companies, largely based in the major powers,
controlled through cross-shareholdings around 40% of the equity in a total of
43,000 international companies based in 116 countries. Most of these 50 were
financial companies, but they were mainly asset managers and insurance
companies, only a minority were banks.
In the light of this reality,
the idea that nationalising banks will rectify the national capitalist economy
is ludicrous. It is an idea based on a nationally-oriented social democratic
delusion, one that soon becomes political support for the national state to
protect the domestic economy against the ‘unfair’ policies of other countries.
Recently in the UK, the loss of steel industry jobs due to a decline in the
world market has led to demands from across the political spectrum that the
British government take action against cheaper imports of Chinese steel. This
makes a defence of jobs and livelihoods dependent upon state action to oppose
another country, rather than showing how the job losses result from an
outmoded, dysfunctional capitalist system of production. Worse still, it
encourages the natural opposition that workers have to bearing the consequences
of capitalism to become a demand for the state to defend the national version
of capitalism against other national versions. In the UK case, it is all the
more naïve when the policy of the British government is to expand deals with
China, both to finance energy and other infrastructure projects that local
capitalists will not do and to open up financial transactions with one of the
few expanding areas of the world economy as a means of boosting British
imperialism’s revenues.
To conclude, I should add that I
am not, in principle, opposed to taking control of the banking system. But the
precondition is first to have a progressive, anti-capitalist force taking
political power to make this work, also known as making a revolution. That is
something British radicals do not want to mention because its probability
shrinks under the weight of a very long experience. The irony is that even with
such political power and control, the issue of ‘nationalisation’ does not
necessarily arise. For example, the Bank of England was nationalised in 1946,
but that has made no difference to its operations as a supporting institution
of British imperial power. The European Central Bank is also owned by its
respective national governments, but has hardly been progressive in its
policies. More importantly, since when has nationalisation been a sign of a
socialist outlook, except in the capitalist state-oriented outlook of the
British Labour Party and the delusions of its radical supporters?
Tony Norfield, 25 October 2015
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