Economy

Apr 19, 2018

Rundle: the finance sector must be socialised

The finance sector is a social resource. In a modern society it is an essential utility, as much as the water or power system is.

Guy Rundle — Correspondent-at-large

Guy Rundle

Correspondent-at-large

Today’s "year in which the contemporary world began" is 1910. In that year, the German Social Democratic politician Rudolf Hilferding published Finance Capital in Vienna. The title suggests its purview: it was a conscious extension of Marx’s theory of capitalism to a new era. This was an era in which banking and finance capital had become autonomous from, and dominant over, industrial capital; an era in which the "joint-stock" limited liability corporation had become the dominant ownership form, and in which this whole structure had become fused to the vast enterprise of global imperialism.

The structure looked unassailable. In fact, Hilferding argued, these were all developments which made socialism possible. Taking Marx’s point that the next social system develops within the contradictions of the previous one -- as merchant capital became industrial capital within the dying structures of feudalism -- Hilferding argued that via financialisation and monopolisation, capitalism was socialising itself. What Marx had called "the anarchy of production" (small proprietors competing, railway companies laying separate tracks side-by-side, etc) was being transformed into a system of planned production. The content of it was currently capitalist; the form could be taken over and rendered socialist.

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13 comments

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13 thoughts on “Rundle: the finance sector must be socialised

  1. RL

    I’m with you comrade.
    Need to look at what happened to the light on the hill when BC popped in the idea of natioanlised banks all those years ago.

  2. Bozwell

    You have never been so correct, Mate.
    Banking and financial scandal and corruption is not a symptom, it IS the system.
    I am an old man and have never trusted the system or the banks, always preferring co-operative or publicly owned enterprises for health as well as finances.
    That is why I have never begrudged paying my taxes.
    As you well conclude, it is a very exciting, interesting, and I would also add frightening time to be alive.
    I might also add, the tenor of your writing dovetails nicely (In my unlearned opinion) with the cracking address given by Richard Flannagan to The National Press Club yesterday.
    With you also RL

  3. Keith1

    Turnbull on taking the PMship: “There has never been a more exciting time to be alive than today and there has never been a more exciting time to be an Australian.” Aaah…yep.

  4. RL

    While I’m at it.
    Australians owned the Commonwealth Bank – Keating sold it – result – lots more competition in banking, better services, lower fees.
    Australian’s owned Telstra – Howard sold it – result sort of NBN. Could have been rolled out through through the Australia wide Telstra network that most people used..
    Australian’s owned Medibank Private – Cormann sold it – result like the banks, oodles of competition – lower fees, better benefits.
    All round good deals for the plebs don’t you reckon.

  5. Bozwell

    Also, like to add that as usual GR provides a great history lesson.
    A far better perspective than the usual suspects’ unthoughtful rehash of current orthodoxy.

  6. Draco Houston

    I’ll have to take a look at that book.

  7. AR

    In the 19thC the workers had long realised that they were not going to be gifted anything by the beneficence of bankers & robber barons so formed mutual societies, building societies, co-operative banks and provender stores.
    But that was anathema to the BigAr$ed end of the production chain and by the late 20thC they had all be privatised, stripped & looted.
    There still exists, in the original premises on King St Newtown, an exemplar of Scottish pernicketiness and actuarial genius in the Starr-Bowkett credit union which charges NO INTEREST for loans up to $250K.
    Are these typos? Mutual funds get the big banks in some sort of check; – did you mean “kept”?
    and
    What happened to Hilferding’s optimism? World War II, and the collapse of the European socialist movement into national patriotism and lethal division – your rhetorical flow suggests that you meant “WWI”.

  8. Christopher Armstrong

    When you consider the banks role in credit creation, and its potent ability to direct the economy, it seems peculiar that we have tolerated such egregious behaviour for this long. It’s horrific enough that they’ve used their dominance to push finance products that strip their customers through outrageous fees, and insurance that is so rigorously complicated that consumers who thought they were covered can never make a successful claim.

    Banks operate with an exclusive licence to generate new money through loans*. This puts them at the heart of the economic decision making process, determining who will get a loan and (broadly) what it is spent on, whether that will be new investment, consumer spending, or to speculate on assets such as shares or property. (It effectively “pulls” economic activity toward whatever the loans are spent on.)

    It’s outrageous that institutions with such a track record of bad behaviour, focused only on their own profitability, should get to make these decisions about the economy on our behalf. I think Rundle puts the case well for democratising a key component of our economic system, regardless of whether you sit on the capitalist or socialist side of the debate.

    * I understand that this runs counter to the economic orthodoxy of “banks lend out deposits” and the money multiplier model (that assumes some kind of reserve or deposit constraint on the money supply), but there is good literature from reputable sources (such as the BoE or the Bundesbank) disputing these misconceptions – the amount of new loans is more likely to be constrained by consumer preferences for a more credit, interest rates, overall borrower creditworthiness and regulation (e.g. minimum deposits or ratio of interest-only loans as a proportion of total new lending). This isn’t magic and it’s not an argument for dangerous reactionary policy like 100% reserve ratios or “the gold standard”.

  9. Dog's Breakfast

    I said in a comment many moons ago that banking profits are effectively a tax that we all pay to engage in modern economy/society. It cannot be avoided, particularly these days with pas going direct into bank accounts. The obvious conclusion with bumper profits growing at 10-15% per annum, in times with inflation around 2%, is that we the people are getting solidly rogered.

    The upshot has to be that the finance sector (and insurance, and if we’re going the whole hog, real estate) must be socialised. They will be cheaper, more efficient, although less efficient at taking money out of your pocket, and will grease the wheels of real production rather becoming the sclerotic threat that they currently are.

    Yes, it is exciting times Guy, but also scary. This could lead to wholesale renewal of the entire system, but the bastards won’t go down easy, and if they don’t go down the alternative is revolution, pitchforks and faggots style, and nobody wins in that scenario.

    Seriously.

    1. AR

      True tha “nobody wins in that scenario” but it might be deemed worthwhile just to see the bastards swinging in the breeze.
      The point is that they will not reform as, like climate change, it would require that they repudiate the mindset which served them the lush lifestyle so well.

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