20 Jul 2012

Banking and Nation States

Banks are complex entities operating in more complex environments. Indeed the the various banks are like a confederation of tribes. They employ thousands of people in many different capacities, all working together to create massive profits. These profits are funnelled in two main directions: 1. to shareholders; and 2. to executive salaries and bonuses. Like most organisations today banks seek to minimise the benefits to labour, the people who toil to generate profits. And since those who contribute capital (the shareholders) and the executives are adept at avoiding taxes, labour is left contributing a greater portion of their wealth to the common good. At present the gap is so wide that the top 1% of earners constitute a parallel society and culture that sucks value out of our society while adding little. We could live without them, but they can't live without us.

And banks cooperate together to alter the environment, i.e. the economy, to make it more conducive to their profit. As we have seen they often use deception to do this. They prey on the weak, and they make common cause with the powerful. Less powerful members of the tribe will gather around a strong leader and support him (it's always him in the banks). They get their own piece of glory by association.

Bankers have also made their way into the echelons of government. Banking and government employ each other as advisers. Government and the finance industry are in a symbiotic relationship. This is far more obvious in the USA where the Secretary of the Treasury and the President of the Federal Reserve Bank are both usually a former CEO of one of the big banks. Even under the Democrat President Obama. This symbiotic relationship guides economic policy, fiscal policy, and especially the making of regulations for the finance industry. And it always seems to benefit the 1% at the expense of the 99%.

I want to emphasise the collective aspects of this story. Shareholders club together to invest. Workers collaborate to make profits. Executives work together to alter the external environment. Banks collude together to fix interest rates. Banks and government are intertwined and create policy together. Tax havens cooperate with the rich to hide their money. At every node in this web we see symbiosis, collectivity, cooperation, and collusion underpinning the 'success' of the banks. Banks show how very effective collective action can be.

This should not be an unfamiliar story. Banks are doing what our nation states have always done in foreign policy terms. British, European and American governments have always cheated, lied to, and made war on their neighbours. Yes, we have long standing agreements between us now, but all of our present allies were once enemies; and many of our present enemies are former allies. And for the banks the definition of 'them' and 'us' is not based on race, religion, or geography. Since the people who run the banks are largely drawn from the richest 1% it's safe to say that the banks notion of 'us' is the 1% and their notion of 'them' is the 88%.

What the banks are doing now, is very similar to what the Dutch and British East India Companies did in the 19th century. The wealth of Britain, even to this day, owes a lot to the BEIC going out to colonise the world, kill and enslave the inhabitants, and strip the colonies of their wealth during the 19th century. We seem to have very short memories for this kind of thing.

What improved the conditions in the various colonies was the imposition of order by the locals, sometimes, as in the USA, by force. When the American colonists rose up against oppressive government they formed a community based on high ideals, almost every one of this is now debased. India's mostly peaceful revolution which culminated in independence in 1949 has been similarly subverted and they now have more billionaires than the UK, despite having about 800 million people living in poverty; while Mumbai has the most expensive land in the world.

In a way we could say that the enormous profits of the banks are a tax on our labour. More so since tax payers bailed out the big banks when their corrupt business practices lead the to ruin. It is a form of taxation without representation. Everyone, but particularly Americans, ought to be mad as hell about it.

Occupy Wall St and similar demonstrations were a good start, but they've faded from consciousness already. Move Your Money UK reckons that half a million people have moved their accounts from the big banks, but out of a population of 50 million adults that's only 1%. Pressure groups like 38Degrees help. We need to cooperate on the same kind of scale as the bankers have done, and though individually we have less power we are millions and millions.

I suspect the time is not yet ripe. But the people who predicted the 2007 crisis are also predicting another major credit crunch in the next 18 months. Maybe that will be the trigger for the kinds of reforms that we need?

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Keep is seemly & on-topic. Thanks.