Last November, Malcolm Turnbull was forced to announce a Royal Commission into the banking sector in a desperate attempt to hold his weak and divided government together. It was a stark turnaround after the Turnbull government spent the previous 18 months insisting that a Royal Commission was not necessary and would not go ahead.
Turnbull’s retreat was sparked when MPs from the National Party threatened to back a move by Labor and the Greens to push their own commission of inquiry through parliament. This would have inflamed tensions within the Liberal-National Coalition and placed the future of Turnbull’s government in jeopardy. Turnbull finally caved after executives from the “big four” banks themselves – Commonwealth, ANZ, NAB and Westpac – wrote an open letter pleading with him to initiate a Royal Commission in order to end the political turmoil.
Pressure has been mounting for years for such an inquiry. Most people rightfully distrust the banks in the wake of the 2008 global financial crisis, which was aggravated by the cutthroat practices of major banks overseas. More recently, a string of scandals found Australian banks engaging in blatant white-collar crime including money laundering, fraud, misleading financial planning advice, and life insurance policies designed to rip people off by using outdated medical terminology. Lives have been torn apart. None of the four big banks were unscathed by these revelations.
All of this is in addition to the “normal” routine of outrageous fee gouging, predatory lending, risky speculative investment, and combined annual profits totalling nearly $30 billion. The paltry budget savings the government makes by attacking students, pensioners and the unemployed are a drop in the ocean in comparison.
In the run up to the 2016 election, the Labor Party took up the call for a banking Royal Commission in a populist bid to win votes. However, like the Liberals, Labor received more than $300,000 in donations from the big four banks in the 2015-2016 financial year. Both major parties have a revolving door between careers in politics and banking. Former state premiers Anna Bligh and Mike Baird took up prominent roles serving the banks last year, and Malcolm Turnbull himself is a former banker. The major parties are in the big banks’ pockets. Evidently a royal commission is not a genuine threat to the banks’ grubby financial interests or they would withdraw their support.
The Commission’s real purpose is to act as a safety valve for the deep anger that exists. The government writes the terms of reference and chooses the Commissioner, thereby determining the scope of the investigation. While Turnbull and the banks would have preferred not to hold a Royal Commission at all, under the circumstances it will be tightly controlled to ensure it stays within narrow limits. They hope to cover over the sector’s systemic problems by diverting attention to individual cases of misconduct and “regulatory failures”. Turnbull made this clear in announcing the inquiry when he declared that “It will not be an open-ended commission, it will not put capitalism on trial”.
While anti-corruption reforms to the banking sector are welcome, we should not expect any changes that go to the root of the problem. Corruption is an inherent product of capitalism’s ruthless drive for profit. The competitive push to slash expenses, maximise returns and dominate the market at all costs leads businesses to put their bottom line ahead of all other considerations, including the law. Any recommendations that come out of the Royal Commission will do little more than tinker around the edges of a system that is fundamentally rigged for the benefit of an obscenely wealthy elite.
Socialists demand that the big banks and their hoarded wealth are taken into public ownership, under democratic control. A single state-owned bank, subject to full community oversight and accountability, could immediately take measures that would help the great majority of people rather than a small clique of big shareholders. It would mean an end to the litany of fees and charges we are expected to pay for basic services. Removing the profit motive from the banking sector would also free up a vast amount of capital to be invested in healthcare, education, housing and much-needed public infrastructure.
A public bank would form the backbone of a socialist economic plan to transform society. This is the only solution to the profound economic and social crisis that capitalism is in today, and it would usher in a new era of human development where the crimes of today’s financial gangsters would be merely a shameful relic of the past.
By Jeremy Trott