Greens leader Richard Di Natale has been in the spotlight recently with calls for the creation of a “People’s Bank”. In his view a People’s Bank would be publicly owned and aim “not to make profits, but to ensure safety and security to depositors”.
His suggestion has been warmly received by many as the big four Australian banks (NAB, CBA, ANZ and Westpac) are embroiled in scandals and accusations of misconduct. The big four have been caught out withholding insurance payouts and life insurance claims, as well as engaging in other dodgy practices such as insider trading and forged customer signatures.
This has happened while they have reaped record profits. Except for a small fall last year (from $30.6 to $29.8 billion) the major banks have experienced increased profit growth every year since the world economic crisis hit in 2008.
It should be noted that a big chunk of this money has been made from banks refusing to pass on the full amount of interest rates cuts made by the Reserve Bank. In a nutshell, Australia’s central bank has made access to credit cheaper for the big four. This is credit that ordinary people use to access loans for houses, cars and other necessities.
Most people expect the banks to pass on the benefits of lower interest rates which would lower their loan repayments and leave them with more money to spend. Instead, the big four have pocketed the money from the Reserve Bank cuts. Adding insult to injury they charge people excessive fees for basic services such as using ATMs. People are rightly furious and it is this atmosphere that has seen the Greens win support for their idea.
According to Di Natale, a new public bank would pull the big four banks into line by offering cheaper and more competitive loans to ordinary people. Many economists are already arguing that this could be relatively easy to implement. Some have gone further, saying that Australians should be able to deposit their savings directly into the Reserve Bank.
There is no doubt that these suggestions are a step in the right direction. Ideally a public bank would not only offer cheap loans to those in need, but it would invest money into areas that address social need.
At the moment, despite the fact that the big four are some of the most profitable banks in the world, this hasn’t translated into economic stability for Australia as a whole. A lack of regulation has meant banks have taken huge investment risks. An example of this has been the massive growth in the finance market and over-investment in housing which has created a huge bubble.
A publicly owned bank could start to tackle these problems, but to really address them you would need to go much further. If left to their own devices the big four would continue these practices. Even if ordinary people moved their money into a public bank, private capitalists would still use the big four to invest in the stock market, derivatives and dodgy hedge funds. The risk of contagion from the big banks to the rest of the economy would still exist.
The only way to really address problems like this would be to create a public bank, but to also bring the big four into public hands. The entire banking and finance sector needs to be in public ownership so that we can combine their resources under democratic control. These assets could then be used to invest in socially necessary infrastructure and jobs.
The only way to ensure that the sector was really run in the interests of the majority would be to involve organisations like trade unions and consumer groups in its management. We could not have a situation where bureaucrats ran public enterprises in a similar way to their private counterparts.
Put simply, the Greens call for a People’s Bank is good start, but it doesn’t go far enough. The only way to really take on the power of the big four is to tackle the problems that exist with socialist policies that aim to create not just a People’s Bank, but a “People’s Economy” that can really cater for our needs.
By Corey Snoek