Posted by John, November 2nd, 2010 - under Nationalisation.

Tags: Banks

The banks are showing us who really runs Australia. After the Reserve Bank put the cash rate up 25 points, the Commonwealth Bank announced it would increase its mortgage lending rates 45 points.

First, let’s deal with the RBA. This unelected group of bourgeois economists and business people has as its remit to keep inflation under control – between 2 and 3 percent. Underlying inflation last month was at its lowest in 5 years.

So why increase rates? Because they predict the mining boom will drive up inflation. You know, the boom because some mining workers will get – shock horror – better pay. So the two speed economy is at the heart of the RBA’s thinking.

I seem to remember the Resource Super Profits Tax would have had the effect of slowing down the mining boom and diverted the benefits and growth to the other sectors of the economy.

So we can thank those who opposed the RSPT, and those in Labor who capitulated and gave us the lily livered Minerals Resource Rent Tax for the latest rate increase.

That capitulation showed unequivocally that Labor manages the system for the benefit of capital and indeed for the benefit of powerful sections of capital. The mining magnates overturned a Government decision to impose a minor tax on them and destroyed Kevin Rudd’s Prime Ministership to do so.

They ruled, Labor managed.

Now to the banks. The Commonwealth has raised its rates because, they claim, its borrowing costs – the money it pays to depositors and to funds in the wholesale local and international markets – have gone up.

That is true – because the global financial crisis meant banks were scared to lend to each other and everyone’s risk profile went up quite a few notches. But Australian banks are among the safest in the world, and with the Government guarantee on deposits even more so.

Remember back to the start of the global financial crisis? In October 2008 the Rudd Labor Government guaranteed bank deposits and bank borrowing. While it later refined these guarantees, propping up the banks was an important part of the Government’s response to the GFC.

The Commonwealth Bank made $6.1 billion profit during a period of intense financial destabilisation. That profit is built on the back of its net interest margin gouging and government support.

Bank net interest margins are the difference between what banks earn in interest from borrowers and what they pay in interest to lenders. They increased during the GFC.

So while borrowing costs did rise the Commonwealth and other Australian banks have increased their lending rates to us by more than their increased borrowing costs. They gouged us, and continue to gouge us.

The banks margin over the cash rate has increased over the last 2 years from 2 percent to 3 percent.

Effectively we workers as bank customers are paying for the impact of the GFC on banks’ profit rates and the opportunity the GFC has presented to increase the banks’ share of the surplus value the workers in industrial sector create. Rather than take a hit to their profit, they have actually increased their return on investment since the GFC by screwing us for more.

The Labor Government response to the banks since they won power in 2007 has been to huff and puff publicly and do absolutely nothing.

Things are so bad that Labor inaction has made Opposition Treasury spokesman Joe Hockey look like a flaming radical with his nine point plan to ‘increase competition’ in the banking sector.

Funny, Keating did that 25 years ago by allowing foreign banks into Australia. That’s been a great success hasn’t it? And in 1990 labor’s Kim Beasley oversaw the privatisation of the Commonwealth Bank supposedly to increase competition and drive interest rates down. Again, that’s been a great success hasn’t it?

The reality is that competition leads to monopoly.

In Australia the Government has a four pillars policy under which the Government mandates the continued existence of the big four banks – ANZ, NAB, Westpac and the Commonwealth. If that four pillars were to be lifted there would be three or perhaps even just two – big Australian banks.

Finance capital fight with other sections of capital for a share of the surplus value workers in productive sector of society produce. But the interdependence of finance and industrial capital makes any attempts to rein in the banks a problem for the effective functioning of capitalism as a whole. At he same time increased costs of doing business (i.e higher interest rates and tighter lending rules) impact on the other sectors of capital and reduce their activity. They slow them down.

Since finance capital depends ultimately on the productive process it cannot consciously destroy that sector. But its own drive for a greater share of the bucket of surplus value forces it to attempt to steal more and more of our expropriated labour from the other vultures on the bones of our wealth production. It is a patient with a sick phobia to attack its very essence over and other again.It is feeding on its own soul.

The banks rule, not Labor.The ALP managed capitalism and so must give in to the banks or at best very slightly restrict their profit gouging.

Hockey isn’t about attacking the banks, he is about making them more powerful. Competition won’t solve the problems the banks highlight – the lack of real democracy in Australia, the rule of the oligopoly of big business, and the passing on of the GFC to workers.

The banks’ profits are untouchable. This is as true for Labor as it is for the Liberals.

Is there an alternative? We could push for a rent tax on the banks’ super profits. But that is small bickies. It leaves in place the structures of exploitation and the ongoing attempts by the banks to maximise their profits..

Nationalise the banks under workers’ control so all the community benefit.

State support and a quasi monopoly of the big 4 banks put the banks in a strong position to grab an extra share of surplus.

So while the banks are particularly hated (since they impact directly on most working people) their gouging merely reflects the feeding frenzy of all the bourgeoisie on the profit we create.

Why not nationalise the banks and use their profits for socially useful spending? The case for nationalisation? Ken Henry put it this way in relation to mining companies.

Public production allows the government to control exploration and production expenditure, but may lower the return to the community if public enterprise is less efficient at resource exploration and production due to a lack of expertise and market discipline.

Substitute banking for resources and the point remains the same. In fact given the failure of the banking sector during the GFC the onus should be on banks to show that public ownership wouldn’t be more efficient.

To paraphrase Henry, public ownership allows the government to control finance, and will increase the return to the community if the public enterprise is under bank workers’ control.

Add in the profits from the other Big 4 banks and a real resource rent tax and we have a good basis for addressing climate change, closing the gender pay gap, ending aboriginal disadvantage, building public housing to end homelessness, fixing public transport, ending the hospital queues, improving education outcomes and paying better wages to the workers in those industries, for example.

None of this will happen because this is a society that puts profit before people. It’s time to turn society on its head and put people before profits. Nationalising the banks under workers’ control would be a good first step in doing that.