Pub­lic inter­est in pro­gres­sive finan­cial reform is grow­ing. After the epic crash of 2008 and the ​“Great Reces­sion,” and with a boost from a sharply pop­ulist cam­paign sea­son, a num­ber of left-of-cen­ter pro­pos­als have cir­cu­lat­ed around the ques­tion of what to do about the bank­ing sys­tem, which has mold­ed con­tem­po­rary soci­ety in its image and defines the hori­zon of what is polit­i­cal­ly possible.

Instead of “too big to fail, too big to exist,” the new watchword for the politics of finance should become “financial power for the public good.”

The inter­na­tion­al banks, whose out­stand­ing deriv­a­tive con­tracts are esti­mat­ed to have a val­ue of over $500 tril­lion, are the mas­sive and pow­er­ful con­duits of world cap­i­tal, with finan­cial assets that dwarf the annu­al GDP of the rich­est coun­tries. A new antitrust move­ment aims at break­ing the pow­er of the largest banks by dis­man­tling them. But while the inten­tions behind ​“break­ing up the banks” are good, such a pro­gram is deeply flawed, dou­bling down on mar­ket com­pe­ti­tion and nation­al­ism when we should be think­ing about new forms of pub­lic con­trol and transna­tion­al coordination.

We need a pol­i­tics that can empow­er pro­gres­sive polit­i­cal forces by shift­ing the eco­nom­ic cen­ter of grav­i­ty deci­sive­ly to the left. Instead of ​“too big to fail, too big to exist,” the new watch­word for the pol­i­tics of finance should become ​“finan­cial pow­er for the pub­lic good.”

The lib­er­al thrust of the new antitrust movement

Bernie Sanders has come out most force­ful­ly in favor of ​“too big to fail, too big to exist,” but he is far from the only one. Eliz­a­beth War­ren advo­cates sim­i­lar mea­sures, and even Hillary Clin­ton, a staunch advo­cate for Wall Street, has paid lip ser­vice to pop­u­lar hatred of the banks. Some aca­d­e­m­ic econ­o­mists also now endorse some ver­sion of the pro­pos­al to break them up.

On its face, the claim makes sense. The basic assump­tion is that restor­ing free and fair com­pe­ti­tion among equal, small­er play­ers in the finan­cial indus­try will end monop­oly pow­er in the mar­ket, reduce sys­temic risk and de-fang the banks, ben­e­fit­ing con­sumers and soci­ety at large.

Yet even assum­ing there is enough will and polit­i­cal mus­cle to do so (and it’s not clear there is), break­ing up the banks would actu­al­ly seri­ous­ly dis­em­pow­er aver­age citizens.

With­out a real plan for impos­ing demo­c­ra­t­ic account­abil­i­ty on a small­er bank­ing sys­tem, we would get the same kind of short-term, dys­func­tion­al finan­cial mar­kets that we cur­rent­ly have, just on a much small­er scale. A bunch of small­er banks that aren’t sub­ject to demo­c­ra­t­ic con­trol would actu­al­ly act much like the big banks.

And even if such plans were enact­ed, the small­er size of the banks would pro­found­ly reduce the scope of pro­gres­sive eco­nom­ic projects. Shrink­ing the banks might allow for reg­u­lat­ing small­er finan­cial mar­kets in the near term, but it would weak­en pub­lic pow­er over the econ­o­my as a whole, because reduc­ing the size of the banks would mean reduc­ing the scale of the invest­ments that could be car­ried out—invest­ments that we des­per­ate­ly need.

At its root, ​“too big to fail, too big to exist” relies on a roman­tic vision of small busi­ness com­pe­ti­tion that not only reduces the scale of our eco­nom­ic pow­er, but also ignores capitalism’s built-in dri­ve toward com­bi­na­tion and cen­tral­iza­tion. Cut­ting the banks down to size might momen­tar­i­ly rein them in, but in the end it would mere­ly set the stage for their even­tu­al re-con­cen­tra­tion in an ever larg­er form, at least under the cur­rent arrange­ment of a cap­i­tal­ist society.

Break­ing the pow­er of finance by down­siz­ing it is not the solu­tion. Rather than dis­man­tling the banks, we must trans­form them.

Finance and the pol­i­tics of production

We need a major shake­up in how we under­stand the rela­tion­ship between pol­i­tics and the econ­o­my. Instead of lev­el­ing down the scale of the econ­o­my to fit our pub­lic insti­tu­tions, we need to empow­er and expand those insti­tu­tions to match the scale of the econ­o­my. And rather than assum­ing the Unit­ed States exists in a vac­u­um from the rest of the world, we have to start tak­ing the inter­na­tion­al orga­ni­za­tion of pro­duc­tion seriously.

This means mov­ing from a pol­i­tics of redis­tri­b­u­tion to a pol­i­tics of production.

The pol­i­tics of redis­tri­b­u­tion frames the ques­tion of eco­nom­ic and finan­cial reform as sim­ply a mat­ter of shar­ing the exist­ing nation­al wealth more equi­tably. It means mak­ing demands around goals like tax equal­i­ty, a strength­ened wel­fare state, mar­ket reg­u­la­tion, and expand­ed access to edu­ca­tion. These are desir­able goals, of course, but all tend to be seen in iso­la­tion from the world eco­nom­ic sys­tem in which they are embedded.

This per­spec­tive ignores the polit­i­cal and eco­nom­ic con­se­quences of the Unit­ed States’ posi­tion in the glob­al divi­sion of labor. It takes for grant­ed that a strong, social-demo­c­ra­t­ic wel­fare state could sim­ply be rebuilt in inter­na­tion­al eco­nom­ic and finan­cial con­di­tions that are rad­i­cal­ly dif­fer­ent from the mid-20th cen­tu­ry, when such states were the norm. And it also over­looks the nec­es­sary role played by inter­na­tion­al finance in coor­di­nat­ing pro­duc­tion and dis­tri­b­u­tion across the world.

For all its reck­less­ness and com­plex­i­ty, the glob­al finan­cial sys­tem is inte­gral to the world econ­o­my. A giant multi­na­tion­al firm like Apple, for instance, relies on the whole bizarre cat­a­logue of finan­cial deriv­a­tives — swaps, futures, options and all of their relat­ed muta­tions — to coor­di­nate its invest­ments across a dozen or more coun­tries. These coun­tries all have dif­fer­ent debt lev­els, cur­ren­cy exchange rates, inter­est rates and polit­i­cal con­di­tions of their own that are fac­tored into invest­ment deci­sions as dif­fer­ent forms of risk.

Liq­uid­i­ty, or the abil­i­ty to buy and sell finan­cial assets at will, is the engine of this process, and the big invest­ment banks — Mor­gan Stan­ley, Gold­man Sachs, Cit­i­group — are its main vehi­cles. Their enor­mous size allows them to act as the oil in the gears across the glob­al geog­ra­phy of production.

Size itself is not the real prob­lem here. Huge and pow­er­ful transna­tion­al insti­tu­tions are need­ed to pow­er glob­al soci­ety and will be required in the future to address the plan­e­tary scale of deep­en­ing eco­log­i­cal and polit­i­cal crises — crises that can only be met through coor­di­na­tion and large invest­ments of pro­duc­tive cap­i­tal into new areas where they are most needed.

Mas­sive­ness is actu­al­ly an asset for this task. The prob­lem is not that the banks have such huge amounts of cap­i­tal — it is who has con­trol over those resources.

The world bank­ing sys­tem has evolved into a wild­ly anar­chis­tic form in which it can only cre­ate liq­uid­i­ty — and thus pow­er pro­duc­tion — through a high­ly volatile, per­ma­nent spec­u­la­tive fren­zy. This means what is con­ven­tion­al­ly writ­ten off as ​“mere spec­u­la­tion” is actu­al­ly at the core of ​“real” or pro­duc­tive nation­al economies, which could not exist with­out inter­na­tion­al cap­i­tal flows pow­ered by mar­ket speculation.

The ​“real econ­o­my” of man­u­fac­tur­ing and indus­try is often seen as inde­pen­dent from the social­ly worth­less gam­bling that goes on in the finan­cial mar­kets. But in fact, the two are inter­con­nect­ed in a con­tra­dic­to­ry, cri­sis-rid­den whole. While much of it is indeed social­ly worth­less, all spec­u­la­tion can­not sim­ply be sub­tract­ed from this equa­tion. In fact, the very idea of some pure ​“real econ­o­my” beneath the par­a­sitic excess­es of spec­u­la­tion, which would final­ly be allowed to thrive if we could only elim­i­nate the lat­ter, is a myth.

But it is a very pow­er­ful one, espe­cial­ly in times of eco­nom­ic cri­sis. It dri­ves the demand to break up the big banks and the notion that the U.S. or any advanced econ­o­my with crip­pling inequal­i­ty could sim­ply turn the clock back and return to a strong, social-demo­c­ra­t­ic wel­fare state on the Scan­di­na­vian mod­el, which is actu­al­ly not look­ing so pro­gres­sive itself these days. It also informs new lib­er­al pol­i­cy ini­tia­tives, like Joseph Stiglitz’s ambi­tious pro­pos­al to ​“reimag­ine the rules” of the econ­o­my — as if it were only a mat­ter of get­ting the right laws on the books that would allow the cap­i­tal­ist econ­o­my to hum along indef­i­nite­ly, to everyone’s benefit.

Such pro­pos­als, which restrict the focus to fight­ing inequal­i­ty in one coun­try, have three major dis­ad­van­tages: They con­fine polit­i­cal atten­tion to the bound­aries of the nation-state when finan­cial pow­er is glob­al; they assume away the his­tor­i­cal evi­dence sug­gest­ing that the con­tra­dic­tions of cap­i­tal­ist pro­duc­tion can­not be con­tained; and their nation­al ori­en­ta­tion is sole­ly con­cerned with improv­ing work­ers’ con­di­tions in the Unit­ed States instead of includ­ing work­ing peo­ple across all nation­al bor­ders. The pol­i­tics of pro­duc­tion rec­og­nizes these con­straints and calls instead for transna­tion­al strate­gies that aim to increase demo­c­ra­t­ic con­trol over cap­i­tal invest­ment. Rather than focus­ing on a fair­er dis­tri­b­u­tion of a giv­en country’s eco­nom­ic out­put, it aims to change how the whole inter­na­tion­al eco­nom­ic sys­tem works.

The best tra­di­tions of the Left are explic­it­ly inter­na­tion­al­ist, reject­ing all nation­al bor­ders as arti­fi­cial con­structs of rival eco­nom­ic pow­er blocs. Recov­er­ing this vision is not only moral­ly right; it is strate­gi­cal­ly essen­tial for any left­ist pol­i­tics wor­thy of the name.

Pro­gres­sive glob­al­iza­tion as the anti­dote to eco­nom­ic nationalism

Instead of break­ing up the banks, thinkers and actors on the Left need to work togeth­er to cre­ate seri­ous pro­pos­als for con­vert­ing the banks into pub­lic, demo­c­ra­t­i­cal­ly account­able insti­tu­tions. How can we do it?

A finan­cial trans­ac­tions tax that would cre­ate enor­mous pub­lic rev­enues through a tiny tax on spec­u­la­tion is an excel­lent start­ing point, but we need to be think­ing big­ger. The Left should set its sights on the glob­al stage. We could start by gen­er­at­ing con­crete pro­pos­als around the kinds of insti­tu­tion­al struc­tures nec­es­sary to coor­di­nate demo­c­ra­t­ic con­trol over the finan­cial cir­cuit­ry of the world economy.

Some mea­sure of con­trol in this area is the only real way to counter aus­ter­i­ty, which is dri­ven by the need to appease inter­na­tion­al finan­cial mar­kets by coun­ter­ing the (most­ly imag­i­nary) threat of infla­tion through ever-small­er pub­lic bud­gets and allow­ing debt-fueled spec­u­la­tion to dri­ve up the val­ue of finan­cial assets. Pub­lic con­trol of finance will be nec­es­sary to defeat the stran­gle­hold of ​“bub­ble­nomics” over our social existence.

One can imag­ine a set of insti­tu­tions whose pub­licly elect­ed offi­cials have the author­i­ty to over­see the ebb and flow of liq­uid­i­ty, man­age and, if nec­es­sary, inter­vene to reduce sys­temic risk, and chan­nel cap­i­tal in spe­cif­ic directions.

One exam­ple: direct­ing the rev­enue from a gen­er­al tax on finan­cial trans­ac­tions into the most cap­i­tal-starved regions of the world. The only pos­si­bil­i­ties for long-term devel­op­ment through large-scale pro­duc­tive invest­ment are out­side the short-term demands for quar­ter­ly prof­its and the relent­less com­pe­ti­tion that dom­i­nates the invest­ment deci­sions of finan­cial mar­kets. An insti­tu­tion­al answer to this could look like the Inter­na­tion­al Mon­e­tary Fund or the World Bank, but not so nar­row­ly behold­en to the inter­ests of U.S. and Euro­pean cap­i­tal — one that is actu­al­ly democratic.

Anoth­er impor­tant idea comes from Germany’s Die Linke (the Left) par­ty, which has devel­oped an ambi­tious pro­pos­al to social­ize the Ger­man bank­ing sys­tem. Their pro­pos­al would reduce bank­ing to its three core func­tions of pay­ments, sav­ings and loans by trans­fer­ring the most sys­tem­i­cal­ly risky banks to pub­lic own­er­ship. Their con­trol­ling boards would be strength­ened and expand­ed to include social stake­hold­ers like trade unions, envi­ron­men­tal groups, com­mu­ni­ty orga­ni­za­tions and oth­ers, whose rep­re­sen­ta­tives are demo­c­ra­t­i­cal­ly legit­i­mat­ed through direct elections.

Though Die Linke’s research is based on the unique fea­tures of the Ger­man bank­ing sys­tem, it could pro­vide a point of depar­ture for more research on transna­tion­al pub­lic bank­ing, which could chan­nel cap­i­tal invest­ment on a much larg­er scale and in direc­tions that are impos­si­ble with our cur­rent finan­cial system.

Instead of turn­ing away from the daunt­ing chal­lenges pre­sent­ed by con­tem­po­rary finan­cial pow­er, the left has to turn and face them square­ly. This means no longer ced­ing a monop­oly on how finance works to those with­in the cur­rent bank­ing sys­tem. If the glob­al econ­o­my is no longer to oper­ate by blind neces­si­ty and sub­mit to con­scious, demo­c­ra­t­ic direc­tion and con­trol, then the Left must find ways to politi­cize finan­cial pow­er and trans­form it from a reck­less, bub­ble-dri­ven fren­zy into a pub­lic util­i­ty. This would amount to pro­gres­sive glob­al­iza­tion.

In con­trast, con­tem­po­rary antitrust move­ments are essen­tial­ly push­ing towards eco­nom­ic nation­al­ism, which sees indi­vid­ual nation-states as locked in bat­tle with their eco­nom­ic ​“com­peti­tors.” The ide­ol­o­gy of eco­nom­ic nation­al­ism under­mines transna­tion­al sol­i­dar­i­ty by encour­ag­ing work­ers in dif­fer­ent coun­tries to com­pete with each oth­er instead of unit­ing against their multi­na­tion­al cor­po­rate exploiters.

And by mak­ing the inter­ests of indi­vid­ual nations the bot­tom line for eco­nom­ic pol­i­cy, eco­nom­ic nation­al­ism push­es an increas­ing­ly frag­ile, cri­sis-rid­den world econ­o­my towards fur­ther frag­men­ta­tion in which coun­tries must com­pete for increas­ing­ly scarce mar­kets and resources. The log­i­cal end­point of this process is the divi­sion of the globe into rival eco­nom­ic and polit­i­cal blocs whose con­fronta­tion can lead to catastrophe.

Transna­tion­al pow­er is the only way for­ward to a post-neolib­er­al future, and democ­ra­tiz­ing finan­cial insti­tu­tions is an indis­pens­able piece of the puz­zle. Bernie Sanders and pro­gres­sives every­where should drop ​“too big to fail, too big to exist,” and instead call for ​“finan­cial pow­er for the pub­lic good.”