Posts Tagged ‘State Banks’

G.D.H. Cole on the Need to Nationalise the Banks

March 22, 2016

I found this very interesting passage in Cole’s Great Britain in the Post-War World. Much of the book is dated, but I think this is possibly more relevant now, post 2008, than it has been previously.

In a properly organised economy, it will be for the central bank-the Bank of England-to follow a financial policy which will provide the monetary supplies needed in conjunction with ‘full employment’-of which more anon-and for the deposit banks to ensure the distribution of credits in proper relation to the requirements of the national plan of production.

With this end in view, it is plainly necessary to socialise the deposit banks, whose existing directors will be apt to be visited by a ‘loss of confidence’ when any progressive Government sets about a policy of social control and economic planning, or threatens in any way the dominance of monopoly capitalism. the deposit banks are largely directed by men closely connected with the big industrial interests, and, with some exceptions, ten to favour big business as against small. They are for the most part bigoted opponents of Socialism, and entirely convinced that capitalism is the best of all possible systems. They are therefore likely to look with special disfavour and lack of confidence on State-promoted industrial plans, and to do all they can to aid and comfort any industrialist who is endeavouring to stand out against a socialistic Government. But fortunately the war has already put them largely into the State’s power. There are very large holders of the public debt, and have become accustomed under war conditions to doing the State’s bidding in the supply of accommodation. They will doubtless strive to escape from this position of dependence on the return of peace; but no quick escape it like to be possible. The time for taking them over is now, while they are acting in effect as the State’s agents in pursuance of war-time economic plan.

The bankers and their allies try to scare the public into opposing socialisation chiefly by two arguments-that private person’s deposits will be less secure when the banks are publicly owned, and that the tax-gather will then be in a position to know all about the private man’s affairs. As for the safety, this argument is mere nonsense. Bank deposits cannot be made less secure by having the formal guarantee of the State behind them; indeed, the truth is quite the reverse. As for the tax gatherer, he knows a great deal already, and it is entirely in the interest of the vast majority of people that the few who now successfully evade taxation should be prevented from getting away with it. Finally, there is the fear among business men that it will not be so easy to get credit from a State Bank as from a private banker. This is doubtless true, where credit is wanted for speculation or for other anti-social purposes; but a State which is deliberately following a policy of ‘full employment’ will surely be eager to grant credits to anyone who is prepared to produce in accordance with the requirements of the public economic plan. If the State decides, as I have urged that it should, to leave private enterprise in being over a considerable part of the industrial field, a State Bank is most unlikely to stint the businesses which are left in private hands of the credit needed for carrying out their part of the production plan. Indeed, the small business is likely to find State credit a great deal easier to come by than it has found private bank credit in the recent past.

There remain the ‘financial houses’-discount and acceptance houses which discount or accept bills chiefly in connection with overseas trade, issuing houses which handle new issues of capital, again, until recently, mainly for overseas, and a few private banks which conduct certain highly specialised forms of financial business for big clients, including both foreign Governments and overseas banks and financial concerns. The deposit banks are already in direct competition with the financial houses over a considerable part of this range of business, and tend to compete more and more. Socialisation of the deposit banks will bring the State right into discount and acceptance, if such transactions are to survive at all. Issuing of new capital is a rather different matter; but there is no reason why a State banking system should not make its own provision for all the issuing that is likely to be required, either directly through the State Bank or Banks, or, as has been often suggested, through some sort of National Investment Board empowered both to underwrite and issue approved loans and investments, or itself to make public investments in concerns which call for development in accordance with the provision of the national economic plan.

It’s now seventy-four years after this was written, and it’s still highly relevant. The banks have opposed any kind of socialisation of the economy. They supported Broon and Bliar only when they promised to continue regulating them lightly. And the result was the financial mess that exploded in 2008. And like the banks in the War, which became heavily indebted to the state, the banks then had to be bailed out by the state, and in the case of the Royal Bank of Scotland, nationalised. And the investment banks are still geared mainly to providing credit for overseas, not for domestic industry.

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