When Banks Were Banks

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The imposing edifice of the Bank of Scotland on the Mound, Edinburgh

Not hogging the limelight

A sliver of news slipped under the media’s radar this week, they far more interested in the Tory party’s spring budget, than bringing the nefarious activities of bank crime to heel.

Charlotte Hogg is an economist. Last month she was made deputy governor, markets and banking, of the Bank of England, you know, the one that actually belongs to the UK, not England, the one that said they were able to make sharing the pound a reality. Anyhow, Hogg forgot to declare an awkward conflict of interest. Her brother, Quintin Hogg, is a director of group strategy at Barclays, which the Bank of England regulates.

Hogg has, I understand, apologised, but that can’t be the end of the matter. Her judgement is tarnished. She has to relinquish her promotion. At first Hogg claimed to the Treasury Committee that she had done the right thing back in 2013, when she joined that august body of robber barons. This was an ‘untruth’. Nor did she declare an interest during yearly compliance checks. Funnily enough she forgot to declare it when helping to write the bank’s code of conduct – stop guffawing at the back – and was absent-minded again when she applied for her new job.

[Hogg resigned three days after publication of this essay. GB]

Hogg has friends in high places. Her mother is Sarah Hogg, journalist, now ensconced in the House of Lords at £300 a day back pocket money. (Gie’s a job! I can do that!) Older readers will remember her father, the third Viscount Hailsham, served in John Major’s government. His career as an MP ended when he was discovered making us pay for his home improvements by charging his moat cleaning to the state.

Other news of other banks went by barely noticed: RBS will retain massive debts until the Earth is hit by a meteor, Lloyds is setting aside more billions to pay back customers it’s cheated, and HSBC, a bank hoping we’ve all forgotten it’s money laundering services, threatens to take itself abroad when the UK leaves Europe.

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The magnificent dome of the Royal Bank of Scotland, St Andrew’s Square

The good old days

Our local branches are closing down everywhere. The few remaining open twice a week when we’re not looking, and are selling the furniture fast as they can. Find a Tesco wall teller or be damned. I refuse to use online banking. If someone’s got my money I want to see their face, I want them to know I know they have it.

Before the 1970s, banks were banks. By that I mean, they were places you could leave your hard-earned money and know it would be their next month, safe. You entered their carved stone portals, and approached their stout mahogany counters to be greeted by pleasant people who added interest to your savings the longer you left them in their good hands.

They did what banks were supposed to do in a state capitalist economy: they took unused funds from your bank account and, for example, transferred them to some potentially useful purpose like helping you buy a home, or sending your son or daughter to university, or technical college. Try securing a mortgage today – you need to be a Saudi prince.

An ominous rumble

Across the pond, the USA’s banking supremo Alan Greenspan decided deregulation was the way we could all get richer. He told banks to throw off restrictions on how they handled ours savings and our pensions, and go forth and multiply. This they did, by using our savings to treble their salaries and bonuses.

Until then banks were solid, reliable places that helped our economy grow. That changed dramatically in the late 1970s. There had been no financial crises since America’s Great Depression, and no disaster in the United Kingdom since the USA loaned us billions in the 1950s to stave off bankruptcy and restart prosperity days after the war. (Interestingly, Scotland has never been bankrupt, not even after the Darien Schemes failed. Indeed, there was a time its GDP was twice as high as England, but never since the 1707 Treaty.)

The 1950s and 1960s saw a period of enormous growth, maybe in economic history, certainly in the life time of many pensioners if endless artificial austerity is to continue as  banksters and their bought politicians make us pay again for their sins.

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Pound stores for us, Harvey Nichols for them

Egalitarian was once a fine term

Growth in the UK was egalitarian. As economists described it: the lowest quintile did about as well as the highest quintile. Lots of people moved up the social ladder to a better lifestyle. Sociologists called it “working class to middle class”

All sorts of political groups emerged for all sorts of political causes. Growing wealth civilised the country in lots of ways that are permanent. But American neo-conservatives were planning a new doctrine – ‘greed is good’. They saw it partly as a way of taming nations whose politics they disliked, or resources they coveted. It soon became a way of keeping  their own population docile.

A good book on the history of those decades will explain detail, but in essence ne-liberalism, as it was mistitled, began to gain acceptance, first under Thatcher’s regime and then Blair’s: de-industrialization, the off-shoring of production, and the shift to financial institutions, which grew enormously.

To add to that expansion of moving wealth and ownership to the top of society we got the high-tech economy: computers, the Internet, and the IT Revolution burgeoning in the state sector. It was a vicious circle. It led to the concentration of wealth increasingly in the hands of the financial sector. On our patch it was RBS’s CEO, Fred the Shred hero of the hour, the man to emulate, until we discovered too late he was incompetent and vain. In the UK endemic corruption in English banks, finance houses, and long-established insurance companies helped gather wealth into the top 10% of the population.

Of Politics and Money

Concentration of wealth yields concentration of political power. And concentration of political power gives rise to legislation that increases and accelerates the cycle. The legislation, essentially bipartisan, drives new fiscal policies and tax changes, as well as the rules of corporate governance and deregulation.

Alongside this began a sharp rise in the costs of elections, which drove the political parties even deeper into the pockets of the corporate sector.

We see it today in Westminster’s cruel and callous fiscal policies: the  withdrawal of the welfare state, the reduction in pensions, a diminution of workers rights, people working longer hours for less pay, pensions delayed till the elderly are in their seventies, house prices moved way out of the pockets of most ordinary people. These  changes are much greater in the UK than countries such as Japan, or some countries in Europe.

Remarkably, with billions in Scotland’s North Sea oil to play with, the British government has made the UK a poorer place – an accomplishment surely on par with Mussolini’s Italy. The British monetary system has been driven deeper into the pockets of the corporate sector and increasingly the financial sector.

Companies moved their goods up-market to cater exclusively for the mobile rich, the rest of us left to get by as best we can. The masses are people who live a precarious existence, the just getting by people (JGB) – the ‘precariat’.

This substantial reduction in people’s living standards and hope for a better future for their children is perfectly exemplified in the cost of a pair of ‘designer’ jeans sold for what used to be a deposit on a car. The jeans have a slightly different design from the ordinary, rubbed hard to look as if used, probably some tears in them, plus a design house fashion label but cost ten times as much. They are made in sweat shops in India, Korea, or Mexico.

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Gale Porter sells the Big Issue in Glasgow telling how she was homeless

The SNP and the Precariat

We are divided into them and us. Indeed, you could argue the entire world is thus divided.

Westminster holds on to Saint Greenspan’s fantasy economic philosophy. He said a lot of the USA’s success was based on what he called “growing worker insecurity.” If working people are insecure, if they’re part of the ‘precariat’, living precarious existences, they’re not going to make demands, they’re not going to try to get better wages, they won’t get improved benefits. We can kick ’em out, if we don’t need ’em.

That’s what’s called a “healthy” economy today. Greenspan was highly praised for his ideas and greatly admired. The Tory party of England receives the same nod from its adherents, and too many delusional Scottish unionists. Though they may not know it, they too are liable to join the precariat.

The SNP is a bulwark against this sweep of wealth away from people and communities to the power elite. It is using its annual allowance from the UK Treasury to fill the gaps in money circulation, to fill the poverty gaps caused brutal policies of the English parliament. That in itself is a sizeable resistance if not yet a revolution.

It is almost as if we are back in 1707 when the UK Treasury raised taxes in Scotland to pay for the loan it had given the few to refill their bank accounts, the rest to take their chances – the precariat of their day. There is nothing progressive about regression.

Carpe diem!

But if Scotland does not sieze back its right of self-determination, keep what it earns and spend it as it thinks will benefit the common good, the historic reversal that began in the 1970s could become irreversible.

A nation has to form the structures that will be sustained, that will go on through hard times. The SNP is trying to do that now on a limited budget. An autonomous Scotland could envisage handing back ownership of industries to the workers who run them, institute partnerships such as John Lewis has with its staff, in other words, create structures that cannot be overturned, to make Scotland a truly democratic society.

The SNP are the only political party in Scotland holding fast to that doctrine. The others are lickspittle messengers for neo-liberal power. But the SNP won’t manage to resist attacks from Westminster for much longer. We’ve reached the stage where we’re marking time before we are free to move forward.

A second referendum cannot arrive fast enough. The rumblings at House of Gothic Horrors – siphoning billions to pay for the refurbishment of its parliament, Buckingham Palace and a new yacht for the Queen, warn us they plan to withdraw powers from Scotland just as they did when we signed the Act of Union. Westminster will take us back to the times they keep asking us to forget.

Hope, striving for something better means we go forward, not backwards.

Poste script

Waiting to collect a relative from Edinburgh’s Waverley station, parked late at night under the flood light illuminating the Bank of Scotland’s old headquarters on the Mound, I suddenly realise it’s no longer a bank  It is now a museum.

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4 Responses to When Banks Were Banks

  1. Hugh Wallace says:

    Excellent article except for one thing: I don’t know what you think John Lewis is dong that is particularly special but a good friend of mine, an unfortunate member of the precariat, works for that company & it is anything but a workers’ paradise. Whatever lip service they pay to the idea of partnership it is very much the same case of management vs. the staff on the shop floor. Her son works for another retailer, TK Maxx, who treats & pays him considerably better than she is despite being a ‘partner’ in the business.

    • Grouse Beater says:

      I very nearly left mention of JL out because I knew there had been some changes since a new CEO took over, the removal of long-serving cleaners from shares, for example.
      But the principle of all workers sharing in a company’s profits, and having a measure of autonomy in their department seems a good thing, even if it could go a step further as far as worker control is concerned.

      • Hugh Wallace says:

        I think the idea is an excellent concept but the reality, in this case at least, is sadly very different. JL appears to have the same approach to partnership with its employees that the Tory government do to the Scottish people.

  2. broadbield says:

    Banks create money “out of thin air” by making loans, which create deposits. See Ann Pettifor The Production of Money: How to Break the Power of Bankers. I believe the JL pay their CEO a fixed multiple of the average/lowest worker; the Ecology BS pay the CEO 4.4 times lowest paid worker.
    Mondragon is a coop in Basque region of Spain which has gained much praise including from Richard D Wolff a US (Marxist?) economist who has written on workers self-directed enterprises as an alternative to capitalism.

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