I went over to Hackney to attend the People’s PPE. This, their second event was called the Hitch Hiker’s Guide to Economics and I have produced a storify here which is a collection of tweets and other social media comments about the event. The rest of this blog is based on my notes and the thoughts it provoked, on debt, banking regulation and Islamic finance, a bit less about the class war.
Ann Pettifor, Director of PRIME, opened the session, stating that the problem was debt and the banks, which create debt. She also quoted as an example of the fragility of the financial sector the size of Deutsche Bank’s derivative book: five times the size of the German economy and 50% of the world’s GDP. She also referenced her record as an activist in the Jubilee Debt campaign, which campaigns to drop the sovereign debt of poorer countries that cannot pay. She also spoke of the “Golden Age of Economics” (1944 – 1973) which started in 1944, when the victorious WW2 powers reset the global economy at the Bretton Woods conference, led by Roosevelt and Keynes, the man who imagined the end to the great recession and the man who acted. She said that Roosevelt’s first rule was that no bankers were to be invited, and Pettifor argued that the meeting came to the conclusion that speculation should be barred, foreign exchange should be regulated and that most importantly for the afternoon’s discussion, interest rates were no longer to be set by the market, but by the central banks.
Yanis Varofakis, the ex-Minister of Finance in the Syrizia government of Greece spoke of Capitalism reversing of the chain between production and debt. The one thing that doesn’t change is that the politically powerful appropriate the production of the masses. (It made sense at the time, but on looking at my notes after the event, I find it harder to understand.) He also spoke about the politics of class war and the 21st century battlefields of austerity and debt. On reflection it reminded me of the Hailwood shop stewards who advised their members not to take out mortgages because it undermined their will to strike to defend their living standards and work place justice.
Mufti Rahamn provided another view on the chain, usury is forbidden under Sharia, as it once was under Christian law, and this means that the axiomatic principle of Islamic banking is shared risk, but it’s tax inefficient because interest is not seen as income and is never taxed in the UK, and so Islamic finance repayments are taxed. Much of Islamic finance seems to me to be an exercise in renaming, but it’s possible that the differences are in the small print. (Something to study.) The principles would make charging fees as opposed to risk premiums might be harder and the risk free income generated by many of the non Islamic banks would be harder to earn. He stated that HSBC have withdrawn their Islamic finance products.
In the question and answer sessions, two trots got to the microphone and asked about nationalising the banks and council cuts. Pettifor answered the question on why she hadn’t spoken of it by saying, “because I didn’t have time”. She pointed out that two of the British big 5 banks were under public control but under neither Labour nor obviously under the Tories had this made any difference in terms of the pursuit of public policy. (It’s unlikely that adding the slogan of workers control to that of nationalising the banks will make much difference to their behaviour.) This is a question of will and the policy prescriptions will need to be much clever than can be expressed in three words.
On Council cuts she placed the dilemma exactly where it belongs. The crisis was caused by unregulated banking, the public debt was caused by saving the banks and our savings, austerity is a deliberate attack on the standards of living on the citizens of this country, and instead of demonstrating against the banks and the Tory government, pickets of Hackney Council are being organised.
The top 5 banks in the UK are all Globally significant financial institutions. Santander’s regulator of last resort is Spain, making the fifth UK G-SIB Standard Chartered, the bulk of whose customers do not live in the UK. Lloyds and RBS/Nat West are nationalised.
The picture below illustrates a group of banking workers, at work.
The picture above is by Richard Alvin, available on flickr CC 2010 BY. It’s a small bank’s trading floor, showing the reality of workers control. We need more regulation not less.
The featured picture is from twitter, a post by Aodhán Cottrell Boyce.