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News that the Australian Securities and Investments Commission (ASIC), having been shamed into doing some actual regulating, is to be “embedded” in the big four banks, with officers working from inside the institutions themselves, has been met with curious silence from what remains of the free-market right. Understandably.

Wasn’t the market meant to be self-regulating, with consumers making sovereign choices blah blah blah to regulate bad actors? Turns out, gasp, there’s a collective self-interest that binds capital together, and prompts it to communicate other than by market means, i.e. the principle fact of capitalism today is not competition, but its opposite.

Banks have now been judged so sociopathic by the public that the government has no choice but to look like it is doing something, and to make that appearance so convincing they actually have to do something. Hilarious.

But in the process, we are getting calls from sections of the left and progressive movements to “break up the banks”, separate savings and small funds businesses, from investment and speculation arms. In the US, Bernie Sanders ran big on this — as did Hillary Clinton, when the popularity of Bernie’s approach gave her no choice. The Greens are the latest to adopt this approach.

Breaking Up the Banks is tempting as a solution, and since it’s more radical than anything we’ve done for a while, it looks striking. But we don’t need to break up the banks; we need to socialise them. If a big four bank is “too big to fail”, then it is not a private entity — like, say, a restaurant is — but a social entity that happens to be in private hands.

Breaking Up the Banks actually adopts the rhetoric and ideology of capitalism — the idea that, at heart, it is a system of competition, and collusion and cartelisation are perversions of its essential purpose. By arguing for break-up and anti-trust measures as social policy, such progressives limit the role of government to being an eternal “reset” croupier, adjusting state settings so that capitalism can work in its “essential” form.

But intense competition is just a stage within the development of particular capitalist systems. The system is always on the way to cartelisation, and dominance by cartels, oligopolies and monopolies has been the truth of Western capitalism for about a century now — pretty much as long as the 19th-century “high capitalist” period, which the right projects as the “true” nature of capitalism.

Furthermore, using a break-up as a lead progressive strategy relies on the neoclassical economic fiction used to justify capitalism: that firms only communicate with each other by means of demand signals and the market – that the firm is a “black box”, emitting prices, goods and services.

The truth is that even with 10 private banks, or four separated investment arms, they will all still meet over tea and Monte Carlos at ABA functions — chaired by Labor hero Anna Bligh; really worth giving your energy to a party led by such people, innit? – and lower limits on prices will simply be set. The divide remains.

There is a case for separating consumer banking and investment arms, because they are often engaged in contradictory practices; but the main game is to take the big four consolidation that occurred in the ’90s, and use its integration for the public good.

To socialise the big four banks — by using compulsory transfer of 51% of the bank into a social holding entity, with compensation by means of long-term bonds and share dilutions — would bring trillions of dollars under public direction.

The banks would then be run by a board, composed of representatives of sub-boards — commercial, consumer, worker, and community — with a series of duties. The duty to “maximise” profit would be eliminated from the law, as sole aim; the duty to ensure the long-term viability of the bank would persist. A range of other duties — concerned with social equality, consumer rights, environmental responsibility, global human rights — would be added.

Different social forces could then advocate politically for banks to lend muscle to massive investment social programs: genuine urban development for a rising population, with the creation of new city hubs, the rapid greening of national infrastructure, all of it providing the base for a new, smart, hi-tech manufacturing sector to address the vast, and largely unspoken of, structural unemployment rife across Melbourne’s north and west, Sydney’s west, and similar areas in other states.

State regulation, ombuds offices, union representation — these would all continue. This is the point of maintaining such banks as socialised but separate entities, rather than absorbing them wholly into the state, so that the irresolvable contradictions of supply and demand, finance and borrowing, capital and labour are not obscured. Eventually, via further state-public buy-outs, the private component could be reduced to 10% or so.

You think this sounds like fantasy; we had a commonwealth bank when the country was scarcely a decade old. We’re trying to restore the gains of 1910. From ’45 onwards, state buy-outs of the private sector were routinely discussed. We’ll either be talking how about how to do this in the next decade, or the boot will be more firmly on our necks than ever.

What do you make of the Greens-led and Allan Fels-backed push to break up the banks? Write to boss@crikey.com.au and let us know.