Many questions have arisen since the 2008 financial crisis concerning the behaviour of banks and the role the financial system should play in our society. My choice of question -- 'What kind of banking system is compatible with a democratic society?' -- may seem a strange one at first. But if you consider the fact that the key decisions about how our global economy will evolve over the next decade are being made this week not at multilateral talks but by the self-selected and hugely wealthy elites who meet within a ring of steel in a Swiss ski resort you may begin to sympathise with this starting-point.
I believe that what the financial crisis has demonstrated most importantly is that unless we have the operation of finance under democratic control we cannot truly claim to live in a democracy: the objective of Green Party policy outlined in our new report Stepping Outside the Casino is to achieve this democratic control.
The outrageous risk-taking that was standard practice amongst financiers and caused the worst financial crisis for a century has directly led to austerity politics and the dismantling of the state as we have come to know and depend on it over the past 70 years. Most of us did not understand the implicit underwriting of the banks' activities that the government had made on our behalf. So when the Chancellor poured money into them to stop the system from collapsing and vastly inflated the national debt we could not have been considered to have given our informed consent.
Fear of the financial markets controls politicians, so that the extent of our debt and our willingness to pay it cheerfully -- and pay the wider price in terms of public spending cuts -- is part of a charade that politicians perform to keep those who trade in our debt happy. If we were to have a genuine debate about the costs of our debt and the terms and period over which we might be prepared to pay it back our bonds would come under speculative attack, as those of Greece, Spain and Ireland have done. In this situation how can we consider that our politicians are making decisions according to a social contract and for the common good?
The media chat in the past five years has focused on two ideas: regulation and culture, the smoke and mirrors of the finance debate. The call for regulation is a hollow farce when the regulators are routinely drawn from the ranks of the bankers themselves. And these same bankers, who have been found to be addicted to risk-taking and more likely than other employees to demonstrate sociopathic traits, are now expected to change their culture! These words are distractions invented by the financiers themselves to divert us from the word we really need to apply here: power.
The first power move that the politicians should make is the obvious one that bankers are most afraid of: the separation of casino banking from the retail banking services we use as citizens. If this link were cut then the financiers would be gambling with their own money and not risking our futures when they take their outrageous risks. We also need to break the banks up into a network of community banks whose job is to lend to local businesses, much as they do in Germany.
Insulating ourselves from casino banking is an important first step, but its activities are still damaging to national economies across the world. So we need greater control over the exotic financial products that are bought and sold in the financial casino. We need to subject all these products to a 'social usefulness' test. In response to this you might suggest that banking is a highly technical activity and that we cannot expect to understand its arcane workings. To which I would respond that if a 'financial product' cannot be justified as socially useful to a representative citizen then it has no place in a democratic society.
We need politicians who are prepared to take back the power over finance from the banks and shadow banks. Through the issuing of bank licences we give banks a huge privilege; in return we should demand that they operate in the social interest. We also need to understand, or at least believe that our representatives understand, the activities of the finance sector that laid us open to such risks and laid on us such a heavy price when their risks went bad. If we are to end the situation where the profits of banking are privatised but the risks remain with us as a society then we need to have a banking system under democratic control.
Download the Green Party report Stepping Outside the Casinohere.