Civic Infrastructure and Nationalised Banks

Ken writes:

Oh the banks banks banks. Picking up the tab for domestic banks added 40%, according to some figures I’ve heard, to the Irish national debt, at a time when the collapse of the housing market and its ramifications put hundreds of thousands into the dole queues and dramatically cut tax revenues. So Ireland went almost overnight from a country with a budget surplus to one with a budget deficit of nearly 20 billion per year, which required a ‘bailout’ from the EU and a host of austerity measures. The bloody banks.

Now it looks like the Spanish banks are on the brink of doing the same thing to Spain. Spain has just nationalised one bank and who knows what state the rest of them are in. Ireland ended up nationalising two (which are currently being wound down) and taking a 99% ownership into the largest bank in the country and a substantial minority stake in the next largest.

It’s really clear to interested nonspecialists like me now that banking has an absolutely fundamental place in countries economy, such that without a health and well functioning banking system the productive parts of the economy simply cannot function. Businesses are going under because they can’t cover the period between paying suppliers for goods and selling them to the public, or between paying employees for their work, and rent for premises, and being paid by other business they supply. Well-functioning banks are supposed to cover this lag and they’re not doing it.

What has become clear to me, at any rate, is the important infrastructural role played by banks. They are facilitators of the productive industry in an economy and in that sense are a bit like motorways and the utilities infrastructure (the gas an electricity network, broadband and telecommunications etc.). Really, a well functioning banking system is a public good from which we all derive benefit, which makes me wonder if it isn’t really the sort of thing the government should take a more substantial interest in.

That is to say, the Government should completely nationalise AIB and run it as a state owned infrastructure company in the public interest. Here are some reasons why:

1. Everyone benefits from having a well-functioning banking system that is efficiently and competently run. A private bank seeks to make a profit on its activities. Were it not run for profit, the money that would otherwise be taken as profit could be used to improve the service, or more likely could be left in the hands of the residents of Ireland by making the services cheaper.

2.Removing the profit motive from AIB might also make its services less risky.

3. Bankers would be civil servants. They would be paid a civil service wage and not the ridiculous and insulting to ordinary people silly figures that bankers in the private sector get. There would be plenty of civic minded economics graduates and general academic types willing to take jobs in a national bank for ordinary money. Some people are motivated by feeling they’re making a positive contribution to their society and don’t need to be bribed to turn up for work.

4. The criticism, which was also my initial suspicion, that banks run by civil servants would make decisions based on political rather than economic considerations is quite unlikely to be true. Assume that the banking civil servants believe they have an important role to play in the national economy by lending money to viable businesses for improvement and growth but also a responsibility to spread that money wisely. They would be conscious of the need to treat all residents fairly so lending decisions would have to transparently meet objective and consistent criteria. After all, the same criticism could be made of staff in the social welfare offices charged with disbursements to low income families. They follow objective criteria rather than making a personal decision about whether someone will get paid. And we trust academics and medics to make decisions on the basis of criteria appropriate to their fields rather than political considerations. The Irish civil service does not have the pervasive endemic corruption you see in some countries where you need to bribe someone for a licence or appointment for something. In fact, the scope for patronage and cosy golden circles and getting bank finance because of who you know is at least as great when banks are in private hands.

So, I would nationalise AIB, fire a bunch of people and make its remaining employees civil servants overnight. The high-flying types who think they can do better are welcome to try elsewhere.

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5 thoughts on “Civic Infrastructure and Nationalised Banks

  1. 2nd the like.

    Could we extend Ken’s arguments to other sectors of work that are supposed to perform a “service” or have a “supporting” role, including “administration”?

    Also, you know, just returning terms to their actual meaning. Call me a flat-footed philologist if you will.

    1. kenanddot

      But could you nationalise all administration?

      Actually, it makes me realise I don’t think you’re entitled to say you’re returning ‘administration’ to its actual meaning. ‘Administration’ now primarily means a certain kind of task, and only secondly a body that carries out that task. (I suppose I’ve got to look this up now…)

      1. My bad: for “actual” read “original.” Given that current usage may be corrupted, a deviation from / perversion of that orginal.
        In the case of administration: Lat. ad + ministrare > OFr > MEn. With, in “minister,” an original sense of “serve.” Still present in some Protestant churches, ex. Lutherans–unsuprising, given the scholarly/philological bent of its founder…
        See further: the AND, LEXILOGOS, the MED, the OED.

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