Wednesday, August 24, 2011

Five ways to beat the banks

On Monday, I mentioned the documentary Inside Job, which detailed the ways greed, shortsightedness and ideology caused a partial meltdown of the financial industry in 2008. Despite official reassurances, the radioactive material from these events is not safely secured, but continues to poison an ever wider part of the world.* If you have seen the documentary and share something of my anger, you might also share something of my feelings of frustration and impotence. When the scale of the problem is so large, and the corruption of key institutions so widespread, there is no single silver bullet. Especially for those of us outside the US, the issues in the documentary feel even more distant, as we can't vote for a representative promising change.**
*I realise I haven't written on Fukushima yet. A post on nuclear power is coming, one day...
**And who then does nothing about it. On this, as on many fronts, Obama has been deeply disappointing. I can't say I didn't warn myself.


So what can we do? We may not singlehandedly reform or overthrow the vested interests that created the mess, but we can live lives that point to another way. I have listed a few random suggestions, but would also love to hear more.

1. Repent of the love of money. Delight yourself in the goodness of God and open your eyes to the false promises made by wealth. Reject the idea that gaining more is at the heart of your identity or life, or ought to be at the heart of our political vision of life together. This one is foundational to all the others.

2. Reduce your debt. The apostle Paul tells us to "owe nothing to anyone" (Romans 13.8). The power of the banks is debt-fuelled, and never more so than in the last couple of decades. Perhaps there may be times when certain kinds of debt can be justified; but not when debt is used to fuel needless consumption, or goes beyond one's likely means to repay, or results in driving major life decisions ("I need to work long hours to pay off my mortgage"). For us, this has meant deliberately stepping off the property ladder and not using credit cards - almost everything is now paid in cash or, if we have to, then with a debit card.

3. Join the global movement calling for a Robin Hood Tax - also known as a Tobin tax, after the Nobel laureate who first suggested it forty years ago - that would place a tiny tax on financial transactions in order to make short-term speculative transactions less attractive. The money raised would ideally be earmarked for development aid and climate action, but the existence of the tax as a disincentive to rampart speculation is a distinct question and doesn't depend on where the money would be spent. This campaign is gaining significant traction in Europe, though relatively little in the US. The UK response is key as to whether it grows (and would likely pull in the US, if the previous link is correct) or stagnates. This point can be expanded to include supporting any other genuine attempts to reform the financial system.

4. Take your money from a big multinational bank and put it somewhere else, such as a local credit union or co-op bank. In the UK, try The Co-op Bank. I'd love to hear any recommendations in Australia, since we'd like to switch banks there too. Of course, not all banks are equally bad, but it is difficult to find a large multinational bank where your money won't be financing the arms trade, fossil fuel expansion, environmental degradation and so on.

5. As a church, let us not neglect to encourage, disciple and discipline our members who work in major financial institutions. I asked a while back whether Christians can be bankers, and my tongue was only slightly in cheek. Usury is condemned in scripture and throughout Christian tradition (until the last couple of centuries, when it has been redefined as lending at extortionate interest, rather than simply lending at interest). This is a large topic (and the subject of an upcoming post), but the church needs to ask these questions once more today, particularly in the context of the systemic abuses found in such enormous concentrations of power. When tax collectors asked John the Baptist "Teacher, what should we do?", he didn't tell them to quit their job, but gave the radical advice, "Collect no more than the amount proscribed for you" (Luke 3.12-23). What is the radical advice the church is to give our present day "tax collectors", that is, bankers?

13 comments:

Tom said...

Got any thoughts on the banking/investment interest that we all inevitably receive? I'm trying to figure out where the money I 'earn' through bank interest and superannuation investments actually comes from. Is it taking money from the poor and giving it to the rich?

Mister Tim said...

Bank recommendation: not that I'm with them personally (although I help manage an account there for a not for profit group), but the MECU is good.

byron smith said...

Thanks Tim, I'll look into them. I like the credit union customer-as-owners structure, and they seem to have a focus on ethical investment. I haven't had a chance to look into what that means.

Speaking of unethical investments, Ethical Consumer has this recent article on failures by RBS, HSBC and Barclays (three of the UK's biggest banks).

byron smith said...

Tom - Where does the money come from? An excellent question, and the answer will depend on your particular bank. But it is a question worth asking. I suspect that most banks will be funding worthwhile and dodgy projects. Are you personally responsible for the decisions they make? No, but your support nonetheless makes a small contribution as an enabling factor.

I guess whether or not there is a problem with the very concept of receiving interest is the broader question. Christian thought (until the last couple of centuries) used to be pretty clear that lending at interest (in the modern sense of the word) amounted to usury, which is of course condemned strongly in scripture. An analysis of our economic system lies well beyond the scope of a blog comment, but I remain suspicious towards the frankly messianic claims made by some apologists for a debt-based economy.

Alan Wood said...

The term 'Tobin tax' clearly denotes a particular idea of a particular eminent thinker, which attacks speculation and over-revving the engine of the financial system. 'Robin Hood' connotes attacking the rich as rich, rather than some of the rich inasmuch as they are destructive speculators.

I'm in favour of a Tobin tax. I distrust the rhetoric of 'Robin Hood' - even though I'm in favour of redistributive taxation. And anything that reinforces the common libertarian talking point that 'tax = stealing' makes my eyebrows itch.

In short, call it a Tobin Tax, please.

BTW (and this really is a quibble), I think most government economists (who you'd need to convince) don't like earmarks. They see them as a necessary evil - you call it a flood levy to absorb the political pain of raising taxes to pay for a flood response, but it is economically 'more efficient' to move everything through consolidated revenue, not to have umpteen different buckets of money that have restrictions on how they may be spent.

byron smith said...

Alan - I agree with all your points, though the Robin Hood Tax for all its faults has managed to generate more political momentum in a couple of years than decades of talking about a Tobin Tax. It is now quite thinkable that Europe might embrace it (Sarkozy and Merkel are both in favour), and if they do, then the US may be forced to join them (according to the link in the post). So while Robin Hood Tax has problematic connotations, it also has political mileage.

Alan Wood said...

I agree there is a short-term rhetorical success, but I think it will lead to longer-term problems. Besides, each time we willingly use a misfit word, something in our language dies.

I haven't read your link yet, but I don't think the US would be forced to change its own tax regime - I think that a tax on transactions would be more likely to push financial activity west across the Atlantic (or perhaps just into the Channel?). I suspect we would need the OECD to go nearly all at once.

byron smith said...

I can only support your desire for linguistic responsibility, though think it would be somewhat quixotic to make support for the campaign contingent on such considerations.

I am no expert on the likely success or failure of less than universal implementation of such a tax amongst OECD nations, though think the whole threat of upping sticks and going elsewhere is itself part of the problem of the financial system (in common with many large corporations), as I tried to illustrate earlier.

Sarah said...

Thanks. I hadn't thought of #4, but in retrospect, duh! Makes perfect sense. I'll be doing that now.

Byron Smith said...

The Conversation: Barriers to switching banks may be smaller than we expect.

byron smith said...

Conversation: Europe moves towards introducing a Tobin tax.

byron smith said...

Regarding #4: Move your money UK. There is also a US version.

byron smith said...

Guardian: Following Barclays, now HSBC are in the limelight.

Another G article looks at ethical banking options in the UK.