http://www.cresc.ac.uk/sites/default/files...anking%20V2.pdfAn interesting paper which provides much information about the influence of the financial institutions and their privileged position wrt to the political process. Worth reading in full, I think
As people here know, I believe that much of what we do is informed by "narrative". We make stories about the world and we act on the assumption that those stories are true. I do not think we can help this. We can try to apply critical thinking to those narratives and that is useful: but nobody can rely on facts and evidence to come to conclusions about everything because we do not have time. We assume that there are "experts" who can tell us what is happening and what it means, and we prefer a coherent story to uncertainty, for the most part. There is nothing wrong with that. If our "experts" really are experts they know far more than we do about their particular field: and we should take their views seriously. But there are many occasions when the "experts" are not experts at all, if what you mean by that term is someone who has deep knowledge and an objective approach to the interpretation of that knowledge. This can be seen in science, which is the fundamental reason for our faith in experts: they gather facts and they conduct elegant experiments to test hypotheses, especially in the hard sciences. The findings are solid: but neither what we choose to test nor how we interpret those results are solid in the same way. Choices of that kind are made by people, not by scientists: and people are informed by their own unquestioned assumptions and understandings. We deal with that problem through a variety of mechanisms but mainly through transparency. Scientists publish their work and they detail what they did and why they did it and what they conclude from the results they obtain: and all of that is open to review and to question. It sort of works: it is better in hard science than in "social science" since most people do not have a basic political stance on the behaviour of stars or of particles: but even there there are limits which derive from our humanity. This is demonstrated in the aphorism that old paradigms do not shift with new knowledge, but rather when their defenders die out. Not the whole story, but certainly a strong part of how knowledge progresses. It is very difficult for an established scientist to admit that his whole career and contribution is worthless because he did not understand something important which emerged late in his life: some can, but most resist. So do we all. When new knowledge arises it is slowly accepted and the extent to which this happens is also dependent on our status as story tellers: new facts don't change paradigms: but new and better stories do.
If you are wondering why I raise this in this thread it is because of experience in discussing banks in recent months. What has become very clear to me is that there is a story about banks in this country: and that story is that they are the drivers of our national prosperity. According to this view banks and financial institutions are the life blood of our state, our social security, our economy, and on and on. In support of this position facts are adduced, such as the contribution they make in the form of tax: both corporate tax and the proportion of the total tax take paid by the elite. London is a major financial centre and most recently the decision by the EU to cap bankers' bonuses had caused outrage in this country. We are told that the banks and financial institutions will move outside the EU: and that this will be a disaster particularly for the UK. What is curious is that many are disgusted by the behaviour of the banks and financial bodies; many consider the bonuses they pay themselves to be obscene; many have a dim appreciation that they caused the crash which has impoverished us all. And yet they have persuaded a great many people that they know what they are doing, on the whole: that the disaster they caused could not have been foreseen; and that any action which restricts their freedom to act in ways that seem good to them are likely to make the situation worse. We cannot regulate them effectively and we should not: for that will result in economic collapse and we will all suffer. That is quite an astonishing story, but it seems to resonate.
What is really being argued is that banks are a force for social good: this is a narrative which has been promoted and accepted for a very long time. It is less secure than it was, because of the crash: but it is strongly embedded. There are few alternative narratives by now and those there are do not get a platform because all of the people who inform the public have already committed to the story. This is particularly noticeable in the case of the BBC, which is disappointing. I have some faith in that institution as a source of information but in the case of economics it never ceases to disappoint. It is required to provide balance: but the hegemony of neoclassical economics means that balance takes the form of presenting two sides of the same story. The "balance" is represented, for example, by debate between neo Keynesians and neo Liberals. As we have seen in other threads, they agree about the fundamentals and their dispute is about the detail, only. That is as good as it gets, in the mainstream, and that is not surprising because the people who present themselves as "experts" within the media have all bought the paradigm: they all believed the neoliberal story (if they did not they would not have their jobs) and mostly they defend it. Why would they not? Those who have doubts need to develop a whole new story from the bottom up: and that takes time. But the media must comment all day, every day: it is hardly likely that they will devise a fresh approach, on different assumptions, on the hoof. So much for a "free press", constrained by few journalists who must Phil Space and have not time for much more than regurgitating what they are fed by corporate press departments; proprietor demands (informed by the fact that they are themselves businessmen); the perceived value of apolitical balance (which fails when the differences are cosmetic); and their own commitment to the prevailing narrative and what it defines as important.
The effect of all this is to narrow the scope of the discussion to exclude alternative stories. And if you repeat something often enough it does tend to be accepted.
So the story of the financial institutions is that they are socially useful and we cannot do without them. Politicians have accepted that story even after the crash, and policy is designed on that assumption. This way of telling the story skips over the main question: which is: Is it true? This paper addresses that
The first important point in the linked paper is that what appear to be independent analyses are not. Reports produced under the stamp of the Treasury, for example, were produced almost exclusively by the financial sector constituted as a "working group", and disguised as the same sort of investigation we knew in the past. Those earlier investigations took evidence from a wide variety of bodies and the conclusions were informed by different interest groups. Although they look similar the current reports do not draw on other groups: and this is related to the abolition of those alternative power bases outlined in the "accountability" thread. The input is monolithic and, not surprisingly, the output represents only one interest group. But the public are probably not very aware of that, and presume that such reports take evidence from all sectors of society: which gives them authority they are not due.
The second point is that the financial sector itself defines what is to count, when considering their value to the wider society: so they add up the tax contribution from the financial sector; export earnings; and employment generated: and they come up with a big number. They do not consider the costs of that contribution, so the number is not a net figure.
The paper makes an attempt to look at the net figure. First it discusses the tax contribution. It is difficult to determine the true figure of tax paid and collected by the financial sector, for figures are not collected in that way. It does not seem unreasonable to adopt the method used by the financial sector itself, so that is what they do. On that basis the tax contribution from financial institutions between 2002 and 2007 amounts to £203 billion. However after 2007 the government had to bail out those same institutions and the authors use IMF estimates. According to that body the direct costs of the bail out were £289 billion: and the full cost including loans and guarantees was £1,183 billion. The latter figure is of course too high: in that some of the guarantees etc were not taken up. But it is clear that the costs outweigh the tax take even on the most conservative calculation of money paid out directly. It can, of course, be argued that some of that money will be recouped when the nationalised banks are re-privatised. But that does not alter the fact that austerity has been imposed because of the bail out: the pain is now, and even if the sale of those assets reverses the position it is doubtful that the public will benefit. Yet that is the plan.
The authors then turn to the claimed contribution of the financial sector in terms of employment. Again it is difficult to estimate this because of indirect effects, which are always a problem in any sector under consideration. Nonetheless the authors state that direct employment in the financial sector has been more or less flat since 1992. This, despite huge increases in profit and activity. Nor does including indirect employment raise the total by very much. On these estimates finance employs about 1..5 million people, which is less than the 2 million or so employed in manufacturing even in its current parlous state. Manufacturing employment has declined a lot in the last decade, but the growth in financial business has not taken up any of that slack. So when it is claimed that it is an important source of employment one must ask "relative to what". It is of no social benefit if a sector become a bigger proportion of employment because other sectors have shrunk, rather than because it has generated additional jobs.
The paper covers much else of interest, and I will not continue to outline the points it makes, for I have no more time now. I may come back to it: but in any case the link is there if you are interested
