The Banking Sector : Rents, Returns, and Resistance

Here is an interesting article from The Economist concerning the banking sector. In short, this article is attempting to explain why the profits in the banking sector have been rising over the last 40 years to their current astronomical heights. It does so via the economic concept of rent.

In neo-classical economics "a rent" is a term used to explain excess profits. Excess profits being profits that can not be explained by the laws of competition and supply and demand. In this case, banks and the finance sector, due to their exclusive access to capital, are able to charge "a rent" to other economic actors and as such have been able to generate large profits

This is really no different to your landlord who, due to their (relatively) exclusive access to land, is able to charge you to live on it. While the article linked above is rife with neo-classical assumptions and offers little more than platitudes as a way of dealing with this problem it provides some wonderfully concrete examples of how the structure of the economy works to rob working people at the expensive of the already rich/powerful.

In the hyper-complex economy that we live in ownership and access to capital are no longer as simple as they once were. Corporations are not owned by a single individual but by a large number of investors, with managers responsible to a board of directors which seeks to maximize the share price/dividends. Facts like these are often used as a critique of Marxist economic interpretations, as ownership of the means of production is no longer the driving force behind capitalist exploitation. The question is asked how can we live in a class based society, if corporations are owned "collectively" in many cases financed by the pension funds/savings of regular working class people.

While, these new cooperate ownership models certainly need to be examined, and there has, perhaps, been a shift in the main locus of exploitation, from ownership of the means of production, to control of the means of production. What relevance do questions like these really have. The expansion of the banking sector, and the further encouragement of people to invest their money in stocks/mutual funds are a tool to free up capital markets and extract wealth from the savings of regular people. Saving our money with in the banking system only provides those with the ability to do so, greater access to the wealth we have created (through our labour).

When I place my money in the bank or purchase mutual funds with the promise of secure savings and future returns, really all I am doing is providing corporations with the capital they need to finance expansion and further profit generation. Additionally, a huge cut is being taken by the finance sector itself to line bankers pockets and purchase outrageous Manhattan real-estate. This makes the returns I expect to receive and security of my money little more than a farce, as many people have witness and are witnessing over the last number of years.

Even more remarkably, to properly function in society, I am all but forced to participate in this game. The speed and complexity of the economy means that if left alone any savings I do generate will be reduced by inflation. I must therefore invest my money, take bets on the economy along with everyone else, because if I don't I will certainly loose it. In this way, we are all trapped, both structurally and ideologically, to participate in a system that ultimately exploits us.

With this said, I think a clear understanding of this process can help us develop some modes of resistance to this all encompassing near monolithic force in our lives (money/the finance sector). Forgive me if some of these sound ridiculous (positing solutions/resistance by its very nature is ridiculous) but here are a few ideas that this line of thought has generated in my head for ways to stop/mitigate these processes and reduce the control of the banking/finance industry over our lives;

• Organized runs on the banks, exert control over our own resources. I imagine it would take a relatively small amount of people to withdraw all their money in the same day to cause a ruckus


• A revitalized radical and real credit union movement. (In short lend money to each other, rather than rely on the banking sector)

Alas I wish I had more, (world workers revolution?) but the ability to posit change or even point in the direction of change remains difficult in the world such as it is. What ever we do we need to create a world where the wealth we create is not run for and by banks and the finance sector but where the needs of people are placed at the centre of our economic system.