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Posts Tagged ‘Banks’

The postmodern payday lender

January 22, 2012 3 comments

Recently it was revealed by McKinsey, the consultancy, that the UK debt to GDP ratio stood at 507% in the middle of 2011. Robert Peston reminds us that this is up from 487% of GDP in the second quarter of 2008, and, incredibly, from around 300% in 2003 – before the credit boom.

Only Japan is more indebted with its debt to GDP ratio at 512%.

Further still, it is the financial sector, mostly in the city, which accounts for 219% of the debt. Household debt experienced a modest decrease, though is still very high.

To rub our noses in it, the Royal Bank of Scotland – undeterred by the reputation left by Fred “the shred” Goodwin – has a pot of £500m to spread liberally around its investment bankers in bonus pay.

This gave grounds for the Wongaforum – a forum, as you might guess, that talks about all subjects wonga, and beyond – to post on how terrible it is that RBS bankers are set to receive such fortunes, while banks themselves receive a downgrade from Moody’s and the rest of us suffer.

This is because with the banks not doing their jobs properly, not heeding to calls to further roll out basic bank accounts and overdrafts (an intervention which didn’t cause the banking crisis, nor would hurt the banks one iota), forcing people into the hands of pawnbrokers and high street shops who promise to cash cheques for high fees, places like wonga are able to pretend to have the moral high ground.

As Stella Creasy recently put it, “Payday loan companies are trying to promote a veneer of respectability”.

Better still, payday loan companies – which Wonga are despite their own denial – are so acutely aware of how horrid an image loan sharks have, that they will do anything to deflect the notion that they are similar.

And to a large extent this is true, though Wonga are also trying to deflect the notion that they are anything like other payday lenders on the high street.

This is because what this trade boils down to is one where sub-prime consumers are given money at high interest to pay for things we in the west would consider basic necessities. Regardless of whether Wonga are providing a service nobody else delivers (banks especially), profiting from the poor looks bad – and for good reason.

They’ll say they stop people from calling on real loan sharks who charge interest rates of percentages in the tens of thousands, though profit from poverty is still frowned upon.

Wonga will even say they don’t target the sub-prime consumers, but there is not enough money to be made in appealing to the Middle classes who have a distrust of banks, and students alone. Though of course any such proof that Wonga have no desire to target this market is hidden behind what they call commercially sensitive data.

In arguing their case, Wonga end up sounding just like the labour union workers in 1930s America did when arguing that low income earners should not be excluded from the credit market. Why, if everyone else could buy on the promise that money will be paid later on, could they not join in? Why were the banks excluding them?

Effectively, Wonga are trying to make a progressive case for their cause – and this is born out of a realisation that they must shift the image both of the loan shark and the payday lender today.

Let’s not forget, though, that banks are allowing Wonga to have this moral high ground, which means that any campaign effort against the profiteering of the payday loan industry, should target banks too, and call for the retail arm of banks to do its job properly.

0.8% growth Q3 still needs to be viewed with caution

October 26, 2010 18 comments

Unfortunately, today’s growth figures act as a Rorschach test; the coalition government and its supporters see growth at 0.8% in the third quarter of 2010, and growth for the last six months at 2%. What the opposition will see is a drop of 0.4% when between April and June growth was positioned at 1.2%.

Since growth was forecasted far lower than expected, many – such as Vince Cable, who was said to have a big smile on his face this morning, possibly after finding out the data – are probably just pleased to see a higher figure, not because it is necessarily a good sign for the economy, but simply because it will make for easy smoke and mirrors. Look we can cut and grow, it’s easy.

Others may note that the worst of the cuts have not been factored into the figures yet. It’s important to note that cuts will have been factored in already; the squeeze for many councils started a while ago, redundancies are a reality now, and small and medium businesses (SMEs) are already checking their books with a grimace.

Construction was the real winner with contributions of 4% (p. 3), compared with an increase of 9.5% in the previous quarter, and 11% since Q3 2009 and Q3 2010.

Read in a certain way, today’s figures will prove politically opportune for the Tory/Lib Dem government, which may set back Labour’s current lead in the polls. But it is not mere politicking to point out that the severity of the cuts, spelt out in the CSR last week, have not been entirely factored in, and that growth really needs to be sustained and sustainable.

There is even tension within the government about the road to growth. Vince Cable has recently slammed David Cameron’s optimism, saying that the “sunlit uplands” strategy will not necessarily be the case. If he has any sense about him, Cable’s supposed smile this morning will be matched by caution.

In Cameron’s “new economic dynaims” vision, he wants to “make sure we have a banking sector that is really focused on small business lending … rather than the banks thinking how [they] can become bigger and bigger investment banks.”

Cameron hopes to get those banks which the government has a stakeholder share of, to start lending again and fuelling a private sector revolution.

According to a recent NEF report entitled Where did our money go? the 2009 budget noted that RBS needed to lend an additional £25bn (£9bn – mortgage / £16bn – business); Lloyds an additional £14bn (£3bn – mortgage / £11bn – business); Northern Rock an additional £5bn in 2009 / £3-9bn from 2010 onwards.

After the bailout, there was disappointment that the banks were increasing the bonus pot without actually kickstarting small businesses with money. In an ongoing discussion I had with an acquaintance, I was reminded that the bailout was paid in order to cover liabilities at the time, but the reason behind doing so, and not allowing them to fail, was so they could start lending again – for this is the reason why those banks are too big to fail.

Vince Cable: Capitalism’s poster boy

September 22, 2010 7 comments

I have tried very hard to find an online source for the wryly comic quote, supposedly from Che Guevara, saying that all he and Fidel were striving for, in the Latin American countries they fought in, was to recreate the same state monopoly model as was practiced in the United States.

The crucial meaning to this comment is that on principle they were not opposed to state monopolies, but they were quite open about that. The US, they would’ve contended, had been doing just that, only they were not honest about it, and operated their monopoly under the guise of free markets and open competition.

But nonetheless, the US was, and still is, a capitalist country, despite the stranglehold on free competition and the secret sanctioning of monopolies.

It is hardly surprising that capitalists, particularly small ones, are annoyed at this type of operation. After all, if competition is suppressed from the top, by greedy corporations not wishing to play the game, then the spirit of Adam Smith is being crushed.

More and more, friendly capitalism is winning the argument. And the variants of capitalism in today’s economic landscape testify to this; you have green capitalism, philanthrocapitalism, compassionate capitalism. Capitalism can be against sweatshops, capitalism can be pro-aid to third world countries, capitalism can provide your community with a new civic centre, capitalism can be against bonuses, capitalism can be against city greed, capitalism can be against corporate ‘short termism’ and so on and so forth.

This, in short, though perhaps for one day only, can go by the name of Cable-nomics.

The Left Foot Forward blog says today:

This summer, Anatole Kaletsky published ‘Capitalism 4.0‘ in which he argues that after the collapse of Lehman Brothers, capitalism will reinvent itself and emerge stronger than before

This is the one true thing about capitalism, it will make timid changes to change perceptions of itself, and why wouldn’t it do that today, particularly when it is popular to bash the bankers. 

In political jargon, bashing the banker might be called ‘populism’. And this, as Dave Osler points out, is exactly what Vince Cable is playing at today.

As they have their annual conference, the Lib Dem popularity rating is sinking quicker than a dead dog tied to a brick in a lake, and needs a boost – and who better to administer such a boost than their cross-party hero Mr Cable.

He threatened to tax banks away from bonusing, he criticised city murk, he has attacked corporate short-termism, and has managed to be called a ‘left-wing socialist’ and even a ‘Marxist‘ as a consequence. In fact, what the capitalists at work blog have said about him is particularly amusing:

The thorn in the coalition’s side is Vince Cable. A left-wing socialist is never going to co-exist easily with a Conservative Government.

It’s so black and white to them – but to serious political thinkers it is quite simple to see how a person, who is avowedly pro-market and pro-business, is able to take the view that bankers are “Scargills in pin-stripes” while not being socialist, but a liberal, a free trader and a fan of open markets.

Bloggers have gone to great lengths today to show that if Cable is really “Red Vince” then he has many unsuspecting allies. Left Outside contributes Adam Smith, while Sunder Katwala throws out a myriad of characters including Red Ted Heath and Red Angela Merkel.

Of course what Cable does want, which Richard Seymour has rightly picked up on, is a better regulated capitalism. But, as Seymour elaborates:

he knows he can’t even deliver that while he’s a helpmeet to George Osborne, the trust fund chancellor who is one of the many millionaires in the Tory front bench, and who is committed to defending a robust, liberated financial sector.

There is a massive difference in opposing how the markets work, and opposing how capital operates. As postmodernism triumphs, and ideology as a term is discarded like last night’s leftover casserole, even those naturally on the “anti-capitalist” left seem to be content with the hot air of Cable-nomics 

Those unhappy with capitalism’s green credentials can be rest assured that the green market is obliging companies to head this direction. Those unhappy that capitalism is not fairly trading will be happy to learn that ethical capitalism has won its battle, and companies like Nestle, in order to remain market players in today’s sensitive consumer age, source their ingredients from sound places.

What passes for anti-capitalism today is just speeding up the process where capitalism itself takes a makeover, and ensures the market is filled with big companies committing to the bourgeois politics of the day.

Capitalism, fear not. Vince Cable is your poster boy.

40 Labour MPs voice dissent at cuts and privatisation

February 1, 2010 2 comments

Forty Labour MPs have put their name to a document which lays out five key areas in which the government is deviating from the wishes of most Labour members, and calls for the restoration of party democracy as a means to ensuring that the voice of its members is heard in future. The signatories range from the MPs of the LRC and the Campaign Group to Compass and a couple of unaffiliated people added in.

The key recommendations are as follows:

A. The recession should be tackled not with cuts in essential public spending, but by massive public investment in house-building, infrastructure and the de-carbonisation of the economy.

B. Banks should be split up with their casino investment arms hived off. Publicly-owned retail banks should be required to meet new social and community objectives and support manufacturing, with lending to businesses and homeowners restored to 2007 levels. Pay and bonuses should be tightly regulated.

C. A clean break must be made with market fundamentalism – deregulation and privatisation. Public provision should be expanded – in health care, education, housing, pensions, energy and transport. Royal Mail must remain wholly in the public sector.

D. In the face of huge and unacceptable growth of inequality, a big redistribution programme must swing resources away from the rich to provide sizeable increases in pensions, the minimum wage, the lowest benefit levels, and to fund job creation and improved public services. Union rights must be restored – it is in economic crisis that workers are most in need of that protection.

E. To achieve the 80% carbon emission reduction target by 2050, renewable sources of energy should be promoted on a far bigger scale, industry (including airlines) should be required to reduce its climate change emissions by at least 3% per year, household carbon allowances should be introduced, and the UK targets should be fully met by domestic action and not by carbon offsetting abroad.

We also believe that if Labour is to revive its membership in numbers and activity, it must fully restore its internal democratic procedures so that the voice of its individual and affiliated members is listened to and taken account of. This process has begun with the adoption of all-member voting rights for the National Policy Forum.

But we believe that several further reforms are needed, in particular to restore to the elected NEC full supervision and control over the party’s operation and finances, to introduce a charter of members’ rights and a Party Ombudsman to enforce them, and to renew for all party employees the core civil service values of impartiality, integrity, honesty and objectivity in the development of party policy and selection of party candidates.

I broadly agree with all of this, though it’s easy to quibble over language. It’s easier still to say that it doesn’t go nearly far enough. The type of state-led banking sector advocated by B, when tied to the increase in state-operated enterprises, is almost guaranteed to go disastrously wrong – taking the UK back to China c1980, where loans were used, via bureaucratic planning, to ‘support community objectives and support manufacturing’ such as the agricultural communes and heavy industry in the northern rustbelt. These were the least efficient parts of the Chinese economy.

Let’s be absolutely clear; there is nothing here which directly and finally challenges capitalism. However, there’s no point calling for the maximum programme when one has to fight even for the minimum programme to get a hearing, so I’m content with what is said, particularly about wealth redistribution and the restoration of trades union rights. These two things alone would go a long way towards strengthening the labour movement and provide the means to halt and reverse the fragmentation of working class power.

Reorganising how finance capital works in the UK involves reaching out to other labour movements internationally, so breaking up banks and attempting to impose a new settlement (think of it as Bretton-Woods II perhaps, though I’m not a Keynesian or neo-Keynesian) would have benefits in terms of providing impetus towards the construction of a network of globally planned, democratic, interdependent economies the premise of which is not the accumulation of wealth by the individual and its transformation into structural advantage for the individual.

What concerns me most about this document, as fabulous as it is to see Labour figures who have previously attacked each other lining up behind it, is that I think it is essentially hollow. What happens when it is ignored? This is something these forty MPs need to sit down and work out with each other, as representatives of whatever passes for the Labour Left these days. They need to get their CLPs involved with the discussion, and various Labour-orientated membership based groups like the LRC, Compass and so on.

If the government ignores the document entirely, and carries on its merry way, and no response is forthcoming from ‘the Left’ (however broad), especially one geared towards actually creating a coherent plan for government on the basis of these tenets, then it sends a very bad signal to the Labour activists and politically interested Labour voters on the Left.

In those circumstances it would instead provide a barometer of the ability of the government to use the Left as a figleaf for its less popular policies, like privatisation, because Gordon Brown et al are safe in the knowledge that on the doorstep the key line for activists is, “I know they voted for that, but us members didn’t support it. Plenty of Labour MPs didn’t support it. Our local guys didn’t support it.”

Wording about a members’ charter, and an ombudsman to enforce them, hides from the core problems; declining numbers of activists, the inability of the membership to rein in the Parliamentary Labour Party, the ability of the union leadership to throw their New Labour cronies a rope every single National Conference through rigidly whipped delegates (and as a side note, the impotence of conference anyway), the damage that Labour in government does to the reputation of the Party and how this is only even partially salvaged by the continuing unpopularity of the Tories.

Simply put, I’d have signed the document too, if it was put in front of me – but a signature on a piece of paper doesn’t mean anything. Building associative links between CLPs and the internal Left-wing campaigning organisations can flesh it out, so I wait with baited breath to see Step 2.

See also A Very Public Sociologist for another Labour outsider’s take.

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