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September 2003   

Interview: Crowded Lives
Labor frontbencher Lindsay Tanner talks us through his new book on the importance of relationships and why politics is letting the people down.

Activists: Life With Brian
Work by men like Brian Fitzpatrick is exposing new Australians to old truths. Jim Marr reports

Industrial: National Focus
A showdown looms in Cancun, Qantas gets bolshie, casual and lazy in its response to aviation challenges, and long festering disputes fester on in Victoria and Tasmania reports Noel Hester in this national wrap.

Unions: If These Walls Could Talk
Trades Hall is preparing for a major facelift but first, Jim Marr reports, it must bid farewell to the colourful bunch who have populated its dusty corridors in recent years.

Economics: Beating the Bastards
Frank Stilwell looks at some of the proposals for building a fairer finance sector.

Media: Three Corners
So its come to this. Four Corners, one of the world's longest running television programs is now under pressure from an ABC Executive that is less cultural visionary than feral abacus.

History: The Brisbane Line
Percy Spender was Menzies' foreign minister, but, Neale Towart asks, was he also prepared to serve as Prime Minister in a Japanese controlled Australia?

Trade: The Dumping Problem
Oxfam-CAA helps set the scene for this month's World Trade Organisation in Cancun.

Review: Frankie's Way
In The Night We Called It A Day Frank Sinatra learns 'sorry' Down Under is a loaded word and refusal to say it when due will lose fans in important places, writes Tara de Boehmler.


The Soapbox
Staking Our Territory
ACTU secretary Greg Combet argued for a fairer Australia in his keynote address to last month's ACTU Congress.

The Locker Room
Seasonally Agisted
Spring is a season when a person�s thoughts turn to�horse racing. Phil Doyle reports on the fate of nags and folk heroes.

Beyond the Block
We are wild about the people who live in The Block but not too interested in those who are on the streets outside, writes Michael Rafferty.

The Westie Wing
Workers friend Ian West MLC, reports form the Bearpit about a project to raise awareness about trade unionism amongst young people.

The Awkward Squad
Paul Smith meets one of the new generation of British union leaders who is taking the ball up to the Blair spin team.


Relatively Speaking
At its heart, political debate has always been a struggle between competing views about how a society should organise itself to maximise the benefits for the majority of its citizens.


 Truckies Tip Safety on AGM Floor

 Geelong Lockout Claims Family Homes

 Aussie Labour Laws Fail US Test

 No Accident � Insurance Dough Rises

 Union Mum Wins

 Rheem Runs Cold On Entitlements

 Unions Take It Up for Footballers

 Drug Boss Fails Workers

 Ministers Urged to Take Responsibility

 Museum Jobs Face Extinction

 Less News And More Of It

 Legal Costs Threaten Access

 Learning for Life

 Activists Notebook

 Lyon Roars
 Spicey and Tart
 Tony and Pauline
 PNG Bags Plastic
 Fighting Words Craig Emerson
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Beating the Bastards

Frank Stilwell looks at some of the proposals for building a fairer finance sector.


Between 1993 and 2002 the number of bank branches in Australia fell by nearly 33% and the number of jobs in banking fell by 30%. Over the same period the profits of the big banks grew by 367%. Profits have soared while bank customers face higher bank charges, poorer services, especially in rural areas, and the remaining bank employees face a higher intensity of work. These are the consequences of a profit maximization process in which notions of community service have been effectively abandoned. No wonder the phrase 'banks are bastards' has become common in Australian society.

The problems with the finance sector are not only with the banks though. A more fundamental structural problem exists because financial interests and processes have become increasingly dominant over productive economic activities. Ever more energies and resources are being directed into financial and speculative activities rather than economically productive activities. They redistribute vast amounts of income and wealth but without adding directly to the production of social value. In the extreme pure speculation is the name of the game, effecting land and property markets, as well as share markets, foreign exchange markets and markets for derivatives and other financial assets whose value has little direct connection with the 'real' economy. Many of our brightest and most creative young people, as well as the major wealth holders in the capitalist class, have been drawn into those processes. It is tempting to draw a parallel with the commercial advertising and sales promotion industries - so much energy and talent used for so little social benefit.

An ideal financial system would comprise a set of institutions to serve the needs of the real economy - of businesses wanting assistance with raising capital for productive purposes, and of workers and citizens needing assistance with the security and management of their financial affairs, seeking loans for the purchase of housing, and so forth. In such a society, finance would serve, and be subordinate to, social and economic needs.

Why has the financial system moved so far from that ideal? Partly it is because of the processes of the globalisation of capital. Financial institutions can now exert a 'global reach' in expanding their opportunities for financial gain. This in turn partly results from the embrace of neoliberalism by the major parties that dominate the processes of government. The deregulation of finance, began by the ALP in the 1980's, has given more freedom to financial institutions to pursue any such possibilities of profit. And the banks and other financial institutions have reorganized into increasingly powerful corporate entities, practicing implicit collusion while preaching the virtues of competition. Changes in technology, ideology and vested interests thereby interact in complex ways.

Arguably, this dominance of finance is not even in the long-run interests of capitalism. A capitalist economy requires supportive financial arrangements, but it requires balance between the wealth-creating and wealth-redistributing elements. 'Casino capitalism' is a potentially very unstable system. Its productivity is also questionable: steering resources into financial activities can be at the expense of using them for to the production of wealth through the making of goods and services. This bodes ill for the economic system, even from a capitalist perspective. From a socialist perspective, the process is doubly disastrous, because it creates widening economic inequalities as well as increasing economic instability. Social needs are subordinated to financial legerdemain.

So what is to be done? As usual in dealing with political economic issues, it is useful to distinguish between three types of response: progressive internationalism, defensive nationalism and alternative localism. Important initiatives are possible at each of these three levels of political intervention.

Progressive internationalism involves 'going with the flow' of globalisation but trying to steer it into progressive directions. One illustrative possibility is the push for the introduction of the Tobin tax. This tax, first proposed by the US economist James Tobin, would be paid on transactions in foreign exchange markets. Levied at a low rate, it would be designed to discourage short-term speculative currency movements. Even if not powerful as a deterrent, it would generate significant revenue which could be used for funding international programs for the alleviation of poverty, for example. The support for the introduction of such a tax is growing, particularly among the European nations, although the USA predictably remains a major obstacle.

There are other options for the international regulation of finance in order to establish more stability into the system. Interestingly, even some major international speculators, such as George Soros, have been publicly calling for stricter international regulation of finance in order to impart more stability and limit the potential for international financial crisis.

At the national level there are also important initiatives that could be undertaken. An enforceable 'Social Charter of Responsibility' for banks and other financial institutions could be established, more clearly identifying the requirements within which they should be allowed to operate. Such requirements could involve stemming the tide of bank branch closure; ensuring access to financial services for low income, elderly and disabled persons; more transparent exchange of information in order to improve customer relationships; proper staffing; and protecting the community from corporate collapse and the adverse effects of bank mergers. Ideally such a charter should be international in scope, but enforceability is easier at the national level.

Another aspect of 'defensive nationalism' involves the further development of Australian institutions to ensure that financial resources are productively used. The development of the Arbitration and Conciliation Commission and the Commonwealth Grants Commission illustrate the institutional ingenuity of Australia in earlier eras of economic development. So too did the Commonwealth Bank, of course, in its original form before the privatisers destroyed its rationale. A strong role for the public sector is crucial in setting the standards and keeping the private sector 'on its toes' in mixed market situations.

Perhaps the biggest challenge and opportunity now is to develop institutional arrangements for steering the vast pool of workers' savings in superannuation funds into productive uses in the national economy. The extension of mandatory superannuation contributions, begun under the Hawke Labor government, has had the effect of extending working life inequalities into people's retirement incomes. At least we should ensure that this money is used for important national purposes rather than in speculative activities or overseas investment. In effect, that would mean coordinating the funds into a national investment scheme. That could then help promote the development of Australian industries, taking account of ethical investment criteria, regional employment implications and the need to invest in the process of industry restructuring for ecological sustainability.

Turning to 'alternative localism', there are also opportunities to develop institutions that challenge the power and policies of corporate finance. One example is Bendigo Bank, a small private bank, which has shown one way forward by developing a new branch-banking model, a Community Bank. Each Community Bank is set up as a franchise, based on an initial investment by each community of around $500,000. In May 2002 there were 64 such Community Banks around Australia and the number is steadily growing.

Some other local communities have formed Local Enterprise Trading Schemes (LETS) as a means of trying to foster and facilitate exchange of useful services without recourse to financial institutions. There is no inference that these sort of schemes challenge the power of the big banks, but they are symptomatic of the quest for alternatives which are not dependent on the realm of corporate finance. They reflect the general concern to 'think global, act local' in responding to the political economic challenges facing us.

So there is no shortage of proposals and actions for building a fairer financial system. It is a challenge for all political parties to incorporate and develop these ideas in their political programs. It is pointless to expect that 'self-regulation' by financial institutions will be sufficient to deal with the structural problems that the ascendancy of finance capital has generated. The problems are social as well as economic: the solutions must necessarily be political.

Frank Stilwell is Professor of Political Economy at the University of Sydney. This article is based on a talk he gave to the recent 'Now We the People' Conference. It draws on the 'discussion starter' prepared for that conference which can be found on the World Wide Web at Fuller draft proposals for a Social Charter of Responsibility for Banks can be found there.


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