Monday, 17 October 2011

Banks and bird food

It seems appropriate that the "Occupy London" protest currently going on should base itself on the steps of St. Paul's Cathedral.

Devotees of Disney films will of course have watched the classic "Mary Poppins". Featured in that film is an old lady who sells bags of bird food on the steps of St. Paul's. Mary Poppins, nanny to the Banks children whose father works at a dusty old bank close to those steps, sings of the plight of the birds and their desperate need for food. At tuppence a bag, the food is just the right price for a rich but neglected child to buy with his pocket money.

I've long thought that it's not the birds that are hungry, but the old lady who is selling bird food in order to earn enough money to live. Juxtaposed in the film are ostentatious wealth, represented by the bank, and grinding poverty, represented by the bird lady. Michael Banks, the younger child, must choose what to do with his pocket money. Should he put it in the bank, or should he buy bird food?

In fact Michael's decision is taken out of his hands. The bank seizes his money against his will. When he protests, other customers of the bank misunderstand, and all start to remove their money, causing a run on the bank. But in the film there is no government to step in and rescue the bank. It is forced to close its doors and suspend business.

It seems to me that the dilemma that our government has faced, and still faces, is the same as that faced by Michael Banks. Do we concentrate our resources on supporting banks and financial markets? Or do we allow them to fail, and instead concentrate on supporting the poor and the needy?

So far government has opted to support banks while cutting support to the poor and needy. It has done so, in my opinion, because of a misguided belief that failing to provide money to banks would endanger the economy, and a second equally misguided belief that supporting the vulnerable costs money that the public purse cannot afford. Banks may not have physically seized government money - although some would argue that they have - but by talking up the dangers of bank failure and convincing politicians of their overriding need for support at all costs, they have ensured that they have first call on public money. The people of the UK get what is left over after the demands of banks and financial markets have been met. And even that is cut to the bone because financial markets actually don't like governments spending money to support the poor and needy. Never mind that the needs of people aren't met. Plentiful risk-free securities supported by AAA credit ratings are all that matters, it seems.

In the film, the outcome of the bank's attempt to seize Michael's money is literally laughable. When the money is eventually donated to the now-broke bank along with a joke, the proprietor dies laughing, forcing a  change in ownership and fundamental reform of management.  We, too, need a change in ownership and fundamental reform of our banks. Some people see this being achieved through full nationalisation and state control. I would personally prefer to see it happen by allowing banks that have become too big and too rigid to fail, so that new forms of banking can develop in their place. It may be that some combination of nationalisation and bank failure will be required, depending on the size and significance of the bank. But even nationalised banks I think should suffer a sea-change - be broken up and sold on in bits to competitors and new entrants.  And we should aim to remove all forms of government support from banks in the longer term.

The question of the bird lady remains unresolved. We don't know what happens to her.  But really, she shouldn't exist. No elderly person should be forced to sell bird food (or anything else, for that matter) in order to survive. The diversion of political energy and public resources to the financial sector in the last few years, coupled with an unpleasant and illogical economic ideology, has meant that safety nets have been reduced, and we still do not have a satisfactory solution to the lack of funding of pensions, both state and private. It seems to me that supporting the poor, the sick and the old is the first duty of government in a civilised society, not the last. Let's get our priorities right.

In the film, Mary Poppins makes it very clear where her heart is, in her impassioned song "Feed the birds". I know where my heart is.

9 comments:

  1. Meanwhile our 'leader' is helping The Princess Royal change road signs in Wiltshire.

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  2. One lesson from the recent series of financial crises is the importance to redefine the role of finance, money and financial institutions in society both on a national and global level and, as you write, maybe to think about new forms of banking. In my feeling, these "musings" (like many of your tweets and comments) make an important contribution to the debate in emphasizing this need. And I like your examples.

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  3. The banks need to be reminded (constantly) that they are a SERVICE industry. They are subordinate to their clients. They are not creators of wealth. They simply store and move other people's money about - and, in doing so, they erode its value through charges and interest.
    So called investment banking is simply gambling with other people's money.
    I even look upon 'their' assets, plush offices etc., with a jaundiced eye because I think that bank should not be ostentatiously wealthy in themselves, but frugal guardians of what is not actually theirs.

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  4. Nice story, would have been more realistic if it said the bankers owned the government they ordered to keep financing them.But why take my word I'm just an old cynic eh?

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  5. Hi Frances.
    I'm a long time lurker on your blog but a first time commenter. First of all, I'd like to thank you for explaining elements of finance I had found too arcane to penetrate in ways that finally made sense to me.

    When you say we should aim to remove all forms of government support to banks, does that include their ability to create money/debt? If so, how would you like to see money created?

    I have been following the Positive Money campaign for a while, but cannot decide if they are a lunatic fringe or the people with the answers.

    I would greatly appreciate your thoughts on the matter if you have time. Apologies if you have dealt with this subject before elsewhere.

    Regards

    SJ

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  6. Good work , keep us posting , your a very good writer...
    Nice site , Very Intresting post. Thank you .

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  7. VERY informative. I'll be making some juice in the near future. Passing this onto my friends. Thanks.

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  8. At the heart of what drives much government policy is how political parties are funded. This is seldom commented on in the media. The government will kowtow to its funders, and those certainly aren't the poor and needy. I'm afraid that 'He who pays the piper calls the tune' and to hell with decency and morality. The funding of political parties needs to be reformed in my opinion.

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