02 August, 2009

Service you can bank on

There has been a lot of chatter recently about whether the Rudd government, as part of its response to the Global Financial Crisis™, ought to set up a “people’s bank” to provide genuine competition to the Big Four and secure a better deal for bank customers. I'm always amazed at how short people's memories are. The triteness of the term probably shows how much they have forgotten.

Sitting here at the wrong end of my thirties, I am old enough (perhaps only just) to remember when we had a people's bank. In fact, we had several. We had the Commonwealth Bank and the State Bank. Most other states had their own State Bank too. Then came the 80s and the new economic religion of deregulation and privatisation. In 1991, in order to dig itself out of a financial hole, the Kirner government sold the State Bank of Victoria. In order to maintain some kind of public ownership, it was sold to the Commonwealth Bank. Since many major towns had both State and Commonwealth Bank branches, this led to numerous branch closures and job losses. And the attempt to keep what remained of the State Bank in public hands was in vain anyway because in that same year, the Hawke/Keating government began a partial privatisation of the Commonwealth Bank by share float. In 1996, the Howard government sold the remaining 51%.

Now, less than twenty years after divesting ourselves of bank ownership, and after being treated like cattle by the banking corporations, people are again getting a taste for banking by the people, of the people for the people. It should not be treated as such an outlandish idea. It's been the natural order of things for most of our history. The last 20 years have been the aberration. It was theorised that profit motive alone would secure the best service for the most people. Now the jury is in.

The discussion is perhaps similar to the perennial debate in the US about public health care – or to be more accurate, public health cover. The care is not in question, only the method of payment. It's something that most civilised countries regard as a no-brainer yet it's greeted with suspicion by many Americans. There's no point in attempting to talk sense to those who claim it's an attempt to turn the US into a socialist dictatorship. Anyone who knows the first thing about either socialism or public health cover knows that's a complete Furphy. Australia has had national public health cover since 1975 and the current system has been in operation since 1984. Even that most zealous of free-market economic rationalists, John Howard knew it would be political suicide to try to dismantle it. Have we been overrun and enslaved by the godless communist hoards? No? QED.

The curious thing about the US debate is that among those who accept the system needs reform but oppose the public option, many of them blame the private health insurance funds for putting profits ahead of people.

Well, DUH!

That is what corporations do. It’s what they are for. They have no charter of public service; they are there to make as much money as they possibly can by any legal means. And after the orgy of deregulation through the 80s and 90s, the definition of legal means got a lot wider. So why is anyone surprised that they care more about profit than people? It’s not their job to care about people. That's what governments are for.

If you want an institution to care more about people than about profits, then it needs to be operated by those who answer to the people, not to the bottom line and the shareholders.

An interesting piece of trivia I like to trot out occasionally is that there has never been a famine in a democracy. (And please don't try to tell me that 19th century Ireland was a democracy) Just think about that. Regardless of natural events, there has never been a devastating famine in any country where the survival of the government depends on the satisfaction of a majority (even a simple majority) of the people. They only occur in countries where the stability of the government is not related to the welfare of its people.

I am sure the same principle applies to banking, health cover, transport and any essential service.

It's at this point that many start talking about government’s inability to run anything. But, as hard as it may be to accept, government really isn't as bad as anyone on any side of the political spectrum says it is. Take a look around you. Do you have roads to drive on? Footpaths to walk on? Ambulances to call if you are sick or injured? Police to call on if a crime is committed against you? These are not private services. And they are not profitable either. It's done because that's what governments do. It's not their business, it's their duty. And if they don't do it to our satisfaction, then we toss them out. If we trust governments to manage things as complex as national defence, infrastructure and diplomacy, then surely running a bank or an insurance system ought to be a walk in the park.

Then there is the argument that the profit motive drives directors of private companies to excel and government could never pay anyone enough to get such results. Well, in his last year, former Telstra boss Sol Trujillo was paid $13.4 million. The annual salary of a cabinet minister is $219,178. We could be really generous and double that, and I bet we would still get no less a mediocre performance if we had a Minister for Telstra.

And if they end up making a pig’s breakfast of everything, then that’s our fault for not electing better candidates. Contrary to claims made by opponents of nationally operated enterprises, the principle of individual choice and personal responsibility applies just as much to public systems because the public (all of them, not just shareholders) get to choose who is going to be in charge of it. Of course, democratising the way our essential services are delivered needn't necessarily mean them being run by government. We could have popular elections for the boards of management of banks and insurance companies the way the US has elections for judges and sheriffs and numerous other municipal offices. That would really keep the consumers involved and the companies accountable – but I'd be happy enough for government to do what we put it there to do and govern.


  1. We had state banks when I was a Commonwealther. And state hospitals. Everybody had cover. Everybody white at least.

    I don't distrust government sponsorship because I think they can't manage a hole in the wall. I don't buy the argument that if they can't manage car trades they can't manage healthcare. I distrust them because I've seen how efficient they can be.

  2. I think it's wise to maintain a healthy distrust no matter who is managing the system.