Less financialisation

Society must become less dependent on the private financial sector to access basic needs such as housing, health, education etc., and the role and size of private finance should be reduced more generally.

What’s the problem?

How easy is it for you to meet your basic needs, like housing or healthcare, without using the financial system? Do you think it should be possible to have an education or a home without plunging into debt, or healthcare and a pension without paying fee after fee to money managers? It’s very possible you are both a saver and a borrower – and modern financial engineering means it’s even possible your pension fund owns your mortgage, or your insurer owns your car loan – in other words you could be borrowing money from yourself and paying fees (twice) for the privilege!

The biggest corporations are also being diverted into financial activities – Apple and Microsoft are bigger financial players than many financial firms themselves. Even our governments try to solve more and more problems with complex financial engineering: the UK government recently sold some of its student loans to a group of hedge funds and pension funds so it could say it had less debt, even though they lost almost £800m on the deal, money that could have better been spent on education or health care.  

 

What’s so bad about that?

The problem is that instead of meeting our needs in the best way for society we end up taking the way that makes most money for the financial system. Giving financial middlemen too much control over access to basic services can be costly, can exclude many people, can be bad for the environment, and gives financial firms too much power over societies. And it’s dangerous – we’re still suffering from the after effects of the financial crisis – and the bigger the financial system the worse the crisis. Right across the Eurozone our economies are only just recovering from the last crisis and it is everyday people who have paid the price. Meanwhile, our governments remain scared to help for fear of “upsetting” financial markets, meekly adopting policies of deregulation, privatisation and tax cuts that mainly benefit the rich.   

 

What’s the alternative?

We must find new (and maybe rediscover some old) ways to meet our needs, including education, health, housing and pensions, without having to rely so heavily on the financial system. We need to find the ‘right’ level of financial services; let’s face it we didn’t need them for most of our existence! Together we can think of new ways for the 21st century.

 

How will it help?

Drastically reducing the role of finance in our everyday lives, in our governments and in our economies will give us the space and the opportunity to think of new solutions to meet the challenges of the 21st century and to make society safer and fairer, less exposed to unpredictable financial markets and their crises.

 

What steps could we take to get started?

  • Find ways, new and old, to provide for people’s basic needs without them having to use the private financial system – most importantly for basic needs such as housing, health, education & pensions. Find innovative new ways to mix public, co-operative and mutual systems of provision.
  • Implement collective and defined benefit pension systems.
  • Increase pay-as-you-go provision more generally. This includes an end to ever more privatisation and public-service outsourcing, so that there is increased public provision. Importantly, defend and develop the pay-as-you-go pension systems, rather than capital savings systems which pour more money into financial markets.
  • Explore universal basic income proposals, in combination with directly providing for people’s needs.
  • Change where society lends and invests. Use regulation to incentivise and force lending and investments towards productive, long-term and environmentally beneficial projects and away from speculation.
  • Use capital adequacy rules to direct lending and investment towards long term environmentally beneficial projects.
  • Outlaw and discourage speculative, short term, lending and investments, including food and commodity speculation.
  • Introduce and strengthen credit allocation quotas both for private and public financial institutions. For example, central banks can support the green transition and help meet Paris climate commitments by altering QE practices and increasing disclosure about their holdings.
  • Fight for less private debt.