Taking on the banks

“Investment bankers, corporate lawyers, hedge fund and private equity managers have displaced corporate executives at the top of the income ladder,” reports Ann Pettifor in this useful new book. “And yet the financial system on which these wealthy individuals have gorged is not itself a private asset...a great public good has been captured by the 1 per cent. It needs to be restored to collective ownership.”

Meanwhile environmentalists have often failed to focus on the link between the ecological crisis and the financial system because of its complexity. But transforming the financial system is the key to finding affordable solutions to the environmental crisis. Moving the economy away from its dependence on fossil fuels means challenging global finance.

The first step she proposes is breaking the imperial power of the dollar, which was actually reinforced by the 2008 crash. This was not inevitable, but the product of the subservience of the Obama Administration to Wall Street. New controls are necessary: “publicly backed monetary systems cannot be managed and deployed in the interests of society and the ecosystem as long as they remain ‘globalised’ – captured and moved offshore, beyond the reach of regulatory democracy.”

Taking control of this system is not a pipedream, argues Pettifor: it was done before. The ending of the gold standard paved the way for the 1944 Bretton Woods Agreement, which lasted until President Nixon unilaterally overturned it in 1971. Since then, national governments have gradually lost control over investment, exchange rates and interest rates to unaccountable global investors. And the more governments lose real power over their economies, the more voters turn to ‘strong men’ for protection, hopelessly, because these leaders are inevitably in thrall to global finance.

Fierce resistance is inevitable to the policies Pettifor advocates. In fact, “financial globalisation has succeeded because regulatory democracy cannot function at the global level.” But equally inevitable are further unpredictable shocks, like the unforeseen 2008 crash, which will confront policymakers with the choice of taking action or doing nothing.

The big challenge then is how to transform the financial system? A move from globalism to localism, restrictions on international capital flows, political control over exchange and interest rates – all good, but is that enough? Having raised the question, Pettifor’s solutions seem to fizzle out.

There are chapters setting out the essentials of a Green New Deal – a steady state economy, a focus on meeting real needs, not wants, self-sufficiency and a mixed-market, labour-intensive economy, based on universal basic services, which the author prefers to universal basic income. Pettifor proposes an essentially Keynesian role for the state to achieve these goals, but, again, comes up short on how to win the inevitable clash with finance capital’s inexorable push for limitless expansion.

A long section on the practicalities of implementing all this shows that the principles set out are more than a wish list. Perhaps surprisingly, given her overall approach, the author strongly opposes Modern Monetary Theory.

Overall, Pettifor is right to be optimistic about what’s possible. Behind the global finance sector stands taxpayer backing and the safety of public debt. This gives governments considerable leverage over that sector – if they choose to use it.

This awareness-raising contribution to an important debate should expand our understanding of what’s possible and encourage us to take action. As the author concludes, “where there is no struggle, there is no progress.”