I learned yesterday that the origin of the dubious notion of issuing 45 million shares in the nationalised banks to electors originated with that arch Thacherite Lord Saachi. It is much the same approach as Boris Yelsin pursued in de-nationalising Russian businesses and we know where that unfortunate policy led.
One of the key causes of the credit crunch and the crisis we are in is what Will Hutton described as the
'the oddest and most regressive constitution for private ownership anywhere in western capitalism'. 45 million share holders will be so dispersed and atomised as to play no effective role in the governance of the business. The policy of keeping them happy by building an increase in shareholder value will dominate and all the high risk strategies that go with us. The share will soon be sold on to the British equivalent of the Oligarchs and a quick profit taken. There will be no reform or restructuring of banking and it will soon be business as usual bonuses and all.
There is a radical Liberal alternative. The banks could be broken up and parts could be re-mutualised. They would then be owned by their member-those to whom they provide services. Such owners-who could not sell on their shares- would have a real interest in holding the management to account and instead of involving themselves in dubious bits of financial alchemy the banks would concentrate on serving their members. This diversity in the 'gene pool' of models of ownership in the financial sector would be wholly beneficial. A regional bank determined to serve its members and locality would be a source of long term finance and partnership for local SMEs (small and medium size enterprises). Those banks driven by the need to make high profits have simply no interest in this sector and as David Boyle pointed out they simply have no insentive to provide the products. One of successes of the Mondragon co-ops that so impressed Jo Grimond was the mutual bank structure which provided the cash for the co-ops to grow.
The nation does need to get its money back from the nationalisation of the banks. This can be achieved by the new banks repaying the cash over an agreed period. A banking structure whose models of ownership was more diverse and risk adverse would be a real benefit in these times. It is of note that all the de mutualised financial institution failed to come through the crash without state aid whereas the mutual sector fared much better.
These would become popularly owned banks protected from the predatory actions of the share owned banks as the shares would not be up for sale. One of the biggest inter-generational rip offs was perpetrated on the present younger generation by the Baby Boomer generation who cashed in all the value of the mutual society as they were sold off. Value that had been built up over generations was squandered in a moment. I know why Thatcher and Saachi would back this notion but why should we?
One of the debates that is raging at present amongst Lib Dems is about the definition of social liberalism/social democracy/ radical liberalism/mainstream liberalism. I would suggest that the daft notion of doing a Saachi with banking shares belongs on the wacky free market fringes of economic liberalism/neo conservatism. The understanding that our freedom is enhanced by individuals coming together in communities to exercise power belongs to the radical tradition. One way leads to extremes of wealth and power the other leads to the spreading of power and co -operation. I know which I choose.