Bankers are unpopular. Not the ordinary bank teller or the back-up IT staff, but the directors and top managers who award themselves huge salaries and big bonuses. They are so unpopular, in fact, that the chief executive of Royal Bank of Scotland, Stephen Hester, has been forced to give up a bonus of nearly £1m while his predecessor, Sir Fred Goodwin, has been stripped of his knighthood.
The banks defend themselves by arguing that they bring “wealth” into Britain, and pay a considerable amount of tax on it. Some even describe themselves as “wealth creators”. This is absurd. What banks do is compete for a share of the pool of wealth already created by the productive sections of the world’s working class, wealth which is extracted from them as surplus value. They can be more or less successful in doing this. Banks situated in Britain can channel some of the world’s surplus value this way which might otherwise have gone elsewhere, but this is capturing surplus value rather than creating wealth. In this way, banks do bring profits to Britain and the taxes they pay on it help finance the capitalist state. It’s an argument that carries some weight with other capitalists and with the government, whether Tory, Coalition or Labour (and it was Labour who knighted Goodwin), which manages the general affairs of UK Plc.
The popular perception of banks as merely shuffling money rather than producing anything useful is basically correct, even if it doesn’t go any deeper than that. Wealth – as something useful to human living – can only be produced by humans applying their physical and mental energies to material that originally came from nature to fashion it into something useful. As an early political economist, Sir William Petty, put it in the seventeenth century, Labour is the father and the Earth is the mother of all wealth. No bank, not even any bank worker, is engaged in the production of wealth as they are not involved in transforming materials from nature into something useful. This is not to say that banks do not play an important role within the capitalist system. They are part of the division of labour within the capitalist class. If banks didn’t exist then industrial capitalists would have to be their own bankers.
Under capitalism, as under all social systems, wealth is produced by human labour acting on materials that came from nature. But capitalism is a class-divided society in which the means for producing wealth – factories, machines, means of transport and communication as well as raw materials – are monopolised by a minority. On those means the rest of us are dependent and in them wealth is produced for sale with a view to a profit for this minority. Two consequences follow. First, wealth acquires a value (related in the end to the amount of labour required to produce it from start to finish). Second, that those involved
in the actual production of wealth are exploited – they produce more value than what they are paid for the sale and application of their mental and physical energies. This “surplus value” is the source of all profit, not just the profit of the industrial capitalists but also of the profit of those capitalists engaged in non-productive activities such as selling – and banking.
Such non-productive activities are necessary under capitalism and if they were not organised by independent businesses then the industrial capitalists would have to arrange for this themselves. They would have to tie up some of their capital in a department to sell their product to the final users or in a fund to finance longer-term activities. It proved more convenient – and in fact more profitable – to in effect hive off these activities to independent businesses. But this still involved sharing some of the surplus value extracted from their workers with these hived-off businesses.
Banks make their profits out of providing some services for other capitalist businesses, but essentially out of lending money to them and getting a share of the surplus value as interest. The money they lend could be their own or, more likely, it could be money they have themselves borrowed, though at a lower rate of interest. While some capitalist firms have a need to expand production, others will have a temporary cash surplus; the economic role of banks is to channel money from those who don’t need it for the time being to those who want to invest it. They are economic intermediaries.
The share-out of the surplus value produced by the productive section of the working class comes about through the averaging of the rate of profit. Different amounts of surplus value are produced in different industries, but if capitalist firms were able to keep as their profit all the surplus value produced in them then some industries would be more profitable than others. To the extent that this tends to happen the higher rate of profits attracts more capitalists to the industry, leading to more being produced and to prices and profits falling. In the end the equilibrium position (which is never reached) is when capital invested wherever, including in non-productive activities, would make the same rate of profit.
It’s as if all the surplus value produced in all industries was pooled and that capitalist firms of all sorts compete to withdraw from it as much profit as they can. This gives rise to the illusion that it is the business acumen of the directors or managers that determines the amount of profit a firm makes. This is true only to a certain extent. The amount of profit a particular firm makes does depend on the decisions of those managing the firm. Being able to see trends and follow them up, being more efficient and the like can bring a firm higher profits. This is why some firms are prepared to pay their top managers big bonuses, on the assumption that their skills will bring in more money than the amount of the bonus. Whether this is in fact the case or whether the top managers are simply plundering the shareholders is an open question. In any event, it is not the business skills of those in charge of a firm that “create” the profits; they only withdraw them from the pool of surplus value previously produced by the working class, “capturing” them as we said. And the more they capture the bigger the bonus some get.
The averaging of the rate of profit means that in effect the whole capitalist class exploits the whole working class. So workers have has no interest in singling out one section, for instance bankers, for special opposition. They are all in it together and should be denounced equally as exploiters and parasites.
We have of course no sympathy for Stephen Hester and Fred Goodwin, but they are only scapegoats for the sins of capitalism. As far as we’re concerned the side show of them being sacrificed is not going to detract us from campaigning to get rid of capitalism altogether.