[OPE] Leo Panitch on Willem Buiter

Panitch says:

Ironically, one of the most radical proposals making the rounds today has
come from an economist at the London School of Economics, Willem Buiter, a
former member of the Bank of England's Monetary Policy Committee and
certainly no Marxist. Buiter has proposed that the whole financial sector be
turned into a public utility. Because banks in the contemporary world cannot
exist without public deposit insurance and public central banks that act as
lenders of last resort, there is no case, he argues, for their continuing
existence as privately owned, profit-seeking institutions. Instead they
should be publicly owned and run as public services. This proposal echoes
the demand for "centralization of credit in the banks of the state" that
Marx himself made in the Manifesto. To him, a financial-system overhaul
would reinforce the importance of the working classes' winning "the battle
of democracy" to radically change the state from an organ imposed upon
society to one that responds to it. "From financialisation of the economy to
the socialisation of finance," Buiter wrote, is "a small step for the
lawyers, a huge step for mankind." Clearly, you don't need to be a Marxist
to have radical aspirations.
http://www.npr.org/templates/story/story.php?storyId=103598828&ft=1&f=1057

Everybody is very focused on banks, but banks are only a part of a much
bigger equation. If the state is in charge of issuing credit, then if the
state says you will not get credit, or not get it on specific terms, then
you cannot go to another bank or finance company for (from your point of
view) a better deal. We could say, tough shit, but this is how we will do
it, no more crappy loans. OK. But what is the effect of that? You get the
emergence of "de facto banks" which are nominally not banks, in other words,
an informal lending circuit, or you get capital flight or capital strikes.

How would you stop that informal lending circuit, in particular given that
this is the era of corporate self-financing? Short of nationalizing
companies, I think you would practically have to specify all the
transactions and legal constructions which are and are not allowed, and find
ways to police all that. Okay, you can do some of that, but a good portion
of capital flows slips through your fingers anyhow, and then you get a big
conflict between those who obey the law and those who dodge it. So a state
take-over doesn't necessarily have anything to do with "democracy" here.

The real problem is that you cannot really enforce a radically different
financial system, unless you have the active co-operation of the majority of
the people about things bigger than themselves, because just as soon as you
have legislated here, somebody tries to dodge it there, in that sense
capital can be a very slippery fish that's much faster than anyone's attempt
to catch it. You cannot say simply that "an institution will take care of
it", because it can't. Believe me, I worked for local and central government
one and a half decade, and one of the biggest chunks of work we get there,
is effectively from citizens who complain that OTHER citizens aren't
sticking to the rule. Then we are in the middle of that.

You might well argue, "well, why the f**k don't you pull the finger out and
do something about it yourself, instead of whinging to an official?". But in
reality if you do that, it often gets even worse, they start to resolve
disputes in ways that nobody can live with, and you get even more people
into the office, which means more work. Here in Holland at least we have
high population density, and if people resolve their own disputes in said
manner it affects a lot of people very smartly. It gives the concept of
civil society a whole new meaning. You realise that the law exists, not
primarily because you should obey it, but because it is better than the
jungle that we originally came from. It's sort of like, I shave, not because
I particularly like shaving, but because if I don't, I feel terrible, and
the effort of shaving is a small price compared to when I don't.

"Behavioural economics", thought through to the end, is "more than a
nudge" - it means the active participation of everybody to make the system
work, on the basis of known rules they agree to, so that nobody gets away
with it. But why would they do that? Because somebody says "Sieg Heil"?
People literally have to embody the organization in themselves. That sounds
nice, but it is much harder to realize than you might think, particularly
if, at the same time, you also want to safeguard respect for individual
freedoms. You have to know when to nudge or not to nudge. Looks to me like
it all starts from below. Or more accurately: it has to start from below AND
from above.

The real question is always: how do you get people's cooperation, and keep
it? That is what the politics and cultural issue in reality is about, and
then you always have to know the difference between the organ and the
organization. Sadly, as I have mentioned before, the scientific literature
on cooperation is very modest compared to the size of the problem - just a
few people like Samuel Bowles and Herb Gintis understand what it is about in
a scientific sense, and are prepared to study it clean. As a student in
1982, I wrote a mini-thesis on one of their books (though I didn't go to
America) and since then I heard people say they aren't socialists, but
that's not true. What they are studying is the very heart of the problem,
the core of the issue.

Hic Rhodes, hic salta!

Jurriaan

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Received on Tue May 26 16:54:30 2009