Financiers can turn the world into a dirty and dangerous place

European Economic and Social Committee. Seminar on “Future energy and climate framework and civil society”. (EESC photographic library, 25/10/1013).

Despite the fact that the civil society is fed up with the absolute indifference of the financial sector about what happens in the real economy, the western political elites continue to nurture the insatiable appetite of the banking system for more book profits. In view of that, the European Economic and Social Committee issued yesterday a resolution proposing new ways out of the crisis. The EESC says that, “quick profits has corrupted our economies, leading many European countries into recession, where algorithms have replaced traders, performing micro-second transactions, and where a company’s share price no longer bears any relation to the actual situation”.

Hard working people have by now understood that the western financial system has disconnected itself from the real economy and has no more need for a hard-working population. Financiers can create wealth all over the world usurping other peoples’ sweat. The complete liberalisation of the banks’ built-in ability to create money and the abolishment of all rules protecting society against bankers during the last twenty years, has demolished any moral barrier on financial activities and has betrayed even Adam Smith’s trust, demanding strict controls on lenders. The prophet of free market economy, when it came to banks, ruled that financiers should be strictly controlled even on moral grounds.

EESC, representing authentically the civil society exclaimed as it follows: “The time has finally come to see that only substantive reforms can put us back on the path to a sustainable economy, with sufficient redistribution of wealth to be able to serve society as a whole”. To support this position employers and workers represented in the Committee looked around for intellectual backing, for their deep sentimental frustration of being ruthlessly exploited by investment banking. In their query they came upon another academic and businessman brought up in Scotland, Lord Adair Turner.

A philippic against bankers

EESC resolution goes like this: “Numerous intellects, less conventional than all the economists who failed to see the crisis coming, are reflecting on possible reforms which could put us back on the path towards a sustainable economy”. The Committee found that the most appropriate proposal came from Lord Adair, former chairman of the British Financial Services Authority.

The essence of his proposal is to clearly distinguish between socially useful and socially useless financial activities. So the EESC concluded that “It is, indeed, time to encourage those activities that finance sustainable projects and contribute to the real economy and – why not – to dare to prohibit those that harm it, which have already been the cause of so much sacrifice”.

For Lord Adair’s proposal to be applied all financial activities have to be strictly controlled. The target will be to distinguish those directly supporting the real economy in undertaking investments plans, which cannot be financed by business sector’s resources alone. Staying in this line of thinking, after distinguishing which are the ‘socially useful’ financial activities, “the money invested will be able to play its role of development lever, matching investment timing to the needs of industry”. This said the resulting obvious policy proposal is that, “Only with a policy that prioritises sustainable investment will Europe be able to reindustrialise; only tailored financing and innovation tools can encourage development of businesses in Europe”.

For sustainable economic growth

This is really a ground-breaking proposal to completely rethink and re-establish the financial sector in Europe. Understandably the EESC fears, that the enactment of the European Banking Union, on the premises of the current laissez-fair financial environment, will end up creating a new support mechanism for banks. In this respect lenders will continue functioning independently from Eurozone’s real economy, betting all over the world other peoples’ money. If their bets are won they keep the profits, if they go sour the Banking Union will undertake the losses.

This is a really a dreadful prospect for Eurozone. If the creation of the Single Resolution Mechanism for failing banks is not accompanied by very strict rules on lenders, the next crisis won’t be very far away. ECB’s supervision cannot change this. If the current regulatory environment of the financial sector is not drastically change, Eurozone’s Banking Union will be an exclusive playing field just for financiers. Only parts of the manufacturing industry will be able to survive, under the roof of European multinationals, which will create their own financial department, to support their real economic activities.

In such an environment the SMEs will be a species under extinction. Financiers and multinationals will become completely stateless entities and will tend to direct economic activities where profits are uncontrolled and uncontrollable. Environment, human rights and democratic rules will be the last things to bother them. In conclusion, if financiers and multinationals are left uncontrolled as they are now, the world may become and dirty and dangerous place.