Retail Banks: Dealers or Rehab Agents?

My last blog explored the concept of the “drug of affluence” and its impact on behaviour – this blog follows that on by looking at the role of banks in our addiction – so let me start with this cheery quote from Thomas Jefferson to set the scene.

 “I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around the banks will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered.”

Thomas Jefferson, Letter to the Secretary of the Treasury Albert Gallatin, 1802

At the risk of joining the masses who condemn ‘The Banks’ I feel a discussion about our increasing levels of debt (and decreasing levels of buying power) is obsolete without a discussion of the main players. So, following the crisis what role are the banks playing with the affluence addicted- are they still the bad guy pushers or are they reformed rehab workers, helping us put our addiction to affluence aside by prudent financial planning and debt management? Ask the affluence addicts and the vast majority will have no problem answering that question.  The Bankers are still the bad guys - but interestingly not because they are overtly peddling affluence these days - rather they are now the bad guys for other reasons – firstly they’re bad because they’ve stopped dealing – they’ve removed our supply, they now won’t lend us money, we can’t afford to buy status symbols we don’t really need and secondly and really annoyingly they still look like affluence addicts themselves with their big salaries and corporate perks and thirdly and most gratingly of all they are using our tax dollars to feed their habit.  However, before all of us affluence addicts rise up and lynch a banker perhaps we should remember how we got hooked on affluence ourselves.

What is clear is that we, the consumers, the addicts, are not clear of all the blame and so if we decide, as many have, that the banks are our drug dealers, we must remember that when they offered us the initial hit we took it happily. And when they offered us another, in a deal that seemed too good to be true, again we said yes. We fed the fire that eventually burnt us.  So to some extent we have to shoulder responsibility – but knowing that doesn’t make us feel any warmer towards bankers.  So what do banks have to do to make us want them and respect them again for what they can do for us?

It is, of course, no surprise that reformed drug addicts can often end up as drug counsellors and rehab workers as they seek to find a way to make amends for the damage that they have done.  Is there a lesson here for the banks?  Absolutely – I think that it is not simply enough for the banks to have “stopped dealing” what us addicts really need now is to see the banks look sorry and provide us with useful help and support as we go cold turkey from affluence.  What I’d love to see are the banks investing more in providing community debt counselling, in providing free and effective financial and business advice to new businesses, in supporting local charities that are failing to secure funding and to find a way to measure whether or not they are raising the general standards of the community of which they are a part.  In other words like a drug worker with an addict, be a shoulder to cry on when our finances hurt, be our trusted counsellor when we need financial education, be a support to those around us when we’ve lost the plot and make the world us addicts live in just a bit better.

The drug of affluence

Whilst Karl Marx may have had some searing insights it appears that he was wrong when he confidently  declared that religion was the opiate of the (European) masses.  It is clearly affluence (and the dream of affluence) that has been the West’s narcotic of choice, not religion.  It is also clear too that our dependency on the affluence drug and it’s imminent withdrawal (see Greece, Iceland, Ireland, Portugal etc) is a major threat to our Western way of life and social structure.   If you want to appreciate how big a threat the drug is to our own Western civilisation one only has to look back in history to the demise of the other great civilisations (Grecian, Roman, Mayan, Egyptian etc) and chart their rise to greatness and their rapid decay.  Without doubt the collapse of these great civilisations is associated with an inability to continue to generate ever greater levels of affluence for a society that then simply implodes on itself.

So, at the risk of being called a Jeremiah (the Old Testament prophet who was renowned for his doom and gloom utterances), I will say again that UK plc has a big problem as we are deeply in love with the drug of affluence and to date this is a problem that we haven’t really faced up to.  Throughout history, wealth, sex, power and influence have always been the drivers of the ruling classes.  However, since the rise of capitalism, social mobility and the emergence of the aspiring masses, the drug of affluence has cascaded down to all levels of society and evolved into mass addiction.    In the UK we have the highest levels of personal debt within Europe – this is not good.

Affluence has powerful effects – it compels us to insist on our rights to health, wealth and happiness.  It creates a belief that we are entitled to the good life.  It strips us of our ability to think and act for the long term and instead creates a dependence on instant gratification and material things to validate us as human beings.  Moralising aside, in a Capitalist system, none of these are particularly bad things in themselves; however, affluence has side effects.   The side effects of affluence, including debt, a sense of entitlement and a general lack of responsibility, are relatively mild whilst we are all taking the drug and climbing the social ladder.  However, the problem comes when the supply of affluence dwindles and we are forced to withdraw from the drug and we experience a mass come-down on epic scales.

When affluence is no longer available, the consequences for a hooked population are dire, and misery, panic, selfishness and brutality ensue.  Like a child deprived of a favourite toy, the population of a nation deprived of affluence can quickly turn nasty, with some very unpleasant results.  It has of course been fascinating to watch the debates across the globe of whether it is better to go “cold turkey” like the UK intends to do under David Cameron’s coalition government or whether it is better to go for the “slow withdrawal” method favoured by Barack Obama in the US.  Either way the misery associated with facing up to drug addiction will be very real.  My hope is, that as we look for ways to cope without affluence, that we don’t get hooked on the equally potent cocktail of anger, recrimination  and blame – let’s hope that this time we can each take our personal responsibility to “do the right thing” seriously, even when it means that we personally will miss out.  To date the response of the Greeks and the public sector unions in the UK does not fill me with great hope.

Here endeth the lesson – sorry for being so moralistic but it probably needed saying.