There’s a deep fear in the Australian psyche that makes the Bank Levy a political knock-out.
The more I look at it, the more the Bank Levy looks like a significant turning point.
One of the things that surprised me during the Rudd / Gillard years was how easy it was for the mining industry to kill off the Super Profits tax.
A relatively cheap PR campaign, a few full-page ads, a couple of pollies in the pocket and bang, it was gone.
Their campaign was so effective (and so cost effective) it has now become the standard in resisting government regulation.
And so now everyone is wondering if the banks could pull off something similar with ScoMo’s Bank Levy. Are they going to try?
Even if they spent a billion dollars, which would be an epic media onslaught, if they ended up saving themselves $6 billion, it would still be a great return on investment.
So they’ve certainly got the means and the motivation.
And on the face of it, it should be easy. The mining industry employs relatively few people, and is something like 85% foreign-owned.
The banking industry employs twice as many people as mining, and is Australian-owned by law. On the economics of it, it is much easier to make the “killing our jobs” case for banking.
So it’s a done deal right? The banks will fight and the banks will win, right?
Hardly. In fact, I haven’t heard a single person who thinks the banks could fight this one back. Most wonder if they’ll even bother trying.
It is true that the political context matters here. With the mining tax, there was an brutally effective opposition at the ready to prosecute the case for the mining industry.
In contrast, Labor has already campaigned hard against the banks, and has said they won’t be fighting this one. (What choice do they have?)
So the banks are up against a rare bipartisanship. That doesn’t help.
And it is also true that banks are on the nose pretty badly these days. There’s been a string of scandals recently. And not just the ones that involve rigging obscure market rates and ripping each other off. They’ve been personal. Real people have been overcharged, denied valid insurance claims, received bad investment advice, or had they mortgages unfairly foreclosed.
The mining industry might not be the greenest, cleanest industry in town, but compared to the banks, they’re model citizens.
And you’ve also got to remember the battler-bludger polarity in Australian politics. The more you can cast yourself as a battler, or pro-battler, the more votes you’ll get.
For the mining industry, this was an easy call. Mining is hard yakka. It involves real work – hot, dirty work out in the middle of nowhere. It involves big trucks and work-boots and hard-hats.
In a digital age, it’s one of the most ‘real’ industries we have left. Total battler country.
Compare that with banking. Banking involves sitting in an air-conditioned office and pushing buttons on a computer.
Other than blogging about property and macro-economics, work doesn’t get much cushier than that.
And banking is not real work. In that, it doesn’t make real things.
Finance plays a unique role in our economy – it’s a facilitator. It connects people with money with the people who need it, to make economic activity happen.
But it is not economic activity itself (even though it’s counted that way). And I think what we have to realise is that if our finance sector is growing (which it has been), then that means our economy is becoming LESS efficient.
That is, if the finance share of the economy is growing, it means we need more finance for the same level of output.
That’s not a good thing.
And I think there’s a danger that our economies tilt towards shuffling money around rather than putting that money to work. Think about the ever-expanding markets in derivatives of derivatives of derivatives.
People make money, but no one is better off.
Such is the nature of banking.
And I think the ancients cottoned on to this. Usury (making money by holding debt over people) wasn’t just illegal, it was immoral.
If you made your living by doing nothing but holding debts over others, you weren’t really contributing to society.
What’s worse, combined with a tendency for power and money to accumulate, you had the potential to create a dangerous parasite.
I think finance in the modern world has reached parasitic proportions. That is, it draws more energy from the economy that it gives back in return – which is why we see it growing and growing.
And I think people are genuinely worried about this.
Don’t get me wrong. Finance is an essential service. We need it. But this need is what gives the finance sector its power.
When you combine it’s essential nature (up there with air, water and wifi), with a parasitic tendency and a concentration of power, and you have something that people are genuinely worried about.
… even if they haven’t been able to name it until now.
So I think this is not just about the recent scandals. Those scandals just make this fear tangible – the fear that we’re living with a monster that we can no longer control.
This is the fear that the Bank Levy plays to.
And it’s why it’s such a political winner.
That said, I’m not sure random taxes here and there really address the issue. But I think it is a very interesting change in the game.
This is about making people feel like their fears are justified after-all, and validating the belief that the people should be able to control the finance sector that serves them.
(What a dangerous idea!)
As far as the banks are concerned this is what will scare them. Money is just money. But if the public believes they have the right to control them? Oh boy, look out.
So they’ll fight it tooth and nail.
But if what I’m saying is true, expect to see a war for the ‘story’. They’ll need to reframe this in a way that is not about the public bringing them to heel – they just can’t allow us to take that power.
It will be interesting to see how the narrative evolves.
Watch this space.
If you were the banks, how would you play it? (Assume maximum evil.)