Banks, who needs them? (2009)

From the April 2009 issue of the Socialist Standard

If there was production directly for use we wouldn’t need banks

Are the banks and greedy and incompetent bankers to blame for the current economic crisis? That’s what a lot of people think and what the media seems to want us to think. Certainly, bank directors generally are greedy – awarding themselves huge “salaries”, bonuses and pensions – and some of them are incompetent on their own terms. But blaming them is to let the real culprit off the hook: the capitalist system of production for profit.

Capitalism inevitably brings about from time to time a fall in production (despite plenty of unmet needs). Banks and bankers are no different from other capitalist enterprises and their directors. When there are profits to be made they go for them and the devil take the hindmost. In the real economy this results in overproduction relative to market demand; in the financial sector it results in the overexpansion of credit, fuelling speculative bubbles. Both of which inevitably eventually end in tears. Overproduction leads to cut-backs in production, factory closures and redundancies; overexpansion of credit leads to not all loans being repaid and to bank losses and credit crunches. In fact, normally it is overproduction that brings about the contraction of credit and the pricking of speculative bubbles. Which is where we are now.

If the capitalist system of production for profit is to blame, the only way to avoid periodically-occurring crises is to get rid of it and replace it with a new and different system. But what? Socialists advocate that production be carried on purely and simply to meet people’s needs. Production for use instead of production for profit, or rather, production solely for use since even under capitalism what is produced has to be useful (or at least seem to be useful), otherwise it wouldn’t sell and there’d be no profit to be made out of arranging for it to be produced.

But before there can be production solely for use, we – society – will have to be in a position to control production, to decide what (and how and where) things are produced, and we can only do this if the places where things are produced and the materials to produce them are no longer the exclusive property of rich individuals, corporations and sovereign states. They must have become instead the common property of the whole of society. Which is not the same as state ownership, or nationalisation, as states never represent the interests of the whole of society but only of a privileged minority within it.
Common ownership is in fact the same as no ownership. It means that nobody or no group can exercise ownership rights over any productive resource. These will simply be there, to be used to produce what people need. But how? It will simply be a question of finding some way of deciding what people want and then of arranging for this to be produced. “Simple” not because it really will be that simple, but simple compared with what has to happen today under capitalism where money – and the drive to make more money – complicates things.

The aim of production under capitalism is for those who own and control workplaces to make a monetary profit, to end up with more money than they started off with. This involves selling what has been produced and at a higher price than was paid for the resources, including the working skills of the actual producers, used in producing it. Everything has a monetary value. To calculate profits, the cost of everything bought and the income from everything sold has to be recorded. In other words, a whole superstructure of monetary accounting is imposed on the actual process of production. Banks come into it as gatherers of funds to lend to other capitalist enterprises.

Of course, with production solely for use, a record in physical quantities of the resources used in producing something will have to be kept too. But under capitalism this is duplicated by parallel records of the monetary value of these quantities. In socialism, with production solely for use, this second recording will disappear, so simplifying the organisation of the production of wealth. After all, all that is needed to produce wealth are materials that originally came from nature and humans with the skills to fashion these into useful things.

Production for use
Even without money and monetary calculation it will still be necessary to co-ordinate the relations between the different workplaces. One suggestion that has been put forward by socialists is what has been called “self-regulating production for use” which, for goods and services for individual consumption, would operate on the same basis as the market is supposed to operate today.

According to economics textbooks, production today is initiated in response to how “consumers” choose to spend their money. They “vote” for what they want to be produced by what they spend their money on. Those who own and control workplaces producing particular types of consumer goods and services respond by organising the production of what people have chosen to buy. If people choose to buy more, they get their workers to produce more; if people choose to buy less, they get their workers to produce less. These workplaces producing consumer goods order the materials to produce them from other workplaces and they from their suppliers and so the initial paying demand works its way through the whole network of workplaces, through those producing machinery to mines and farms producing the original materials from nature.

Of course this ignores the fact that the money most consumers have to spend is limited by the size of their wage or salary, the total amount of which depends on how much labour those who own and control workplaces want to employ. Which depends on how much profit they think they can make by selling their product. In other words, it is the prospects for profit-making, not consumer demand, that initiates production and determines what is produced; the level of consumer demand, and its ups and downs, is a consequence of this. But, leaving this aside, it is true that under capitalism signals as to what to produce are conveyed via the market.

With socialism, and production solely for use, the consumer really will be the start of the process leading to the production of things and services for individual consumption, only the message will be conveyed not by what they can afford to pay for but what they actually take to satisfy their needs. We can imagine that they go into a super-store as today and take off the shelves what they need. What is taken off over a given period will be recorded and transmitted to suppliers. If stocks are down, this will be a signal to produce more; if they are slow to move that would be a signal to produce less those who own and control workplaces those who own and control workplaces those who own and control workplaces – and so on throughout the whole productive network. It will be more or less self-regulating like today except that the messages will be conveyed as required amounts only and not this and their monetary value.

This is only one suggestion as to how the production and distribution of wealth, or at least of consumer goods and services, could be organised without money. Other more directly planned arrangements would have to be made for expanding productive capacity and infrastructure projects as well as for introducing new products.

But whatever the arrangements, with production solely for use, money will have no place. So neither will the complications that it brings to the organisation of the production of wealth. Money may make the world go round under capitalism but it also, from time to time, stops the world going round, creating unused resources alongside increased unmet needs.

With production solely for use, overproduction could still occur but only by accident (and it would be overproduction in relation to real needs, not in relation to paying demand as today) but this would not have the consequences it does today. It would not clog up production and lead to its interruption. Production in other sectors would continue as before. So would consumption since what people can consume would not be tied to working for a monetary income as today. Everybody would be able to satisfy their needs, irrespective of whether or not they were currently working, without being restricted by the amount of money they have.

No money means of course no banks either. Saving, borrowing and lending will have no more sense in a production-for-use society than buying and selling. So, what we say about the banks is not regulate them, nor nationalise them, but make them redundant. Abolish them, along with all the rest of the complicated, financial superstructure of the capitalist production-for-profit economy.

Adam Buick