Occupy ideas (2013)

Pamphlet Review from the January 2013 issue of the Socialist Standard

The Little Book of Ideas. By Occupy London’s Economics Working Group. 

This 60-page booklet has been produced to mark the first anniversary of the Occupy camp outside St Paul’s. It is not a manifesto nor a policy document but ‘a small handbook which explains complex economic terms and theories in simple language’ so that people can understand what’s gone on and take part in discussions about what to do. The terms are dealt with alphabetically from ‘Austerity Measures’ to ‘Tax Havens’. When it comes to proposed reforms, the case for and the case against are presented though it is generally clear which side they are on. For instance:

  ‘Supporters of the banking system say that it has been the means by which industrial development has been so successful. However others contend that reckless lending by the banks is an inevitable consequence of a financial system driven by profit at all costs, and an alternative banking and monetary system is essential to wrest power and wealth away from the banking interests which precipitated the current crisis.’

What ‘others say’ here could be seen as the underlying theme of the whole booklet, i.e., that the current economic downturn was caused by the behaviour of the banks and so offers a purely monetary explanation.

It is true that in a system ‘driven by profit at all costs’, when things are going well and it seems that this will continue, ‘reckless’ behaviour in pursuit of profits will be an inevitable consequence. But this applies to the economic system as a whole and not just to its financial sector. In such a situation banks overlend. Corporations involved in the real economy overproduce. In fact, it is this latter that causes the financial crisis and subsequent general economic downturn.

Surprisingly, in view of the efforts made by currency cranks to influence Occupy, the booklet does not reflect the views of any of these. In fact it gives a not too inaccurate description of how banks work (‘acting as financial intermediaries between sellers and buyers, asset holders and lenders, in order to guarantee payment’) and even of so-called fractional reserve banking (‘banks are forced to keep a fraction of their deposits in case depositors want their money back’).

Their argument — not so different from the conventional view — is that ‘in recent years the system has got out of control’. Which suggests that downturns like the present could be avoided if in future banks are subjected to adequate regulation. The booklet, not being a policy document, only mentions various proposed reforms: separating retail and investment banking, ‘full-reserve banking’, peer-to-peer lending, banning short selling and trading on margins.

But what if (as Marxists contend) the banks did not cause the crisis, but at most only made it worse when it broke? Then, any ‘alternative banking and monetary system’ would be irrelevant as a means of avoiding future slumps. A more radical change away from the whole economic system based on production for profit would be required.

Adam Buick