The SNP Spring Conference endorsed a motion calling on the Scottish Government to establish a Scottish National Investment Bank (SNIB). The idea of National Investment Banking has recently found favour among the left of British politics, with left wing Independence campaign Common Weal publishing a blueprint and Jeremy Corbyn proposing a British bank with regional branches as a key economic policy.
The SNP motion on a SNIB was not detailed, merely calling on the leadership to explore the idea. If they do, the place they may start is with Common Weal’s document. It draws up a blueprint for the SNIB based on academic research, experience of NIBs in other countries such as Brazil and Germany.
The idea of a National Investment Bank is a simple one: a publicly-owned bank that borrows money from private banks to invest in things that the Government wants to steer investment towards. It has been called ‘fiscal policy (ie, government stimulus spending) by other means’ and proponents say doing it this way has two main benefits: it works out as cheaper than public-private finance plans (such as PFI, PPP and the Scottish Government’s NPD) and it allows the Government to spend more money but keep it off the official budget.
The SNIB would thus help the Scottish Government solve two financial problems. Though PFI has been replaced by the Non-Profit Distributing (NPD) scheme, Scotland is still encumbered with £22bn in local council debt. NPD boasts less profiteering from private financiers, but while PFI contracts usually expected a 15% return on investment, NPD barely cuts this to 12%. Government borrowing is much cheaper than private sector borrowing, so a SNIB would create a way to more cheaply finance public projects.
The other problem the Scottish Government faces is limitations on its capital spending. There are also EU “state aid” rules which prohibit Governments from “distorting markets” through targeted public spending, which are nearly impossible to get around. As a devolved institution, there are limits on borrowing and spending put in place by the UK Treasury. A SNIB could potentially work around these rules and give the Scottish Government more to work with on its economic strategy.
Common Weal highlights these issues in its document “Blueprint for a Scottish National Investment Bank”, written in partnership with the New Economics Foundation. There is some wiggle-room in EU state aid rules for economic sectors that face underinvestment from private sources, the document states. Underinvestment is a major point for proponents of a SNIB, who point out a lack of investment in Scottish infrastructure, small business and innovation (research and development of new technology). It is in these three areas that the Scottish Government wishes to invest as the core of its economic strategy.
A RADICAL PROPOSAL?
Common Weal correctly identifies governance – how the Bank is run and who by – as a key issue in ensuring the SNIB does pursue its stated social aims. This is, of course a step in the right direction. However we must ask, would the proposed alternative lead to the radical change needed in Scotland? If not then what should be proposed?
What power would this Bank really have? ‘Power’ meaning money, of course. With an initial Scottish Government fund of £255 million, the blueprint envisages that the bank could mobilise a few billion. Small in the grand scheme of things but certainly not something to be snubbed.
Lenin uncovered in his pamphlet “Imperialism: The Highest State of Capitalism” – written over 100 years ago but one of the most important works for understanding capitalism in the 21st century – the economy is dominated by the “financial oligarchy” of the big banks.
The concentration of capital in a few big banks creates a hierarchy in which the lower orders are subject to the interests and plans of the top. This way the big banks control the direction of the economy and unless their power is broken it could not be otherwise. A SNIB would struggle to compete with these big banks and merely fiddle around the edges of the economy rather than shape its destiny.
If fiddling around the edges is the most a SNIB could do, it’s not necessarily a bad thing. If it does make investments in the short-term interests of local communities and the working class generally, then what reason do we have to oppose it? However the Common Weal blueprint proposes that while there will be some written social mission or charter for the Bank, it would ultimately be an “independent commercial entity”. Therein lies the problem with NIBs: a bank is still a bank.
“Independent commercial entity” means that the SNIB will still be constrained by commercial viability; by the need to make profit on every loan they give out. The blueprint naively states that, “the SNIB would be profit making but would not seek to maximise profits”! A bank Director would be committing career suicide if they put that on their CV. Maximising profit is an iron law of capitalism that no amount of corporate social responsibility or government regulation can change.
No real solution is proposed, however. For all intents and purposes the SNIB will be run just like any other bank, with some political “supervision”. This follows the examples of NIBs in Brazil and Germany. In these examples however, the “supervisors” are invariably Government insiders or industry technocrats. The blueprint merely touches on a potential alternative – control by bank workers and the local communities they serve – by suggesting a “trade union backed” staff representative on a supervisory board that meets once a year, merely to check the accounts! This representative and another supervisory board of MSPs are strictly prohibited from interfering in the Bank’s operations.
Nationalise all Banks under Workers’ Control!
Common Weal doesn’t claim the SNIB to be a particularly radical proposal per se. Rather, it is a part of their overall vision of an alternative banking system for Scotland, outlined in their paper “Banking for the Common Good”. This envisages a network of local, non-profit, democratic banks that help small businesses and social enterprises grow, and provide an ethical alternative for personal banking. This sounds much more like the banking system of a new economy, but as it stands the blueprint for a SNIB offers no way to get there.
Trying to build up an alternative to the financial oligarchy without directly challenging its power is doomed to fail. Like the co-operative sector, it would be suffocated by monopoly capital or corrupted by it. It’s not a fair or free market; we can’t beat them by playing by their rules and trying to compete. Making an alternative to capitalism means first and foremost a political struggle to overthrow capitalism.
The Scottish National Investment Bank supporters have every good intention. The SNP conference motion calls out the PFI profiteers for ripping us off. It correctly points out the failure of private banks to invest and create jobs. The Common Weal blueprint rightly shows that this failure is inherent to the big banks, who now make more profits on speculation and other “coupon clipping” as Lenin called it, rather than investing profits back into production. Public sector borrowing is so cheap because the banks are sitting on trillions of dollars which can’t find anywhere to be profitably invested, so it falls to reliable debtors like national governments.
The document claims that a SNIB could be used to steer the economy towards the achievement of “social and environmental goals”, such as transitioning to a “post-fossil fuel economy”. This would be a radical change indeed. However in order to achieve this, the banking and financial sector would have to be under the full control of the working class and other exploited layers, through trade unions, workplace committees, local communities and representatives of a genuine workers government. Such a move would be an inspiration to the workers of the rest of Europe and the world over. Only with such an international movement to overthrow capitalism could world wide issues such as climate change be tackled.
This is capitalism in crisis. If we are serious about moving beyond this dead-end system, then we must raise revolutionary demands. No less than the nationalisation without compensation of the big banks and monopolies which dominate the economy, with no compensation, to be run under democratic workers control and in the interests of all! If Common Weal used their platform to call for this they’d be surprised by how much support it would get.
