Banks, Parasites of Destruction – Nationalize the Banking Sector

At the time of writing 3 US banks have collapsed and a fourth is “floundering”. This was followed by the collapse of Credit Suisse. The latter is a colossus of the global banking system, the second largest Swiss bank with a 166-year history. In all probability the banking crisis will continue and will be reflected in the real economy.

Savior state 

In all cases the US and Swiss governments have rushed to the rescue – in the US deposits were rescued, in Switzerland, Credit Suisse, after being propped up with some 100 billion euros, was absorbed by UBS (the biggest Swiss bank). Faced with the prospect of a complete collapse, the US and Swiss governments had no choice but to intervene. If they had simply let these banks go bust with depositors bearing the cost, we’d have gone straight into what happened in the 1930s: massive economic collapse, massive business closures, massive unemployment, social and political unrest unprecedented in recent history. 

So, suddenly, the bankers, infamous defenders of “free” markets and fanatical enemies of state intervention, are “worshipping” and “glorifying” the state. But in reality, they are cynical hypocrites: it is their own choices and policies that are once again causing a crisis. These policies are bringing them unimaginable profits and wealth. But when they bring about a crisis, it is the national economies and the working class that pay the cost. 

The real question 

The question posed by the apologists of capitalism in the establishment media, faced with the current crisis, is what can we do to avoid the risks of banking collapses in the future and in general

But the real question is different: why do the banks, with the monstrous power they hold –which allows them to plunge entire economies, including the international one, into crises and destruction– belong to private capital? Why are they not in the hands of society, so that they operate to serve the economic needs of the mass of the population rather than speculating for the benefit of big capital and a handful of millionaires? It is precisely this speculative character that lies behind every major banking crisis, whether it was that of 1929 or the more recent one of 2007-8-9.

The debt 

The previous major international banking crisis occurred in 2007-8-9. The cost of bailing out the banks then, was huge and it meant that public debt sky-rocketed for countries across the planet, with the popular layers paying the price (having to face austerity policies to pay back the debt). 

The mechanisms today are different from then, but the essence is similar. 

The policies pursued from the previous crisis to the present day have led to the largest global debt ever – $300 trillion (300 thousand billion), equivalent to 349% of world GDP (according to S&P Global Ratings and the International Finance Institute, IIF). 


This huge debt is the background on which a number of factors have operated (the opening of economies after the pandemic lockdowns, the energy crisis of 2021, the consequences of the war in Ukraine, the geopolitical competition between the US and China, etc.) and have led to the re-emergence of inflation after 4 decades and, to make things worse, in conditions of stagnation in the major (industrially developed) economies.

To cope with inflation, the “developed” countries reversed the close to zero-interest-rate policies of the previous decade and are following a policy of continuous increases; now after about one year of interest rate hikes, they are in the region of 5% in the US, with Europe following at some distance. At the same time, they are implementing policies that shrink labor income (refusing to give increases equal to the rate of inflation) and lead to increased unemployment, so as to reduce demand in order to accelerate the fall in prices. 

Time bomb

However, raising interest rates sets off the ticking time bomb of over-indebtedness – this is the root of the current banking crisis. 

Many over-indebted borrowers, who took out loans when interest rates were close to zero, can no longer repay their debts. This applies to households who may lose their homes and other assets; it applies to businesses that may collapse and lay people off; it applies to banks that will suffer losses because borrowers will not be able to make their repayments; it applies to countries that are over-debted and will be forced to default. 

In all cases the cost will be paid by the working class and the poor.

The unimaginable destructive power of bankers

The economic life of every country, the very course of the world economy, are controlled by big financial capital – that is, by private capitalists who only care for the maximization of their profits. Through their speculative games, their endless gambling, they are playing with the lives of millions of people. And yet, their risky games are “safe” for them: when their gambling and profiteering causes destruction, then their “age-old” enemy, the state, will come to their rescue, in the name of the good of society, passing the cost on to the popular masses. 

Banks in the hands of society, not the speculators 

The banking system must be public, owned by society, operating in full transparency, under conditions of social and workers’ control and management. 

Its operation must be exclusively geared to serve the economic needs of society and not private profits. Its job should be to finance investments to develop the economy according to society’s needs and to provide low-interest loans to consumers and small businesses. 

This is the only way to abolish the parasitic and destructive role that banks currently play in the hands of private capital. 

The parties of the Left have an obligation to place high on their agenda the demand for re-nationalisation of the banking system, under workers’ control and management. Any party that speaks in the name of the Left but does not promote the nationalisation of the banks is simply not a Left party.

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