The Case for a Public Bank
Michael Noonan and Fine Gael have made it clear that they plan to sell 25% of the shares in AIB to the private market in the coming days. AIB is our bank. We bought it. It was a terrible deal when we did, but now that we’ve nursed it back to health, the government want to pass on the winnings to the bankers who lent us the money to pay the debts caused by our bankers losing all our money. It’s the epitome of “Socialism for the rich, dog-eat-dog capitalism for the rest of us.”
The idea would be laughable if it wasn’t such a serious economic crime against the citizens of Ireland.
Some have said that AIB is not worth much anyhow, so we might as well sell it. As if investors are fond of lining up to buy things that aren’t worth anything. If it’s worthless, nobody will buy it and there is no point in selling it. And if it’s worth something, why are we selling it? Do you kill the golden goose to have a one-time meal or do you use the golden eggs? Noonan wants us to kill the goose.
In the wake of the financial crisis of 2008, the state ended up with 99.8% ownership of the AIB. This makes it ours to control. And control it we should. Surely we can now use it to perform the sorts of tasks that banks are good at. We can have a bank that serves the needs of ordinary people, instead of engaging in reckless financial speculation.
We have a housing crisis and a jobs crisis. Having a publicly-owned bank gives us an opportunity to connect the dots for once. To deal with the housing crisis we create a national housing authority which is charged with building houses for cost-rent for the general public. This will provide houses, but the building of these houses will, of course, provide jobs. AIB could invest in this new housing authority, but also in a public construction firm and a public apprentice programme to train people up in the best techniques of all aspects of building.
With a public bank, we can get people off the dole and back to work. We could make really well-built, quality public housing while employing people who currently can’t find work.
But the real benefit of owning and democratically managing a public bank is that it helps us to answer the eternal question – where will the money come from? A public bank provides us with more options than any other structure to finance and invest in what we believe is socially important – not just profitable for elites.
AIB already control pension funds or other low-risk investments which can be used as seed funding for public projects. To get really significant investment, this pool of deposits can be expanded through the introduction of a single, mandatory pension scheme, funded by employers. This will mean that everyone will be taken care of in their old age, but it will also mean that we’ll have a lot of money to invest in job creation now. AIB could then act as a strategic investment bank, funding cooperatives and public enterprises to make Ireland a player on the global market.
A mandatory pension contribution fund, similar to the one that exists in Australia, would amount to an investment of approximately €1.6 billion annually. This could directly generate 30,000 jobs, reducing the number of people on the live-register by 10%.
AIB also holds mortgages and one of the consequences of this is that under-performing mortgages are being sold on to vulture funds in preparation for privatisation. No account is being made of how this will impact those who hold those mortgages, or those who rent from the distressed mortgage holders. Instead, a public bank could implement a mortgage-to-rent scheme which offers homeowners secure, lifetime tenure and increases the public housing stock. This would help to keep the property market from re-inflating, and would keep people in their homes.
If we attack the housing problem and the jobs problem simultaneously, we also make products cheaper, and easier to export, making our industries much more sustainable. This is because the cost of living will be reduced substantially, allowing investments in industry to be more effective at creating jobs throughout the economy.
All of this is possible if we have publicly-owned financial institutions which we run for the public benefit. The possibilities outlined here are just scratching the surface. If we start a serious conversation about the national economy and what we want it to do for us, instead of the other way around, it will become abundantly clear that we can’t get it without having public institutions.
We need a public bank. We have one. Let’s keep it.