Cooking the Books: Marx and Banks

The Morning Star (23-24 March) carried a cartoon which has Marx holding a piece of paper on which is written ‘Cyprus banks grab’. He is writing on a blackboard:  ‘Banks in Capitalist society are institutions created for the systematic robbery of the people’ and asking, ‘Now will you believe me?’

The only problem is that this is not a quote from Marx, nor does it correspond with Marx’s expressed views on banks. Marx was well aware of the opportunities for swindlers opened up by the coming of limited liability companies and their promotion, and by stock exchange manipulations in which some financiers and banks already were involved in his day, and wrote about this.

However, Marx’s whole analysis of the nature of exploitation under capitalism was that this took place in the course of production in the places where real wealth was actually produced when capitalist employers extracted surplus-value from wage-workers, not in the sphere of money and finance.

In Volume 1 of Capital he specifically repudiated such views:

‘The great part that the public debt and fiscal system corresponding to it have played in the capitalization of wealth and the expropriation of the masses, has led many writers, like Cobbett, Doubleday and others, to seek here, incorrectly, the fundamental cause of the misery of the people in modern times’ (Chapter 31).

A large part of Volume 3 of Capital is devoted to a discussion of banking and finance. Here Marx analysed banks as being essentially institutions for collecting the savings of people who did not want to spend their money for the time being and channelling these as money capital for productive industry. As he put it:

‘A bank represents on the one hand the centralization of money capital, of the lenders, and on the other hand the centralization of the borrowers. It makes its profit in general by borrowing at lower rates than those at which it lends.’

In other words, banks were not a scam to systematically rob people but institutions which played an essential role in the operation of the capitalist system.

There is another problem with the cartoon’s supposed quote. When it says ‘banks in capitalist society’ this could imply that banks in a non-capitalist society would have a different role. But it was Marx’s view that banks would have no place in a socialist society (or as he preferred to call it, a communist society, meaning the same thing).

In Volume 2 of Capital he wrote: ‘if we were to consider a communist society in place of a capitalist one, then money capital would immediately be done away with’  (chapter 14, section 3) and that ‘with collective production, money capital is completely dispensed with’ (Chapter 18).

This is clear enough. Banks channel savings as money capital. Money capital won’t exist in socialism. Therefore banks won’t exist in socialism.

Ironically, since the paper normally gives free range to currency cranks, Richard Seymour writing in the Guardian (27 March) got it better when he concluded an article: ‘Cyprus crisis: why do we need banks at all?’

‘To paraphrase Karl Marx on religion, the demand to abolish banking is a demand to abolish the state of affairs that needs banking.’

That’s what Marx is more likely to have written on the Morning Star’s blackboard.