Paul Murphy (Dublin South West, RISE) | Oireachtas source

It has been 13 years since the 2007-08 crisis, a crisis for which people paid a significant price and at the very centre of which in Ireland and around the world were the banks and private banking. However, it seems that almost no fundamental lessons have been learned because in the aftermath of that crisis, as well as massive austerity being heaped onto ordinary working-class people, the banks were bailed out and nationalised in order to save them.

Since then, we have been on a road back to private ownership of the banking system, bit by bit. They are being restored to profitability and then put back into private hands. We are going in a circle, not in precisely the same way but with many similarities, back to where we were. We have a banking sector that is increasingly seen to be an oligopoly with three main banks which dominate it. All of them operate 100% on the basis of profit maximisation.

From a socialist perspective, the most basic point is that private banking does not work. It works for the private bondholders while they are making profits, but it does not work for the workers of the banks or the ordinary people who want, for example, to be able access banking services in their local communities. It does not work from the point of view of society and the economy as a whole and from the perspective of ordinary people. Banks will pursue their own profit, regardless of the expense for the workers, communities, society and the economy at large, regardless of the consequences. That is what we saw 13 or 14 years ago. It is what we will see again.

The alternative is very simple. The banking sector should be in public ownership and should be nationalised. It should be run democratically and as a public utility. The idea is that instead of running large parts of the economy as a service for the banks, we should run the banks as a democratically owned public utility in the service of the economy and society as a whole.

Taking some of the arguments that are made for why we need private ownership of banks and why that it is so important, the argument is often made that banks advance credit to small and medium-sized enterprises. However, the figures are striking as they show how little credit has been advanced to SMEs in the last year, for example. Some €4.1 billion was advanced in credit to SMEs in the last year, amounting to a decrease of €1.3 billion or a fall of almost 25%. It is the largest annual decline since records began. If we look at where the lending is actually going, the vast majority of it is going to large enterprises. A portion of it is going to SMEs, which is not included in the figure of €4.1 billion I previously mentioned, the majority of which is property related. The banks are still just financing property. It points to the fact that private banking is not playing much of a role in terms of productive investment in the economy. It is still mainly focused on property investment, even if it has largely cut back to its traditional core business of residential mortgage lending, in other words, fleecing workers who are trying to buy a home.

I made the point earlier that banking has changed to some degree. One of the ways it has changed is in the commercial property side. A large element of the crisis in 2007 and 2008 was caused by a small cartel of developers defaulting on large speculative commercial property loans after property prices rose so high that the property bubble burst, leading to the collapse of all the main banks. Commercial property was a central activity of the banks at that point in time. Without regulation, the banks continued to lend bigger mortgage amounts to ordinary people to make bigger profits on the interest, as house prices lost all connection to wages. However, first came the defaults on commercial property. After that, ordinary people began to default on their mortgages as a result of the ensuing collapse of the economy due to the impact of the State bailing out the banks to pay for the property bubble. The commercial property market collapsed in the aftermath. Then came the austerity and the slashing of public spending to compensate for the fact that the banks were effectively bailed out. Massive job losses and so on, went with that.

Something interesting that has changed in the property market is the shift to vulture funds. The majority of commercial property is no longer funded by the private banking sector. Instead, the Government quite consciously rolled out the red carpet to vulture funds so that they would lend to developers instead and therefore the State would not be on the hook for losses. Of the supposedly fundamental aspects of the banks, for example, providing credit to small businesses and ordinary people, there is not much of happening in that regard. In reality, the vast majority of it is still related to property, either building it in terms of businesses or mortgages. No matter how the rules of the capitalist casino are rejigged after each disastrous new crisis, the house always wins. This time, it is US vulture funds and corporate landlords. Last time, it was Irish bankers and property developers and small-time rack-renters. That is why we need a fundamentally different system.

See this speech in context