Call it whitewashing or greenwashing, World Bank subterfuge doesn’t fool us

Every so often, the World Bank puts out a paper that calls for better social protection or at least a somewhat better deal for working people. The public relations people there evidently believe we have very short memories.

No, dear reader, the World Bank has not changed its function, nor have elephants begun to fly. Without any hint of irony, the World Bank’s latest attempt at selective amnesia is what it calls its “Social Protection and Jobs” strategy, in which it purports to advocate that the world’s national governments “greatly expand effective coverage of social protection programs” and “significantly increase the scale and quality of economic inclusion and labor market programs.” Hilariously, the World Bank titles its 136-page report fleshing out this strategy “Charting a Course Towards Universal Social Protection: Resilience, Equity, and Opportunity for All.”

In that report, the World Bank, with a straight face, writes that it “recognizes that the progressive realization of universal social protection (USP), which ensures access to social protection for all whenever and however they need it, is critical for effectively reducing poverty and boosting shared prosperity.” Furthermore, the report builds on a previous document that allegedly offers “an overarching framework for understanding the value of investing in social protection programs and outlined how the World Bank would work with client countries to further develop their social protection programs and systems.” The report asserts goals of achieving equity, resilience and opportunity for all people, especially the developing world’s most vulnerable, and “to create opportunity by building human capital and helping men and women to access productive income-earning opportunities.”

^{A demonstration in Oslo during the World Bank conference in June 2002 (photo by Vindheim)}

We arrive at that favorite set of code words, “human capital.” We’ll return to that shortly. But before we highlight the actual record of the World Bank and its role in imposing devastating austerity on countries around the world, at enormous human cost, let’s take a brief look at the International Trade Union Confederation response. The ITUC, which represents 200 million workers in 163 countries and has 338 national affiliates, says its “primary mission is the promotion and defence of workers’ rights and interests.” Readers may recall that the ITUC issues a yearly report on the state of labor, consistently finding that not a single country fully upholds workers’ rights.

In its four-page summary of the World Bank declaration, the ITUC said it agrees with the World Bank’s stated goals, and “agrees with the Bank that the lack of social protection for the majority of the world’s workers in the informal economy is a challenge that needs to be urgently addressed.” Nonetheless, the ITUC “has a number of considerable reservations to some of the policy messages” and disputes “the rigor of the analysis underpinning some of the policies proposed.”

The ITUC writes: “The Bank’s vision of universal social protection appears to prioritise the extension of targeted non-contributory social assistance at the expense of social security, when both forms of support serve distinct and complementary functions.” Further, it “disagrees with the Bank’s critique of social security schemes, especially pensions, as an undue burden on public finances and ‘regressive’ in nature.” The World Bank’s “solution” to make pension and social security systems sustainable “mainly involve reducing public subsidies to social security, strengthening the link from contributions to entitlements through defined-contribution schemes [retirement plans in which you pay into but have no guarantees as to payout], as well as strengthening the role of voluntary and private pensions.”

In other words, it’s work until you drop! That is already a long-term goal of right-wing ideologues and corporate interests not only in the United States but around the world.

Underneath the rhetoric, the usual right-wing prescriptions

And, true to right-wing form, the World Bank places the onus for unemployment squarely on individuals. The ITUC critique says: “the onus of addressing unemployment appears to focus on the individual, rather than on the broader structural forces at play. The [bank report] disregards in particular the measures that governments can take to create new, quality jobs, such as proactive industry planning, public sector job creation, and public investment – including in labour intensive sectors with strong social and environmental dividends, such as infrastructure, care and the green economy.” Finally, the World Bank claims that labor regulations are “excessive” and threaten employment, and advocates lowering already meager worker protections.

Once again, the World Bank has not forgotten its raison d’être; it has not suddenly changed its stripes. Elephants will continue to not fly.

Did we really expect otherwise? A look at the World Bank’s record provides all the evidence anyone could want of it being one of the world’s most destructive agencies, an organization dedicated to enhancing corporate plunder and imposing punishing austerity. A one-two punch with the International Monetary Fund. Both organizations do the bidding of the Global North’s multi-national corporations through playing complementary roles.

^{Three Gorges Dam, a project funded by the World Bank that displaced 1.3 million people (photo by Christoph Filnkössl)}

When I last checked in at the World Bank, in 2018, the bank was in the process of completing its “World Development Report 2019: The Changing Nature of Work,” which opened with quotes from Karl Marx and John Maynard Keynes. That was merely a feint. What we soon read in examining the report is that the problem is “domestic bias towards state-owned or politically connected firms, the slow pace of technology adoption, or stifling regulation.” Sure, jobs are disappearing, but that’s no problem because “the rise in the manufacturing sector in China has more than compensated for this loss.” Essentially, the World Bank was advocating that we become sweatshop workers in China. What else to do? “Early investment in human capital” — in other words, pay lots of money for advanced degrees you won’t be able to use — and “more dynamic labor markets,” which is code for gutting labor protections and making it easier to fire workers.

Elephants didn’t, after all, fly five years ago, either. 

The World Bank has even declared itself above the law. Unfortunately, at least one U.S. court agrees. A lawsuit filed in federal court in Washington on behalf of Indian farmers and fisherpeople ended with a ruling that the World Bank is immune from legal challenge. The bank provided $450 million for a power plant that the plaintiffs said degraded the environment and destroyed livelihoods. The court agreed with the World Bank’s contention that it has immunity under the International Organizations Immunities Act. The World Bank thus was declared the equivalent of a sovereign state, and in this context is placed above any law as if it possesses diplomatic immunity. Another suit, however, also filed by EarthRights International against the World Bank for its role in turning a blind eye to alleged systematic human rights violations by a palm oil company in Honduras for a project it financed, was allowed to proceed by the U.S. Supreme Court in 2019. That case, however, appears to yet be decided by the trial court. So the World Bank can sometimes be sued in the United States legal system but it remains to be seen if it will have to shoulder any responsibility.

The World Bank has a long history of ignoring the human cost of the projects it funds. The World Development Movement, a coalition of local campaign groups in Britain, reports that the World Bank has provided more than US$6.7 billion in grants to projects that are destructive to the environment and undermine human rights, a total likely conservative. To cite merely three of the many examples, the World Bank:

• Loaned an energy company in India more than $550 million to finance the construction of two coal-fired power plants. Local people, excluded from discussions, were beaten, their homes bulldozed and reported reduced food security and deteriorating health as a result of the power stations.
• An Indonesian dam, made possible by the World Bank’s $156 million loan, resulted in the forcible evictions of some 24,000 villagers, who were subject to a campaign of violence and intimidation.
• In Laos, a hydropower project made possible by World Bank guarantees displaced at least 6,000 Indigenous people and disrupted the livelihoods of around 120,000 people living downstream of the dam who can no longer depend on the rivers for fish, drinking water and agriculture.

A study of World Bank policies, “Foreclosing the Future” by environmental lawyer Bruce Rich, found that:

“Drawing on Bank studies, project evaluations and sectoral reviews, it is shown that the World Bank still suffers from a pervasive ‘loan approval culture’ driven by a perverse incentive system that pressures staff and managers to make large loans to governments and corporations without adequate attention to environmental, governance and social issues. In 2013, Bank Staff who highlight social risks and seek to slow down project processing still risk ‘career suicide.’ … [The bank] has continued to binge on enormous loans to oil and gas extraction, coal-fired power stations and large-scale mining generating environmental damage, forest loss and massive carbon emissions.”

Destroying the environment in the service of short-term profits

Want more? The World Bank has provided nearly $15 billion in financing for fossil fuel projects since the 2015 signing of the Paris Climate Accords. An October 2022 report by Big Shift Global, a coalition of 50 environmental organizations across the Global North and South, notes that despite World Bank claims that it would end financing for upstream oil and gas production, it has other avenues to promote fossil fuels. One of these methods is to send funds to a financial institution, which in turns sends the money to the fossil fuel project. Another is to provide non-earmarked funds but make the money conditional on instituting reforms encouraging fossil fuels.

The biggest fossil fuel funding, according to the Big Shift Global report, is $1.1 billion for the Trans-Anatolian Pipeline, a gas distribution project in Azerbaijan. Another $600 million went toward a gas storage project in Turkey and another eight projects were given at least $100 million by the World Bank. Projects that the World Bank has financed include expansion of coal. Other work by the World Bank includes $2.8 billion so that Ghana could move its energy mix from mostly hydropower to majority fossil fuels, and pressured Ghana to enter into gas contracts that causes it to pay $1.2 billion annually for gas it doesn’t use, which also has put a greater debt burden on the country. 

The World Bank also encouraged Guyana to use a Texas law firm that has Exxon as a major client to rewrite its petroleum laws, while providing money for oil and gas development in Guyana. That development will benefit Exxon as the fossil fuel multinational snagged a contract under which Guyana doesn’t receive any of the profits until the costs of the field are paid off. In other words, the Big Shift Global report says, “Exxon can continue to charge Guyana for every newly developed oil field. It could take decades before the money trickles down to the people.” 

^{Protest at the World Bank (photo by “Jenene from Chinatown,” New York City)}

The World Bank attempted the same whitewashing stunt with its fossil fuel funding, once issuing a report lamenting global warming while completely ignoring its role in worsening global warming. At the time of that whitewashing report, the bank was providing billions of dollars to finance new coal plants around the world. By any reasonable standard, the World Bank is a key organization in the concatenation of processes that has brought the world to the brink of catastrophic climate change. The policies of the World Bank and its sibling, the International Monetary Fund, have constituted non-stop efforts to impose multi-national corporate control, dismantle local democratic institutions and place decision-making power into the hands of corporate executives and financiers, the very people and institutions that profit from the destruction of the environment.

A trail of evictions, displacements, gross human rights violations (including rape, murder and torture), widespread destruction of forests, financing of greenhouse-gas-belching fossil-fuel projects, and destruction of water and food sources has followed the World Bank. It works in conjunction with the International Monetary Fund, whose loans, earmarked for loans to governments to pay debts or stabilize currencies, always come with the same requirements to privatize public assets (which can be sold far below market value to multi-national corporations waiting to pounce); cut social safety nets; drastically reduce the scope of government services; eliminate regulations; and open economies wide to multi-national capital, even if that means the destruction of local industry and agriculture. This results in more debt, which then gives multi-national corporations and the IMF, which enforces those corporate interests, still more leverage to impose more control, including heightened ability to weaken environmental and labor laws.

The World Bank compliments this by funding massive infrastructure projects that tend to enormously profit deep-pocketed international investors but ignore the effects on local people and the environment. The two institutions are working as intended, to facilitate the upward distribution of wealth, regardless of human and environmental cost.

Central banks are a symptom, capitalism is the cause

Wishing for central banks to act in the interest of working people rather than the financial industry is about as fruitful as hoping a starving wolf won’t eat the chicken that was just placed next to it. Pigs will fly, the Amazon will freeze over and Wall Street will give all its money away before a central bank in the capitalist core goes against its raison d’être.

We need no fresh reminders of central bank behavior. Consider that just five central banks — the U.S. Federal Reserve, the European Central Bank, Bank of Japan, Bank of England and Bank of Canada — handed out about US$10 trillion (€8.8 trillion) to artificially prop up financial markets in the first two years of the Covid-19 pandemic on top of the US$9.36 trillion (or €8.3 trillion at the early 2020 exchange rate) that was spent on propping up financial markets in the years following the 2008 global economic collapse.

So about $20 trillion — that’s the equivalent of a year’s gross domestic product of Japan, Germany, India, the United Kingdom, France and Italy combined — to reward the most parasitic portion of the economy, an industry that confiscates money not only from all of you who work for a living but from industrial capital as well. What did you get? Little or, more likely, nothing. Actually, what you have been getting for the past year is worse than nothing. And that brings us to the topic of interest rates. Although we ordinary mortals are not supposed to comprehend the mystical alchemy of the practitioners of high finance as they conjure the forces of capitalism to magically guide the economy to a steady course, in reality there is no mystery. 

Given a choice among the Federal Reserve’s three congressionally mandated goals  — maximum employment, stable prices, and moderate long-term interest rates — employment is what is jettisoned every time. The European Central Bank is a little more honest by listing its single goal to be to “maintain price stability.” The Bank of Canada is somewhere between those two by stating that its mandate is “to promote the economic and financial welfare of Canada.”

^{Bank of Canada facade} 

Of course, with bankers defining “welfare of Canada,” we need not hold our breath in anticipation of how that “welfare” will be determined. Although there are reasons for the sudden appearance of price inflation from early 2022, this really isn’t a mystery, either. Ongoing supply-chain disruptions due to the Covid-19 pandemic, drastic rises in fuel prices due to Russia’s invasion of Ukraine and Western cutoff of Russian energy in response, and good old fashioned corporate greed account for the past year’s inflation, not wage increases. How to respond? The world’s central banks responded in unison — throw people out of work to dampen the economy.

Indeed, when the only tool you have is a hammer, every problem is a nail to be hit hard. Perhaps central bank officials do have other tools, but can’t seem to find anything other than the hammer. The hammer here is interest rates, and they have been using their one and only inflation-fighting tactic of rapidly raising interest rates to slow down the economy. By making it more expensive to borrow money, business and consumer spending will slacken and when that happens, layoffs follow.

When the hammer is the only tool and it is used on you

Inflation is not good, but central bank officials are not using their hammer because they are upset that you are paying more for groceries but rather because inflation reduces the value of speculators’ financial assets. Just as the then chair of the Federal Reserve, Paul Volcker, plunged the United States into what was then the steepest recession since the Great Depression by raising interest rates to unprecedented highs, and thereby causing unemployment to skyrocket to 10.8% — with the enthusiastic support of the Reagan administration even though Volcker was an appointee of Jimmy Carter — interest rates have risen sharply this year. Nowhere near to the extent of the early 1980s, yet, but enough to make a recession a real possibility in 2023.

Here are a few numbers to illustrate this:

• The Federal Reserve raised its benchmark interest rate to 4.375% in December 2022, up from 0.125% at the start of 2022, with more to come.
• The European Central Bank has raised its benchmark rate for lending to banks to 2.5%, up from years of 0%, with more raises expected.
• The Bank of Canada raised its policy interest rate seven times in 2022, to 4.25% from 0.25% in March.
• The Bank of England raised its interest rate eight times in 2022, reaching 3.5% in December 2022, with further raises expected.

The bottom line is that you’ll pay more to use your credit card and the price of mortgages (and rents) will rise even higher; housing costs are already obscenely high because housing is a commodity. Bank profits, however, will go up — and there is nothing more important than that for bankers, in or out of central bank offices.

^{The European Central Bank in Frankfurt (photo by DXR)}

So although there are always a few spare trillions dollars or euros or pounds or yen lying around to shovel into the bottomless pockets of financiers, it’s crumbs for you if you are lucky. Thus central banks are acting in the interest of speculators with these rapid-fire interest rate increases just as they did for years following the 2008 economic crash that financiers caused and then again in the wake of the sudden 2020 downturn triggered by the pandemic. Their standard solution to recessions is to throw more money at banks and inflate another stock-market bubble. Now that wages have temporarily ceased falling (and even slightly nudged upward) and unemployment has fallen sharply, it’s time to apply a different medicine, one that, in a remarkable coincidence, also punishes working people and rewards speculators.

So, are central banks simply evil people? Is it time to “end the Fed” as Federal Reserve critics frequently call for in the United States? Or to put an end to other central banks?

Ironically, the answer is no.

That answer certainly is counter-intuitive. Why shouldn’t we be rid of institutions that do so much to perpetuate, and widen, inequality, and which are run by bankers for the benefit of bankers despite being formally government institutions? Simply put, if you don’t like what the Federal Reserve, or the European Central Bank, or any other central bank does, what you actually don’t like is the capitalist system. The Federal Reserve, for example, is surely (as its critics accurately charge) a far too secretive, unaccountable branch of government that protects the interests of financiers at the expense of everybody else. Nothing unique there. The European Central Bank is perhaps the world’s most undemocratic central bank — it is the most powerful entity in the European Union and is completely unaccountable to anyone, openly operating on behalf of European finance capital.

Recall how Greece was treated by the European Central Bank during the country’s financial crisis of the mid-2010s. The ECB issued a series of diktats that cut off all funding for the Greek government, including from Greek banks, in order to bring the new Syriza government to its knees and force a full surrender to punishing austerity imposed by it, the European Union and International Monetary Fund. So harsh were these measures that the IMF reportedly said the ECB was too extreme in its austerity measures! The Greek economy was crushed to ensure banks that lent to Athens, in particular French and German banks, would be repaid in full no matter the cost to Greeks.

No sense reforming what can’t be reformed

Democratically accountable central banks that promulgated policies to increase employment and toward a socially responsible financial system would be welcome reforms. But such a reform is an impossibility, and not simply because central banks are outside any democratic accountability under the official rationale of lessening “political interference” in economic decision-making but in reality because finance capital is so powerful that it can demand, and has received, the right to act without constraints in its own interests. As much as powerful capitalists possess the ability to bend government politics toward their preferred outcomes, finance is the only industry that has government departments dedicated to it, that its executives manage independently of any other government entity.

If it can’t be reformed, why not get rid of it? Eliminating central banks while keeping the rest of capitalism in place is a pointless idea because they are a necessity in advanced capitalist countries, which is why each has one. And, perversely, eliminating the central bank would actually increase the dominance of financiers and would make the booms and busts of the capitalist business cycle sharper than they already are. 

Strange as it seems today, there was a populist component to the creation of the Federal Reserve. Populists of the late 19th century wanted a more elastic currency so that the government could extend emergency credit when the economy collapsed (as it then frequently did) rather than be handcuffed by the gold standard. In those days, when a crash happened, the U.S. government had to turn to the biggest robber barons of the day, such as J.P. Morgan, and ask them directly for a bailout.

Banks hoarded their reserves during crashes, making the downturns worse, and could issue their own banknotes, helping to fuel bubbles. But, since we are talking about the United States, it took a consensus on Wall Street and not popular demand for a central bank to be created in 1913. Financiers had come to believe that a central bank would temper the extremes of booms and busts, thereby stabilizing the economy. Industrialists joined financiers in that consensus.

^{The Federal Reserve Annex in Washington (photo by AgnosticPreachersKid)}

Needless to say, the capitalists and not the populists were the drivers of Fed policy from the beginning. But a central bank does, albeit in a highly inegalitarian manner, stabilize a national economy through regulating credit and alternately tightening and loosening monetary policy. Central banks in all advanced capitalist countries manage domestic money supplies and currencies, a crucial task in today’s world in which markets subject to wild swings set prices for everything.

Somewhat similarly, the Bank of England, created in 1694 by royal charter, “was founded to ‘promote the public Good and Benefit of our People,’ ” according to its website. Despite that lofty sentiment, the bank admits it was created primarily to fund a war against France. The Bank of England was nationalized in 1946 and although it remains wholly owned by the British government, it, like central banks generally, is “independent” — in other words, completely free of democratic accountability. That independence” was granted by Prime Minister Tony Blair in 1997. Not for nothing did Margaret Thatcher say her greatest accomplishment was “Tony Blair and New Labour.”

It won’t come as a surprise that financial institutions are skilled at finding ways around central bank policies. Not that central banks don’t act in those interests — the Fed under Alan Greenspan encouraged the 1990s stock market bubble and the real estate bubble of the 2000s, and following the 2008 crash, Ben Bernanke was focused on the then long non-existent phantom of inflation while ignoring the all too real problem of high unemployment. The European Central Bank is, if anything, even more guilty of that than the Federal Reserve.

If central banks went away, financiers wouldn’t

The entire capitalist system acts to benefit capitalists (industrialists and financiers) to the detriment of working people. Why should we expect an arm of a capitalist government to act any different? If central banks were eliminated, the exact same powerful capitalist interests would continue to bend government policy to their preferred outcome and would continue to exercise the same dominance over government, social institutions and the mass media. The only difference would be that the economy would become more unstable than it already is because there would be less ability on the part of governments to dampen excesses. Why would that be good?

Capitalism is an unstable system that will always have booms and busts, and as time goes on the busts tend to worsen. (That tendency was temporarily kept at bay after the Great Depression by significant reforms, but those reforms have been undone and the tendency has reasserted itself.) Capitalism is a system in which those who amass the capital thereby amass power, and power translates into the ability to bend the rules to preferred outcomes or to bypass the rules. Money concentrates into fewer hands and wages are squeezed to facilitate the upward flow of money. Those who succeed are the people endowed with outsized desires to acquire and the personality traits that enable those desires to be met.

Yes, those people so endowed can and do create policy for central banks. Eliminating those banks wouldn’t touch the ability of people so endowed to suffuse their viewpoints and favored policy outcomes throughout a capitalist society, nor would it touch their ability to leverage their outsized wealth and the power their wealth gives them to shape government policy and public opinion making to benefit themselves. Getting rid of government would actually intensify the dominance of industrialists and financiers in all spheres of life. The dominance of a globalized class that maintains power through a web of institutions and scrambles to manage ceaseless instability — not a small cabal of bankers who somehow control everything, an idea rooted in Right-wing conspiracy theories that easily shade off into anti-Semitism.

None of the foregoing is to suggest that we should simply accept the brutal, dehumanizing capitalist system. But rather than hankering for reforms that might actually make it worse, a better world with an economy designed for human needs is what we should be after. If we blame central banks instead of the system that it is a component of, then we are doing nothing more than blaming the messenger. Capitalist markets are nothing more than the composite expression of the interests of the largest industrialists and financiers, and allowing those markets even greater freedom is what we should be fighting, not tacitly helping.

Banks fueling global warming is business as usual

The gap between what needs to be done to save the Earth from the environmental disaster of unchecked global warming and what is actually being done continues to widen. Yet another exemplar of this gap is the funding practices of the world’s biggest banks.

Capitalists not concerning themselves with small things like the future ability of the planet to remain livable is nothing new, or we wouldn’t be in our present predicament. But a new report from seven environmental organizations finds that 60 of the world’s biggest banks have invested US$4.6 trillion in fossil fuel projects since the Paris Climate Accord was signed in 2015.

Our descendants, should they be faced with a chaotic climate, massive agricultural disruptions, mass extinctions on land and in the sea, drowned coastal cities and desertification — as they will be should present-day business as usual continue — are not likely to believe that their ruined world will be a fair tradeoff for a handful of industrialists and financiers of the past getting obscenely rich.

Can curses be made retroactive? Perhaps not. But perhaps a worldwide environmental movement can grow sufficiently large and militant to force the necessary changes. There are many out there trying to organize and raise attention — particularly young people, because they will be around long enough to potentially see today’s dire predictions become tomorrow’s reality — but perhaps global warming remains an abstract in too many minds. Or perhaps the daunting challenge of transcending capitalism, without which it is essentially impossible to reverse global warming, is too difficult a challenge. Throwing up our hands in despair would be easier, but if we wish our descendants (or people already alive) to inherit a living world, activism on a world scale is essential.

^{The Alberta tar sands (photo by Howl Arts Collective, Montréal)}

What words should we use to describe an economic system under which it is profitable for a handful of powerful people to profit from the destruction of the environment, and this behavior is richly rewarded?

What words should we use to describe an economic system in which, despite overwhelming evidence of the suicidal course that system is leading humanity, is nonetheless heading straight for global calamity?

What words should we use to those who profit enormously from all this, and why do they have such enormous sums of money to be able to force a continuation of this suicidal course? None of you reading these words voted for this, and none of you can vote to put an end to this. Economic decisions are completely out of the hands of working people; current capitalist ideology has evolved to the point where it is supposed to be unthinkable that economic decisions could be subject to democratic processes. Yet more proof that without economic democracy, there can be no political democracy. A lesson capitalism imposes daily.

Nice words for the environment, gigantic sums of money for fossil fuels

The aforementioned exemplar, a report titled “Banking on Climate Chaos: Financial Fuel Report 2022,” sponsored by Oil Change International, Rainforest Action Network, Indigenous Environmental Network and four other organizations, “finds that even in a year where net-zero commitments were all the rage, the financial sector continued its business-as-usual driving of climate chaos.” Banks are investing in fossil fuels at levels even higher than in 2016, the year after the signing of the Paris Climate Accord, when the world’s governments agreed to the goal of holding the global temperature increase to 1.5 degrees from the pre-industrial level. Of the $4.6 trillion invested by 60 of the world’s biggest banks since the Paris agreement, $742 billion was invested in the industry in 2021 alone.

These banks come from countries around the world, but four United States-based banks were the worst offenders, the report said. “Overall fossil fuel financing remains dominated by four U.S. banks — JPMorgan Chase, Citi, Wells Fargo, and Bank of America — who together account for one quarter of all fossil fuel financing identified over the last six years,” it said. “RBC is Canada’s worst banker of fossil fuels, with Barclays as the worst in Europe and MUFG as the worst in Japan.” Three Canadian banks — RBC (Royal Bank of Canada), Scotiabank and Toronto-Dominion Bank (TD) — are among the top dozen in the world for financing fossil fuels.

Even more alarmingly, Royal Bank of Canada and TD have been the “leaders” in a grotesque expansion of tar sands financing — $23 billion was invested in tar sands production in 2021, a 51 percent increase from 2020. Those two Canadian banks combined doubled their funding for tar sands in 2021 compared to 2016. Even more money was poured into fracking. Last year alone, $62 billion was poured into fracking. Wells Fargo more than doubled its fracking investments to $8 billion in 2021. Since the Paris Climate Accord was signed, four U.S. banks are far and away the biggest culprits in fracking — JPMorgan Chase, Wells Fargo, Citigroup and Bank of America.

^{Graphics via Banking on Climate Chaos report}

Yes, the world’s governments are hypocritical in signing agreements to reduce greenhouse-gas emissions with no enforcement mechanisms and are far from meeting their announced goals. But that certainly is no reason to excuse the financial industry for its significant role in ensuring that more greenhouse gases than ever are thrown into the atmosphere. Or bank hypocrisy. Take London-based Barclays, Europe’s biggest banking contributor to fossil fuel production and the world’s fifth-largest investor in fracking, trailing only the four U.S. banks mentioned just above.

What are we to make of Barclay’s pronouncement, right on its website home page, proclaiming that “Barclays gives shareholders a ‘Say on Climate.’ ” The bank says it will give shareholders “an opportunity to vote on its climate strategy, targets and progress” at its 2022 annual general meeting. Barclays Chairman Nigel Higgins, in a slick pamphlet, claims the bank aims to be “net zero” by 2050. It would seem to be heading in the opposite direction, unless the intention is to pour billions of pounds into fossil fuels until 2049, then magically stop. If the situation weren’t so serious, we could laugh at the chairman’s assertion that “We believe that our original championing of net zero and Paris alignment has made a difference in banking.” If hot air could displace carbon dioxide, I suppose it would make a difference.

The slick pamphlet, 36 pages long, is full of aspirational goals and even goes so far as to proclaim itself a founding member of the Net Zero Banking Alliance, “part of the Glasgow Financial Alliance for Net Zero.” How lovely. The result of last year’s Glasgow climate summit was to continue the tradition of “we were happy to talk and we will be happy to talk some more” while making commitments that ensure global temperatures will soar past 2 degrees C. As for Barclay’s, a reader searches in vain for any mention of what shareholders will be asked to vote on. Those affected by fossil fuel production won’t be asked, of course.

If only hot air could be tapped as an energy source

The intent here isn’t to single out Barclays. Rather, this sort of corporate greenwashing is all too typical. The world’s biggest funder of fossil fuel projects, JPMorgan Chase, for example, claims that it has a “commitment to align key sectors of our financing portfolio with the goals of the Paris Agreement” and “we are measuring the emissions of our clients in key sectors of our financing portfolio.” It would seem there are plenty of greenhouse-gas emissions to measure. But are we supposed to be fooled by this folderol?

Similarly, Royal Bank of Canada, the largest non-U.S. funder of fossil fuels and world’s fifth largest overall funder, says with a straight face that is helping clients reach net-zero goals and is “Setting the standard for best-in-class governance, including through our Climate Strategy & Governance group.” We’d hate to see what a lower standard might look like given the $201 billion it invested in fossil fuels from 2016 to 2021, with 2021’s total double that of 2020.

Although paling in comparison to the US$4.6 trillion the biggest banks have ladled out to the fossil fuel industry over the past five years, including $742 billion in 2021, the World Bank and International Monetary Fund have done their part. The World Bank, funded by the world’s governments, in particular those of the Global North, has provided tens of billions of dollars for fossil fuels since the Paris Climate Accords were signed, reports Urgewald, a non-profit environmental and human rights organization based in Germany. This money includes $12 billion in direct project finance in over 35 countries; as much as $20 billion annually given as government budget support, including for coal projects; and billions more for infrastructure projects that enabled new coal-fired plants that would not have been built otherwise.

The International Monetary Fund (IMF), notorious for imposing extreme austerity on peoples around the world as the price for loans, sometimes imposes additional conditions mandating they “roll out the red carpet for the fossil fuel industry,” reports the U.S.-based environmental organization Friends of the Earth. An FOE report found that:

“Aside from the austerity measures it is so well known for, the IMF has been found to attach conditions in its lending to a number of countries that support new tax breaks for Big Oil. One recent study found that IMF loan programs supported new producer subsidies for coal and gas in Mozambique and Mongolia. The Fund also enabled new legislation in these countries to facilitate public finance of fossil fuel projects. As more countries turn to the IMF for help in coping with COVID-19, it is imperative the IMF does not further entrench fossil fuel dependency around the world. But a recent analysis has found that the IMF’s COVID-19 era loans failed to boost green recovery policies. Another study found that most Covid-19 era loans by the IMF call for austerity measures to be implemented once the pandemic crisis subsides, limiting the resources that countries will have to spend on a just and green recovery.”

Nor can the massive industry subsidies be forgotten. A paper prepared in 2015 by, ironically, four IMF economists, found that subsidies for the fossil fuel industry totaled an astounding $5.6 trillion for 2014. This total included environmental damages, including air pollution, in addition to direct corporate subsidies, below-cost consumer pricing and foregone taxes. No, the IMF was not suddenly questioning capitalism, nor did this report, carefully noting that it did not represent the views of the IMF, devote so much as a single word questioning the economic system that has produced such disastrous outcomes. A more recent IMF study found that fossil fuel subsidies have increased to $5.9 trillion, of which 92 percent arose from undercharging for environmental costs and foregone consumption taxes.

Perhaps those responsible for IMF lending practices don’t read their own organization’s papers (or, if they do, ignore them when they contradict the IMF’s mission of enriching capitalists and immiserating working people). Government officials don’t pay attention to Intergovernmental Panel on Climate Change reports detailing the dire state of the climate. And oil and gas executives laugh at what they get away with and continue to fund “think tanks” that pump out a steady stream of global warming denial. Canada, during the Stephen Harper régime, went so far as to invent the new crime of being a member of an “anti-Canadian petroleum movement,” equating such a stance with terrorism. The Royal Canadian Mounted Police added to this criminalization of advocating for clean air and water by challenging the very idea that human activity is causing global warming or that global warming is even a problem. The basis on which a police force can make such a declaration is unclear.

Capitalism can’t be anything other than what it is

Capitalist governments, not only those countries like Canada and Australia that are dependent on energy and/or mining exports, are beholden to not only the industrialists and financiers who are the real rulers of the world but to the ever intensifying competitive pressures of capitalism, from which industrialists and financiers are not exempt. The controllers of corporations routinely threaten to move elsewhere if political office holders don’t do as corporate executives demand, and the decisions of those executives are not reviewable no matter the effect on the local area.

For corporate executives and the speculators whom they in turn must indulge, maintaining profits means cutting costs (in the first place, the cost of labor), taking bigger shares of existing markets, forcing open new markets and developing new ways of achieving these goals. An enterprise that doesn’t do these gets run out of business by enterprises that do. Larger enterprises, those big enough to be listed on stock markets, have to increase profits, not maintain them, piling on still more pressure — not only from the competition, but from the financial industry, which holds a whip over the producers and distributors of tangible goods and services. A company that merely has steady profits, no matter how high, will be punished by financial speculators because the stock price won’t rise. Stock prices are bets and claims on future profits, and finance capital is relentless in expecting higher stock prices. A corporate executive team that doesn’t deliver will be forced out and replaced by another team that will do as financiers demand.

A corporation can achieve the necessary profits by reducing wages, through either layoffs or moving production to low-wage locations with few regulations. Corporate globalization is due to precisely that. Corporations can also buy machinery so that they can employ less workers; they are doubly incentivized to do this because the machines can be depreciated, lowering their taxes. As more people are put out of work, faster overall economic growth is needed just to maintain existing employment; thus the long-term tendency of more unemployment and lower wages as more people compete for fewer jobs. As industries in national economies become consolidated in an oligarchy of the handful of giant corporations who survived national competition, the route to growth is to expand elsewhere. As the winners in other countries undergo the same process, the relentless competition, now on a planetary scale, winnows these national winners into a small number of global winners.

And when one competitor gives itself a boost to profits (including by finding the country with the lowest wages), the other competitors have to do the same to stay in business. Profits margins decline as the initial boost is eroded by competitors doing the same; and the next round of “innovation” — finding another country with yet lower wages, more layoffs, work speedups, exemptions from environmental rules, pressure on governments to reduce taxes and eliminate tariffs, and inducing governments to enact draconian “free trade” agreements elevating multinational capital above governments — touches off another round of cost cutting and doing whatever possible to boost profits. This is a cycle that has no end under capitalism.

As this mad, endless growth continues, more must be produced, more must be transported, new sources of energy and raw materials must be exploited and more pollution must be dumped into the environment with no cost to the corporate polluter. More carbon dioxide, methane and other greenhouse gases will be thrown into the atmosphere as a direct result of this growth and frenzied activity. Thanks to the massive capital accumulated by the winners of capitalist competition, industrialists and financiers can spend gigantic sums of money spreading propaganda through a network of institutions, bend school and university curricula to their interests, own and control the mass media and buy the political system.

Growth for growth’s sake, and without controls — capitalism is a cancer. A system that nobody controls nor can anybody control it. A system, however, that runs on its own momentum and can’t be anything other than what it is. That we can somehow get control of the machine and make it do good is worse than an illusion.

The future has no value in capitalist economics

Not only is the environment an externality that corporations do not have to account for, thereby dumping the costs on to the public, but orthodox economics doesn’t account for the environment, other than as a source of resources to exploit. The same capitalist market that is nothing more than the aggregate interests of the largest and most powerful industrialists and financiers is supposed to “solve” environmental problems. A May 2009 Monthly Review article by sociologists Richard York, Brett Clark and John Bellamy Foster, “Capitalism in Wonderland,” puts this contradiction in stark perspective:

“Where [orthodox economists] primarily differ is not on their views of the science behind climate change but on their value assumptions about the propriety of shifting burdens to future generations. This lays bare the ideology embedded in orthodox neoclassical economics, a field which regularly presents itself as using objective, even naturalistic, methods for modeling the economy. However, past all of the equations and technical jargon, the dominant economic paradigm is built on a value system that prizes capital accumulation in the short-term, while de-valuing everything else in the present and everything altogether in the future.”

^{A melting glacier (photo by Vojife)}

From that perspective, it follows that present-day environmental damage is of minimal concern to capitalists and future damage of no concern. The industrialists and financiers who reap billions today won’t necessarily be around when the environmental price becomes too high to avoid. The “Capitalism in Wonderland” authors write:

[H]uman life in effect is worth only what each person contributes to the economy as measured in monetary terms. So, if global warming increases mortality in Bangladesh, which it appears likely that it will, this is only reflected in economic models to the extent that the deaths of Bengalis hurt the economy. Since Bangladesh is very poor, [orthodox] economic models … would not estimate it to be worthwhile to prevent deaths there since these losses would show up as minuscule in the measurements. … [E]thical concerns about the intrinsic value of human life and of the lives of other creatures are completely invisible in standard economic models. Increasing human mortality and accelerating the rate of extinctions are to most economists only problems if they undermine the ‘bottom line.’ In other respects they are invisible: as is the natural world as a whole.”

Every incentive is for more

Lest we doubt that orthodox economists are moving down a down a slippery slope in which some humans are valuable and others are without value, recall the infamous memo of Lawrence Summers, written when he was chief economist for the World Bank, in which he wrote:

“I think the economic logic behind dumping a load of toxic waste in the lowest wage country is impeccable and we should face up to that. … The costs of pollution are likely to be non-linear as the initial increments of pollution probably have very low cost. I’ve always thought that under-populated countries in Africa are vastly UNDER-polluted.”

The modern corporation has a legal duty only to provide the maximum profit for its shareholders. In other words, it is expected to act to further its own interest without regard to anything else. The corporation is considered a legal person under U.S. law — one that has no biological limits nor barriers to its growth. Joel Bakan, in the introduction to his book The Corporation: The Pathological Pursuit of Profit and Power, summed up capitalism’s dominant institution this way:

“The corporation’s legally defined mandate is to pursue, relentlessly and without exception, its own self-interest, regardless of the often harmful consequences it might cause to others. As a result, I argue, the corporation is a pathological institution, a dangerous possessor of the great power it wields over people and societies.”

That pathological institution is controlled by, and the wealth produced for, a tiny percentage of people. We can call them the one percent (using the language of Occupy Wall Street), the bourgeoisie (using classical terminology), or industrialists and financiers (using broad labels). Their towering piles of money, hidden away in tax havens and secret bank accounts, are directly built on the backs, the sweat and labor, of their employees. This would be the case even without the added bonus of corporate personhood. Yet no matter how successful today, corporations must expand and be ruthless in beating the competition on pain of going under tomorrow. Every incentive is for more growth, more production, more consumption. Nobody, not even the biggest or most powerful capitalist, has the ability to stop or control it. Even capitalists ride the tiger, although of course they have vastly better ability to manage the vicissitudes of capitalist competition than do working people.

Capitalism is a system that is built, and functions, to generate profit, not to meet needs. If you doubt that, then why are extraordinary amounts of money spent on advertising to get us to buy what we don’t need? If global warming is to be reversed, a rational economic system based on human need, not on private profit, is what is needed. Cooperation for the common good, not competition for the profit of a few at any cost. Is corporate profit really worth the destruction of Earth’s livability?

Wall Street bigger and badder than ever

Being a banker means never having to say sorry. Or worry where that next million is going to come from.

Financial results are in for 2016 for the biggest U.S. banks and — surprise! — profits continue to reach the stratosphere. And with Goldman Sachs in firmer control of the U.S. Treasury Department than ever before, the good times will continue to roll for Wall Street. For the rest of us, that’s another story.

No less than six “Government Sachs” executives have been nominated to high-level posts in the new Trump administration. As a candidate, Donald Trump attacked opponents for their ties to Goldman Sachs during the campaign, but the joke is on those who naïvely believed the real estate mogul was going to “drain the swamp.” Heading the list is the treasury secretary nominee, Steve Mnuchin, who spent years at Goldman Sachs before earning the title “foreclosure king” as chairman and chief executive officer of OneWest Bank.

Occupy Wall Street (photo by David Shankbone)

Mr. Mnuchin, who bought distressed mortgages and evicted thousands of homeowners during the financial crisis, further demonstrated his humanitarian streak when he announced that, as treasury secretary, he would oversee “the largest tax change since Reagan” and said his “No 1 priority is tax reform.” More tax cuts for the wealthy and corporations. Hurray! How many more people would pay for this by losing their ability to keep their homes was not indicated.

The Guardian, however, did report that “Mnuchin went on to sell OneWest last year for more than double what he paid the Federal Deposit Insurance Corporation for the assets in the teeth of the financial crisis.” The California Reinvestment Coalition has calculated that Mr. Mnuchin’s bank was responsible for more than 36,000 foreclosures in in that state alone, and reported he disproportionally foreclosed on seniors. It did so frequently using harassment and other aggressive tactics, even to the point of changing the locks on a senior’s home in a blizzard.

“Vampire squid” indeed. Those are the sort of tactics that surely endeared Mr. Mnuchin to President Trump.

Citigroup hopes to replicate destruction of Detroit

No roundup of the year in banking, however, would be complete without the wit and wisdom of JPMorgan Chief Executive Officer Jamie Dimon. When we last checked in a year ago, Mr. Dimon insisted that declining incomes for working people was no big deal, because they are better off by virtue of possessing iPhones, while in 2014 he complained that — oh the humanity! — “banks are under assault.” As we look back at 2016, he has again provided us with comic relief.

Somehow keeping himself composed as he told Bloomberg News that “business [has] been beaten down as if we’re terrible people,” he upheld the work of banks in saving Detroit. You can’t make this up: He said, “Detroit is a perfect example where civil society, not-for-profits, government, business all work together to improve the lives of American citizens. If you can duplicate what they’ve done in Detroit around the country, you’re going to have a huge renaissance.” He finished by declaring “JPMorgan didn’t jeopardize the system. We did not cause the crisis. We have three times more capital than we had back then. We saved 30,000 jobs.”

Goldman Sachs headquarters (photo by Quantumquark)

We’ll pause here so you can enjoy a hearty laugh. There is no need to point out the tremendous damage major banks did to economies around the world, and the trillions of dollars of handouts given to them as a reward for their destructive behavior. There is little need to point out the damage done to Detroit, but as a reminder, complex and poorly understood derivatives were decisive in Detroit’s fiscal downfall.

These derivatives were sold to the city as a form of “insurance” against possible increases in interest rates, but when interest rates fell and Detroit’s credit rating was cut, hundreds of millions were siphoned from city coffers into Wall Street pockets, and the banks that sold the derivatives jumped to the head of the line of creditors. No money for pensions or government services, but plenty for financiers.

Mr. Dimon does seem to be rather well compensated for his difficulties, “earning” $27.6 million for 2015, tops among banking chief executive officers. Goldman Sachs’ Lloyd Blankfein didn’t do too badly himself, hauling in $23.4 million in compensation. Another nine topped $10 million.

Bigger and badder than ever

These bloated salaries did not, so to speak, break the banks. Once again, profits for the six biggest U.S. banks were massive — nearly $93 billion for 2016.

Here’s a breakdown of the six banks for 2016, three of which reported record profits.

• JPMorgan Chase & Company reported net income of $24.7 billion on revenue of $99.1 billion, the bank’s highest-ever profit, beating out the record set just the year before. These massive profits led to a massive bonanza for speculators — JPMorgan handed out $15 billion in dividends and stock buybacks.
• Bank of America Corporation racked up $17.9 billion in net income on revenue of $83.7 billion, both increases from a year ago, which, in turn had tripled 2014 earnings. Speculators did well here, too, as Bank of America ladled out $7.7 billion in dividends and stock buybacks, and plans on buying back another $4.3 billion of its stock in the first six months of 2017.
• Citigroup Incorporated reported net income of $14.9 billion on revenues of $69.9 billion, both a little bit lower than a year earlier. But shed no tear for downtrodden speculators as Citigroup handed out $10.7 billion in dividends and stock buybacks. Five separate violations cost a total of $485 million in government penalties, but that seems to be no more than a minor speed bump.
• Wells Fargo & Company had net income of $21.8 billion on revenue of $88.3 billion, a dip in profits from 2015 due to having to pay a penalty of $1.2 billion for shady mortgage lending practices and another $185 million in fines because of its illegal practices of opening fake accounts in the name of its depositors. Who says crime doesn’t pay? Speculators certainly won’t say that: Siphoning money from its account holders helped Wells Fargo be in a position to shovel $12.5 billion into financiers’ pockets through dividends and stock buybacks, almost equal to what it handed out a year earlier.
• The Goldman Sachs Group Incorporated reported net income of $7.4 billion on revenue of $30.6 billion, a bigger profit and profit margin that a year earlier. The company did not break out its expenses for its purchases of the U.S. government in its latest financial report. Goldman Sachs spent $7 billion on buying back its stock and proudly declared itself first in the world in mergers and acquisitions, work that added billions to the investment bank’s bottom line while costing untold numbers of people their jobs. Profits would have been even bigger had it not been for a $5.1 billion fine for selling toxic mortgage securities to unsuspecting investors.
• Morgan Stanley reported net income of $6.0 billion on revenue of $34.6 billion, a profit about two percent lower than that of 2015. Despite that slight dip in income, the bank somehow found the means to buy back $3.5 billion worth of its stock — a 67 percent increase from what it bought back a year ago. Morgan Stanley would have seen its profits increase for 2016 had it not had to pay $3.2 billion in penalties related to its role in the subprime-mortgage housing debacle.

Beyond the whip of Wall Street

The biggest banks not only extract more money from the rest of the economy than ever, but are bigger than ever — banks with more than $100 billion assets increased their market share from 17 percent in 1995 to 59 percent in 2014. This is the mad logic of capitalism — grow or die. Finance capital, despite being the whip enforcing trends that worsen inequality, is not immune from what it enforces on everyone else. One measure of the cancerous growth of financial products bearing little relationship with actual needs is this: In 11 business days financial speculators trade instruments and contracts valued at more than all the products and services produced by the entire world in one year.

Reducing banking and finance to a public utility would be the only way to break the grip of giant banks and financial institutions. One intermediate step that could be taken would be government banks that would fund public infrastructure projects and provide low-cost loans, and which would be the recipient of government revenue rather than commercial banks.

The Bank of North Dakota is an example of such an institution that already exists, with proposals for state banks being floated for Vermont, Washington state, Oregon and California. A New Jersey gubernatorial candidate, Phil Murphy, has made a public state bank the centerpiece of his campaign, arguing that students would benefit from low interest rates for college tuition, more loan capital would be made available and municipal governments would no longer have to pay high interest to Wall Street.

The Left Party of Germany has a detailed plan to bring banks under democratic control. Although the party’s proposal is specific to Germany, its basic ideas are transferable to any country. Any form of democratic control of an economy would be impossible without banking and finance being reduced to a public utility, and thus serving to benefit communities rather than existing as a parasite that exists to profit over every aspect of human activity, no matter the social cost.

Let them eat iPhones

You say you are struggling to cover your rising expenses while your pay is stagnant? You should have become an executive at a bank. Break the economy and earn big rewards!

But don’t sweat it — you have a phone and that more than makes up for your lack of adequate wages, declining ability to access health care and lack of a pension. Just ask JPMorgan chief executive officer Jamie Dimon.

Mr. Dimon’s pay is more than 220 times that of the average employee at JPMorgan, reports Business Insider, but he says you underpaid employees shouldn’t complain — because you have iPhones! At least Marie Antoinette’s alleged belief in cake allowed France’s plebeians to eat, more than can be done with a phone. Here is what Mr. Dimon said in his latest attempt to show compassion, according to BloombergBusiness:

“ ‘It’s not right to say we’re worse off,’ Dimon said [last September 17] at an event in Detroit in response to a question about declining median income. ‘If you go back 20 years ago, cars were worse, health was worse, you didn’t live as long, the air was worse. People didn’t have iPhones.’ ”

Cutting the pay of chief executive officers would do nothing to solve inequality, Mr. Dimon proclaimed. Instead, “investing in ‘intelligent infrastructure’ ” is what is needed. If possessing a “smart phone” is the key to happiness, apparently “smart buildings” would make us still happier. There’s progress for you — Marie Antoinette never offered anyone a bakery. But as you apply ketchup to your iPhone, you will surely digest smoothly with the knowledge that the chief executive officers of Goldman Sachs and JPMorgan officially became billionaires during 2015.

U.S. Treasury Department under new management (photo by takomabibelot)

Goldman Sachs’ chief, Lloyd Blankfein — or Lord Blankcheck, as Occupy Wall Street activists memorably dubbed him — took home US$23 million last year, while Mr. Dimon “earned” $27 million, a healthy 35 percent raise. And shed no tears for those who have yet to reach the corporate pinnacle — three Goldman Sachs executives each took home $21 million and three JPMorgan execs each were awarded more than $10 million in stock alone.

Profits of biggest banks increase again

When we last heard from Mr. Dimon, about this time last year, he complained that “Banks are under assault,” adding that “We have five or six regulators coming at us on every issue.” As the six biggest banks in the U.S., which includes JPMorgan, racked up profits totaling $75 billion for 2014, you will be excused for having doubts about just how tough regulators are.

Profits for those banks were no more endangered in 2015, totaling almost $93 billion. Here is how they fared in the just concluded year:

• JPMorgan Chase & Company: net income of $24.4 billion on revenue of $96.6 billion. JPMorgan reported its highest-ever net income in 2015, and paid out $11 billion to shareholders through stock buybacks and dividends.
• Bank of America Corporation: net income of $15.9 billion on revenue of $82.5 billion. Net income more than tripled from 2014, and it nearly doubled the dividend it paid shareholders — the bank said it handed out $4.5 billion through common stock buybacks and dividends.
• Citigroup Incorporated: net income of $17.2 billion on revenue of $76.4 billion. Although revenue was down slightly, net income more than doubled because Citigroup wasn’t troubled with having to pay out billions in fines over its toxic derivatives as it was in 2014.
• Wells Fargo & Company: net income of $23 billion on revenue of $86.1 billion. The bank reported it handed out $12.6 billion through stock buybacks and dividends, yet it relentlessly demands its tellers pressure customers to open multiple accounts and pays those tellers too little to live on.
• The Goldman Sachs Group Incorporated: net income of $6.1 billion on revenue of $33.8 billion. Goldman Sachs’ net income was below that of 2014 due to a $3.4 billion deduction (or “charge”) from its earnings due to its reaching a settlement with government regulators over its toxic mortgage-backed securities; profits would have risen without the fine. But please don’t shed any tears for the investment bank — it proudly reported that it “advised” on corporate mergers and acquisitions worth more than $1 trillion, work that by itself netted it billions of dollars while jobs disappeared.
• Morgan Stanley: net income of $6.1 billion on revenues of $35.2 billion. Similar to its peer banks, Morgan Stanley shelled out $2.1 billion to buy back its stock in an effort to have its profits shared among fewer stockholders. Despite that profit, the bank has said it will lay off staff as part of an effort to “cut costs” under Wall Street pressure.

The biggest get bigger

Yes, the biggest banks keep getting bigger. The four banks with the largest holdings accounted for a composite 42 percent of all U.S. banking assets in 2014, a total that has steadily increased, both before and after the 2008 crash.

And not even the fines levied by regulators slow them down. Earlier this month, Goldman Sachs announced that it had agreed to $5 billion in penalties to settle claims arising from the marketing and selling of dodgy mortgage securities, although nearly $2 billion of that is “consumer relief” in the form of loan forgiveness, the bank said.

Banks have paid a total of $40 billion to settle claims by financial regulators and prosecutors, yet these penalties are bumps in the road for them, no more than a business expense. In part, perhaps that is because much of these penalties come in the form of mortgage modifications, rather than cash, and often these modifications are to loans that the banks service but don’t actually own — allowing them to get credit for modifying loans belonging to another company.

Banking of course is not the only industry undergoing consolidation. Mergers in 2015 were bigger than ever, with corporate deals worth $4.7 trillion. Investment banks earn huge fees for arranging mergers and acquisitions, none more so than the biggest U.S. banks. Goldman Sachs, Morgan Stanley, JPMorgan, Bank of America and Citigroup ranked as numbers one through five in the world in terms of the value of the deals banks “advised” on.

Competitive pressure accounts for some corporate mergers — the capitalist imperative to grow or die does not abate even for the biggest corporations — but pressure to “enhance shareholder value” plays a significant role. “Enhancing shareholder value” is finance-speak for acceding to speculators’ demands for more short-term boosts to profits and higher stock prices, no matter the cost to others or the long-term damage to the company itself. Hedge-fund billionaires are among the fiercest in pressing these demands, continually demanding cuts to jobs that serve only to fatten their swollen wallets. The big banks, as major Wall Street players themselves, both apply this “market” pressure for the same reasons and further profit from acting as “advisers.”

Reforming such insanity is a hopelessly sisyphean task. What if instead banks became a public utility with an end to speculation? Proposals are being floated in the U.S. to create state banks, perhaps on the model of the successful Bank of North Dakota, and the Left Party of Germany has a detailed plan to bring banks under democratic control. Capitalist propaganda aside, there is no need for banking to exist as an uncontrollable behemoth extracting wealth from all other human activities. Why shouldn’t it be a utility under public control that exists to serve the productive economy? We can’t survive on iPhones alone.

Central banks have trillions for speculation, none for people

There’s no money for schools, no money for social services, no money for the environment. There is lots of money for speculators, however. A tsunami of money. Money that is measured in the trillions.

The central banks of the United States, Britain, the eurozone and Japan have so far spent US$6.57 trillion (or €6.06 trillion if you prefer) on “quantitative easing” programs. And, for all of that incomprehensibly gigantic sum of money, what mostly has been accomplished is a stock market bubble. And, as a secondary effect, a boost to real estate prices, making real estate speculation pay off a bit more than it ordinarily does.

(Photo by Photo Dharma from Penang, Malaysia)

Oh, no so much for the overall economy you say? Hard to argue that point. The world’s advanced capitalist countries are mired in stagnation, structural unemployment and widening inequality, with public investment starved and personal debt a monumental problem. Surely those staggering sums of money could have been put to better use. We’ll get to that in a moment, but first a quick accounting. Money spent on quantitative easing is as follows:

• Federal Reserve: $4.1 trillion in three programs that ended in November 2014.
• European Central Bank: €600 billion so far; the ECB has committed to spending a total of €1.1 trillion through March 2017.
• Bank of England: £375 billion.
• Bank of Japan: ¥155 trillion so far in two and a half years; the Japanese central bank is committed to spending ¥80 trillion per year with no ending date.

“Quantitative easing” is the technical name for central banks buying their own government’s debt in massive amounts; in the case of the Federal Reserve it also bought mortgage-backed securities. The supposed purpose of quantitative-easing programs is to stimulate the economy by encouraging investment. Under this theory, a reduction in long-term interest rates would encourage working people to buy or refinance homes; encourage businesses to invest because they could borrow cheaply; and push down the value of the currency, thereby boosting exports by making locally made products more competitive.

In actuality, quantitative-easing programs cause the interest rates on bonds to fall because a central bank buying bonds in bulk significantly increases demand for them, enabling bond sellers to offer lower interest rates. Seeking assets with a better potential payoff, speculators buy stock instead, driving up stock prices and inflating a stock-market bubble. Money not used in speculation ends up parked in bank coffers, boosting bank profits, or is borrowed by businesses to buy back more of their stock, another method of driving up stock prices without making any investments.

The irrationality of more for those with more

Given that banks are bigger and more profitable than ever (the six biggest U.S. banks racked up a composite net income of US$75 billion in 2014) and U.S. corporations spend about $1 trillion per year buying stock to artificially boost stock prices, shoveling still more money to those with far more than can be spent or invested in any rational way is irrational, no matter how many reports are pumped out by think tanks they pay to tell them otherwise.

So what might have been done with those quantitative-easing trillions thrown at banks instead? The total student debt in the United States, where the costs of higher education has risen more than double the rate of inflation since 1982, is $1.3 trillion as of October 2015. Printing the money to cover the entirety of the country’s student debt would total less than one-third of what the Federal Reserve spent on inflating a stock-market bubble. That leaves many more needs to be addressed.

The infrastructure of the U.S. is crumbling, and governments are short of money to fix what needs to be fixed. The investment needed to modernize and maintain school facilities is estimated to be at least $270 billion. The foreseeable cost of maintaining water systems in the coming decades in the U.S. is estimated at $1 trillion. The American Water Works Association arrives at this total by assuming each of 240,000 water main breaks per year would require the replacement of a pipe. Capital investment needs for wastewater and stormwater systems are estimated to require another $298 billion over the next 20 years.

The shortfall of funding to clean up Superfund sites is estimated to be as much as $500 million per year. The Environmental Protection Agency estimates that one in four United Statesians lives within three miles of a hazardous waste site; more than 400,000 contaminated sites await cleanup. And we can throw in another $21 billion to repair the more than 4,000 dams deemed to be deficient by the Association of State Dam Safety Officials.

Jobs instead of speculation

Add up all of the above and we would have spent a total of $3.4 trillion. Instead of throwing money at speculators and banks in the vain hopes they would spend the money productively instead of pocketing it or directing it toward speculation or boosting stock prices, we could have wiped out all student debt, fixed all the schools, rebuilt aging water and sewer systems, cleaned up contaminated industrial sites and repaired dams, and still have $700 billion more to spend on other needs.

If we were to apply that remaining $700 billion to create a federal jobs program, such as was done during the Great Depression, a total of 14 million jobs paying $50,000 and lasting one year could have been created, or three and a half million jobs paying that salary and lasting four years. That is in addition to all the people who could be put to work performing necessary infrastructure repair work if the above projects were carried out.

All of that for no more money than the Federal Reserve threw away on quantitative easing. This same argument can be made elsewhere: The British think tank Policy Exchange estimates Britain’s needs for investment in transportation, communication and water infrastructure to be a minimum of £170 billion. That is less than half of what the Bank of England spent on its quantitative-easing scheme, and dwarfs an estimated £2.5 billion deficit in the National Health Service.

Instead of spending this money on programs that would put people to work and enable them to get on their feet financially, those with more get more. European non-financial companies are estimated to be sitting on $1.1 trillion in cash, or more than 40 per cent higher than in 2008, the Financial Times reports. The St. Louis branch of the Federal Reserve estimates that, in 2011, U.S. corporations were sitting on almost $5 trillion of cash, a total likely to have increased.

This is what class warfare looks like, when only one side is waging it.

Bigger rewards for holding the economy hostage

They are bigger and badder than ever. The heightened offensive against regulations launched by the financial industry carried forward by the new Republican Party majority in the United States Congress is one demonstration, but just in case you wish more evidence, bank profits got bigger in 2014.

The multibillion-dollar fines U.S. government agencies have assessed banks has merely dented profits, and only in some cases. Four of the six biggest banks in the U.S. — which together hold about two-thirds of all assets in the U.S. financial system — reported higher profits for 2014 than in 2013, and in the cases of the other two, it appears that an increase in fines paid was responsible for their decline in profits.

Overall, these six banks — JPMorgan, Bank of America, Citigroup, Wells Fargo, Goldman Sachs and Morgan Stanley — racked up a composite net income of US$75 billion on revenue of $413 billion.

The most comical comment during the banks’ announcements last week of their financial results was that of JPMorgan Chairman and Chief Executive Officer Jamie Dimon, who whined on a conference call with reporters that “Banks are under assault,” adding that “We have five or six regulators coming at us on every issue.”

Those regulators seemed to have taken it easy on JPMorgan last year. The company’s total legal costs for 2014 were $2.9 billion, compared to $11.1 billion in 2013, according to a report carried by financial news network CNBC. Nonetheless, JPMorgan’s $21 billion in profits for 2014 was considered a disappointment by Wall Street, because the fourth-quarter profit dipped slightly from the previous year’s fourth quarter. Thus, the company wasted no time in announcing that “Senior executives at JPMorgan Chase & Company are pressuring managers across the bank to cut costs,” according to Reuters.

Wall Street traders have already punished the company by sending its stock down in three of the first four trading days following its “disappointing” results. Not even Wall Street banks are immune from their own role as enforcers. Some low-level employees are about to pay for that with their jobs.

U.S. Treasury Department under new management (photo by takomabibelot)

Never mind that the U.S. Treasury Department handed out $700 billion to Wall Street (among other measures), bailing out the very banks whose bottomless greed and reckless gambling brought on a global economic downturn now in its seventh year. A downturn paid for not by the banks, nor their executives, but through the endless austerity imposed on working people throughout the world. Not one Wall Street executive has been prosecuted.

JPMorgan has been assessed fines for a variety of crimes, among them mortgage fraud and currency-market manipulation. A compliance lawyer for JPMorgan tried to alert authorities to systematic irregularities in mortgage securities before the crash, but was ignored. Jamie Dimon, heroically holding up against the assault on his bank, earned $20 million for 2013. One suspects he will not be homeless once his 2014 compensation is totaled.

That his company will need to come up with billions of dollars by 2019 to meet Federal Reserve capital requirements, which will slow down its ability to speculate with money it doesn’t have in reserve, might just have something to do with his whining.

It pays to be a banker

The year 2014 was a very good one for banks. Here are the full-year results for the six largest banks, as reported by themselves.

• JPMorgan Chase & Company: net income of $21 billion on revenue of $97.9 billion. This was three billions dollars more than the year before, but still not good enough in the eyes of speculators.
• Bank of America Corporation: net income of $4.8 billion on revenue of $85.1 billion. The net income is down from 2013, but that appears to be due to “litigation expenses” of $16.4 billion, more than double the 2013 litigation expenses of $6.1 billion. Almost all of those extra expenses occurred in its consumer real estate division; the bank agreed in August to pay nearly $17 billion to settle charges that it sold toxic mortgages.
• Citigroup Incorporated: net income of $11.5 billion on revenue of $77.2 billion. Citigroup’s profits were lower than the year before, but the culprit is familiar — it reported legal costs of $4.8 billion in 2014, more than ten times the $430 million of 2013. Citigroup agreed in November to pay $1 billion for rigging foreign-exchange markets and agreed in July to pay $7 billion for selling bad mortgages.
• Wells Fargo & Company: net income of $23.1 billion on revenue of $84.3 billion. With profits up from 2013, Wells Fargo said it handed out $12.5 billion to shareholders through dividends and net share repurchases, five billion dollars more than a year earlier. This at the same time that many of its branch tellers can’t move out of their parents’ house because of low pay.
• The Goldman Sachs Group Inc.: net income of $8.5 billion on revenue of $34.5 billion. Those were higher than a year earlier. The average pay for Goldman Sachs employees for 2014 was $373,265, but as that includes secretaries and clerks, those involved in speculation make far more.
• Morgan Stanley: net income from continuing operations of $6.2 billion on revenue of $33.6 billion. This profit is more than double what the company made the year before, but nonetheless is not good enough. The company moved quickly to appease speculators, announcing it would cut the percentage of its revenue going to wages, pay higher dividends and buy back more stock.

What would they do if they weren’t under “assault”?

Subject to the same remorseless laws of capitalism as any other industry, the industry rapidly consolidated. The percentage of total industry assets owned by the five biggest U.S. commercial banks has increased more than four-fold since 1990. Nor is that something peculiar to U.S. banking — the five largest banks in the European Union hold 47 percent of their industry’s total assets.

The “assault on banks” must have been conducted with a wet noodle. Although by any ordinary human logic, these colossal sums of money should satiate the most asocial speculator, the remorseless logic of capitalism dictates that more is never enough, that profits have to increase steadily. Even the rate of the increase can be expected to increase.

While working at a financial news wire during the stock-market bubble years of the 1990s, I vividly recall one day when a major computer company reported a profit of more than $800 million for its latest three-month period, more than the year-earlier quarter, only for its stock price to be driven down. Curious, I discovered that “analysts” had forecast a profit even bigger, and the rate of the increase had been lower than the rate of the increase a year earlier. That was enough for speculators to lash out.

The financial industry acts as both a whip and a parasite in relation to productive capital (producers and merchants of tangible goods and services). The financial industry is a “parasite” because its ownership of stocks, bonds and other securities entitles it to skim off massive amounts of money as its share of the profits. It is also a “whip” because its institutions — stock, bond and currency-exchange markets and the firms that trade these and other securities on those markets — bid up or drive down prices, and do so strictly according to their own interests.

A management that fails to maximize profits in the short term and deliver higher stock prices in the longer term is in danger of being pushed out, not because diffuse shareholders possess that leverage individually, but because the financial industry as a whole, through the markets it controls, can sell off enough stock to make the price nosedive, leaving the company vulnerable to an unfriendly takeover by a speculator seeking to profit from the reduced value of the company. Executives who do what the “market” dictates, on the other hand, are showered with riches.

Moreover, companies with stock traded on exchanges are legally required to maximize profits for shareholders, above all other considerations. A company that fails to make a deal, or decides against selling itself to another company, is subject to being sued in courts because angry speculators will sell their stock, causing the price to decline and then complain that the company’s management failed to maximize “shareholder value.”

Governments representing the world’s four largest economies — the U.S., the E.U., China and Japan — committed US$16.3 trillion in 2008 and 2009 alone on bailouts of the financiers who brought down the global economy and, to a far smaller extent, for economic stimulus. These are the governments that are “assaulting” banks. Such is the looking-glass logic of capitalism.