Home / Opinion / Are Bankers Good or Bad for Society, Part One

Are Bankers Good or Bad for Society, Part One

I gave a speech at Gresham College last week that started as a little white paper and ended up being a 30-page monolith. 

As it's worth sharing, in fact it may even become a book, the paper will be published here in six parts this week and next, covering:

[If you just want to get the slides and download the
whole speech, click here

In today's first part, the argument is that bankers' are essential for a civilised society.

The whole paper and associated slides will be published next week.

Good evening ladies and gentlemen and thank you to Professor Mainelli and Gresham College for inviting me here this evening.

This evening actually marks a major milestone to which I shall return later, as it is exactly 80 years to the day since the stock market crash on Wall Street which triggered the Great Depression of the 1930s. Yes, October 29th 1929 was that day.

Thank goodness that couldn’t happen again (I jest!).

It also seems like a long, long time since we agreed this presentation theme and months later, here we are. The strange thing is that the theme we agreed back at the start of the year is more salient than ever today, as banks, regulators and policymakers argue about the role of banks and banking and whether they are morally and socially repugnant or whether their methods and manners are acceptable overall.

This argument began with the commentary from Lord Turner in Prospect Magazine in September where he states that some banking activity is “socially useless”. What he actually said, in a roundtable discussion with four esteemed questioners is the following:

“It is hard is to distinguish between valuable financial innovation and non-valuable. Clearly, not all innovation should be treated in the same category as the innovation of either a new pharmaceutical drug or a new retail format. I think that some of it is socially useless activity. On the other hand, I don't know whether that means the world would have been better off without any credit default swaps, or simply some credit default swaps. I just think it's difficult to work out where one can draw the line with this.”

The line: “I think that some of it is socially useless activity” caught the headlines, and created a storm of reactions from the industry.

For example, the current Chairman of Lloyds Banking Group, Sir Victor Blank responded by saying we’ve “got to make sure we don’t have headlines saying banks are ‘socially useless’, because they ain’t. We provide bank accounts to people who would not otherwise have one. We give to charity. We provide a very important social function.”

And Stephen Green, Chairman of HSBC and also of the British Banker’s Association, added:

“At their worst, financial markets can be engines of destructive excess. In recent years, banks have chased short term profits by introducing complex products of no real use to humanity. It is clear that very many innovations introduced by the financial markets have been socially useful, and indeed is critical to economic and social development – to our prosperity, in short.

“But it is equally clear that some parts of our industry had become overblown, and that certain products and services failed the tests of usefulness, suitability and transparency.”

As can be seen, there is a raging debate about what banking is and what it does today. What is the heart of banking? What is it there for? What makes it socially useful or socially useless? And are bankers good or bad for society?

Most people suspect bankers of being bad for society today, which is unsurprising because of what has happened recently and, as I gathered my thoughts for this presentation, I realised that the question: “are bankers good or bad for society?” is not only prescient but has been with us throughout time immemorial.

It is also strange that as I put this presentation together, the more I realised I would be discussing things that are core tenets of society: politics, religion and sex.

I know we’re not meant to talk about politics, religion or sex in open conversation but I’m going to, as this is critical to the point of whether bankers are good or bad for society. However, in doing so, I found that the more background I put into this presentation, the more it became a religious and historical discussion so please bear with me.

I am not trying to tell grandma to suck eggs or give you a lesson in history, but purely exploring and explaining the context by which we can answer the question posed: “are bankers good or bad for society”.

To do this, I have an agenda which will look at why banking is essential for society and specifically how and why bankers can be a force for both good and bad. Then we can move onto bankers today and tomorrow, and how to ensure that we make bankers a force for good in the future.

Let us begin with why banking is essential to society.

Why Banking is Essential for Society

Banking is essential for society because money and sex are at the heart of everything we do.

As Jeremy Clarkson puts it:

“Money and rumpy-pumpy are the twin engines powering everything we do.”

Jeremy Clarkson may not have realised how insightful this line proves to be but Money and Sex are the core methods of controlling people and society.

Money was in fact invented to support the world’s oldest profession: prostitution.

In Ancient Sumeria, 5,000 years ago, the concept of money did not exist. However, by this time, the world had moved from one of nomadic clan cultures that bartered to civilised communities based around farming.

Farming meant that rather than scavenging for food all the time, food could be created in abundance; but abundance can have its downside, as it caused fights over who had access to what lands, food and crops.

Therefore, there had to be a way of controlling the community.

Initially, this control was created by using the fear of gods, but food and abundance could sometimes take precedence over religion and fear.

This meant that the political leaders – the Church of the time – had to find an even better way to control their society.

And so they invented money to control the community.

Money was therefore a political device created by priests to keep society in order and avoid anarchy.

By way of proof here’s an ancient Sumerian vase, which was one of the few remnants that survived the bombing of the Baghdad museum.

What this vase shows are the farmers of the community arriving at the temple to be greeted by the priests who give them their ancient coin: a shekel.

Now why would you want a shekel?

To buy some wine and food?

Yes, but more importantly to gain access to the Temple of Inanna.

Inanna was the Goddess of Love in Ancient Sumeria and her living embodiment were women who inhabited her temple and, by the exchange of a shekel, a farmer could be consummated in the ritual of intercourse with the living embodiment of Inanna on Earth.

Some might call sex for money prostitution, but it was very effective in controlling a society who had an abundance of produce. The political and religious leaders were happy therefore.

Money and its controllers – the bankers – are the core behind control and power, politics and religion, sex and society.

And this is why bankers need strong regulation as, without it, they can be prone to be like kids in the candy store. With no store owner in sight, they would be likely to trash the store.

Therefore the constraints on bankers’ activities has to be fear of what regulates their activities. Today, that is fear of regulation. Historically, it was fear of God.

This constraint of fear has to be there, or bankers will cause society harm, and this fear needs to be there because bankers hold the keys to our world. The keys they control are the keys to power. They have the power to create or destroy countries and economies, to make or break businessmen and politicians, the ability to literally give you happiness or create misery.

Money is power.

So when we ask: “are bankers good or bad for society?” the qu
estion must start with the understanding that bankers are essential to society.

We can then ask the follow-on question: are bankers a force for good or bad.


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About Chris M Skinner

Chris M Skinner
Chris Skinner is best known as an independent commentator on the financial markets through his blog, TheFinanser.com, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal’s Financial News. To learn more click here...

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