Town & Country Planning, November 2008
I used to write a column in this slot about local currencies, but rather ran out of things to say.
That is a serious confession for a columnist to make. Yet the truth is that genuine financial innovation – which helps ordinary people and ordinary places – gets a little scarce in the boom times.
But cometh the crash, cometh the innovation, and suddenly local currencies are back.
The most surprising implication of this was the launch of the Lewes pound in September, covered by practically every mainstream news outlet in the country.
I have no doubt that proximity to London helps get this kind of thing into the media, which is pretty unfair, especially when the broadcast coverage generally gave the wholly inaccurate impression that nothing of the kind had ever happened before in the history of the human race.
I even did an interview on The World Tonight in the car park of Clapham Junction on the subject, on the grounds – so I was told by the BBC – that it sounded as if we were in Lewes.
But what was fascinating about the Lewes pound was the involvement of the local branch of Barclays. This was as innovative as it was unexpected, because the one thing we are not used to hearing about from our mega-banks is local innovation.
I must admit, the idea that a centralised monolith like HSBC might agree to anything like that remains remote, despite their hard-fought but misleading slogan “the world’s local bank”.
In practice, the successful local currencies in the USA are all characterised by the involvement of local banks. But they still have local banking in the United States, despite the loss of the Savings and Loans in the 1980s – large credit unions, community development finance institutions, social banks, just as they still regional and agricultural banks in northern Europe.
It is hard to underestimate just how important this is. It means that there are local bank managers with the flexibility to use their judgement about loans to local business, rather than using the centralised formula that is now withdrawing loans from local business all over the UK.
You might even blame the loss of local bank managers in the impoverished cities of the USA for the credit crunch. When one financial investigator looked at the list of sub-prime mortgages sold in one city early last year, the name ‘M. Mouse’ caught their eye immediately.
When Mickey Mouse starts taking out mortgages you know that financial problems are looming. You also know that a handful of Captain Mainwarings in strategic positions might have made sure such a thing never happened in the first place.
And speaking of Captain Mainwaring, he was priased last week by one of the panellists on Any Questions as the archetype of bankers we should defend. In practice, in the UK at least, Captain Mainwaring has been wholly wiped out, replaced by a series of computer formulae and a call centre.
Because, compared to the USA, we have long since lost our local banking infrastructure in a flurry of mega-mergers over the past ten years and the demutualization of the building society network.
My colleagues who specialise in such things tell me that the credit crunch began for the poor in Britain a good ten years ago.
Then suddenly we woke up in mid October, at the height of the financial crash, to discover that all that was left of banking in the UK – apart from the relatively tiny credit union network – is a handful of nationalised mega-banks.
Plus our social banking network (small), Abbey National (foreign), Nationwide (mutual) and HSBC (miserably centralised). The rest may now be creatures of the government, or about to be, but that hardly makes them responsive to local credit needs. Quite the reverse, in fact.
So the political question, now that Alastair Darling is in charge of our banking infrastructure, is this. What are they going to do to restore the kind of system they have in the United States and northern Europe to build local enterprise, so that our local economies don’t have to be supplicants to the centre.
The answer is that there seems to have been an instruction passed down to the monsters to lend money to local business. The problem is, thanks to their dwindling local branch network and the loss of all those local bank managers, that they are unable to do effectively.
No, it is time started to ask much more difficult questions than those which, anyway as I write, are currently in the news. Will the government rebuild a proper local branch network? Will they build a new mutual banking sector to replace the one so fraudulently stolen and now destroyed? Will they invest in a proper reinvestment banking network like the one in the USA?
But there is an even more pressing question, it seems to me, at least for anyone who believes in the localism agenda. Will they set about demerging an infrastructure that has merged beyond the point of usefulness?
I hope they will say soon. And if, in the meantime, Mr Darling happens to phone me up for advice, this is what I will tell him: split them up, give us back a proper regional banking infrastructure so that we can rebuild the real economy.
David Boyle is a fellow of the New Economics Foundation and the author of Toward the Setting Sun. These columns are available at his website: www.david-boyle.co.uk.