In the fall of 2008, the global financial sector was on the brink of collapse. After decades of neoliberal restructuring marked by a rapid rise in social inequality, widespread privatization (particularly of pensions) and, above all, deregulation, the banking sector collapsed virtually overnight.
To this very day, substantial changes have yet to be made. When the governments saved the banks, they promised fundamental reforms in the financial sector to prevent a repeat of this “state rescue” in the future. But since then hardly anything has occurred. Except for a few new rules such as capital requirements for banks, the sector can go on as before, doing business as usual.
The excessive power of the banks, the subordination of politics to their needs, and the tremendous civic distaste for the bank rescue appear to offer good conditions for the rise of the left. For years, the left had focused on stronger regulation, the reduction in social inequality and a halt to continued privatization. But in the face of the crisis, it was evident that the left had no specific concepts for how the financial sector should be reorganized from a leftist perspective. Put simply, the international left proved to be largely speechless in the face of the crisis.
In this policy paper, Axel Troost, member of the German Parliament and Deputy Chairman of the Left Party, and Philipp Hersel, research fellow of the left parliamentary group in the German Bundestag, help to overcome this speechlessness. Instead of merely complaining about the situation, they seek to formulate concrete answers to the question of what could and must be done differently on the political level.
Drawing on a functional conception of banks, Troost and Hersel plead for a return to core business activities in the banking sector, which must be accompanied by socialization. In other words, they seek a democratic embedding of the banks in their economic and social environment. A new start in the banking sector initially requires a systematic cleansing of the balance sheet; fundamentally, it should be possible for banks either to become insolvent or receive support through state recapitalization and be transferred to public property. A consolidation of the German banking sector must be based on two pillars: cooperatives and public trusts. The financially bloated and speculative capital market business would no longer be admissible. Troost and Hersel argue that the left will only overcome its speechlessness if it is ready to fight for a fundamental restructuring, socialization and rigorous regulation of the banks.