If not capitalism, what?

Excuse me starting with a reference to Britain. I don't mean to be parochial; it's just that in a financial crisis what the City of London does, and even what it thinks, is of much more than local significance. In a particularly acute way, the behaviour of the City demonstrates how important it is, at this time, for the left to think through the issue of public ownership of the banks and what new democratic institutions of public finance would look like.
A week or so after Gordon Brown unveiled a rescue package for the banks (some of the most powerful inhabitants of the City) of around £400bn, providing funds for their re-capitalisation plus short term loans and loan guarantees, we read financial journalists reporting that the 'City is alarmed ' by the government’s plans for public spending to counter the recession. The fear is that it will unduly increase the public debt. The cheek of it! How can the thoughts of those responsible for 'financial innovations', that have turned financial markets into wreckers of the real economy rather than its servants, be taken seriously?
The lesson, surely, of the financial crisis is not to listen to the City but to grasp this moment when it is wobbling on its back foot to end its power. Regulation is not enough nor are the non-voting (and temporary) shares which the British government has taken as part of the rescue package. The extent to which this financial crisis has upset the daily lives and peace of mind of millions of people demonstrates that finance is too important to leave to the financiers. As the 17th century philosopher Francis Bacon put it: 'Money makes a good servant but a bad master'. The banks should be the servants of the public. This moment of their collapse and their total dependence on public authorities is the moment to turn them into public utilities. In several senses, money is a distinctive kind of public good. Money is human-made. Money of some sort is a feature of any complex society. Money is also as essential to the infrastructure of society as a natural resource like water or a physical infrastructure like transport. It should, in ways appropriate to its public function, serve as a means of exchange, circulation and investment, and it should be as responsive to public and individual need as these other activities which are generally seen, except by Friedman-like ideologues, to be best run as public utilities. My friends and comrades on Socialist Register, Leo Panitch and Sam Gindin, put the case well in The Current Crisis and socialism in www.socialistproject.ca
But then what? In Norway between 1988 and 1992, the government effectively brought the banks under public ownership. When the banks were restored to good health, the government first sold them back to the private sector and then used some of the proceeds to establish a public social fund. What if they had remained public utilities?
We know that the state on its own – as a single central entity – cannot run the economy. We cannot evoke public ownership and think that is the end of the matter. We need to ask, how would publicly owned financial markets work, both in the long run and in the medium term while much of production is privately owned? Would it be a matter of government lending with ecological and social conditions, favouring the growth of the social economy, and using public financial power to exert pressure on the corporations to convert to ecological forms of production and end products?
At the same time as we build up pressure for governments to go beyond propping up the banks to becoming their proprietors, we need to scale up the alternatives we have been developing or trying to develop on the ground, as we resist or struggle to survive. Take one example that has been central to the alternatives emphasised by the global justice and Social Forum movements of recent years: participatory budgeting. Wouldn't public banks hugely open up the scope for popular control over budgets, presently circumscribed by the dependence of municipalities on private financial markets or on national governments under pressure from these markets? Couldn't municipalities be one source of pressure to turn banks into servants of the public? This need to scale up and link up the huge range of alternatives that have emerged over the past thirty years to counter the Washington Consensus is the challenge facing all of us who participate directly or indirectly in the World Social Forum in Belem Brazil 2008.
Montly column for Amandla magazine, South Africa.

Hilary Wainwright is a fellow of the Transnational Institute and a co-editor of Red Pepper.