This is Richard Wolff with a response
to an AskProfWolff question from our Patreon community,
and in particular
from Liz Mednik, who asks about what she sees
where she lives: a proliferation of banks,
literally occupying all four corners of an intersection,
spreading around the community, as if a kind of hysterical process of
plunking down bank branches was underway.
She worries that this is crazy, that this is too many banks chasing after a limited number of
depositors and it won't end well, and she wants my response.
Good question, correct observation. Let's see what it means.
More than ever in today's capitalism, everything is financialized.
Consumers spend more borrowed money, often, than they spend of their own earned wages,
salaries, and so on.
Every business
borrowing wildly,
especially in the last 10 years, as the government responded to the crash of
2008 by dropping interest rates to the lowest levels in history, which was an incentive,
of course, for everyone in economic difficulty -- a
consumer, a worker, a
business, a government -- to borrow like crazy because money was rendered so cheap. And so
the level of indebtedness
exploded.
Everybody needs to deal with their debts
with the credit system, and
therefore everybody needs a bank. And as everybody needs a bank, more and more,
to get cash out, to solve problems with your checking account, your savings account,
your credit card, your home mortgage, and whatever else,
the banks not only reap a profit bonanza, but they find themselves in a tough competition
for the loyalty and the business of
companies,
individuals, and so on. And so a mad rush of
competition is underway. And that's what you see: every
spare office, every spare storefront, grabbed so that there can be a teller machine,
perhaps a teller or two that are living people, and the rest of the apparatus of a bank.
It won't end well. It is chaotic. It is one of the best examples of
capitalist
inefficiency that one could look for.
Think about it for a minute. If, as you have in my neighborhood, banks on all four corners of an
intersection, here's what you know:
With modern computers, one bank could easily handle the business now being handled by four.
The same computer could easily handle it. The same or
a larger number of teller machines could exist in one room or
antechamber of an office as in four. The duplication of security personnel, of clerks, and so on is
legendarily idiotic. Ditto for the safe- deposit boxes, and so on, and so on. This is a vast
waste of resources,
serving what end?
Well, after a few years some of these banks will collapse and be replaced by another kind of store.
The chaotic and inefficient
competition among
capitalists will end up with only one or two left. And guess what.
They will reward us for this capitalist, wasteful competition by becoming
monopolies or
oligopolies, when a very few are in a position to jack up the rates,
because we're used to banking in our neighborhood, and if there's only one bank, it can charge more for the safe-
deposit box, and the checking account. You see the picture. It's chaotic. It's inefficient. It's the way
capitalism works. Good
observation, Liz Mednik, and I hope this response
clarifies what you're seeing.