Douglas Carswell has a bit of a fetish…

September 15, 2010

…for property, that is, and it’s one that’s illustrated by his 10-minute rule bill that’s he’s speaking to as I write this. The idea is that the law should be changed to prevent banks from lending out any money you deposit with them without your consent, as legally when you deposit any funds they become the bank’s money. This means that banks can lend out your money even if they don’t have enough money to pay you back. Under Carswell’s scheme, this would be changed to banks being required to ask you if they could lend out your money, and otherwise merely holding on deposit until you collect it.

This notion is called ‘honest money’ and is derived from the work of the Cobden Centre, a libertarian think-tank. And it stands in astonishing contradiction to the rest of libertarian thought; which revolves around the idea that the private sector always knows best and that Government should stay out the interests of private concerns as much as possible. This is a clear state intervention in the banking market, ostensibly on the side of the little guy who’s being taken advantage of by these terrible, terrible banks.

The problem is that banks are a business. They do what they do for profit. Under Carswell’s scheme, say you’re on Jobseeker’s Allowance and are receiving £60 per week. Thanks to the largely free banking system we have in this country, you could immediately deposit that in a bank without incurring any cost. However, under Carswell’s scheme, the bank would incur a cost for taking your money (staff time, processing etc.) but be unable to make a profit on it unless you consented to allow them to lend it out. Why on earth, in that case, would the bank want to handle your money? They’d either charge you a handling fee or simply refuse to take deposits from those who want to retain full rights over their money. In practice, therefore, the £60 would become perhaps £58 per week, unless you gave up your property rights in a way which seems anathema to Carswell.

The upshot is that the little guy would be in the same situation as he is now, as the least well-off can’t afford a handling fee for the use of banks. They’d either be excluded from the financial system altogether or give up their rights. This is a logical consequence of banks being profit-making entities.

This bill seems to be the result of the fetishisation of property rights – the near-worship of property itself – to the point where they overwhelm the interests of the least well-off. But as I’ve said before, that’s what libertarianism is all about.


7 Responses to “Douglas Carswell has a bit of a fetish…”

  1. […] This post was mentioned on Twitter by Adam Bell, Adam Bell. Adam Bell said: @SimonJGibbs It's the consequence of his 'honest money' and banks making a profit. See: […]

  2. Paul Sagar said

    Well I suppose Carswell might reply: “the guy on JSA would get nothing in my Libertopia, because he wouldn’t be reliant upon state handouts as the minimal nightwatchman state wouldn’t be giving any to anyone”.

    But your point stands, of course.

    It’s also worth noting how utterly naive and narrow-minded Carswell’s proposal is. The entire banking system runs on debt – and that’s a good thing. Debt is what allows people to lend and borrow, and thereby (e.g.) finance large projects which would be untenable if people/organisations had to stump up all the cash up front.

    Debt has big scary connotations now – partly because of the 2008 crisis, partly because of Christian/puritan legacies, partly because of fogetting that the problems of indebted individuals do not represent the entire nature and reality of the use of debt in the wider economy/society – and that’s something we have to deal with. What a shame that Carswell is too thick to understand the basics of why debt in the banking sector enables a developed economy to stay up and running.

    I’d say we should expect better from our MPs, but…

  3. declineofthelogos said

    So, your position is that you want to think that cash given to a bank is still yours because you want to think that. You also want the State to back your conception of what a bank is, even though no contracts are broken in the current system. That’s a pretty bloody weird version of libertarianism.

    Banks wouldn’t need to give people incentives to allow lending deposits; the practical disincentives of not receiving any interest and having to pay for a current account would ensure that pure deposit accounts would only be available to those who could afford them.

  4. Bk said

    “…it stands in astonishing contradiction to the rest of libertarian thought; which revolves around the idea that the private sector always knows best and that Government should stay out the interests of private concerns as much as possible.”

    -this would be a good point if not for the fact that the banking practice of dual-ownership of deposits was originally reinforced by judicial ruling in the first place; leaving the opportunity for varying banking systems to develop on their own (and according to demand) within the private sector as an impossibility… my point is that the banking industry has never been in a ‘private sector.’ It is the only industry in which either rule of law or king has always determined its practices…and for obvious reasons when considering that a truly private sector is a pro-consumer environment. Its a constant battle between business and consumer for the upper hand in the marketplace; and unfortunately we see that the State abandoned the consumer and sided with business centuries ago, particularly in the field of banking.

    • declineofthelogos said

      You would have a point if that judicial ruling had compelled banks to only offer the sort accounts we have at present. All that ruling ensured is that banks were free to offer debtor-style banking. If there really was demand for the sort of banking Carswell wants to legislate for, someone would’ve set up a bank to provide it. There’s no force being used to stop anyone doing so, and no fraud involved in deposit accounts as they are now. State deposit guarantees would apply equally to banks using a Carswell-type system.

      You’ll have to demonstrate why the sort of banking you’re after is at a competitive disadvantage under the current system, for your position to work.

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