The University of Massachusetts Amherst

In Recent Paper, UMass Economists Epstein and Uğurlu ask: ‘Are Bankers Essential Workers?’

Monday, October 19, 2020

--Via UMass Amherst News Office

Are bankers essential workers? This is the question asked by Gerald Epstein and Esra Nur Uğurlu, economics and the Political Economy Research Institute (PERI), in a recent paper exploring the opportunity facing the United States to create a system of public banking and finance institutions (PBFIs) similar to those found in other nations across the world.

Their paper, published by the journal Catalyst, examines the ways that private lenders have inserted themselves into all aspects of the American economy, their many detrimental effects on individuals and small businesses and how community and public banking can serve as a means to rebalance the power currently held by the nation’s “big banks.”

“When they clapped every night on their balconies at 7 p.m. or made signs or sent out heartfelt messages thanking ‘our essential workers,’ they mentioned health care workers, first responders, teachers, grocery store workers, delivery people, and farmers, among others,” Epstein and Uğurlu write. “But bankers?”

The economists focus on four challenges facing the U.S. and global economies:

  • Revival and reconstruction of the economy amid the COVID-19 pandemic
  • Transitioning to a carbon-free energy system to avoid catastrophic climate change
  • Addressing racial inequality, poverty and exploitation
  • Creating an economy that can produce meaningful and productive jobs for all while reducing “the savage and destructive inequalities that pervade our society”

In other countries, there has been a resurgence of public-oriented banking as the challenges facing their economies and the failures of the private financial institutions mount, they say. In the U.S., however, the authors write that the opposition of the private banking system, the industry’s political friends and the public financial governance institutions that favor private banking — most importantly, the Federal Reserve, have ensured that public banking and finance has remained small and underfunded.

Epstein, professor of economics and co-director of PERI, and Uğurlu, a doctoral candidate in economics and PERI research assistant, say that PB&Fs could provide as many as 10 potential benefits in the U.S., including competition and regulation, financial inclusion, financial resilience and stability, the promotion of full employment and better jobs and the reduction of the power currently held by financial elites.

“Lloyd Blankfein, CEO of Goldman Sachs, famously said that it was unfair that people were so mad at him and other bankers for crashing the economy because, contrary to common belief, they were doing ‘God’s work,’” the authors write. “There is a real kernel of truth to the bankers’ and economists’ claims. In any modern economy, especially capitalist ones, money and credit are foundational. They provide key mechanisms through which economic activity takes place, and they are the medium through which everyday transactions occur. They provide a conduit for economic policy. And, perhaps most important, in market-based economies, money and credit provide a key fulcrum on which major economic transformations can be effectuated.

“Progressives need to grab this essential mechanism and turn it over to communities and the citizenry, so that they can apply it to their own purposes, rather than allowing bankers to make themselves essential even as they threaten to undermine the economy,” they write. “We also need to design effective ways to help workers, communities and the public at large to take more control over this critical financial system and use it as a tool for social, environmental and political transformation.”

The complete report, “Are Bankers Essential Workers?,” is available as a PDF on PERI’s websiteCatalyst: A Journal of Theory and Strategy, is a peer-reviewed journal exploring capitalism, published quarterly in print and online by the Jacobin Foundation.

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