BANKING ROYAL COMMISSION MUST HAVE BROAD TERMS OF REFERENCE

It may be better for Australian banks to have the Standing Committee on Economics inquire into them than a Royal Commission—because they know that most parliamentarians are economically ill-informed (such as remaining under the delusion that budgetary surpluses are good for the nation)—but it’s most certainly not better for an increasing number of thinking Australians.

This includes those who know government may spend all it likes for productive purposes, provided it captures the economic rent of its natural resources to stop land price inflation. In 1879 the American social philosopher Henry George, having expressed the distributional formula that production is the sum of the incomes to land, labour and capital (P = R + W + I), made the point that labour’s wages (W) and capital’s profit (I) must decline if we fail to capture the rent of land (R) which in the economics sense includes all natural resources, land sea and sky/airwaves, viz, P – R = W + I, rent being the economy’s surplus owed equally to everyone (as it hasn’t been generated by labour or capital). Many see that if we fail to capture the land rent provided by infrastructure and other locational facilities, it becomes privately capitalised into escalating land prices, and is financialised by banks at a great cost to Australian wages, profits and social stability.

As a Royal Commission into banking is likely to find that government surpluses act to further assist banking interests intent on maximising profits via escalating private debt and bubble-inflated mortgages, rent-seeking interests (currently supported by the Liberal Party) are clearly served best by forestalling such a public inquiry.

Economic fallacies still abound in the twenty-first century. As they’re interrelated with banking, any Royal Commission into Australia’s banks must also be given the power to inquire into government deficits/surpluses, into money/debt and into economic rent/land price. If we acknowledge that rent-seekers have both money and power—Twiggy Forrest we learn has directed $400 million of our ‘super-profits’/economic rent to charity—we may expect them to endeavour to delimit any Royal Commission’s terms of reference into banking away from such necessary considerations. The Labor Party may be in favour of a Royal Commission into the banks, but its position on such broader terms of reference is unclear at best.

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