I stumbled upon a presentation released by the Business Development Bank of Canada (BDC) yesterday. The presentation outlined strategies for companies to integrate ethical and environmental concerns raised by consumers. In many ways, this is nothing new. The distance between this rather tepid advice and the actual needs of facing our economy and our planet brought to mind another gulf that will likely be need to be bridged first: that between public ownership and public aims.
The BDC is a Crown corporation that provides financial services. In short, it is a public bank, an institution of socialized finance. It is a good example of how the reality of socialized finance differs from its potential – of the limits of public ownership that exists without a broader context of democratic pressures for public aims.
The BDC has a broad mandate to support entrepreneurship with particular focus on smaller and medium-sized enterprises. That the BDC would take up the mantle of Corporate Social Responsibility (CSR) is no surprise, especially since the institution boasts of itself as a B (“Benefit”) corporation that looks after more than the bottom line.
Take this to be a sign of the times. One would hope that a publicly-owned institution would implicitly have goals beyond profit-maximization. The fact that these have to be made explicit – and using the now-ubiquitous corporate language no less – only points to the difficulty of raising more comprehensive public aims. CSR is innocuous enough, though it speaks more to how companies have changed the ways in which they represent themselves rather than how they operate.
Regardless, this is not so much a critique of what the BDC is doing, but a look at its unrealized potential. On the one hand, conservatives like the C.D. Howe Institute have criticized the BDC and other Crown corporations that provide financial services for not being as efficient as private institutions. There is no space here to recount all the criticisms of the assumptions behind this argument, most of which have come from mainstream economists. Volumes of well-known work on a range of information asymmetries put lie to the simple equation of markets in the abstract realm of perfect competition with markets in the real world and the resulting unbridled support for the private sector.
In another sense, however, the C.D. Howe Institute is right: the private sector can do much of what the BDC aims to do better because the BDC’s role has become one of playing the private sector at its own game. What the C.D. Howe report misdiagnoses as the “expansion of [the BDC’s] mandate” is actually its watering down. The mandate of the BDC is today not all that different from that of a private bank – which bank doesn’t want to support entrepreneurship via lending and hope for a decent return from this support?
Compare this to the more limited but more pointed mandate of the forerunner of the BDC, the Industrial Development Bank (IDB). Established after World War II, the IDB had the aim of helping move Canada’s economy from a war footing. It is hard to picture the IDB of the 40s telling firms to highlight the “hidden” peace-making attributes of rifles and infantry mines. Today, however, we find the BDC advising companies to “identify ‘hidden’ benefits that can be marketed as health- or wellness-related”.
Some of the other recommendations made by the BDC are less obviously aimed at image over substance. And clearly the BDC is not responsible for the failure of businesses to face up to environmental and ethical challenges. Many have no problems failing at this without outside intervention. The BDC’s messaging to businesses is, however, a good example of the gap between what is and what is possible – indeed, what is necessary in the face of the mounting social and ecological costs of today’s economic and financial model.
What if the mission of the BDC was to help comprehensively move the economy from a fossil fuel-footing – a task as serious as moving the economy from a war footing? Or a precarious-labour footing? These are broad goals supported by the public, but ones that are out of bounds in corporatized public institutions. Greater democratic control and input is a necessary first step.
If socialized finance is to be an important part of the answer to reorienting economic relationships, then it needs pressure for public aims to be fulfilled rather than simple public ownership in the corporate shareholder model. Without attention to aims, the institutions of socialized finance risk being subsumed into the logic of existing finance.
Second, socialized finance should move beyond its niche. A system of socialized banking is not only a rational response to the problems with today’s financial system, but it is also an idea garnering some increasing attention. A German parliamentarian recently formulated a detailed plan of a hypothetical socialization of the German banking sector – based in large part on co-operatives. The Fire Brigades Union in the UK has produced a pamphlet on the public ownership of banks and approved a resolution in favour of this policy. In Canada, the socialization of finance was an integral part of the CCF’s Regina Manifesto. All of these documents link socialized banking with public aims and substantial democratic oversight (and have the potential for broad progressive support – see Note below).
The case of the BDC shows what happens when public ownership is largely divorced from the service of public needs. This is where treating people as consumers rather than citizens comes full circle. Rather than engage enterprises in substantial changes and channel investment for solving pressing social and environmental challenges, the current institutions of socialized finance like the BDC will continue to produce half-measures that focus significant energy on marketing and not enough on the real needs and dangers we face.
The BDC is subject to parliamentary review every 10 years. The next such review is coming up in 2015. The realistic chances for any meaningful change in a year’s time are exceedingly slim given political realities. Perhaps, however, this review would be a good occasion to launch a concurrent “People’s Review” of not just the BDC but the entire financial sector? Socialized finance is a reality – but one that is far from fulfilling its progressive potential.
Note: Socialized finance has the potential for broad appeal across theoretical differences among critics of the current financial system. For some, including myself, public banking is a much-needed radical idea not because finance is a parasite on a mythical healthy “real” economy but because finance is part and parcel of a sick economic system. Finance creates important sources of value and plays a crucial role in the real economy. Others disagree and believe that the role of finance is more limited. While these differences are important and need to be resolved, public banking is a solution to that both strands of critical thinking about the role of finance in the economy can agree on.