Erica Vause, Assistant Professor of history at Florida Southern College writes on this dilemma on banking. Banks run on trust but remain on of the mistrusted organisations. Why is this so?
Since the early 19th century, banks have thrived, and are foundational to modern economic life. Yet the ambivalence surrounding them has not dissipated. Over the course of the 19th century, the ideal of the independent property-owner, upheld by the classical republicans, gradually faded. Instead, factory labour became the ideal form of ‘real’ value, beside which finance seemed dubious and fictional. The heroes of many 19th-century novels, such as Elizabeth Gaskell’s North and South (1855) and Anthony Trollope’s The Way We Live Now (1875), preferred the ‘real’ work done in factories to the ‘fictional’ and often dangerous fortunes to be reaped from financial speculation.
Viewed in light of this long history, present-day distrust of banks, so salient since 2008, appear less as novel reactions to our changing times than as the latest chapter in the long-running paradox of trust and credit. On a day-to-day basis, most of us trust banks well enough. We’d prefer to deposit our money in a bank account than, say, stuff it in a mattress. Yet no single capitalist institution compares with the bank in terms of the sheer amount of unease and antipathy it engenders. Polls show that a mere 18 per cent of Americans trusted banks in 2010. The 2015 Edelman Trust Barometer, a yearly survey of attitudes across 27 industrialised nations, indicated that, among major industries, only the media is less trusted than banking and finance.
Suspicion of banks today traverses the political spectrum. Different political viewpoints tend to linger on different aspects of the original critiques of the banks. The Left sees finance as integrally connected with a parasitic elite of largely idle profiteers. Much like the classical republicans of yesterday, they see banks as guilty of fabricating fictitious value and avoiding ‘real’ work. The Right portrays banking as a threat to personal or national sovereignty. They evoke the classical republicans’ anxiety about banking and despotism. In the United States, for example, conservative commentators such as Glenn Beck and Ron Paul have not only charged the Federal Reserve with causing inflations and depressions, but denounced it as an instrument of tyranny. Outside mainstream discourse, conspiracy theories about the banks are often tinged with anti-Semitism. Try searching for ‘banking’ on YouTube. In these conspiracy theories, rumours such as the one about the Rothschilds and Waterloo thrive.
No institution more clearly relies on trust than the bank. That is precisely what makes banks a lightning rod for suspicion. From the time modern banking emerged, it has been the subject of intense misgivings. Many of these suspicions are with us still. How and why one mistrusts banks, however, tells us a lot about the way one sees the world politically.
This is all very interesting aspects of banking and finance.
Given what is going on in India at the moment, it is not difficult to see rise in mistrust in banks. Earlier they impacted lives of the big and mighty, now they impact life of one and all.