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Australian Banks are trying to defend their excessive profits and lack of competition by using the furphy that because Superannuation funds are large owners of shares, that their profits benefit ordinary Australians who own the shares through those funds. However, reality is more complicated than that

1) Large amounts of fees are siphoned off in fees to the super funds, and go to superfund managers – so the main beneficiaries are the managers and people with large superfund holdings, not ordinary Australians, unless perhaps the funds are industry based. The first fund I was in cost more in entrance and exit fees than I could possibly earn on input. This is clearly not the banks fault, but it indicates something odd about the way ‘we’ own these shares. Putting it in another way, the rational action of fund managers acting for their own benefit with these shares, does not have to deliver maximum benefit to the people who pay into the fund.

2) We “ordinary Australians” do not own the shares. We cannot vote, we cannot influence bank policy because of those shares. We do not hold the rights associated with those shares. Those shares are owned by the superfund, and any input into the bank will tend to benefit the fund not its members. It is irrelevant as to whether it might be ‘better’ for large institutions to take those rights away from us and exercise them as if they owned the shares – which they do (again the point is that the institutions have the ownership, not ordinary Australians).

3) This fictitious ownership only exists as long as we keep paying the super company. Again we do not own the shares, we pay the Superfunds to own them, hopefully (but certainly not guaranteedly) on our behalf.

4) However, the public pays the costs and losses associated with those shares, while the funds continue to pay out to themselves, irrespective of loss. This is the usual privatization of profits, publicization of loss common in capitalism.

5) The banks may also have holdings in the Superfund, and these holdings are large enough to be used to outweigh any objections that individual members have to the way they operate. and use the shareholdings to benefit themselves and shut down inquiries by the fund into the way profits are made, declared and distributed.

6) It is more than likely that most of the bank shares are owned by a very few, and only a few shares owned by the many.

As usual, the market is structured by political action, usually the action taken by those who are wealthy, and is intended to benefit them. The market is rarely ever neutral – it is intertwined with power relations.

(Some of these arguments borrowed from a critical thread in response to an article on the Conversation)

https://theconversation.com/factcheck-do-bank-profits-belong-to-everyday-australians-88156

Tags: economics, free markets

This entry was posted on February 19, 2018 at 3:17 am and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.