Sun | Jun 16, 2024

Peter Espeut | Unwillingness to regulate

Published:Friday | January 27, 2023 | 12:05 AM
Peter Espeut writes: Banks charge a fee for face-to-face banking, and now they charge a fee to use an ATM.
Peter Espeut writes: Banks charge a fee for face-to-face banking, and now they charge a fee to use an ATM.

Our present government is wedded to the economic philosophy of Classic Liberalism. They are true believers in the religion of the “Free Market”, which means that they believe that the prices of goods and services must be determined by supply and demand expressed by sellers and buyers. Being market fundamentalists, they believe that markets operate best without the intervention of government or any other external authority; when allowed to operate freely in an atmosphere of perfect competition, “the free market” most efficiently leads to wealth creation and prosperity for all.

Classical liberals believe that in a “free market”, both labour and capital will receive the greatest possible reward. When individuals are free to obtain work from the highest-paying employers, they will maximise their income; the profit motive will ensure that products that people desire will be produced and sold at the lowest possible prices, maximising profits. Classical liberals argue for what they call a minimal state, with as little government regulation as possible.

All this is not just theory in someone’s head; the operationalisation of Classical Liberalism by the Jamaican government touches and affects each and every one of us. In previous articles I criticised banks for levying a raft of fees and bank charges on its customers which go straight to its bottom line. In the old days, if you left your money in the bank (to grow) in a savings account, every six months they would credit your account with interest. I would take my passbook (provided at no cost) to be updated. When I withdrew anything, I would pay stamp duty to the government. Passbooks have been abolished. Today if I want a statement of account I have to pay for it.

SUBTRACT MY MONEY

If I do not disturb my account, they deem it to be dormant, and begin to subtract my money “likkle-likkle until it done!” They say that it costs them to keep my money, so they have to charge me to keep it. Really? I thought they wanted my money to lend to others. Surely it must cost more to service an active account than a dormant one?

They have my cell number and my email address. If my account is going dormant, why can’t they notify me? They call to query cheques, or if my payments are overdue. Why doesn’t the government which regulates banks require them to advise me before they take action which disadvantages me? Is the government on my side? Or on the side of the banks?

The banks say it costs them to keep their doors open and to pay their tellers. They don’t want me to come in to do transactions (as bank customers have done for 100s of years), but to do it all online, or use automated teller machines (ATMs). They charge a fee for face-to-face banking. And now they charge a fee to use an ATM. They want me to give up my customary right to face-to-face banking so they can make more money.

Surely this rapacious behaviour is illegal! Surely those that regulate Jamaican banks must step in and protect Jamaicans from being exploited.

Every month I used to get a printed statement showing the status of my chequing and credit card accounts. I could see what charges and fees they deducted, and when my annual fee was due. In one fell swoop banks have cancelled my customary right to receive a monthly statement. If I want a statement of my account I have to pay for it.

I receive my monthly utility bills by email. Why can’t I get my monthly bank statements by email also? Aren’t the banks up to it? Why have the regulators not required banks to provide monthly statements to their customers by email? In whose interest do they regulate?

Add up all the money Jamaicans pay in bank fees (just over the last five years) for services that we used to get for free and I am sure that it exceeds the amounts scammed from our beloved Usain Bolt.

In the good old days, I used to pay my utility bills at the company offices (electricity, water, etc.). The utility companies claim that it is too expensive to maintain offices to collect my money, so they have closed many of them (saving billions in salaries, etc.) and I must pay my bills at a bill-payment agency. Smart business move!

SERVICE CHARGE

Now I find that I have to pay a service charge to the bill-payment agency for the services they perform. Surely it is the utility companies which saved billions by closing so many offices that should pay this service fee? This arrangement was for their benefit, not mine!

Add up all the money Jamaicans pay in service charges (just over the last five years) for services that we used to get for free and I am sure that it exceeds the amounts scammed from Bolt.

The truth is that this government which operates under Classical Liberalism seeks to do as little regulation as possible!

I was pleased when opposition MP Fitz Jackson brought to Parliament a bill to regulate the fees that banks charge their customers. Jackson was calling for certain bank services and transactions to be free. Using Classical Liberal thinking they accused Jackson of wanting to introduce price-fixing, claiming that “the market” must determine bank charges, not the government, and customers will then bank where the fees are lowest.

When it comes to the religion of the market, I am an atheist. There are just too many instances when “the market” operates in favour of big business and against the consumer.

True-believers in the religion of the market have faith that the “law” of supply and demand in the context of “perfect competition” can regulate production and labour if left to work, without interference from government or any other agency. But they also admit that there is no such thing as “perfect competition”. The whole system is more airy-fairy and pie-in-the-sky than fundamentalist religion.

The truth is that the banks cartelise, getting together and fixing bank charges to subvert the market. I deposit my money in the bank, but they determine the interest they pay me, and what fees I must pay. Sounds like financial rape!

Economist Dr Damien King, bishop in the religion of the “free market”, defines “bank fees” and “interest rates” as prices for the services which banks offer. He wrote on Twitter: “My first-year economics students already know that attempts to legislate prices nearly always leave customers worse off. And the bank fees bill was such an attempt”. Free market fundamentalists like Dr King believe that the setting of prices must always be left to this theoretical construct, this article of faith called “the free market”.

The government has bought into this theoretical framework and really does not wish to regulate banks, bill-payment agencies, securities traders or the environmentally damaging behaviour of the private sector. The damage is there for all to see. Are they yet smelling any coffee?

Peter Espeut is a sociologist and development scientist. Send feedback to columns@gleanerjm.com