“Without debt you cannot have sustainable growth”? Au contraire!

Without debt you cannot have sustainable growth.

said Antony Jenkins, the new CEO of Barclays Bank at a recent event hosted by the St Paul’s Institute event, entitled  ‘Good Banks’.

I wish the chap who asked the question — Paul Mills of the Jubilee Centre — had been able to come back with a follow-up. He would no doubt have pointed out that, yes, “without finance you are unlikely to get sustainable growth” but that “finance” does not have to take the form of “debt”. The alternative is equity finance (e.g. buying shares in the company, or going into a partnership). That means co-investment in companies and projects, taking on shared ownership and shared risk. We already use this form of finance alongside debt. Islamic finance is (or is supposed to be) entirely non-debt based.

Would equity finance alone produce higher or lower rates of growth as the current financing mix? That’s a separate question. But to flat out say that sustainable growth (of any level) is impossible without debt is plain ridiculous. Coming from the mouth of one of Britain’s most powerful three bankers (CEOs of the big five banks minus RBS and Lloyds which are majority state-owned at present) this is all of remarkable, appalling and unsurprising.

Finally, what’s this about sustainable growth? Some might argue that the type of growth encouraged by debt is far less sustainable that growth produced by equity finance. But that’s for another time.


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