The power that finance holds over the quality and direction of our lives cannot be overstated. It is the muscular heart whose every beat directly or indirectly pumps essential nourishment—money—into every one of society’s organs, be they private businesses, not-for-profit organizations or government departments performing essential services. Look at the organizations of people around us. Without investment, what moves? What works?
You might reason that a function so critical to our common welfare would be administered in the public interest by democratically accountable public authorities. In the United States, you would be wrong! Our system of banks, credit and money and the power to decide which human needs and desires receive precious investment and which do not is effectively controlled by unelected elites in the form of private banks. Their headquarters is Wall Street, not Washington, D.C. We need only consider the crumbling storefronts, sidewalks and roads in our towns or those nearby to grasp the ruinous consequences.
There is an alternative way of organizing our system of finance to meet the needs of our communities. A decentralized network of state-, county- and city-owned banks would scatter from sea to shining sea the God-like power currently monopolized by Wall Street, granting communities and the state and local governments that are supposed to support them the independent power to create the investment they need to build and maintain the infrastructure and industries that are essential to civilized life. This is finance operated as a supportive public utility, not a private, profit-making enterprise.
It’s not just a nice idea. Governments own and operate some 25 percent of banks worldwide. Economists credit these institutions with helping enable the dramatic economic successes in recent decades of capitalist countries like China, Brazil, Russia and India. Just one publicly-owned depository bank exists in the United States, however. After briefly taking power in the 1910s, the socialist Nonpartisan League established the Bank of North Dakota in that state to make affordable credit available to farmers who couldn’t afford the usurious interest rates charged by out-of-state banks. Conservatives preserved the state bank when they retook power years later and have used it to support the state’s economy ever since.
With the state’s tax revenue as its deposit base, the Bank of North Dakota works with privately-owned community banks to provide low-interest loans to people looking to start businesses, buy homes or attend college, as well as government agencies undertaking public projects, including disaster relief. The interest earned on these loans returns to the state as new, non-tax revenue that is available to support the public budget or increase the bank’s lending power. Rather than displace community banks, the Bank of North Dakota partners with them to increase their security and ability to lend, filling the gaps that otherwise would exist in the state’s financial infrastructure.
The Bank of North Dakota also acts to stabilize the state’s economy in the event of a national or international financial crash. During the Great Recession, North Dakota suffered no bank failures. It ran budget surpluses and maintained one of the nation’s lowest home foreclosure and unemployment rates. The cheap credit provided by the bank is ballast that keeps the state’s economy upright in a storm. And public money is protected from the stock market casino gambling that destroys economies, communities and lives.
Legal experts suggest that Dutchess County, the City of Poughkeepsie and other Hudson Valley governments could quickly establish their own banks. In many cases we would simply transfer taxpayer funds from Wall Street to our shiny new public financial institutions. Once there, our money can be put to work financing essential public goods, such as social housing and a transition to 100 percent clean, renewable energy well ahead of targets set by New York State, all while creating jobs and generating wealth for our communities.
Banks situated within our communities and controlled by us can serve our needs and interests in ways that banks headquartered far away do not and cannot. If there is a future worth having, public banking will be part of it.
A version of this piece appeared in The Hudson Valley News