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WE WILL HAVE PUBLIC BANKS
The power 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 each and every one of society’s organs, be they private businesses, not-for-profit organizations or government departments performing essential services. Look at the institutions around you. Without investment nothing moves, nothing works.
You might reason that a function so critical to society’s welfare would be administered in the public interest by democratically accountable public authorities. In the United States you would be wrong. Here, finance—our system of banks, credit and money and the power to decide which human desires and undertakings receive precious investment and which do not—is effectively controlled by unelected elites in the form of private banks. Their headquarter is Wall Street, not Washington, D.C. You need only consider the crumbling storefronts, sidewalks and roads in your town or those nearby to grasp the ruinous consequences.
There is an alternative proposal for how our system of finance could be organized to meet the needs of communities, including our own. 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. Worldwide, some 25 percent of banks are owned and operated by governments. 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 happily used it to support the state’s economy ever since.
Using the state’s tax revenue as its deposit base, the Bank of North Dakota works with private 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 collected 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 the bank provides to government and private borrowers is ballast that keeps the state’s economy upright in a storm, while 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 a transition to 100 percent clean, renewable energy well ahead of the 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 we have a future worth having, public banking will be part of it.
BY ALEXANDER REED KELLY