Public Banks as the Antithesis of Neoliberalism

The United States’ participation in the Copenhagen Summit, and its signature on the nonbinding Declaration, raises the question of what governments are supposed to do to domestically enact the soft norms they’ve officially and ceremonially agreed are important. At least two United Nations experts have weighed in on the role of income distribution and poverty in the enactment of international human rights norms. José Bengoa, Special Rapporteur to the Sub-Committee on Prevention of Discrimination and Protection of Minorities wrote in 1997 that it was reasonable for human rights monitors to note: 

when situations are occurring where the high concentration of wealth in a few hands is producing devastating social effects with consequences so serious as to threaten the ‘social integration’ of the society in question, or at the international level, the balance of a given region . . . From a human rights perspective, it is generally felt that [extreme inequality and wealth concentration] would entail violation of the economic, social, and cultural rights of the population, incurring permanent discrimination and violation of the fundamental rights of individuals . . . Poor income distribution constitutes a specific type of discrimination that very often aggregates with other discrimination . . . and has as a consequence the new forms of poverty that are the scourge of the world today. 

And, scholar A.M. Lizen, an expert on the Commission on Human Rights, explained in 1999 that the most appropriate domestic implementation of socioeconomic rights is structural, listing “infrastructure targeted for low-income communities,” “access to basic social services for all,” and “sustainable livelihoods for the poor, including access to productive assets such as credit.”

Talking about a human right to economic security, by the way, isn’t outlandish or hyperbolic. It’s far less incendiary than what the current pontiff is saying:

Referring to businesses that hire employees on part-time contracts so they don’t have to provide health and pension benefits, Francis said Thursday (May 19) that was akin to sucking the blood from their workers’ veins, leaving them “to eat air.” “Those who do that are true leeches, and they live by spilling the blood of the people who they make slaves of labor” . . . “We thought that slaves don’t exist anymore — they exist,” the pope said. “True, people don’t go and get them from Africa to sell them in America anymore, no. But they exist in our cities. And there are traffickers, those who use people through work without justice.” 

That moral posturing, combined with the recognition that material deprivation is a form of discrimination and constitutes a violation of human rights, is historically appropriate. Put together, Lizen and Bengoa’s analysis suggests that there is a human right to economic security, in the absence of which people suffer acute discrimination; and that the best way to execute that right is through structural reforms aimed at material accessibility.

Which brings us to public banking—everything from large-scale infrastructure and business lending (if we actually want to make market economies work for everyone, or if we want to experiment with alternatives, public banks to finance those alternatives), to postal or other banks to lend credit and even facilitate direct cash transfers or basic income as it becomes increasingly clear that old models of business and productivity do not account for new economic realities, from labor-saving innovations to the ecologically necessary transition away from extraction and exploitation. 

Public banks work. They fund public goods, they can be engineered to facilitate sustainable economies, they can be made 100% transparent and democratically accountable, and they have no institutional incentive to gamble on misfortune and misery. Utilizing them would shatter the illusion that there is some kind of fiscal scarcity that functions in the same way as the scarcity of natural resources. The very existence of public banks capable of democratizing the creation of money refutes false scarcity and clarifies what we don’t have enough of (and must therefore manage) and what we have an abundance of (and must therefore share).

One can and should read the literature for and against public banking, the variety of methods to implement it, and the experiences of those groups around the United States who have been pushing for several years now to get public banking bills out of committee and onto legislative floors. One should observe how vociferously and vacuously opponents of public banking—so very often supported by big private financial interests—churn out bad arguments against it. But if you don’t have time to study all of that, the foundational justification for public finance is simple: Although material resources are scarce, money is a social construct. That doesn’t mean we ought to create money carelessly, but it does mean we create money. So the only questions are who ought to control that process, and how to prioritize the applications of its power. The people should be in control, and private interests making money from money is socially destructive. 

The Clinton administration didn’t understand this in the 1990s. The Bush administration that followed didn’t even understand that it didn’t understand it, and the Obama administration, in continuing a weak approach to Wall Street regulations, while pushing “managed” private health care and neoliberal trade agreements, and demanding energy transitions with only half-measures of economic security for energy workers, has been disappointing. Both parties have thoroughly bought into monetarism and neoliberalism, allowed Wall Street to steal hundreds of billions of dollars from municipalities, and maintained a narrative (albeit occasionally standing on distinct sides of it) that assumes people only deserve economic security through hard labor that adheres to a capitalist business model and that the transition to ecological sustainability, like the transition to universal health coverage, must be filtered through the demands of big capital. The idea that a corporate-bred thuggish “strongman” in the executive office can somehow solve all of this is also frustratingly hilarious.

But do we need the federal government to implement this particular iteration of socioeconomic rights and economic democracy? Maybe not. States and municipalities are great sites for public banks, because they are where the most effective resource management decisions can be implemented, and they are where human needs and cooperative economic solutions are most readily apparent. Consider the damage done by irresponsible financial marketization of city budgets, underfunding and deindustrialization of major cities, and the gentrification that occurs when cities begin to thrive. 

Public banks can help municipalities create and fund work-spaces for nontraditional work reflective of the new economy. They could do so if they took their money out of Wall Street banks and created their own North Dakota- or German-style public banks. Some communities are already experimenting with cooperative and sustainable economies that reward, rather than punish, residents who only want to (or can) work part time. There are housing alternatives that would fit more small-scale and sustainable models. The case for funding all of this rather than relying on neoliberalism’s repackaged trickle-down economics is strong.