Public Banks as the Antithesis of Neoliberalism

I’m for public banks because people have a right to share in sustainable abundance, such abundance is relatively easy to achieve structurally and democratically, and neoliberalism’s reliance on the private sector to get us there is foolish.

The Commission on Social Development is a sub-body of the United Nations Economic and Social Council. In 1995 the Commission hosted a Summit on Social Development in Copenhagen, which the United States attended — sending a contingent led by then-Vice President Al Gore. All participating nations at the Summit signed its set of conclusions, the Copenhagen Declaration on Social Development. The Declaration held that the Commission’s task was “to address both [the] underlying and structural causes” of poverty, unemployment, and social exclusion, and “their distressing consequences in order to reduce uncertainty and insecurity in the life of people.” The agreement wasn’t law, it wasn’t enforceable even by the limited standards of international law, but it established a public and agreed-upon moral framework among its participants, good enough to at least inform a conversation on economic policy in these troubling and rapidly-changing times.

The Copenhagen Declaration was riddled with the contradictions of bourgeois political economy — contradictions that have heightened a lot in the 20 years since the Summit. Although the document argued that economic and environmental insecurity were intimately related, it clung to “economic growth” as a prerequisite to “social justice,” albeit in the context of sustainable development. Classical models of productivity ran through the rhetoric, from lamenting the “ineffectiveness in the functioning of markets” to utilizing the language of “opportunity” — complete with availability of credit as a model solution. “Productive employment and work” was similarly unreflective. The “liberalization of trade and investment” were assumed to be necessary for “sustained economic growth and the creation of employment.”

Today we know that there is plenty of work, but much of it no longer fits (if it ever did) into Fordist models of structural employment. In the developed world in particular, we know that the elites don’t even want everyone to be employed, that artificial scarcity is necessary to justify the continuation of whole categories of financial practices, and that traditional employment is vanishing while working people’s financial obligations are not. However imperfect, the 1995 Declaration contained seeds of hope that, when planted in the soil of a New Economy, could produce far better fruit than the bitter trees of neoliberalism. It insisted that people “are entitled to a healthy and productive life in harmony with the environment.” And it recommended social expenditures for the poor in language that didn’t suggest “workfare” or other exploitative shams.

Vice President Gore’s statement at the Summit, on behalf of the United States, showed much more concern for environmental reform (which Gore has always filtered through the lens of corporate capitalism) than economic reform. Restructuring was necessary for environmental solvency, Gore’s rhetoric seemed to imply, but he framed poverty along very neoliberal lines. His articulation of the foundational poverty question of the Summit was: “What can be done to lift the poorest of our citizens into productive lives?” And he viewed humans, from healthy and productive to sick and uneducated, as “unrealized economic and social potential.” Potential for what? The answer would come in his administration’s NAFTA push, and something even worse. In his statement, Gore said:

We [the Clinton administration] are working now to create a more vital relationship between the government and the people. We cannot succeed if we treat the poor solely as passive recipients of assistance — whether for welfare, food stamps or medical care. We are instead designing an approach that empowers people to be active partners in the management of their own fates. We have to find new links to our own people — with a government that works better and costs less, and focuses on results.

The new “approach” Gore was talking about was the Personal Responsibility and Work Opportunity Act, a devastatingly awful piece of legislation that bought into the twin false narratives of economic scarcity and poverty-as-personal failure and outflanked the Republicans by driving millions of people into material desperation. In a 2012 article, Jason DeParle articulated the devastation:

. . . much as overlooked critics of the restrictions once warned, a program that built its reputation when times were good offered little help when jobs disappeared. Despite the worst economy in decades, the cash welfare rolls have barely budged . . . Even as it turned away the needy, Arizona spent most of its federal welfare dollars on other programs, using permissive rules to plug state budget gaps. The poor people who were dropped from cash assistance here, mostly single mothers, talk with surprising openness about the desperate, and sometimes illegal, ways they make ends meet. They have sold food stamps, sold blood, skipped meals, shoplifted, doubled up with friends, scavenged trash bins for bottles and cans and returned to relationships with violent partners — all with children in tow.

. . . Poor families can turn to other programs, like food stamps or Medicaid, or rely on family and charity. But the absence of a steady source of cash, however modest, can bring new instability to troubled lives.

. . . if the rise in employment was larger than predicted, it was also less transformative than it may have seemed. Researchers found that most families that escaped poverty remained “near poor.” And despite widespread hopes that working mothers might serve as role models, studies found few social or educational benefits for their children. (They measured things like children’s aspirations, self-esteem, grades, drug use and arrests.) Nonmarital births continued to rise. . . . the number of very poor families appears to be growing.

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.