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Monday, June 17, 2013

Tinkering with capitalism or thinking about revolution

Anyone who surfs the American left websites will eventually come across Ellen Brown and others such as Carl Gibson of the American wing of UNCUT and Professor Gar Alperovitz who are all full of praise for the Bank of North Dakota as an alternative model for the Wall St/City of London Big Bank system. It is held up as an example of a “good”  bank because it is owned by the actual State of North Dakota, gives business loans conditional on the business providing jobs, and returns some of its profits to the General Fund of the state.

SOYMB came across this critique of the BND by John Spritzler,  a writer we have previously linked to and his observations are worth quoting extensively to combat erroneous alternatives being put forward by supposed “radical” economists.

“The conditions that the bank makes for its loans are those required to make the business profitable, which include lowering the costs of production (just as today) and hence lowering the cost of labor (just as today) and hence reducing wages and benefits as much as possible. The workers are told to wear their "we are the owners" hat and accede to the logic of these demands...

...The example of the Bank of North Dakota (BND) that Gibson highlights is interesting to examine. This bank is the only bank in the United States that is owned by the state itself. Its existence raises two questions: #1) Can the negative consequences of the "coop" economic model based on production-for-profit be eliminated if banks like the BND replace traditional capitalist banks? #2) If so, what would it take to go from the present status quo to the full implementation of this solution?

Regarding question #1, the only way it would seem possible for a BND-type of bank to eliminate the problems caused by production-for-profit would be for the bank to give (for free, via the state or directly on its own) everybody the money they lacked to buy the things they needed but couldn't afford. The bank would in effect tell a business, "Produce X instead of Y, because even though the people who need X can't afford to buy it at the price you'd have to charge to make a profit, we (the bank) will give them the money to buy it." But this is equivalent to the bank saying, "Produce X instead of Y because the people need X, and we (the bank) will pay you directly (why pay you indirectly by giving money to poor people who then just turn around and give it to you?) enough money for you to make your profit." The bank, in turn, would get the money to make these payments by taking it from the profits of the businesses (as "interest" on a loan or on some other pretext.) What this ends up being is an economy that is not really based on production-for-profit at all anymore, but rather production for need, with those who need something getting it for free if the bank decides they deserve it.

This scenario represents something entirely different from the "coop" model based on production-for-profit; it is a sharing economy. In fact, the role of money would be entirely superfluous now. The bank simply tells workers what people need and asks them to produce it and give it to them for free, period. When cost/benefit decisions are made about trade-offs between the desirablility of using resources for this or that, it is no longer profit that determines the decision but the bank's considerations of the pros and cons of various choices. And if the bank is controlled democratically, and democratic decision-making is based on decentralized voluntary federation of local assemblies, then this scenario is what is described in what Dave Stratman and I wrote about in "Thinking about Revolution. "

Now let us consider question #2, about what it would take to achieve this desirable scenario. Do we merely need to set up some more "coop banks" like the Bank of North Dakota. This is what Gibson implies when he writes, "The cooperative economic model can also apply to banks, as seen in the Bank of North Dakota," as if nobody would mind if we created more and bigger BNDs. As nice as the currently existing Bank of North Dakota may be, it is the only such bank in the United States, and its role even in North Dakota is very small economically. The BND provided only $60 million to the North Dakota general fund during the 2001-3 biennium (the most recent biennium for which this figure is online). In stark contrast, the state's budget for the earliest biennium reported online (2005-7) is $5.5 billion, or almost 100 times what the BND contributes. Our society is one in which a very wealthy and powerful plutocracy prevents something like the BND from playing anything but a minor role. Wikipedia reports:

"Though initially conceived by populists in the Non-Partisan League as a credit union-style institution to free the farmers of the state from predatory lenders, the bank's functions were largely neutered by the time of its inception by the business-backed Independent Voters Association. The recall of NPL Governor Lynn Frazier effectively ended the initial plan, with BND taking a more conservative central banking role in state finance. The current president and CEO is Eric Hardmeyer, however the bank is managed by the North Dakota Industrial Commission, which is composed of the Governor, Attorney General, and the Agriculture Commissioner (formerly the Agriculture and Labor Commissioner) of North Dakota."

Since 2010 the governor of North Dakota has been Jack Dalrymple, a Republican businessman whose speech here indicates that he thinks things are good and getting better for people in his state. In truth, in the last two decades the average annual increase in income for North Dakota's poorest fifth of families compared to its richest fifth of families was $175 for the poorest versus $2,525 for the richest. Governor Dalrymple is the kind of person who manages the Bank of North Dakota today. Expanding the magnitude enormously and drastically changing the nature of the role of the BND to the point where egalitarianism prevails would clearly require abolishing the power of the wealthy class that currently rules North Dakota and the rest of the nation. This is not something that can happen without at some point confronting and defeating the full power of the American ruling class with an explicitly revolutionary mass movement....”

Like ourselves in the World Socialist Movement, Spritzler advocates “...an egalitarian society with an economy based on sharing according to need instead of buying and selling for profit, and a vision of genuine democracy...” and, also like ourselves, against the arguments of proponents of co-operatives Spritzler explains that “It is not possible to abolish a social and economic system based on inequality by "sneaking" in a different system without confronting and defeating the plutocracy whose wealth, power and privileges depend on keeping the present system.”

The companion blog Socialist Courier recently carried a post on co-operatives 
A post on co-ops on  SOYMB can be found here 

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