Cooperative Economics

Mug Shots and Bankruptcy Proceedings

May 11, 2018
Matt Stannard

The other day I stumbled upon this example of the practice of publishing people’s bankruptcy proceedings. Declare bankruptcy at the U.S. Bankruptcy Court in Spokane, and the Tri-City Herald will publish your name, address, total debts, and total assets.

They’re a matter of public record, of course, but one’s conscience asks why such painful information needs to be publicized in this way (if there are public policy-oriented reasons for disseminating bankruptcy information, surely there are better ways to do it), even as one’s legal mind may understand the theoretical reasoning: Bankruptcy is the public legal forgiveness of debt.

But as I cited in a recent public banking article over at Occupy, debt itself is a political and sociological invention.

In his 2011 book Debt: The First 5000 Years, anthropologist David Graeber chronicles the transition from communal systems of sharing – including shared obligations – to capitalism’s assimilation of all relationships into a system that generates profits for investors. Integral to that process is the individuation (and demonization) of debt, one of the many relationships that are stripped away, often through literal violence.

 

In addition to Graeber, in that article I also cite Linda Coco, a law professor and innovative legal clinician concerned with how debt and financial distress damage us. I learned about Professor Coco’s work when I read her 2016 article on bankruptcy as discipline in the Wyoming Law Review. Concerned with how bankruptcy court procedures construct and reinforce a narrative of fiscal failure, Coco concludes:

The bankruptcy petition codes [petitioner’s] financial life according to a legal and procedural logic found in the bankruptcy legal world . . . [their] financial lives and their identities are properly rendered into a recognizable pattern. Their information is fixed within the grid of the schedules and organized over time in the Statement of Financial Affairs. Their financial life is organized and controlled. It becomes legible in two-dimensional space. It is clearly analyzed and rendered for and in the bankruptcy process . . . a normalizing force in American social and cultural life. The internalization by disciplinary techniques of these dominant discourses results in the collective doxa of a group in which “more and more people must attune their conduct to that of others, the web of actions must be organized more and more strictly and accurately, if each individual action is to fill its social function. Individuals are compelled to regulate their conduct in an increasingly differentiated, more even and more stable manner.’  Therefore, discourses of economic utility and individual responsibility create the standards by which individuals compare themselves to each other, the manner in which individuals distinguish themselves, the way that individuals rank and measure each other, generate ideas of good and bad, and ultimately decide what is normal and abnormal behavior. The social group views individuals experiencing over-indebtedness and financial distress as aberrant. Financial failures are people who have not mastered the requirements of economic productivity and utility. According to the economic utility models, individuals experiencing financial difficulty are believed to be unable to exercise restraint and self-control.

Professor Coco’s article is a profound exposition of an insidious ideological machine. Another law professor, similarly concerned, is Mehrsa Baradaran, whose recent prolific work effort proposes that we create supportive, rather than adversarial, relationships with our financial structures. For Baradaran, this reformation includes a more authentic and class-conscious interpretation of the Bank Holding Company Act’s public benefits requirement, and the creation of postal banks with a mandate to provide credit and liquidity to the economically marginalized.

Those would be relatively modest reforms, if we’re being honest with ourselves. But conventional American economic thinking sees such proposals as pretty much Fully Automated Luxury Gay Space Communism. If such a reconciliation of Americans’ material vulnerability with the building of democratized and compassionate financial utilities is difficult to conceive in the present moment, one reason for this is the not just the ritualized discipline of financial failure, but also its ritualized spectacle. These newspaper bankruptcy notices are a manifestation of that spectacle. They are like, although perhaps not completely like, “mugshots” magazines available for sale (because people buy them) in gas station convenience stores across the Midwest.

“Of all capitalism’s tricks,” I wrote in the Occupy article, “the trickiest is convincing people that debt, credit and currency have an objective existence and power beyond what we give them.” Marching debtors out naked onto the public stage while their debts and assets are called out as dry, existing things is one way to reinforce that topos.

Featured image: Philip Nicholas Bankruptcy Proceeding, signed by John Quincy Adams as Commissioner.
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200 Red Balloons

He seems older to me.

Whatever else you want to say about Karl Marx (and there’s a lot to say, he doesn’t actually seem like someone I’d have wanted to be friends with), he had a profound, unprecedented critical sensitivity:

    • he possessed an empathy with the excluded periphery of the material and political world,
    • he was capable of finding the classist metaphysical assumptions, the cruel theology, in conventional assumptions about economics, and
    • he spotted, with precision, the ways in which symbolic, legalistic, institutional reforms failed to address the underlying problems they set out to reform.

Materiality always seems to have the last word, even though materialists have a mixed record on understanding oppression holistically. But you can’t get oppression without understanding how wealth, the generation of wealth, differences in wealth, control of systems of production large and small, contextualize it.

While I won’t defend those who insist that economics always comes first, it seems like the more pressing challenge always is convincing people it comes at all. There is a great material interest in obfuscating materiality.

Just search “Marx at 200” today and you’ll find many interesting reads, but a few that stand out are Andrew Hartman’s “Marx at 200: Just Getting Started” and Nigel Gibson on “why the workers’ way of knowing still matters.” Gibson writes:

In his last years, after the Paris Commune of 1871 when working people rose up against the capitalist state, he became interested in alternative paths to socialism. In his Ethnological Notebooks compiled in 1881, he critically read ethnographers, praising the freedom that the Native American Iroquois women had compared to women in “civilized” societies. It was live human beings and their reason that remained essential – not the mechanical materialism that Marxism is often reduced to. Marx was a revolutionary humanist, open to – and inspired by – the new passions and forces that spring up and open new avenues to a truly human society.

But he was also a materialist, and I think we have to be both and more.

matt

 

7 Reasons Your Economic Insecurity Isn’t Your Fault

. . . and why that matters

by Matt Stannard
January 29, 2018

The sobering assessment at the end of 2017 by Philip Alston, the UN’s special rapporteur on extreme poverty and human rights, concerning the 40+ million Americans living in poverty, left a question unasked: Why have there been so few effective grassroots political revolts against inequality and material deprivation in the United States?

The seeming lack of class consciousness is even more surprising when we consider that economic insecurity doesn’t just affect those below the poverty level: over 215 million Americans–which I count as 66 percent of the population–couldn’t cover a $1000 emergency with the money in their savings account. That’s over five times as many of us who technically live in poverty, and it suggests that economic insecurity is now an intrinsic feature of the American identity.

This knowledge alone, that there are well over 200 million people just like us, should help temper the feeling of failure that Americans tend to feel about their economic insecurity. But the cultural and rhetorical forces of capitalism are strong. The billionaire class invests a lot in teaching us that our material insecurity is our fault. That unique capitalist apologia has an illustrious history.

Such shaming, along with the condition of economic insecurity itself, extracts terrible tolls on our health, and makes us less effective in fighting the underlying socioeconomic and political conditions responsible for the difficult conditions so many of us are in. The shame of economic insecurity demoralizes and weakens us and makes it less likely we will join in struggle with others against unfair economic conditions.

So I actually hope that if you are economically insecure–whether in poverty or swimming a few days above it, as you read this short article, your shoulders will feel less tense, you’ll breathe more deeply, and let go of the guilt that the oligarchs and moralists want you to carry. Then, I hope you’ll find the strength and love to become more resolute in your determination to help create a world without this kind of abuse, and with the opportunities that come from egalitarian, cooperative security–the kind of world that, frankly, the majority of the world wants and has always wanted.

Here goes: This is a meditation. Your economic insecurity is not your fault because:

1. . . . wages aren’t under your control

Wages haven’t kept up with productivity gains or inflation over the last several decades. The work you are doing now could very likely have been enough, on its own, to support you and a few others, and own a house and car. Even low-income work could sustain a decent apartment. None of that is true anymore. The elites have many reasons for wanting to keep wages low in most sectors of the economy, including protection of their profits, but other reasons too. I’ll just let Richard Wolff explain it:

Capitalist enterprises keep moving their operations (first manufacturing, now also many services) from high to low-wage regions of the world to raise their profits. Departing capitalists leave their former host communities with unemployment and all its social costs. Such conditions force desperate competition for jobs that drives down wages and guts job benefits. Public services decline as government budgets suffer. Capitalism no longer delivers a rising standard of living in the regions where it began and developed first: Western Europe, North America and Japan. Instead of goods, capitalism delivers the bads.

Wages suck, the wage economy is designed to suck for most of us, and none of that is your fault.

2. . . . capitalism is like a roller coaster

Our economic system is subject to periodic crises. During those crises, people who’ve been “doing the right thing” all their lives are often ruined. A haunting Wikipedia page, “List of economic crises,” traces economic crisis from first century Rome to the present. The crises proliferate over time, with one crisis in the 14th century (it was a banking crisis), eight in the 18th century (including the Bengel Bubble Crash and the collapse of French enterprise on the Mississippi) to twenty five in the 20th century. Every economic crisis devastates countless lives and re-boots generational economics. Those devastated lives are then dehumanized further by public discourse blaming working class and poor people for the state of the economy.

3. . . . capitalism reproduces itself in social relations

Although pointing this out makes postmodernists cringe, it’s not unreasonable to conclude that the way a society produces and distributes its goods, and the patterns of mass scarcity that may result from inequality, influence the way we interact with each other vis. institutions and cultural behavior. We can debate about how much, but it seems to me that economic determinism is more true the poorer or more insecure you are, which is another way of saying that scarcity “overdetermines” the cultural expression of economic relations.

A description of the important anthology Millennial Capitalism and the Culture of Neoliberalism lists those various relational themes:

how the triumph of the free market obscures rising tides of violence and cultures of exclusion, and the growth of new forms of identity politics. The collection also investigates the tendency of neoliberal capitalism to produce a world of increasing differences in wealth, environmental catastrophes, heightened flows of people and value across space and time, moral panics and social impossibilities, bitter generational antagonisms and gender conflicts, invisible class distinction, and “pariah” forms of economic activity.

4. . . . a few powerful entities could make the system work for us all but won’t do it

Although pointing this out makes revolutionary socialists cringe, a few basic reforms –far from the new paradigms of ownership cooperativists ultimately advocate — could solve many, if not all, current manifestations of economic insecurity. A reasonable regime of taxes on capital and the recovery of the trillions of dollars hidden in tax havens could eliminate the effects of poverty and economic insecurity, if not the root causes. All that would take is a tiny group of Americans deciding to end their intransigence on just taxation–but we all know this is unrealistic.

But please tell us more about how our inability to rent one-bedroom apartments in Denver and San Francisco is our fault.

5. . . . “money” is a construct

The increasing realization among scholars and activists that “fiat currency is a social construct” could not have come at a better time. Economist James Galbraith calls the axioms of Modern Monetary Theory “factually uncontroversial.” Governments choose to order and symbolize their financial endorsements the way they do. Both governments and banks create what can be called money, and the real questions are how to manage that process, how to incentivize social goods and ameliorate social bads and deal with other actors, like workers, businesses, and consumers. As Atossa Araxia Abrahamian explains:

The decisions about how to issue, lend, and spend money come down to politics, values, and convention, whether the goal is reducing inequality or boosting entrepreneurship. Inflation, MMT’s proponents contend, can be controlled through taxation, and only becomes a problem at full employment—and we’re a long way off from that, particularly if we include people who have given up looking for jobs or aren’t working as much as they’d like to among the officially “unemployed.”

Irrespective of what money “is” in either a metaphysical or practical sense, the value of your money is not under your control. When our parents accused us of “not knowing the value of a dollar,” they were more correct than they knew.

6. . . . “work” is a construct

I remember sitting with activists at a community center in Detroit in a snowy January in 2014, talking about their revolutionary approach to inner-city unemployment. The reemergent phrasing was that there’s no jobs but plenty of work. This truth has been pointed out all over the country. Anyone looking around immediately sees things to do–things that would improve life for everybody, things that could make the planet happier, busy work, dirty work, dignified work. Under our current wage-based paradigm, “jobs” are what private shareholders want to extract from us to increase their profits, and whatever public and nonprofit work can be painfully extracted from these powerful interests. As our crumbling infrastructure and shrinking social service networks testify, there’s plenty of genuinely valuable work not being done.

Moreover, a “work week,” a reasonable number of hours to work in a day, the way differently-abled and differently-privileged people are capable of arranging their work lives? You guessed it: all arbitrary and a function of what economic elites want the extraction of your labor power to look like. For this caprice and myth of order, we’ve been shamed for our inability to always do the kind of work they want us to do.

7. . . . “personal responsibility” is a construct

Even if personal responsibility exists, a person can incur neither credit nor blame for endowments they possess or lack. Even if you can trace your financial mistakes–a job you fucked up, a bad marriage, a criminal record, these mistakes fall differently on different people. The late John Rawls caused a stir among philosophers of “moral desert” when, in A Theory of Justice, he argued that people cannot claim moral credit for their natural endowments and tendencies. Sure, Rawls argued, people can expect to get paid well for doing good work, but that doesn’t mean we deserve or do not deserve good things in a general sense based on what we’re good or not good at.

People resist this because they think personal responsibility is important. But, like the foundational assumptions of MMT, the assumptions of Rawls’ dismissal of moral desert are perfectly reasonable, and their consequences are dependent upon what we do with the understandings we have of our moral, material, and political agency. The real question isn’t whether you are genuinely or absolutely culpable for your individual economic condition (have I mentioned you aren’t?), but what we can do, acting together, to achieve real moral agency, which is control over our material lives.

The think tanks and spokespeople deeply invested in making you feel guilty for not having enough money to live are also deeply invested in systems of production and finance that ensure it will stay that way. As we stop feeling guilty, we’ll find new layers of energy with which to defeat and bypass them.

Should you hold yourself accountable for bad choices you made when you know you can “do better?” Sure, if you think it will help you do better. I’m not suggesting you shouldn’t. But we’re all part of a larger set of systems. We’re smart enough to understand that responsibility is dialectical. It’s just that we’ve been pushed so far in the direction of absolute moral desert that we are, per Kenneth Burke, “rotten with perfection.” We should try forgiving ourselves and each other and moving forward together to overthrow the existing economic order.

Matt Stannard is a legal and policy advocate for sustainable farming and cooperative economics.

Image: The Panic – Run on the Fourth National Bank, No. 20 Nassau Street. Illus. in: Frank Leslie’s Illustrated Newspaper, 1873 Oct. 4, p. 67.

A Stakeholders’ Case for Public Banking and a Public Cannabis Bank in California

by Matt Stannard and Marc Armstrong
Commonomics USA
Presented to Cannabis Banking Working Group, Los Angeles, California, August 10, 2017

As our organization, Commonomics USA, is concerned with policies that prioritize the commons, we talk a lot about stakeholders. Stakeholders are also an appropriate place to start in this meeting, because neither a Cannabis Banking Working Group nor a special session on public banking would exist but for strong public demands: for a policy of legal recreational cannabis, for financial protection and security for the MRB industry, and, as we’re seeing throughout California, for public banks.

 

 

When viewed from the lens of stakeholder needs, the question becomes what banking system creates security, predictability, opportunity, and sustainability for the primary stakeholders in California’s transition to a new cannabis economy. Those stakeholders are (1) California residents, who voted to regulate rather than prohibit recreational cannabis, but want to be free of crimes, including financial crimes, associated with marijuana-related finance and commerce; and (2), California marijuana-related businesses, of whom many cities are paying special attention to businesses emerging from communities historically victimized by the war on drugs.  In Commonomics USA’s experience, publicly-owned and maintained systems often do a better job meeting those particular needs–security, predictability, opportunity, and sustainability–than privately-owned systems, for the greatest number of stakeholders, and especially for disadvantaged stakeholders.

California needs a solution to the cannabis banking conundrum by January 2018. As statements to the Working Group have established, private banks are reluctant to “touch” cannabis money absent a prior “first touch” by the State of California. Although it is unclear whether the federal Department of Justice has the resources or political capital to hinder commerce in states that have legalized recreational cannabis, and experts have told this Working Group that the Cole Memorandum and FinCEN guidelines might “prove to be more resilient” than many suppose, federal prohibition is vexing, particularly with respect to financial transactions for MRB money, and especially against the backdrop of a DOJ led by a vocal critic of recreational marijuana.

The legal and policy context for these problems is ambiguous and unpredictable. The federal government has not explicitly asserted that states cannot set different controlled substance schedules and policies. As legal scholars have pointed out, certain provisions of the CSA seem to anticipate this. Moreover, the United States Supreme Court declined to hear an objection to state-level legalization from other states. Meanwhile, the state of California collects taxes and fees from California MRBs now and will continue to do so no matter how this Working Group answers the banking questions. The federal government, through the Department of Justice and Department of Treasury, has not seriously questioned the tax and fee revenue from California MRBs and there has not been a distinction between tax and fee revenues from medical and recreational cannabis .

This raises interesting philosophical questions: When the state government touches that money, what is the legal basis for it being clean enough to be deposited in a bank? Is the state compromising its fiduciary responsibilities by assuming that these monies are not at risk of seizure? Is mixing tax receipts between different industries merely perpetuating the obfuscation and lack of transparency of an underground economy? We ask these questions because we believe that the legal basis for the state’s ability to legitimize cannabis money needs to be built and made explicit.The federal government has jurisdiction over interstate commerce, but California needs to develop the legal and policy framework for in-state commerce of a product that is federally illegal and, in the case of recreational cannabis, potentially the target of federal hostility. A public bank solution will allow California the opportunity to express the first iteration of the terms of any such answer–by asking the administration and the Federal Reserve banks whether the policy objectives of federal financial crimes and drug laundering laws favor a centralized state bank in the driver’s seat, or a continuation of the decentralized, ad hoc, and often surreptitious practices of cash collection and quirky experiments by small private banks.

Rather than looking at this as a cannabis problem, this is really a banking problem–a problem of the inability/unwillingness of the private banking sector to address both a segment of the population and a pressing social need. That’s a familiar situation for those of us in the banking and public policy world–particularly those of us interested in public banks. In fact, as California stands at the precipice of a cannabis banking crises, it is also immersed in two other banking crises, slow-burning problems that hurt the state’s communities and its economy. The first is the economic toll that big private banks have taken on the state. California’s state and local treasuries have suffered greatly under the interest rates and fees charged by big banks, the costs of financing infrastructure and development, and the reluctance of private finance to fund the kinds of development Californians need. Capital appreciation bonds saddling school districts with interest charges that dwarf the size of the principle are probably the most egregious, but the results are the same: costly public financing, lack of access to financing for public sector goods, and a cynical sense that we can no longer afford to fund good ideas.

The second banking crisis is the unavailability of basic banking services to so many Californians. According to the 2015 FDIC National Survey of Unbanked and Underbanked Households, almost 900,000 residents of the state lack basic banking services, and thousands more — over 19% of households — are “underbanked,” meaning they subsist financially with short-term and very expensive services. Lack of access to affordable services contributes to financial precariousness and insecurity, which is harmful to the individuals, families, and communities affected, and a barrier to sustainable economic security across the state.

So privately owned banks seem to trip over a number of market failures, of which cannabis revenue is one. The reasons may be different–in the case of cannabis revenue, a heavy-handed federal government–but the common denominator is that the tendency to view banking as merely a business opportunity rather than a public utility has meant and will continue to mean that huge populations are unserved, and huge public needs unmet.

But the State of California stands in a unique position to take on these challenges. California is the sixth largest economy in the world. Policy-wise, it has pushed itself ahead of the federal government and much of the rest of the nation on policies from post-carbon energy to family leave, from struggling to forge a universal health insurance system to protecting immigrant communities. New government-owned, nonprofit JPAs are being formed to produce renewable energy. One might say California is forging a new economy. We think a new economy needs a new bank–a bank of its very own, that leverages the power of banking based on deliberative policy objectives rather than using profit and loss as a starting point for financial policymaking.

After studying public banks and public banking campaigns for many years, and listening intently to the discussions in these Cannabis Banking Working Group meetings, as well as several divestment and public banking meetings across the state, we offer this four-stage proposal as a starting point for discussion.

The first phase would be the drafting and legislative enabling of a public bank: The Department of Business Oversight would define a Public Bank Charter for a depository bank serving the unmet banking needs of the California public. California’s legislature would pass the enabling laws to support and protect this bank license. In this phase, the state would develop a business plan as part of its application to the Federal Reserve Bank of San Francisco for a master account number. We believe that this phase can begin immediately and, as a matter of fiduciary responsibility, would lower the risk of the subsequent phases. Should the Federal Reserve Bank of San Francisco grant the master account to this public bank without a fight, the landscape dramatically changes.

The first phase also includes capitalization. Many possibilities exist for capitalizing the bank, including debt or equity financing, issuing corporate bond and pension funds with the cannabis industry or the general public stepping forward to participate; or even constrained common stock in the fashion of the ownership of the Green Bay Packers.

In the second phase, the state bank creates depository services for MRBs and the unbanked and underbanked. Limited commercial account services could include demand deposit account services, cash concentration services, depository reporting, and automated payroll deposits for employees. Core, low-cost, retail banking services for the un- and under-banked market could include simple transactional and savings accounts, automated payroll deposit, peer-to-peer money transfer, international remittances, and debit cards. Low-cost methods used to access bank accounts could include online devices, existing ATM/Kiosks, and mobile phones.

In the third phase, the bank develops its capacity for risk management, compliance automation, and payment automation. The objective would be to lower the cost of compliance by using analytics and monitoring software to provide important reports using automated procedures and monitoring products. This Working Group has already heard about these capabilities from other participants. These products will provide greater transparency to the financial system. These participants have also mentioned payment automation capabilities, and we recommend that this phase includes this important technology. This can be done with an app that would complete payment transactions between cannabis consumers and cannabis businesses with an account at the public bank. If necessary or desirable, it could avoid the VISA, MasterCard and American Express network and transfer funds from the buyer’s California bank account to the seller’s account in the public bank.

In the fourth phase, the bank provides credit, lowering the cost of public financing, using public credit instead of taxpayer money or municipal bonds for the construction of schools, toll bridges, water and sewer systems, and a sustainable post-carbon energy system. Many additional public goods require financing and have huge social and economic payoffs, from affordable housing loan programs (including loans directed to public employees), that help people live in the same communities where they work, to loans for cooperative startups. The bank could also use its public credit to provide lower costs to wage earners saddled with student loan debt, helping a demographic that has, by many measures, gotten a raw deal in California.

There are four main benefits that a public bank can provide:

  1. Satisfies unmet market needs. In the event of market failures, when private banks are not able to meet the needs of the banking market, a public bank is able to be used to fill in the gaps, to provide deposit account and credit services where there are none.
  2. Cost savings. A public bank has a lower cost of doing business (no bonuses, no extreme salaries, no dividends, etc.) that can be passed on to borrowers, whether students, businesses or municipalities.
  3. Economic sovereignty. A public bank is a democratic approach to public finance, involving both the public and other stakeholders in the loan portfolio decisions.
  4. Counter Cyclicality. A public bank’s equity is not publicly traded on a stock market and is not subject to the same changes in valuation in as rapid a pace as we saw in 2008 and 2009 stock market, where some banks lost upwards to 80% of their equity. Because of this, public banks have the ability to continue to make loans precisely when private banks are terminating lines of credit, ending loan programs, and not accepting deposits.

Some folks, including a public official or two, are tired of public banking advocates bringing up the Bank of North Dakota. So we will only bring it up to explain that there are many roads to banking democracy This proposal, as presented, does not suggest transposing the BND model onto the State of California. It isn’t a proposal to use California’s assets to capitalize the Bank or to seek partnership with or underwriting of the private banking industry. In the wake of natural disasters, BND has the ability to make bridge loans to businesses and homeowners before they are reimbursed by FEMA and suspend mortgage and student loan monthly payments. In 2015, BND obtained more than $2.5 billion in public deposits through pledging services for private banks, in addition to providing $679 million of liquidity through BND’s secured and unsecured federal funds lines. Our proposal doesn’t preclude any of that, but it doesn’t require any of that.

The process outlined in our proposal should occur in tandem with the ongoing effort to relax federal law, consistent with the recommendations of Erwin Chemerinsky, Jolene Forman, Allen Hopper, and Sam Kamin, in their UCLA Law Review article “Cooperative Federalism and Marijuana Regulation.” Passage of the SAFE Act, a robust reaffirmation or strengthening of Cole-style and FinCEN guidelines, all as part of the ongoing effort to reach out to rational federal policymakers–who we believe really do outnumber the louder and less reasonable voices in Washington. California is likely to make that request to the federal government anyway. But doing so having created a public bank in the world’s sixth largest economy, a bank committed to financial oversight of cannabis banking as a matter of public policy, creates a very different context for the dialogue between the federal government and the states concerning cannabis.

Similarly, if it is to find any “banking”-based solution to MRB revenue’s federal illegality, California will inevitably have to face the question of obtaining a Master Account Number from the Federal Reserve Bank of San Francisco. Why not, then, have the State of California itself, on behalf of a state-owned bank with unprecedented control over the cannabis economy, make that application?

Most people in this room understand the general case for public utilities meeting unmet market needs and, specifically, public banking doing the same. As movements in Oakland, here in L.A., and in other parts of the state suggest, there is widespread support for exploring public banking in California. But the reason we’re having this conversation, here with the Cannabis Banking Working Group, is that this is a “try or die” moment for the cannabis banking question. Some entity or collection of entities must inevitably dialogue with the sources of current federal complications concerning cannabis banking. From a stakeholders’ perspective, we believe it makes a lot of sense for that entity to be the State of California–affirming the decisions the people of the state have made, owning those decisions.

This is a chess game, with economic sovereignty being the big win for California. Understanding the possible moves that the federal government can make is critical. We assume, for instance, that recreational cannabis tax revenue can be collected and placed in one of the state’s accounts in a private bank. What if, in the Attorney General’s quest to disallow recreational use of cannabis, this regulation is changed to disallow this recreational cannabis tax revenue from being legally deposited in private banks? California can collect the tax, but it’ll end up with the same banking issue now experienced by MRB’s. There will be yet another run on pickle barrels, only this time the state will be buying them.

What is needed is a body of state law that creates a Public Bank Charter (or license), defines “municipal affairs” for state charter cities, sets standards for in-state commerce of recreational cannabis, and protects Californians so that they may conduct safe economic transactions in the currency medium of choice.

A public bank can then be created in order to act as the organizational bulwark, protecting California’s interests by meeting unmet market needs and issuing deposit accounts to MRBs and the unbanked, efficiently handling the federally mandated compliance issues, automating payments (including tax payments), and making California’s economic sovereignty a reality.

A public bank acting as a necessary public utility that provides banking services to MRBs, to the unbanked and underbanked, and for lower cost infrastructure and commercial financing, can help California use its status as a global economic power, and its huge economies of scale, to create the appropriate financial infrastructure necessary for this undertaking. The decision to create such a bank as a solution to the cannabis conundrum would send an unprecedented signal to the world that California is stepping into a new cannabis economy and a banking economy that meets the needs of all Californians, businesses no matter the industry, and municipalities.

Matt Stannard is policy director of Commonomics USA. Marc Armstrong is president of Commonomics USA. 

Public Banks and Credit Unions: What’s the Difference?

by Marc Armstrong

Anything that takes control from Wall Street banks is viewed by many as a positive development. Public banks, credit unions, and, to some extent, the new fintech firms all do this: they change the competitive landscape and provide a variety of services that appear to compete with traditional banks. Two of these players, public banks (of which the Bank of North Dakota is presently the only one in the United States) and credit unions, are considered by some to be in the same space, but they are actually quite different. This post will map out some of the key similarities and differences.

Public banks are government owned entities that act in a not-for-profit capacity to finance public goods, with their earnings passed back to the people in the form of lower interest rates on loans or government dividends. Public banks have many measures of democratic control, such as a more participatory form of governance. But since low interest rates on loans and local control are also the hallmarks of credit unions, what are the differences between public banks and credit unions?

The main difference is distinct and important: Thanks to the banking lobby, federal law prohibits credit unions from making commercial loans that exceed 12.25% of their total assets. This is a significant limitation that keeps credit unions out of the core business of banks: issuing credit. Of course credit unions can make consumer loans and mortgages, but this focus on member loans, savings, and other consumer-oriented services places them in the same market as most retail banks.

publicbankingworksPublic banks, on the other hand, are in decidedly different markets: commercial lending and public finance. They can ignore the retail sector entirely and have laser-like focus on generating credit to fund commercial and infrastructure loans. Because there is no need to provide costly retail banking services, an already crowded market in many areas of the country, public banks can be the engine for a state or city’s economic development program by providing affordable loans. Anyone who supports a good idea like renewable energy, worker-owned cooperatives, or effective public transit systems knows that very often the roadblock for each is always the same — lack of money. Without taxpayer funding many of these ideas die or the implementation gets postponed. But with low cost credit, available through a public bank, many of these good ideas can get funded. A credit union does not have the lending capacity of a public bank to fund these kind of loans, many of which run into the hundreds of millions of dollars.

There are other differences. Public banks are owned by government entities, while credit unions are owned by their members, who are the depositors, and with whom credit unions work collaboratively to share resources for convenience and savings. CU Service Centers and the CO-op ATM Network are two examples of this cooperation, something that a public bank as we normally conceive it would not consider (although new forms of public banking are always possible).

Both government-owned public banks and cooperatively-owned credit unions are ways to create more democratic approaches to banking. While their differences are significant, they both move in the same general direction, returning banking to our communities and sharing in the many benefits that come from localized control of banking.

Marc Armstrong is the president of Commonomics USA and co-founded the Public Banking Institute.

What We’re Doing in Laramie

by Matt Stannard

Members of the Laramie Ecovillage Group, myself included, are in the process of creating an intentional, ecologically sustainable, income-sharing community near Laramie, Wyoming. If you share our values (cooperative culture, non-hierarchical economic communalism, deliberative democracy, commitment to personal and spiritual growth), you might consider reaching out to us and join us in committing our lives to a world beyond capitalism.

We consider our effort to be revolutionary in scope. All of us in the group are, in ways both different and similar, economic refugees. All of us are committed to both reducing the adverse impact humans have on the environment, and practicing a personal, radically intimate (while deeply respectful of personal security and space) localized socialism that we believe is conducive to a widespread transformation of economic and political systems. We share the belief that personal and social change ought to be complimentary, and reject the idea that we must choose between mass political change and local community building as “first priorities.”

We are committed to income-sharing because economic insecurity has killed those we love and has whittled away at our own lives. Our community will share in both debits and rewards, and we will practice carefully-planned scaling of costs and community enterprises to take advantage of the basic principles of economic cooperation. We are already forming one cooperative business enterprise and will facilitate more, aided by the plentitude of information about cooperative management from a variety of values-compatible sources.

Presently, we are exploring many land acquisition options, from community land trusts to cooperative or private purchase. We are looking at several pieces of land and have so far received one offer from a seller. Our group includes legal professionals and experienced intentional community consultants–and several people who have previously lived in intentional communities.

Next weekend, we are hosting a retreat, with around ten guests coming from outside of Laramie, for people interested enough in this project to spend the weekend with us discussing cooperative culture and economics, income-sharing, ecological sustainable community, and how people live communally.

If, in the course of reading this, you have found yourself feeling that this is something you’d like to do, if it has spoken to your deep sense that a community like this is possible, necessary, and a place where you would thrive, you should get in touch with us. Joining would follow a careful and conscientious process and a mutual decision between you and the community. You would need to be committed to becoming a better, more cooperative person always, and doing what you are capable of doing to contribute. It’s definitely not for everyone, but it could very well be for you.

What we’re doing isn’t unique. There are thousands of intentional communities, including many income-sharing communities. But we know what we’re doing will make a difference for our membership, and we hope it will help shape a world that desperately needs this kind of re-shaping.

Matt Stannard is policy director at Commonomics USA and a founding member of the Laramie Ecovillage Group.

The 2016 Elections: 6 Takeaways for the Economic Cooperation Movement

by Matt Stannard

1. Because capitalism. The election of America’s most prominently parasitic and malicious real estate capitalist to Chief Executive says “this is what happens, Larry.” An economic system based on predatory finance, making money through exploitation of labor, extraction of the planet, and the financial leverage of money itself, gets us mass immiseration, deep cultural divisions, irrationality-as-ideology, fake populism, incipient fascism. The 2016 election was an indictment of extract-and-exploit capitalism, not a vindication of it. Breathe deeply knowing that. Keep talking about it. More and more people will want to talk about it.

2. These Herberts won’t solve anything. The new (deeply incompetent and crony-driven) administration will push poorly-planned, graft-heavy infrastructure and other mega projects. It will continue to promise to bring back coal jobs and manufacturing jobs. All of the administration’s economic initiatives will likely be ecologically indefensible and not truly beneficial to the local economies they’ll purport to target. We have to keep emphasizing public and community finance, local protection of the commons, and the economic viability of cooperative communities.

3. Local politics matters now more than ever. We already know how fossil fuel giants manifest their politics via controlling state legislatures, and pro-carbon state-level politicians came out ahead in the 2016 elections. ALEC-like entities will continue to influence state and local governments. But this is also where we have the greatest chance of resisting bad policies and carving out exceptional, even revolutionary, communities. We must run for local offices and support legal efforts to increase municipal autonomy.

4. We are transpartisan. Democrats are demoralized, but many are eager to build a tycoon-proof society. Some Republicans are bright enough to see the reality of what they have created, ready to reject hate politics, and amenable to the localist component of our vision. Greens, Socialists, and others are still struggling for national relevance but have always had valuable knowledge of and commitment to cooperative economics (and those groups have run some great local campaigns that align with our values). A hell of a lot of people are unaffiliated and/or didn’t vote. Economic cooperation must be politically ecumenical in precisely the ways that bourgeois, corporate media-driven politics can never be.

5. Materiality intersects. We need to work on class, race, gender, sexuality, disability, indigenous rights, and other oppression points in our unique way: emphasizing the material components of identity-based oppression where activists inhabiting the conventional political economy cannot. While others are arguing about whether poor whites are more white than poor or more poor than white, let us create spaces where economic insecurity no longer sparks, exacerbates, or obfuscates identity-based prejudices. There will still be bigotry, but we can make it easier to fight it.

6. We are building the alternative. We have to keep building, building, building. Keep creating and converting worker-owned cooperatives. Keep creating and strengthening eco-villages, income-sharing communities, and community land trusts. Keep reminding cities and states that public banks offer independence from a federal government owned by Wall Street. Keep fighting every attempt to privatize the commons. Keep building cooperative culture, local currencies and time exchanges, strong social service networks and resource-sharing programs. Every time we demonstrate that cooperation works, the forces that gave us President-elect Trump lose. A cooperative economy is a material base against exploitation and fascism. Whatever the importance of other activism, this is the importance of ours.

Image: Union Cab workers in Portland, Oregon. Photo credit: NW Labor Press