By Dan Kervick
According to their website, the Alternative Banking Working Group is “a group of concerned citizens, activists, and financial professionals with two goals: the first is to explore and, if possible, establish alternative banking systems that might replace the current system. The second goal is to broadly understand and educate people about the current financial system, as well as come up with short and long term plans to improve it.”
A member of the working group, Chris Wroth, recently posted a call for a proposal to be presented to the Occupy Wall Street General Assembly, with the aim of achieving a consensus on “an effective fiscal/monetary policy for addressing the problems of wealth inequality and economic injustice.” Sensibly, Wroth called for a proposal that is “short, simple, and sweet.” He suggested that “to reach consensus a proposal will have to be boiled down to a few clear sentences. (Something that can be read and understood in less than a minute?).”
But Wroth made a further suggestion that I found perplexing:
“So, to offer a starting point: Can we discuss the possibility of making the proposal about the federal budget and federal fiscal/monetary policy – ignoring the private banking/investment sector? If we focus on the money that is held in common and owned by the people, then we are focusing on the money that is legally held in common, not held by individuals. By law, government (public) money is the only money that MUST be used for public purpose. (Private money can be voluntarily offered for public purpose, but not expropriated without an eminent domain ruling or some other court action.)”
The notion that private money can only be “expropriated by an eminent domain ruling or other court action” seems strange. There are perfectly ordinary and straightforward methods for converting privately held funds into public funds and for converting public funds into private funds: these are the methods of taxing and spending. Every time the US Congress or some other legislative body passes a tax law and collects taxes, the government expropriates privately held money and transfers it to the public treasury. And every time the government spends money out of the public treasury by making a payment to someone in the private sector, it converts publicly held money into privately held money. These are routine, core process of democratic government.
So while it might be true, narrowly speaking, that only public money must be used for public purpose, it is also true that it is the public that ultimately must decide where the line between public and private will fall. Furthermore, the dollar system is fundamentally a public utility. Every additional dollar in our system is in one way or another created under the public’s monetary authority. Whether a dollar ends up being privately or publicly held is always a question of public policy and public choice. It does not reflect any deep distinction between the kinds of dollars involved.
Similarly, the private banking system is a network of institutions that are charter members of the Federal Reserve System. The Federal Reserve System is a public institution created by Congress under the monetary authority granted to Congress by the US Constitution. Its governors are appointed by political leaders in Washington, and it is required to report to Congress on its actions. It is currently the central institutional framework through which the United States government implements its monetary policies. Given the social importance of that framework, it seems forced and unnatural to attempt to divorce resolutions about the future of the federal budget, fiscal policy and monetary policy from questions about the future of the private banking and investment sector.
So why leave the monetary system and the private banking system off the table? We all want a healthy balance between private initiative and public action, and some protective boundaries between the private and public sphere. But we shouldn’t presuppose that the exiting balance is healthy or that the existing boundaries should be granted undue deference. I would be surprised to learn that the Occupy movement is so captive to conservative, laissez faire notions about the inviolable sanctity of private property and the independence of private banks that it can’t achieve any resolution about our country’s economic future unless these questions are shunted aside.
And so what would I propose if I were the one offering a resolution? Mine would go something like this:
1. The dollar is the American people’s national currency, and the dollar system exists to serve public purpose. Monetary policy must be subject to effective democratic oversight and direction. It is time to end central bank independence in its current form, and replace the outmoded and poorly accountable banker’s technocracy known as the Federal Reserve System with a more democratic and accountable system.
2. The wealth and prosperity of the nation depend on the engaged commitment of its people, and on their willingness to act as democratic stewards of the nation’s real resources, and to invest those resources as necessary to create the country they will bequeath to posterity. We call for an end to the fatalistic passivity of neoliberalism and laissez faire economics, and call for a second New Deal era of activist government and public engagement in building our economic future. The second New Deal will organize public investment in projects whose vision and ambition is equal to the spirit of an industrious, ambitious and hopeful people. These projects should include lifelong public education of all of our people; a determined effort to save our environment from the ravages of climate disorder; and the pursuit of bold and visionary transformations of our energy system and infrastructure.
3. Democracy cannot survive in an environment of profound economic inequality. We must take firm and deliberate steps to restore social justice and broad prosperity, to build social solidarity based on democratic equality, and to end the grotesque exploitation, inequality and economic hierarchies that have poisoned our democracy and destroyed security and prosperity for millions of Americans. The American people did not ask for class war, but they we will fight back in the war that has been taken to them by a plutocracy that has captured and subverted American democracy and destroyed public morale and the social fabric.
4. Social solidarity in a democratic society is based on a contract of mutual obligation among that society’s citizens. The contract is based on a willingness of all citizens to dedicate their own talents and industry to others for the good of their society, and a corresponding commitment to provide each of its citizens with the means and opportunity to participate with their labor in the pursuit of the common good. The United States must therefore commit itself to a national policy of true full employment, anchored in a guaranteed job for each American able and willing to work, and a guaranteed level of income commensurate with the dignity of equal citizenship.