Public Sector Banks: From Black Sheep to Global Leaders

By Ellen Brown (Reprinted from Centre for Research on Globalization with permission of the author)

Once the black sheep of high finance, government owned banks can reassure depositors about the safety of their savings and can help maintain a focus on productive investment in a world in which effective financial regulation remains more of an aspiration than a reality. Centre for Economic Policy ResearchVoxEU.org.

Public sector banking is a concept that is relatively unknown in the United States.  Only one state—North Dakota—owns its own bank.  North Dakota is also the only state to escape the credit crisis of 2008, sporting a budget surplus every year since; but skeptics write this off to coincidence or other factors.  The common perception is that government bureaucrats are bad businessmen.  To determine whether government-owned banks are assets or liabilities, then, we need to look farther afield.

When we remove our myopic U.S. blinders, it turns out that globally, not only are publicly-owned banks quite common but that countries with strong public banking sectors generally have strong, stable economies.  According to an Inter-American Development Bank paper presented in 2005, the percentage of state ownership in the banking industry globally by the mid-nineties was over 40 percent.[i] The BRIC countries—Brazil, Russia, India, and China—contain nearly three billion of the world’s seven billion people, or 40% of the global population.  The BRICs all make heavy use of public sector banks, which compose about 75% of the banks in India, 69% or more in China, 45% in Brazil, and 60% in Russia.

The BRICs have been the main locus of world economic growth in the last decade. China Daily reports, “Between 2000 and 2010, BRIC’s GDP grew by an incredible 92.7 percent, compared to a global GDP growth of just 32 percent, with industrialized economies having a very modest 15.5 percent.”

All the leading banks in the BRIC half of the globe are state-owned.  In fact the largest banks globally are state-owned, including:

May 2010 article in The Economist noted that the strong and stable publicly-owned banks of India, China and Brazil helped those countries weather the banking crisis afflicting most of the rest of the world in the last few years.  According to Professor Kurt von Mettenheim of the Sao Paulo Business School of Brazil:

Government banks provided counter cyclical credit and policy options to counter the effects of the recent financial crisis, while realizing competitive advantage over private and foreign banks.  Greater client confidence and official deposits reinforced liability base and lending capacity.  The credit policies of BRIC government banks help explain why these countries experienced shorter and milder economic downturns during 2007-2008.

Surprising Findings

In a 2010 research paper summarized on VoxEU.org, economists Svetlana Andrianova, et al., wrote that the post-2008 nationalization of a number of very large banks, including the Royal Bank of Scotland, “offers an opportune moment to reduce the political power of bankers and to carry out much needed financial reforms.”  But “there are concerns that governments may be unable to run nationalised banks efficiently.”

Not to worry, say the authors:

Follow-on research we have carried out (Andrianova et al, 2009) . . . shows that government ownership of banks has, if anything, been robustly associated with higher long run growth rates.

Using data from a large number of countries for 1995-2007, we find that, other things equal, countries with high degrees of government ownership of banking have grown faster than countries with little government ownership of banks. We show that this finding is robust to a battery of econometric tests.

Expanding on this theme in their research paper, the authors write:

While many countries in continental Europe, including Germany and France, have had a fair amount of experience with government-owned banks, the UK and the USA have found themselves in unfamiliar territory. It is therefore perhaps not surprising that there is deeply ingrained hostility in these countries towards the notion that governments can run banks effectively. . . . Hostility towards government-owned banks reflects the hypothesis . . . that these banks are established by politicians who use them to shore up their power by instructing them to lend to political supporters and government-owned enterprises. In return, politicians receive votes and other favours. This hypothesis also postulates that politically motivated banks make bad lending decisions, resulting in non-performing loans, financial fragility and slower growth.

But that is not what the data of these researchers showed:

[W]e have found that . . . countries with government-owned banks have, on average, grown faster than countries with no or little government ownership of banks. . . . This is, of course, a surprising result, especially in light of the widespread belief—typically supported by anecdotal evidence—that ‘… bureaucrats are generally bad bankers’ . . . .

What accounts for their surprising findings?  The authors provide a novel explanation:

We suggest that politicians may actually prefer banks not to be in the public sector. . . . Conditions of weak corporate governance in banks provide fertile ground for quick enrichment for both bankers and politicians – at the expense ultimately of the taxpayer. In such circumstances politicians can offer bankers a system of weak regulation in exchange for party political contributions, positions on the boards of banks or lucrative consultancies.  Activities that are more likely to provide both sides with quick returns are the more speculative ones, especially if they are sufficiently opaque as not to be well understood by the shareholders such as complex derivatives trading.

Government owned banks, on the other hand, have less freedom to engage in speculative strategies that result in quick enrichment for bank insiders and politicians. Moreover, politicians tend to be held accountable for wrongdoings or bad management in the public sector but are typically only indirectly blamed, if at all, for the misdemeanours of private banks. It is the shareholders who are expected to prevent these but lack of transparency and weak governance stops them from doing so in practice. On the other hand, when it comes to banks that are in the public sector, democratic accountability of politicians is more likely to discourage them from engaging in speculation. In such banks, top managers are more likely to be compelled to focus on the more mundane job of financing real businesses and economic growth.

The BRICs as a Global Power

Focusing on the financing of real businesses and economic growth seems to be the secret of the BRICs, which are leading the world in economic development today.  But the BRIC phenomenon is more than just a growth trend identified by an economist.  It is now an international organization, an alliance of countries representing the common interests and goals of its members.  The first BRIC meeting, held in 2008, was called a triumph for former Russian President Vladimir Putin’s policy of promoting multilateral arrangements that would challenge the United States’ concept of a unipolar world.

The BRIC countries had their first official summit and became a formal organization in Yekaterinburg, Russia, in 2009.  They met in Brazil in 2010 and in China in 2011, and they will meet in India in 2012.  In 2010, at China’s invitation, South Africa joined the group, making it “BRICS” and adding a strategic presence on the African continent.

The BRICS seek more voice in the United Nations, the IMF, and the World Bank.  They are even discussing their own multicultural bank to fund projects within their own nations, in direct competition with the IMF.  They oppose the dollar as global reserve currency.  After the Yekaterinburg summit, theycalled for a new global reserve currency, one that was diversified, stable and predictable; and they have the clout to get it.  According to Liam Halligan, writing in The U.K. Telegraph:

The BRICs account for . . . around three-quarters of total currency reserves. They have few serious fiscal issues and all are net external creditors.

Western financial interests have long fought to maintain the dollar as global reserve currency, but they are losing that battle, despite economic and military coercion.  Russia, China and India are now nuclear powers.  The BRICS will have to be negotiated with, and the first step to forming a working relationship is to understand how their economies work.

Written for the Public Banking in America Conference April 27-28th, Philadelphia.


Ellen Brown is an attorney and president of the Public Banking Institute,http://PublicBankingInstitute.org.  In Web of Debt, her latest of eleven books, she shows how a private cartel has usurped the power to create money from the people themselves, and how we the people can get it back.  Her websites are http://WebofDebt.com and http://EllenBrown.com

America’s Credit and Housing Crisis: New State Bank Bills

By Ellen Brown (Reprinted from the Centre for Research on Globalization with the permission of the author)

Seventeen states have now introduced bills for state-owned banks, and others are in the works.  Hawaii’s innovative state bank bill addresses the foreclosure mess.  County-owned banks are being proposed that would tackle the housing crisis by exercising the right of eminent domain on abandoned and foreclosed properties. Arizona has a bill that would do this for homeowners who are current in their payments but underwater, allowing them to refinance at fair market value.

The long-awaited settlement between 49 state Attorneys General and the big five robo-signing banks is proving to be a major disappointment before it has even been signed, sealed and court approved.  Critics maintain that the bankers responsible for the housing crisis and the jobs crisis will again be buying their way out of jail, and the curtain will again drop on the scene of the crime.

We may not be able to beat the banks, but we don’t have to play their game.  We can take our marbles and go home. The Move Your Money campaign has already prompted more than 600,000 consumers to move their funds out of Wall Street banks into local banks, and there are much larger pools that could be pulled out in the form of state revenues. States generally deposit their revenues and invest their capital with large Wall Street banks, which use those hefty sums to speculate, invest abroad, and buy up the local banks that service our communities and local economies.  The states receive a modest interest, and Wall Street lends the money back at much higher interest.

Rhode Island is a case in point.  In an article titled “Where Are R.I. Revenues Being Invested? Not Locally,” Kyle Hencewrote in ecoRI News on January 26th:

According to a December Treasury report, only 10 percent of Rhode Island’s short-term investments reside in truly local in-state banks, namely Washington Trust and BankRI. Meanwhile, 40 percent of these investments were placed with foreign-owned banks, including a British-government owned bank under investigation by the European Union.

Further, millions have been invested by Rhode Island in a fund created by a global buyout firm . . . . From 2008 to mid-2010, the fund lost 10 percent of its value — more than $2 million. . . . Three of four of Rhode Island’s representatives in Washington, D.C., count [this fund] amongst their top 25 political campaign donors . . . .

Hence asks:

Are Rhode Islanders and the state economy being served well here? Is it not time for the state to more fully invest directly in Rhode Island, either through local banks more deeply rooted in the community or through the creation of a new state-owned bank?

Hence observes that state-owned banks are “[o]ne emerging solution being widely considered nationwide  . . . . Since the onset of the economic collapse about five years ago, 16 states have studied or explored creating state-owned banks, according to a recent Associated Press report.”

2012 Additions to the Public Bank Movement

Make that 17 states, including three joining the list of states introducing state bank bills in 2012: Idaho (a bill for a feasibility study), New Hampshire (a bill for a bank), and Vermont (introducing THREE bills—one for a state bank study, one for a state currency, and one for a state voucher/warrant system).  With North Dakota, which has had its own bank for nearly a century, that makes 18 states that have introduced bills in one form or another—36% of U.S. states.  For states and text of bills, see here.

Other recent state bank developments were in Virginia, Hawaii, Washington State, and California, all of which have upgraded from bills to study the feasibility of a state-owned bank to bills to actually establish a bank.  The most recent,California’s new bill, was introduced on Friday, February 24th.

All of these bills point to the Bank of North Dakota as their model.  Kyle Hence notes that North Dakota has maintained a thriving economy throughout the current recession:

One of the reasons, some say, is the Bank of North Dakota, which was formed in 1919 and is the only state-owned or public bank in the United States. All state revenues flow into the Bank of North Dakota and back out into the state in the form of loans.

Since 2008, while servicing student, agricultural and energy— including wind — sector loans within North Dakota, every dollar of profit by the bank, which has added up to tens of millions, flows back into state coffers and directly supports the needs of the state in ways private banks do not.

Publicly-owned Banks and the Housing Crisis

A novel approach is taken in the new Hawaii bill:  it proposes a program to deal with the housing crisis and the widespread problem of breaks in the chain of title due to robo-signing, faulty assignments, and MERS.  (For more on this problem, see here.)  According to a February 10th report on the bill from the Hawaii House Committees on Economic Revitalization and Business & Housing:

The purpose of this measure is to establish the bank of the State of Hawaii in order to develop a program to acquire residential property in situations where the mortgagor is an owner-occupant who has defaulted on a mortgage or been denied a mortgage loan modification and the mortgagee is a securitized trust that cannot adequately demonstrate that it is a holder in due course.

The bill provides that in cases of foreclosure in which the mortgagee cannot prove its right to foreclose or to collect on the mortgage, foreclosure shall be stayed and the bank of the State of Hawaii may offer to buy the property from the owner-occupant for a sum not exceeding 75% of the principal balance due on the mortgage loan.  The bank of the State of Hawaii can then rent or sell the property back to the owner-occupant at a fair price on reasonable terms.

Arizona Senate Bill 1451, which just passed the Senate Banking Committee 6 to 0, would do something similar for homeowners who are current on their payments but whose mortgages are underwater (exceeding the property’s current fair market value).  Martin Andelman calls the bill a “revolutionary approach to revitalizing the state’s increasingly water-logged housing market, which has left over 500,000 of Arizona’s homeowners in a hopelessly immobile state.”

The bill would establish an Arizona Housing Finance Reform Authority to refinance the mortgages of Arizona homeowners who owe more than their homes are currently worth.  The existing mortgage would be replaced with a new mortgage from AHFRA in an amount up to 125% of the home’s current fair market value. The existing lender would get paid 101% of the home’s fair market value, and would get a non-interest-bearing note called a “loss recapture certificate” covering a portion of any underwater amounts, to be paid over time.  The capital to refinance the mortgages would come from floating revenue bonds, and payment on the bonds would come solely from monies paid by the homeowner-borrowers. An Arizona Home Insurance Fund would create a cash reserve of up to 20 percent of the bond and would be used to insure against losses. The bill would thus cost the state nothing.

Critics of the Arizona bill maintain that it shifts losses from collapsed property values onto banks and investors, violating the law of contracts; and critics of the Hawaii bill maintain that the state bank could wind up having paid more than market value for a slew of underwater homes.  An option that would avoid both of these objections is one suggested by Michael Sauvante of the Commonwealth Group, discussed earlier here: the state or county could exercise its right of eminent domain on blighted, foreclosed and abandoned properties.  It could offer to pay fair market value to anyone who could prove title (something that with today’s defective title records normally can’t be done), then dispose of the property through a publicly-owned land bank as equity and fairness dictates.  If a bank or trust could prove title, the claimant would get fair market value, which would be no less than it would have gotten at an auction; and if it could not prove title, it legally would have no claim to the property.  Investors who could prove actual monetary damages would still have an unsecured claim in equity against the mortgagors for any sums owed.

Rhode Island Next?

As the housing crisis lingers on with little sign of relief from the Feds, innovative state and local solutions like these are gaining adherents in other states; and one of them is Rhode Island, which is in serious need of relief.  According to The Pew Center on the States, “The country’s smallest state . . . was one of the first states to fall into the recession because of the housing crisis and may be one of the last to emerge.”

Rhode Islanders are proud of having been first in a number of more positive achievements, including being the first of the 13 original colonies to declare independence from British rule.  A state bank presentation was made to the president of the Rhode Island Senate and other key leaders earlier this month that was reportedly well received.  Proponents have ambitions of making Rhode Island the first state in this century to move its money out of Wall Street into its own state bank, one owned and operated by the people for the people.


Ellen Brown is an attorney and president of the Public Banking Institute, http://PublicBankingInstitute.org.  In Web of Debt, her latest of eleven books, she shows how a private cartel has usurped the power to create money from the people themselves, and how we the people can get it back.  Her websites are http://WebofDebt.com and http://EllenBrown.com

Matt Taibbi: “Banks Sold Oregano as High Grade Weed”

In this 5-minute video, journalist Matt Taibbi talks to Occupy Wall Street and explains how the mortgage-backed security scam works.

What Does Thomas Ferguson Know That Other Political Scientists Don’t?

Thomas  Ferguson, professor of political science at the University of Massachusetts (Boston) and father of the “investment theory of party competition” is joining Alternet as a contributing editor. When asked what is unique about his method of analysis, this is what he said:

Tom Ferguson: My favorite short take is Andrew Gelman’s: “It’s interesting reading Ferguson because his perspective is completely different from most political scientists. We talk about opinion, he talks about money.” Of course, at some point we all take account of opinion data and I’m no exception. But, yes, the core differences relate to the meaning and role of money in elections.

Political parties today are first of all bank accounts: what is said to be the voice of the people is mostly the sound of money talking. With unions in decline and community organizations basically broke or dependent on philanthropy from the 1 percent, political party conflicts mainly represent battles between investor blocs. Election analysts of course need to study the votes, but their primary problem is to puzzle out the patterns of bloc formation taking form behind specific candidates. They have to look beyond the horse race and the rhetoric to identify the specific policies that these blocs are seeking.

Studying elections from this “investment” perspective changes everything. It matters whether someone’s campaign is chiefly aligned with, say, defense industries, finance, or oil. And analyzing campaigns in this way has real predictive power. It’s like an x-ray of the system. Contrast my prediction that Obama would not promote serious financial reform, published in April 2008, after I had analyzed early money in the primaries, with what virtually everyone else was saying then.

Or, look at Congress. Congressional polarization is plainly driven first of all by money flows, and not by public opinion. Both major parties now operate virtually a “posted price” system in which representatives essentially have to buy their committee chair slots by raising money for their colleagues and, crucially, for the national party political committees. These latter are controlled by the leadership, which thus acquires enormous power over the average member. The swelling resource imbalance makes crossing party lines very costly by comparison with a generation ago.

To see what Ferguson is predicting for the 2012 election cycle, continue reading here.

Fracking Bans that Can Stand

In New York, judges are standing up for communities’ rights to say no to corporate drilling.

By Maura Stephens (Originally published in Yes! Magazine, February 29, 2012)

In New York State, some 82 towns and counties have passed ordinances outlawing fracking, a natural gas drilling method known for causing severe water pollution. Another 35 have ordinances in the works. But until last week, no one knew quite what would happen when those ordinances were—inevitably—challenged by drilling companies.

Now, in a resounding win for activists, two different state Supreme Court justices have upheld fracking bans in two different New York towns.

Dryden gets active

This is the story of one of those townships, and how it came to be a leader in the fight against fracking. Dryden is home to some 14,000 people amid the rolling hills and glacial valleys of central New York. There, the economy has been sluggish for decades, farmers struggle, and people work hard yet barely make ends meet—making communities ripe for exploitation by an unscrupulous industry.

But the industry didn’t bargain for Hilary Lambert, or Judy Pierpont, or Marie McRae, or any of the tens of thousands of activists, or the dedicated pro bono attorneys who have mobilized to ban fracking in townships across the state before it begins. (New York currently doesn’t allow fracking, pending a review of the practice’s safety by the state Department of Environmental Conservation.)

Dryden residents began mobilizing around fracking in 2009, when a small group began meeting to discuss the issue. Dryden Resource Awareness Coalition (DRAC) evolved; its 10 to 20 most active members would become the core of the town’s efforts, but the organization has no real hierarchy or structure. And that’s the way they like it.

“Significant things can be accomplished by people operating as a collaborative with virtually no hierarchy, coming to consensus on both what’s the right thing to do and on how to get it done.”

“We set biweekly meetings, reserved space in Town Hall, and people just started showing up,” says Judy Pierpont, a retired professor. “It’s a very loose group. People found their niche and contributed in whatever ways they could. Anyone can participate. We have no officers. We work by consensus. People volunteer for things, and people emerge as leaders.”

That was a new experience for everyone, perhaps no one more so than Joe Wilson, who retired in 2009 from his long-time role as a high school principal.

“All my experience,” says Wilson, “had been in hierarchical organizations with formal planning. We even had plans on how to execute plans. I learned that significant things can be accomplished by people operating as a collaborative with virtually no hierarchy, coming to consensus on both what’s the right thing to do and on how to get it done. I also learned there’s power in such groups. It’s not futile to find grassroots groups that want what you want, band together, and lean on elected officials to move in the direction you favor.”

“We didn’t think we had a right to ban fracking.”

By early 2010, says Jason Leifer, a town board member who has served since 2007, at least some members of the board knew fracking was not something they wanted for Dryden. “I’d been reading blogs by people from other shale plays, in Texas, Wyoming, Colorado, who were writing about the bad things happening in their areas,” he says. “Spills, too many trucks, the trend toward suburban drilling. This was nothing like the old vertical wells.”

But in New York law, towns didn’t have the right to regulate drilling. Leifer and town supervisor Mary Ann Sumner began talking about how the town might deal with fracking if it were to come. “It seemed odd to me that we could have a say in cell towers — which have far less of an impact than a gas well,” says Leifer. “It made no sense. We should have some say in where these things go, if they go anywhere.”

“Initially, like the other communities, we didn’t think we had a right to ban fracking,” says Marie McRae, who owns and operates a small private horse boarding facility in Dryden. She had signed a gas lease in 2008 after being “chased by a landman for nine months,” she says. “He told me that all the other land around was leased, and if I didn’t sign they’d come and take the gas from my land anyway. ‘This lease is your last chance to have a say about what happened to your land,’ he told me. That’s a lie, as I later learned, but I signed. Then I curled up in a fetal position, mentally, for about six months.”

But then McRae, who had never been interested, let alone involved, in politics, woke up — and she has long since made up for any lost time. She joined DRAC, becoming a core member and frequent spokesperson.

The idea that an outright ban might be possible came via neighboring towns, including Ulysses, Danby, Ithaca, and Middlefield, which were pursuing their own bans. All were basing their work on the research of Ithaca attorneys Helen and David Slottje, who found that, while towns are not permitted within New York State law to regulate the natural gas drilling industry, prohibiting the activity of the industry in the first place avoids the problem of interfering in the industry’s conduct of its business.

“The people who believed fracking is ‘safe, clean, and domestic’… they’d heard industry ads and thought
of them as news.”

“These gas companies are waging war on people, on communities,” says Helen Slottje. “You see this kind of bullying all over. In West Virginia, Morgantown passed a ban, and Chesapeake [Energy Company] took away the money they were donating for the school band. The corporations get communities dependent on them, and then they use that dependence to buy silence. And many towns don’t have good legal representation, so they get bullied, beaten up. The gas companies launch smear campaigns and make people’s lives miserable. That makes me angry. That’s what motivates me.”

Through their Ithaca law firm, Community Environmental Defense Council, Inc., the Slottjes have counseled more than 50 municipalities around the state, doing all the work pro bono and relying on donations from individuals and foundations to help support the efforts.

All the towns were trying something totally new, blazing new ground, and with the Slottjes’ counsel, each community was trying to customize what would work for its own unique character and needs.

Convincing the community

After some Ulysses residents came to Dryden and gave pointers about how to petition for a ban, DRAC wrote a simple ban statement and began going door-to-door to collect signatures.

“We started out with about eight of us,” recalls Pierpont, “but then friends, and friends of friends, and friends of friends of friends joined. We also had an online petition, which was very helpful.” The canvassers found that 80 to 85 percent of those they approached were ready to sign the ban petition. But if people’s minds were made up on the other side, some would not even engage in conversation.

The people who believed fracking is “safe, clean, and domestic” shared their views and opinions in language that was straight out of gas company commercials, Wilson notes. They’d heard industry ads and thought of them as news.

“What people see on TV and in major publications is shaped by the gas companies’ ability to get broadcasters and reporters to use a position favorable to energy companies as a point of departure,” Wilson says. “They think they know facts, and therefore they disagree with us. Mainstream media are very powerful in creating frames of reference which we then have to deal with.”

During four months of canvassing, DRAC was also hosting community forums on fracking, where people could hear perspectives not generally available to those getting their news from mainstream media. That helped change some minds, reports Wilson.

“People who seemed to move opinion best were the physicians and scientists, considered bound by their professions to be even-handed, unbiased,” Wilson recalls. “People were also ready to sign if they’d gotten their information from [non-mainstream] sources, such as reading a letter to the editor from someone trusted in the community, or if the veterinarian they’ve been going to for a long time says fracking will harm animals.”

And the Slottjes, who patiently explained complicated legal matters over many visits to Dryden, were influential with residents as well as with the Town Board. They recommended that Dryden and other municipalities adopt a zoning law or amendment that specifically prohibits high-impact industrial use, which should be defined as “encompassing unconventional gas drilling and any other use they considered inimical to the municipality’s character and goals.”

The Dryden Town Board held two official public hearings, where the majority of speakers spoke against fracking. On April 20, 2011, at a board meeting packed with more than 100 residents, almost all of whom supported the ban, DRAC announced that it had gotten 1,594 signatures on the petition. Thirty of thFose signers got up to speak for two minutes each. Longtime resident and former Dryden Planning Board member Buzz Lavine said, as DRAC reported, “The federal and state governments cannot protect us. The power to do that is right here in this room.”

At that meeting an audience member warned that the town might be sued by a big gas company. David Slottje assured the board and the crowd that long legal precedent existed for towns to zone out undesired uses.

Industry fires back

On August 2, 2011 the Town Board voted unanimously for a ban on fracking, fully aware that a lawsuit might ensue.

It did. On September 16, 2011 Anschutz Energy Corporation, which had spent about $4.7 million on leases in Dryden, filed a lawsuit against the town to overturn the ban. They claimed that state law supersedes all local regulations relating to oil and gas activities except as applied to local roads and real property taxes.

But Judge Phillip Rumsey of the New York State Supreme Court ruled on February 21, 2012 that Dryden does indeed have the right to prohibit fracking in the town.

Some people think it’s likely Anschutz will appeal within the 30-day time limit. But, says Mahron Perkins, who has served as Town of Dryden attorney for 33 years and who presented the town’s case, “Judge Rumsey gave a very reasoned, well researched, well articulated decision. I think it’s going to stand up on appeal.”

Moving forward

In the meantime, at Wilson’s urging, DRAC members are also planning to get the town board to put in place secondary protections: road, air quality, critical environmental area designations, rules about setbacks around wellheads. “Our county’s council of governments has a spreadsheet that lists 15 or 16 different municipal tools to enhance the protection of citizenry against fracking,” says Wilson. “We’ll be working on model regulations for the so-called gathering lines, pipes taking the gas from wellheads to compressor stations. No one regulates them now—not the feds, or the state, or municipalities. Perhaps this is something municipalities can claim.”

“It feels like affirmation that when you have integrity in a legal
system, things can work… we were lucky to get an honest,
reasonable judge who looked at this very fairly.”

“Some people say that to say ‘No’ to natural gas makes you a NIMBY,” says Hilary Lambert, steward of the Cayuga Lake Watershed Network, who spent 16 years as a coal activist in Kentucky before moving back to her childhood home in Dryden. “We’re very concerned about this. It’s a crowded world, and it’s getting more crowded. We know we have to take care of everybody’s water, everywhere. We work with everyone across borders, across Appalachia and every other part of the country. Without clean water, we don’t have anything.”

In fact, some of the Dryden activists are already helping other towns build their case for a ban. “We’ve learned so much,” says Pierpoint. “We want to use that knowledge to help other communities.”

She adds, “It feels like affirmation that when you have integrity in a legal system, things can work. We were besieged by somebody with a lot of money and a certain ill will, and we were lucky to get an honest, reasonable judge who looked at this very fairly. We’re fighting to keep our communities safe, but also for the viability of our system of democracy. If we don’t defend it, it goes down.

“In this case, it worked.”

A concurring opinion

Middlefield, New York, a few hours to the east of Dryden, also outlawed fracking last year, with a zoning law banning heavy industry uses of land, including drilling for shale gas. Jennifer Huntington, a dairy farmer who had leased 380 acres of her land for drilling, sued the town, claiming that the ban caused her economic harm.

Three days after the Dryden ruling, another New York Supreme Court judge, Donald Cerio Jr., upheld Middlefield’s ban, finding strong merit in the argument that municipalities have the right to keep harmful activities out.

New York’s Little Revolution
How the state’s fight for clean water is reshaping its political landscape.

Attorney Helen Slottje saw it as a clear win, and wrote to her allies congratulating them for the hard work so many people had put into making local laws to protect their communities.

“We have been saying for some time now that towns had the right to zone out drilling activities,” she wrote on hearing the news from Middlefield.

“Industry has, and surely will, continue to engage in bullying, intimidation, and scare tactics against the citizens of the state of New York. But local elected officials across the state have stood strong and stood together, with the unflinching backing of so many of their residents in the face of these strong-arm threats.”

“Because the members of the town boards in Dryden and Middlefield were willing to exercise their right to protect their citizens and stood firm in their convictions, we now have definitive answers from two separate courts that clearly support local community rights.”


Maura Stephens wrote this article for YES! Magazine, a national, nonprofit media organization that fuses powerful ideas with practical actions. Maura is an independent journalist and associate director of the Park Center for Independent Media at Ithaca College and a founding member of the Coalition to Protect New York. She is writing a book, Frack Attack: Fighting Back, about unconventional gas drilling and the grass-roots people who are combating its dangers.

Interested?

Our Co-Owned Future

From health care to jobs to community development, why the future will be cooperative.

By Gar Alperovitz (Originally published in Yes! Magazine, March 2, 2012)

This is the second post in a series of three. Click here to read the first.

The explosive force of Occupy Wall Street—and more than a thousand other local efforts—offers hope that a movement committed to long-term change might one day achieve a fundamental transformation of the American political-economic system. Quietly, a different kind of progressive change is emerging, one that involves a transformation in institutional structures and power, a process one could call “evolutionary reconstruction.”

The first post in this series reviewed emerging possibilities for change in the financial sector both nationally, and state-by-state. This part takes up health care possibilities, along with the democratization of ownership now quietly going on in communities throughout the nation.

That a long era of social and economic austerity and failing reform might paradoxically open the way to more populist or radical institutional change—including various forms of public ownership—is also suggested by emerging developments in health care. Here the next stage of change is already under way. At first, it is likely to be harmful. Republican efforts to cut back the mostly unrealized benefits of the Affordable Care Act, passed in 2010, provide one example of this. The first stages, however, are not likely to be the last. Polls show overwhelming distrust of and deep hostility toward insurance companies. We can also expect public outrage to be fueled by stories like that of fifty-nine-year-old James Verone who attempted to rob a bank in Gastonia, North Carolina last year—but only, he made clear, for one dollar. The reason: unemployed and without health insurance, Verone simply saw no way other than going to jail to get health care for a growth on his chest, foot difficulties, and back problems.

Cost pressures are building in ways that will also continue to undermine corporations facing global competitors, forcing them to seek new solutions. A report from the federal Centers for Medicare and Medicaid Services (“National Health Expenditure Projections, 2009–2019”) projects health care costs to rise from the 2010 level of 17.5 percent of GDP to 19.6 percent in 2019. It has long been clear that the central question is to what extent, and at what pace, underlying cost pressures ultimately force development of some form of single-payer system—the only serious way to deal with the underlying problem.

A new national solution is ultimately likely to come either in response to a burst of pain-driven public outrage or, more slowly, through a state-by-state build-up to a national system. Massachusetts, of course, already has a near universal plan, with 99.8 percent of children covered and 98.1 percent of adults. In Hawaii, health coverage (provided mostly by nonprofit insurers) reaches 91.8 percent of adults in large part because of a 1970s law mandating low cost insurance for anyone working twenty hours or more a week. In Vermont, Governor Peter Shumlin signed legislation in May 2011 creating “Green Mountain Care,” a broad effort that would ultimately allow state residents to move into a publicly funded insurance pool—in essence a form of single-payer insurance. Universal coverage, dependent on a federal waiver, would begin in 2017 and possibly as early as 2014. In Connecticut, legislation approved in June 2011 created a “SustiNet” Health Care Cabinet directed to produce a business plan for a nonprofit public health insurance program by 2012, with the goal of offering such a plan beginning in 2014. In California, there is a good chance a universal “Medicare for all” bill may be on the governor’s desk for signature by mid-2012. (Similar legislation passed by both the House and the Senate was vetoed by then-Governor Schwarzenegger in 2006 and 2008.) In all, nearly twenty states will soon consider bills to create one or another form of universal health care.

One can also observe a developing institutional dynamic in the central neighborhoods of some of the nation’s larger cities, places that have consistently suffered high levels of unemployment and underemployment, with poverty commonly above 25 percent. In such neighborhoods, democratizing development has also gone forward, again paradoxically, precisely because traditional policies—in this case involving large expenditures for jobs, housing, and other necessities—have been politically impossible. “Social enterprises” that undertake businesses in order to support specific social missions now increasingly make up what is sometimes called “a fourth sector,” different from the government, business, and nonprofit sectors.

Roughly 4,500 not-for-profit community development corporations are largely devoted to housing development. There are now also more than eleven thousand businesses owned in whole or part by their employees; five million more individuals are involved in these enterprises than are members of private-sector unions. Another 130 million Americans are members of various urban, agricultural, and credit union cooperatives. In many cities, important new “land trust” developments are underway using an institutional form of nonprofit or municipal ownership that develops and maintains low- and moderate-income housing.

The various institutional efforts have also begun to develop innovative strategies that suggest broader possibilities for change. Consider the Evergreen Cooperatives in Cleveland, Ohio, an integrated group of worker-owned companies, supported in part by the purchasing power of large hospitals and universities. The cooperatives include a solar installation company, an industrial scale (and ecologically advanced) laundry, and soon a greenhouse capable of producing more than five million heads of lettuce a year. The Cleveland effort, which is partly modeled on the nearly 100,000 person Mondragón cooperatives in the Basque region of Spain, is on track to create new businesses, year by year, as time goes on. However, its goal is not simply worker ownership, but the democratization of wealth and community-building in the low-income Greater University Circle area of what was once a thriving industrial city. Linked by a nonprofit corporation and a revolving fund, the companies cannot be sold outside the network; they also return 10 percent of profits to help develop additional worker-owned firms in the area. (Full disclosure: The Democracy Collaborative, which I co-founded, has played an important role in helping develop the Cleveland effort. See www.Community-Wealth.org for further information on this and many other local and state efforts.)

Another innovative enterprise is Market Creek Plaza in San Diego. There a comprehensive, community-owned project links individual and collective wealth-building through a $23.5-million commercial and cultural complex anchored by a shopping center. The complex has developed a range of social and economic projects that have resulted in the employment of more than 1,700 people. Its multicultural emphasis on the arts has helped create several venues for common activity among the local Asian, Hispanic, and black communities.

Significantly, these collectively owned businesses are commonly supported by unusual local alliances, including not only progressives, labor unions, and nonprofit and religious leaders but also, in many cases, the backing of local businesses and bankers. The efforts have also attracted surprising political support. In Indiana, for example, Republican State Treasurer Richard Mourdock has established a state-linked deposit program to provide state financing support for employee ownership. At this writing, Ohio Democratic Senator Sherrod Brown has plans to introduce model legislation to support the development of an initial group of Evergreen-style efforts in diverse parts of the country. Environmental concernsare also involved; many of the enterprises are “green” by design, increasingly so as time goes on. Cleveland’s Evergreen laundry, which uses less than a third the amount of water used by comparable commercial firms, is one of the most ecologically advanced in the Midwest. In Washington state, Coastal Community Action (CCA) operates a portfolio of housing, food, health, and employment programs for low-income residents that uses development and ownership of a fourteen million dollar wind turbine to generate income to support its social service programs.


Gar Alperovitz is the Lionel R. Bauman Professor of Political-Economy at the University of Maryland and co-founder of the Democracy Collaborative. He is author, most recently, ofAmerica Beyond Capitalism: Reclaiming Our Wealth, Our Liberty and Our Democracy and, with Lew Daly, of Unjust Deserts: How the Rich Are Taking Our Common Inheritance. He is working on a new book on systemic institutional change.  This article is adapted from a piece in Dissent Magazine

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