By David Morris
Reprinted with permission from the Institute for Local Self-Reliance
[Editor’s Comment: Note in the article that follows the discussion of the Bank of North Dakota, which has received particular attention in the last few years because of its beneficial role in helping North Dakota weather the storms of the Great Recession. Note especially in this regard the writings of Ellen Brown, President of the Public Banking Institute, author of Web of Debt and the The Public Bank Solution. See also her article, “NORTH DAKOTA’S ECONOMIC “MIRACLE”—IT’S NOT OIL.”]
On June 14th, North Dakotans voted to overrule their government’s decision to allow corporate ownership of farms. That they had the power to do so was a result of a political revolution that occurred almost exactly a century before, a revolution that may hold lessons for those like Bernie Sanders’ supporters who seek to establish a bottom-up political movement in the face of hostile political parties today.
Here’s the story. In the early 1900s North Dakota was effectively an economic colony of Minneapolis/Saint Paul. A Saint Paul based railroad tycoon controlled its freight prices. Minnesota companies owned many of the grain elevators that sat next to the rail lines and often cheated farmers by giving their wheat a lower grade than deserved. Since the flour mills were in Minneapolis, shipping costs reduced the price wheat farmers received. Minneapolis banks held farmers’ mortgages and their operating loans to farmers carried a higher interest than they charged at home.
Farmers, who represented a majority of the population, tried to free themselves from bondage by making the political system more responsive. In 1913 they gained an important victory when the legislature gave them the right, by petition, to initiate a law or constitutional amendment as well as to overturn a law passed by the legislature.
But this was a limited victory for while the people could enable they could not compel.
In 1914, for example, after a 30-year effort, voters authorized the legislature to build a state-owned grain elevator and mill. But in January 1915 a state legislative committee concluded it “would be a waste of the people’s money as well as a humiliating disappointment to the people of the state.” The legislature refused funding.
A few weeks later, two former candidates on the Socialist Party ticket, Arthur C. Townley and Albert Bowen, launched a new political organization, the Non Partisan League (NPL). The name conveyed their strategy: To rely more on program-based politics than party-based politics. According to the NPL its program intended to end the “utterly unendurable” situation in which “the people of this state have always been dependent on their existence on industries, banks, markets, storage and transportation facilities either existing altogether outside of the state or controlled by great private interests outside the state.”
The NPL’s platform contained concrete and specific measures: state ownership of elevators, flour mills, packing houses and cold storage plants; state inspection of grain grading and dockage; state hail insurance; rural credit banks operating at cost; exemption of farm improvements from taxation.
In his recent book, Insurgent Democracy Michael Lansing explains, “Small-property holders anxious to use government to create a more equitable form of capitalism cannot be easily categorized in contemporary political term.” The NPL “reminded Americans that corporate capitalism was not the only way forward.” Supporters of the NPL wanted state sponsored market fairness but not state control. They wanted public options, not public monopolies.
In the language of our 2016 political campaigns, it would not be much of a stretch to characterize the NPL as a movement for an American-style decentralized, anti-corporate, democratic socialism.
The NPL was as one contemporary observer, Thorstein Veblen described it, “large, loose, animated and untidy, but sure of itself in its settled disallowance of the Vested Interests… “
The movement was membership-based. Members were kept informed through a regular newsletter. This was part of a massive popular education effort. Membership fees allowed the NPL to hire organizers and lecturers who traveled throughout the state. Townley, the founder and leader of the NPL, proved an entertaining and charismatic speaker. Sometimes thousands would gather to hear him speak. Speeches themselves were community affairs.
The goal was to convince farmers that collectively they could significantly influence the decisions that would affect their personal and business lives.
To gain power the NPL relied on a political tool born of the Progressive movement: the political primary. To make government more responsive and transparent, Progressives urged states to bypass political conventions, political bosses and backroom deals and adopt direct primaries. By 1916, 25 of the then 48 U.S. states had adopted the primary as the vehicle for nominating political candidates.
The primary system gave people the power to elect candidates of their political party, but the key to the remarkable political revolution that swept through North Dakota was its adoption, in 1908, of an “open primary” law that allowed anyone to vote in a party’s primary even if unaffiliated with that party.
On March 29, 1916 the NPL took advantage of that law by convening its first convention. Attendees endorsed candidates who swore allegiance to its platform. These candidates ran in the June Republican primary, a primary targeted by the NPL because then (as now) the Republican Party dominated North Dakota.
In June 1916 the NPL effectively took over the Republican Party. In November 1916 NPL –endorsed candidates won every statewide office except one and gained a majority in the state Assembly, although not in the Senate. By that time the NPL boasted 40,000 members, an astonishing number given the state population of only 620,000.
In the succeeding legislative session the NPL was able to implement parts of its platform: a grain grading system, a 9-hour workday for women, regulation of railroad shipping rates and increased state aid to rural schools. But the Senate narrowly defeated the key to implementing NPL’s broad vision: a constitutional amendment to allow for state-owned businesses.
In 1918, the NPL gained a majority in the state Senate. That year North Dakotans voted on 10 constitutional amendments. They approved every one. One, endorsed by a resounding margin of 59-41 gave state, county and local governments permission “to engage in industry, enterprises or businesses.” Another allowed the state to guarantee $2 million in bonds and established voting requirements for future bonding. Another created state hail insurance.
Other amendments expanded the possibility of direct democracy by reducing the number of signatures required to put an initiative on the ballot, and by allowing constitutional amendments to be passed by a simple majority of the voters.
In June 1919, voters approved 6 of 7 legislatively referred statutes, including the establishment of a state bank, that latter by a vote of 56-44. The one ballot initiative North Dakotans rejected—giving the Governor the authority to appoint every county school superintendent—was itself revealing. North Dakotans wanted a state that could stand up to big out-of-state corporations but they preferred local control to state control.
The Bank of North Dakota (BND) was the centerpiece of the NPL’s effort to take back control of their economy. It was intended to strengthen, not undercut local banks. It established no branches, nor did it accept independent deposits or accounts. The Bank “strongly recommended” that borrowers seek mortgages by working through local institutions. Banks across the state used the BND as a clearinghouse for various financial transactions.
Farmers immediately benefited as their interest rates on loans dropped to about 6 percent from the prevailing 8.7 percent.
In November 1920 voters strengthened the BND by narrowly approving an initiative requiring all state, county, township, municipal and school district funds be deposited there.
In March 1920 the NPL legislature referred to the people a constitutional amendment allowing them to petition for the recall of any elected officials. That unprecedented extension of direct democracy proved its undoing, for in late 1918, at the peak of the NPL’s power, political opposition had coalesced into a new organization, the Independent Voters Association (IVA). As the NPL battled internal divisions and a growing unease that it had begun to pursue measures beyond its mandate, the IVA gained support.
The IVA used the political tools the NPL had created. In 1921 its members successfully petitioned for recall elections for the three state officers who constituted the membership of the Industrial Commission that oversaw state enterprises: the governor, attorney general and commissioner of agriculture. The IVA slate won by a whisker. It was the first and last time a U.S. Governor has been successfully recalled.
The IVA immediately set about to undo the NPL program by putting nine provisions on the ballot, including one to abolish the state Bank. Another intended to shrink the capacity of state government by reducing the amount of state bonded debt. Another would have undermined the open primary by requiring separate party ballots for primaries.
Every ballot measure lost, albeit by very narrow margins.
In November 1922 the IVA achieved what the NPL had four years before: Control of all three branches of state government. The NPL’s abrupt disintegration resulted from a number of factors. In 1921 the price of wheat dropped about 60 percent. The resulting economic pain would have reduced the support for any sitting government. The Russian Revolution ushered in a nationwide “Red Scare.” The opposition labeled the NPL’s leaders Communists and Bolsheviks and launched a new magazine called Red Flame. Townley himself was jailed under a Minnesota sedition law for opposing the U.S. involvement in WWI. Meanwhile, internal divisions continued to beset the NPL.
The Legacy of the NPL
As the Nation magazine observed in 1923, “…although the visible machinery largely melted away, a sentiment and a point of view had been established in the minds of hundreds of thousands of farmers and ranchers.” Looking back in 1955, Robert L. Morian, author of the classic Political Prairie Fire, comment that the NPL helped to develop “some of the most independently minded electorates in the country.”
Those independently minded electorates and their anti-corporate, pro-cooperative and independent business sentiment continued to inform and often guide policymakers in the decades to come.
The North Dakota Mill and Elevator Association began operation in a modern facility in 1922. Today it consists of 7 milling units, an elevator and flour mill and a packing warehouse to prepare bagged products for shipment. It is the largest flour mill in the U.S. and the only state-owned milling facility.
In 1932, North Dakotans voted 57 to 43 to ban corporations from owning or leasing farmland.
In 1963 the legislature enacted a law that required pharmacies be owned by a state-registered pharmacist. The effect was to ban chains, except those operating at the time the law was passed.
In 1980 North Dakotans voted to establish a State Housing Finance Agency to provide mortgages to low income households.
In recent years several of these laws protecting independent farmers and businesses have come under attack by big corporations. After several attempts by Big Pharmacy failed to convince the legislature to repeal the Pharmacy Ownership Law, Wal Mart spent $9.3 million to finance a ballot initiative. In November 2014, by a vote of 59-41 the initiative lost.
In 2015 big corporations did convince the legislature to overturn the 1932 anti-corporate farming law. This June, as noted at the beginning of this article, by a resounding margin of 76-24 North Dakotans voted to reinstate the old law.
Today the economic structure of North Dakota reflects its focus on independent and cooperative businesses.
The Pharmacy Ownership law, for example, has markedly benefited North Dakota. A report by the Institute for Local Self-Reliance (ILSR) found that on every key measure of pharmacy care, including quality and the price of drugs, North Dakota’s independent pharmacies outperform those of neighboring states and the U.S. as a whole. Unsurprisingly North Dakota also has more pharmacies per capita than other states. Its rural residents are more likely to have a nearby pharmacist.
North Dakota’s banking system reflects a similar community-based structure. An analysis by ILSR found that, on a per capita basis, the state boasts almost six times as many locally owned financial institutions as the rest of the nation. (89 small and mid sized community banks and 38 credit unions). These control 83 percent of the deposits of the state. North Dakota’s community banks have given 400 percent more small business loans than the national average. Student loan rates are among the lowest in the country.
As Stacy Mitchell, Director of ILSR’s Community-Scaled Economy Initiative observes, “While the publicly owned BND might well be characterized as a socialist institution, it has had the effect of enabling North Dakota’s local banks to be very successful capitalists.” In recent years local banks in North Dakota have earned a return on capital nearly twice that of the nation’s largest 20 banks.
In the last two decades years the BND has generated almost $1 billion in “profit” and returned almost half of that to the state’s general fund.
Recall that in 1919, voters had approved the Bank of North Dakota, by the very slim margin of 51-49. A switch of 2,000 votes would have killed the Bank in its infancy. Today no party would dare propose its destruction.
North Dakota’s impressive 21st century telecommunications infrastructure is also a testament to its historic focus on local and independent ownership. The state ranks 47th in population density. That means it has one of the highest costs per household for installing state-of-the-art high-speed fiber networks. Nevertheless it boasts the highest percentage of people with access to such networks in the country. Why? One reason is its abundance of rural cooperatives and small telecom companies, 41 providers in all, including 17 cooperatives.
North Dakota is also home to the Dakota Carrier Network. Owned by 15 independent rural telecommunications companies, the DCN crisscrosses the state with more 1,400 miles of fiber backbone. In the last five years independently owned companies have invested more than $100 million per year to bring fiber to the home. They now serve more than 164,000 customers in 250 communities.
What Should Bernie’s Brethren Do?
Certainly the road to political power faces many more obstacles now than the NPL faced a century ago. North Dakota was a largely agricultural state. The key to NPL’s organizing effort was access to a car and gas money, not an easy get in those days, but much easier than the amount of money now needed to mount a political campaign.
Most new movements will be unable to take advantage of the open primary. After the NPL gained power in more than half a dozen states, the existing parties fought back. Nevertheless, 11 states still have pure open primaries; about a dozen more have hybrid systems.
Recently the courts have not been sympathetic to the open primary. Not long ago the Supreme Court invented a new “right of association” and bestowed that right on political parties. In 2000, for example, by a 7-2 vote, the Court overturned a California form of open primary approved by the voters by a 60-40 vote. Writing for the Majority, Justice Antonin Scalia objected that the California law “forces political parties to associate with—to have their nominees, and hence their positions, determined by—those who, at best, have refused to affiliate with the party, and, at worst, have expressly affiliated with a rival.”
After the California decision the voters of Washington, by a similar 60-40 vote, adopted an open primary system similar to California’s but with a key difference: The candidate would have to declare a “party preference” that would appear next to his or her name on the ballot. In 2008, the Supreme Court, again by a 7-2 vote, this time upheld that law, a ruling that might allow for a variant of the NPL strategy.
Before we develop a strategy for winning office we need to take a page from the NPL playbook and develop a platform, one consisting of specific, concrete, policies, not a laundry list of all desirable policies.
Bernie Sanders and his followers currently are working to write a platform for the Democratic Party convention. That is important and useful, but that platform by its nature will have a national focus and speak to the exercise of power by the federal government. We also need platforms that focus on states and cities and counties and school districts and offer concrete measures they have the authority to enact.
Those platforms will provide the basis for endorsing candidates, regardless of their political affiliation or whether they run in a closed or open primary state. In those states that permit, we may be able to enact various planks of the platform through initiative and referendum. At this point 27 states have initiative and 24 have referendum. Nineteen allow constitutional amendments by initiative.
The Nonpartisan League’s tenure in power was brief, but its policies, the public institutions it built and perhaps most important, the public sentiment it nurtured and brought to maturity, endure to this day: A true example of a political revolution from the bottom up.