Why North Dakota Wheat Farmers Needed a Public Bank – and Why We Do, Too

by Stoney Bird

North Dakota wheat farmers had had it. Mill owners, grain elevator operators, and railroads, mostly based in Minneapolis, had them at their mercy and their own state government, whether under the Democrats or Republicans, was not stepping up.

So, the farmers took the bit in their teeth.

They formed something called the Nonpartisan League. The League took North Dakota – and many neighboring states and Canadian provinces – by storm. To get the word out the League sent out organizers who were paid commissions each time they signed up a new member of the League and who were issued the newest thing in communications gear – a Model T Ford – so that they could traverse the wide prairies from farmhouse to farmhouse.

Their mascot? A goat, bearing a sign on its side saying, “You can’t get this goat” or “We’ve got the governor’s goat.”

And they had a gifted cartoonist in the person of John Miller Baer who later became one of North Dakota’s Congressmen. (see July 2021 Pacific Call)

From a standing start in 1914 the League controlled the selection of candidates enough in the open primaries so that they took over the governorship, both houses of the state legislature, and the state supreme court by 1918. The legislative session that year was the shortest in North Dakota history. The League legislators just sat down and adopted their program one item after the other.

Here is what their program included:

· A state-operated grain-grading system – grain-grading had previously been conducted by representatives of the mills, presenting an open temptation for false grading often succumbed to

· A state-owned grain elevator

· A state-owned wheat mill

· A state bank deposit guarantee program

· A state highway commission

· Tripled money for education

· New railroad regulations

· Women’s suffrage for presidential and municipal elections

· New tax structure – shifting taxes “from industry and enterprise to privilege”

· Mandatory hail insurance

· Workers’ compensation

· Expanded rights of initiative, referendum and recall

· And the Bank of North Dakota, which would lend to farmers on relatively easy terms.

This was a revolution – carried out by strictly legal and peaceable means.

Often smeared in their time as “utopians” and “socialists”, the small-scale wheat farmers who constituted the bulk of League members – and most of the population of the state – had no thought that the state should take over the economy. They had no desire to get rid of capitalism or of private property. After all they were small-scale capitalists and property-owners themselves. They just wanted to temper the excesses of the laissez-faire system so that more than a few could prosper and, as economists delicately say, accumulate.

In this they succeeded, and one of their many lasting achievements was the state bank that is still there.

What a Public Bank Could Do for Us in Washington

What distinguishes a public bank from any other? For one thing it is owned by one or more government entities at one or more levels rather than by shareholders. (Note: the so-called “Federal” Reserve is not a public bank in this sense. It is owned by the big banks.)

Because of its ownership, a public bank is not by law required to make as much money as it can – though it must of course stay in the black. Instead, it can make investments in the public interest even if they do not make the maximum possible return. For example, it can conduct its operations in countercyclical fashion, lending more during downturns to avert harm to families and businesses and lending less during upturns to avoid bubbles.

Another way that a public bank can support the public interest is by lending to our governments at more favorable rates. And since a public bank would be owned by one or more public entities, any profits that it makes from handling the public’s money would be returned to those entities instead of flying off to a private-sector bank’s private shareholders.

The people of North Dakota saw these ideas operating during the 2008 collapse. Unlike nearly all private-sector banks in the United States and around the world, the Bank of North Dakota increased its lending during the Great Recession. The result was that North Dakota suffered fewer foreclosures, fewer bankruptcies, and lower unemployment than any other state.

One of the Bank’s mandates is to support community banks in North Dakota by making partnership loans with them, stepping in to help when a local bank does not have the wherewithal to fund a project all by itself. As a result, community banks are thriving in North Dakota. There is a higher percentage of community banks in that state than anywhere else in the country. Elsewhere they are being swallowed up year after year by the Wall Street megabanks.

In Washington state last year, the League of Women Voters of Washington decided to support the formation of a public bank after a specially assembled League Task Force assessed the idea. The League then formed a Public Bank Advocacy Committee and has been actively promoting the idea in the legislature and to any others around the state who will listen. (Your writer is one of the Co-Chairs of the League’s Advocacy Committee.) The League could take up this issue because it had adopted a position on privatization in 2011 which said that an activity should be privatized only if the public interest was served thereby.

In the Washington state legislature, Senator Hasegawa has been championing the idea of a public bank since the 2008 financial collapse. Not so incidentally, two of those who urged Senator Hasegawa onto this pathway back at that time were the present editor of the Pacific Call, John Repp, and his wife, Cindy Cole. Mike Yarrow set up the original meeting. In 2018 the legislature commissioned the UW Dan Evans School to study the idea of a cooperatively owned public bank and come up with a business plan. The business plan was published last year and was the basis of Senator Patty Kuderer’s SB 5188 in this year’s legislative session. That bill came within a hair’s breadth of passing, failing only because the legislature ran out of time. That bill can be seen as a step towards a public bank for our state. It proposed an expanded revolving fund for public projects but did not have a mandate to charter a bank.

Many of us are not used to the idea that banking can be conducted in any way other than in private hands, but there is no inherent reason why this is so. With a public bank, stewardship of public funds would be handled in such a way that the cost of financing public projects would be about half as what they cost now, and any profits would be returned to the public treasury. The financial capacity of our state and local governments would be greatly increased. At least one banking institution in our state would be able to act in countercyclical fashion. That is efficient public finance. That is what a public bank can offer.