David Boyle writes:
There are rumours of a political squall the capital city of Vermont, about the promotion by public employees of the idea of a ‘public bank’. A big enough squall to ruffle feathers a little over here.
The mayor of Montpelier, John Hollar, has told off one of his employees, Montpelier’s city planner Gwen Hallsmith, for her very public advocacy of a state bank. http://neweconomyweek.org/blog/mayor-montpelier-vt-tries-silence-city-employee-advocating-public-banking?utm_source=New+Economics+Email+List&utm_campaign=279c8387f6-New+Economy+Newsletter+-+October+2013&utm_medium=email&utm_term=0_6f7a9ab0ed-279c8387f6-18216661
Gwen Hallsmith is a prominent member of Vermonters for a New Economy, a lobby group for green, local economics. It doesn’t help that Hollar is also a registered lobbyist for Bank of America, a very big bank indeed.
This is a minor political squabble in a small town in New England and it has few implications for Old England, or indeed anywhere else in the UK. But it is still fascinating, and for the following reasons.
- Vermont is the capital city of asset-based local economics, the antidote to the prevailing doctrine of comparative advantage, which advises cities to specialise. It is an approach that believes that local resources can be used to regenerate an area. Vermont is home to the Intervale, 200 acres of an old dumping ground, which is now a city garden of a dozen community farms supplying 7 per cent of fresh food to the 35,000 population of Burlington.
- Public banks are big news in the USA, a nation where half of all the money is already kept in local banks (http://www.demos.org/publication/banking-america-how-main-street-partnership-banks-can-improve-local-economies). American radicals are looking to the Bank of North Dakota, founded in 1919 and owned by the state, as the reason it is one of the few of the 50 US states which stays in the black.
North Dakota is a deeply-conservative Republican state which just happens to own its own bank. The Bank of North Dakota was set up in 1919 (the same year, ironically, as Neville Chamberlain’s Birmingham Municipal Savings Bank) in response to a wave of farm foreclosures at the hands of out-of-state Wall Street banks.
The state bank provides the answer why North Dakota has no debt and also has its largest-ever budget surplus, contributing over $300 million in dividends to the state’s coffers over the past decade.
It also partners with local banks to provide the loan finance for small business lending which – as everyone knows but nobody will say publically – is no longer possible for big banks. This is known as ‘partnership banking’.
This is all a long way from the situation in the UK, where there are no local banks as such, and where the CDFI and credit union market is still some way behind their equivalents in the USA.
But the idea of state funds being used in this way is catching on over here. The planned British Business Bank looks as if it will work in similar ‘partnership’ ways, and a handful of local authorities are looking at related or similar projects,
First off the ground was the Cambridge and Counties Bank, a joint venture between Cambridgeshire County Council and Trinity Hall, Cambridge. Next was the Bank of Salford. Bournemouth is looking in the same direction. So is Liverpool.
The implication is that all these institutions need somewhere to keep their money, and it makes economic sense to invest in local enterprise if it can be done reliably and effectively.
Somehow we have to remake the link between local deposits, local savings and local investment, which has been mislaid a century or so ago – and losing it has put the UK economy at a disadvantage.
What policy-makers need to do is to help them.