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Across the nation, hundreds of thousands of climate activists participated in the September climate strike in a series of protests that drew over 7.6 million people across the planet. In the first wave of protests, an estimated 537,000 activists went to the streets in the United States demanding bold and transformative climate policy and a total divestment from fossil fuels. By no fault of their own, however, all of these activists were complicit in supporting the very industry that they sought to bring down. Whether you have funds directly held by banks—such as Wells Fargo, JP Morgan Chase, or Bank of America—or are simply a tax paying resident of the United States, your money has been used to support nearly $2 trillion worth of fossil fuel investments.
For context, a standard method of revenue generation for banks is the loaning of deposits (that can mean your wages, salary, gifts, savings, etc.), meaning that one’s bank can support a number of projects through loans. Just like any individual, government entities may also hold their assets and revenues in a private bank. Privy to this, a coalition of activists in Seattle successfully pressured the city to transfer $3 billion in assets to a bank more “socially conscious” than Wells Fargo, only for the city to find that there was no tangible alternative. Seattle promptly renewed its contract with Wells Fargo.
If climate activists truly desire to deliver transformative and just climate policy, a total divestment from private banks is necessary. Private banks make meaningful initiatives—such as green public housing and mass public transit—prohibitively expensive due to ludicrously high interest rates. To a private bank beholden to its shareholders, fossil fuel projects present a much more immediate return on investment than a public works project would. This explains why U.S. based banks provided over $3.7 billion in loans to the Dakota Access Pipeline project while continuing to charge ludicrously high interest rates to public infrastructure projects. If any government, state, city or other locality is to realistically fund infrastructure projects, it is important that the profit motive of private industry is stripped from the process through a system of public banking.
Such a system does not exist without significant precedence. The New Deal—a collection of some of the largest economic recovery projects in U.S. history, as well as the clear forerunner of the Green New Deal—was financed by the publicly owned Reconstruction Finance Corporation (R.F.C.). Founded in 1932, the R.F.C. would go on to support an inflation-adjusted amount of roughly $470 billion on economic recovery projects over two and half decades. In Germany, the nationally owned Kreditanstalt für Wiederaufbau bank (KfW) has funded the building and refurbishment of over 4 million energy-efficient homes while creating over 320,000 jobs per year in the process.
If crafted properly, the creation of a public bank would provide not only a viable means to financing massive infrastructure projects like the Green New Deal, but also hand financial and institutional power directly back to the people. In Costa Rica, the Banco Popular established the Assembly of Working Men and Women. The 290-member assembly—which requires 50% of its representatives to be women—is considered to be the highest and most democratic decision-making platform of a bank in existence, with workers across ten social and economic sectors participating. In a reversal of standard power structures, Banco Popular’s board of directors is composed of three government officials and four assembly members with its power delineated from above by the assembly, not below.
A common criticism of public banks is that global private capital is too large to compete with and that there is not enough capital to seed an effective public alternative. However, the reality of global capital is that $38 trillion (roughly 48% of global GDP) is publicly held across almost 700 already established public banks. The aforementioned Banco Popular derives its seed funds from a 1.5% wage tax, 1.25% of which is transferred into a pension fund, much like social security. This format, which includes localized democratic leadership branches for local projects and concerns, has convincingly shown that any government body has the power to be led by the people, not for-profit global finance interests.
A key and unique advantage enjoyed by communities in the United States is that the public banks do not yet exist. As activists and local elected officials push towards public banking, it is the local community—not global capital interests or deep-pocketed politicians—that has the power to shape how their public banks work. For the more than 40 million Americans whose basic checking, savings, and low interest loan services are not available to, localized and democratized public banking would invigorate economic activity and security. Unbanked and underbanked Americans, who are disproportionately people of color and/or LGBTQ+, could be freed from the shackles of the predatory loan industry. These direct tax dollars would then be put towards building climate friendly infrastructure and reconciling decades of environmental racism.
Fortunately, the concept of public banking is not just a low-key idea bouncing around left-wing think tanks. Across the nation, legislation and local initiatives are popping up and pushing to divest from the private system of capital. After years of hard-fought activism, California’s 2019 Assembly Bill 857 finally legalized public banking and empowered localities to implement community written and approved bank charters. At the federal level, DSA members Rep. Alexandria Ocasio-Cortez and Rep. Rashida Tlaib have introduced legislation in the spirit of the Green New Deal that not only emulates the California law, but goes a step further in explicitly prohibiting public banks from investing in and collaborating with the fossil fuel industry. Though an under-discussed issue, the topic of public banking is certainly gaining steam. Mass actions such as the climate strike are certainly beneficial to public awareness, though such actions should not and cannot be the end. The framework and precedent have been set. As members of the community who are tied directly to the fossil fuel industry, it is our responsibility to ensure the return of financial power to our communities.
