Who is really in control of our system? Who’s behind the wheel and where is this road taking us? After reading the last post, one might wonder if we’re all at the mercy of corporate extortion, unchecked development, greed, and politicians who see growth as the only answer. However, as I’ve been saying, it’s the system that is the cause of our problems. A major flaw of that system is the fact that “We the People” do not control the economic rudder.
“We the People of the United States, in Order to form a more perfect Union, establish Justice, ensure domestic Tranquility, provide for the common defense, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America.”
– Preamble to the Constitution of the United States
Allow me to explain.
The United States is a republic, a representative democracy. The Founding Fathers wanted to create something better than they had experienced back in England and wanted to guard against the excesses caused by too much power in the hands of too few. Thus, they gave careful consideration to the balances of power. The balance they sought was between anarchy, which can be thought of as too little power (or no power at all), and tyranny, which can be thought of as too much power. They realized that no single system is entirely good or bad. A monarchy works well so long as the king is good. Decisions can be made rapidly without long debates and deliberation. The down side is that one person has absolute power and will eventually make some poor decisions at best or, at worst, will become a despot. On the opposite end of the scale is consensus, where everyone must agree before a decision can be carried out. This never works for the simple reason that people are all too human and a group of them are not likely to ever be in complete agreement on anything. The happy medium – the balance of power – is representative democracy. Everyone votes on representatives that are given power to make decisions. This allows for a smaller body that can react quicker. That’s the pro. The con is that the majority rules and that often leaves segments of the populace out in the cold.
The economic balance was a different animal entirely. Well aware of the faults within the various systems practiced in Europe, the Founding Fathers were willing to experiment with free enterprise. The great experiment called “America” was (and is) as much about capitalism as democracy. Free enterprise had never been attempted before, but the Founding Fathers felt confident that it would prove to be better than the system from which they had come. They hoped that, given the right climate and no interference from the government, business would flourish and “the market” would naturally correct any problems encountered along the way. As our nation’s history illustrates, that hasn’t been the case. Something went wrong. This shouldn’t come as a surprise. Since no one had ever attempted a free market system, how could anyone know what to expect?
Furthermore, the American system, great though it was, was incomplete. The Founding Fathers only created three branches of government – executive, legislative, and judicial. They needed a fourth – the pecuniary branch. That’s “pecuniary” – meaning having to do with money. As brilliant as they were, the founders of our country didn’t know what kind of banking system would best compliment free enterprise. While congress was given the power to coin money, no one was sure just what type of banking system the United States should use. Since nothing like this had ever been done before, they had to make it up as they went along. They turned the problem over to Alexander Hamilton who tried repeatedly to find something that would work. He never did. For the next one hundred twenty-six years after the Constitution was ratified, the United States tried at least three different systems and all of them failed. Our current system, the Federal Reserve, didn’t come about until 1913, and even it is far from perfect. One could easily argue that we still have not figured it out. The global economic crisis that unfolded in 2008 originated in the United States due in large part to our financial system lacking the checks and balances found in and among the legislative, judicial, and executive branches of government. Were there a pecuniary branch with the same restraints, it might have been possible to avoid the crisis altogether.
Think of it this way. The nation is like a ship. Call it the Ship of State. The people are the sail of the ship; they provide the power – through votes and participation in the economy – that moves the ship forward. The bow of the ship is politics. Its sole function is to create a wake that allows the rest of the ship to follow. That’s what a bow is, a wedge that parts the waters so that the vessel may move forward with the least resistance. What steers the ship? What determines which way it will go? The rudder of course.
The rudder is economics, or capitalism for the sake of this discussion. Whoever controls the rudder controls where the ship will go. And who is that? I would argue it is not “we the people” – not you and I nor any average citizen of the United States.
Where there is money there is power. The top one percent of Americans have more wealth than the bottom ninety percent. The assets of the top two hundred corporations in the world are twice that of the combined assets of eighty percent of the world’s population. Many of these companies, and other special interests groups representing various industries, donate heavily to political campaigns. There are over fifteen thousand paid lobbyists in Washington D.C. spending over one billion dollars a year to promote their causes. Who do you think the politicians are listening to? You and me? Not likely. While our nation may have been founded on the concept of ‘We the People,’ we the people do not run the show because we don’t control the economic rudder. That’s why good legislation – legislation that would positively impact various needs in this country and legislation that voters want – is routinely defeated or shelved. We have lost control of this country. It’s gotten away from us because non-elected corporate interests run the show via their control over the economic rudder. The “Great Experiment” has gone wrong and we are no longer evolving as a nation. Instead, we are mutating, and it seems to be getting worse. With few exceptions, the majority of registered voters don’t even bother to show up on Election Day. Why should they? They realize what’s going on. They know they aren’t in control. Thus, the system continues to degrade further.
Consider that Americans work longer hours than many modern nations, which supposedly contributes to the highest standard of living in the free world, yet almost any American will tell you their lives are harder not easier. So just how great is that standard? The average American carries more debt and saves less than citizens of many other nations, all the while participating in the most rabid consumer society on the planet. The whole system is a mess, yet it’s considered the greatest system in the world. What’s wrong here?
It’s rather simple really. Our constitution is based on “We the People,” on democracy and rule of law. However, the Founding Fathers didn’t finish what they started. They couldn’t, because what they were attempting had never been done. They never figured out the banking system, but they did create a constitution that could be amended. They intentionally created a dynamic system that could be changed according to the needs of the people and the times. They gave us three branches of government to act as checks and balances to each other, but they needed a fourth branch, a pecuniary branch to manage the financial system. They didn’t do that because they didn’t know how, and we haven’t fared much better. We seem content to leave it in the hands of the free market (which is far from “free” as evidenced by enormous government bailouts and ongoing subsidies to numerous industries). The United States Constitution is a great document, granted, but it isn’t the end-all of human achievement and the Founding Fathers knew that. That’s why they created a process for amendments, so that changes could be made as time and situations and the people demanded it. The purpose of the Constitution is to provide the process, not spell out the solutions.
I’m not suggesting an overhaul of the Federal Reserve, the creation of a new central bank, or a move toward socialism. I’m talking about giving people control over their own money. That’s what tax dollars are – the people’s money. Yet special interest groups and corporations exert far too much influence over government because they have more money. These companies would not even exist were it not for the free market system ensured by the Constitution and the Bill of Rights, yet they seem content to abuse the system at every turn – the system responsible for their livelihood. So, you see, we have little or no control and therefore little power.
“The best long-term environment for commerce is provided by true democratic systems of governance that are based on the needs of people rather than business.”
– Paul Hawken, Amory Lovins, L. Hunter Lovins
Aside from spending the money you have in your bank account, what control do you have over it? Most likely, none. You have no say in what your bank does with it. Most likely they are loaning it to outside interests and corporations who then use it to their own ends. Besides, what is a bank anyway? It’s a company, a corporation whose business is banking. Which brings us back to the original problem of who controls the economic rudder. Is it the people, the government, the banks, or the corporations? While our constitution is based upon “We the People” our banks, being corporations, operate very differently. Our political structures are based upon grass roots support of the people – power from the bottom up. We still elect our officials to act on our behalf, even if they seldom do. We are in control to some extent – or at least think we are. Yet, we have no representative control over our money, the banks that use it, or those they lend it to. Corporations are based on control from the top down. A select, privileged few are in control and they determine what happens. The executives and stockholders call the shots in their best interest and that interest is nearly always solely on increasing profits.
So, what we have is a political system attempting to go one way – because it’s based upon one system – while our businesses go another way because they are based upon another system. This tension, attempting to go two directions at once, is a kind of social sheer. It is tearing the country apart and the ship of state is sinking.
To correct the situation, congress attempts to pass legislation. That’s like trying to steer the ship from the bow and it won’t work. All the bills and laws in the world won’t make much difference so long as the people don’t control the economic rudder. This is especially true in the age of Citizens United, arguably one of the worst Supreme Court decisions ever, and possibly the death knell for a free and fair democracy. If money equals free speech, then those with the most money can easily drown out those without. Only the voices and choices of the wealthy will be heard, creating a tyranny of the minority, something the Founding Fathers sought to prevent by creating a constitutional government.
Another factor working against us is Congress’s willingness to side with banks over citizens. They recently voted to strike down laws that allowed Americans to sue banks for malfeasance despite documented abuses by many banks. Wells Fargo was caught creating false bank accounts with customer information, but now the ability of consumers to redress such grievances is severely limited. Might this have anything to do with the millions of dollars the banking industry donates to congressional political campaigns? Of course it does.
We the people are no longer in control. Our voices and choices are being drowned out by an tidal wave of money that decides where and how our money is spent.
It’s time to take back the ship of state and steer it where we want to go, not where the moneyed special interests – that currently control everything for the sole purpose of profit – wish to take us. But how do we do it? What is the answer? How can “We the People” regain control of the ship and begin to steer it properly – using the rudder instead of the bow? If “We the People” are the sail, the ship shouldn’t move at all without our consent. Yet, daily reality shows us that it does.
The answer requires a total shift in our perception of organization, politics, and democracy, and a willingness to accept that – despite all we’ve been taught about the “American Way” and America’s exceptionalism – there are serious, systemic flaws in our system that actively work against us achieving true greatness.
If we are to take back control of the ship of state and steer a more humane and just course, we need a better form of democracy; one that hears all voices and empowers people at every level, one that clearly outlines what is to be done and how, and carries the full endorsement of those affected by the decisions made. Fortunately, such a thing exist and has already been proven to work. It’s called sociocracy.
We also need other banking options. Credit Unions are an alternative used by millions of Americans. The major difference between a credit union and a bank is that banks, as has been mentioned, are corporations. As such, they are beholden to their stockholders and exist to make a profit, which they tend to do by any means necessary far too much of the time (as the global financial crisis of 2008/2009 clearly demonstrated). Credit Unions, on the other hand, are not-for-profit entities beholden to their member shareholders, who are also the owners. All those with money in a credit union have a voice in how it does business.
Another possible solution might be a socially responsible bank fund. Back in 1989, a community group in Vermont concerned about socially responsible investment felt that Vermont’s banks were neglecting small and employee-owned businesses, minority and women-owned businesses and businesses that were innovative or environmentally conscious. They explored the possibility of starting a bank that would be more responsive, but were dismayed to discover that doing so required almost ten million dollars. They didn’t have that kind of money, but they refused to give up. So, after pondering the alternatives, they decided upon a rather ingenious strategy.
They approached the Vermont National Bank with a proposal to create a segregated banking operation within the existing bank. The deposits generated would be loaned out according to the citizens group’s criteria and audited by their auditors on a regular basis. The bank agreed and the Socially Responsible Banking Fund™ was born.
Side Note: “Socially Responsible Bank Fund” is a registered trademark of the Vermont National Bank. Hereafter, the term Commonwealth Bank Fund is used. Commonwealth derives from the Middle English commune welthe meaning “common well-being” and aptly describes the purpose of such a fund.
Vermont National Bank merged with Chittenden Trust Company in 2000, which then merged with People’s United Bank in 2009. I’ve been unable to find any current information on the Socially Responsible Bank Fund or even verify if it still exist. Therefore, I’ve opted to refer to the fund in the past tense.
This is one way for average citizens to gain control of the economic rudder and put people in control of their money. It’s an example of democratic control over local finances (although the bank is still a corporation seeking to make a return on investment for it’s owners and stockholders). By 2001, the fund had over 21,400 depositors and $165 million in deposits. The result was an overwhelming success for both the bank and the citizens of Vermont. Hundreds of loans were made to all kinds of projects. Depositors voted to elect a twelve member advisory board that provided insight on the lending issues facing the communities and ensured that loans were made where they are most needed. The board guaranteed that the loans made matched the lending criteria established by the depositors. The criteria targeted investments toward affordable housing, environment and conservation, agriculture, education, and small and dual bottom line businesses.
In addition to spelling out what type of loans were supported, the criteria also dictated that no investments were to be made in weapons, alcohol, tobacco, gambling or any related businesses. They not only spelled out what they would support, but what they wouldn’t support. Imagine a community actually choosing not to fund activities that destroy it. It proved to be an excellent means of civic reinvestment, and it required no extra effort on the part of the bank. All they had to do was note which fund the money was in on their ledger. No special permission was required from regulatory agencies. All accounts were FDIC insured and all customer services like checking, savings, credit cards, and so forth operated as usual.
What did the bank get out of it? A unique marketing angle that attracted new business. Over seventy percent of the deposits were new money that the bank acquired because of the fund. The fund was consistently profitable, experiencing zero percent default on loans most years of its operation. They also devised new innovations in lending practices that reduced the transaction costs as well as the interest rates of small business loans. The bottom line was that it was good for the bank’s bottom line and the community. The fund worked and made a positive impact.
Once considered a bold move, social investing has come a long way in the last 30 years, driven primarily by consumer demand. Financial institutions that engage in such activity even have their own association called The Forum for Sustainable and Responsible Investment.
We, the people, can regain some measure of control over the economic rudder and chart a course to a more sustainable world. It simply requires a bit of effort. We must make the conscious choice to put our money where our beliefs are. Ours is a consumer society, which means we have choices. We can choose to do business with a bank that has no scruples, or we can invest our dollars in a credit union or a socially responsible bank or fund. Our ability to choose is our power.
However, a socially responsible, community guided bank fund won’t solve all our problems. I haven’t been to Vermont lately, but I don’t recall hearing that it’s turned into a utopia. No, there is more to it than just opening up an account or creating a green fund. When it comes to large-scale transformation, depositors can only do so much. The greater problem lies with our monetary system itself. The way that we use and interact with money is ludicrous. Money was created as a tool in order to conduct commerce, and it’s certainly an improvement over the barter system. (I’d hate go around trading chickens, corn, or craft items for the things I needed to survive.) But instead of serving our needs as it was originally intended, we’re now serving the needs of money. We’re jumping through all kinds of hoops because of the way we’ve designed our monetary system and it’s unnecessary. If we designed it, we ought to be able to redesign it.
To be continued…
Tim Wardell is a deep thinker, gardener, husband, father, would-be science fiction sex comedy novelist, and margarita aficionado. When not doing any of those things, he reads, studies, practices, and blogs about sustainability.