Lessons from North Dakota

A century ago, the state of North Dakota underwent a peaceful political revolution—one more radical than what Bernie Sanders attempted this year.  The benefits to the people of the state endure to this day.

North Dakota farmers were subject to the domination of banks and flour mills in Minneapolis-St. Paul.  They set mortgage interest rates and the price of wheat.  Business interests dominated North Dakota government.

But progressive reformers opened up the political process through the initiative (voters could propose laws), the referendum (voters could vote directly on laws) and the recall (unsatisfactory state legislators could be voted out before their terms ended).  More importantly, the state legislated open primary elections.

This opened up the process for the Non-Partisan League, organized by a fiery socialist named Arthur C. Townley.  Starting in 1914, he recruited 40,000 dues-paying members, mainly farmers, in a state whose population was 600,000.  The NPL then endorsed and campaigned for candidates who adopted the NPL program.

In 1916, NPL candidates effectively took over the Republican Party in the state.   NPL candidates won all statewide offices and a majority in the state Assembly; in 1918, they took over the state Senate as well.

Among their reforms were a state grain grading service so that farmers were assured a fair price, regulation of railroad shipping rates, and authorization of state-owned enterprises, including the Bank of North Dakota, the crown jewel of the NPL program, which is still going strong.

nonpartisan-league-leader-cover

From the cover of the NPL’s National Leader for January 1919

Illustration via Patrick Murfin.

The Bank of North Dakota has been more profitable and more stable than Wall Street banks.  It came through the 2008-2009 financial crisis in good shape, and provided credit for the state.

Chester Dawson, in a 2014 article in the Wall Street Journal, noted that the Bank of North Dakota was more profitable than Goldman Sachs, had a better credit rating than J.P. Morgan Chase & Co. and hadn’t seen a drop in profit growth since 2003.

It did this by investing in the local economy, often in partnership with local community banks, rather than speculative investments elsewhere.

Ellen Brown, writing for Counterpunch in 2014, said this was not due to North Dakota’s fracking boom, which began in 2010.  In fact that boom has put a strain on the BND because it issues bonds to pay for repairs to state roads and other infrastructure that are worn down and damaged by the fracking industry.

No, she wrote, the secret of the BND’s success is that:

Profits, rather than being siphoned into offshore tax havens, are recycled back into the bank, the state and the community.

The BND’s costs are extremely low: no exorbitantly-paid executives; no bonuses, fees, or commissions; only only one branch office; very low borrowing costs; and no FDIC [Federal Deposit Insurance Corporation] premiums (the state rather than the FDIC guarantees its deposits).

These are all features that set publicly-owned banks apart from privately-owned banks.  Beyond that, they are safer for depositors, allow public infrastructure costs to be cut in half, and provide a non-criminal alternative to a Wall Street cartel caught in a laundry list of frauds.

David Morris, writing for AlterNet recently, explained how the BND has benefited the state:

An analysis by ILSR [the Institute of Local Self-Reliance] 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, the BND has generated almost $1 billion in “profit” and returned almost half of that to the state’s general fund.

Morris mentioned other ways in which North Dakota is distinctive:

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.

∞∞∞

A couple of other North Dakota reforms are worth mentioning.

  • In 1932, the state legislature passed a law banning corporate ownership of farmland.
  • In 1963, it passed a law saying that the only people who could open new drug stores in the state were licensed pharmacists living in North Dakota.

Morris reported that the 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. North Dakota also has more pharmacies per capita than other states, he wrote, and its rural residents are more likely to have a nearby pharmacist.

Walmart in 2014 spent $9.3 million to finance a ballot initiative to repeal the Pharmacy Ownership Law.  It was defeated, Morris reported by ratio of 59 to 41 percent of the votes.

In 2015, the legislature repealed the 1932 anti-corporate farming law.  North Dakotans voted to reinstate the law by a ratio of 76 to 24.

Some of North Dakota’s success in making reforms and sticking to them may be due to the fact that it is a small state with a strong state spirit.  It has a population of about 750,000, roughly equal to the population of Monroe County, NY, where I live.   I’m not sure New York state or other large and diverse states could use North Dakota as a blueprint.

The significance of the history of the Non-Partisan League and the Bank of North Dakota is that when the people understand the issues, and are united and determined, they can prevail.

LINKS

Bank of North Dakota Outperforms Wall Street by Ellen Brown for Counterpunch (2014)

Sanders Supporters: Check Out This Amazing Piece of American History for a Path You Might Take by David Morris for AlterNet.

 

 

 

Tags: , , ,

2 Responses to “Lessons from North Dakota”

  1. williambearcat Says:

    Thanks Phil for finding and reporting on areas where government works. That fear of “socialism” is so strong is a result of a well financed propaganda agenda. Even people who would benefit along with the nation resist the very idea of “socialism” without knowing how well it has worked. The failures are well documented, but not the successes.

    Like

  2. Tom Says:

    Thanks Phil, another very interesting post.

    The ND Mill and Elevator (located in Grand Forks), the largest flour mill in the US, is also state-owned. It is referred to locally as “The State Mill.” Another proud legacy of the old days when Americans believed in progress and implemented it.

    Like

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s


%d bloggers like this: