by William Wharton, CounterHegemonic

Yes, “nationalize the banks!”—the thoughtless slogan advanced by any number of ultra-left groups engaged in gross public displays of political masturbation. Yet, like the old saying goes, even a broken clock is correct twice a day. So, perhaps we can have a few words on the notion of bank nationalization in this tumultuous financial crisis which threatens to extend into every area of the economy with dire consequences for working people.

The banks, instead of acting like banks and extending credit to enterprises in need of capital, they are hording cash in fear of becoming entangled with other institutions that are hiding assets which are essentially worthless on their books. Such uncertainty has led to substantial freezing-up of lending activity.

The Federal Reserve and Congress have tried a series of measures to gently coax the banking sector into once again performing its role. First, they decreased the cost of money by lowering interest rates. This did not work. Then the Fed moved to end the logjam more directly by purchasing commercial paper—short-term no-collateral loans frequently used by businesses to cover shortfalls. This has apparently not worked either. Finally, the interest rate cut was made into a global action as central banks around world implemented cuts in unison. This also appears to have had little positive effect.

The only option left is to cut to the root of the problem—that’s right, the US state will have to take direct control of the banks. Provisions of the recently passed “Bailout Bill” allow the Treasury Department to take an ownership stake inside of financial institutions that decide to accept state funding. This represents a partial nationalization of the banks and will allow state actors a voice in decisions made by previously wholly private enterprises.

Such a move should allow socialists to move beyond just the blanket rhetorical call for nationalization to a more detailed, and far more useful, conversation of just what nationalization could mean. Economist Doug Henwood, for example, has consistently advocated for the creation of a banking sector in the image of a highly-regulated state utility. Even more radical is his proposition that such a banking utility could also be de-centralized and serve as means to foster local community development and undercut other predatory lenders such as check-cashing and pay-day loan businesses.

Such a socialist vision understands banking as less of a profit-generating enterprise and more of a financial traffic cop moving funds rationally and efficiently from one productive enterprise to another. Such discussion is not held entirely on a theoretical plane. A bank such as the one roughly described above exists in the MondragĂłn cooperative sector in the Basque area of Spain. The Caja Laboral Popular (Working People’s Bank) serves to ensure the financial viability of this network of worker-run cooperatives by allocating social capital and servicing the financial needs of cooperative members. The CLP has allowed cooperative production to move beyond the boundaries which would have been placed on it by private investment banks while serving as a key reserve to allow the network to weather downturns, even severe ones, in the general capitalist-directed economy.

There are however, important differences between the CLP and the impending maneuver by the US Treasury Department. The CLP rests upon and emerged out of a democratically run socio-economic project. The MondragĂłn cooperatives produce useful items for domestic and global consumption. Conversely, US banks are part and parcel of an economic system with a logic dictated in important ways by financial capital. Instead of useful items, financial capital logic results in speculative bubbles as it desperately attempts to replicate itself in the most rapid and voluminous ways. Even if partial nationalization steadies credit markets, it will do little to change the fundamentals of the US economy. What is most needed at this moment is a change in both form and content.

The great challenge for the left in the US in the coming period is twofold. On the one hand we need to use the conceptual and economic opening provided by the failure of the banking system to agitate around concrete demands for publicly-controlled essentials—healthcare, water, education… Private enterprise has not only ruined the financial system; it has made our bodies less healthy, our environment less livable, and our minds less enlightened.

Simultaneously, we must develop imaginative and innovative schemes to re-start useful productive enterprises in the US. In doing so, we should be careful to remember the need to transform both form and content. There are no easy solutions or pre-fabricated schemes to employ here. The MondragĂłn cooperative sector, for instance, has run into serious problems regarding democratic functioning and social equity as it has spread its production globally. As a general guide though, we can say that production can best be organized and the economy can most efficiently be re-started by worker-run cooperatives which develop into interlinked beehives of productive activity.

If we leave either task—securing social necessities or re-starting production—up to the capitalists, we can be certain that far bleaker days of permanent war, debtor’s prison and general state-sponsored repression are ahead.

So, go ahead Henry Paulson, nationalize the banks. Let it be a wakeup call to democratic socialists and anarcho-syndicalists that the moment for serious politics, and serious thinking, has begun.


William Wharton is editor of The Socialist, monthly magazine of the Socialist Party USA.

This piece first appeared Oct. 9 on the blog CounterHegemonic.

See also:

Globalization, Oil Shock and the Iraq War
by Vilosh Vinograd
World War 4 Report, September 2008


Doug Henwood’s Left Business Observer


Reprinted by World War 4 Report, Dec. 1, 2008
Reprinting permissible with attribution