By Bonnie James
It’s official: The US entered a recession in February. In the ensuing months, more than 40 million Americans lost their jobs as the coronavirus pandemic moved rapid-fire through our cities, towns and farmlands, shutting down whole sections of the economy, from services to manufacturing. More than half of all low-income households lost their livelihoods and, by some estimates, more than 100,000 small businesses have permanently closed since the pandemic escalated in March.
Moreover, it is virtually certain that we are only at the beginning of what promises to be the deepest economic downturn since the 1930s. But, unlike the Great Depression, this time around the economic challenge is profoundly complicated by the pandemic, and by the unprecedented social upheaval—a phenomenon that has spread even faster than the pandemic has—triggered by the murder of George Floyd on May 25. There is no question that Floyd’s brutal murder by a white police officer in Minneapolis would have been quickly forgotten as have all such previous atrocities, had it not been for the tumultuous historic context.
What made this killing exceptional was that it had occurred at a time of crisis on several levels: Deaths in the US from the coronavirus had exceeded 100,000, with dramatically disproportionate numbers among people of color. The pandemic has struck with unequal force among the poor and disenfranchised, both in the US and around the world, and cast a harsh light on the economic failures of the past half-century. Even before Covid-19 had begun ravaging the globe, the decades of deindustrialization had ripped out the undergirding of the physical economy, taking down the immense advances of the World War II industrial buildup, the postwar expansion of infrastructure, and the Apollo space program, and more. As the US swung from a progress-based, industrial economy to a “service-based” consumer-driven economy, millions of Americans were left by the wayside, and, as always, African Americans and other minorities were hardest hit.
In my previous article for this website [https://www.frontiere.eu/americas-summer-of-discontent-will-we-forge-a-new-beginning/], I posed the question as to whether America would forge a new beginning, by turning the emergency into a moment of opportunity. Here, I will show that there is a successful pathway out of our present woes, one with deep roots in American history, one which has guided the nation in earlier times, and which is available to us now: The remedy is national banking.
The First National Bank and Its Successors
The first iteration of the national bank was that put forward by Alexander Hamilton in 1790, as the new nation was struggling under the burden of the crippling debts it had incurred during the War of Independence.
In his Report on a National Bank, written two years after the adoption of the US Constitution, Hamilton, the first Treasury Secretary of the US in the George Washington administration, called for a federally managed bank that would assume the state debts; the debt would then be converted into interest-bearing bonds that would be used to capitalize a national bank, thereby turning the debt into credit to finance economic growth, internal improvements, and so forth. The first Bank of the United States was established in Philadelphia in 1791, capitalized at the then-magnificent sum of $10 million; it operated successfully until 1811, when its charter expired. Under the Bank’s guidance of the economy, the nation prospered, enjoying two decades of growth and expansion during the crucial time of its infancy. Although the Bank’s charter was not renewed in 1831, due to opposition from the financiers and the Jeffersonian planter class, in 1816, a second National Bank was founded with a 20-year charter. Under the direction of Nicholas Biddle, and with the support of President John Quincy Adams, despite early mismanagement, the Bank fulfilled its purpose, and the national economy surged forward.
By the 1830s, the principle of national banking was well established, such that when the future president, Abraham Lincoln was campaigning for the Illinois state legislature in 1832, he offered this as his program: “…I am in favor of a national bank. I am in favor of the internal improvement system, and a high protective tariff.” In 1864, during the nation’s gravest trial, Lincoln’s administration adopted the National Banking Act of 1863, and renewed in 1864. This measure, explicitly based on Hamilton’s National Bank, along with Lincoln’s greenback policy, fostered tremendous economic growth, including the construction of the Transcontinental Railroad, even as the Civil War raged.
When Franklin Roosevelt assumed the presidency in 1933, the USA had been plunged into a complete breakdown of its economy and financial system, following the utter failure of the market-based policies of the Coolidge and Hoover administrations, which led to the Crash of ’29. FDR took command, unleashing a panoply of government-sponsored programs to address the emergency which had thrown millions out of work and onto relief. In order to finance the recovery, the New Deal established a national bank called the Reconstruction Finance Corp. (RFC), which sold bonds to raise capital for huge infrastructure projects such dams, bridges, railroads, etc., and which played a central role as well in the industrial mobilization for World War II.
Whenever the US has adopted the principle of national banking to spur industrial development, scientific advance, and infrastructure building, it has made tremendous progress. When, instead, national banking has been replaced by the Wall Street/central bank monetarist agenda, as it has for the past 60 years, the nation has been plunged into the kind of depression and despair we are now living through.
But, as with previous crises in our history, we are now presented with a unique opportunity: Our eyes have been opened to the truth: There has been no real progress in the US, or in other so-called advanced countries, since the 1960s, notwithstanding the “marvels of technology” like cellphones and social media. But, as in the past, there are those who are moving to seize the moment.
Call for a National Infrastructure Bank
A movement for establishment of a federally charted national bank is growing among members of Congress, state legislators, labor unions, individuals, and political groups, led by the Coalition for a National Infrastructure Bank (NIB). A bill, HR 6422, The National Infrastructure Bank of 2020, was introduced March 31 by Rep. Danny Davis, a Democratic from Illinois. The NIB would be capitalized at the level of $4 trillion to fund great infrastructure projects to include: rebuilding crumbling road, dams, and bridges; creating 25 million new, productive jobs; building hundreds of new state-of-the-art hospitals and research centers, and restoring manufacturing capability so that US states and cities never again have to rely on China and other nations to supply medical equipment as was the case when the coronavirus hit; rebuilding the power grid, building new airports and high-speed rail; and relaunching the US space program.
As dire as is the crisis we face today, if we look back, we find that humanity has overcome many calamities, some even those worse than what we are now facing. For example, in the middle of 14th Century, the Black Death overtook the city of Florence, Italy, and between 1348 and 1351, it is estimated that half the population succumbed to the plague. Yet, by the early 15th Century, Florence emerged as the center of the Golden Renaissance, by drawing on the inspiration of its own past, such as the great architecture of Rome, the poetry of Virgil, Dante, Boccaccio, and Petrarch, and by reviving the wisdom of the ancient Greeks, and the Arab Renaissance, thereby transforming not only Italy, but the entire world.
We can and will do it again.