Cities Reclaim Privatised Utilities as Public Ownership Proves Itself – Thomas Hannah

Video Thumbnailhttps://vimeo.com/430866178 All around the world cities are taking back ownership of privatized utilities, as public ownership proves to be more effective than private. It's also time for public control of finance. Thomas Hanna joins Paul Jay on theAnalysis.news podcast. Transcript Paul Jay Welcome

All around the world cities are taking back ownership of privatized utilities, as public ownership proves to be more effective than private. It’s also time for public control of finance. Thomas Hanna joins Paul Jay on theAnalysis.news podcast.

Transcript

Paul Jay

Welcome to theAnalysis.news podcast. I’m Paul Jay. In the new book, The Future Is Public: Towards democratic Ownership of Public Services. The editors write in the introduction, the COVID-19 crisis clearly demonstrates the disastrous effects of years of austerity, Social Security cuts, and public service privatization. The most glaring effect is on health care systems. In developed countries, these have undergone optimization and new public management reforms, as well as public staff hiring and investment freezes, often pushed through post-2008 crisis fiscal consolidation measures. As consequences, both public and privatized healthcare services are now primarily run to minimize cost and generate profits. In developing countries, donor conditionalities have imposed sharp reductions in public spending,  going as far as targeting public health workers’ wages.

The net result unveiled by the COVID-19 pandemic is the inability of health care systems run this way to deal with a health crisis where the severe shortages of medical equipment and staff have visibly translated into many more dead, especially among the most vulnerable and among health personnel. The privatization of public services now stands more discredited than ever before. The book describes how in cities across the world, including the United States, there’s a movement to re-municipalize services of all types, including water, energy and more.

Now joining us is one of the contributors to the book, Thomas Hannah. He’s the research director of the Democracy Collaborative and co-director of the organization’s Theory, Policy and Research Division. Thanks for joining us, Thomas. 

Thomas Hanna

Thanks for having me.

Paul Jay

First of all, give us a picture of why there are hundreds of cases, apparently, where cities have taken back control of various public services. And how is it worked out? 

Thomas Hanna

Yes, so in that book, which is the culmination of years of research, the  Transnational Institute, which is based in Amsterdam, documented, I think, around two thousand four hundred municipalizations and re municipalizations across 60 or so countries between years 2000 and now 2020. And that’s really, I think, the tip of the iceberg, given that they could not survey all of the countries in the world. It’s only a small snapshot of the countries. And I think what this shows us is that there is a definite movement and definite energy to sort of reverse the era of privatization, the era of neoliberalism. All across the world and communities all across the world, people are reacting against the deficiencies of privatization and austerity and neoliberalism and trying to take back control of different parts of their economy in different parts of their economic and different economic sectors. And the United States is no different, you know. The United States is often considered to be the sort of beating heart of free-market capitalism, but you actually have quite a large and robust sector of public ownership and municipal ownership, especially at the local government level.

 And so while we didn’t go full on for privatization, as did many parts of the rest of the world, we are actually still experiencing this as pushback against privatization and austerity. Some interesting examples are in the water sector in recent years. So in the 1990s and early 2000s, there was a wave of water privatization in the United States, and it wasn’t as big as in other countries. It was definitely not as big as in, say, Britain, where they privatized the entire water sector and turned it over to private corporations. But we did start to have some water privatizations here in the ’90s and early 2000s. And then after that, you know, because of the failure of a lot of these privatizations, most famously in Atlanta, Georgia. That was a massive failure of privatization where after they turned over their local water system for-profit corporation, service quality went down. “Boil water” advisories and eventually the city, under a lot of pressure from community groups and advocates, canceled a lot of privatization contracts.

 And we started to see that across various cities and in the United States, in various communities in the 2000s and in recent decades, especially since the financial crisis of 2008 and 2009. And so now you see, whenever there’s an attempt to do a lot of privatization in the United States they’re very opposed by community groups. And a lot of organizations that have gone to referendums have been rejected, often by wide margins.

Paul Jay

I’m looking at some of the infographics in the book and the number of remunicipalization cases is really extraordinary, 156 in France, 411 in Germany. This includes not just water, but energy companies, schools, telecommunications, in Norway, 42, Spain, 119, in the United Kingdom, 110. That’s a lot. And we hear almost nothing about this. Generally, all we hear is just how efficient privatization is. But apparently that’s not how it turned out.

Thomas Hanna

No, definitely not. And energy is a very interesting one. So sometimes you hear a little bit about Germany’s energy transition or their renewable energy transition. They’re sort of efforts to get off of coal and in some cases, nuclear and move to more renewable sources. And what we don’t hear about, often when people talk about Germany’s renewable energy transition, is that a lot of it consists of this effort to remunicipalize their electric utilities because a lot of them were privatized in the 1990s again. And now they’ve been taken back. And so a lot of those municipalizations that you see in Germany, 400 or so that you mentioned, those are electric utilities. And we’re seeing a lot of that energy here now in the United States, as well.

Paul Jay

Well, give us more specific examples. I know there was some fairly well-known case in Paris with the water. What happened in any of these examples? Just tell us a bit about the story.

Thomas Hanna

Sure. The Paris water municipalization’s quite interesting. In around 2010, Paris overturned their privatization and returned their water utility to public ownership. And as a result, they’ve had considerable success. I think water rates have dropped significantly. They’ve installed drinking water fountains across the city. A colleague of mine over in the U.K., she has this great line because Paris water utility, not only have they installed free, clean drinking water fountains, they’ve also installed fizzy drinking water fountains. So she calls it, “Socialism with a sparkle over there in Paris.” But they also have one number of reward awards for being efficient and transparent and participatory. So they have a multistakeholder board for the Paris Water Utility that includes city councilors, employee representatives, civil society representatives and some of the civil society representatives were actually drawn from a separate body called an Observer Choice for the Paris Water Observatory. And that’s a citizen participation body that allows people or tries to enable people to participate in the running of their water system. And they also have heightened transparency. So I think that they also have heightened transparency laws. So they allow all people to be able to observe what’s going on in the water utility, including their financial statements. And I think in 2017, or so, they won an award from the United Nations for high quality in the areas of accountability and transparency and integrity.

Paul Jay

The energy companies, that’s a very profitable sector. One would think they’re not very happy about getting remunicipalized. Where has that happened in the United States? How much of a battle has it been?

Thomas Hanna

Yeah. The United States is quite interesting on municipalization. To start with, we actually have a considerable number of publicly owned electric utilities in the United States. There are about 2000 publicly owned electric utilities here. That, along with co-operative supply, is about 25 percent of the nation’s electricity. So a lot of communities, especially in rural communities and in the Midwest in the last half, you already have publicly owned utilities. So we have plenty of examples of places where these things work very well, often in very conservative or Republican areas and such. You know, we can compare private utilities to public utilities in the United States in a way that you kind of can’t in a lot of other sectors and a lot of other parts of the country, and there have been, I think, over the past 20 years or so, I think there have been more municipalization and electric utilities than have been privatizations of U.S. electric utilities.

That being said, it’s not easy. These things are very hard to municipalize. Boulder, Colorado has been trying for more than 10 years to supply its electric utility, which is run by a giant corporation called Xcel Energy. And Xcel has basically fought them every step of the way to have numerous referendums, public votes that have to go to the Public Utilities Commission and courts. And it’s been a huge fight, but it’s being led by the leaders of the City Council, but also by climate and energy activists and movements in the city trying to move that along.

Who knows how it will turn out? Maybe they’ll strike some deal, and they will actually municipalize. But it’s increasingly being sought as an option, a strategy by climate activists, in particular across the United States. There’re now campaigns underway in numerous jurisdictions, especially in places like Rhode Island and Maine, Chicago, various other places that are looking. In California, especially in response to the failures of PG&E in the fires that they’ve had there, there’s big activist efforts and campaigns to take over and municipalize electric utilities in the U.S. 

Paul Jay

And what’s necessitating this? In what way does a public utility, energy company or water, but let’s focus on energy. How would it act differently than a privately funded, privately owned one?

Thomas Hanna

Yeah, the benefits of public ownership, in general, is that it’s a flexible ownership form.  It’s not inherently better or worse than any other ownership form. But it allows you, or it allows the city or community, to determine what the priorities are, or their enterprise, or for their service. So, for instance, of the energy utilities, a lot of the drive to municipalize electric utilities is around renewable energy and around climate hurdles. Large, for profit companies, are very much constrained by their quarterly returns, by endless growth, having to deliver profit to their shareholders. And they are very reluctant to do anything that interrupts that. Especially things that are more long term, in the long term interests of people and planet. Municipal utilities, on the other hand, belong to the people. So a useful utility, or a public enterprise of any form, can be tasked to whatever the people decide they want and want to be tasked to do. So, for instance, one of the first utilities in the United States to get to 100 percent renewable was in Burlington, Vermont.  Was there publicly owned utility there? That’s because the people of Burlington, Vermont, the city leaders, wanted to get 100% renewable energy. So they have control. So it’s very much about control and who has control. Publicly owned enterprise gives the community control over a very important asset or service or enterprise.

Paul Jay

I wrote an article about who killed the Rodney Todd family. And it’s the fifth year, fifth anniversary of the death of Rodney Todd and his seven children. He couldn’t afford the electric bill even though he had a full time job, but he was being paid minimum wage, lived in a small town in Maryland, and he got a propane heater and had it inside the house because people think it was so noisy he didn’t want to put it outside the house and wake up his neighbors. And the gas leaked. There were some kind of fumes and Rodney and all seven children died one night. Would a public utility allow such a thing? Do they, publicly owned? Would they cut somebody off in winter? It’s supposedly illegal in Maryland to cut someone off in the middle of winter. The excuse was that the meter he had wasn’t an authorized meter, and for safety reasons they had to take it out. But there’s no evidence that Rodney put the meter there. Some people speculate it was the landlord. But whatever the power company, which in the final analysis actually is controlled by financial institutional investors, including BlackRock, which is one of the largest.

The company took no measures to make sure there was power, even if they thought the meter wasn’t safe. Are you finding that publicly owned utilities are dealing with situations like this any better than the privately owned ones?

Thomas Hanna

That’s a very tragic story and probably one that is relatively common in the United States, given the way that a lot of our public services are oriented towards profit and extraction. The thing about the United States is, and public enterprises versus private enterprises in the United States,  it’s very much about control. So if you orient a publicly owned enterprise to simply make profit, or to generate as much revenue as possible for the municipality, you’re likely to replicate some of the same practices that exist in privately owned enterprises and utilities.

Paul Jay

That was happening in Baltimore where the city owned the water, but the bills they were charging for water and cutting off water for unpaid water bills was as bad as any private company would have done.

Thomas Hanna

Exactly. And so inherently it’s not better or worse. It’s about the ability to get control, to change those practices. And you do see in the evidence, especially in the academic literature, that, you know, publicly owned utilities, publicly owned enterprises are better on a lot of things. They’re usually better on cost than of a profit motive. They’re usually better governance issues in terms of transparency and accountability and knowing what’s happening within the enterprise of the utility. They’re also better at climate change. And in many ways as well, there’s academic literature, by Mildred Warner, on this about public utilities versus privately owned utilities.

Paul Jay

Let me add to the Baltimore story, which sort of strengthens your case.  Because it was public the community was able to actively push back on the water pricing policies and get them changed. I think they passed some measures that made it illegal, or at least there was a policy that they wouldn’t cut people off. And I don’t know how successful that would have been if it had been privately owned. 

One of the things your chapter of the book, focusses on the issue of the Internet and broadband and publicly owned broadband initiatives. What’s been happening in that? 

Thomas Hanna

In the United States, broadband Internet has been probably the biggest sector of growth of public ownership in recent years and probably over the past decade, and the past several years there’s been around 800 communities like towns, cities, counties have established what we call community owned broadband networks. And all of these, around 500 are straight up, are state publicly owned. The other 300 are cooperatives of some form or another. And of these around 150 have really superfast networks like one gigabit speed networks or higher. Some have 10 gigabit speed networks. And one of the leading examples a lot of people know about is in Chattanooga, Tennessee, where the city, very early on, 2009, through their publicly owned electric utility, began operating a fibre network. And it was the first location in the U.S.of any location to offer one gigabyte speed. So our estimates subsequently upgraded at any speed service, and it’s had incredible impact on their communities. Some of the stats that we cited in the chapters that it’s directly responsible for adding around 2800 new jobs and adding about a billion dollars to the local economy, especially in rural areas or small towns and cities.

This is an economic development strategy. You’re seeing an outflow of population to larger cities. You’re seeing all the economic development funding funneled to these larger jurisdictions and less rural areas and small towns and cities. I can’t compete in the 21st century digital economy. We’re just going to see further concentrations of people and capital in the United States and access to Internet is absolutely crucial.

Paul Jay

Tell us more about the Chattanooga story, because that’s kind of remarkable. I know the small amount that I have followed this story. The majors fight this like mad. I mean, this is, you know, AT&T and all the other big players in the Internet providing business. This is death to them. I mean, who would ever buy one of them if you have a public service at that kind of level? 

Thomas Hanna

Yeah, exactly. And what we’ve seen in recent years, not so much lately, but in recent years has been what we call preemption laws being put in place across the United States, not only in broadband, but in other areas as well. And this is essentially that the large corporations know that they can’t win these battles at the local level. They lose the referendums. They’re not well regarded when it comes to local service. Such they sort of jump over the local level, and they go straight to the state legislators and state legislatures where they have considerable power. And they put in place preemption laws, which essentially cut off local jurisdiction’s ability to experiment with alternative models of ownership and different ways of doing economic development.

Paul Jay

And these these laws are passed at the federal level or state level?

Thomas Hanna

These laws are passed at the state level. So in the case of broadbands, there have been many, many states. I don’t remember the exact number, but upwards of 15 states that have, mostly conservative states, have passed restrictions on the ability for local governments to set up their own Internet networks or to expand their own Internet networks. And so a lot of the energy around these broadband in recent years has been OK.

So now we need to go to the federal level, to the FCC and to Congress and try and get these preemption laws thrown out to allow local choice to happen again at the municipal level. And so President Obama supported getting rid of these preemption laws, as have presidential candidates like Bernie Sanders and Elizabeth Warren and so on and so forth. And legislation has been introduced in Congress. By Senator Cory Booker and others to get rid of these preemption laws.

But it’s hasn’t happened yet. And essentially, what the courts have said is that the FCC alone cannot get rid of these preemption laws. It’s going to have to come through an act of Congress.

Paul Jay

The Supreme Court has said this?

Thomas Hanna

No, I think it was a district court that had ruled against the FCC during the Obama era. And it hasn’t gone up to the Supreme Court.

So, I think it would be outrageous that you could have laws that simply protect some big Internet providers. But I guess this is the power of Horizon and such outlets.

And it’s the same with things like fracking as well. It’s been interesting things happen in places like Texas where, you know, very conservative local communities don’t want fracking to happen in their communities, and they’ve passed laws that say, we don’t want fracking. And then the state government of Texas says local governments can’t pass anti-fracking laws. Try to preempt that. It’s interesting in terms of the political dynamics, as well, as a lot of these communities, the smaller these are, also the conservative communities, but not their choice. Their local self-determination is being taken away by state legislatures.

Paul Jay

The places where cities have been successful. How effective are the cities at running Internet companies? In theory, it’s pretty high tech and complicated business.

Thomas Hanna

Yeah, these have been very successful. You know, there have been some failures and some places where things have reverted back to private ownership or there have been issues. You know, one was near where I live in Virginia, in Bristol. But, you know, as a whole, they have been very successful. You know, they’re usually very well-run. They’re usually faster in many places. They’re usually cheaper in many places. And there’s different ways of setting them up, different types of partnerships.

They often, as I said, some of them are run through the public electric utility. Some of them are on the stand–alone things. Some of them are, basically the fiber networks are owned by the city and the services provided by a small ISP Internet service provider. Sometimes they’re cooperatives, for basically a lot of small municipalities will get together to form a group that will provide the service because it’s uneconomical for some town or city, to be able to do it by itself. Sometimes there are, what we call public–public partnerships, whereby two or three or more public entities within the jurisdiction of courts or a university or local government all get together to be able to provide service, electric service and run these works.

Paul Jay

One of the chapters in the book, I think this one’s by Hilary Wainwright. She talks about how it’s not enough just to have the public ownership. And you mention, as well. It’s really about control, which means who has control and the nature of the state. The issue of who has control, to the large extent, whether it’s city level, state level or federal level, it’s really the financial sector that’s so powerful and so dominates every level of government, and including who’s making economic policy, especially at the federal level.

It’s the same. And everyone talks about this revolving door of Wall Street and the Treasury Department and the Fed and so on. The issue of public ownership, it seems to me as a piece of this issue of democratization, a critical piece is the development of public banking. If we don’t break the power of the financial sector, it’s going to be very difficult to do much of anything else, given that the extent to which the financial sector can essentially blackmail at every level and especially cities in terms of municipal bonds and and so on. But public banking, I would think, is a real way to start pushing back on the power of Wall Street and and create an alternative. And I’m talking more than retail banking. Like I know there’s a lot of talk about postal banking, which is, I would think, a good idea, but doesn’t there need to be a really thinking through how to create public banking on a scale that can actually push back against the massive financial institutions who just blindly pursue, you know, profit. And they really can’t do anything else. It is what they are. It is what it is. They are who they are. That is what the system is like in this article, “Who killed the Todd family?” The power company, I think I mentioned it, ends up being owned by BlackRock, the largest financial asset company. I mean, they don’t go out to kill the Todd family, but I guess it’s collateral damage. I mean, their job is to maximize for their investors, the return, and that’s the way the system works.

You’ve got to have a paradigm shift. And that shift, I think, has to do with public ownership and democratization. I know you’re on, you advise on some organizations on the question of public banking. So what’s your vision of how we can move towards a vision of public banking on a larger scale than, maybe, most people have been talking about?

Thomas Hanna

Yeah, I one hundred percent agree. I mean, I think one of the features of the neo-liberal period has been these large scale structural changes, the financial sector and its relationship to the economy as a whole, and specifically, both the massive expansion of the financial sector and the consolidation growth of our financial institutions. And so, I think that a lot of people know some of these trends around financialization better than I do, and I won’t get into too much. But least in terms of banking, you know, at times over the past couple of decades, finance’s share of total profits have been anywhere between 25 and 40 percent. And a lot of experts identified as increasing financialization of our economy as one of the root causes of a lot of our economic dysfunction. And on top of this, the financial sector as a whole has also been seeing incredible consolidation over this period. And the big banks are getting bigger and bigger. And I think between the 80’s and early 2000’s, like 7000 banks disappeared through mergers and acquisitions prior to a financial crisis. And so I think that public  banking or, you know, various ways to address financialization of public banking, is definitely one of the key ones. And it’s one that’s been getting a lot of attention lately in the United States and around the world, especially. There’s a very, very vibrant public banking movement in the United States. A lot of people and the rest of the world are really envious of the public banking movement here. And a lot of the successes that are starting to happen, especially in places like California, where they’ve actually passed legislation at the state level that will enable localities to set up banks. We are, we sometimes with public banks, forget how prevalent they actually are in the world. My friend, Thomas Morvois, he’s in the book as well, as we’ve  mentioned, he’s shown that figures produced by international organizations like the World Bank and the OECB, consistently underestimate and misrepresent the value of public banks. 

So, like they say, public banks have something like two or five trillion in assets. But Tom’s research has shown that there are, in fact, like almost 700 public banks around the world, and they have assets as much as 40, around 40 trillion dollars. And when you add in bilaterals, pension funds, sovereign wealth funds, central banks and so on, the public finances amount to around seventy four trillion. And so public banks exist. They’ve always existed, despite efforts to delegitimize them. They’re very prevalent around the world. And you need to look to what’s happening around the world. And we need to expand the public banking sector beyond that, beyond retail banking, beyond some of the small scale banks. I think they’re very important things. like Sparkassen banking network, the savings banks in Germany, where there’s three or four hundred of these local savings banks. Beyond even things like the Bank of North Dakota, which is our longstanding hundred year old, pretty famous public bank here in the United States.

But we need to think there. I mean, there are some very, very big public banks around the world. Germany’s KFW Group is this huge state bank. India. Russia has a public bank. Italy has a public bank. Brazil has a public bank. The British government still owns a significant chunk of Royal Bank of Scotland, which is a giant bank that they bailed out during the last financial crisis and retained ownership. So public banks can absolutely, 100 percent play various roles in the economy and the things that we need to do.

One of the really interesting parts of public banking is linking public banking up to the renewable energy transition and dealing with the climate crisis. And it’s actually becoming acceptable around the world, especially in  international institutions and international development, to look to public banks, to basically take on the financing of renewable energy that the private sector just doesn’t want to take on and isn’t going to ever be able to take on. One interesting example that Tom points out is that there’s a hydro power company in Norway that’s a municipally, publicly owned hydro-power company. A lot of, I think 14 or 15 different municipalities in different parts of the country owned this hydro-power company. And this hydro-power company wanted to embark on a process of building environmentally sustainable power generation plants as part of the country’s efforts to become carbon neutral. And so they linked up with the Nordic Investment Bank, which is a giant public bank, to be able to provide the financing that was necessary for that completion. There’s another one in Costa Rica, Banco Popular. And this is the other part of the question that you were talking about, about democratization. So not only in terms of addressing the finance question, but also addressing this question of how you get control, and how we democratize publicly owned enterprises. So Banco Popular is, I think, the third largest bank in Costa Rica. It was originally a development bank, but over time, it’s become one of the leading ecological lenders in the country. And it’s a quasi co-operative public bank. So they have, I think, at 290 person General Assembly, where they draw representatives from all across the country, different economic sectors, workers and so on and so forth. And that General Assembly elects up, I think, four members to the board of the bank. And in the states, the Costa Rican government wants another three members. And they do popular planning and consultation process every certain number of years. Through that process they’ve really focused in on social benefit and climate transition. 

Paul Jay

Yeah, I think the climate movement and the movement for public banking and the people in the streets demanding control of the police, all these various things really need to merge into some very clear demands about what kind of society, what kind of economy, what kind of politics we’re going to have, and not in the distant future because there is no distant future. If you listen to what the scientists are telling us. The leading environmental scientist, climate scientist in Australia, was just quoted recently, and essentially the science is now, we’re going to hit 1.5 degrees warming above pre-industrial levels. We are going to hit two degrees. There is nothing being done now that’s going to prevent us hitting two degrees. And once we hit two, it’s every likelihood that the kind of tipping points, feedback loops and so on are very unpredictable. And I think the only thing that’s been clear in the pattern of prediction is the scientists always seem to, I shouldn’t say all, but most, to err on a conservative side that winds up being wrong. And the speed of the process seems to be faster than the scientists thought. I mean, it’s very likely, from what I’m reading, I’m no scientist. But from when I’m reading, it’s very likely we’re gonna be hitting as much as two degrees by 2050, maybe even 2040, unless something radical is done and something radical is being done in the United States. But I think it’s true for Canada, and it’s true for all the advanced capitalist countries. If the power of finance isn’t broken over the politics, finance is incapable of doing this. Like BlackRock, the big investment company. I wrote an article about this that’s on our Website. You know, they made all kinds of declarations about how they were going to go green, and they were making green sustainability one of their criteria for investment. They’re pulling back from coal, and it’s all B.S. when you look at what they’re really doing. The commitment of BlackRock to get out of coal was they wouldn’t invest in any company that, I think the number was that 25 percent of their revenue came from coal. They wouldn’t put any money into them now. And first of all, most of BlackRock investment is in big index funds, and they don’t pick and choose specific, stocks. So if there’s a coal producing entity that’s in the index, they will continue to invest. Now, yeah, in their discretionary money, they may not invest in companies that do 25 percent of the revenue from coal. But even that’s a bit of a scam. And I don’t have the detail on my finger tips, but people can go read the article on the website. Some of the companies that are the largest coal producers also have lots of other sources of revenue. They’re not just solely coal. So the coal component of their revenue could be easily, in one case in particular which is one of the larger coal producers in the country and the United States. Coal is less than 25 percent. But there’s still one of the largest coal producers. So BlackRock can keep putting money in. My point is BlackRock can’t do otherwise. Only government and only government that has enormous pressure on it from a mass movement with clear objectives in this direction and a Congress that has a lot of progressive representatives and so on. And the key to it all, I think, is, at least one of the keys, is there has to be public banking on a large scale. It may be diversified. It could be at the level of regional states getting together and creating them. Municipalities creating them. At some level federally, creating them because you do need to be concerned about the concentration of ownership into too few public hands, because that can also tend to work towards not being anything to do with democratization. You can have a kind of Mussolini kind of state and then create some public banks. But this conversation about public banking breaking the political power of finance in order to save the planet, because it seems to me we do it, or we perish.

Thomas Hanna

Yeah, I agree. And I think that for public banking, there has to be both a bottom up and top down strategy to salvage public banks. So from the bottom up strategy, we need a mass movement in our cities, in our states as it’s happening in California and other parts of the country to establish local city public banks so that we can establish independence of our communities from Wall Street banks. We need state banks like the Bank of North Dakota that acts as sort of a backstop; thriving and diverse local ecosystem of community banks. But then we also need to  work from the top down, as well. And so when there are crises like in 2008, 2009 or even the most recent crises, we need to use those crises to be able to intervene and to take ownership and take control over the financial sector, especially if we’re providing boatloads of free money and credit and bailout funds for these financial institutions. We should be taking ownership stakes and equity stakes in these corporations and bringing them back under public controls. I think there’s definitely a bottom up and top down strategy.  There’s also a strategy, I think, that needs to happen in terms of the climate crisis, a strategy around nationalizing the fossil fuel industry outright. I think what we’re seeing is that there is there is a double edged sword coming. Essentially, we’re either going to have a climate crisis, or we’re going to have a giant financial crisis because there’s a giant carbon bubble, trillions of dollars in financial markets, essentially the value of fossil fuel assets that are locked into our financial markets, that if they’re not burns, they’re going to create a financial crisis. And if they are burns, these losses, all those, we’re going to have a climate crisis. And so, we really need to have some sort of massive intervention that could essentially take over, buy out, nationalize these fossil fuel companies and their reserves and keep those reserves in the ground.  And I think some colleagues of mine have been working on this  for many years. And it was a very fringe idea for for many years.

But then since the financial crisis and a rapid drop in valuation of oil companies and collapsing oil prices, it’s become a very talked about issue, especially in the climate movement dealing with the supply side issues, and now very much the time for the government to use its financial power.

Paul Jay

I mean, it seems to me that the issue comes down to something that’s rather straightforward. Assuming Biden is elected, a mass movement and all the progressive economists and everybody have to get on the page of a few very clear and specific demands. And one of them has to be the nationalization, and it can be done very easily. You don’t have to expropriate, just buy the shares, because as long as the federal government is going to say, OK, no more free money to you, Bank of America, no more free money to you, X, Y, Z, banks and the government will be able to buy the shares of these banks for a song because they’re not going to last without public money. And that goes for BlackRock. The stock market would go so down the toilet. If the Fed isn’t propping it up the way it is now, then the government can say the same thing to Black Rock and State Street and Vanguard. These are the big asset management companies that just the three of them control. I think they’re up around 15 trillion dollars of assets under their management. And those three companies, along with other similar type of companies and financial institutions, control 90 percent of the S&P 500. That means just about everything that’s on the stock exchange. They wind up controlling the votes of who gets to be the management and what the policies of these companies are. Just by the government buying, controlling shares of a few of these big asset management companies there’d be enormous, what amounts to nationalization of sorts, but focusing on the finance sector to begin with. I mean, this all needs to be worked out in more detail, but if this isn’t done, we’re done.

It’s not a far off notion, wouldn’t it be nice someday in the future? I just don’t see how we deal with the climate crisis. And let me add to that. I know it just complicates the issue, but it’s also true in threatening the issue of the massive new expenditure on nuclear arms, a trillion dollars over the next, what is it, 20 years or something. It’s extremely dangerous. But it all reduces itself to the same question, like who’s in control, who has power and who is this politics economy going to be run for? But who owns all the major, 12 major manufacturers of nuclear weapons? Well, BlackRock, Vanguard, State Street. It’s the same financial institutions now. Are they essentially the controlling interests of just about everything, including Lockheed Martin and Boeing? And let me say also The New York Times and Time Warner, that’s on CNN, almost all the private media. It goes on and on. We’d better all start talking about this because if in the next four years, assuming it’s Biden, if it’s Trump, then this isn’t the same conversation at all. We batten down the hatches. I don’t have any big expectations about Biden at all given his history. But, at least, maybe there’ll be a conversation about this. But only if there’s a mass movement with clear objectives of the one, some of which you’re suggesting, I’m suggesting. 

Thomas Hanna

Yeah, exactly.The crisis that we’re currently in. Things that you mentioned as well. It really just shows that we have the ability. We have the power. Government can intervene and it can spend money on things that it finds important. It’s just a question of what it finds important. And so the Federal Reserve, in particular, appears to have learned some pretty significant lessons in the 2008 crisis. And according to a lot of observers, the Fed acted much more quickly and decisively this time to prop up the financial system when it became clear that the COVID-19 pandemic was going to have a pretty massive impact on the economy. It’s launched a lot of new programs and legal work arounds that it never even contemplated during the Great Recession. I think Jerome Powell just recently said that the Fed had crossed a lot of red lines, that it had never crossed before. And so, you know, once again, just like in 2008, we’ve responded to a major economic crisis by using public funds to prop up the profits of private, financial institutions and corporations. So once again, profits have been privatized and losses have been socialized. And granted, the circumstances leading to this crisis are very different. But the simple fact of the matter is, is that our financial lives and largely privatized economic system is really incredibly vulnerable and incapable of operating for a long time without implicit and explicit support from the public sector. And so to me, I think this is ample evidence that we need to restructure our financial system under public control. So that it works to support the real economy rather than casino-like speculation. So that it serves the public good rather than private accumulation.

Thanks a lot, Thomas. Thanks for joining us.

Thomas Hannah

Thank you so much.

Paul Jay

And thank you for joining us on theAnalysis.news podcast.

 

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