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going local
The UK doesn’t have small, local banks any more, but things might just be beginning to
shift – the time for UK-style local banking is almost nigh, says David Boyle
time to be a bit more
sophisticated about money
We are, let’s face it, not very sophisticated about
money in this country. There is a general sense that
the banking system descended on a cloud
somewhere around the sixth day of creation.
If the bankers screw up, or pay themselves
outrageous amounts, that is very regrettable, but it
hardly seems to occur to us to do anything about it
– or anything that might upset the status quo of a
system that was actually created by the longstanding
Bank of England Governor Montagu
Norman. Norman was an early patient of Jung’s,
who proclaimed later that he thought he was
probably insane, but that is beside the point.
And we were assured a few years ago by the
Washington editor of one of our national
newspapers that all money was based on gold,
when it hasn’t been since 1931. Admittedly, he was
from the Sun.
The point I want to make here is that it is different
in the USA, where banking and money creation is at
the very heart of politics, and has been since the
days of Alexander Hamilton. Since before that, in
fact – one of the causes of the War of
Independence was the habit some states had of
printing their own money.
So when the Huffington Post ran a campaign last
year called ‘Move Your Money’, tens of thousands
did as requested and moved their money from big
banks to small ones (and half of all the money in the
USA is still in small banks).
In the UK, thanks to Montagu Norman, who
disapproved of them – and created the Big Five, as
it was then – we don’t really have small banks any
more, certainly not local ones. But things might just
be beginning to shift.
After Essex and Birmingham set up their own
local banks, other local authorities are thinking about
it. With the Icelandic banks pretty much defunct,
they do have a need for somewhere useful to lodge
their money – and why not near home, where it
might be available for useful investment? Even the
Local Government Association has been discussing
the idea.
The lesson of New Mexico, which admittedly is
not well known in this country, might weigh heavily.
The state decided that its own money should be
lodged only in local banks, turbo-charging the
amount of money available for lending to local
business. This is not at the moment a trick open, for
example, to Devon County Council, because –
thanks to Montagu Norman and his successors –
there aren’t any local banks to shift to.
But the real lesson that has been exercising the
USA is the example of North Dakota. Why is it,
people have been asking, that when most of the 50
states are close to bankruptcy, North Dakota is
thriving?
‘North Dakota is a state which
just happens to own its own
bank...The state bank provides
the answer why North Dakota
has no debt and its largestever
budget surplus,
contributing over $300 million
in dividends to the state’s
coffers over the past decade’
North Dakota is a deeply conservative Republican
state which just happens to own its own bank. The
Bank of North Dakota was set up in 1919 (the same
year, ironically, as Neville Chamberlain’s Birmingham
Municipal Savings Bank) in response to a wave of
farm foreclosures at the hands of out-of-state Wall
Street banks. The state bank provides the answer
why North Dakota has no debt and its largest-ever
budget surplus, contributing over $300 million in
dividends to the state’s coffers over the past
decade.
It also partners with local banks, providing the
loan finance for small-business lending, which – as
everyone knows but nobody will say publicly – is no
longer possible for big banks.
298 Town & Country Planning June 2011 : GRaBS Project – INTERREG IVC; ERDF-funded