Science in Society Archive

New Economy Now

Away from the headlines, a new economy is taking shape through financial innovations on the Main Street and grassroots local action Dr. Mae-Wan Ho

The colonized 99 %

The unregulated money and banking system put in place since the 1970s and 1980s is now generally regarded as the fundamental cause of the 2008 global financial crash (see [1] “Shut Down Wall Street!”, SiS 53). The massive government bailouts handed to the financial institutions in its wake ensured their speedy recovery to profitability and big bonuses, but have made things worse for “the 99 %”. Far from stimulating the real economy and creating jobs, unemployment soared, especially among the young, home foreclosures continued unabated, and the world is plunged into a sovereign debt crisis from which it may never recover.

Wall Street’s relationship with the US is likened to that of a colonial occupier devoted to extracting and expropriating wealth from the people [2]. The US is by no means alone. Global corporations, financial and otherwise, do not have a mission to create jobs. On the contrary, they are there to maximize profit by all means available, including [2] “eliminating jobs and work benefits, depressing wages, evading taxes, denying health insurance claims, and pillaging the retirement accounts of the elderly.” Doesn’t that sound familiar?  

Indeed, the middle class has been all but eliminated in the ‘economic growth’ fuelled by the financial deregulation of the 1970s and 1980s: the richest becoming even richer while the ranks of the poorest swelled to more than half the population. Between 1983 and 2009, over 40 % of the wealth-gain went to the wealthiest 1%, and 41.5 % went to the next wealthiest 4 %  [3]; the bottom 60 % of US households gained nothing at all; they went into debt instead (see Figure 1).

Figure 1   Share of wealth gain 1983-2009

Wages and workers’ benefits are eliminated and minimized by automation and outsourcing to countries with the cheapest labour cost. But that does not mean an increase in global employment. Between 2000 and 2009, according to the US Department of Commerce, transnational corporations - which employ about 20 % of all US workers - slashed US employment by 2.9 million and increased overseas workforce by 2.4 million, resulting in a net loss of 0.5 million jobs.

The major task in building a new economy is to replace Wall Street by Main Street money and banking system accountable to local communities and responsive to their needs; and along with that, the creation of good jobs at living wages that generate real wealth for people.

Fortunately, we don’t have to wait for governments to make this happen.

Communities bank on community wealth

The first in a six part action plan proposed by the New Economy Working Group (NeWGroup) to liberate America from Wall Street [4] is to reverse banking consolidation, break up megabanks and build a national system of community banks, in particular cooperatives or ownership by non-profit organisations devoted to building community wealth.

The New Rules Project of the Institute for Local Self-Reliance [5] reports that the US still has some 8 000 credit unions and more than 7 600 community banks (with assets ≤ $1 billion(. Partly as a result of the Move Your Money campaign [6], which en­courages people to transfer their bank accounts to local financial institutions, the credit unions are booming [7]. Between the start of 2009 to June 2010, credit unions added over 1.5 million new members, their deposits grew by 10 percent in 2009, and held 10 percent of US deposits by June 2010.

Community Development Banks [8] - private federally-insured for-profit banks and thrift institutions with a mission to serve low and moderate income communities -finance affordable housing, small busi­nesses, community facilities, consumers, and mixed-use commercial real estate. They also support the devel­opment and application of green technologies.

According to the Forum for Sustainable and Responsible Investment (formerly Social Investment Forum) [9], the combined assets of community development banks, community development credit unions, community development loan funds, and com­munity development venture capital funds rose more than 60 % from $25 billion in 2007 to $ 41.7 billion at the start of 2010.

There are other financial innovations from community banks cited in the NEWGroup report [4].

The Bremer Bank, operating in Minnesota, North Dakota, and Wisconsin, manages $8 billion in assets and specializes in serving local farmers and businesses. It is owned 90 % by a non-profit foundation that returns all profits to the community; and the bank’s employees own the remaining 10 %.

One PacificCoast Bank was founded as OneCalifornia Bank to serve low-income communities. It is owned by the non-profit One PacificCoast Foundation set up by financier Tom Steyer and his wife Kat Taylor with an initial philanthropic investment of $22.5 million. The foundation receives all financial benefits, and makes charitable and educational grants to support the bank’s social goals. In 2010, OneCalifornia Bank acquired ShoreBank Pacific, which specialized in providing loans for local businesses engaged in the restoration and sustainable management of environmental resources. The com­bined banks now operate as One PacificCoast Bank.

Southern Bancorp, one of America’s largest and most profitable development banks with over $ 1 billion in assets, is a for-profit bank with restrictions on ownership participation. Most of its shareholders are foundations and corporations that invested for social rather than financial returns; most have no rights to receive dividends, share in profits, sell their shares, or convert the bank to a conventional model. Their mission is to achieve three transformational goals for the communities they serve in Arkansas and Mississippi over the course of 20 years: reduce poverty by 50 %, reduce unemployment by 50 %, and improve high school graduation rates by 50 %. Southern Bancorp offers a full range of banking services to the poor: checking accounts, credit cards, cheque cashing, small consumer loans, and several non-traditional financial services such as matched savings accounts and free tax preparation. The profits go either to increase the capital base to support expansion of the lending programmes or recirculate back to the poorest in the community as banking services or philanthropy.

The Enterprise Cleveland Group (ECG) in Ohio is a tax-exempt non-profit community development financial institution (CDFI) that helps small businesses grow, through loans and technical assistance. Its Evergreen Cooperative Development Fund, established by the Cleveland Foundation (US’ first community development foundation) in partnership with the Democracy Collaborative at the University of Maryland and the Ohio Employee Ownership Center, expects to become an independent CDFI in 2012. Together, these groups have launched a growing network of employee-owned businesses to provide employment for Cleveland’s low income communities. The employee-owned companies, in turn, are committed to dedicate at least 10 % of their profits to seeding new investments as co-investors in the Fund. The Fund also raises investment funds from institutions, foundations, government programs and individuals in the form of grants and social responsible investments.

A New York Times article published in December 2011 [10] reports some 130 million Americans participating in the ownership of co-op business and credit unions, 6 million more than in private-sector unions; and over 1 million Americans have become worker-owners of more than 11 000 employee-owned companies.

State banks for safe deposits

The second item in the NEWGroup liberate America agenda [4] is to establish a system of state-owned banks to serve as depositories for state financial assets and to partner with community development financial institutions on loans to local homes, industry and commerce.

The Bank of North Dakota (BND) is a shining example of such a state bank. It was established in 1919 to promote agriculture, commerce and industry in North Dakota. It is 100 % owned by the State, and conducts its business solely in the public interest in partnership with the state’s local private banks. Its deposits, primarily interest-bearing accounts of the state and its political subdivisions – are guaranteed by the State of North Dakota. The  BND is a major reason why North Dakota has more local banks per capita and a lower default rate  on loans than any other US state, and also why its community banks were relatively untouched by the 2008 financial crisis. This has inspired other states to set up their own state banks.

By March 2011, state partnership bank legislation has been introduced in  8 states: Maryland, Oregon, Hawaii, Washington, Illinois, Louisiana, Massachusetts, and Virginia, and additional state bank legislative initiatives were in the pipelines in Maine and California.     

By December 2011, 14 states are considering legislation to create public banks similar to BND [10].

Grass roots action

Occupy Wall Street, and Occupy, is a spontaneous worldwide protest movement that has alerted and galvanized the ordinary people against the greed and corruption inherent to the current monetary regime [1]. But other action has also been happening behind the headlines.

The Move Your Money campaign [6] encourages individuals and institutions to divest from big Wall Street banks ‘too big to fail’, to take power into their own hands by stopping contributions to the corrupt financial system and create a stable, localized banking system instead.

Resilience Circle is a movement for a small group of 10 – 20 people coming together to increase personal security by learning, mutual aid and social action [11].

U.S. Uncut runs a non-violent direct action campaign to focus public attention on corporate tax dodgers and their part in the public budget deficits.

The Public Banking Institute [12] is dedicated to the understanding and facilitating the implementation of public banking at all levels, local, regional, state, and national. 

To conclude

We have all the elements of a new socially accountable economy that provides good jobs at living wages, and generates real wealth for people, at least in the United States. But that is not enough, we need a truly green circular economy that works with and within nature to generate and regenerate wealth for people and planet (see [13] Living, Green & Circular, SiS 53).

Article first published 04/01/12


  1. Ho MW. “Shut Down Wall Street!” Science in Society 53 (to appear).
  2. Cavanagh J and Korten D. JOBS, A Main Street Fix for Wall Street’s Failure. A Report from the New Economy Working Grooup, 29 November 2011,
  3. Mishel L. Huge disparity in share of total wealth gain since 1983, Economic Policy Institute, accessed 15 September 2011,
  4. Korten D. How to Liberate America from Wall Street Rule, New Economy working Group, July 2011,
  5. New Rules Project, Institute for Local Self-Reliance, accessed 15 December 2011,
  6. Move Your Money, accessed 15 December 2011,
  7. “Credit Unions hang tough, see surge in deposits”, Stacy Mitchell, 22 June 2010,
  8. Community Development Bankers Association, accessed 15 December 2011,
  9. “Experts: As traditional banks fail to meet more and more local needs, community investing poised to break through to mainstream”, Press Release, The Forum for Sustainable and Responsible Investment, 13 April 2011,
  10. “Worker-Owners of America, Unite!” Gar Alperovitz, 14 December 2011,
  11. What is a Resilience Circle? Resilience Circles, accessed 15 December 2011,
  12. Public already works in the United States and is catching on! Public Banking Institute, accessed 15 December 2011,
  13. Ho MW. Living, Green & Circular. Science in Society 53 (to appear).

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Amyan Macfadyen Comment left 5th January 2012 07:07:40
As an Englishman I was not aware of most of this and am greatly heartened by this report. In Europe we have a number of similar banks and building societies especially Triodos Bank, the Co-operative bank and The Ecology Building Society all of which I support.

Gene Sperling Comment left 5th January 2012 07:07:45
A wonderful explanation of living globally and responsibly by investing locally. The basis for a green economy is going to begin with a local green financing system that is capable of being screened for corruption and adequate oversight. Thanks for including the finances of science. Cheers, Gene Sperling

Dylan Comment left 5th January 2012 07:07:51
Some good ideas, but too little and too late in the day - enough derivative derived stolen digits exist already in unregulated dark pools of capital to WIPE OUT the value of all fiat curriencies overnight if they should be deployed into circulation. Nothing less than total regime change will solve the problem, the parasites must be brought to justice and the source of their power - central banks and their debt based fiat fractional reserve fraud must be taken away and replaced. Bankers expand and contract the money supply and through special priviledge and inside information, buying the troughs and selling the peaks, transfer real wealth to themselves from the masses. Thats how it has been throughout history. The only way out of this double-edged trap is to have an absolutely transparent, non-privately produced,interest free unbacked fiat currency BUT with an HONEST, non-manipulated precious metal market that can trade at its true value and act as a brake on excessive paper printing. Paper and electrons then primarily assume the monetary role of medium of exchange while gold and silver primarily assume the monetary role of store of wealth. This is the true synthesis to the keynesian thesis and its anti-thesis - austrian school economics, both previously used by the few to screw the many back and forth between the two poles - thriving from entropy. In an interest free fiat money system, there would be no deficit (which has always been a fraudulent illusion to maintain the debt prison)as money is created with no debt attached. A non-manipulated gold and silver price would reflect excessive fiat creation which an educated public would be protected against through possession of PMs as a store of wealth. That in itself would keep the money printing in check. Thats the purpose of gold and silver when freely traded, to hold their value and speak truth to paper. I have absolutely nothing against UNmonopolised private money creation as long as everything else is free to trade including gold and silver. This way the free market and the people can decide for themselves OF THEIR OWN FREE WILL what to put their trust in.

Tertius Comment left 8th February 2014 04:04:59
Dylan, I agree with most you say except for the last bit about the precious metals. That is only valid if your country mines silver or gold. If you don't, you first have to buy the gold or silver from a country where it is mined. So you use precious resources just to get something to base your financial system on. That increases the input costs to the country's financial system. That is one of the key reasons for the Anglo-Boer war, the British Empire needed to get the biggest source of global gold under their control so they can get it as cheap as possible. Or for free as they make profit from selling gold to other countries. And with that the pound became the global trading currency. Then after Britain was weakened in two world wars, the Americans took over as the global ruler and the dollar became the global trading currency backed by something far more useful than gold at that time, OIL. And to control the oil supply they had to fight and are still fighting many wars. Even if a country has gold or silver or other precious metal that can be used for currency, why mine it at all if the only use for it is currency? Mining creates immense environmental damage. It was calculated that if the gold mines in South Africa had to repair all the environmental damage they caused, they would run at a loss. So mining is a hidden cost to society. Why go to all this trouble, waste of lives and damage to the environment if with plastic, paper and electrons you can make a currency that cannot be counterfeited? One of the problem with financial systems is that currency does not match real economic output. Currency should only exist if it can match the cost of a real product, a real service or wealth accumulated from the profit of selling real products or services. Can this be done? In a technically unsophisticated environment it would be as easy as if the chicken farmer signs an IOU to deliver the agreed equivalent of eggs for the liters of milk she buys from the dairy farmer. That is if they are in a trust situation where the diary farmer knows the chicken farmer has enough hens to produce the eggs he needs. Or the maths tutor can get a few liters of milk after signing an IOU for the equivalent amount of maths lessons for the diary farmers kids. In our modern environment we can use the Internet and all other electronic appendices such as mobile phones to develop an electronic trading / payment system to do this. As the trust relationship that exist in a small town is absent in large cities and international trade, a bank can serve as an intermediary. The bank would inspect the chicken farm and issue an interest-free buying credit based on the potential sales of eggs. These buying credits (electronic) will then be guaranteed by the bank to create a trusted currency. This is more or less what a bank does when it approves a loan. This currency can then be used by the chicken farmer to buy whatever she needs. An alternative would be a trading system where the buying and selling of different traders products are matched electronically before transactions take place. In essence using offers to buy your product as a currency to buy other products. People who cannot supply should be sanctioned in some way or barred from using the system. It should be possible to trade products or services. Employment contracts with a verified salary can also be used to buy no interest credit to the value of the monthly salary. The other problem is ownership. If a bank was owned by all the depositors / traders as a co-operative, it would be run in such a way as not to risk the funds of the owners. But most, if not all banks are owned by rich financiers who need to be controlled by government regulations as if they are not, they will swindle those who deposit there as much as they can get away with. Just as is happening now. So co-operative banks should be the norm. In essence, the systems should be designed on the following principles 1) lowest cost of set-up and operation 2) trust 3] reliability 4]effectiveness 5] versatility 6] security 7] acceptability 8] ease-of-use This is only an outline and a lot more thinking needs to into this. The main purpose of my comment is to counter the arguments about the necessity for a precious metal such as gold as a store of wealth and too point out the critical issue of ownership. Issues about interest is debatable. Seeds and farming animals grow in value over a period. If I borrow you a cow, she can have calves. If I kept her, I would have the cow and the calve. When the loan ends, should I only get back the cow, not the calve? And what about the milk she gave you? What would be an equivalent energy exchange? But all this can be calculated, not like interest rates which are controlled by central banks.

jim pelland Comment left 15th December 2014 08:08:55
from all the research I have done over the years, I agree with the article and came to similar conclusions, but tertius has a good point, I consider history to be the greatest teacher of long as the driving force is the acquisition of wealth and has a monetary base ,it will be hard to change anything until people realize we can work together not for money but to better ourselves...