Public Banking and Taxing the Wild Frontier: Conclusion

As the twenty-first century drags on, we face an uncertain road ahead. To catch a glimpse of hope we need not look that far back into history to find working models for both prosperity and sustainability. It has been encouraging to see activists working hard on forming public banks, for these banks can change the fortunes of every member of the economy in a time of vast wealth inequality. The times call for practical-minded solutions to big problems like climate change and economic stagnation. To seize the moment, we need only look to our own past for models that work.

Out west, cannabis is one of the biggest economic drivers of the region. Its coming into the fold of taxation and regulation at the state level offers a turning point that could lift up far more than just the people involved in the industry. By chartering a public bank in California, the cannabis industry can use banking services where once they could only use cash. It solves the problem of paying taxes in large suitcases full of dollar bills and a lack of small business loans for cannabis businesses with less start up capital. But the really exciting part comes with what the state can do with its own bank once that revenue is drawn in from pot funds. Financing large scale infrastructure projects that can transition the economy from one based on fossil-fuels and freeways into a renewable economy with clean energy all but requires that we utilize public banks. Nothing else can bring all of the funds together for such a massive undertaking that so many people believe must be done.

The pioneers of cannabis farming sought to escape from a society that suffocated their creativity and freedom of expression. They were so successful that others followed them out there in a curiously similar movement to other historical movements that brought people out west in droves. The California Green Rush, like the Gold Rush and the Timber Boom before it, brought billions of dollars to the further reaches of the American west in a hurried and chaotic fashion. It is likely that the Back-to-the-Land cannabis farmer will be mythologized in a similar way that the gold panning pioneer was in the nineteenth century. With the Redwood Curtain lifted and profits soaring, rugged individuals and hippy communes are sure to get the romanticized treatment of yet another distinct culture subsumed by modern business. Public banking offers a way out of this predicament. With its public financing model, we no longer have to play the game rigged by Wall St to benefit the already well-off. Hippies get to put a dent into the capitalist machine after all – just not the way they expected 50 years ago.

Small farmers and landed peasants have always born the brunt of specialized industry marching forward. It’s a fact that has torn apart people’s relationship with the earth for over 200 years now. It has also created enormous prosperity, especially at the national level. Innovations in banking, worker specialization, and increased scales of production set off irreversible processes into motion that need to be reckoned with democratically instead of with a blanket rejection. Alexander Hamilton’s vision won out but the implementation has gone way off course. If we hearken back to the eighteenth century, we can see a virtuous project too far ahead of its time to be appreciated in the Bank of the United States. The man wasn’t perfect (in fact, he was down-right elitist), but Hamilton did have the common good in mind when he conceived a national public bank in his mind and willed it into existence. With a quick crash course in public banking, one can grasp just how necessary establishing new banks are to creating an economy in which everyone wins.

Currently, cities and states must borrow money from Wall St banks to finance their projects. The payments made to municipal and state bondholders, plus interest payments made to banks from loans doubles the cost of any large project. Public worker’s hours and pensions are being slashed, facilities are downsizing and getting privatized, and the investor class is making off with the profits like bandits. Money that could be circulating within the public sector and distributed equitably is drying up. Fringe finance is replacing banks that no longer deem it profitable to do business with the poor, extracting wealth for basic services that could be done easily by the post office. The money pie is shrinking because access to credit has been consolidated by extraordinarily wealthy financiers in their private bank accounts and tax shelters. Public finance is the key to unlocking the economic potential just waiting to be let loose. [What We Could Do with a Postal Savings Bank: Infrastructure that Doesn’t Cost Tax Payers a Dime]

Public banking has a proven track record. Everywhere you look, from Germany to China to early America, linking governments to the technologies of banks is a proven winner. It is not only profitable for governments but the private individuals involved in financing and borrowing from it. The only ones who lose are the already ultra-rich 1%, the ones who want to keep their monopoly on the lending/money-creation powers of banks. With the sudden availability of funds opened up by the cannabis industry’s wave of legalization, the time is now to turn high profits into big ideas for a sustainable future. [Dave Dayen: The Ultimate Cash Crop: How a Pot Crisis Restarted a Public Banking Conversation in America]

Public Banking and Taxing the Wild Frontier: Part Four

In the period following the ratification of the federal US Constitution, the financial course for the new nation had yet to be charted. Alexander Hamilton had a dream to turn the former colonies into a modern mercantilist nation on a model he borrowed from the British and its Bank of England. His idea would succeed with flying colors, but few truly understood just what he had done to make banking so indispensable to the health of this new form of economics. It would take decades for the nation to warm up to the idea of banks as an everyday feature of American life, but by that time, private banks would dominate the landscape and the old civic-minded banks would be a distant memory.

People were highly suspicious of the purity of Hamilton and other speculator’s motives, and rightfully so. Populist anger the elite eastern “stockjobbers” was well-founded, the blanket rejection of banks and all financial schemes was, however, foolish. Banking (especially of the public variety) would prove to be so successful that its detractors would come around in the long run, but the damage would already be done by that time. The option for government involvement in banking was besieged and destroyed in the first decades of the United States, that is, until the populist farmers realized that bringing banking into the government was the best and perhaps only defense against the insatiable greed of Wall Street bankers and industrialists in the antebellum nineteenth century. In hindsight, keeping public banks around was the best way to prevent gross economic hardship, but the battle-lines were drawn differently in these very different times.

The revolts and minor uprisings that occurred in this time period were all debt related. Traditional debt relations were far more fluid and amenable to the needs of common villagers before modern economics took a hold of them. The soldiers and suppliers of the Revolutionary War had not been paid. Their expedients for trade were dashed. Their protests were quelled. Before 1787, farmers outside of the merchant city regions had the benefit of the state’s former issuance of paper money to stimulate business. They began as a war-time expedient during the seven-years-war but remained afterward to everyone’s joy. In a frontier land lacking in specie (metal coin currency), paper money was a godsend. But the new constitution forbade the states from issuing any more colonial scrip and centralized the money-making function within the new federal government. The very first articles of the US Constitution are explicitly designed to prevent states from issuing their own ‘bills of credit’ and instead enshrine the return of the economy to a hard currency basis. The framers worried about the inflation these bills created, but paper money would come to dominate the economy anyways in the form of bank notes.

If bills of credit or paper money could no longer be used by farmers, then they were stuck with hard specie scarcity. Their business was less connected to the world at large, so metal money was harder to get their hands on.On top of that, exploitation by speculators, who sensed their desperation only to capitalize on it, added to their affective loathing of all things financial coming from the coastal port cities. Upon reading accounts of the financial hardships of American farmers and poor debtors, laid out in the previous post, it’s easy to see why they would be driven to such hate. But every actor needs a circulating medium of exchange to lift their fortunes. The distrust of a banker-government partnership inculcated during this period of history went a long way towards eliminating the necessary checks against the money-creating power of private banks. The banks role in controlling the increase or decrease in the overall supply of money could only be effectively curtailed and controlled by a central governing body endowed with financial powers like that of a bank. Distrust and anger at central government and public banks actually hurt prospects for economic justice by empowering private banks to carry on this highly profitable enterprise free of restraint.

Bray Hammond sticks the point well at the beginning of his grand history of banks in Banks and Politics in America: From the Revolution to the Civil War:

“The agrarian demand for paper money and easy credit which did at last appear in the States in the latter part of the 19th century arose from tardy recognition by the agrarians that they lived in a modern economy, not in dreamland, and in order to hold their own must use credit as business men did. It arose from a slow realization that farming must be a means of making money, not of withholding oneself from the world… But in the face of business enterprise and industrialization, it became impossible for farming to remain unchanged. Stock had to be improved. Machinery had to be acquired. The elements of farm capital became diversified, the land itself ceasing to be the one ingredient of weight. Money and credit forced their way into the farmer’s reckoning.” (Hammond, p.33)

It’s at this point that a shift in emphasis must ensue. A different country than the one Jefferson envisioned was taking shape around the turn of the 18th to the 19th century and we cannot simply remain pitted against all financial concoctions wherever they crop up. The future involves banks and they need to be made to work for the people or the vast majority instead of fought at every turn. The makings of a modern economy were shaping up at this time; increased specialization in the workplace and the overriding importance of overseas trade in the international game of political economy was drowning out the small farmer’s hope for New World of freeholders. The cat was out of the bag.

The scars leftover from Federalist era lingered on into the Jacksonian era of Democratic entrepreneurialism until the producing farmers figured out how debt, monetary policy, and banks effected them on the national level many decades later. The populist party sought to take over control of the money supply away from banks in the late eighteenth century with their ‘sub-treasury’ system and the non-partisan league would successfully lobby for a state-owned bank in North Dakota. But no movement in America has been able to sustain a public-oriented financial school of thought in the tumultuous times that capitalist industrialism wrought at the end of the 19th century, 20th and up until today. We have a moment right now to establish new public banks with the growing momentum of the public banking movement. It is high time that certain truths about banking become a part of common wisdom and used for the benefit of the 99% instead of the exclusive gain of the 1%.

Hamilton’s Bank of the United States was lauded by all those who understood it. It not only flipped a liability in high war debts into an asset (quite literally), it spread new money out into the economy whenever loans were dispersed. It’s bank notes functioned just like money, similar to the paper money of colonial scrip but more like state bank notes also circulating, so it increased the amount of business that could be done in two separate ways simultaneously. It offered credit for new projects in a typical lending fashion and then, as a result, bank notes could be drawn on representing the promise to repay the debt. These notes were basically paper IOU’s for the original loan/deposited coin (more on this later), but they would inevitably change hands many times in the course of business and effectively enter circulation as money. This is the what makes banks so hotly contested: they don’t just offer loans and act as special intermediaries for future business (though they do that also), they increase the amount of money in the system as a whole so long as they remain solvent (i.e. have enough hard currency to back up the notes that come back in for redemption, or withstand the depletion of specie from their vaults). That these bank notes could be used to pay federal taxes enhanced their acceptability as legitimate money.

Absent regulation, this operation is fragile and private banks are incentivized to extend credit wherever they can profit. The increase in available paper bank notes/IOU’s increases the amount of money passing from hand-to-hand in the general economy, even if you as an individual do not have an account at that bank or any bank. Those paper bank notes can always be redeemed at a local branch of the corresponding bank for hard coin in the vaults, that is, unless too many notes come in for redemption at once and the vaults are depleted.Provided the bank remains solvent, the net effect on the economy at large is immense. Having more things getting passed around as money lifts up the general economic prospects of every actor in the system, provided that the amount of notes issued are commensurate with the overall level of real economic activity. Issue too many and you get price inflation, too little and prices drop but there is less money around to get your hands on.

The national public bank of Hamilton was able to check the excessive issuance of bank notes in the way that a central bank does now. Today central banks are independent of government and merely transfer money from one bank within its system to another in the form of reserves in their central bank accounts. The first and second Bank of the United States operated slightly differently but also kept private banks and state banks that existed before them from collapsing in a heap of panic, rendering its notes useless and its contribution to the overall money supply vanishing in a flash. It made sure that the ratio of bank notes to reserves didn’t get too high and private banks couldn’t print way more notes than they could back up with coins. The first Bank of the United States, Hamilton’s bank, operated in a time when the split between public and private sectors was not so pronounced. Many believed that private investors were needed to lend credibility to the institution in the first place, the government being too young and fragile to instill any confidence. But it was a public bank that served the needs of the people at large by servicing the new and fragile government’s debt and hence its credibility as a future borrower. It increased the supply of money to stimulate industry by issuing its own US Bank Notes that had a wide circulation.

Banks whether public or private wield enormous power by controlling the size of money in the economy at any given time. This is not always well-understood by economists but when banks make loans they increase the amount of money flowing through the economy. Bank loans create more money, paying back those debts created by the loan destroys it. It’s an extraordinary tool within a modern economy and there is no reason why governments shouldn’t be involved in banking when it plays such a vital (and lucrative) role. This is what Hamilton’s bank did before private businessmen and entrepreneurs started opening up their own banks and attacking the national bank. In another one of histories ironies, it was farmer’s opposition to the Hamilton’s policies that killed the second Bank of the United States when Andrew Jackson swept into power. Little did they know that this national, central bank was the only thing preventing private banks from wildly profiting off of the economy’s need for credit, in turn playing havoc on the money supply. The full story is told in Bray Hammond’s standard financial history book in Banks and Politics in America from the Revolution to the Civil War.

According to Hammond, Hamilton did understand this crucial function of banking. It’s quite possible that only a handful of individuals grasped this operation and its significance and few understand it still today. The fact that banks create money, control its supply (in a more-or-less/marginal sort way of increases or decreases from day to day instead of absolutely), and perform a systemically vital function to a dynamic modern economy escapes contemporary economic textbook definitions of banks as mere “intermediaries.” If we replace the terms of 21st century economics with ones from the 18th century, we can still detail the same banking function:

“…[I]n the sentence before his explanation of specie deposits, Hamilton had made the observation that every loan which a bank makes is in the first instance a credit on its books in favor of the borrower and that, unless withdrawn in specie, it remains a liability of the bank till the loan is repaid. In these words he explained 20th century banking as will as 18th, and how bank lending creates bank deposits, with the difference that he did not call them “deposits” but reserved that term for specie transactions, distinguishing credit for specie from credit for the proceeds of loans. He did so because he observed banking in terms of the individual bank and not of many banks constituting a system. He was writing at a time when there were three banks only in America, each sole in its community. The effect each bank’s lending had on its own positions was in those circumstances direct and unobscured; its loans obviously increased what would now be called its deposits; for the checks drawn on it were not being deposited in other banks nor were the checks drawn on others being deposited in it. Each bank was a closed and separate system. Hamilton simply noted what in the then situation was plain and required no unusual discernment. The records of the Massachusetts Bank indicate how common it was at the very beginning to credit borrower’s accounts with the amounts lent them; and the known figures of deposit liabilities are plainly too large to have arisen from specie alone. Such credits seem in practice to have been included with deposits proper but in discussion to have been kept distinct. A deposit was of something tangible, whether for safekeeping or to apply on a capital subscription. The liability for amounts lent was called credit or book credit, as by Hamilton in the passage in which he described the procedure.

Though exempting specie deposits from the restriction could scarcely have given a bank any more inducement than it already had to acquire specie; it doubtless seemed logical to Hamilton that the liability arising from deposits of specie be distinguished from the liability representing the proceeds of loans and that it be excepted from limitations on an expansion that could occur only when liabilities were assumed in excess of the specie held. The issuance of notes and the crediting of customers’ accounts might and did entail the assumption of liabilities in excess of specie holdings, but not when the issuance of the credit resulted from a deposit of specie.” (Hammond, p.138-9. Emphasis mine.)

In other words, when a loan is made by a bank it doesn’t matter that there isn’t enough corresponding metal coin specie to match it one-for-one. Taking in deposits or specie to store in its vaults and making loans to those seeking credit are two separate functions of banking that work in tandem but don’t require a steadfast equivalence. When a loan is made, the amount of money requested by the borrower is written into their account, which they can then draw on regardless of how much specie that individual has deposited on their own. The only thing that matters is that people don’t rush in and grab all of the hard currency all at once in a panic. As long as the bank is believed to be trustworthy, it is. The bank can then keep on lending as much as it likes (more or less), printing more of its bank notes (no doubt to change hands many times), and profiting off of the regular interest payments coming in from the borrower. It’s this ambiguity that leads people to call banking a monster of instability playing fast and loose with our money. Within the accounting format called ‘double-entry bookkeeping’ is the ability to measurably increase the overall money supply by entering numbers on a piece of paper during the loan making process. Whether those two sides read ‘asset/liability,’ ‘credit/deposits,’ or ‘bank credit/specie capital’ is insignificant. It’s in the proportion of one to the other that the fluctuations in money supply increase or decrease, but the ratio itself was fluid in the early days of banking.

“The practice then was less conventional than now, for then, taking advantage of the fact that every item on a bank’s books has both an asset and a liability aspect, it might be called either; whereas now every item belongs rigidly on one side or the other. Thus deposits were sometimes what a bank held and sometimes what it owed; and circulation represented money lent as much as money owed. There is a modern parallel in the fact that bank credit may be measured either in assets or in liabilities, and though the statistical practice of measuring it in loans and investments is now well established, deposits are often taken informally as its measure, and the law provides for its control through the ration of reserves to deposit liabilities.” (Hammond, p. 141)

Banking reform would later come in the form of reserve ratios to restrict the amount of loans on one side of the page to the reserves on the other side. Playing with this ratio became the way to check bank’s influence on the economy at large and prevent collapse of banks who greedily issued to many notes without having enough coin to back them up. But fixing reserve ratios as a universal standard did not and does not provide an effective restraint upon the banking system in general. This method assumes, falsely, that issuance of loans comes attached to the specie in the vault when they are actually two separate functions within a bank. The ratio can go up or down and still be left in tact. What matters is that the confidence trick in the bank’s vaults is upheld and people don’t collectively make a run on the bank. As Hammond explains above, it doesn’t really matter if you focus in on the amount of deposits at the bank or the amount of book credit granted by a loan. They are two separate things that have been joined together within the marble walls and pillars of the bank so that a single thing (money) can be multiplied and dispersed where businesses wants it to go.

The Bank of the United States performed this function in a controlled, centralized manner that serviced a fledgling nation. It’s not so absurd to say that without it, the United States might have crumbled in its infancy under the surrounding colonial European powers and its own war debts. Hamilton’s Bank serviced the interest on the debt, enhanced the credibility of the United States of America abroad, stimulated business, and acted as an early-modern regulator of the banking system.

“its prominence as one of the largest corporations in America and its branches’ broad geographic position in the emerging American economy allowed it to conduct a rudimentary monetary policy. The bank’s notes, backed by substantial gold reserves, gave the country a relatively stable national currency. By managing its lending policies and the flow of funds through its accounts, the bank could — and did — alter the supply of money and credit in the economy and hence the level of interest rates charged to borrowers.

These actions, which had effects similar to today’s monetary policy, can be seen most clearly in the Bank’s interactions with state banks. In the course of business, the Bank would accumulate the notes of the state banks and hold them in its vault. When it wanted to slow the growth of money and credit, it would present the notes to banks for collection in gold or silver, thereby reducing state banks’ reserves and putting the brakes on their ability to circulate new banknotes. To speed up the growth of money and credit, the Bank would hold on to the state banks’ notes, thereby increasing state banks’ reserves and allowing those banks to issue more banknotes by making loans.

The Bank’s branches were all located in the fledgling nation’s port cities. This made it easier for the federal government to collect tax revenues, most of which came from customs duties. Locating the branches in ports also made it easier for the Bank to finance international trade and help the Treasury fund the government’s operations through sales of US government securities to foreigners. Furthermore, the Bank’s branch system gave it another advantage: it could move its notes around the country more readily than could a state bank. The Bank’s branches also helped to fund and encourage the country’s westward expansion, particularly with the establishment of a branch in New Orleans.” [Federal Reserve History Website]

So the utility of this bank is without question. More than a money-making machine for a handful of investors getting fat off collecting interest payments, it actually prevented the excesses of banks from spiraling out of control and wrecking the greater economy – as would happen many times after the two banks were killed. In its virtuous civic function, The Bank of the United States was almost an “anti-bank bank” that looked after all actors within the bounds of the nation instead of a small faction of wealthy investors. The number of those kinds of banks would multiply very soon and the network of private banks would come to dominate the American economy to this day. Had the Bank survived, industry would have progressed much more steadily and without the chaos of epidemic bank failures, greatly reducing the severity of depressions that jaded so many Americans. One can imagine the despair and resentment of a population left holding worthless pieces of paper that used to be as good as money, failing to understand what exactly had gone wrong.

It’s worth looking at how this bank was incorporated, if only to admire the grandeur of an intelligent plan conceived on paper but willed into reality. With the war debts exceeding $150 million from the federal and state treasuries combined, interest payments would need to be effected soon. Direct payment with taxes would have crippled an economy that didn’t have as much specie available to do business as is, with outlying farmers feeling this pain exceptionally. The bank would offer to the public a subscription for future stock of the bank to the limit of $8 million, with the federal treasury owning $2 million for a total of $10 million. The federal government would own one-fifth of the bank and private citizens would make up the remaining four-fifths, drawing interest from the scrips they bought. Once enough specie was collected (which it was almost immediately), the game was in play and debt servicing could commence on the basis of that hard currency.

“Though the authorized capital of the Bank was $10,000,000, of which $2,000,000 was to be paid in specie, the Bank was permitted to organize as soon as $400,000 had been received from the subscribers. Whether much more was ever got from them on successive installments is doubtful, though the Bank subsequently accumulated a treasure much in excess of what the stockholders were supposed to pay. Payment for the government’s stock was accomplished under an authorizations in the charter that was taken over almost intact form Hamilton’s proposal and was presumably intended by him to give the appearance of a cash payment. In effect the Treasury drew for $2,000,000 on the United States commissioners engaged in selling government securities in Amsterdam, deposited the drafts with the Bank, and then drew against the deposit to pay for the stock. Technically this consummated the purchase of the stock with funds borrowed in Europe. But it was not desired to have the drafts go through and the specie shipped from Europe, because it would have had to be shipped back for other purposes. So the Treasury borrowed $2,000,000 from the Bank and used the amount to take up the drafts on the commissioners, with which the whole transaction had opened. The net effect was therefore to leave the government in possession of $2,000,000 of Bank stock and in debt to the Bank for $2,000,000, though technically the money owing to the Bank had not been used to buy the stock but to “restore” the funds in Amsterdam which had been “used” for that purpose.” (Hammond, p.123-4)

It was a kind of trick that can work with the use of a public bank and the stability of a government combined. Only enough specie needed to be acquired so that those who needed it could draw on it when they needed it. The rest of the subscribers, including the treasury, kept their accounts on the books and waited for the interest payments to come in from regular installments. The one-fifth of the bank that the government owned it didn’t actually pay for, it borrowed the money from Dutch financiers already keen on these machinations. Instead of physically transferring specie hand-to-hand, agents of the treasury gave to the Dutch paper promises to pay later. They then used this borrowed money to buy bank stock (which earns interest) and pay off the imbalances of the account as time goes on. It all works because there is enough specie to be drawn out of the bank on occasion, allowing the pretense of convertibility between metal money and paper money to persist. People trusted that there would be enough business in America for these accounts to be settled in the end because there was so much nascent potential on the American continent, the bank allowed them to push paying off debts forward into the future by playing with this divergence in forms of money. Essentially, it was a leap of faith on everyone’s part:

“The early Americans were short of capital, particularly capital in the form of gold and silver. If that dearth of gold and silver had been allowed to hold up their formation of banks, the circle would never have been broken; instead they resorted to arrangements which had the practical virtue of establishing the proper procedure in principle if not in fact. And in time, because the pretenses worked, they accumulated the gold and silver and made the principle a reality. It is a case where a pious lifting of oneself by the bootstraps is preferable to cynical realism or conscientious passivity. And for the most part a saner and more honest practice in capitalization established itself as soon as a surplus of wealth made it possible. Without the initial act of faith, so to speak, the surplus would have been slower in coming. The Americans had declared their political independence before it was a reality, not after; and what they did in the matter of financial competence was much the same.” (Hammond, p.124)

It’s the complexity of the move, the juggling of many different obligations all at once, that makes people resort to religious terminology to explain what in the world just happened before their eyes. But all parties simply had enough trust in the ability for a national government to persist in a stabilized capacity, collect enough taxes, pay investors their installments of interest, and receive the required initial subscription to kick things off. Hamilton was also an eloquent speaker and assured congress that his plan would work. He was right and he knew it.

The Bank of the United States brought together private business and public regulation together at a time when both needed each others help. The bank and public banks like it expanded the total money supply in a controlled and regulated fashion, while giving the government the means to pay off its own debts. When the treasury was forced to liquidate its bank stock, it profited for “$672,000 or 30 per cent, and the dividends it received while shareholder were $1,100,000.” (Hammond, p.207) Public banks are very profitable for the governments they represent, but they partner with the other banks and keep them from stashing these profits all to themselves. If large projects are to be effected without a public bank to borrow from, private banks pocket the interest from that demand for funds. Since banks create money, owning one means you can essentially borrow from yourself, like the confidence trick of the Bank of the United States.

The expediency of the bank can be mimicked in our own day and at the state level. Having a public bank for each state would stabilize the rest of the banks of that state by providing additional money to borrow at lower interests. Interests rates could be lowered across the board, or raised if too much business activity is causing inflation and over-extension of credit; and there lies the great hope: a regulated banking industry unbeholden to the insatiable demands of unchecked private banks. This is not a faux-public central bank like the federal reserve, but one that really works for the people by relieving the strangle hold that private banks have on the creation of money. Governments don’t have to be debtors begging for money to start their projects, slashing public worker hours and benefits, stagnating wages, and paying huge amounts of interest to private bankers when they own their own bank.

Public Banking and Taxing the Wild Frontier: Part Three

Much More than a Whiskey Bottle

The cannabis farmers who found the road to economic self-reliance in the redwood forests of northern California suddenly find the road closed. As the pioneers of the most lucrative industry in California and the first to take the risk nationwide, they are now being cast aside by entrepreneurs with plenty of start-up capital. Multilayered taxes, including a big excise, now threaten the small farmer haven that once was the emerald triangle. [East Bay Express: Nipped in the Bud]

When the back-to-the-land hippies fled a stultifying mainstream American culture, they discovered an older America: the Jeffersonian vision of the self-reliant yeoman farmer. They will likely share the fate of that vision however, trampled upon by industrial and efficient Hamiltonian businessman. Battles for a sustainable use of land and resources, as well as an equitable share in the industry, can and should be fought for. But the biggest battle will be fought over which version of the Hamiltonian vision will be instated in the aftermath. With the new tax and regulation of this massively lucrative industry will come the opportunity to revisit the better side of Hamilton’s legacy: his championing of public-oriented financing in the form of the first Bank of the United States.

Before we get to the first public bank in America, it’s worthwhile to explain the economic situation facing the frontier farmers of that time. Their plight at the hands of Hamilton mirrors the plight of the small cannabis farmer when you substitute weed for whiskey.

The aftermath of the revolutionary war saw a period of radical economic transformation, to say nothing of the unprecedented political innovations. Soon after the revolutionary war and the signing of constitution, congress approved of Alexander Hamilton’s funding scheme to assume all of the debts that the states had incurred and centralize them in the new United States government. This would result in a huge windfall for the bondholders of American war debt: over time they would received both the accrued interests and the principle of these bonds at face-value. Taking on this debt would be the engine that propelled the first Bank of the United States into working order and, in turn, set the country off on the right footing with respect to the rest of the world.

All seems well on the face of it, after all, ordinary farmer-soldiers bought paper war bonds too. But the economic conditions in the west were vastly different than those in the wealthier east. The long time that had elapsed since the issuance of the bonds rendered them useless to farmers in need of metal coins or specie to conduct trade. Years had gone by where nobody could be sure that these bonds would be paid back and people needed hard money to go about their lives. Most of the revolutionary war bonds ended up in the hands of the eastern merchants who could afford to hold onto them during the long wait before redemption. The lack of acceptable currency in the west convinced greedy speculators to scour the western lands and swoop them up on the cheap. Western farmers needed acceptable cash immediately and were desperate to sell these bonds and chits. This drove down the prices of to a fraction of their original worth. But when Hamilton’s financial plan was passed, the bonds suddenly gained their full value back and wealthy easterners reaped a huge windfall. Financiers of the east had swindled the frontiersmen of the west less than ten years after they had fought and defeated the British Empire.

And that’s just the tip of the iceberg. The greatest change took place when the new invention of paper currency, called colonial scrip, was taken away after the establishment of Constitution in Congress. No longer could states issue their own currency and make it easier for average person to conduct business. Paper money was the brainchild of Benjamin Franklin and a huge hit with the poor western farmers that lacked specie. It was a totally new brand of finance that facilitated inclusive economic activity, one of the most revolutionary of innovations in a time of so much revolutionary activity. The only problem was that it created currency value inflation due the ease of printing more whenever the occasion arose. The real conflict came, however, from the depreciation of the bonds that wealthy merchants held. Increasing the money supply by printing of more paper money meant that the return on the bonds came back with weaker money than it was lent with. Creditors took a reduced return on their investment but everyone else (the vast majority of Americans) benefited from the ease of doing business. The more money available, the more poor farmers could conduct trade. It was a clear class conflict between debtors and creditors: creditors hated the uncertainty of price fluctuations and taking a bath on war bonds, debtors wanted more money in the economy at large and therefore more economic equality.

Populist finance in America has a long history that rarely makes its way into mainstream canon. A number of authors have written on the subject and deserve praise for their efforts. So much of the historical activity of a people that claims such a democratic heritage was directed at wealthy financiers who got rich at the expense of the vast majority. These democratic actors had potent critiques, alternative ideas that could work, and sound minds for political economy. They simply lost the important battles of history and history, as we all should know, is written by the victors. As William Hogeland put it (the first author who opened my eyes to the history of missed opportunities for American democratic finance in Founding Finance: How Debt, Speculation, Foreclosures, Protests, and Crackdowns Made Us a Nation): “It’s Hamilton’s America… we all just live in it.”

Summarizing the economic grievances of western Pennsylvanians, Terry Bouton writes,

“During the 1780s state leaders had eliminated paper money, which was the primary medium of exchange, especially in the back country, where gold and silver coins were always scarce. They had killed a government loan office that had offered long-term low-cost credit to small farmers and craftsmen – and replaced it with a private bank that offered loans only to merchants and land speculators. The state government had adopted a plan to repay the Revolutionary War debt that taxed the soldiers and farmers who had fought and supplied the war effort so that wealthy men who had speculated in once-worthless war bonds and IOUs could make a financial killing. Those new taxes were often to be paid in gold and silver. All of these policies stripped the countryside of cash and left thousands of farmers unable to pay debts, mortgages, or taxes. The result was waves of sheriff’s auctions that swept the state, a floodtide of misery that, in [William] Findley’s home county, foreclosed about 40 percent of the taxable population.

At the same time that ordinary Pennsylvanians were losing cows, tools, and farmland at auction, state leaders were making it increasingly hard for them or their children to acquire new land. Officials at the land office gave preferential treatment to big speculators (including themselves). Revenue officials refused to prosecute large speculators who had not paid their taxes at the same time that they pushed to foreclose ordinary taxpayers. Judges ruled in favor of wealthy speculators over settlers in nearly every land conflict. In 1792 the state supreme court turned a clear anti-land-speculation law into a pro-speculator one. The law had put caps on the amount of land anyone could purchase to limit speculation. Defying the law’s stated objectives, however, the supreme court ruled that the limits applied only to small farmers and that wealthy speculators could buy as much land as they could afford[.]” (Bouton, ‘William Findley, David Bradford, and the Pennsylvania regulation of 1794,’ in Revolutionary Founders, p.237-8)

With the war over, it seems that the Federalist who took charge of the new government felt the poor farmers of the west were expendable. The new measures crippled the financial base of the liberty-loving rabble-rousers and bolstered the already wealthy speculators that Hamilton championed, setting a precedent that has more-or-less held up throughout American history. Populist direct action had been the bread-and-butter of the movement for independence in the colonies and the new government now regarded them and their proponents as a threat to the new order. This was all very painful for untamed patriots, with this pattern of financier-oriented policy fostering two previous militia formations before the whiskey tax, but when the excise tax came it added insult to injury. The whiskey tax struck at the livelihoods of the very people who joined Hamilton in fighting the British and creating a new republic.

What makes the whiskey tax so hurtful is not that it kept uneducated farmers in the wilderness from getting drunk, distilling and selling whiskey (often to those with the money to buy it out east) was a cost-effective strategy for earning an income through trade. After all of the financial attacks that drained the economic base of the western farmers, now their last profitable trade was being hit by an excise tax. Whiskey distilling drastically reduced the transportation costs in comparison to other goods. It allowed subsistence tenant farmers and self-sufficient landowners alike to sell a valuable product from the periphery back to core market at a reasonable profit. Hogeland explains this dynamic the best: whiskey was exceptional,

“… for being a cash crop, with eager markers both within the region that produced it far away. A gallon of good rye whiskey might sell for only twenty-five cents in the west; easy of the mountains, it could bring from fifty cents to a dollar. Hauling twenty-four bushels of milled rye over the Alleghenies took three pack animals with projected revenues of a mere six dollars; costs outran revenues. Reducing those bushels, at home or at a community still, to two eight-gallon kegs of whiskey amplified their value almost three times while reducing transport requirements to a single animal.

So with a value nearing the absolute, whiskey became currency in places where coin wasn’t seen. Always exchangeable for cash somewhere down the line, whiskey maintained good value against metal. That tended to democratize western economies… The product gave cash-starved segments of society opportunities for small-scale commercial development that might begin freeing ordinary people from debt and dependency.” (Hogeland, p.178)

So whiskey distilling kept these humble farmers economically afloat. Distilling whiskey and selling it back east, just like growing cannabis from the 1970’s to the present, kept communities moderately prosperous without going big and corporate. Their distilleries were often used communally and seasonally. The excise tax on spirits disproportionately effected those smaller distillers because the larger distillers closer to the eastern core could pay a lower tax rate by keeping the stills churning out whiskey bottles all year long. The tax was calculated with an assumption that the stills would be used year-round: impossible for seasonal independent farmers but advantageous to business-oriented distillers seeking to maximize the profits from their investment in their distillery. Large distillers could lower their prices and push out the smaller ones hit harder by the excise. This was complicated macroeconomic tinkering and Hamilton was smart enough to understand the consequences of his legislation. Frontier farmers must have seen this move as yet another targeted attack by financial aristocrats.

Resistance to the first excise taxes in Britain, as Thomas Slaughter describes early on in his The Whiskey Rebellion: Frontier Epilogue to the American Revolution, was one of the quickest and angriest responses ever engendered by a government’s tax scheme. Excise taxes are also called “inland taxes” or “internal taxes” and levy a percentage of the value of a commodity at the point of production. High war costs during the English Civil War forced seventeenth century British governments to seek more revenue. “Opposition was immediate, violent, and persisted in some regions for over a century thereafter… a mob burned down the London excise house during the 1650’s.” (p.12) The core-periphery dynamic was at play here, with London and other central regions of the empire being easier to administer than the farther reaches. “Resistance was always greatest in Scotland, Ireland, Wales, and the outlying rural parts of England.” (p.12) Yet, despite their unpopularity, excise taxes remained a feature of life in the empire. “Indeed, despite pockets of resistance, the excise surpassed the land tax and customs duties to become the single most lucrative source of government income between the years 1713 and 1799. For much of that period it constituted over 40 percent of all Treasury receipts”. (p.13) American farmers no doubt had a collective memory of these tax measures and did not wish to see a repeat in their new country. To add on top of the financial hardship and pro-speculator policies drying up their wealth an excise tax that disproportionately affected their most lucrative business would have seemed like a declaration of war. After all, the impulse to independence and revolution in 1776 was summed up by the slogan “no taxation without representation.” Thousands of farmers did not wish to see the same enemy that they had fought so hard against suddenly reappear under a different guise.

Somewhere between 7,000 and 10,000 men descended upon Braddock’s Field near Pittsburgh, Pennsylvania in 1794 to formulate a response to the excise tax. (Slaughter, p.234) These regulators came from all over the peripheral lands in an orderly and deliberate fashion. Similar actions had occurred recently in the Newburg Crisis and Shay’s Rebellion (or the Massachusetts Regulation) and they drew from a history of populist tax and creditor resistance from the traditional Anglo-Saxon past. The Whiskey Rebellion was a series of mass actions that sprang up all across the countryside – sympathy demonstrations even took place in the big eastern cities. Debt courts were shut down, road blocks were created to stall property foreclosures, and tax collectors were tarred and feathered. (Bouton, p.241) Resistance was a widespread phenomenon that a great deal of the western culture took part in. Though mostly peaceful, tarring and feathering is no benign action – these people were serious about protecting their participation in a trade that became essential to their livelihoods.

Though mass assemblies brought some orderliness to the tax-resistors, they remained divided on how to continue in the face of the impending military campaign to round them up. Some wanted to meet Hamilton’s volunteer/mercenary militia head on or even secede from the republic and found their own nation. Others like William Findley wanted to organize the people into a new party and win seats in congress. There inability to unite, together with the presence of Hamilton’s army enforcing official national law, caused them to disintegrate. Added to this were reports coming in of the atrocities committed by liberty-loving revolutionaries in France, souring the public opinion of widespread disorder and generating well-founded anxiety. The private army raised to put down the rebellion arrested what regulators they could, sometimes indiscriminately seizing individuals at will. To his credit, president Washington pardoned every person imprisoned for their seditious activity, the damage to the movement having been done. Memories of this event and other events like it led to the political collapse of the Federalist party in just a few years. The excise tax followed them out the door when Jefferson’s Democratic-Republican party repealed it.

As Hamilton’s army approached, thousands could see the writing on the wall and fled farther west into the wilderness. Resistance to rich eastern elites would thereafter be fractured or be duped into picking the wrong targets. The coalition that got Thomas Jefferson elected and shook up the electoral shape of America understandably reviled Hamilton’s bank and the means he used to establish it. As prominent figures like James Madison learned of the financial might of villainous speculators, he too turned on his Federalist ally. Madison tried to distinguish between rightful or original owners of government bonds so as not reward rich speculators, but Hamilton’s plan was complete and Madison’s plan infeasible. No records were kept for the sale of these bonds that had changed hands many times. Such was the double-edged genius of Alexander Hamilton: his mastery of finance came at the cost of alienating those around him. He could personally rout the frontiersmen and create many enemies in Washington yet still be revered for the extreme utility of his public bank.

Much to their frustration, neither Jefferson nor Madison could deny the utility of a public bank. Jefferson never understood how debt kept the money system stable and acquiesced to his Treasury secretary Albert Gallatin’s level-headed advice. The agrarian sentimentality cultivated in Virginia and reflected in much of the population of America left Jefferson unable to shape the economic future of the country he did so much to inaugurate. Madison chartered a new Bank of the United States himself to handle the debts from the War of 1812. When that bank was up for recharter, Andrew Jackson, swept into office on popular anger against the financial elite, vetoed it. It would take another 50 years or so for populist agrarian crusaders to realize that government/state owned banks were viable institutions that could protect their interests.

The scars left by rich speculators lingered on for some time after whiskey tax and subsequent repression. From then on, distrust of banks would be a feature of oppositional political thinking in America. Banks would win the future however and without a public option in the banking sector, wealthy businessmen could simply charter their own private versions. For the better part of the nineteenth century, all banks would be viewed by farmers as monstrosities that use a baffling magic trick to mess with their fortunes. But banks are not necessarily evil institutions, the measure of their social utility depend on who is in control of them. Today banks are mostly private corporations with shareholders that demand the maximization of profits as a matter of principle. It need not be this way though and, ironically, Hamilton himself illustrated the best populist alternative to the machinations of the wealthy 1% of today with the Bank of the United States.

The next piece will examine this functioning of this bank and public banking more generally.

Public Banking and Taxing the Wild Frontier: Part Two

Legalization Is Pushing Small Cannabis Farmers Out, So Lets Make the Pot Profits Work for Everyone

A large chunk of hippy counterculture took a turn toward a rural agrarian lifestyle in the 1970’s in a movement called ‘back-to-the-land’ and subsequently discovered a path to riches. Marijuana is illegal under federal law so smoking it became a mark of the renegade subculture — growing and selling it even more so. Growing cannabis was a way for the people of this movement who sought to reconnect with nature and disconnect from mainstream American society to support themselves. What began as a practice for supplementing an alternative lifestyle up in the secluded mountains of northern California blossomed into one of the most lucrative industries on the west coast today, with much of the cannabis heading east to find markets in the rest of the country. Within a single generation, the hippy subculture turned from gleefully impoverished idealists seeking self-sustenance to rich independent farmers when the full financial potential of this crop was inevitably realized.

Money was never the objective when hippies started cultivating cannabis in the mountains, but by the time President Reagan declared a war on drugs small-time farmers were making millions. It was a curious transformation riddled with irony: a people trying to escape individualistic materialism and found a communal ethic out in the woods suddenly found an easy path to riches. Just how much money changed the culture is debatable. What is undeniable though is that the marijuana that was grown in Northern California found its way into a vast unregulated market worth billions of dollars. It would only take a few decades for politicians to start eye-balling that black market money, especially with the negative perceptions of smoking marijuana cooling off nationwide.

As of January 1st, 2018, the law approved by a simple majority of all Californian voters are in effect, attempting to bring cannabis cultivators back into the fold of the taxable California State economy. No longer will the industry operate in a strictly core-periphery dynamic: the secluded hills and favorable climate where cannabis is grown are now heavily targeted by entrepreneurs. The old-school cannabis farmer lived in a community that developed a sense of freedom and independence while simultaneously feeling besieged by the federal government. Paranoia was a shared sentiment that reinforced defiant hippy beliefs about authoritative American culture and produced an ethic of mutual aid. High profits, a protected geography dubbed the “Redwood Curtain,” and a healthy degree of solidarity among cannabis farmers allowed for a mutated form of hippy counterculture to persist. But once the word got out around the mid-nineties more people started flowing into Humboldt, Mendocino and surrounding counties in what became known as the “Green Rush” (because cannabis is the new gold). The profit margin was just too darn high to keep people from jumping on the bandwagon that hippies inadvertently created and sustained.

It’s a story that has been told before and people started to notice the continuity of the back-to-the-land hippies with the American culture they initially broke off from. This perceived connection brought local author Ray Raphael into the study of the revolutionary America with his popular history books. [Ray Raphael] Having written books on nature, northern Californian geography and marijuana farmers in Cash Crop: An American Dream, he then went on to become a decorated heterodox historian of the revolutionary period with an eye towards everyday people and their struggles. Near the end of Cash Crop, Raphael writes, “As a rags-to-riches story, the marijuana boom goes straight to the heart of American mythology.”

“A heightened sense of individualism — that definitive ideal of Americanism, the theoretical hub of our social philosophy — is central to the ideology of marijuana growers. The flamboyant and free-spirited “do-your-own-thing” of the original back-to-the-land movement has evolved quite effortlessly into more traditional manifestations of American individualism: an obsession with private property and a conservative reaction against governmental intrusions into private affairs.” (p.160)

It’s as if hippies tried to escape America in their communes only to find more America. Instead of a utopia of liberation they found the Jeffersonian ideal of the yeoman farmer, an independent and self-sustaining landowner in a vibrant community. After the communes disintegrated, the spirit of communitarian values persisted and even thrived thanks to influx of bags full of greenback dollars. But were the new riches creating greater resiliency or altering the culture to one of materialistic wealth accumulation?

In a particularly ominous passage Raphael writes,

“From a democratic point of view, perhaps the biggest failure of the traditional capitalist system is its tendency for consolidation. Small businesses continually go under, either driven out or swallowed up by their larger competition. Even in agriculture, the family farm is no longer a viable unit; high-tech agribusiness drives prices down to where small, labor-intensive farmers can no longer compete. Apparently, consolidation is an inevitable feature of capitalism — except in the case of marijuana farming. In the marijuana industry there are structural forces which counteract the natural tendency toward centralization. The combination of illegality and geographic isolation provide built-in guarantees against consolidation. The larger the operation, the higher the risk — so there’s a strong incentive to stay small and decentralized.” (p.171)

With the protective barrier to consolidation and bigness gone, replaced by legal farms able to withstand the very high start-up costs, the pioneers of cannabis farmers face an uncertain future. The high taxes, lawyer and filing fees, new labeling requirements, and more have prevented most farmers from becoming legal compliant. As of March 2018, over 99% of cannabis farmers have not gotten through the onerous licensing process. [Report: 99% of Cannabis Growers Are Still Unlicensed] Especially onerous is the excise tax — just like Alexander Hamilton leveled on the whiskey distillers. The cannabis excise tax comes in at a whopping 15%, with multiple sales taxes accompanying it along the supply chain until retail. This has caused the price of legal cannabis to jump about 50% at the same time as the price of illegal cannabis sold on the street plummets. So many people began growing this plant during the green rush that it resulted in a glut in the market supply, without adequate means for those new farmers to go legal. After prop 64 took effect, people who once could live off of their marijuana crop now find themselves in dire straights.

At the time of writing this piece, politicians are signaling that they will attempt to lower the excise tax in a bid to draw more cannabis farmers into the fold. [California considers cut in marijuana taxes in bid to lure legal users] Such would be an act of mercy and justice for the pioneers of an industry that will net the state billions in additional tax revenue. In a contentious hearing at the board of supervisors meeting in Humboldt country (ground zero for early cannabis farming), citizens poured into the halls to plead for lower taxes and the end of corporate loopholes that favor the wealthy. [Frustration and Fear: Local Cannabis Farmers Ask for Help, Claim Measure S Could Put Them Out of Business and Deprive County of Their Tax Revenue] It’s still unclear whether the barriers to entry will remain so high, but people are pushing back and want to be a part of the legal economy. The demand is now for an easier way to join the state regulated economy rather than escape it. The pot growing community has come a long way since the idealistic days of nonconformity.

The desire for access into the regulated market is mainly to prevent the consolidation of industry that Ray Raphael wrote about in Cash Crop. People had always known that legalization would encourage big agribusiness to move into their backyard; without proper permits, law enforcement would end up taking down the smaller business instead of targeting the large ones like it did in the past. Legalization mixed with high taxes has meant that the scale of cannabis farms is getting bigger, a reversal of the tacit agreement between the community and federal drug enforcement that kept operations small. It is the fear of monopoly capitalism that supersedes fear of big government for the people out west — it is the Left Coast after all. The only game left in town is tweaking the rulers so that the law promotes a decentralized industry instead of one dominated by a few players. If we believe with Raphael that capitalism inevitably consolidates into monopoly power, then fair laws that protect small farmers are the only check cannabis farmers have left.

With the law kept as is, small farmers will likely be phased out of the market. Bigger farms tend to yield more product with fewer costs in what economists call “economies of scale” or, in other words, capitalist consolidation. Perhaps the back-to-the-landers are facing a reckoning for failing to curtail gangs from extracting as much black market profits from the region or for looking the other way when signs of environmental damage were all too apparent. [Outlaw Weed Comes into the Light] But there are forces at play that dwarf the collective power of this little haven that hippies found in Northern California. The next step for counterculture on the west coast will be to engage with those greater forces and follow the money instead of stash it.

If cannabis farmers (whoever ends up with the legal profits in the industry) could pool their money together into a bank that the entire state of California has access to as deposits for loans, a great victory would be achieved. A public bank would be the saving grace of the hippies and cement their legacy as a true force against American mainstream capitalism. This would complete the journey of the back-to-the-landers after their escape from American culture. They could take their place alongside the populist farmer movements like the NonPartisan League that willed the Bank of North Dakota into existence. [How the Nation’s Only State-Owned Bank Became the Envy of Wall Street]

The best part is, one doesn’t even have to be a cannabis farmer nor ever have been in the cannabis industry. All we have to do is educate people on the benefits of public banking and for those people to lobby California politicians. [Public Banking Institute] The crucial factor on this issue is linking cannabis profits with accessible deposits for the rest of California. [A Public Bank for Pot Entrepreneurs? How About the Rest of Us?] Such would be practical way to bring economic justice to everyone in the state (and galvanize a nationwide movement) instead of just those under the majestic Redwoods.

For the next installment, I’ll give a brief history of the controversy over the whisky tax in the 1790’s before moving on to public banking.

Public Banking and Taxing the Wild Frontier: Intro

What the Whiskey Rebellion Can Teach Us About Using Cannabis Money for Public Banking

Something big is stirring out west. Since the California voters passed Proposition 64, cannabis use and cultivation has been made legal for all adults over 21 years old and the consequences of this law are far reaching. When we contrast the history of cannabis cultivation with the new practices resulting from Prop 64, a story emerges that is at once new and old. What is new is a centralized, regulated, and taxed cannabis industry replacing the decentralized small farmers of the past, what is old is a story of taming frontier economies with high taxation. It’s a story that is liable to provoke romantic sentiments for the plight of the small-time farmer in the face of unstoppable capitalist progress but we can do better. With the right degree of activist lobbying the cannabis industry can lead the charge in demanding a California state public bank – a bank that would solidify the populist legacy of the outlaw pioneer cannabis farmer.

Something similar was accomplished in the first years of the republic. During the so-called ‘Whiskey Rebellion’ (a term invented to discredit the uprising) farmers on what was then the wild frontier formed militias to resist the new taxation policy of Alexander Hamilton. These rowdy ‘regulators’ protested against a financier-oriented tax plan that was onerous and unfair even though it ended up financing a beneficial new institution. Their anger was justified: western farmers had been targeted by the wealthy easterners before and now further economic burden would befall them where they could afford it the least. Protesting in those days had a different meaning than it does today. We haven’t seen someone tarred-and-feathered in centuries, nor have we seen spontaneous armed uprisings in quite some time. Instead, we should look at what all of this tax revenue generated by the whiskey tax was used for and what all of this money generated by the Cannabis industry could be used for now.

Despite the absence of tax-resisting militia-men today, the similarities between the changes taking place within the cannabis industry and the Pennsylvania regulation of 1794 are striking, especially when we look into the realm of banking. Although the new cannabis tax revenue for California can’t go towards funding a public bank (the funds generated by prop 64 will go into a special fund predesignating where the money will go), the cannabis industry needs a place to safely store its profits and a public bank is the only kind of bank that can fit the bill. Marijuana is still a schedule one illegal substance at the federal level (amazingly, given its proven medicinal properties), so businesses operating in cannabis do not have access to nationally chartered banks under FDIC requirements. A huge industry generating many billions of dollars is forced to operate with duffle bags full of cash. A state owned and operated bank, on the other hand, bypasses this oddity and creates a win-win for both Californians and the cannabis industry.

Public banks have an enormous benefit for the economy within which they operate. Hamilton conceived the first Bank of the United States and the means to fund it entirely on his own. It helped stabilize the finances of the nation in its infancy after it had accumulated massive war debts both foreign and domestic. By a stroke of genius, those debts were parlayed into a system that convinced investors to do business with the unproven new nation and continue to allow the government to borrow on favorable terms. War debts became the basis of the new economy under this program of ‘Assumption’ and bondholders would continue to hold confidence in doing business with the American government. The only problem was the start-up costs came from poor frontier farmers already beset by economic suppression. It was a giant slap in the face to the people who had fought for liberty and independence, but the bank that financed it stabilized a nascent country in precarious circumstances. Today we have much more willing tax base, in spite of the many resentful cannabis farmers getting edged out by the high cost of going legit, and with the help of persistent public banking advocates a Public Bank of California that benefits the entire state is within reach.

The differences between these two events separated by over 200 years are numerous but three important elements bring them together: a profitable yet unregulated agrarian economy suddenly besieged by taxes, a maligned commodity that is much more than what it seems, and the establishment of a public bank (potentially this time). Like the cannabis farmer on the west coast, the whiskey distiller on the frontier lands of western Pennsylvania, Massachusetts, Kentucky and elsewhere used distilled spirits as a cost-effective means for earning an income. Whiskey was downed by almost everyone in America and the frontier people could sell it to the easterners with a fraction of the transportation costs compared with other goods. At their high points both whiskey and weed were so valuable that they were used as money. [see Terry Bouton, ‘William Findley, David Bradford, and the Pennsylvania Regulation of 1974’ in Revolutionary Founders: Rebels, Radicals, and Reformers in the Making of the Nation]

The burdens of taxation hit communities like these particularly hard. The whiskey rebels turned to the traditional form of protest to try and stop the tax collectors from charging distillers: armed mob threats against tax collectors, shutting down courts, and erecting liberty poles for gathering points. We’re pretty far away from seeing people using such tactics in 2018. However, a public banking movement has been boiling up for years now in both cities and states from Oakland to New Jersey. [Public Banking Movement Gains Grounds in Cities and States across the US]  If the cannabis industry can rally for a bank that would accept its money as deposits it would be a complete game-changer, offering a beacon of light to the similar public banking projects already underway in 20 other states. [How Public Banking Is Winning the West]

Populist finance has seen a resurgence since the Occupy movement put the spotlight on the greed of private banks and the vast disparity in wealth between the rich and the rest of us. [link from occupy.com] While frontier regulators of the late-eighteenth century opposed all financial schemes, today progressives understand that dealing with massive wealth inequality will take drastic measures at the state and national levels. Taking on Wall Street will require more than agrarian regulators marching against the tax man or, in other words, good-old-fashioned direct action. California State Treasurer John Chiang has been conducting public hearings after the formation of the Cannabis Banking Working Group and there the public made its desire for public banking known. Instead of giving them the brush-off, Chiang responded positively and it seems the lobbying by public banking advocates has been met with some success. [Activists Urge California Public Bank not Limit to Cannabis Revenue] The issue now is whether or not the prospective new bank will be extended beyond just the cannabis industry to cover the needs of general California business.

These developments are encouraging for populist finance. In an era beset by financial parasitism and high private debt levels, public-based solutions to money and banking point the way towards prosperity and equality. What will follow is a story about two moments in American history that connects the populist practices of the whiskey-fueled past with our pot-blazing present.

The Dude and the New Left in the Post-Cold War Era

It would be hard to overstate the impact that the Coen brother’s 1998 movie The Big Lebowski has had on contemporary pop culture. Social gatherings often fall into competitions for who can quote more lines from memory, cosplay for the movie’s characters is frequent, and twenty years after its release one can still find late-night screenings at the cinema packed with viewers. The fan base for The Big Lebowski has shown remarkable endurance and this may or may not be because of the points I will make in the following exposition, but shot throughout the film are references to the predicaments facing leftists in the post-Cold War period. Though the film is a patchwork of styles, genres, and character types often labeled ‘postmodern’ for being such a hodge-podge, but there are clues running through the story that allow for the viewer to put together an over-arching message – like a puzzle. With the shear amount of interest in and admiration for this movie, a large chunk of the population has a chance to learn about the perils of leftists political activity and the difficulty in maintaining it.

The Big Lebowski has already been subjected to numerous studies and cultural analysis on a variety of topics and its popularity will see to it that it will remain fertile grounds for diverse interpretations. The old-Hollywood style musical dream sequences filled with Valkyrie women, phallic bowling ball pins, giant scissor-wielding nihilists, and Saddam Hussein ensure that Freudian takes will crop up and references to the dude’s youthful activity as a New Left radical in the sixties ensure that its political context can’t be ignored either. It’s in taking stock of the images popping up throughout the film that we can detect a firm connection between both: The Dude’s predicament and the greater predicament facing America in the 1990’s overlap, so that the anxieties and concerns of the dude are a reflection of the time-period. The dude’s unconscious desires are not merely private, they resonate with his own Baby-Boomer generation rolling along past the collapse of the Soviet Union, but the movie has struck the greatest cord among their children. Those who came of age in the nineties or “Gen-Xers” and those proceeding them as “Millennials” are the people who have taken Lebowski most close to heart. It’s not the older generations who are putting on their best Walter impressions and acting out scenes over drinks; the youth have embraced the rich personalities in The Big Lebowski while, both curiously and provocatively, they reflect the anxieties of an older generation. What results is an odd kind of inter-generational transference of the afflictions of Baby-Boomer leftists onto the younger, post-Cold War babies. It’s not an accident that Maude Lebowski doesn’t want The Dude to father the child she has conceived with him: the problems of the left will be transferred to the next generation by a non-familial medium, like a film.

There are many ways to interpret a film so off-the-wall and popular, but I want to stick with the one involving politics and inter-generational relations. For this purpose I will draw on the assistance of particularly thoughtful work of film studies edited by Edward P. Comentale and Aaron Jaffe in The Year’s Work in Lebowski Studies, particularly in the essays by Stacy Thompson and David Martin-Jones. Thompson helps highlight the significance of The Dude’s history as a member of the New Left during his heyday, while Martin-Jones helps draw the connection between the film’s motifs and American national policy since it has emerged as the dominant world power after World War II. Though the conclusions drawn by the latter remain more convincing to me but together they demonstrate how the Dude and Walter’s adventure has a significance that stretches deep into the American national psyche.

Lebowski Studies

We are told at the outset of the film by a deep-voiced cowboy narrator that its main character will be “The Dude.”He says of the Dude: “I won’t say a hero, because what’s that?”, but a protagonist nonetheless. The mystic cowboy that sandwiches our story doesn’t have much to say about the Dude aside from the fact that he has a certain fondness for him and that he is quite possibly one of the laziest people in the world. The crucial point that he works himself up to saying is that, aside from labeling him as a sort of anti-hero, “he’s the man for his time and place. He fits right in there. And that’s the dude.” So, despite the fact that the monologue is delivered in a sleepy tone that wanders without urgency, we learn from the get-go that somehow (without explicitly explaining why) the Dude has a special significance for the city of Los Angeles. More broadly speaking, he also mentions the era in America in the time of the first Gulf War or Operation Desert Storm. The opening remarks trail off with: “[s]ometimes there is a man, sometimes, there is a man…” before he abruptly cuts himself off, not sure where all of this talk about “a man” is really going.

As The Dude floats through a big-box grocery market to buy the one missing ingredient for his favorite cocktail, the ‘White Russian,’ he catches a glimpse of the former CIA director and current commander-in-chief George H.W. Bush giving quick justification for his sending the United States military into battle to fight against Iraq: “this aggression … will not stand.” It’s this phrase that will set off The Dude on his quest and offers us the closest thing to a motive. When his house is broken into and his rug soiled, it’s this feeling of being violated that works him up into seeking a replacement rug. Without this sentiment – that unwarranted aggression is unacceptable and must be challenged – the oft-repeated desire for a new rug will be a red-herring. Even when The Dude gets a new rug, he isn’t particular about which one it is, and the rug’s desirability is only to “tie the room together.” The rug only serves as an object on which to focus his sense of injustice – The Dude has been wronged and something must be done in response.

It’s only after some inflammatory conversation with his friend Walter at the bowling alley that The Dude has his sense of injustice flared up enough into doing something about it. The conversation that provokes him into action is confusing and multi-layered (“you have no frame of reference Donny”), having become something of an infamous point of reference for film critics and others. I’ll leave comments on this conversation for another time, but what’s important for the point I am trying to illustrate here is at the end of this jumble of contentious words is that Walter eventually wins out and convinced the Dude to retaliate for this wrongdoing.

Walter provides much of The Dude’s support throughout the film by egging him on. He’s a persistent instigator who often wrecks havoc on the situation, more bravado and impulse than a helpful collaborator. As a stereotypical Vietnam War veteran, Walter’s outbursts give the film tension-filled comic relief that makes him out into a buffoon. His personality is a perfect contrast to the Dude’s lazing-about attitude, but the point here is that the two of them are both in agreement that something must be done to right the wrong of The Dude’s soiled rug. People just can’t go around destroying the property of others in America according to Walter’s inflated sense of righteousness and he becomes The Dude’s partner in the quest for retribution because, ultimately, he’s right. His methods look like taking a bulldozer to a garden party, but there always remains the possibility that he really is “calmer than you are.”

After taking the initial action in the name of retribution, The Dude is strung along by hopes for a big pay-out from the big Lebowski, an apparently rich man who touts his own achievements as a wealthy businessman. And this further demonstrates how the rug is a red herring: the Dude allows himself to stumble into the scheme of another for the sake of quick cash. Having gotten himself caught up in a rat race for a briefcase full of lost money, our “man for his time and place” must now figure out what’s going on with the big Lebowski’s money. What began as play for compensation following an injustice will result in something much more complicated.

Eventually, we learn that The Dude had quite an interesting early career. He did go to college but spent most of his “time uh,  occupying various administration buildings,” “breaking into the ROTC,” and playing the part of the rabble-rousing young man of the New Left era. He claims to be one of the authors of the “original” Port Huron statement (“…the original Port Huron Statement, not the compromised second draft.”) and a member of the Seattle Seven. All of these claims place him firmly in the tradition of the New Left – more of a phenomenon than a coherent movement in which young students engaged in civil disobedience in large numbers to protest and disrupt the imperialist policies of mid-century America. The Coen brothers have admitted that their character The Dude is inspired by a real-life person named Jeff Dowd, himself one of the members of the Seattle Seven and the Seattle Liberation Front. Dowd himself went on to be a film producer and not the casual lay-about, so the image of The Dude as an intentionally lazy single man is a product of the Coen brother’s imagination. He represents the retreat from the wild political activity of the 60’s and 70’s into individualistic tranquility. Whether by physical exhaustion and burnout, disillusionment with the cause, reactionary suppression, or some other reason, the New Left fizzled out before the Reagan revolution swept into power. Both The Dude and Walter are contrasting character profiles in coping with the trauma of that time period, with Walter having fought in the Vietnam War and The Dude undoubtedly having protested against it.

Port Huron

The New Left generation was inspired by Martin Luther King’s sustained movement of civil disobedience in the Jim-Crow South for a morally righteous cause. They sought alternative forms of political participation because they felt marginalized by the towering bureaucracy of Washington and looked towards adult professional life with dread. Gravely concerned that their nation was becoming a malevolent empire, students created their own cultural shift to ward off the banality of American life in the early 1960’s. The movement was given a foundation by a group of students with aspirations toward building a greater body of activists throughout the country, calling themselves The Students for a Democratic Society or SDS. The Port Huron statement was crafted by a charged-up party of students sequestered in a camp retreat that was owned by labor unions. Dozens of students would all participate in a group-writing process that crystallized their hopes and beliefs for reinvigorating democracy in America. Suddenly it felt like they had a voice in creating a new founding document, a document that carefully covered all of their ideological bases but kept their vision for the future vague. In that exciting atmosphere, a guy like Jeffrey Lebowski was pushing for the more militant version (on which there is some contention over its historical existence), staking out his claim as a revolutionary.

The protests and street demonstrations that flowed from the positions of the SDS gave a generation the radical sense of possibility. With young people swarming together over principled concerns and unified in a sense of outrage over an unjust war it felt like something new and better was emerging within American culture. The activists within and around the SDS wanted to stop their own nation’s turn towards imperialism and they weren’t shy from instigating mob actions to do it. Someone like a pre-Dude Jeff Lebowski would fit in nicely with the radical wing of this milieu.

Initially met by some success, the SDS had immense difficulty scaling-up its direct democracy practice (or ‘participatory democracy’) to cover its expanding base. Attempts were made to streamline the process for a more centralized organization but these were never brought to consensus. Alas, the organization was taken over by “Old Left” sectarian Marxists that the New Left had tried to distance itself from from the get-go. The movement could not sustain itself and the SDS splintered into individually driven campaigns and initiatives, some of which turned out successful. It’s hard to know where to place the character of Jeffrey Lebowski in all of this, but it’s made fairly clear that The Dude has achieved a kind of happiness, or at least comfort, after a flurry of contentious political activity in his youth. The image of the dashing protester fighting for a just cause and coming from the New, resurgent Left has now been transformed into an aimless man of leisure.

This is thrown into The Dude’s face early on in the movie by the businessman he decides to confront. After getting the brush off, he stands firm: “The Dude minds man!”, “This aggression will not stand, man!”, and he takes the wealthy mans rug by deceit. This is not before The Big Lebowski gets in a few pointed lines: “Your revolution is over, Mr. Lebowski! Condolences! The bums lost!” The Dude takes it all in stride. Unfazed, he gets what he wants, but on his way out he comes into contact with some other characters trying to take a piece out of the Big Lebowski: Bunny Lebowski and her accomplices, the nihilists. They too want a piece of his fortune and so have similar objectives. A few scenes later we learn that Bunny Lebowski has been kidnapped and The Dude is tasked with delivering the ransom money for a hefty reward. At first glance, it appears that the nihilists are behind the kidnapping. After The Dude can feel smugly satisfied in replacing his soiled rug, he allows himself to be dragged into a ransom affair. At this point, The Dude and the nihilists share a goal of purely monetary gain.

The nihilist are the true foil for The Dude, not simply because they are his competition but because they represent an extreme version of a potential path for him. The Dude’s laziness is ever at risk of falling into a passive nihilism whose ideological content is nearly identical to the film’s active nihilists who threaten to “cut off your Johnson!” They abuse their (non)ideological affiliation as a justification for behaving like thugs. As with every other character in The Big Lebowski, the nihilists are stereotypes. Lacking any real presence as criminals, they place all of their weight behind their ideological attachment to inspire fear. After all, what is so intimidating about a pet marmot?

The nihilists are made to look utterly ridiculous by the end of the film. Their empty exclamations (“We believe in nothing Lebowski!”) aren’t what worries The Dude so much as having his dick cut off. But they represent one of the many challenges for The Dude’s mind – the fate of his lifestyle and whoever else takes it up (and there are many out there, just read about Dudeism). In a truly care-free world without rules or beliefs of any kind, anything goes and everything is justified. Murder and the disintegration of the world can be met with a shrug, apathy and anti-politics can wash over the left, aggression can go unchecked. While the criminal nihilists are another colorful exaggeration of the film, the children of the New Lefties were widely derided in the 90’s for their apathy and non-involvement in politics. The serious viewer of The Big Lebowski must face the possibility that the Dude and his type has brought on a period of nihilism and political quiescence – exactly what The Port Huron Statement tried to fight off. It is certainly feasible that in 1998 the Coen brothers are provoking their viewers with the question of The Dude’s nihilism, or, in other words, how does our lovable aging hippy in The Dude separate himself from nihilism?

It’s in facing this question that we can turn towards Stacy Thompson’s essay ‘The Dude and the New Left.’ There is much digression into Lacanian psychoanalysis and terminology borrowed from Badiou, but she sketches an intriguing image of The Dude as a faithful adherent of New Left ideology. The founding document of the New Left is rather wordy and vague, standing primarily on principle but adding heaps of quick analysis on top of it. The Port Huron Statement shows signs an intense collaborative writing process by beginning with a shared sentiment, that American society is deteriorating into empire and meaningless work, and aggregates on top of that sentiment a multiplicity of responses by numerous participants. It’s the product of committed individuals trying to act out their dreams for a better society by including as many voices as they can, leaving no stone of their political anxiety unturned. It’s publication marks a turning point for the left, but one that left the organization (and perhaps a generation?) without a clear plan, only vague expressions of a desire for “more democracy.”

It is the Dude who maintains a fidelity to the [Port Huron] Statement as an event that shattered and reorganized the situation of his mid- to late-1960’s California life.

But where does laziness (as a sign of a failed New Left) fit into the SDS, the Statement, and fidelity? A clue can be found in the fact that the Port Huron Statement can be read as a lazy Communist Manifesto, where its laziness is precisely what allows for the Dude’s apparent shiftlessness. Where Marx and Engels list the famous Ten Steps Necessary to Move from Capitalism to Socialism and insist upon the “[e]qual liability of all to labour” (490), the Statement lists a series of “root principles” that must be implemented to move from a “domineering complex of corporate, military, and political power” to a “participatory democracy.” In relation to labor, the Statement argues that “work should be educative, not stultifying; creative, not mechanical; self-directed, not manipulated, encouraging independence, a respect for others, a sense of dignity, and a willingness to accept social responsibility.” Isn’t it possible, then, that in the context of the Statement laziness can be something more than itself? Perhaps the Dude is not lazy but refuses to work at stultifying, non-creative tasks. The Dude takes the Statement at its word and refuses work (or refuses to look for work) that doesn’t interest him. Only when the Big Lebowski offers the Dude a sleuth gig, ironically recently upbraiding him for laziness, does the Dude, intrigued, accept the job.”

-Thompson

On this take, the Dude is actually faithful to The New Left and the Port Huron Statement by being lazy. It was a lazy document lacking discipline and so the Dude is the long-term consequence of this moment, considered within the hindsight of the 1990’s. Considering that the New Left was marked by a surge of activity both aggressive and morally inspired, the Dude is its natural product. This feature of the Dude could be read negatively because the New Left is regarded as a failure that withered away but it could also be read generously; in a world where work indeed is largely unfulfilling and tedious, the Dude is a shining example of living comfortably and as he wishes. The Dude is beholden to nobody, does what he pleases, and isn’t forced to compromise his beliefs for a boss. Living like the Dude is something many people around the world can only dream about. A legion of fans can attest to the Dude’s status as a cultural icon of doing as one pleases, a west coast superstar of hippy hedonism.

But the Dude’s celebrity has a blemish: he is the loyal inheritor of a failed movement. As a lovable sage for a new generation of citizens he risks becoming the champion of blissful, self-indulgent apathy. This is why the Coen brothers must have him do battle with the nihilists or… at least confront them. The Dude does believe in something and it is a widely shared belief operative throughout the international community: aggression cannot go unchecked. A nation or a person should not be allowed to attack and steal from another unprovoked. The Nazis can’t just invade all of Europe and thugs can’t just walk into someone’s house and pee on a stranger’s rug. The Dude and the New Left’s formula for how to remake the world into a more principled one might not have been well-defined enough to persist but they do reflect a commitment to justice – a commitment perhaps too fleeting to be carried on all by itself.

And here is where Walter Sobchak must enter the picture. Just as the Dude is the caricature of the aging New Left radical, so Walter is a blatant caricature of the traumatized Vietnam War veteran. Walter is obsessed with upholding a principled order of civil liberties and civil rights in a world he believes is letting them slip away. And that’s putting it mildly. No incident and no encounter is too small for Walter to miss a chance to get on his high horse and rant about how he risked his life for the liberties they enjoy. He says, “Lady, I got buddies who died face down in the muck so that you and I could enjoy this family restaurant!” – apparently believing that Vietnam was a defensive war. Given the Dude’s extreme care-free attitude, it makes sense that his buddy is such a complete opposite on the spectrum of assertiveness. This all measured on scales of personality and not on the scales of belief mind you: we assume that they don’t have glaring differences in opinion because they are such good friends. This means that the Dude has actually accomplished something that the New Left wanted to do but couldn’t bridge the cultural gap to achieve: binding the anti-war protester with the war veteran. Despite the demonstrations and the large publicity, the New Left was unable to end the Vietnam War and it wasn’t until internal sentiments of the troops reached such a high pitch that true pressure was felt by the high command. It was the grunt soldiers that fragged their commanding officers and the military disobedience that forced the US to exit Vietnam without victory, not the civil disobedience. There is no indication that Walter knew anything about this, or even the thought that the war itself was anything but noble, but Vietnam isn’t a point of contention that has ripped through his friendship with the Dude either. It is more likely that their friendship is bound by their shared ethnic background in being Polish. Sobchak and Lebowski are both Polish names and it is another well-hidden clue from the Coen brothers that ethnicity is what brings an old leftist and a wing-nut libertarian together.

Walter believes with far more zeal than the Dude can muster that aggression cannot go unchecked. He’s carried it down to the smallest of places in LA, like in coffee shop etiquette or bowling rules, well, “league games” at least. He sees himself as a knight that must protect the order of society through force and determination. But he’s not your typical law-and-order conservative at all, certainly not when carrying a machine gun to… help the Dude perform his task as a bag-man in the ransom episode. His type is that of the civil libertarian watchdog, putting up a fight against all the forces that would conspire to erode our “basic freedoms.” His disproportionate use of force against Smokey at the bowling alley for stepping over the line and committing a fault gives us everything we need to know: “Has the whole world gone crazy?! Am I the only one around here who gives a shit about the rules?! Mark it zero Dude!” Walter is easily agitated because he thinks that nobody has the backbone to defend their rights anymore. He sees himself as the last defense against a world without a purpose, a world that will let its liberties slip away with a shrug, he’s the last defense against, in other words, nihilism.

It’s no accident that Walter knocks out the nihilists all by himself, while the Dude is trying to hand them a few dollars to make them go away. He calls them out for being toothless and puts his foot down on the same principle that sparked the Dude initially: “what’s mine is mine” whether what is owned is a rug or the contents of his wallet. It’s not so much a question of guarding one’s private property that is the issue here (nor is it “the Chinaman”), the issue is “unchecked aggression”, a sense of injustice that must be righted. This is a unifying sentiment for the Left and no person or group of people is spared from reproach for committing an unjust act. The sense that insufferable harm is being systematically inflicted on people anywhere around the world is partially what defines the left. The Dude senses this too but he has left his activism days behind as he attempts to revive his own personal dignity, hence, the nihilists are a threat to his manhood. Walter, on the other hand, has no lack of confidence and he ejaculates his frustration all over every situation. That the two have buddyed-up is a little glimpse of a representation of both the left and the right coming together in a tense but not exactly dysfunctional relationship.

the-big-lebowski

Walter represents more than just an over-correction to the Dude’s placid character. He’s also a converted Jew who at one point loudly quotes Theodore Herzl, the father of Israeli political Zionism (“If you will it, it is no dream”). His constant effort at staving off cultural complacency has led him zealously hold onto a belief in Judaism, a belief that he gained when he married his now ex-wife. The Dude calls him out near the end of the movie by saying, “your not even fucking Jewish man!” but Walter follows the rituals and takes his religion seriously, so its not his commitment that is at stake here. What matters is that his devotion feels arbitrary and he comes off as desperate holding onto it with such ferocity.

Walter’s conversion and resolve is an allusion to the US’s unwavering attachment to the state of Israel. Support for Israel in the US is something of a political necessity in Washington, despite an ongoing occupation, slow-motion colonization of Palestinian lands, massive poverty, and disproportionate use of force. It’s gotten to the point where professors at universities are losing their jobs for their criticisms of Israel. It’s as if every question of the legality or morality of the actions of the state of Israel is met with a Walter shouting in your face to shut up. This is just one of The Big Lebowski’s foreign policy references and when put together they create an important world-political subtext that runs throughout the Dude and Walter’s adventure.

Our rambling cowboy friend who introduces us to the Dude from the outset of the movie also sets us within the stage of history. He informs us that this affair took place “just about the time of our conflict with Saddam and the Iraqis”, right before going on about how the Dude fits into this time and place. Saddam Hussein himself makes an appearance in one of the Dude’s trippy dream sequences (to complement George H.W. Bush’s t.v. appearance early on) and we are never spared from Walter going on and on about the Vietnam War. It’s within this loose association of early-nineties images that there is a connection (“not a literal connection Dude”) to the uneasy place that the left occupied – and perhaps still does. Walter persistently invokes Vietnam because of the trauma of his experience in the war no doubt, but on the world stage, the war tarnished the image of the United States as a benevolent global actor. The atrocities committed by soldiers, fruitless and destructive bombing campaigns, chemical warfare, and civilian murders all worked against the national image, provoking deep regret and soul searching among the American population. Opposition to the Vietnam War unified much of the left and helped confirm the worries of the SDS that their country was becoming an empire without conscience. Anti-war demonstrations were massive and inflammatory, no doubt where Jeffrey Lebowski cut his chops as a radical. The nation will forever live with that stain on its record but the perception of the nation shifts as time keeps a rollin on…

After the end of the Gulf War, the first president Bush was quoted privately saying, ““By God, weve kicked the Vietnam syndrome once and for all!” It was the ease of achieving victory and the apparent righteousness of the American cause in operation Desert Storm that brought on a sort of reappraisal of the United States as the only remaining world power. The war faced almost no opposition at home, compared to Vietnam’s mass demonstrations, and Washington could portray the event as an assistance in Kuwaiti self-defense. Moreover, this was facilitated by images that well-depicted the US military’s might. New footage from a behind the cross-hairs perspective placed the viewer in the shoes of a soldier. The Soviet Union had collapsed, Americans could rejoice, and the world suddenly had a triumphant superpower winning wars it could be proud of. There was only one problem: nobody could figure out what the war was all about. The motive, the reason for engaging in such an expensive war couldn’t be pined down aside from a few catch phrases like “stabilizing the region” and “unchecked aggression.” But there was a nagging suspicion that this all had something to do with the huge reserves of oil in Kuwait, oil that Saddam had his eyes on and the US wouldn’t let him take.

Guf War Time

With these developments, the chip on America’s shoulder was removed, or it appeared to be removed at least. And that’s what matters in this context: the Walters of the world could suddenly be made out to be less crazy and more sympathetic. It would be difficult to counter the narrative of a benevolent American superpower “making the world safe for democracy” now. This sense of victory for tradition and militarism, combined with the disintegration of the communist bloc in eastern Europe, plagued the left throughout the 90’s and beyond. There wasn’t a good enough analysis for what had just happened to challenge the prevailing image of purely idealistic motive for the US. They would have to wait until the second Iraq war turned out to be such a disaster for that sense of possibility to return.

The confusion surrounding the First Gulf War, together with its revitalizing effect, remains in the background of the Dude’s story. Aside from images and name drops, the progressive destruction of the Dude’s car holds symbolic value. Martin-Jones brings the connection to light: “Far from “pop cultural potpourri,” The Big Lebowski uses its intertextual references and film buff-directed allusions to invite the viewer to make the connection between the life of the Dude, his car-oriented context, and the legacy of America’s past.” (p.210) Cars have been integral to American culture since the days of Henry Ford and the mass manufacturing of consumer products. The mass production of automobiles that the working class could both build and afford to buy marked a turning point in capitalist development, dubbed Fordism. Fordism “created a feedback loop in which interminably fed consumerism. Moreover, as this process began to spiral outward, car production also affected the spatial geography of the United States.” (p.211, Martin-Jones) As highways were built following WWII, Americans had a massively upgraded range of motion. With a car and freeways to drive them on one could travel across the country with ease – but only with a few tanks of gasoline. Oil became the primary strategic asset for American policy planners because it was and still is required to sustain the new economic program (really just a new version of capitalism) that kept consumers satisfied with their new automobiles. Sold as a ticket to freedom, these cars gave America a new image to replace the cowboy now occupying a frontier-less West, an everyman’s dream of self-mobility.

all america car 52

Our wistful cowboy friend in The Big Lebowski seems out of place at the bowling alley. His presence in late-90’s LA helps us bridge the jumble of background images related to US national policy with the Dude and his story. Located on the West Coast, Los Angeles could be read here as the termination of the frontier, or the final outpost in the wild west. The tumble weeds of the western plains blowing by the dueling gunman locked in a stare-down rolls its way into an LA beach. The auto-mobility now available to the American consumer means that everyone gets to don the image of the free and lonesome cowboy explore the open lands. The frontier is now anywhere in America. The cowboy becomes a symbol of freedom that see in the movies and romanticize. LA represents not only the advent of consumer-car culture but the Hollywood era of cinema. It was Hollywood films that gave us the image of the romantic cowboy to go along with its construction of highways and freeways for car owners. It is here that our Dude will have his car stolen, beaten and battered over the course of the story until finally the nihilists torch it. The Dude’s car is destroyed along with his freedom of mobility, his masculinity placed in jeopardy, his Johnson on the chopping block.

Right around the time SDS folded up and splintered off, a new international norm took shape that locked in US dependence on maintaining a steady supply of oil. Oil already was a vital aspect of any modern economy and the US was was outproducing all others with its steady stream of oil coming from various parts of the globe. Currency values were determined by the amount of a nation’s gold reserves, which also played a major role in the strength of an economy. With America bleeding gold in the early 1970’s and its relative economic strength diminishing, Nixon felt he had little choice but to end the gold backing of the dollar and let its value float. This means that dollars would not be redeemable in gold, instead changing in value relative to other currencies from day to day. As the 1970’s wore on and other nations began to challenge US economic superiority, a deal was struck with a Saudi Arabia that held more oil than any other nation on earth: Saudi Arabia agreed to accept only dollars, effectively forcing every other nation to borrow dollars to buy this necessary commodity. The result was effectively a new and bigger regime of imperialism, summarized under the term ‘petrodollar recycling,’ that was birthed right under everyone’s nose. A fractured left had no means to confront this development and the machinations of power politics eluded anti-imperialists, sending the US economy and others into a tailspin of oil shocks and high debt.

All of this had the effect of bolstering the US power position, but it was to the detriment of of domestic its domestic manufacturing base. The American automotive industry (and others) were no longer required to maintain economic supremacy. The Dude’s car could be smashed and burned, it didn’t matter. And as we turn back to the Dude in post-Fordist LA, we see that the New Leftists had the right enemy (US imperialism) but not the right mix of energy and discipline. His story takes place in LA because it “is perhaps the point of at which the westward expansion of the interstate necessitated by Fordism literally ran out of room.” (p.213, Martin-Jones) LA is a city of cars and highways, a place where America’s need for oil is best symbolized, and it is that most westward city in which US economic manufacturing gave way to another kind of economic management involving the rest of the world. The road of imperialism goes through LA and out to a new frontier, no longer on the American continent.

None of this is on the Dude’s radar, it fills the background of his quest initiated by his need to take a stand. He’s not so defeated that he cannot see it through to the end and discover that the money everyone is chasing around doesn’t exist. There is something potent in having the big revelation in The Big Lebowski be the moment when the Dude realizes he has been tricked by the wealthy businessman; in fact, the wealthy businessman isn’t actually wealthy or successful at all. It was all a con to make everyone think there was a lot of money where there was none. This doesn’t mean that dollars are all fake or that rich people aren’t rich, it means the source of their wealth is the result of a system based on a lesser-known trick: the diplomatic invention of one Henry Kissinger. That the Dude can see through the big Lebowski’s trick makes him a redeeming character: lazy people can be good detectives too.

cosplay-big-lebowski-2

The ultimate Irony of The Big Lebowski lies between it and its fan base. Just as the American Left stumbles along after the New Left pool of righteous anger dried up, so do its fans adore its characters without detecting the critical subtext. Just as ecstatic fans enjoy the movie without grasping it as a political commentary, so does the state of American political discourse continue fire-up or slough-off by turns without understanding the geopolitical dimensions of international politics that underwrite every important political decision. In a strange way, the themes of Lebowski are reflected in the cultural space its fans created, making the movie seem like it’s trolling its own fan base. Even film critics and scholarly commentary miss the significance of US militarism lurking underneath the plot. Everyone loves the movie, but nearly everyone misses the geopolitical aspect; the cheeky caricatures keep everyone coming back, while the political realities that move the world the most nestle their way into our unconscious desires, seemingly destined to remain their forever. Such is the way of the world that the New Left could not change for its children: our understanding of world powers and the man moving the levers behind the curtain are only brief images flashing before our eyes that sometimes persuade us what it is we should be getting angry about and without much effort.

We would do well to take heed of the wisdom of Hannah Arendt when she says in a late interview:

The New Left has borrowed the catchword of the third world form the arsenal of the Old Left. It has been taken in by the distinction made by the imperialists between colonial countries and colonizing powers… This imperialist leveling out of all differences is copied by the New Left, only with the labels reversed. It is always the same old story: being taken in by every catchword, the inability to think or else the unwillingness to see phenomena as they are, without applying categories to them in the belief that they can thereby be classified. It is just this that constitutes theoretical helplessness.” (p.210, ‘Thoughts on Politics and Revolution,’ from The Crisis of the Republic)

This situation is reflected in the script each time a character mimes the words of another. Even “the Dude abides” is taken from the big Lebowski’s line, “I will not abide another toe.” This persistent passing around of words and catchphrases in the movie focuses our attention on how the language we use is both passed down and manipulated by media.

The response to The Big Lebowski itself demonstrates this copying by the proliferation of catchwords and quoted lines. The Coen brothers could have more effectively conveyed these subtexts, a criticism Martin-Jones (citing Mike Wayne) brings up, but then it is doubtful that it would have achieved such a devoted following. That the script from The Big Lebowski has burned its way into the hipster lexicon means that these topics are ripe for discussion whenever the movie is brought up in a social setting. This is perhaps what has given the film its 20 year longevity as a cultural phenomenon: the viewer must think to tie the loose ends together, just like the Dude must straiten out the mess of competing actors trying to get their hands on the briefcase to learn the truth. This puts the Dude within that category of anti-hero detective which so prospered in Los Angeles for American cinema (think Jack Nicholson in Chinatown or Humphrey Bogart in The Big Sleep): the man who can move about a corrupt milieu and play the part but keeps his conscience intact. This savvy, grizzled stereotype is updated by the Coen brothers to include the man who has burned himself out of political activity early on but is still capable of discovering certain truths. This image of the Dude as anti-hero makes his shortcomings appear less fatal and his character more complex.

Fatherhood is not the Dude’s strength and he would agree. Luckily for him, when we learn that “a little Lebowski is on the way,” he will not have to do any child rearing, nor is he wanted to. Everyone seems to love the Dude like a puppy, not as an authority figure. The Coen brothers seem to be saying that the new generations of political leftists must navigate through the world without a father figure, as if the New Left could not manage to reproduce itself in the traditional familial manner. The New Left was born in rebellion not just of American society but of their Old Left ancestors. Now the question we are left with at the film’s ending is, what happens to the children born from rebels rebelling against rebels? Yet more rebellion? Is the vicious cycle is broken with the absence of a father, or does this only create more inter-generational strife? This is less of a lesson than a situation which confronts young people, a send off. Even if the Dudes of the world don’t handle authority very well they usually have good stories to tell, and occasionally we can learn something from them. They don’t take shit from “real reactionar[ies]” either.

The Old Left was united in a particular critique of capitalism that supplied the confidence necessary to interpret the ongoing developments of world history. It was when the explanatory power of this analysis broke down and the atrocities of the communist bloc became known in the west that the next generation felt it was time for a new beginning. The Dude’s passing reference to Lenin (“Vladimir Illanich Uleninov!”) suggests that he has (or at least he had) a critical understanding of the political economy of capitalism. Though the New Left was right to reject communism and the SDS folded when communist groups took it over, a new analysis of what was moving the great powers never filled the void. No doubt such analyses exist, but nothing that could function as a unifying current for the left as a whole has emerged. As we stand at the new frontiers of America, perhaps it would be wise to go back even farther than the Old Left and find out what it was that pushed so many onto the old frontiers. For no matter what becomes of the new in each generation, the continuity with the old must be reckoned with lest it haunt the new. But that’s just like, my opinion man.

Kaepernick’s Protest Goes Right to the Heart of American Nationalism

At first glance, meaning a week of media uproar, I dismissed Colin Kaepernick’s mild protest of standing up for the singing of the national anthem as unimportant. The patriotic among us would denounce his disrespect of the flag, the agitators and progressive among us would back him up for his right to protest, and the whole thing would blow over. It may well eventually do just that, but the issue had a stickiness to it that lingered on longer than I had expected. Perhaps I am just to close to the center of the discussion in the California Bay Area, perhaps the mainstream media was attracted to a heated debate about a patriotic symbol (the patriotic symbol?) during the lead up to the 2016 election, perhaps forcing the talking heads of the sports commentators to make a statement on the issue fueled the fire for longer (considering how much football Americans watch), but perhaps this simple refusal to stand was a brilliant move to catalyze a movement to change America to its core. Just maybe this simple act of of protest cuts through the sort of media hype that seizes on a hot-button issue like a pack of ravenous wolves and has nestled its way into the heart of the national consciousness. Continue reading “Kaepernick’s Protest Goes Right to the Heart of American Nationalism”