Saskia Sassen: Investing in a new infrastructure for distributed capitalism

The effect I have in mind is a widely distributed range of growth sites, that incorporate more and more people. Clearly, this is not a revolution. This is within capitalism, but it begins to lay the ground for a widespread and distributed economic network, that can function as one platform for gaining entry into out economic “system” and begin to relate to it as ours.

In this excerpt from a contribution by Saskia Sassen to the Reimagining Society Project, the left scholar argues that instead of giving trillions to save zombie banks, billions would be enought to create viable distributed infrastructures.

Saskia Sassen:

“Let’s focus on the work that needs to be done in our country. It is vast – we need to produce housing, healthcare, build urban parks and develop urban agriculture, clean our waters, weatherize all housing, from now on build only zero emission buildings, and so on. Doing that work would absorb all available workers, and then some. It would require that those who are skilled in whatever the task at hand, train the unskilled. In short we would all be occupied, most for pay; it would also draw on those who do not need income but need purpose in their lives.

This would vastly expand the economic footprint and, critically, it would mean a lot of economic activity geared towards the disadvantaged. This is economic activity that would iterally enter the abandanoned, neglected, actively segregated, at best policed and rarely governed, spaces of our country, from the forgotten dying towns scattered all over our country to the brutalized hyper-ghettoes of our cities and the abandoned spaces where the homeless now live. It would also enter the spaces that are now guarded by private guards – malls, corporate towers, coal mines, highly polluting factories.

The distributed character of this expanded footprint would/could begin to produce the experience that it is “our” economy, one we all work in and we work for all. Here comes my pragmatic approach to the matter of moving towards a new socialism -not quite re-imagining a full-blown socialism, but rather a step in the direction of making a new socialism. This kind of experience would/could enable a sense of the collective, of being part of an economy, rather than being used by an economy. From there would/could come a greater sense of existential security, and a buffer agaisnt the persuasive but predatory consumer advertising – a possibility of not feeling here I am alone and dependent on the market, the corporations. There would/could be a grater sense of lateral articulations, even for those who cannot wrap their minds around notions of class solidarity -this is the USA after all.

The reason that beginning such a long term project is more of an option now than in the last fifty years is that the government has shown it is willing to pump money into the economy. Pity it has been pouring most of it into rescuing zombie banks.

Over the last few months we have gottten used to hearing talk of the trillions it will take to rescue our financial system. But it would take billions, not trillions, to begin to work on the work that needs to be done. If we think in terms of the billions of the economy, rather than the trillions of high-finance, it all looks better. And there are hundreds of small traditional deposit-based banks in the US that also function in billions and are doing fine and can be channels for offering credit to small firms etc.

The effect I have in mind is a widely distributed range of growth sites, that incorporate more and more people. Clearly, this is not a revolution. This is within capitalism, but it begins to lay the ground for a widespread and distributed economic network, that can function as one platform for gaining entry into out economic “system” and begin to relate to it as ours. It is a sort of parallell to the notion of an organizational infrastructure that the left has long though would be a step to take us past this type of brutal capitalism.

MOVING RESOURCES TO WHERE THEY ARE NEEDED.

A first major issue is how to move money into work that now falls outside the dominant profit logics. But in a capitalist economy the government needs channels to use taxpayers’ money to work on needs which cannot easily be met through market mechanisms given today’s dominant profit logics in the US. The financial crisis and the environmental crisis have unwittingly joined to create an opening for the government to intervene in the economy. Infrastructure repair/development and the greening of our economy have become two key mechanisms for governments to channel money to thousands of localities, small and medium sized firms, and indirectly households. Eventually it would take a far greater, and somewhat different, allocation than the financing of Obama’s stimulus plan and its distribution. But it would not take the up to 8 trillion dollars the Fed has basically extended to the financial system just to pay for its troubles with few feedback loops into the average economic sector. Building infrastructure and greening are labor-intensive and requie the participation of a broad range of economic sectors, thereby creating potentially significant multiplier effects for sectors not directly engaged by those activities.

Here are just a few numbers to illustrate what we could do with billions, let alone the 8 trillion extended to the banks. For example, the ASCE (American Society of Civil Engineers) estimated that the U.S. needs to invest an average of 300 US billion a year over the next 5 years. It documents that most components of America’s infrastructure are poor or mediocre, and all sectors except aviation have declined since 2001. For instance, by 2007, 26% of the nation’s 599,893 bridges were rated structurally deficient or functionally obsolete. According to EPA estimates, the US needs to invest $390 billion over the next 20 years to replace existing waste treatment systems and build new ones to meet increasing demand. The EPA’s 2004 Clean Watersheds Needs Survey calls for an estimated investment of $134.4 billion for wastewater treatment and collection systems, $54.8 billion for combined sewer outflows, and $9 billion for storm water management. If this is not done then we risk losing the gains that have been made in cleaning up the nation’s rivers, lakes, and streams since the enactment of the Clean Water Act in 1972.

And on and on… The reader can find a list of all kinds of infrastructure projects that would together cost less than 1 trillion and would make an enormous difference along the lines I describe above: www.huffingtonpost.com/saskia-sassen/the-billions-of-our-econo_b_170009.html

It would be critical to do all this needed infrastructure building in an environmentally sustainable manner. And environmental sustainability has become an accepted mechanism for the government transferring money to the economy. Greening is also likely to lead to more labor-intensive building processes and to more distributed sites for the work. Let me illustrate what I mean through a familiar issue: if we maximize the use of solar energy we have to make millions of production points (solar panels on roofs and on walls), rather than centralized distributors of energy. And we would use very diverse types of work. For instance, doing flood control in a sustainable way would involve returning cement covered land to their original status as wetlands, and it would require repairing dying wetlands -such as the oil pipe traversed wetlands by New Orleans, which have killed much of the wetlands that regulated changing water levels in the Missisippi. Re-making and repairing wetlands is labor intensive and requires a very different workforce from building a concrete flood-wall. In some instances, sustainable construction would not necessarily add jobs, but it would add more people-intensive modes of transport: thus building roads anywhere would always include safe parallel cycling lanes.

Weatherizing housing is a good example of an initiative that mobilizes households and many local firms, and thereby has the additional effect of mobilizing people into joint action – who then are also potentially mobilized for other projects. Austin’s (Texas) program to weatherize low-income housing gives grants to these households and expects them to contract the work out to local firms. It is not very expensive, creates jobs, supports local enterprises, and begins to green the city. And importantly, it creates a collective effort.

THE US HAS OVER 6,000 SMALL BANKS: The government should use them!

One final item I want to discuss here is how e can being to make ours what is now the banking function in a capitalist economy. I make a difference between finance and banking. Simplifying, banking is about selling money you have while finance is about sellling money you do not have. (For more detail on this point, see http://www.huffingtonpost.com/saskia-sassen/a-bad-idea-using-a-financ_b_145283.html ).

We need a distributed, locally based banking system. Most needs of households, enterprises, workers pension funds, and local governments can be met through small banks. To build a dam (not such a good idea anyhow!) or a brand new steel mill takes a vast amount of capital that in a capitalist economy will require either a government or a group of large banks to finance. But mostly it is small enterprises, households and local governments that need to borrow to do what they need to do.

We know that small banks tend to be geared to the local economy and to have as their clients small and medium sized enterprises and lower and middle-income housholds, partly because they know the local conditions and can gauge the soundness of borrowers in a local context. Their situation provides them with far more information about the borrower than is the case with national and global banks. Most households and most enterprises do not need the big banks for their basic banking services, including residential and commercial mortgages. But since the deregulations of the 1980s, the big banks have grabbed most of the market share even in these sectors.

If 1 trillion dollars of the bank bailout taxpayers money would have been channeled through the 6,000 plus small banks we have in the US, we would have strengthened these banks and they would have used that money to make loans, unlike the big banks which used it the bailout dollars to build up their capital reserves (at best) and did not extend loans to modest income households and enterprises. Further, workers’ pension funds are more likely to have better oversight of how a banks is handling their funds and to secure better investments for their workers than is the case with bigger banks where there now is considerable evidence that investments favored the profit logic of the banks and demanded excessive fees.

It is also one way of beginning to build a distributed, locally based banking system. The US has over 7,000 small banks, with below one billion in capitalization. And half of these have less than half a million in capitalization. This is truly small in the current context. These banks need small enterprises and medium to low income households. It is a very different relationship structurally than tht of the big banks to these modest actors. This further strengthens the structural articulation of these banks to their locality. Even bank owners who are greedy and not interested in the well being of their communities are structurally dependent on those communities. That is the key.

Again, my pragmatic rather than utopian view of moving towards a new socialism, sees in this distributed small banking footprint a potential platform for a more distributed capitalism. Yes, this is still capitalism. But it begins to move in another direction. If we join this to a mobilizing around the issues I described above, we begin to get a bigger citizen and community involvement with at least some part of the banking system. And we begin to build up that local banking function rather than give our banking accounts and credit card business to the big banks.

Below is a breakdown of the small banks as of early 2009 according to the FDIC. Since then a few may have closed but we also know that a) new small banks have been opened, and b) many are actually doing very well as people move their savings accounts from large to small banks. More than two-thirds of all insured banking institutions are doing fine, but their aggregate earnings were outweighed by large losses at several big banks. Total deposits increased by $307.9 billion (3.5%) among small banks.

Note that there were 2784 banks with assets under $100mm and 3,790 with assets from $100mm to $1B. Those are very reasonable concentrations of capital in that they are small and do not produce a massive power and control over the economy and the political system , as has been the case with the large banks. Clearly, these banks cannot take care of huge projects, but they can take care of the needs of 80% of the US population and many of the small and medium sized firms. They should be strengthened.”

2 Comments Saskia Sassen: Investing in a new infrastructure for distributed capitalism

  1. AvatarJeo

    The problem is that the people who make the decisions are those who have reached the pinnacle of our highly centralized system. With few exceptions, their interest is in strengthening the centralized systems they control, not in decentralizing and hence destroying their power base.

    If we want to decentralize, we’re going to have to do it ourselves.

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