Socialism and Public Banking: The Story of the Bank of North Dakota and the Nonpartisan League

By Seattle DSA Organizer Justin Hutchinson

Some Seattleites have been interested in public banking lately, and with good reason. There’s a growing mass of citizens who don’t want Seattle or Washington pumping money into Wall Street extraction industries, and since the Great Crash of 2008 is still fresh in people’s imaginations, there has been widespread distrust in the financial sector. That distrust has led many activists across the nation to embrace the seemingly audacious idea of a public bank. A public bank, simply stated, is a bank that is controlled by a city or a state as opposed to a private enterprise. As such a public bank wouldn’t be beholden to profit margins and the will of shareholders, instead it would serve the people. No longer would we as citizens have to beg Wall Street banks and other various bloodsuckers to fund public infrastructure; the will of the people instead could make it happen. No longer would we have to show developers that public housing projects can be “profitable” to get built; the city or state could fund those projects themselves as needs arise. A public bank would also save billions of dollars in banks fees as well as provide affordable loans to students and homebuyers. If you watched this year’s mayoral debates, you would have heard Washington State Senator Bob Hasegawa advocate for a public bank and cite a seemingly-unlikely model: North Dakota.

North Dakota might seem like a strange place for a public bank; after all, a public bank is a leftist institution in a state that went 63 percent for Donald Trump last year. North Dakota wasn’t always so right-wing, though. In the 1910s, the Socialist Party of North Dakota and its successor, the Nonpartisan League, were popular in the state. Creating the Bank of North Dakota was the Nonpartisan League’s crowning achievement, as well as an example of the success that populist and socialist groups had in the early part of the 20th century.

The evolution of the bank

The story begins with Arthur C. Townley, a flaxseed farmer who, in the early years of the 20th century, was the “Flax King of the Northwest.” But, his fortunes faded when a freak snowstorm and fluctuations in the price of grain bankrupted him in August of 1913. Arthur was in need of a new job, and he soon became a paid organizer for the Socialist Party of North Dakota. His early efforts to organize farmers were met with resistance because the farmers felt that Marx, and socialism in general, was focused on urban factory workers and not yeoman farmers like themselves. Arthur decided that he needed to change his tactics.

The next year, Townley bought a Ford Model T and drove all across North Dakota. When he met with farmers, he didn’t mention the Socialist Party at all; instead, he charging them dues to become a member of the “Organization Department”. It worked– he was soon able to raise enough money to purchase three more automobiles and to put his own organizers in the field. The Socialist Party of North Dakota didn’t appreciate Townley’s rogue operation, and in December of 1914, he and his associates were expelled from the party.

One year later, Townley formed the Nonpartisan League of North Dakota with his friend, Frank B. Wood. The newly-formed NPL aimed to address the concerns of farmers that felt they were being exploited by out-of-state companies, with a platform that called for the state of North Dakota to create its own bank, warehouses, and factories. drew up their radical plan to address the farmers’ needs and he was soon was back driving his Ford Model T and signing up new members for the Nonpartisan League– this time, charging $6 in membership dues. The local farmers joined in droves, and the League started winning elections– former farmer Lynn Frazier won the governorship, John Miller Baer was elected to the US House of Representatives, and enough NPL state senators and representatives to control both houses of the state legislature.

The NPL wasn’t shy about using their mandate– they created or passed the state-operated Bank of North Dakota; North Dakota Mill and Elevator; a state-owned railroad; a graduated income tax; state-run hail insurance; a workers’ compensation fund; a Home Building Association that aided in financing and building houses. Townley gave fiery speeches calling for the “conscription of wealth,” blaming the “big-bellied, red-necked plutocrats” for the carnage of World War I.

However, the end of World War I caused commodity prices to plummet, which along with a devastating drought, caused an agricultural depression. This spelled disaster for the Nonpartisan League. The new state-owned industries, facing financial ruin, tried to raise money by issuing state bonds, but were sabotaged by the private banking industry who claimed that the NPL’s “theoretical experiments” had failed (Of course, when the tables were turned in 2008, almost a century later, the financial industry was happy to accept trillions of dollars in government money to bail themselves out).

The Nonpartisan League didn’t have the political experience to fight back, and its popular appeal plummeted. The final nail in the coffin came in 1921, when an investigation found that the state bank was insolvent. Voters called for a special election, and Lynn Frazier was the first United States governor to be recalled. Ironically, the ability to recall elected officials was one of the many reforms that the Nonpartisan League had won.

Listen to the needs of the people

Around the same time, Arthur C. Townley was serving a 90-day jail sentence in Jackson County Minnesota for “conspiracy to discourage enlistments,” since some Nonpartisan League pamphlets questioned the war effort. Townley was essentially defeated. After he served his sentence, he bounced around aimlessly from job to job, later becoming another anti-Communist crank in the McCarthy era. The North Dakota Farmers Union would eventually sue him for libel when he accused them of being controlled by Communists.

The Nonpartisan League had some electoral success in the 1930s, but nothing compared its victories in 1918; it eventually merged with the Democratic Party of North Dakota, creating the North Dakota Democratic Nonpartisan League Party. Changes aside, the bank they helped create is still standing strong. While it may have morphed into a more “conservative” central banking role in state finance, the Bank of North Dakota still issues student loans, business development loans and state and municipal bonds. While socialist parties may rise and fall, the institutions that they create can last for generations. The city of Seattle is fertile ground for a public bank. We are in the midst of housing crisis amongst the worst in the country and a public bank can help fund more public housing. At the mercy of cartel-like telecommunication giants Comcast and CenturyLink, both providing poor service at ever-increasing prices, we desperately need municipal broadband that a public bank could help finance. Our city continues to be paralyzed by worsening traffic congestion and needs a drastically expanded light rail system and which a public bank could build in our lifetime.

What can we learn from the meteoric rise and precipitous fall of the Nonpartisan League? For starters, leftist reforms, like municipal banking, are wildly popular and can be extremely successful. That’s why the Bank of North Dakota and the North Dakota Mill and Elevator are still standing strong today, despite being in a red state. More importantly, the NPL teaches us that the path to electoral success is listening to the needs of the people and pushing policies that address those needs. Public banking is an excellent opportunity to show Seattle what socialized institutions can do for them.

Unless expressly stated, Dispatches do not necessarily reflect the views of Seattle DSA as an organization or its leadership.