Can Public Options Really Serve The Public? Just Check Out Thriving North Dakota (Joe Rothstein's Commentary)

September 28, 2009

By Joe Rothstein
Editor, EINNEWS.COM

Need a job? Go to North Dakota, where unemployment is lower than any other state.

Your kid ready to go college? Think about North Dakota, where they've just increased the education budget by tens of millions of dollars.

Worried about a tax increase? Go to North Dakota. The state has a $1.2 billion surplus.

North Dakota has weathered the banking crisis. Its economy is strong. And the state's taking care of a lot of public needs while other states are closing them down.

What's going on up there? For one thing, North Dakota has a rich agricultural economy. It also happens to have a lot of oil. In fact, of all the states, North Dakota is now the fifth largest oil producer. But farming and oil are not enough to explain North Dakota's success. After all, most other states rich with oil and agriculture are struggling.

The big difference between North Dakota and the rest of the U.S. is that North Dakota is the closest thing we have to a socialist state.

Among other things, North Dakota is in the banking business. No other state has a bank owned and operated with public funds. North Dakota also buys and distributes its home-grown agricultural products. And all that electric power needed for homes, businesses and manufacturing----that's provided by a user-owned cooperative, not a private utility.

In other words, North Dakota figured out long ago that a public option is needed to keep a lot of the big boys honest.

You can trace the start of North Dakota's flirtation with public ownership back to the early 1900s. On its web site the Bank of North Dakota recounts how "grain dealers from outside the state suppressed grain prices; farm suppliers increased their prices; and interest rates on farm loans climbed."

So, in 1919, the state legislature established the Bank of North Dakota and the North Dakota Mill and Elevator Association. Since 1919, by law, North Dakota state and local governments have to deposit their revenues in the Bank of North Dakota. And, by law, the state leverages those deposits to make loans that contribute to the state's economic development.

The State Mill and Elevator started operations in 1922 as the public option to Minnesota grain operators who had been holding down farm prices to pump up their own profits. The North Dakota Mill receives no funds or financial assistance from the State of North Dakota. It just competes in the private market, buying and storing grain and selling it to wholesale and retail users.

The State Mill and Elevator and the Bank of North Dakota are both profitable ventures and each year contribute much of their profits to the state's general operating fund. In the current state budget that contribution adds up to 20% of North Dakota's general fund revenues. That's in addition to all of the jobs they create, the goods and services they buy and the loans, credit and other contributions they make to keep North Dakota's economy humming.

The electric utility, Basin Electric, came on line as an outgrowth of an executive order signed by President Roosevelt in 1935, during the depths of the Great Depression. At the time, only a small fraction of rural America was electrified. Private power companies weren't much interested in stringing wire over long distances of sparsely populated land.

The Roosevelt administration offered financial incentives to the private companies to do it anyway, but was turned down. In fact, utility executives wrote to Roosevelt claiming they had done extensive research and found few farms requiring electricity.

Republicans in Congress at the time, as you might expect, opposed TVA, the Rural Electrification Administration and the Electric Home and Farm Authority, calling them communism and an unconstitutional interference in business.

Angered by the rigid opposition of the Republicans and the private market to fill the need for electric power, Roosevelt used his executive powers to forge ahead and establish the framework for rural cooperatives. Within 15 years rural America went from being 10% electrified to 90%.

Today Basin Electric, located in Bismarck, generates and transmits electric power to users in nine states. It provides electricity from coal, gas and wind power-----and is very profitable. As a co-op, the profit goes back to its users.

Is there a message here for President Obama and Congress and all others currently caught up in the fights to reform health care, establish a 21st century energy policy, and bring sanity to the out-of-control "masters of the universe" on Wall Street?

Once you get past the tired slogans and into the real world, it turns out that cooperative, public control of basic and needed services can be done efficiently, profitably and without turning recipients into political automatons. North Dakota's congressional delegation is comprised of all Democrats. The governor and the majority in the state legislature are Republicans.

Public option, anyone?

(Joe Rothstein can be contacted at joe@einnews.com)