The Federal Reserve & Structural Racism

America uses a debt-based monetary system; money can only enter the American economy as a loan from a bank. Banks have preferred customers, to whom they more generously loan funds than they do to other customers. Preferred customers, of course, are typically large corporations.
This brief essay argues that America's monetary system represents a structural advantage for a white power class, which enjoys long-standing familiarity with the corporate form and which has consolidated control of large American corporations in their hands. It starts by introducing the process of money creation, then turns to the history of the American corporation and American imperialism, and ends by arguing that these forces have combined to disempower some of the most vulnerable members of American society.
The conclusion is clear: Progressives who purport to espouse equality, diversity and multiculturalism have overlooked the foe of debt-based money for far too long.

Banking & Money

The Federal Reserve has a monopoly on the creation of legal-tender notes in the United States today. Only the Fed can create the green bills (Federal Reserve Notes) we call money. The Fed deals almost exclusively with a small list of eighteen global banks, called “primary dealers.” When the Fed creates legal-tender notes, it usually uses that money to buy bonds and securities from one of those global banks. Of course, the Fed also sometimes acts as a “lender of last resort” for smaller banks. Either way, the Fed deals only with banks.
Not only legal-tender notes are money, of course. After all, the funds in your checking account are money, as are the funds in a certificate of deposit, even though the bank does not back all those funds with green bills. The banking system as a closed unit enjoys a monopoly on money creation: All commercial banks have the legal authority to create government-backed money. They are limited only by the amount of Federal Reserve Notes that they hold. Typically, a bank can create ten times as much money as it holds in green bills—that is, a bank with $1 million “on reserve” has the right to have created $10 million in the American economy.
Banks have preferred customers, and the preferred customers tend to be corporations. Not every customer is created equal in the eyes of a banks, and it is probably not too surprising that Boeing International and Exxon Mobil get better access to cheaper bank credit than do American consumers.

Corporations & Multiculturalism

The corporation finds its roots in Renaissance England. The English crown chartered private corporations to accomplish all sorts of useful social purposes: including the East India Company in 1600, to conduct trade with India; and Hudson’s Bay Company, founded in 1670, to conduct the fur trade in North America, including what is now Washington State. Many American colonies were even founded by crown-chartered corporations: For example, Virginia was founded by the Virginia Company of London, incorporated in 1609.
The modern corporation emerged in England and the United States, during the mid-nineteenth century. In England, the 1844 Joint Stock Companies Act gave individuals the power to create corporations as a matter of right, through a simple registration process, rather than through a separate act of Parliament. The 1855 Limited Liability Act allowed stockholders to create corporations where they could only lose their capital investment, and not be personally liable for any further losses.
In the United States, Delaware and New Jersey passed some of the earliest corporation-friendly laws. Delaware was the first state to allow any group of individuals to incorporate as a matter of right—without getting a special bill passed by the state legislature. New Jersey was the first state to allow corporations themselves to own stock in other corporations, thereby concealing a natural person’s ownership stake.
The dawn of the American corporation also marks the dawn of American imperialism and the cementing of American union. The United States launched the Mexican-American War in 1848, taking vast expanses of land from its neighbor to the South. The Civil War of 1865 created a single national economy, and decisively ended the battle between the competing systems of slavery and free labor, and plantation agranianism and industrialism. Finally, the Spanish-American War of 1898 witnessed America expand its empire into the Caribbean, and as far as the Phillippines, Hawaii, and Guam.
America’s new global reach brought new peoples into the body politic. Freed slaves were no longer the property of a plantation master—they were, nominally at least, citizens. So too were the mestizo people of Arizona, New Mexico and California; and, with time, so were the Pacific Islanders of Hawaii.

Structural Racism

Anglo-Americans inherit a legal and cultural tradition that has long included the corporation, and many prominent Anglo-American families have benefitted greatly from the corporate form. “The House of Morgan,” for example, started as a banking firm in London. The Du Pont family traces its roots back to French nobility that had long-standing ties with English corporations. To this day, J.P. Morgan Chase constitutes one of America’s most-powerful banking firms, and the Du Pont family owns a consortium of corporations that employ approximately ten percent of Delaware’s population.
The newest members of America’s multicultural society come from cultures that have not enjoyed the long familiarity with the corporation, and they are generally members of families that have not had the opportunity to use the corporate form to accumulate such vast quantities of wealth.
American blacks were emancipated only in 1863, and Jim Crow reigned in the American South until well into the 1950s. During that time, power and wealth were consolidated in the hands of white elites. Those same elites have a strategic information advantage—they understand the corporate form and its many uses much more deeply than do most Americans.

Financial Crisis

During the financial crisis, Americans learned just how vulnerable many of today’s corporations are. Many corporations lacked the cash on hand to meet their payroll obligations more than three months after the crisis of September 2008, and would have failed but for the congressional bank bail-out.
Of course, banks came to their rescue, giving corporations the credit they needed to meet their obligations. By saving the corporations, however, the banks saved a social model that consolidates power in a few hands, generally white and male.

Conclusion

Today, society expects people from whatever background to adopt a highly Anglo form of social organization. If individuals want to produce finished goods and sell them on the market, they must incorporate. If they want access to credit markets, they must incorporate. This expectation is inconsistent with multiculturalism and human freedom: different peoples from different parts of the world will organize themselves in different ways. If our markets require them to organize in a particular way, we are imposing upon them a particular social model, and are depriving ourselves of the innovation they would offer. We must re-examine our markets.
So long as banks are allowed to create new government-backed money, and so long as a failure of American corporations represents a threat to America’s way of life, it will be impossible to dismantle that power structure. The challenge to progressives today is to focus their attention debt-based money: a true enemy of liberty and multiculturalism.