Protesters take a stand against Wall Street on April 28, 2010 in New York, NY.

Photo by The Other 98%

The parallels between the independence movement that liberated thirteen colonies on the east coast of what is now the United States and the emerging independence from Wall Street movement are both revealing and instructive.

Taking on the king:

As I wrote in Agenda for a New Economy:

As the economies of Britain’s thirteen colonies on the eastern seaboard of North America began to grow in their production of real wealth, their prosperity attracted the attention of the British Crown, which sought to increase its take through new taxes and the grant of a tea monopoly to the East India Company, in which the king held a financial interest.

Taking on Wall Street:

More than a century and a half later, in the years following World War II, the policies of the Roosevelt New Deal created a prosperous middle class and flourishing Main Street businesses growing the real wealth of their local communities. Main Street’s prosperity attracted the attention of Wall Street, which used its political and economic power to assume the role of colonial overlord and increase its take by charging interest rates and fees; asserting monopoly control of intellectual property rights, markets, and resources; and accelerating its creation of phantom wealth financial assets to expand its claims against the real wealth produced by others.

Taking on the king:

As the threat to their liberty and prosperity became evident, the colonists mobilized in resistance to the British Crown. Some colonists formed local resistance groups, with names such as Sons of Liberty, Regulators, Associators, and Liberty Boys, to engage in acts of non-cooperation such as refusing to purchase and use the tax stamps that the Crown demanded be applied to all colonial commercial and legal papers, newspapers, pamphlets, and almanacs.

The New England merchant class—given to slave trading and piracy—had no reservations about evading import taxes by adding smuggling to their business portfolios. When the Crown decided to assert its authority over the Massachusetts Supreme Court by paying its judges directly from the royal treasury, the people responded by refusing to serve as jurors under the judges.

Other colonists formed Committees of Correspondence, groups of citizens engaged in sharing ideas and information through regularized exchanges of letters carried by ship and horseback. These committees linked elements of diverse citizen movements in common cause across the colonial borders that had long kept them divided.

Taking on Wall Street:

As the Wall Street threat to their liberty and prosperity became clear, the people began mobilizing in resistance. They formed organizations with names like Art and Revolution, Direct Action Network, the Indigenous Environmental Network, the Institute for Local Self-Reliance, the International Forum on Globalization, National Farm Workers Association, Public Citizen, Rainforest Action Network, the Ruckus Society, and United for a Fair Economy. They created Internet forums to share ideas and information and to unite movements in common cause, reached out even across the national borders that had long kept them divided. In alliance with similar groups in other nations, they mobilized millions in global demonstrations that regularly disrupted the international meetings in which the rich and powerful gathered to circumvent democracy, rewrite the rules of commerce to remove restrictions on the consolidation of corporate power, and negotiate their division of the spoils.

Taking on the king:

The colonists also undertook initiatives aimed at getting control of economic life through local production. They boycotted British goods and subjected merchants who failed to honor the boycott to public humiliation. Artisans and laborers refused to participate in building military fortifications for the British. Women played a particularly crucial role by organizing Daughters of Liberty committees to produce substitutes for imported products.

Why We Revolt
When and how do ordinary people discover their own power?

Taking on Wall Street:

Local Main Street businesses, workers, and consumers undertook initiatives aimed at getting control of economic life through local production and the patronage of local business. They organized farmers’ markets, food co-ops, “local first” campaigns, local investment funds and credit unions, and consumer boycotts of big-box stores and the products of corporations that harm the environment and pay substandard wages. They campaigned for state banks. Local businesses formed national alliances like the American Independent Business Alliance, the Business Alliance for Local Living Economies, and Transition Towns. Local chambers of commerce disaffiliated from the corporate-dominated national Chamber of Commerce and joined these new alliances. New organizations like Americans for Financial Reform, the New Economy Network, the New Economy Working Group, and a New Way Forward formed to mobilize popular support for new rules to break up the big banks and hold financial institutions accountable to the public interest.

Because economic democracy and political democracy necessarily go hand in hand, the New Economy movement is an essential leading edge of this next phase in the larger human struggle to liberate ourselves from cultural and institutional chains of Empire. Wall Street is a formidable foe, but so was Britain. At the time of the rebellion, it was the most powerful empire on Earth. Fortunately, the advantage in any such struggle ultimately lies with a motivated and organized citizenry.

[Next: When the People Lead]

David Korten (livingeconomiesforum.org) is the author of Agenda for a New Economy, The Great Turning: From Empire to Earth Community, and the international best seller When Corporations Rule the World. He is board chair of YES! Magazine and co-chair of the New Economy Working Group. This Agenda for a New Economy blog series is co-sponsored by CSRwire.com and yesmagazine.org based on excerpts from Agenda for a New Economy, 2nd edition.

Interested?

• Main Street Businesses Take on Corporate Tax Havens
  Small businesses have decided they’re done picking up the slack when Wall Street dodges taxes.
• The UK’s Progressive Tea Party
  In the UK, the Great Recession inspired ordinary people to take on corporate tax evaders—with enormous success. Can the same model work in the U.S.?
  

• 10 Common Sense Principles for a New Economy
  It’s time we the people declare our independence from the money-favoring Wall Street economy.
  
• Agenda for a New Economy available from the YES! Magazine web store.

Photo by Chris Devers

A work by the street artist Banksy, in Boston's Chinatown.

From the beginning of history, Empire’s rulers have maintained their power by sowing fear, mutual suspicion, and division to prevent those who bear the burdens of their rule from uniting against them. Currently, on the political right, anger is directed against government. On the political left, it is directed against Wall Street corporations.

Each blames the other for America’s decline and the economic distress of working families, thus diverting attention from the deeper truth. Corporate money, perks, and the revolving door between Congress and lobbying firms have corrupted the political process. As a consequence, Wall Street and Washington are both running out of control and united in the pursuit of agendas that grow the power and privilege of the few at the expense of the many.

Whether the blame lies more with Wall Street or with Washington is largely beside the point. The bottom line is a Wall Street–Washington axis that has stolen our money and country, denies us our rights, undermines national security, and threatens the future of all our children, irrespective of political orientation.

Two events following the 2008 financial meltdown so focused attention on the power and dysfunction of the Wall Street-Washington axis that the establishment propaganda machine that keeps us divided came near losing control. They demonstrate the potential for a broad popular transpartisan political alliance.

One was the government bailout of Wall Street. Virtually no one outside of Wall Street was happy about government taking money from struggling taxpayers in order to give it to Wall Street bankers so they could reward themselves bonuses for crashing the economy.

The other was the Supreme Court decision in Citizens United v. the Federal Election Commission that gave corporations carte blanche to buy elections. Follow-up polls reported that the Supreme Court’s decision was opposed by 80 percent of Americans, including 76, 81, and 85 percent of Republicans, Independents and Democrats, respectively—a truly extraordinary consensus in this time of political division.

No More Budget Cuts
Without Tax Fairness

I come from deeply conservative roots and distrust any concentration of unaccountable power. As the author of When Corporations Rule the World, my view of the unconscionable abuse of corporate power is on public record. I also recognize the profound truth of Paul Hawken’s observation in The Ecology of Commerce that it is big business that creates the need for big government to constrain the excesses and clean up the messes. What we now have, however, is big government aligned with big business to facilitate the excesses and reward those who create the messes. It is a disastrous arrangement against which the vast majority of conservatives and liberals should be united.

Conservatives are correct on a key point liberals tend to overlook: the federal government is too big and intrusive. The Patriot Act, which passed with a large bipartisan majority, is an abomination against democracy and foundational American ideals. We do have a public spending problem. The public debt owed to foreign nations and Wall Street bankers is unsustainable and a threat to national security.

Taxing the poor to pay for subsidies to powerful corporations and squandering our national treasure on unwinnable wars that have no point other than to fuel corporate profits is unconscionable. Health insurance programs designed to benefit insurance and pharmaceutical companies need to be restructured to reduce costs and improve services.

We spend too much on safety net programs that would not be necessary if we rolled back ill-conceived trade agreements that facilitate outsourcing and the global bidding down of wages and benefits and required corporations to pay employees a living wage with basic benefits. It is absurd to tolerate the Federal Reserve giving Wall Street banks virtually free money to loan back to U.S. taxpayers at a market interest rate.

There is good reason for outrage against both big business and big government. We must respond, however, from a place of love, national unity, and sense of possibility rather than a place of fear, anger, and division. When consumed with anger, our reptilian brain takes control. Our capacity for nuanced critical thought is diminished and we easily succumb to manipulation by propagandists and advertisers. Note the ease with which Wall Street billionaires feed and manipulate the anger of Tea Party members to mobilize them in support of campaigns that support Wall Street interests at the expense of their own.

If those on each side of America’s deep political divide could see the merit in the arguments of those on the other, we might come together as a powerful citizen alliance. We could break up concentrations of corporate power, get money out of politics, end senseless wars, achieve an equitable distribution of wealth, downsize government, and hold politicians accountable to an authentic popular will. That is an agenda that principled conservatives and liberals should all be able to get behind.

[Next: The Next American Revolution?]

David Korten (livingeconomiesforum.org) is the author of Agenda for a New Economy, The Great Turning: From Empire to Earth Community, and the international best seller When Corporations Rule the World. He is board chair of YES! Magazine and co-chair of the New Economy Working Group. This Agenda for a New Economy blog series is co-sponsored by CSRwire.com and yesmagazine.org based on excerpts from Agenda for a New Economy, 2nd edition.

Interested?

• Why This Crisis May Be Our Best Chance to Build a New Economy
  Wall Street is bankrupt. Instead of trying to save it, we can build a new economy that puts money and business in the service of people and the planet—not the other way around.

• 10 Common Sense Principles for a New Economy
  It’s time we the people declare our independence from the money-favoring Wall Street economy.
  
• Agenda for a New Economy available from the YES! Magazine web store.

Photo by Domenico Bettinelli

I am among those who hoped that President Obama, based on his campaign promises, would introduce reforms putting the United States on the path to a New Economy.

Unfortunately, for all the powers of the presidency, any new president, no matter what his intention, quickly learns that he is captive to institutional forces that severely limit his ability to set a course for uncharted waters.

For example, once elected, the first task of a new president is to staff the top positions of the world’s most complex and sprawling bureaucracy. He is necessarily limited to selecting appointees from a small pool of people with the experience and credentials to win speedy confirmation and step instantly, with confidence and authority, into impossibly complex jobs.

Those so qualified will almost inevitably be practiced in working within the established institutional and policy frames and disinclined to challenge the foundations of the institutions on which their power and prestige depend.

In the economic policy arena, President Obama faced the additional handicap that his choice of eligible candidates was limited to market fundamentalists, Keynesians, or some hybrid of the two.

Market fundamentalism is more ideology than science. Its practitioners are dedicated to privatizing public assets and services, deregulating markets, lowering taxes on corporations and the rich, and limiting government’s role to enforcing contracts and protecting property rights. This school has prevailed for more than thirty years and pushed through the policies that led to the present unconscionable concentration of wealth and crashed the economy. It remains oblivious to the lessons of its experience.

Keynesians, members of the only contemporary school of economic thought that offers an accepted counter to market fundamentalism, recognize a need for governmental intervention to assure sufficient aggregate demand to keep people employed.

When the financial markets crashed, some market fundamentalists called for subjecting failed banks to market discipline by letting them go bust. Keynesian pragmatists, however, recognized that given the size of the banks in question and the implications of interlinked derivatives contracts, this would instantly collapse the entire economy.

Although they may appear to be poles apart on the role of government, Keynesians and market fundamentalists share a basic Old Economy perspective on many basic issues. Both look to GDP growth as the true and defining measure of economic performance. Both take the existing structure of market institutions as a given. Both ignore the difference between phantom wealth and real wealth.

Neither school has the tools to conceive or implement a New Economy restructuring of the money/banking system. Under a New Economy regime, government would have taken over the failed banks, negotiated financial settlements at steeply discounted prices with creditors, and restructured Wall Street’s mega-banks to spin off individual units as independent locally owned community banks, mostly organized as nonprofits or cooperatives. So-called “shadow banking” institutions devoted solely to playing unproductive financial games would have been shut down.

Instead, captive to Wall Street political interests and limited to an Old Economy frame, the Federal Reserve and the Treasury Department teamed up to shower Wall Street banks and corporations with $13 trillion in virtually free bailout money to fund bonuses, dividends, takeovers, and the purchase of bonds paying a market interest rate issued by the government to fund the bailout.

How different things might now be if Wall Street had been forced to absorb its losses and the government had instead directed just a fraction of this bailout money into the Main Street economy to keep people working and in their homes.

Taking Financial Reform
into Our Own Hands

With a New Economy frame, the federal government would have placed the Federal Reserve under government supervision and used its facilities to support a restructuring of the financial system and to provide interest-free financing to rebuild America’s crumbling and outdated infrastructure.

Such a dramatic departure from business as usual would have required a ready team of strong leaders working from a shared framework understood and embraced by a major segment of the public. Tragically, the education and experience of our leaders — including President Obama — and the general public have been limited to economic models that are at best seriously limited and at worst actively destructive.

It remains to the institutions of global civil society to articulate and popularize a sound and compelling New Economy policy framework that includes a strong institutional component. A number of new groups have formed since September 2008 to carry forward this work, including the New Economy Working Group, the New Economy Network, the New Economics Institute, and the American Sustainable Business Council.

Recognizing that the needed change will come only as “We the People” demand it, other groups with broad popular outreach capability are currently preparing to launch a national mobilization to support New Economy solutions.

Without fundamental restructuring, another Wall Street crash is assured. Hopefully, next time we will be prepared with at least a rudimentary map to a New Economy.

[Next: How the Left and Right Can Unite]

David Korten (livingeconomiesforum.org) is the author of Agenda for a New Economy, The Great Turning: From Empire to Earth Community, and the international best seller When Corporations Rule the World. He is board chair of YES! Magazine and co-chair of the New Economy Working Group. This Agenda for a New Economy blog series is co-sponsored by CSRwire.com and yesmagazine.org based on excerpts from Agenda for a New Economy, 2nd edition.

Interested?

• System Failure? Look Upstream
  Why it's important to address our economic problems at their Wall Street roots.

• 10 Common Sense Principles for a New Economy
  It’s time we the people declare our independence from the money-favoring Wall Street economy.
  
• Agenda for a New Economy available from the YES! Magazine web store.

Photo by Daniel Borman

We think of stock sales as ways for households to invest and for corporations to raise capital. But if you dig into the numbers, something very different is going on.

In 1999, according to corporate-ethics guru Marjorie Kelly in The Divine Right of Capital, the public sale of newly issued corporate common stock netted $106 billion—in other words, less than 1 percent of the $20.4 trillion in corporate shares traded in that year went to the corporations that issued them.

Even more surprising, Federal Reserve data reveal that from 1981 to 2000, the overall net flow of money to corporations from stock sales was a negative $540 billion, meaning that corporations spent more money from their treasuries to buy back their own shares than they raised by selling new shares.

One might wonder why corporate management would use company money to buy back its own shares, rather than use it either to pay dividends to their shareholders or to invest in new productive capacity.

One effect of such purchases is to inflate the price of the stock, which defenders of the practice argue serves shareholder interests. Another answer is offered by the independent market observer and author Thornton Parker. Using Federal Reserve statistics, Parker found that from 1982 to 2008, the largest net sellers of corporate stocks weren’t corporations, but households—to the tune more than $5 trillion. Corporations during this same period were net buyers by $737 billion.

At first blush, this makes no sense. The presumed function of share markets is to facilitate the purchase of corporate shares by households in order to raise money for productive corporate investments. Corporations should be net sellers and households should be net buyers.

Parker provides a telling explanation of why the reality doesn’t match up. When corporate executives sell the shares they receive as part of their compensation packages, the proceeds go to them, not to the corporation, and therefore count as household sales. The data thus suggest that since the 1980s, the function of the public share markets has not been to fund productive investment. Rather it is to build the financial assets of corporate executives who took a major portion of their compensation in newly issued shares.

So much for the claims of politicians and pundits shilling for Wall Street that tax breaks for the wealthy will translate into investments that create good jobs. Most Wall Street players are interested in only one job: their own.

But What About My 401(k)?
Credit cards, mortgages, insurance, retirement: How to fulfill our basic financial needs (and find real security) without Wall Street.

Ownership should be in the hands of people who have a stake in the long-term health of the enterprise and the community and ecosystem in which it is located. Rather than turn our retirement savings over to Wall Street con artists, we will do much better as individuals and as a society to favor direct, long-term investments by individuals in companies of which they have personal knowledge. An owner who needs to cash out his or her shares can sell them to another owner, a new stakeholder, or even the company itself in a private transaction.

Wall Street operates a sophisticated con game that leaves us dependent on a series of scams that it presents to us as financial services essential to our well-being. By pushing down wages relative to the cost of living, Wall Street makes us ever more dependent on consumer credit and borrowing against our home equity. The greater our desperation, the higher it pushes fees and interest rates. It collects our insurance premiums in return for promises of payment in the event of a personal disaster—a promise that it has no intention of keeping if it can wiggle out on a technicality.

It entices us to put our savings in the care of professionally managed phantom-wealth funds with fantasies of a luxurious twenty- to thirty-year work-free vacation at the end of our lives that would place an impossible burden on the working population. It would have us believe that when we buy shares of stock on Wall Street exchanges we are providing investment funds for companies to expand productive output, when in fact we are mostly converting our personal financial assets to the personal financial assets of Wall Street privateers.

Daily expenditures should be covered by living family wages. Insurance is best provided by nonprofit insurance pools managed for the benefit of their participants. Old-age security depends on an intergenerational contract. Savings should flow to real investment in real productive enterprises and infrastructure.

The leadership for change will not come from within the Wall Street-Washington axis. It must come from a powerful citizen movement that reframes the public debate and creates a political force that official office holders cannot ignore.

[Next: Mapping Uncharted Economic Waters]

David Korten (livingeconomiesforum.org) is the author of Agenda for a New Economy, The Great Turning: From Empire to Earth Community, and the international best seller When Corporations Rule the World. He is board chair of YES! Magazine and co-chair of the New Economy Working Group. This Agenda for a New Economy blog series is co-sponsored by CSRwire.com and yesmagazine.org based on excerpts from Agenda for a New Economy, 2nd edition.

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• 7 Cool Companies
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• 10 Common Sense Principles for a New Economy
  It’s time we the people declare our independence from the money-favoring Wall Street economy.

• Agenda for a New Economy available from the YES! Magazine web store.

There are better ways to create real security than depending on Wall Street savings that—as we learned in 2008—can disappear in a flash.

Photo by John

The first reaction of most people to the call to shut down Wall Street is one of jubilant enthusiasm. The second reaction is, “But what about my 401(k) retirement account?” The same question might be raised about our credit cards, mortgages, and medical, homeowners, and auto insurance.

Money may be nothing but a number, but survival in a modern society is impossible without basic financial services. There are, however, better ways to deal with our very real financial needs than those presently offered by Wall Street. Here are some examples.

Credit Cards. Credit cards have two distinct functions: a convenient means of clearing transactions and an open line of credit. The first is a straightforward and beneficial service if properly regulated and transparent. The second is an enticement to debt slavery and predatory lending.

The solution to wages inadequate to provide for daily needs is not easier, cheaper, or fairer credit; it is to restore living-wage jobs, to tax the rich to provide a floor of essential public services, and to reduce household expenses by restoring the household as a center of production. Financing for large, durable purchases like a home, car, or major appliance can be arranged on a case-by-case basis with a local bank, savings and loan, credit union, or even the local merchant from which the purchase is made.

Home Mortgages. The purpose of a mortgage is to finance homeownership, not to fuel speculation, create a foundation for loan pyramids, inflate a housing bubble, or substitute for a paying job. We best advance the goal of broad participation in responsible homeownership by measures that increase job security, raise wages, maintain stable housing prices, and restore a system of member-owned mutual savings and loan institutions like we once had that extend and hold mortgages for local home buyers under a system of state and federal supervision.

Insurance. Insurance involves a pooling of risk by which a group of individuals guarantee one another against individual ruin from a catastrophic illness, disability, fire, flood, or other random unavoidable event. Private, for-profit insurance companies are an inherently problematic instrument for pooling risk, because they create an inevitable conflict of interest between the insured and those who agree to bear their risk for a profit.

The more appropriate mechanisms are nonprofit, member-owned mutual insurance associations and federal programs like Social Security or Medicare, in which there is a strong commonality of interest. Public programs have the added advantage of assuring universal coverage, spreading the risks over a large number of people, and minimizing the costs of recruitment and administration.

Retirement. The idea that a generation of workers can secure its retirement by storing numbers in an individual retirement account on the computer hard drive of a Wall Street financial institution is a cruel illusion. Retirees cannot eat financial bubbles. Numbers stored on a computer drive will not nourish them even if the institution remains solvent. They need real food, shelter, medical care, clothing, recreation, and other goods and services—all of which must be produced and provided by working people at the time the retirees’ needs are presented. Furthermore, it is impossible to know in advance how long an individual will live or what his or her health needs will be. It is therefore impossible to determine the individual savings required to be secure.

For a society, retirement is inherently an intergenerational contract between retirees and working adults—much like the U.S. Social Security program, in which working people agree to commit a portion of their labor to providing for the elder care needs of those who nurtured them during their childhood. They expect the next generation of youth will likewise care for them in turn.

The threat facing future retirees is not insufficient money—which government can easily create with an accounting entry—it’s demographics. In 1960, there were five working people per retiree. Because of longer life spans and the greater percentage of people reaching retirement age, that ratio was 3.3 to 1 in 2004. Unless the retirement age changes dramatically, it will be down to 2 to 1 by 2040.

Those of working age best secure their elder years by investing in the productivity of those who will follow them—by investing in the education, technology, and infrastructure required for the next generation of workers to provide for their own future nutrition, shelter, health care, and other essentials, while doing the same for those who can no longer provide for themselves.

Wall Street financial scams and phantom wealth financial assets will not feed us or provide us with essential shelter and health care. We had a system of institutions that effectively met our need for the basic financial services required by a real wealth economy—until Wall Street dismantled them. We can rebuild them.

[Next: The Great Stock Scam]

David Korten (livingeconomiesforum.org) is the author of Agenda for a New Economy, The Great Turning: From Empire to Earth Community, and the international best seller When Corporations Rule the World. He is board chair of YES! Magazine and co-chair of the New Economy Working Group. This Agenda for a New Economy blog series is co-sponsored by CSRwire.com and yesmagazine.org based on excerpts from Agenda for a New Economy, 2nd edition.

Interested?

• Get Free From Wall Street: An Interview With David Korten
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• New Economy, New Ways to Do Finance
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• My Best Investments Are Down The Street
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• Agenda for a New Economy available from the YES! Magazine web store.

Photo by Jun

Wikipedia defines a “confidence trick” as “an attempt to defraud a person or group by gaining their confidence. The victim is known as the mark, the trickster is called a confidence man, con man, confidence trickster, or con artist, and any accomplices are known as shills. Confidence men exploit human characteristics such as greed and dishonesty.”

Ever hear a business reporter on the evening business news say, “Today, investors drive up the price of commodities to create a hundred billion in new value,” or some such? Sounds great, almost implying we should offer thanks to these champions of the public good who are risking their fortunes to expand the pool of wealth to enrich us all. The reporter is manipulating the language to set us up as marks in the Wall Street con.

A more honest report might have said, “Today, hedge fund traders speculating with other people’s money walked away with multimillion dollar commissions for inflating the commodities bubble by a hundred billion dollars.” In a more honest world, the report would clearly distinguish between real investors creating real wealth through real investments and speculators creating phantom wealth with financial games. People who bet on the price of pieces of paper would be called “gamblers.” Those who hold the bets and distribute the winnings would be called “bookies.”

Boil it down to the basics and you see that Wall Street is in the business of operating four sophisticated, large-scale confidence games.

• Counterfeiting: Through financial bubbles and loan pyramids, it creates facsimiles of official money for private gain unrelated to anything of real value.

• Securities fraud: Selling shares in asset bubbles that are maintained solely by the constant inflow of new money is, in effect, a Ponzi scheme.
• Reverse insurance fraud: Insurance fraud, by common definition, occurs when the insured deceives the insurer. In reverse insurance fraud, the insurer deceives the insured. In Wall Street practice this involves collecting premiums to cover risks the insurer lacks adequate reserves to cover and then refusing to pay legitimate claims.
• Predatory lending: Using a combination of extortion, fraud, deceptive promises, and usury, predatory lenders lure the desperate into perpetual debt at exorbitant interest rates.

The Moral Underground: How Everyday Americans Subvert an Unfair Economy

All around you are everyday heroes who refuse to be complicit in the economic mistreatment of other people.

Because of Wall Street’s hold on lawmakers, these may all be perfectly legal, but phantom wealth is still phantom wealth, and these are all forms of theft. In three-card monte the dealer shuffles the cards so fast you can’t follow them, while talking even faster. Complex derivatives are a fast shuffle that makes it virtually impossible to follow the connection to any real value.

What makes the Wall Street con so much better for the dealers than a typical street con is that Wall Street dealers bet on their own game using other people’s money and then manipulate the market outcome in their own favor, rewarding themselves with huge bonuses when they win and taking billions in taxpayer bailouts when they lose.

Real financial reform would render unproductive speculation either illegal or unprofitable. Here are a few suggestions:

1. Prohibit selling, insuring, or borrowing against an asset not actually owned by the seller, and issuing any security not backed by a real asset—all common Wall Street practices.
2. Place strict limits on how much a financial institution can borrow against its equity and establish conservative reserve and capital requirements for institutions in the business of selling insurance of any kind.
3. Regulate bond-rating agencies and impose strict penalties for fraudulent ratings.
4. Impose a small financial-speculation tax of a penny on every $4 spent on the purchase and sale of financial instruments such as stocks, bonds, foreign currencies, and derivatives. This would have no consequential impact on real investors making long-term investments in real businesses and assets. But it would discourage short-term speculation and arbitraging.
5. End the obscure tax loophole that allows hedge fund managers to report their billion-dollar compensation packages as capital gains, taxed at only 15 percent.
6. Assess a 100 percent capital gains surcharge on profit from the sale of assets held less than an hour, 80 percent if held less than a week, and perhaps falling to 50 percent on assets held more than a week but less than six months. This would render most forms of speculation unprofitable, stabilize financial markets, and lengthen the investment horizon without penalizing real investors.
7. Eliminate debt slavery by raising the wages of working people and the taxes of the moneylenders.

Opponents will claim that such regulation and taxes will stifle financial innovation. Good. That is the intention. Wall Street’s financial innovations are mostly ever more sophisticated and deceptive forms of theft. They should be discouraged. Keep the casinos in Vegas. The need to rebuild financial institutions that meet our needs for basic financial services will be the subject of next week’s blog.

[Next: But What About My 401(k)?]

David Korten (livingeconomiesforum.org) is the author of Agenda for a New Economy, The Great Turning: From Empire to Earth Community, and the international best seller When Corporations Rule the World. He is board chair of YES! Magazine and co-chair of the New Economy Working Group. This Agenda for a New Economy blog series is co-sponsored by CSRwire.com and yesmagazine.org based on excerpts from Agenda for a New Economy, 2nd edition.

The ideas presented here are developed in greater detail in Agenda for a New Economy available from the YES! Magazine web store.

More from David Korten:

• 10 Common Sense Principles for a New Economy
  It's time we the people declare our independence from the money-favoring Wall Street economy.
  

• The End of Empire
  Wall Street's days are numbered. Ours need not be.
  

• Fix the Economy, Not Wall Street
  Why regulate a broken system when we can build a better one?
• Agenda for a New Economy available from the YES! Magazine web store.

Main Street in Northfield, Vermont. The state has banned billboards for more than 40 years.

Photo by Air Watcher

In a world rushing toward environmental and social collapse, there is no place for war, speculation, auto-dependent sprawl, toxic contamination, and wasteful consumption —activities that generate a major portion of current GDP. This massive misallocation of resources is an artifact of a mistaken belief that human prosperity is maximized by unrestrained global competition for resources, markets, and money to drive growth in the consumption of whatever goods and services generate the greatest private financial profit.

The living economy frame shifts the focus from making money to making a living. This simple shift in perspective shines a spotlight on the many ways we can simultaneously improve the quality of our lives while reducing our human burden on the biosphere. For example: 

• We can renounce war as an instrument of foreign policy and dismantle the military establishment;
• We can reorganize and retrofit our built spaces to roll back urban sprawl, reduce auto dependence, increase energy efficiency, strengthen community, and restore the natural beauty of place by reclaiming and restoring forests, agricultural lands, and wild spaces;
• We can eliminate the advertising pollution of public spaces and the promotion of compulsive consumption of harmful or wasteful products.

Unrealistic? Perhaps. But so is the assumption we humans can continue our current path of military conflict, sprawl, auto dependence, consumerism, and toxic pollution and still have a livable future.

Consider the possibilities for shifting resources from destructive to beneficial uses:

Real Security: The United States faces no credible conventional military threat from any nation. Our primary military threats are from a handful of terrorists armed with little more than a willingness to die for their cause. Yet we devote more than half of the federal government’s discretionary budget to the military, an amount roughly equal to the military expenditure of all the world’s governments combined.

Real Security
Climate change is teaching military leaders to rethink security.

Our most certain security threats come from human-induced climate chaos and the related food insecurity, economic dependence on oil, shortages of freshwater, extreme inequality and disintegration of the social fabric, catastrophic health care costs, and a predatory financial system.

Reducing our need to expropriate the resources of others to maintain our material extravagance will be a far more effective counter to terrorism than military occupation of countries like Iraq and Afghanistan. Rolling back our military commitment will free up real resources to address the real threats to our security. 

Healthy Communities: Sprawling low-density, auto-dependent exurbs populated with poorly insulated homes and unsightly strip malls consume prime agricultural and forest lands, reduce food security, increase infrastructure costs, reduce aquifer regeneration, increase dependence on foreign oil, generate pollution, and dehumanize us by isolating us from one another and from nature. We can reconfigure and retrofit our built environment to restore green spaces and create walkable, high density communities served by clean and efficient public transportation. This will eliminate the need for most private vehicles; recover land needed for agriculture, forests, and natural habitat; reduce commuting time; purify our air and water; minimize dependence on fossil fuels; and restore the relationships of community essential to human health and happiness.

Liberated Culture: Wall Street maintains its hold on our minds by the constant bombardment of our eyes and ears with paid messages crafted by communications professionals to manipulate our sense of who we are, what we value, and what gives us pleasure. The goal is to manipulate our minds to get us to buy products we don’t really want or need and to vote for politicians who serve interests other than our own.

The manufactured messages are so pervasive that it becomes difficult to know our real selves, our real values, and the real sources of our well-being and happiness. We end up devoting our lives to serving the corporate drive for ever expanding profits at the expense of democracy, happiness, our humanity, and the future of our children.

Market theory assumes that the business role is to respond to consumer preferences, not dictate them. Let’s give it a try in the living economy world.

10 Common Sense Principles for a New Economy

An advertising ban would raise complex free speech issues. There is nothing in the Constitution, however, that says expenditures on speech must be tax deductible. Let advertising expense beyond providing basic information on product availability and specifications come from after-tax revenues. I don’t get a tax deduction for exercising my free speech rights. Why should a corporation?

Far from imposing sacrifice, the transition from the Wall Street suicide economy to Main Street living economies can at once increase our security, health, and happiness while reducing advertising pollution and our burden on the biosphere. It will surely reduce the paychecks of Wall Street bankers and traders, but it is a major upside opportunity for the rest of us.

Next: [7 Ways to Stop Wall Street's Con Game]

David Korten (livingeconomiesforum.org) is the author of Agenda for a New Economy, TheGreat Turning: From Empire to Earth Community, and the international best seller When Corporations Rule the World. He is board chair of YES! Magazine and co-chair of the New Economy Working Group. This Agenda for a New Economy blog series is co-sponsored by CSRwire.com and YesMagazine.org based on excerpts from Agenda for a New Economy, 2nd edition.

The ideas presented here are developed in greater detail in Agenda for a New Economy available from theYES! Magazine web store — where there are 3 WAYS TO GET THE BOOK and a 22% discount!

Interested?

• Agenda for a New Economy available from the YES! Magazine web store.

More by David Korten:

•  The New Economy: Design for Life
  Can we design a self-correcting society?
  
• Living Economies: Learning from the Biosphere
  How we humans can redesign our failing systems by turning back to nature—and learning to live by the rules of life.
  
• Microcredit: The Good, the Bad, and the Ugly
  Unraveling the confusion behind microfinance: how some models help alleviate poverty, while others exploit the poor to make the rich richer.
  

Photo by Michael Aston

I’m sometimes called an economist because I write and speak about economic issues. The discipline for which I received my academic training, however, is organizational systems design. I view the economy through an institutional design lens.

As a Harvard Business School professor in the early 1970s, I taught the art of structuring human relationships in corporations to maximize profit. Partly, that involves getting the incentives right; it also involves culture, authority, communication flows, and a host of other influences subject to management intervention.

The same intellectual tools can be used to design the institutional structures of societies—either to consolidate the power and privilege of the ruling elites or to share power and facilitate creative, democratic self-organization directed to enhancing a community’s well-being. Institutional systems can also be designed to maximize the rate of consumption of real wealth to create phantom wealth, or to meet the needs of all in balanced relationship with the biosphere.

A focus on designing economic systems to maximize private financial return has given us the Wall Street dominated system that drives a violent competition for resources; a global race to the bottom on wages, benefits, environmental standards; flagrant excesses for the few, misery for the many; and insecurity for all.

Worst of all, this system has no built in capacity to self-correct. Its decision makers are insulated from the social and environmental consequences of their decisions. Concerns for unemployment, family and community breakdown, collapsing fisheries, and melting glaciers find no place in their decisions. Indeed, the system rewards the decision makers most generously when their actions inflate financial bubbles and thereby assure eventual system collapse. In A Short History of Financial Euphoria, Keynesian economist John Kenneth Galbraith documents this pattern playing out in finance capitalism’s repeated cycles of boom and bust over a period of more then 360 years.

Our design goal for the New Economy is a system that will self-organize toward:

• Earth Balance between aggregate human consumption and the regenerative capacity of Earth’s biosphere. Achieving Earth Balance will require restoring our sense of place, reducing aggregate material consumption by eliminating wasteful and destructive resource use, and investing in restoration of healthy ecosystem function.
• Shared Prosperity through the equitable distribution of real wealth and opportunity to secure for everyone access to the essential means for healthy and fulfilling lives. Achieving shared prosperity will require recognition that no individual is born with a natural right to a greater share of the common heritage wealth of society or nature than any other and that more equal societies enjoy greater physical and emotional health, stronger families and communities, less violence, and healthier natural environments.
• Living Democracy through the active and equitable engagement of every person in making the political and economic decisions that bear on their health and happiness. It manifests the ultimate ideal of popular sovereignty—government of the people, by the people, for the people—and is built on the caring relationships of family and community. Its realization depends on acceptance of the moral responsibility of every individual to act with regard to the needs and well-being of others.

As we restructure our human economies to support these conditions, they will increasingly mimic and integrate with the biosphere’s natural structures and processes.

Like the biosphere, the living economies we seek will self-organize within a framework of market rules. Rooted locally everywhere and dependent primarily on their own resource base, they will have built in incentives to optimize creative adaptation to local microenvironments. With the decision-making powers of ownership distributed among the community’s members in their multiple roles as producers, consumers, and citizens there will be a natural incentive to internalize costs and manage resources responsibly.

What Do the Healthiest, Happiest Societies Have in Common?
It's not more stuff, but more equality, says epidemiologist Richard Wilkinson.

The culture of a living economy recognizes the mutual responsibility of individuals to meet their own needs in ways that contribute to the well-being of the whole and thereby optimize their own well-being. Business enterprises are expected to do the same. Making a profit is recognized as essential to the health of the enterprise, but is not its sole or primary purpose.

These outcomes are wholly beyond the reach of an economic system in which the locus of power resides in global financial institutions that recognize only financial values and seek only individual financial gain.

They depend on complex processes of self-organizing adaptation that are possible only within place-based caring communities built around institutions that nurture and reward adult responsibility and link decisions to consequences. It is fundamentally a question of life-values and shared power, both of which are long standing human ideals that we now have both the imperative and means to put into practice.

[Next: Making a Living]

David Korten (livingeconomiesforum.org) is the author of Agenda for a New Economy, TheGreat Turning: From Empire to Earth Community, and the international best seller When Corporations Rule the World. He is board chair of YES! Magazine and co-chair of the New Economy Working Group. This Agenda for a New Economy blog series is co-sponsored by CSRwire.com and YesMagazine.org based on excerpts from Agenda for a New Economy, 2nd edition.

The ideas presented here are developed in greater detail in Agenda for a New Economy available from theYES! Magazine web store — where there are 3 WAYS TO GET THE BOOK and a 22% discount!

Interested?

• Agenda for a New Economy available from the YES! Magazine web store.

More by David Korten:

Photo by ippei naoi.

My favorite definition of life comes from evolutionary biologist Lynn Margulies: “Life is matter with the capacity to choose.”

The intricate self-organizing structure of Earth’s biosphere is the product of life’s extraordinary 3.5 billion year evolutionary quest to explore and expand the possibilities of its capacity to choose. The result is a complex and highly sophisticated fractal structure of nested, self-reliant, progressively smaller-scale ecosystems, each exquisitely adapted to its particular place on Earth to optimize the capture of energy to sustain matter in a living choice-making state.

To this end, trillions upon trillions of cells, organisms, and communities of organisms engage in an exquisite continuing dance of cooperative exchange. Each participant in this dance maintains its own identity and vitality while contributing to the needs of its neighbors and to the balance, stability, and resilience of the whole.

We humans, with our extraordinary capacity for choice, are a product of this wondrous process. In our species' immaturity, however, our dominant cultures have forgotten that our individual and collective well-being depends on the well-being of the whole. We must now step to a new level of species maturity, redesign the culture and institutions of our economic system to mimic the structure and dynamics of the biosphere, and learn to live by life’s rules. It is an epic test of our human capacity for learning, creative innovation, self-organization, and individual and collective choice. 

The following are three defining characteristics of the living systems our human economies must emulate.

1. Cooperative Self-Organization: Ecosystems have no central control structure. Their health and vitality depend on processes of cooperative self-organization in which each species learns to meet its own needs in ways that simultaneously serve the needs of others. The more diverse and cooperative the bio-community, the greater its capacity to innovate and the greater its resilience in the face of crisis.
   
2. Self-Reliant Local Adaptation: The biosphere’s cooperatively self-organizing fractal structure supports a constant process of adaptation to the intricate features of Earth’s distinctive local microenvironments to optimize the capture, sharing, use, and storage of available energy. Local self-reliance is a key to the system’s ability to absorb and contain most system disturbance locally with minimum overall system disruption. So long as each local subsystem balances its consumption and reproduction with local resource availability, the biosphere remains healthy and dynamic.
   
3. Managed Boundaries: Because of the way life manages energy, each living entity must maintain an active flow of energy within itself and in continuous exchange with its neighbors. Life requires permeable managed membranes at every level of organization—the cell, the organ, the multi-celled organism, and the multi-species ecosystem—to manage these flows and as a defense against parasitic predators.
   
   If the membrane of the cell or organism is breached, the continuously flowing embodied energy that sustains its living internal structures dissipates into the surrounding environment, and it dies. It also dies, however, if the membrane becomes impermeable, thus isolating the entity and cutting off its needed energy exchange with its neighbors. Managed boundaries are not only essential to life’s good health; they are essential to its very existence.

A New Deal for Local Economies
More local, durable economies are already taking root. How can we can help them along?

These are foundational design principles for the cooperative, self-organizing, self-reliant adaptive living economies on which our human future depends. The institutional structures of living economies facilitate joyful non-monetized exchanges of life energy based on relationships of trust and caring—the social capital of vital cohesive living communities.

Reorganizing our human economies to function as locally self-reliant subsystems of our local ecosystems will require segmenting the borderless global economy into a planetary system of interlinked self-reliant regional economies. This does not mean shutting out the world. Vital living economies exchange their surplus goods for the surplus goods of their neighbors and freely share ideas, technology, and culture in a spirit of mutual respect for the needs and values of all players.

In a living economy, the rights and interests of living communities of living, breathing people engaged in a living exchange with the natural systems of their bioregion properly take priority over the presumed rights of artificial corporate entities that value life only as a marketable commodity and operate by the moral code of a malignant cancer. Protecting the boundaries of the community from intrusion by predatory corporations is an essential function of any responsible government.

We humans are the most advanced expression of life’s capacity to choose. We must now demonstrate our ability to use that capacity wisely.

[Next: Design for Life]

David Korten (livingeconomiesforum.org) is the author of Agenda for a New Economy, TheGreat Turning: From Empire to Earth Community, and the international best seller When Corporations Rule the World. He is board chair of YES! Magazine and co-chair of the New Economy Working Group. This Agenda for a New Economy blog series is co-sponsored by CSRwire.com and YesMagazine.org based on excerpts from Agenda for a New Economy, 2nd edition.

The ideas presented here are developed in greater detail in Agenda for a New Economy available from theYES! Magazine web store — where there are 3 WAYS TO GET THE BOOK and a 22% discount!

Interested?

• Agenda for a New Economy available from the YES! Magazine web store.

More by David Korten:

Image by Aaron D. Feen.

In 1992, I participated in the civil society portion of the Earth Summit in Rio de Janeiro, Brazil. It involved some fifteen thousand people representing the vast variety of humanity’s races, religions, nationalities, and languages. It was, at the time, the largest and most diverse global gathering in human history. Our discussions centered on defining, and committing ourselves to, the vision of the world we would create together.

These discussions were chaotic and often contentious. But at one point it hit me like a bolt of lightning. Despite our differences, we all wanted the same things: healthy, happy children, families, and communities living in peace and cooperation in healthy natural environments. Out of our conversations emerged an articulation of our shared dream of a world in which people and nature live in dynamic, creative, cooperative, and balanced relationships. The Earth Charter, which is the product of a continuation of this discussion, calls it Earth Community, a community of life.

I’ve lived in a lot of places with starkly different cultures: Ethiopia, Nicaragua, Indonesia, the Philippines, California, Massachusetts, Florida, Virginia, New York City, and Bainbridge Island in Puget Sound. Surprise! Look beneath the colorful differences in cultural expression and you find at the core everyone wants to breathe clean air and drink clean water. They want tasty, nutritious food uncontaminated with toxins. They want meaningful work, a living wage, success and happiness for their children, and security in their old age. They want a say in the decisions their governments make and they want to live in peace.

Rabbi Michael Lerner, the editor of Tikkun magazine, observes that:

The great spiritual-religious wisdom traditions of the world have all taugh some variant of this message: The deepest human pleasures come from living in a world based on justice, peace, love, generosity, kindness, and celebration of the universe and service to the ultimate moral law of the universe (whether learned through revelation or through reason).

For 5,000 years we have continuously recreated a world that appeals only to the psychologically deranged.

Beyond our varied races, religions, nationalities, and languages, we humans share a collective dream of a world of healthy, happy children, families, communities, and natural environments joined in peace and cooperation. These are all forms of real wealth that are not available for purchase or sale and have no monetary equivalent. These are our primary sources of true happiness.

We have been trapped in Empire’s pernicious rule-or-be-ruled, kill-or-be-killed, play-or-die dynamic by geographic and cultural barriers that have kept us divided and unable to embrace our true nature and common interest. The possibility to liberate ourselves from this self-inflicted tragedy is within our grasp.

The communication technologies of the Internet in place for little more than 20 years create a potential for collective dialogue, organizing, and action never before available. We now have the means, as well as the need and the right, to bridge the geographic and cultural barriers that have for so long divided us, recognize our common yearning, and bring forth cultures and institutions that cultivate and reward our higher nature.

Do we have the will? I believe we do. It is being expressed by growing millions of people working largely outside the institutions of Empire.

What is Real Wealth?
We've been measuring happiness in all the wrong ways. How can we find true quality of life?

Yet economists prefer to assess economic performance by growth in gross domestic product (GDP), a measure of the market value of economic output. The GDP can be rising in the face of simultaneous epidemics of child obesity and starvation. It can be rising in the face of disintegrating families and a vanishing middle class, increasing prison populations, rising unemployment, the disruption of community, collapsing environmental systems, the hollowing out of domestic manufacturing capabilities, failing schools, growing trade deficits, and costly but senseless foreign wars.

And all the while, economists tell us we are getting richer. Such nonsense.

Consider how differently we might organize our human economies if we measured economic performance by indicators of the outcomes we truly seek—the sources of true happiness.

It is a stunning and hopeful truth. The world we must now create if there is to be a human future is also the world of our common dream. The barriers are self-inflicted. They include the fabricated belief that we are by nature incapable of cooperating in the common good and the use of flawed measures of economic and social performance.

So let us recognize and cultivate the potentials of our true nature and henceforth assess the performance of our economies against the outcomes we truly seek.

[Next: Learning from the Biosphere]

David Korten (livingeconomiesforum.org) is the author of Agenda for a New Economy, TheGreat Turning: From Empire to Earth Community, and the international best seller When Corporations Rule the World. He is board chair of YES! Magazine and co-chair of the New Economy Working Group. This Agenda for a New Economy blog series is co-sponsored by CSRwire.com and YesMagazine.org based on excerpts from Agenda for a New Economy, 2nd edition.

The ideas presented here are developed in greater detail in Agenda for a New Economy available from theYES! Magazine web store — where there are 3 WAYS TO GET THE BOOK and a 22% discount!

Interested?

• Agenda for a New Economy available from the YES! Magazine web store.

More by David Korten:

Photo by Knight725.

The successful function of mature democracies, caring communities, and living economies requires caring, mature, and responsible citizens who care not only for their own well-being, but as well for that of their neighbor. Given the experience of human history, many will ask with good reason whether this might be contrary to human nature.

We humans are complex beings with many possibilities. Empire has demonstrated our capacity for extremes of individualistic greed, hubris, deceit, ruthless competition, and material excess. Yet most people daily demonstrate our human capacity for caring, sharing, peacemaking, and service.

The former are the possibilities of our lower nature; the latter, the possibilities of our higher nature. Contrary to what morally challenged market fundamentalists would have us believe, both are within our means. What in fact makes us distinctively human is our capacity to choose which of our many possibilities will define us as individuals and societies.

We humans have a complex three-part brain. At the base is our “reptilian” brain.

It coordinates basic functions, such as breathing, hunting and eating, reproducing, protecting territory, and engaging the fight-or-flight response. These functions are essential to survival and they are part of our nature. The are not, however, characteristic of our human nature, but rather of our reptilian nature—defined by the most primitive and least-evolved part of our brain.

Layered on top of the reptilian brain is the limbic or “mammalian” brain, the center of the emotional intelligence that gives mammals their distinctive capacity to experience emotion, read the emotional state of other mammals, bond socially, care for their children, and form cooperative communities.

The third and, in adult humans, largest layer is the neocortical brain, the center of our capacity for cognitive reasoning, symbolic thought, awareness, and highly developed self-aware volition. The neocortical brain is the source of our capacity for choice, including our capacity for moral choice, and our capacity to decide whether to create an economy that celebrates and rewards our reptilian nature or our distinctively human nature.

Most of the development of the limbic and neocortical brains essential to actualizing the capacities that make us most distinctively human occurs after birth and depends on lifelong learning acquired through our interactions with family, community, and nature. Developmental psychologists describe the healthy pathway to a fully formed human consciousness as a progression from the self-centered, undifferentiated magical consciousness of the newborn to the fully mature, inclusive, and multidimensional spiritual consciousness of the wise elder.

Scientists who use advanced imaging technology to study brain function confirm that the mature human brain is wired for caring, cooperation, and service. Their studies reveal that merely thinking about another person experiencing harm triggers the same reaction in a mentally healthy adult brain as that of a mother who sees distress on her baby’s face.

Conversely, engaging in an act of cooperation and generosity triggers the brain’s pleasure center to release the same hormone that’s released when we eat chocolate or engage in good sex. In addition to producing a sense of bliss, this hormone benefits our health by boosting our immune system, reducing our heart rate, and preparing us to approach and soothe.

Want the Good Life? Your Neighbors Need It, Too: An interview with epidemiologist Richard Wilkinson, whose research shows that what the healthiest and happiest societies have in common is not that they have more, but that what they have is more equitably shared.

Positive emotions like compassion produce similar benefits. Negative emotions, by contrast, suppress our immune system, increase our heart rate, and shift us into reptilian mode prepared to fight or flee.

It is entirely logical that we humans have an instinctual desire to cooperate and protect the group. We are helpless as infants and even as adults are individually weak. As a group, however, we are the strongest of Earth’s living creatures. This in turn creates a moral obligation to use this power responsibly for the good of the whole. These findings are further confirmed by the pleasure that most of us experience being a member of an effective team or extending an uncompensated helping hand to another being.

Behaviors driven by our lower, more narcissistic, orders of consciousness are perfectly normal for young children, but they become sociopathic in adults and are easily manipulated by advertisers, propagandists, and political demagogues. Tragically, persons who have been thwarted on the path to maturity are those most likely to engage in the ruthless competition for positions of unaccountable power—and to abuse that power when they succeed.

Just as we have chosen to create economies that reward and celebrate the sociopathic greed and ruthless competition of our reptilian nature, we can and must now create economies that nurture and reward the caring, sharing, peacemaking, and service of our distinctively human nature.

[Next: The World of Our Dreams]

David Korten (livingeconomiesforum.org) is the author of Agenda for a New Economy, TheGreat Turning: From Empire to Earth Community, and the international best seller When Corporations Rule the World. He is board chair of YES! Magazine and co-chair of the New Economy Working Group. This Agenda for a New Economy blog series is co-sponsored byCSRwire.com and YesMagazine.org based on excerpts from Agenda for a New Economy, 2nd edition.

The ideas presented here are developed in greater detail in Agenda for a New Economy available from theYES! Magazine web store — where there are 3 WAYS TO GET THE BOOK and a 22% discount!

Interested?

•   Agenda for a New Economy available from the YES! Magazine web store.

More by David Korten:

Photo by Goldemberg Fonseca de Almeida.

We humans are living out an epic morality play. For millennia humanity’s most celebrated spiritual teachers have taught that society works best and we all enjoy our greatest joy and fulfillment when we share, cooperate, and are honest in our dealings with one another.

But for the past few decades, this truth has been aggressively challenged by a faith called market fundamentalism—an immoral and counter-factual economic ideology that has assumed the status of a modern state religion. Its believers worship the God of money. Stock exchanges and global banks are their temples. They proclaim that everyone does best when we each seek to maximize our individual financial gain without regard to the consequences for others.

In the eyes of a market fundamentalist, to sacrifice profit for some presumed social or environmental good is immoral. The result is a public culture that proclaims greed is a virtue and sharing is a sin.

Having established control of the institutions of the economy, media, education, government, and even religion, market fundamentalists initiated a global social experiment to test their theory. The results are now in.

The prophets of the older faith traditions were right. Our common future depends on rediscovering their truth and redefining our public culture and governing institutions accordingly.

The following are some of the more visible elements of Wall Street’s global campaign of moral perversion.

• It uses control of media outlets, advertising, and politicians to shape and spread a global culture of individualistic greed, material self-indulgence, ruthless competition, and moral irresponsibility.
• Through the pursuit and celebration of financial gain at any cost, it provides role models for immoral behavior.
• It undermines democracy and the legitimacy of government by buying politicians to do its bidding.
• It uses student loan programs to get the best and brightest youth mired in debts they can repay only by selling themselves to jobs that serve Wall Street interests.
• It buys up and monopolizes control of the world’s land and water resources in anticipation of extracting monopoly profits by charging what the market will bear as scarcity increases.
• It uses its financial power and creative accounting skills to manipulate markets and obscure market signals, as when helping governments hide their debt or helping corporate CEOs hide their insider bets against the future of their own companies.
• It buys the deeply discounted debt obligations of hapless underwater homeowners and countries on the open market and then demands full value payment from governments or philanthropists who step in to lend a helping hand to the afflicted.
• It puts in place global rules requiring that if a government introduces regulations that prevent a foreign corporation from harming or killing people with its toxic products or discharges, the country’s government must compensate the corporation for the profits it estimates it will lose.

By capitalism’s perverse moral logic, if a person sells toxic assets by knowingly misrepresenting them as sound, the fault lies not with the misrepresentation of the seller, but rather with the lack of due diligence on the part of the overly trusting borrower. When the assets prove worthless and threaten both the solvency of both the seller and the borrower, the logic says the party responsible for the misrepresentation has a moral obligation to demand redress from the government, “Buy my toxic assets at face value and make me whole so that I return to my trade in toxic assets, or I will be forced to stop lending and crash the economy.”

7 Steps for Action
Toward a New Economy
Rather than turning again to increased global competition to mend our failing economy, we must instead steer our focus toward cooperation and equality.

Step back to take in the big picture, and it turns out Wall Street market fundamentalists have proclaimed the seven deadly sins of pride, greed, envy, anger, lust, gluttony, and sloth to be virtues. In turn they have proclaimed the seven life-serving virtues of humility, sharing, love, compassion, self-control, moderation, and passion to be sins against the market.

There is a widespread sense that with Wall Street’s apparent recovery, the window of opportunity for serious structural change has passed. Such a judgment, however, is premature. Far from closing, the window of opportunity for serious change continues to widen as public awareness of Wall Street corruption grows and true and appropriate moral outrage builds.

Most psychologically healthy adults recognize in their heart of hearts the moral perversion of the old economy, but may fear to speak up because so many experts—including even some religious leaders—continuously assure us in so many words that greed is good, even that God wants us to be financially rich and financial wealth is a mark of God’s favor.

If all who share a mature moral consciousness find the courage to speak the simple truth that greed is driving us to collective self-destruction and cooperation is essential to our common salvation, we can put the perversion behind us and secure the future of our children.

[Next: Our Human Nature]

David Korten (livingeconomiesforum.org) is the author of Agenda for a New Economy, The Great Turning: From Empire to Earth Community, and the international best seller When Corporations Rule the World. He is board chair of YES! Magazine and co-chair of the New Economy Working Group. This Agenda for a New Economy blog series is co-sponsored by CSRwire.com and YesMagazine.org based on excerpts from Agenda for a New Economy, 2nd edition.

The ideas presented here are developed in greater detail in Agenda for a New Economy available from the YES! Magazine web store — where there are 3 WAYS TO GET THE BOOK and a 22% discount!

Interested?

•   Agenda for a New Economy available from the YES! Magazine web store.

More by David Korten:

• Fix the Economy, Not Wall Street
  Would-be Wall Street regulators aren't asking the right question: How do we create a financial services sector that directs money where it is actually needed?
• Clueless Economists, Smart Ecologists
  David Korten: To successfully address climate change and extreme poverty, the ecology paradigm must replace the traditional economics mindset.
• David Korten: My Defection Story
  How I came to challenge the legitimacy of the institutions I once served.
  

The George Washington statue outside the New York Stock Exchange.

Photo by Mikael Tjemsland.

In an earlier day, our rulers were kings and emperors. Now they are corporate CEOs and hedge fund managers. Wall Street is Empire’s most recent stage. Its reign will mark the end of the tragic drama of a 5,000 year Era of Empire.

Imperial historians would have us believe that civilization, history, and human progress began with the consolidation of dominator power in the first great empires that emerged some 5,000 years ago. Much is made of their glorious accomplishments and heroic battles.

Rather less is said about the brutalization of the slaves who built the great monuments, the racism, the suppression of women, the conversion of free farmers into serfs or landless laborers, the carnage of the battles, the hopes and lives destroyed by wave after wave of invasion, the pillage and gratuitous devastation of the vanquished, and the lost creative potential.

Nor is there mention that most all the advances that make us truly human came before the Era of Empire—including the domestication of plants and animals, food storage, and the arts of dance, pottery, basket making, textile weaving, leather crafting, metallurgy, architecture, town planning, boat building, highway construction, and oral literature.

On the Origins of Corporations
How the buccaneers and privateers of days past came to be the Wall Street profiteers of the present.

As the institutions of Empire took root, humans turned from a reverence for the generative power of life to a reverence for hierarchy and the power of the sword. The wisdom of the elder and the priestess gave way to the arbitrary rule of often ruthless kings. Social pathology became the norm and society’s creative energy focused on perfecting the instruments of war and domination. Priority in the use of available resources went to military, prisons, palaces, temples, and patronage.

Great civilizations were built and then swept away in successive waves of violence and destruction. War, trade, and debt served as weapons of the few to expropriate the means of livelihood of the many and reduce them to slavery or serfdom. Whole empires were subjected to the delusional hubris and debaucheries of psychopathic rulers.

If much of this sounds familiar, it is because in the face of the democratic challenge, the dominator cultures and institutions of Empire simply morphed into new forms.

The ideals of the American Revolution heralded the possibilities of a new era of equality and popular democratic rule, but it was a more modest beginning than we have been taught to believe. Once the former colonies gained their freedom from British rule and declared themselves the United States of America, their new leaders put aside the pronouncement of the Declaration of Independence that all men are created equal and enjoy a natural right to life, liberty, and the pursuit of happiness—and set about securing their own power. 

The king was gone, but the Constitution they drafted with a promise to “secure the Blessings of Liberty” for “We the People of the United States” effectively limited political participation to white male property owners and secured the return of escaped slaves to their designated owners. Colonial expansion followed soon after as the new nation expropriated by armed force all of the Native and Mexican lands between themselves and the distant Pacific Ocean.

Global expansion beyond U.S. territorial borders followed. The United States converted cooperative dictatorships into client states by giving their ruling classes a choice between aligning themselves with U.S. economic and political interests for a share in the booty or being eliminated by assassination, foreign-financed internal rebellion, or military invasion. Following World War II, when the classic forms of colonial rule became unacceptable, international debt became a favored instrument for forcing poorer nations to open to foreign corporate ownership and control. 

We're Number One!
America is number one in quite a few areas—but they're not all accomplishments to be proud of.

Most of the economic, social, and environmental pathologies of our time—including sexism, racism, economic injustice, violence, and environmental destruction—originate in the institutions of Empire. The resulting exploitation has reached the limits that the social fabric and Earth’s natural systems will endure.

As powerful as Wall Street appears to be, its abuse of power has so eroded the economic, social, and environmental foundations of its own existence that its fate is sealed. We the People have a choice. We can allow Wall Street to maintain its grip until it brings down the whole of human civilization in irrevocable social and environmental collapse. Or we can take control of our future and replace the Wall Street economy with the values and institutions of a New Economy comprised of locally owned businesses devoted to serving their communities by investing in the use of local resources to produce real goods and services responsive to local needs.

Either way, Wall Street’s days are numbered. Ours need not be.

[Next: Greed is Not a Virtue]

David Korten (livingeconomiesforum.org) is the author of Agenda for a New Economy, The Great Turning: From Empire to Earth Community, and the international best seller When Corporations Rule the World. He is board chair of YES! Magazine and co-chair of the New Economy Working Group. This Agenda for a New Economy blog series is co-sponsored by CSRwire.com and YesMagazine.org based on excerpts from Agenda for a New Economy, 2nd edition.

The ideas presented here are developed in greater detail in Agenda for a New Economy available from the YES! Magazine web store — where there are 3 WAYS TO GET THE BOOK and a 22% discount!

Interested?

•   Agenda for a New Economy available from the YES! Magazine web store.

More by David Korten:

• Fix the Economy, Not Wall Street
  Would-be Wall Street regulators aren't asking the right question: How do we create a financial services sector that directs money where it is actually needed?
• A System Designed to Crash
  David Korten on why a money system dependent on constant growth can't last.
• War Against the Middle Class
  

  David Korten: Why is the middle class shrinking?

Photo by Nick Ares.

The unrealistic expectation that money should grow effortlessly in perpetuity [see my last blog] is more than an issue of unrealizable expectations. It combines with a Wall Street controlled debt-based money system to create an imperative for the economy to grow the profits of bankers, and thereby the richest among us, to keep the financial system, and thereby the economy, from collapsing.

It is odd that we experienced a financial collapse in 2008 because of a credit crunch, a shutdown on lending, at a time when the world was already awash in money. BusinessWeek’s July 11, 2005, cover story shouted “Too Much Money” and spoke of a savings glut. Its June 11, 2008, European issue reiterated the theme: “Too Much Money, Inflation Goes Global.”

Most discussion of the financial crisis focuses on the details and misses the big picture. First, much of the money was tied up in the Wall Street casino rather than facilitating productive activity in the real economy and was simply pumping up a phantom wealth bubble. Second, virtually every dollar in the system was borrowed, because in our money system, banks create money by lending it into existence. When this debt is used to inflate financial bubbles and support Ponzi schemes, eventual default is inevitable. 

Third, Wall Street and the Federal Reserve are joined in an alliance to keep “wage inflation” below the level of growth in the real cost of living. This assures that the benefits of productivity gains all go to owners rather than being shared with workers. It also keeps inflation confined to financial bubbles that inflate the phantom wealth financial assets of the rich.

Furthermore, it forces the bottom 90 percent of the population—the people who make their living by producing real goods and services—into debt at usurious interest rates to the top 10 percent to cover daily basic daily expenses. Inevitably, the amounts owed exceed the borrower’s ability to repay. The lenders then stop lending and foreclose on the assets of the desperate borrowers.

When a loan is repaid or goes into default, the debt is canceled and the money supply shrinks by that amount. Most loans continue to be repaid, but if new loans are not being issued, the demand for real goods and services falls because people don’t have the money to pay for them. As demand falls, businesses lay off workers, who then join those pushed into default.

The problem appears to be a lack of money, even though the total money in circulation is far more than enough to cover real-wealth exchanges in a rational real-wealth economy. The money, however, is locked up in the Wall Street casino economy rather than circulating in the real Main Street economy. Pouring public bailout money into Wall Street serves only to reflate the bubble. It does nothing to revive the real economy.

The demand by Wall Street for the eventual repayment with interest of nearly every dollar in circulation means that to avoid collapse, the economy has to grow to generate demand for new borrowing to put new money into circulation to pay the interest due to bankers on already outstanding loans. This demand for perpetual growth simply to keep the bankers solvent results in a serious distortion of society’s economic priorities.

Rather than maximizing real well-being, policy makers are compelled to focus on avoiding economic collapse by growing the money economy. A debt-based money system can make sense when the credit funds real investment. When the credit funds current consumption and phantom wealth speculation, the result is ever-increasing debt, inequality, destruction of the natural environment, erosion of the social fabric, and ultimate default.

7 Steps for Action Toward a New Economy

For too long, we have put up with a money system designed to grow the financial assets of rich people at the expense of assuring continuing cycles of economic boom and bust, confining billions to lives of desperation, and reducing Earth to a toxic waste dump. We can do better.

Growth in GDP creates the illusion that we are getting richer, even as we accelerate our material, social, and spiritual self-impoverishment as a species. Fortunately for our common future, people everywhere are waking up to the reality and challenging conventional economic wisdom. They are focusing their attention on rebuilding their communities and local economies to improve human security, health, and happiness without regard to how this impacts GDP, corporate share prices or other bogus indicators of economic well-being. It is an important beginning.

An obvious next step is to replace GDP and other financial indicators with indicators of the health of our children, families, communities, and natural systems as the basis for assessing the economy’s performance. We may then notice that destroying living wealth to create financial wealth is an act of collective suicidal insanity and begin treating money as a useful tool for managing our economic choices rather than as the end to be maximized.

[Next: The End of Empire]

David Korten (livingeconomiesforum.org) is the author of Agenda for a New Economy, The Great Turning: From Empire to Earth Community, and the international best seller When Corporations Rule the World. He is board chair of YES! Magazine and co-chair of the New Economy Working Group. This Agenda for a New Economy blog series is co-sponsored by CSRwire.com and YesMagazine.org based on excerpts from Agenda for a New Economy, 2nd edition.

The ideas presented here are developed in greater detail in Agenda for a New Economy available from the YES! Magazine web store — where there are 3 WAYS TO GET THE BOOK and a 22% discount!

Interested?

•   Agenda for a New Economy available from the YES! Magazine web store.

More by David Korten:

• Phantom Wealth and False Expectations
  It's time we stop expecting money to grow on Wall Street—and start putting people to work creating real wealth to meet real needs.
• Clueless Economists, Smart Ecologists
  To successfully address climate change and extreme poverty, the ecology paradigm must replace the traditional economics mindset.
  
• War Against the Middle Class
  Why is the middle class shrinking?

David Korten: These days, we seem to expect whatever money we don’t immediately spend to grow in perpetuity without effort.

Photo by Keith Ramsey.

It is a curious thing. Unless we stuff it in a mattress, we expect whatever money we don’t immediately spend to grow in perpetuity without effort. We do not expect the same of real wealth. Buildings must be maintained. Machinery must be replaced. Knowledge must be updated. The trust and caring of a community must be continuously renewed. Skills must be practiced. Even wild spaces must be protected from predators, particularly human ones. All of these require a real investment of our time and life energy.

Only phantom financial assets, the product of financial bubbles and fancy accounting tricks unrelated to the production of anything of real use, can grow effortlessly and perpetually—producing phantom expectations that, in the aggregate, can never be fulfilled.

Financial planner Thornton Parker has pointed out phantom wealth expectations are likely to be an issue for baby boomers who built up financial assets during the stock market boom in anticipation of a comfortable retirement. Just as their collective decision to put money into the stock market during their working years helped inflate share prices, so their collective decision to take it out during their retirement deflates those prices, leaving them in potentially desperate straits.

The problem is not confined to retirement accounts. It applies as well to the endowments of foundations, universities and other nonprofits. It applies to the public trust funds of libraries and municipalities, college savings funds, the reserve accounts of insurance companies, personal trust funds and much else.

Wall Street’s phantom-wealth machine has created phantom expectations far in excess of the real wealth available to satisfy them.

Financial figures that get thrown around in relation to the credit crash and financial bailout of 2008 defy both reality and imagination. The financial assets of the richest one percent of Americans before the crash totaled $16.8 trillion, representing what they understood to be their rightful claim against the world’s real wealth. To put that in perspective, the estimated 2007 U.S. gross domestic product was $13.8 trillion and the total federal government expenditures that same year were only $2.7 trillion.

System Failure? Look Upstream
Why it's important to address our economic problems at their Wall Street roots.

Clearly the $16 trillion worth of financial assets that evaporated globally between mid-September and end of November 2008 as the market value of the world’s publicly traded corporations’ share prices fell by 37 percent was phantom wealth—and that was only in publicly traded stock shares. Much of that phantom wealth has since been restored by a stock market recovery, without a corresponding recovery of jobs that put people to work producing real goods and services.

Welcome to the Alice in Wonderland world of phantom expectations.

It isn’t necessary to know the details of Wall Street’s esoteric inner workings to recognize we are dealing with a system that is delinked from reality and operating with no one at the helm.

Nor does it take special genius to recognize when folks are moving around trillions of dollars in secret transactions to generate billion dollar bonuses for themselves and cannot explain in a credible way where the money is coming from or where it’s going, and cannot make a credible case it is serving a beneficial purpose, they are probably up to no good.

Beyond the more visible economic, social, and environmental consequences of Wall Street excess, it has also destroyed the integrity of the money system and created expectations that society has no means to fulfill. No one is even asking how the inevitable loss of unfulfillable expectations might be fairly distributed. A given dollar doesn’t come with a marker that tells us whether it was earned through productive labor or is a product of financial manipulation and accounting tricks.

When the Fed creates money with a wave of an accountant’s magic pen, it is creating phantom financial assets. This can be sound policy if the phantom financial assets put unemployed people to work creating real wealth by producing real goods and services of real value. If the Fed’s pen is used simply to re-inflate financial bubbles or keep Ponzi schemes afloat, it is simply playing accounting games to hide the real problem and delay the inevitable reckoning.

The sooner we realize the real nature of the problem, seek an orderly resolution of the unrealizable phantom wealth claims and give priority to directing money to where it will put people to work creating real wealth to meet real needs, the greater our hope for a viable future.

[Next: A System Designed to Crash]

David Korten (livingeconomiesforum.org) is the author of Agenda for a New Economy, The Great Turning: From Empire to Earth Community, and the international best seller When Corporations Rule the World. He is board chair of YES! Magazine and co-chair of the New Economy Working Group. This Agenda for a New Economy blog series is co-sponsored by CSRwire.com and YesMagazine.org based on excerpts from Agenda for a New Economy, 2nd edition.

The ideas presented here are developed in greater detail in Agenda for a New Economy available from the YES! Magazine web store — where there are 3 WAYS TO GET THE BOOK and a 22% discount!

Interested?

•   Agenda for a New Economy available from the YES! Magazine web store.

More by David Korten:

• War Against the Middle Class
  Why is the middle class shrinking?
  
• Jobs, Not Handouts
  Wall Street's plunge shows what's wrong with phantom wealth. Why support that system when we could be creating jobs in the real economy?
• The Illusion of Money
  Real wealth or phantom assets? David Korten explores the difference between the kind of wealth that makes life better and the phantom wealth created by financial speculation.