Protesters in Seattle during the 1999 WTO protests that subsequently inspired massive protests wherever corporate elites met with national political leaders and bureaucrats to negotiate away the people’s rights and interests.

Photo by Chris Blakely

Through word and deed, the early American colonists who refused to accept the authority of a distant British monarch and his rapacious chartered corporations created a political imperative. Ultimately the formal political leaders we now call the founding fathers were forced to issue a Declaration of Independence and raise an army or risk being swept aside. The people led; the leaders followed.

The idea of ordinary citizens leading the way to liberate the United States and the world from the grip of the Wall Street–Washington axis might seem a naïve fantasy. We, however, live in a unique historical time in which seemingly impossible transformations of unjust and deeply destructive relationships of power occur on a global scale with breathtaking speed and inspiring regularity.

An advantage of reaching my elder years in this historically unique time is that I have been witness, sometimes at close hand, to events that have fundamentally shifted global relationships. My lifetime has spanned the liberation of India from rule by the powerful British Empire, the collapse of the Soviet Union and the dismantling of the Berlin Wall, the end of apartheid in South Africa, and the People Power Revolution that brought down the Marcos dictatorship in the Philippines. All came quickly and were achieved through largely peaceful means.

From my vantage point as an Air Force officer assigned to the Office of the Secretary of Defense in the Pentagon as the Vietnam War began to wind down, I witnessed from inside the U.S. military establishment the beginning of the defeat of the world’s most powerful military by an ill-equipped but determined ragtag army of Vietnamese peasants. Attempting to resist the will of a determined people is futile, no matter how many guns and how much money the colonizing power has at its disposal.

I have also been witness to the dramatic changes brought by the civil rights, women’s, and environmental movements in little more than a half century.

On a visit to the South with my parents in my early teens I rode a bus in Miami in which “colored” people were confined to the last rows. It was beyond imagination that I would live to witness millions of whites weeping tears of joy over the landslide election of a black president.

When she went off to college, Fran, my wife [and publisher of YES! Magazine], was warned by her father that if her grades were too high, no man would marry her. She had a straight-A average when I met her. I married her anyway—a smart choice, as it turned out—but assumed without question that she would follow me without complaint and subordinate her career to mine. Years later, she was the primary wage earner and I happily and productively followed her path from the U.S. to Asia and back again, fashioning my career to fit hers.

As a participant in the citizen portion 1992 UN Earth Summit in Rio, the author of When Corporations Rule the World, and a founding member of the International Forum on Globalization (IFG), I was on the front lines of the birthing of global civil society as it developed in tandem with the Internet as a tool for citizen organizing on a global scale in defense of democracy and popular sovereignty.

The movement began with a tiny group of "Third World" activists centered in Penang, Malaysia going back to the 1980s. In 1994, when I was writing When Corporations Rule the World, there was still virtually no public awareness that trade agreements were being used to facilitate the global consolidation of corporate power beyond democratic accountability. That year I was invited to join a small international group of activists that formed the IFG and launched a largely below-the-media-radar public education campaign. In 1999, a powerful and interlinked global civil society announced itself to the world with the historic Seattle World Trade Organization protest.

Inspired by its success in Seattle, global civil society subsequently mobilized millions of people in massive protests wherever corporate elites met with national political leaders and bureaucrats to negotiate away the people’s rights and interests. The abuse of multi-lateral trade agreements was thwarted and the WTO never recovered.

In 2001, the movement energy began to shift from resistance to a proactive effort to build the institutional foundations of a planetary system of locally self-reliant and rooted economies that function in balanced relationship to their local ecosystems.

Now, through word and deed, global civil society is building the institutional foundations of a New Economy. Millions of people of every color and every cultural and religious identity are sharing ideas and inspiration and growing the political power to awaken our formal leaders to the imperative to get on board or risk being swept aside.

[Next: A Crumbling Cultural Story]

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 New Economy 2.0 blog series is co-sponsored by csrwire.com and yesmagazine.org based on excerpts adapted from Agenda for a New Economy, 2^nd edition.

Interested?

• Every Great Social Movement
  When ordinary people reject the cultural stories that limit their possibilities and bind them to servitude, the course of history turns.
• The Story of a New Economy
  As the story fabricated to serve Empire unravels, an authentic story born of the experience and aspirations of ordinary people is emerging to displace it.
• How the Left and Right Can Unite
  f we'd stop tearing each other apart, we might see an opportunity to win back our democracy from the rich and powerful.
  

A pro-union protester in Madison, Wisconsin on February 18, 2011. David Korten points out that America's once strong middle class came out of New Deal legislation, including strong support of labor unions.

 

Photo by Rob Chandanais.

As did most Americans of my generation, I grew up in the post-World War II years believing that America was defined by a strong middle class supported by a durable bipartisan political consensus.

In fact, the American middle class was created in the space of just a few years by New Deal legislation that established Social Security and other safety-net programs, implemented a highly progressive taxation of income and estates, supported unions, and raised the floor on wages to narrow the wealth and income gap between the upper and lower economic classes.

Perhaps because I was living abroad during most of the 1970s and 80s, even into the 1990s, I believed until the mid-1990s that the middle class is a universal American ideal. It was quite a shock when I eventually came to realize that America is governed by an owning class that considers government intervention to maintain an equitable distribution of wealth anti-American, socialist, and a threat to individual liberty and national prosperity.

In the 1970s, an alliance of elite interests began preparing to roll back the measures that created the American middle class and launched a full-scale class war during the 1980s under the banner of the Reagan revolution. Corporate interests provided the money and controlled the real agenda. Religious fundamentalists provided votes in return for lip service to a conservative social agenda opposing abortion, family planning, and gay marriage. Libertarians provided an ideological framework removing constraints to the unlimited concentration of wealth in the name of market freedom. Neo-conservatives provided justification for wars and outsized military expenditures to swell the profits of the defense industry and secure corporate access to the world’s resources and markets. 

Once in power, the Reagan administration rolled back taxes on the wealthiest Americans, ended robust antitrust enforcement, and launched a stunningly successful campaign to make finance the U.S. economy’s dominant and most profitable sector. This process continued seamlessly through subsequent Republican and Democratic administrations.

In 1950, arguably the peak of U.S. global power, manufacturing accounted for 29 percent of the U.S. gross domestic product and financial services for 11 percent. By 2005, manufacturing accounted for only 12 percent of the GDP, and financial services for 20 percent—more than manufacturing, health, and wholesale/retail combined. This weakened unions, put downward pressure on wages, and increased the power of the owning class.

Bigger than Unions, Bigger than Wisconsin
How Americans of all stripes are uniting in opposition to Wisconsin's anti-union bill—and cultivating a movement that reaches far beyond the state border.

In 1999, on the recommendation of Wall Street insiders, Congress “modernized” the country’s financial system by repealing Glass-Steagall, a Depression-era law that limited commercial banks to commercial banking activities. In 2004, the established requirement that investment banks maintain a 12-to-1 leverage ratio of debt to equity was repealed, leaving them free to make much greater use of borrowed money.

Between 1980 and 2005, there were some 11,500 bank mergers in the United States, an average of 442 per year. As the banking system consolidated, its focus shifted from providing financial services for productive activity on Main Street, to funding speculation on Wall Street.

Hedge funds, the high rollers that led the speculative frenzy responsible for the 2008 financial collapse, proliferated from a few hundred in the early 1990s to some ten thousand in mid-2007, by which time they had more than $1.8 trillion in financial assets under management.

Wall Street used its political influence and control of the money supply to ensure that its players captured virtually all the benefits of productivity gains in the Main Street economy as interest, dividends, financial service fees, and inflated asset prices.

This effort to achieve an upward redistribution of wealth was so successful that from 1980 to 2005, the highest-earning 1 percent of the U.S. population increased its share of taxable income from 9 percent to 19 percent. Most of that gain came from the bottom 90 percent and went to the top tenth of 1 percent. In 2007, the top 400 U.S. tax returns reported an average annual income of $345 million—compared to an average of $12.7 million for the top 427 returns in 1955, adjusted to 2007 dollars.

As Wall Street exported its modernization plan to the world, the wealth gap widened almost everywhere. In 2005 Forbes magazine counted 691 billionaires in the world. In 2008, only three years later, it counted 1,250 and estimated their combined net worth at $4.4 trillion. According to a United Nations University study, the richest 2 percent of world’s people now own 51 percent of all the world’s assets. The poorest 50 percent own only 1 percent.

Efforts to fix Wall Street miss an important point. Wall Street, as we know it, is an instrument of class war that poses a mortal threat to the middle class and democracy. For the sake of our most cherished American ideals, it must be dismantled and replaced.

[Next On the Origin of Corporations]

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:

• 10 Common Sense Principles for a New Economy
  It’s time we the people declare our independence from the money-favoring Wall Street economy.
  
• System Failure? Look Upstream
  Why it's important to address our economic problems at their Wall Street roots.
• 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.
  

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:

Just as stories fabricated by Wall Street are an instrument of social control, authentic stories are an instrument of liberation.

Photo by Yeonsang

Some years ago the Filipino activist-philosopher Nicanor Perlas shared an insight with me that has since been a foundation of my work. Each of the three institutional sectors—business, government, and civil society—has its distinctive power competence. Business commands the power of money. Government commands the coercive power of the police and military. Civil society commands the power of authentic moral values communicated through authentic cultural stories. Moral authority ultimately trumps the power of money and guns. Therefore, civil society holds the ultimate power advantage.

This simple frame helped me see the extent to which the global citizen resistance against the corporate misuse of multilateral trade agreements was a contest between competing stories—one fabricated to serve the interests of Empire; the other an authentic story born of the experience and aspirations of ordinary people. According to the story fabricated and promoted by Wall Street’s PR machine:

The use of multilateral trade agreements to eliminate national borders as barriers to the free flow of trade and investment is bringing universal peace, prosperity, and democracy to all the world’s peoples and nations.

Wow, that sounds wonderful. But even in the early 1990’s it was becoming evident that the reality was quite different.

A group of some 50 citizen activist-leaders from around the world began meeting in 1994 to share their actual experience with these agreements. They found a consistent pattern of results wholly contrary to the corporate story, broke the silence, and spread the real story:

Multilateral trade agreements are freeing global corporations from restrictions on their ability to exploit workers, ignore community interests, circumvent democracy, pollute the environment, and expropriate the resources of poor countries, with devastating consequences for people, community, democracy, and nature.

Just as fabricated stories are an instrument of social control, authentic stories are an instrument of liberation. Although corporations controlled the money and the media, the civil society story trumped the corporate story, because it was true to what people were actually experiencing. The awakening of public consciousness changed the political context of corporate-sponsored multilateral trade negotiations and brought them to a near standstill.

A similar process is now playing out. The fabricated story that there is no alternative to the existing Wall Street system is being challenged by the New Economy story that it is possible to create a world of strong communities and living economies. People across the United States and the world are organizing to make the new story a reality in the places where they live.

The New Economy story that we humans are capable of creating a vibrant, peaceful, cooperative world bursting with life resonates deep within the soul of all but the deeply psychologically damaged. Once that connection is made between a possible human future and the soul’s deepest yearning, the lies of Wall Street advertisers and propagandists are exposed and trance is broken. We are liberated to take responsibility for our future and get on with living the world of our shared human dream into being.

New Economy messages are spreading through countless conversations to challenge the false claims of the fabricated stories of the old economy culture that: 

• It is our inherent human nature to be individualistic, materialistic, greedy, competitive, and violent.
• We live on an open frontier of endless resources that are free for the taking to grow the economy.
• Money is wealth, money defines the value of life, making money is our highest human calling, and everything related to money is best left to the market.
• Government is the problem and unregulated markets are the solution.

As pointed out in previous blogs, the truth is that:

• The human brain is wired to support creativity, cooperation, and life in community. That is our nature. The prevalence of materialism, greed, competition, and violence common in modern society is a symptom of severe cultural and institutional dysfunction.
• We humans inhabit a wondrous but finite living planet with a self-organizing biosphere to which we must adapt our lives and economies.
• Life, not money, is the true measure of value; money’s only legitimate use is in life’s service. An obsession with making money is a sign of psychological and social dysfunction.
  
• Markets are essential to the function of a healthy democratic society. Their proper function, however, depends on proper rules implemented by democratic governments under the watchful eye of a strong and dynamic civil society.
  

Story power is the ultimate power. Authentic stories liberate the human consciousness, build immunity to cultural manipulation, and give us the courage and insight to create a world of peace and prosperity for all.

[Next: Every Great Social Movement]

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-distributed by CSRwire.com and yesmagazine.org based on excerpts from Agenda for a New Economy, 2nd edition.

Interested?

• 10 Common Sense Principles of a New Economy
  David Korten on the foundations of a wholly different economy.
• The Next American Revolution?
  What America's current movement against corporate power can learn from that time we overthrew a king.

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

Photo by Wally Gobetz

Like most white middle class Americans of my generation, I grew up believing that our strong market economy and democratic political institutions make us the world's greatest and most prosperous nation. The America of my youth was the product of a strong social contract that said we are all in this together—at least the white folks—and we all do best when we all do well. That contract made America the envy of the world. With the civil rights movement, many of us hoped we could expand the contract to truly include everyone.

Then Wall Street got greedy, abandoned the contract, and created a winner-take-all economy controlled by an oligarchy dedicated to growing its personal financial assets. Contrary to what Wall Street propagandists would have us believe, Wall Street is a job killer, not a job creator. It prospers by depressing wages, eliminating and outsourcing American jobs, and extracting usurious interest rates from Americans forced to borrow to put food on the table or to maintain a middle class lifestyle. The result is an America in decline and out of work.

Wall Street flies the American flag when it is convenient. It relates to America, however, as an alien occupier, much like the British prior to the American Revolution. Tax breaks and deregulation for Wall Street will only strengthen the role of the occupier and destroy more jobs than they create. An effective jobs program will increase taxes on Wall Street corporations and billionaires and regulatory restraints on their destructive practices.

Main Street is the job creator. We rebuild America’s productive capacity through programs and institutions that support and invest in Main Street businesses, farms, and infrastructure owned by people who have a stake in being responsible citizens in their communities. These programs and institutions are properly funded, at least in part, by taxing the financial wealth expropriated by Wall Street corporations and billionaires through deception and unproductive financial manipulation.

To build a prosperous 21st century America we must declare our national independence from Wall Street and build a New Economy adapted to the realities of a finite planet and an interconnected 21st century world.

The underlying institutional structure of this New Economy will look a good deal like the Main Street economies of human-scale, locally rooted businesses that produced the American middle class, made America the world leader in industry and technology, and fulfilled the American Dream for millions of Americans. This economy was the product of rules put in place in response to the Great Depression of the 1930s to limit Wall Street power and hold it democratically accountable to Main Street needs and interests.

Shifting economic and political power from a predatory Wall Street economy to a generative Main Street economy is the common theme of most every initiative documented or recommended in my book, Agenda for a New Economy and this blog series.

Unlike the American economy either before or after the Wall Street takeover, America’s new 21st century economy will:

• Bring America’s material consumption into balance with our ecological resources.
• Secure for every American—irrespective of race or gender—the opportunity to achieve an adequate and dignified living.
• Take a bold new step toward true democracy by creating a nation of owners who have a strong stake in the health and vitality of their local communities and natural environments.

We humans are a species of many possibilities. Wall Street has proven our ability to create a culture and institutions that cultivate, celebrate, and reward the pathologies of our lesser evolved reptilian capacities for ruthless individualism, greed, and violence. We can, if we choose, create a culture and institutions that nurture, celebrate, and reward the higher order capacities for creativity, sharing, and cooperation that make us distinctively human.

We can turn as a species from an economic system devoted to perfecting our capacity for violent exclusionary competition to one devoted to perfecting our capacity for caring, inclusive cooperation. We can turn from economic institutions that draw down Earth’s nonrenewable reserves of fossil energy to oppose, dominate, and mine Earth’s biosphere to institutions that work in integral partnership with the extraordinary generative capacity of Earth’s self-organizing living systems.

Agenda for a New Economy
How can we build an economy that works for all of us? David Korten lays out his vision in this special serialization of his latest book.

As I witness the devastation wrought by the Old Economy, my greatest source of sadness comes from an awareness of the profound gap between our human reality and our human possibility. My greatest source of joy and hope is my awareness of the vitality of the human spirit as demonstrated by the millions of people who are working to realize their shared vision of a just and sustainable world that works for all. My greatest source of motivation is the knowledge that it is within our collective means to unleash the positive creative potential of the human consciousness and make that vision a reality.

We are privileged to live at the most exciting moment of creative opportunity in the whole of the human experience. Now is the hour. We have the power to turn this world around for the sake of ourselves and our children for generations to come. We are the ones we have been waiting for.

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.

• How to Liberate America
  How is it that our nation is awash in money, but too broke to provide jobs and services? David Korten introduces a landmark new report, “How to Liberate America from Wall Street Rule.”
• Every Great Social Movement
  David Korten: The biggest shifts of our time have been sparked by ordinary people rejecting the cultural stories that dominated them.
• How the Left and Right Can Unite
  David Korten: If we'd stop tearing each other apart, we might see an opportunity to win back our democracy from the rich and powerful.

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 Hernan Seoane

Few and fortunate are those whose lives have not been directly touched by the 2008 Wall Street meltdown and its consequences. People want to understand what went wrong and how we can set it right. Yet the public commentary continues to center primarily on finger-pointing. Who knew what when? Which regulators were asleep at the switch, and why?

Most calls for action seek only to limit the excesses and deceptions of greedy bankers and complicit regulators. We have yet to engage in a much-needed national conversation that addresses essential, yet unasked, questions. For example:

• Do Wall Street institutions do anything so vital for the national interest as to justify opening the national purse strings and showering them with trillions of dollars in order to save them from the consequences of their own excess?
• Is it possible that the whole Wall Street edifice is built on an illusion that has no substance yet carries deadly economic, social, and environmental consequences for the larger society?
• Might there be other ways to provide necessary and beneficial financial services with greater effectiveness and at less cost?
  

Ultimately, it comes down to a question of the values we believe the economy should serve. Should it give priority to money, or to life? To the fortunes of the few, or the well-being of all?

The existing Wall Street-led economy is highly effective and efficient at converting real living wealth to phantom financial wealth to make rich people richer. It is a path to collective suicide.

Our future and that of our children depend on replacing the values and institutions of the Wall Street economy with the culture and institutions of a New Economy designed to provide an adequate and satisfying livelihood for all people in balanced relationship to Earth’s biosphere.

I believe that an honest public examination of these questions will lead to a unifying national political consensus that Wall Street institutions produce nothing of value to the society and fulfill no need not better served in other ways. They can and should be replaced with institutions that act like mature, caring adults and serve real needs in ways appropriate to the realities of the twenty-first century.

We cannot, however, simply let the Wall Street financial institutions collapse, as would have happened in 2008 without the federal bailout. Wall Street controls the creation and flow of the money that facilitates the economic transactions on which we depend for meeting most all our material needs. If its institutions suddenly shut down with no alternative in place, we would be left only the money in our pockets and instantly reduced to barter for most essentials of daily life, including food and water.

The process of shutting down Wall Street properly proceeds in parallel with action to put in place the institutions of a New Economy, including a new system for creating and allocating national currencies in ways more responsive to society’s needs.

Building Community: An Economic Approach: David Korten: What economic transformation has to do with building stronger, happier communities.

Leadership for institutional transformation rarely comes from within the institutions of Empire, which bring special privilege to the few and hardship to the many. It invariably comes from authentic grassroots movements that self-organize from outside the establishment to challenge the status quo and create alternative institutions that ultimately displace those that no longer serve.

Efforts to form a social movement to confront the Wall Street-Washington axis are handicapped, however, by the absence of a broadly shared vision of an economic system structured to achieve and maintain financial stability, ecological balance, prosperity for all, and full democratic participation.

As I will elaborate in a future blog, the true alternative to the Wall Street capitalism that is imposing an intolerable burden on society is not totalitarian Soviet-style socialism. It is a system of locally rooted, self-reliant market economies that honor true market principles, operate by clear rules maintained and enforced by truly democratic governments, and mimic the structure and dynamics of Earth’s biosphere.

[Next: My Defection Story]

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.

• Building Community: An Economic Approach
  David Korten and David Brancaccio discuss what economic transformation has to do with building stronger, happier communities.

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

People often fail to recognize the difference between phantom financial assets and real, living wealth.

Photo by Mike Bitzenhofer

In business school, we were taught to assess investment options to maximize financial return. I don’t recall that the professor ever mentioned that this meant maximizing returns to people who have money—to make rich people richer. Or that money is a system of power and that the more our lives depend on money, the greater our subservience to those who control the creation and allocation of money.

Nor do I recall asking my professors, “What is money?” “Why do we assume that maximizing financial return maximizes the creation of real value?” “How does the conversion of natural living wealth to financial wealth create real value?” “What about the many fortunes built through financial speculation, fraud, government subsidies, the sale of harmful products, and the abuse of monopoly power?” I may have had some doubts, but kept them to myself for fear of being dismissed as hopelessly stupid.

Perhaps those who taught us economics, finance, and accounting did not themselves recognize the difference between real living wealth and phantom financial wealth.

Real wealth has intrinsic value. Examples include fertile land, healthful food, knowledge, productive labor, pure water and clean air, labor, and physical infrastructure. The most important forms of real wealth are beyond price and are unavailable for market purchase. These include healthy, happy children, loving families, caring communities, a beautiful, healthy, natural environment.

Real wealth also includes all the many things of intrinsic artistic, spiritual, or utilitarian value essential to maintaining the various forms of living wealth. These may or may not have a market price. They include healthful food, fertile land, pure water, clean air, caring relationships and loving parents, education, health care, fulfilling opportunities for service, and time for meditation and spiritual reflection.

Money, a number on a piece of paper or created with an accounting enter, has no intrinsic value. Wall Street generates it in astonishing quantities through accounting tricks, financial bubbles, and debt pyramids. It appears from nowhere and can disappear in an instant, as a phantom in the night. 

Those engaged in creating phantom wealth collect handsome “performance” fees for their services and walk away with their gains. When the bubble bursts, borrowers default on debts they cannot pay and the bubbles and debt pyramid collapse in a cascade of bankruptcies.

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

It is easy to confuse phantom financial assets with the real wealth for which they can be exchanged. Indeed, the illusions of phantom wealth are so convincing that most Wall Street players believe they are creating real wealth.

The market, of course, makes no distinction between the dollars acquired through means that enrich society, those created by means that impoverish society, and those simply created out of thin air. Money is money, and the more you have, the more the market eagerly responds to your every whim. It is still only a number with no existence outside the human mind.

Those who benefit from the creation of phantom wealth may never realize that their gain is unfairly diluting everyone else’s claim to the available stock of real wealth. They may also fail to realize that Wall Street and its international counterparts have generated total phantom-wealth claims far in excess of the value of all the world’s real wealth, thus creating expectations of future security and comforts that can never be fulfilled.

The deceptions are built right into our language. We refer to speculation as “investment” and to phantom financial wealth as “capital.” Indeed, when we hear the terms wealth, capital, assets, or resources we have no way to know whether the reference is to a real asset or only to a phantom financial asset. Our language gives us no way to make this essential distinction. It is no wonder we get confused and fail to recognize that Wall Street produces nothing of real value.

[Next: System Failure? Look Upstream]

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.

• Putting the Science of Happiness into Practice
  Countries around the world are beginning to apply the science of well-being to the decisions they make. News from the 5th International Conference on Gross National Happiness.
  

• Building Community: An Economic Approach
  David Korten and David Brancaccio discuss what economic transformation has to do with building stronger, happier communities.

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.

Interested?

• 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.

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?

It's easy to fix the symptoms of a problem, but finding a real solution involves looking upstream to figure out what's causing the problem in the first place.

Photo by Stu Mayhew.

Many years ago a wise Canadian colleague, Tim Brodhead, explained to me why most efforts to end poverty fail. “They stop at treating the symptoms of poverty, such as hunger and poor health, with food programs and clinics.” They never ask the obvious question: “Why do a few people enjoy effortless abundance, while billions of others who work far harder experience extreme deprivation?”

I realized it was the same lesson my business school professors had drummed into my head in my student days. “The visible problem—a defective product or an underperforming employee—is a symptom of system failure. Look upstream to find and fix the problem at its source. Step back and look at the big picture.”

Tim summed up his observation with a profound lesson, “If you act to correct a problem without a theory about its cause, you inevitably treat only the symptoms.”

I soon found myself asking a yet larger question: “Why does our economic system consign billions of people to degrading poverty, destroy Earth’s ecosystem, and tear apart the social fabric of civilized community?”

It turns out that the consequences of acting on a bad theory based on a false premise can be even worse than acting without a theory. Indeed, it can lead to collective self-extinction.
Cultural historian Jared Diamond tells of the Viking colony on the coast of Greenland that perished of hunger next to waters abundant with fish; it had a cultural theory that eating fish is not “civilized.”

As we are perplexed by the foolishness of the Viking colony, future generations may be perplexed by our equally foolish devotion to an economic theory that using borrowed money to speculate on financial bubbles will eventually result in prosperity for all. No need for concern that in the process we are trashing Earth’s life support system and destroying the social bonds of family and community. Eventually, or so the theory goes, we will have enough money to heal the environment and end poverty.

As I looked ever further up-stream I was startled to find that the source of our foolish behavior is an illusion: the belief that money—a mere number created with a simple accounting entry that has no reality outside the human mind—is wealth—indeed the standard against which all other forms of wealth are properly measured.

Time for a New Theory of Money
Ellen Brown: When we recognize that money is simply credit, we can unleash it as a powerful tool for our communities.

Because money represents a claim on so many things essential to our survival and well-being, it is easy to confuse it with the things for which it may be exchanged. From there, we easily slip into evaluating economic performance by the rate at which it is growing phantom wealth financial assets. Focused on returns to money, we embrace GDP growth, essentially a measure of the rate at which human relationships are being monetized and commodified and real assets are being converted to financial assets, as our primary measure of progress.

Once the belief that money is wealth is implanted firmly in the mind, it is easy to accept the idea that money is a storehouse of value rather than simply a storehouse of expectations, and that “making money” is the equivalent of “creating wealth.”

This misdirection ultimately explains why we tolerate an economy that cycles violently between boom-and-bust; decimates the middle class; forces families to choose between paying the rent, putting food on the table, and caring for their children; and wantonly destroys the relationships of community and Earth’s biosphere.

It explains why we have allowed Wall Street to assume control of our most powerful economic, political, and media institutions to make financial speculation, accounting fraud, and the inflation of financial bubbles our national economic priorities. It explains why we allow the perpetrators of this fraud to reward themselves with obscene bonuses for creating phantom financial assets that inflate their claims to the real wealth created by others—an act that in a slightly different context would be considered counterfeiting, a form of theft.

The Wall Street edifice sits on a foundation of a false theory grounded in grand illusion. Spending trillions of dollars to renovate the edifice is a fool’s errand. Our best hope for a viable future is to build a New Economy grounded in reality-based theories and devoted to the sustainable production and exchange of real goods and services to meet the real needs of our children, families, communities, and natural environmental systems. [Next: Money from Nothing?]

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.

• 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.
• 7 Ways to Transform Banking
  Each of us can help build a resilient financial system that will serve real people in real communities.
  

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.

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:

The Fleet of the East India Co., Homeward Bound from China, Under the Command of Sir Nanthaniel Dance by William Daniell, 1804. The East India Company was chartered in 1600 to aid in Britain's colonization of India, and in the early 1800s the company exported tea from China using illegal opium to pay for its purchases.

Painting by William Daniell, 1804.

Like many Americans, I grew up believing that conservative values were about local control and personal responsibility for family, community, and nature. It seemed curious to me that the political alliance that drove a rollback of the Roosevelt-era policies that created the American middle class called itself conservative and dismissed its liberal opponents as un-American.

Eventually, however, I discovered that the term conservative harkens back to a day when conservatives were monarchists who considered democracy a threat to social order and the seas were ruled by buccaneers and privateers. That was a clarifying moment.

Buccaneer is a colorful name for the pirates of old who pursued personal fortune with rules of their own making. They were, in their time, an iconic expression of “free market” capitalism.

Privateers were buccaneers to whom a king granted legal immunity and safe harbor in return for a share of the booty. Their charge was to extract physical wealth from foreign lands and peoples by whatever means—including the execution of rulers and the slaughter and enslavement of native inhabitants.

Hernán Cortés claimed the Mexican empire of Montezuma for Spain. Hernando de Soto made his initial mark trading slaves in Central America and later allied with Francisco Pizarro to take control of the Inca empire based in Peru. 

Some privateers operated powerful naval forces. In 1671, Sir Henry Morgan (yes, appreciative British kings granted favored privateers with titles of nobility in recognition of their service) launched an assault on Panama City with thirty-six ships and nearly two thousand brigands, defeating a large Spanish force and looting the city as it burned to the ground.

Eventually, the ruling monarchs turned from swashbuckling adventurers and chartered pirates to chartered corporations as their favored instruments of colonial expansion, administration, and pillage. The sale of public shares enabled a single firm to amass virtually unlimited financial capital and assured the continuity of the enterprise beyond the death of its founders. Limited liability absolved the owners of personal liability for the firm’s losses or misdeeds.

Corporations chartered by the British Crown established several of the earliest colonial settlements in what later became the United States and populated them with bonded laborers—many involuntarily transported from England—to work their properties. The importation of slaves from Africa followed.

The East India Company (chartered in 1600) was the primary instrument of Britain’s colonization of India, a country the company ruled until 1784 much as if it were a private estate. In the early 1800s, the East India Company established a thriving business exporting tea from China, paying for its purchases with illegal opium.

The Dutch East India Company (chartered in 1602) established its sovereignty over what is now Indonesia and reduced the local people to poverty by displacing them from their lands to grow spices for sale in Europe.

Bankers, Bookies, and Gamblers
What is the proper role and social function of a bank? The answer starts with getting the question right.

It is no exaggeration to characterize these forerunners of contemporary publicly traded limited liability corporations as, in effect, legally sanctioned and protected crime syndicates with private armies and navies backed by a mandate from their home governments to extort tribute, expropriate land and other wealth, monopolize markets, trade slaves, deal drugs, and profit from financial scams.

Wall Street hedge fund managers, day traders, currency traders, and other unlicensed phantom-wealth speculators are the independent, unlicensed buccaneers of our day. Wall Street banks are modern day commissioned privateers who ply a similar trade with state backing and safe harbor. The economy is their ocean. Publicly traded corporations serve as their favored vessels of plunder, financial leverage is their favored weapon, and the state is their servant-guardian.

As with the buccaneers and privateers of days past, Wall Street’s major players find it more profitable to expropriate the wealth of others than to find honest jobs producing goods and services beneficial to their communities. They walk away with their fees, commissions, and bonus packages and leave it to others to pick up the costs of federal bailouts, gyrating economic cycles, collapsing environmental systems, broken families, shattered communities, and the export of jobs along with the manufacturing, technology, and research capacities that go with them.

They seek self-enrichment by plundering wealth they had no part in creating, enjoy substantial legal immunity, and acknowledge no duty or accountability other than to themselves. Legal or not, taking the property of another through deception, fraud, and expropriation is theft. Only tyrannies guarantee the liberty of the few to plunder the wealth of the many.

[Next: Phantom Wealth and False Expectations]

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:

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

David Korten's roots in small town America taught him the value of community.

Photo by Steve Minor

Many people are intrigued by the story of my defection from my establishment roots to becoming a rebel voice challenging the legitimacy of the institutions I once served. It is the story of a lifelong journey filled with an uncommonly rich and varied collection of experiences. Here are some highlights:

I grew up in a conservative small town where I learned to value family, community, and nature. I was raised to believe in the special character of America as a middle-class democracy, free from the extremes of wealth and poverty that supposedly characterized the world’s less advanced nations. In my childhood, my dad, a local retail merchant, taught me that if your primary business purpose is not to serve your customers and community, then you have no business being in business.

My Stanford Business School education taught me to look for the big picture. My doctoral dissertation research on cultural change in Ethiopia and its impact on modern organizations taught me the power of culture in shaping collective behavior.

From my experience as an Air Force captain on the faculty of the Special Air Warfare School and as a military aide in the Office of the Secretary of Defense during the Vietnam War, I learned how the world’s most powerful military was thwarted by the self-organizing networks of an ill-equipped peasant army motivated by a vision of independence and self-rule. That experience helped me later recognize the potential of a committed citizenry to likewise thwart the seemingly invincible power of Wall Street and gave me insights into how that resistance might self-organize.

While academic director of the Central American Institute for Business Administration in Managua, Nicaragua, I witnessed the extreme gap between the super-rich and the super-poor.
While a professor on the organization faculty at the Harvard Business School, I learned how the structures of large-scale institutional systems shape behavior and how system structures can be designed to support intended outcomes.

During fifteen years in Asia with the Ford Foundation and the U.S. Agency for International Development, I experienced the positive power and potential of local community self-organization and the importance of the local control and management of essential natural resources and participated in many experiences in large-scale organizational change. These were the years of my awakening to the terrible truth that development models centered on economic growth almost inevitably make a few people fabulously wealthy at an enormous social and environmental cost to the substantial majority.

In 1992, Fran (my wife) and I returned to the United States and settled in New York City near Union Square between Madison Avenue and Wall Street and engaged the inquiry into the nature of the publicly traded limited liability, private-benefit corporation as an inherently destructive anti-market business form that produced When Corporations Rule the World.

As a founding member of the International Forum on Globalization, I learned about the power of a new story propagated through global citizen networks to thwart the agenda of the world’s most powerful corporations and reshape the course of history.

As the co-founder and board chair of YES! Magazine, I have come to realize that every act of resistance against what we don’t want must be paired with a positive vision of what we do want.

The Missing Vision
David Korten begins a blog series outlining his Agenda for a New Economy

Writing The Post-Corporate World: Life After Capitalism drew me into in the study of the incredible reality of life’s capacity for creative, cooperative self-organization and the implications for the design of economies that mimic healthy living systems.

The Great Turning: From Empire to Earth Community drew me into an examination of contemporary impact of five thousand years of organizing human societies as hierarchies of domination governed by institutions that nurture and reward moral, emotional, and behavioral dysfunction.

My experience as a founding board member of the Business Alliance for Local Living Economies has immersed me in the experience of communities all across the United States and Canada that are taking control of their economic future by rebuilding their local economies.

These are a few of the experiences and lessons that inform and find expression in Agenda for a New Economy and the blogs I will be sharing here in the next few months.

[Next The Illusion of Money]

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.

• Building Community: An Economic Approach
  David Korten and David Brancaccio discuss what economic transformation has to do with building stronger, happier communities.

• Lighting the Way to a New Economy
  All across the United States and Canada people are rebuilding their local economies to restore community and regain control of their economic lives. How do these local efforts add up to global economic transformation?.