Get Free From Wall Street: An Interview With David Korten
How to avoid money games and create real wealth.
David Korten’s 1995 bestseller, When Corporations Rule the World , was a key document in building the anti-globalization movement. In the aftermath of the 2008 economic meltdown, he wrote Agenda for a New Economy , a critique of the overwhelming influence of Wall Street on economic policy, which has resulted in a political system that serves, not the many, but the very wealthy few. Eighteen months later, Korten is back with a much-expanded second edition of Agenda in which he details a strategy for taking back our political and economic systems and using them to create localized, community-controlled economies that foster the things we really need. I had a conversation with David at the YES! offices.
Doug: I’d like to talk with you about the new edition of Agenda for a New Economy, and your thoughts on the current state of the U.S. economy. The first edition came out just a bit more than a year ago. Why a second edition so soon?
David: Well, the first edition was written in immediate response to the crash. I was very taken by the fact that the crash opened up the potential for discussion of some really deep but neglected issues. To my dismay that wasn’t happening. The political system jumped in immediately to try to fix Wall Street—to get it back to its normal function—which seemed to me the totally wrong agenda.
The book was written and published within the space of two months, which meant that I was building it around things that I had already had in place.
Doug: Quite an accomplishment. So what’s different in the new edition?
David: The second edition goes so far beyond the first that many people ask me, “Well why do you call it a second edition rather than a new book?” It has 100 additional pages, a much stronger framework, and a much more comprehensive and systemic, holistic agenda. I’m very excited about how it came out.
Doug: What do you see as the principal routes in to the kind of systemic change you’re talking about—especially the ones that go more to public participation than top-down organization?
David: Well, in fact, most of the change has to be bottom-up. Because—going back to my larger frame in The Great Turning: From Empire to Earth Community—if you understand the organization of society in terms of dominator systems, the impetus for change rarely, if ever, comes from within the system. Even changes in the laws depend very much on popular mobilization and demands on the political system.
One of the things that is much clearer in the new edition is the framework for a strategy of change, which, as I’ve come to see it more clearly, has three essential elements.
The first is changing the stories in the cultures. Much of the work here can be done on a very individual level, in terms of organizing conversations in your neighborhood or your church or your library, whatever groups you’re connected to. Engaging people in conversation around the reality of the economy that we have, the ways in which we’re trapped in fabricated cultural stories, and the possibilities of a new economy. That’s part of changing the economic story that frames the policy debates.
The second element is creating the new reality. It is about shopping locally, supporting local products, local farmers, supporting the various initiatives around rebuilding local food systems and local economies.
And the third is engaging politically to enact real policy changes that support the new economy over the old economy.
Doug: In the United States, it’s an article of faith that we depend on Wall Street for economic well-being. You suggest that Wall Street is actually the cause of many of the problems on Main Street. How are people reacting to that challenge to such a widespread belief?
David: Well, it’s a very interesting tension, because at one level, people have seen so clearly the corruption of Wall Street: the greed, the meanness, the predatory ethics and practices. So there is enormous outrage against Wall Street that cuts across the political spectrum.
On the other hand, we have been lured into a situation where many of us depend for our retirement on Wall Street investments, which is really a euphemism for Wall Street speculation. Since our expectations of income cannot be met by Social Security alone, we look to these financial funds as the real basis of our retirement security. So that creates an enormous political constituency in favor of Wall Street. The tension is very real and very powerful.
Doug: What needs to happen to resolve the tension between outrage and dependency?
David: The interesting part of this and the key to understanding it is recognizing the distinction between real wealth and what I call “phantom wealth.” Phantom wealth is money that is created from nothing, unrelated to making anything of real value. The Wall Street game is about generating financial claims on the real wealth of society, while doing nothing to contribute to the pool of real wealth—food, shelter, entertainment, transportation, education, health care—on which those claims are made.
Doug: Why is this distinction hard for people to make?
David: Our whole language about money is so convoluted that it’s almost like the language was designed to prevent us from seeing the reality. When a person uses terms like “assets,” “wealth,” “capital,” “resources,” there is absolutely no way you can tell whether they’re talking about money, which is simply accounting entries, or about real things that those accounting entries are claims against.
If you add up all the financial assets in the world, they exceed the market value of all the world’s real wealth, which means those claims can never be fully actualized.
Over the long term, the system has to collapse, as it did. Since we are pumping it back up, it will inevitably keep collapsing until we fundamentally restructure it.
Doug: So the fact that there’s more money doesn’t mean that there’s more stuff to buy with it. As an example, there’s the housing bubble. Four to six trillion dollars of value went away when the bubble popped. But what does that actually mean in terms of housing?
David: It means absolutely nothing in terms of houses. That’s part of understanding the difference between phantom wealth and real wealth. It was a financial bubble, and the most extraordinary thing is how few economists and economic policy makers seem to have had any recognition of the distinction. An increase in real housing value would, for instance, provide more comfortable shelter. The simple inflation of housing prices changed nothing except increasing the financial claims of those who held title to those houses.
Doug: What about the stock market? That’s widely accepted by Americans as an index of economic health.
David: Well, the fact that the total value of stock market assets can go up and down by trillions of dollars day by day is a pretty powerful indicator that it has no relationship to any underlying real value. It’s purely a matter of speculation.
So we’ve really got two competing systems. One is a system of essentially pure money that is highly biased towards the wealthiest and most predatory members of society. The other is the real economy of Main Street where people are trying to figure out things to do with their resources to provide for their livelihoods and to create community wealth and maybe develop a little resilience against upcoming shocks.
Doug: What is your response to people who say that capitalism, freedom, and democracy are inseparable? That it’s all part and parcel?
David: It’s a total lie. In terms of human liberty, capitalism works really well for the liberty of the very, very rich. If your concern is the liberty of billionaires, it’s quite an adequate system. But more broadly, it is the absolute enemy of the free market, because the whole dynamic of capitalism and the goal of the larger corporations is to establish monopoly control of whatever sector they’re in. Whether it’s monopolizing seeds, water, air, whatever it is—that’s the game, so that you can extract monopoly profits.
Capitalism is also the enemy of democracy because the goal is for the financial interests to dominate the political system and manipulate the rules in ways that benefit the very rich and are totally contrary to the interests of ordinary people. That ultimately strips ordinary people of meaningful participation in the political process.
Doug: According to standard American analysis, if you say that about capitalism it must make you a Marxist.
David: Part of the mental trap that we’re in is this idea that our only choices is between the repression of rapacious capitalism and the repression of communism.
I grew up very conservative, even fairly right-wing. The reason I pursued a career in international development was my concern about a communist takeover of the world, and how that threatened our American way of life. I am most definitely not a Marxist.
Actually I see myself as being an advocate of democracy and real markets. In some ways, I see Adam Smith as my patron saint, if you really understand Adam Smith’s framework. His Wealth of Nations was a tirade against corporate monopoly, and essentially against the dynamics that we now celebrate as capitalism.
It’s pretty clear to me that Smith’s market ideal was an economy comprised of locally rooted enterprises owned and operated by people who live in the community and function within a framework of community moral values.
Doug: In the book you make an analogy between economies and living cells, which need to have permeable boundaries but still need to maintain those boundaries. What are the implications of that model for nations? Particularly the United States, where the borders cross both ecological and cultural boundaries.
David: An important and complex question. I would agree that our current national boundaries are artificially drawn in ways that make no particular ecological or cultural sense. The more fundamental issue, however, is whether the primary boundaries within which we organize society and our economies will be defined by private corporations to secure their private assets or by the nation-state to secure the interests of everybody living within its geographical borders.
The primary unit really needs to be the bioregion—organizing economic life within each local biosystem to meet the needs of everyone in ways that maintain a sustainable balance with the biosystem’s regenerative capacity. Governance at all system levels needs to be based on a concept of subsidiarity, which means that rather than making individual local decisions, higher system levels support local control and assure balance in relationships among more local bioregional systems.
Doug: The first edition of Agenda for a New Economy was a call to action: It’s time to bring down Wall Street. What is the essence of the new economy that you’re laying out in greater detail in the new edition?
David: The much clearer frame now is the need to organize our economic systems to mimic and integrate with the systems of the biosphere. This requires a shift in the defining value from money to life and a shift in the locus of power from global financial markets to local communities. The new edition goes much deeper into the values issues. One of my favorite new phrases is “greed is not a virtue, sharing is not a sin.”
I began delving into this really weird reality that the capitalist culture has taken what religion has characterized as the seven deadly sins, and has actually come to characterize those as virtues and to label the corresponding virtues as sins. I mean it’s turning the whole moral framework on its head and convincing us that somehow the pursuit of the seven deadly sins is really good for society and helps us build wealth and happiness. It’s the most incredible moral perversion and the fact that this is not widely recognized is sort of like “oh my goodness.”
Doug: You mention in the new edition that people’s reaction when you speak is not “I’ve never thought of that before; that’s completely outside the realm of my experience.” It’s more like, “Now that you mention it, that’s what I really thought. What I’ve been taught doesn’t make any sense.”
David: Exactly. It’s a mark of the power of the cultural manipulation. Not many people have really thought systematically about the transformation of the seven deadly sins into seven virtues. But most people recognize it at a heart level.
Most psychologically healthy people recognize the truth, because I believe the true moral values are innate in our mature human nature. Yet the power of the perverse cultural manipulation in our society is so strong that it causes people to doubt that which they know in their heart to be true. And I see one of my most important roles in the world as saying “No, you’re not crazy. In fact, there’s good reason to believe that you’re right and the culture is crazy, as are the people who intentionally propagate that culture.”
Doug: What gives you hope that the system can change in time to really make a difference?
David: The hope for change resides in the people who are engaged in rebuilding their local economies. I’m also sensing an enormous openness to examination of these basic issues of how we organize the money system and how we rethink economic policy.
Doug: What do you want readers to take away from having read the book? On a personal level?
David: Most all of the dysfunctions that we’re experiencing in society—economic instability, social breakdown, violence, and war, environmental destruction—they are all inevitable consequences of an economic system that is designed to concentrate power and focus social values on money. The only way we’re going to be able to correct the failure is through economic transformation. The new edition of Agenda for a New Economy presents a model and framework that address these issues and that have a very real prospect of increasing the security, well-being, and happiness of almost everybody except perhaps a few of the greediest billionaires.