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Korten: Yeah, I spent most of my adult career working in International Development. I set up a business school in Ethiopia and Addis Ababa to prepare business managers there, and I was the Harvard Business school advisor to the Central American Management Institute in Central America and Nicaragua, then spent 15 years in the Philippines and Indonesia working with the Ford Foundation, then USAID and ultimately, working with private voluntary organizations.
So yeah, I've seen a good deal of the world the experience of going out in the world initially with the youthful mission to, you know: "We're going to end global poverty by bringing the secrets of U.S. business success to the rest of the world."
I was kind of a slow learner, but eventually I figured out that much of what we were taking out to the world was actually far more destructive than productive; that business as usual is destroying the environment, destroying the social fabric of what once were its cultures and actually enriching a few people, but pushing most people into greater desperation.
So ultimately, I realized the same pattern was going on in the United States and other so-called developed countries, so I came home to work on education here. I'm really interested in this financial collapse which is clearly a very serious moment, but I think we need to recognize that it is a moment that potentially opens up all kinds of issues for serious discussion that otherwise were totally off the table.
This is a time to really urge people to step back and energize conversation about what kind of a financial system do we really need to serve, not speculators and the creation of multi-billion dollar fortunes, but rather to serve main street and the people who play by the rules, who put in an honest day's work, and want to have a decent life. In other words, we've got to create a financial system that serves Main Street rather than the Wall Street speculators.
Kall: So, how do we do that?
Korten: Well, the first of all, we start talking about it. One of the things that's very encouraging; it looks to me like this bailout package is "Dead on Arrival" in Congress you've got the far right out there wants to use it to eliminate capital gains taxes, further reduce corporate income taxes, while on the Democrats' side, you've got people talking about limiting compensation and taking an equity share in the companies we bail out. And you have apparently, George Bush saying, "If either of you guys touch it in either direction, I'll veto it."
So, hopefully the Bailout Package is dead. But we need to do what you're doing actually, as Bernie indicated: to start a conversation about what kind of a system we actually need. And the piece you mentioned that I was writing last night is now on the Yes! Website: Main Street before Wall Street and it's an effort to contribute to framing that discussion; it really starts with asking the question "what is money and what is the positive function of money and what's the proper role of a financial system. A lot of people have been framing it in terms of the juxtaposition of Wall Street and Main Street and that's actually a very powerful frame because what's happening here is we're seeing "Wall street expose itself in a way that probably hasn't happened since the...
Kall: Great Depression.
Korten: great financial collapse of 1929. But what we see behind the curtain is a system that is in fact awash in money; you mention a need to increase liquidity, but what's been going on here is the banking system and the Federal Reserve working together with their power to create money, has been absolutely flooding us with money and liquidity, but it's not been channeled into productive enterprises, or into living wages for real people, it's been channeled into the biggest global banks, eh hedge funds, the private equity funds to all of these institutions in Wall Street that have de-linked from any concern for real productive activity and they're basically creating financial bubbles and debt pyramids partly for the financial returns but an awful lot of it, stunningly, just to create an opportunity to collect humongous fees.
The hedge fund managers take 20% off of any gains they take in and I don't know if you're familiar with this stunning statistic: that the top 50 paid hedge fund managers last year averaged 288 million dollars in compensation EACH.
Kall: That's unbelievable.
Korten: You know, that's over half a billion dollars. That's what Wall Street is currently about; it is managed almost exclusively to do that; if it provides any funding to real people or to real business, that's pretty much incidental. And at the same time, we've (you know, there's a very interesting book by Kevin Phillips called Bad Money) and he talks about the huge increases in private debt, and much of it, most stunningly, is in the institutions in the financial sector loaning money to each other.
The financial sector debt, these are just he corporations that played money games; the total debt was 14 trillion dollars in 2006, which was 32% of all U.S. debt and 107% of U.S. GDP (Gross Domestic Product) This is just mind boggling this is—we're creating an economy based on people trading pieces of paper back and forth and we're working under the illusion that somehow this is creating wealth. What we neglect is that the wealth creation function is in Main Street with real businesses; real people using real resources to produce goods and services that people need to have a decent life.
The only legitimate reason for the existence of Wall Street is to provide an orderly flow of money, which is simply a medium of exchange to support the exchanges in the real economy. So what we need to do is step back and say not what do we need to do to patch up the existing Wall Street so it can get back to business as usual; we need to step back and say what would a money system look like if we really designed the system to serve ordinary people, to serve main street?
I noted in your conversation with Bernie, you were talking about your local bank, that's basically the answer before the Wall Street folks started using all their political clout to get themselves out from any kind of public accountability or regulation, our financial system much it's centered on local community banks; we used to have a system of unitary banks.
