This week on InterOccupy's Hot Topics Conference Call, David Korten discussed our country's economic problems. He credited the Occupy Wall Street movement for calling attention to the group at the root of the problem, namely, Wall Street. He called out economists for thinking that the economy is only about measuring money, rather than measuring the benefits that economic activities bring to people in the society. Finally, in our Questions and Answers session, we discussed the steps we could take to bring about an economy that benefits society.
David Korten is co-founder and board chair of YES! Magazine, an influential voice within the progressive movement with a focus on framing the emerging new economic, political, and cultural mainstream. He is also co-chair of the New Economy Working Group. The NEW group is an informal alliance of think tank, media, and businesses. He is the author of Agenda for a New Economy, and When Corporations Rule the World. He is principal author of How to Liberate America from Wall Street Rule, which was published by the New Economy Working Group and which spells out the steps that could rebuild a system of community-based and accountable institutions devoted to financing productive activities to create good jobs for Americans and generate real community wealth.
How to Liberate America from Wall Street Rule - David Korten by New Economy Working Group
David is "struck by the brilliance of the Occupy movement," and the fact that it "pointed the finger of national attention on the institutions of global finance and then named extreme inequalities a defining issue of our time," stating that it has shifted the debate. More equal societies are healther, according to studies. Many of the dysfunctions within our society trace back to inequality, and "inequality traces directly to the Wall Street fianancial system."What is the problem of our money system and what can we do about it?
Korten believes that much of what we've learned about our financial system, money, and even human nature is wrong. The nature and purpose of money, especially, and how it relates to the economy, is a problem within our society.
"Most economists assume the purpose of the economy is to make money, and they really don't want to discuss money as a system of power."
In fact, Korten believes, money's purpose as a system of power is the most important aspect of our current system. He states that what we're taught about money is wrong. "We're taught," he says, "that money is wealth. That society is best served when we each seek to maximize our short term personal financial gain. Without regard for the consequences to others, particularly the social and environmental consequences." Korten says that we are taught that our personal gain is the just reward for the contribution we make to increasing the wealth, or total well being of society, which he also believes is wrong, and another cause of our dysfunctional institutions.
To Korten, money cannot be wealth, because in our society today, money has become just a number on a computer hard drive. Modern money has no existence other than as an electronic trace. It has no reality outside the human mind. In our society our access to almost everything essential to life--food, shelter, education, healthcare etc.,--depends on money, we have so commoditized these essentials. He calls us to think about "the power over our lives that this gives to those who create money and determine who gets these numbers that we use as money."
Korten states that we have given the power of creation of and access to money to "institutions that are designed to disregard all consequences other than their own financial return." If we actually thought of publicly traded corporations as people, we would have to classify these people as psychopaths. (Cf: The film "The Corporation" showed a similar concept, calling it "the pathology of commerce.")
"To cut through the mess that Wall Street has created, we have to cut through the fallacies and obfuscations."
The idea of money as a reward is a fallacy, according to Korten, because the whole idea of money is to get us to do things we would not otherwise do.
He quoted Sheila Bair, the former chair of the FDIC: "In policy terms, the success of the financial sector is not an end in itself, but a means to an end--which is to support the vitality of the real economy and the livelihood of the American people. What really matters to the life of our nation is enabling entrepreneurs to build new businesses that create more well-paying jobs, and enabling families to put a roof over their heads and educate their children."
"It has become clear," said Korten, "that our money system is not serving that purpose. The whole system is controlled by Wall Street which uses its control of the creation to make more money for itself, so that the lead Wall Street players gain more control of the world's real wealth."
Korten says that the markets can organize in a way that is beneficial to society, but it depends on their organizing structure and framing rules. Korten states that the situation today is starker than that of 1929, the last great crash, which was also due to "Wall Street excess." After 1929, we eventually came up with good answers to the problem, that could serve as current guides. We put in place a highly progressive tax system and strong regulation of Wall Street banks and corporations. The result was a strong system of "Main Street economies," which were rooted in people, community and place, creating the American middle class that was the envy of the world. It also built us the industrial base that made us the leader in technology, and it made the "American dream" a reality for a substantial majority of Americans ("at least Americans with white skin," Korten added.
This economy served us well, Korten said, up until the 1960's, when "Wall Street began mobilizing." The mobilization was "an assault on unions, regulations, the social safety nets, and on taxes on the rich. As their power grew, the Wall Street players became ever skilled at pushing down wages and benefits, eliminating and outsourcing jobs, switching financial markets from long term investment to short term speculation... As wages fell relative to the costs of living, then Wall Street stepped in to loan us money at usurious interest rates, and getting us ever more dependent on borrowing for current consumption, and turning us into a nation of debt slaves."
He cited the fact that banks formerly were community institutions, accountable to the community, focused on local investment. Then power shifted from local communities to global financial institutions centered on Wall Street, and activities shifted from funding productive activity to using money to make money through financial means, without actually producing anything. This led to the financial crash.The New Economy Working Group
Korten cited the recommendations of the The New Economy Working Group, of which he is a member, as a way to recreate a money system that will actually serve community needs.
- Recreate the system of locally rooted community banks, with preference to those organized as cooperatives, or those classified as for-profit, but owned by non-profit organizations. This requires breaking up the big banks, and creating regulations to give advantage to those types of community banks. One can state this simply as "restoring basic, boring banking."
- Establish state-owned partnership banks in each of the fifty states (similar to North Dakota's state bank), to serve as depositories for state financial assets.
- Restructure the Federal Reserve to make it totally transparent, (note: this and the next point were acknowledged as proposed by William Greider).
- Set up a Federal Recovery and Reconstruction Bank, to which the Fed would hand over any newly created money. Anytime it is necessary to increase the money supply, under this new regime, the money would go to this bank, which would have a list of projects to fund, the list to be compiled by Congress, with the focus on green infrastructure projects. Thus, newly created money would flow into the economy via the bottom -- through wages and purchases.
- Rewrite international trade investment rules to support national ownership, local economic self reliance, and self-determination. This is a direct response to the abuse of free trade agreements of the last two decades, which eliminate the ability of nations to regulate their economies, and place global corporations, markets and banks beyond public accountability.
- Implement a series of appropriate regulatory and fiscal measures to secure the integrity of financial markets and the banking system. "Most of what Wall Street does, particularly the speculation, serves no useful purpose, and should be basically eliminated," Korten said.
The response of those on the call to Korten's presentation was to ask, in effect, how do we change things?
- How can this happen without electoral reform?
- How can we focus Occupiers to focus on local and state elections as a starting point?
- Isn't the problem as much due to immoral politicians as it is to Wall Street?
Korten admits these are foundational questions, and does not mean to suggest the task will be easy. But "change begins by changing the conversation," says Korten. Occupiers know that the conversation is about connecting different agendas. The "no demands" nature of the Occupy movement is the power that allows for those connections. People are contributing many activities to restore power to people. When considering Congress, or politicians, the question to ask is why politicians take these actions--Korten says they do it for the same reasons as others do. But if we get wealthier the more we destroy society and the planet, just to accumulate money, then we are all psychopaths.
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