Path to a Peace Economy
David Korten presented the following speech on October 19, 2009 during a keynote lecture at the Economics of Peace Conference in Sonoma, California.
I start with a basic truth. A persistent pattern of violence against people, community, and nature is inherent in the institutional structure of our existing economy.
You don't treat a cancer with Band-Aids, and we can't resolve our current economic crisis with marginal regulatory adjustments. It is time to rethink and restructure.
Our economic institutions have been designed by Wall Street interests to secure personal economic and political power in the hands of members of a small ruling elite. They do it well. Unfortunately, it is the wrong purpose. We need a top to bottom redesign to put in place the institutions of a new economic system, a New Peace Economy, designed to share power and resources in a world that works for all.
So how bad is the failure of our current system? It is public knowledge. A brief review, however, is in order.
The Wall Street financial collapse has stripped tens of millions of previously middle class Americans of their jobs, homes, and retirement assets and plunged them into poverty and despair. The federal government and the Federal Reserve have responded by pouring trillions of dollars into the Wall Street financial institutions that created the crisis with minimal conditions and oversight, all in the hope that some of this money would trickle down as loans to the productive economy. The recipient financial institutions used the money instead to fund acquisitions that make "too big to fail" banks even bigger, pay dividends to shareholders who by market rules should have been wiped out in bankruptcy proceedings, award obscene bonuses to criminally culpable executives, and launch new predatory financial scams that create new systemic risks.
Wall Street says we have now weathered the crisis, which basically means the profits and bonuses of its most rapacious financial institutions have been restored. The jobs, homes, and retirement assets of ordinary Americans have not. To the contrary, job losses, bankruptcies, and housing foreclosures continue.
This, however, is only the tip of the iceberg. In the absence of progressive tax and public service policies, the institutions of the old economy create an ever-growing wealth gap between the profligate few and the desperate many. This obscene injustice is tearing apart the social fabric of family and community essential to a healthy society. The resulting fear, insecurity, and sense of injustice fuel the forces of violence as expressed in terrorism, genocide, political deadlock, and high rates of crime, incarceration, and suicide. All are both consequences and indicators of a failed economic system.
Now we come to the system's ultimate failure: environmental collapse. The rules and institutions of the Old Economy drive endless growth in wasteful and destructive forms of material consumption that deplete soil and water, disrupt climate patterns, and convert Earth's natural capital into toxic garbage, thus reducing Earth's capacity to support life, creating massive human displacement, and intensifying a violent competition for Earth's remaining resources that finds expression in bloated military budgets and wars of occupation.
Start with virtually any dysfunction or injustice in our society and it traces back to a failed economic system. Follow the money, and it leads ultimately to Wall Street.
A Failed Experiment
For some thirty years, we have been engaged as a nation and as a species in a social engineering experiment to test the claims of an extremist economic ideology known as market fundamentalism.
Ideology of the Sociopath
You've heard the sermon preached by its most fanatic true believers:
There is no public interest—only an aggregation of private interests, which are best served when we each pursue our individual greed in a marketplace unfettered by rules and other forms of government interference. Public assets must be privatized to increase their productivity and efficiency by selling them to the highest bidder. The faster we consume, the faster the economy grows and the wealthier we become as a rising tide lifts all boats.
Inequality is essential to social order and prosperity. It provides us with wealthy investors able to bear the risks of investing in the creation of jobs and a working class motivated by economic insecurity to work hard at those jobs at a globally competitive wage. There is no alternative. If a few get rich, instead of condemning them out of envy—which is a mortal sin—celebrate their good fortune, because as the rich get richer, wealth trickles down and we all get richer. In America, anyone can succeed who applies himself. Failure is a sign of a flawed character.
Is this story familiar? It is no mystery why this economic theology leads to ruthless competition, obscene accumulation, and reckless consumption that destroys the environment and tears apart the social fabric. It embodies the moral philosophy of the sociopath.
It is now time to acknowledge the lessons of this disastrous experiment. Markets do have an essential role in a healthy economy, but market extremism does not. It turns out that markets do need rules, there is an essential role for government, we all have more when resources are shared, and Jesus and the other great religious teachers were right. We are members of a community and we all do better when we care for one another and act with mindful consideration of the needs of others.
Wall Street as Operating System
The institutions of the economy determine how, as a society, we allocate whatever resources are available to us. In an earlier time, we organized ourselves into clans and tribes in which we cared for one another and allocated resources to secure the well-being of all. Resource allocation decisions were local and relationships were mediated by bonds of mutual caring and security. Money in the earliest human societies was unknown. In our current society, most relationships on which we depend for the basics of survival, including food, water, shelter, and health care, are mediated by money. This gives enormous power to those who control the creation and allocation of money. In our country, that would be Wall Street.
To use a computer analogy, the Wall Street financial system has become the operating system of the economy and the society. The values and priorities of Wall Street thus become the defining values and priorities of the larger society. Wall Street has one value—money—and one goal: to maximize financial returns to those who control the money system. Social or environmental consequences find no place in Wall Street decision making.
A Choice-Making Species
In a few minutes, I will take up the question of how we can change this. In the meantime, I want to put our situation in its deeper historical, evolutionary, and spiritual context. For the past 5,000 years, we humans have been living in a cultural trance of our own making that alienates us from the land, our true nature, and our place in the cosmos.
So who are we humans? From where did we come? And for what purpose? Here is how I understand the big story based on the data of science, the wisdom of indigenous peoples, and the teachings of Jesus and other mystics.
Hundreds of thousands of years ago, the Great Integral Spirit that expresses itself through what we know as creation embarked on a bold and risky experiment in reflective consciousness: bringing forth a species able to step back and to reflect on creation in awe and wonder and to participate as a conscious co-creator in the continued creative unfolding. We humans are that species.
Our reflective consciousness gives us the capacity to choose our future with conscious collective intent. It was a risky experiment, however, because the capacity for self-awareness gives us an ego that can run out of control if it forgets it exists only as part of a larger whole.
In our earliest days, we humans raised our children collectively in the clan, tribe, or village, initiating them to the ways of life and the need to care for our Earth Mother as she in turn cares for us.
Over millennia, as our human consciousness was awakening and our capacities for self-direction grew, we learned to communicate through speech, master fire, domesticate plants and animals, and construct houses of skins, wood, stone, and dried mud. We developed the arts of pottery, painting, weaving, and carving. We undertook vast continental and transcontinental migrations to populate the planet and adapted to vastly different physical topographies and climates. We created complex languages and social codes that allowed for life in larger communities.
Then, some 5,000 years ago, something began to go terribly wrong. We turned from the ways of Earth Community and embraced the ways of Empire. It was a time of separation and forgetting. Community, partnership, and the celebration of life gave way to individualism, domination, and violence.
The few expropriated the wealth of the many. The masculine drove out the feminine. We continued to worship the Sky Father, but turned against our Earth Mother. We came to value the power to kill and destroy more highly than the ability to create and nurture life. Conquest became the measure of greatness. Economies came to be based on servitude and eventually money became the prime arbiter of human relationships.
Consider the dynamics inherent in a dominator system. With a few on the top and the many on the bottom, everyone is placed in competition with everyone else for the favored positions and the bonds of caring and sharing are broken. The creative energy of the species is redirected from securing the well-being of the tribe to advancing the technological instruments of war and the social instruments of domination.
The winners expropriate the available resources to maintain the system of domination. Positions of power are too often claimed by the most ruthless and psychologically damaged members of society. And so it has been for 5,000 years
If this discussion of Empire sounds familiar, it is for good reason. The kings and emperors have been replaced by corporate CEOs and hedge fund managers, but we are still living in the Era of Empire—and the basic dynamics still hold.
In the past 100 years, we humans have achieved technological mastery beyond the imagination of previous generations. Yet, lacking in the wisdom of place and community that is the heritage of indigenous peoples, the cultures we call mainstream have lost their way—forgetting what it means to be human and denying our connection to the web of planetary life. The time has come to rediscover our humanity and bring ourselves back into balance with our living Earth Mother. Creation has presented us with our final examination to determine whether we are a species worthy of survival. We must not, need not, fail.
When Money Rules
At its core, our current economic crisis is a spiritual crisis framed by this well-known scriptural verse from the Sermon on the Mount:
No one can serve two masters: for either he will hate the one, and love the other; or else he will hold to the one, and despise the other. Ye cannot serve God and mammon. Matthew 6:24.
Mammon refers to wealth as an object of worship; the worship of a false god; a form of demonic possession; an evil force in opposition to Life.
Our worship of Mammon is the consequence of an illusion: the illusion that money is wealth and that making money is synonymous with producing wealth. The truth, as Wall Street has so dramatically demonstrated, is very different. Money isn't wealth, and it is quite easy to make lots of money without producing anything of value to the larger society. Money, the most mysterious of human inventions, a magical number of no meaning or existence outside the human mind, has displaced life as our object of sacred veneration and become the ultimate arbiter of human priorities. Money determines the fate of nations and shapes the boom and bust cycles of economic life. It allows some to live in grand opulence in the midst of scarcity, while confining others to death by starvation in the midst of plenty.
This is money as a system of power, a tyranny all the more complete because it is largely invisible to those it enslaves. To liberate ourselves from the tyranny, we must demystify money and recognize that it is a mere number created from nothing with a simple accounting entry when a bank issues a loan. As economist John Kenneth Galbraith once famously observed, the process by which money is created is "so simple it repels the mind."
When you take out a loan from a bank, the bank opens an account in your name and enters the amount of the loan in its ledger. That becomes a liability on the bank's accounts, offset by the corresponding asset of your promise to repay with interest. Two simple accounting entries, and money magically appears from nowhere. This simple fact makes banking a very profitable business and is the key to the ability of the institutions of Wall Street and its global counterparts to rule the world.
Mayer Amschel Rothschild, founder of the Rothschild banking dynasty, once famously said, "Permit me to issue and control the money of a nation and I care not who makes its laws."
That pretty well sums it up. In our current system, this control is centralized in and monopolized by Wall Street institutions that value only money and seek only private accumulation. From a societal perspective it is a devastatingly unwise and destructive arrangement.
Money, particularly money that is created out of nothing without any contribution to the creation of anything of corresponding value, is phantom wealth—it has no substance or intrinsic utility. Creating phantom wealth is a Wall Street specialty. They call it financial innovation. I call it theft.
A Real Wealth Economy
So what is real wealth? We might say it is anything that has a real intrinsic value: land, labor, knowledge, food, education.
Most valuable of all are those forms of wealth that are beyond price: Love, a healthy, happy child, a job that provides a sense of self-worth and contribution, membership in a strong caring community, a healthy vibrant natural environment, peace—none of which find any place on Wall Street balance sheets or in our calculations of GDP.
Pull back the curtain, as the financial crash has done, and the truth is revealed that Wall Street acquires its power by destroying real living wealth to create phantom financial wealth. Wall Street is more than immoral, it is an institutional manifestation of evil.
So what will the New Economy look like, and how will we achieve it?
We begin with a recognition that the old economy is based not only on the illusion that money is wealth, but as well the illusion that we live in a world of open frontiers with endless abundant resources free for the taking. We are only now as a species awakening to the reality that we are passengers on a living spaceship and must learn to live in balanced relationship with our local ecosystems everywhere, working with nature to reuse and recycle everything and to eliminate the release of any substance that nature cannot readily absorb and detoxify.
Spaceship Earth, our Birth Mother, is endowed with a wondrous self-managing, self-regulating life support system that has nourished us as a species through the years of our growing up. As a loving parent, she has absorbed the insults and injuries of our reckless adolescent behavior. Our numbers and the power of our technology, however, now exceed her capacity to absorb.
We must now restructure our economic institutions to align with three foundational principles: Ecological balance. Shared prosperity. And living democracy. Let's take them one by one.
- Ecological Balance: It's spaceship management 101. We must bring ourselves into balance with Earth's life support system-the biosphere. This requires something you don't normally hear mentioned at economics conferences. We need to reduce aggregate human consumption, global GDP, starting with the most profligate nations. I'll say more about this later. Follow me closely here: We must simultaneously redesign our human economies to function everywhere as subsystems of the local ecosystems that comprise Earth's biosphere.
Shared Prosperity: As we act to reduce aggregate consumption, we need to recognize that Earth's bounty is the shared birthright of all living beings and learn to share it equitably to the benefit of all. The potential benefits of sharing prosperity go far beyond securing our mutual survival. According to a massive body of public health research, people in societies in which wealth and work are equitably shared enjoy greater physical and emotional health, stronger families and communities, less violence, and healthier natural environments than people in more unequal societies. Societies that are more equal are also more democratic and more resilient in the face of crisis.
This has important implications for those of us who live in the United States. UK social epidemiologist Richard Wilkinson observes that among the world's 30 richest countries we in the United States are number one in many things, including homicide rates, teenage pregnancy rates, rates of imprisonment, and numerous other social dysfunctions. We are also number one in the size of the income gap between our richest and poorest members. This is not a coincidence.
The reason is simple. Greater inequality means greater psychological and emotional stress and insecurity for everyone, including for those at the top. Great sharing means less stress and insecurity.
- Living Democracy means exactly what it says: living democracy as a daily practice of civic engagement. In a living democracy, popular sovereignty is integral to the fabric of community life. Living democracies celebrate and affirm diversity within a framework of individual rights, community responsibility, and mutual accountability. Their political and economic institutions support local decision making within a framework of cooperation and mutually agreed rules.
Ecological Balance, Shared Prosperity, and Living Democracy: three foundational principles of the new living peace economies on which the human future depends.
A Familiar Alternative
Those of us who came of age during the latter part of the twentieth century were taught that we are limited to a choice between two economic models: the model of Wall Street capitalism or the model of Soviet communism. We in the West chose Wall Street capitalism based on the false claim that capitalism is the natural champion of democracy and market choice. Now we see the reality that when Wall Street capitalism has its way, our political choices are limited to politicians who serve Wall Street interests and our market choices are limited to those that generate the greatest Wall Street profits.
Living Market Economies
We're not supposed to notice that both capitalism and communism, as we have known them, are simply alternative models of elite rule.
We have another option that is rarely mentioned, a planetary system of local living market economies that distribute and root decision-making power everywhere in inclusive, democratic, place-based living Earth communities, much in the manner of healthy ecosystems.
Many of the features of this New Economy option are more familiar than we might at first realize. They bear substantial resemblance to the Main Street economies many of us knew as we were growing up in the 1950s, 60s, and 70s.
The America We Once Knew
Although we had not yet dealt as a nation with crucial issues of race, gender, and the environment, the market rules of that day protected the public interest as we then understood it. Strong labor unions secured worker rights and assured a living wage. Our middle class was the envy of the world.
Banks were local and strictly regulated. Anti-trust protected the public from the abuse of corporate monopoly power. Cities and towns had vibrant lively Main Street economies served by local independent businesses that were accountable to the community and honored community values. And imagine this: Many insurance companies, hospitals, and financial institutions were organized as nonprofit cooperatives accountable to their members.
Most manufacturing was domestic, much of our food production was local, and we had a positive trade balance. Few families needed more than one car and per capita energy use was modest by current standards. There was substantial non-market household production and the typical wage for one employed working person was adequate to support a family.
Wall Street Take-Over
From the late 70s onward, Wall Street market fundamentalists mobilized to roll back the rules to unleash a consolidation of corporate power and de-link it from public accountability. Their right-wing social-engineering experiment allowed Wall Street to colonize the Main Street economy, decimated the middle class, undermined democracy and sense of community, reduced our national happiness index, and brought financial, social, and environmental devastation wherever it has reached.
Markets can and do support individual liberty and the public interest, but only when they operate within a framework of appropriate market rules and are complemented and supported by strong, democratically elected governments that enforce these rules and assure the provision of essential public services and infrastructure.
Appropriate rules support local ownership, bar private monopolies except within a strong regulatory framework, secure cost internalization and balanced trade among communities and nations, and prohibit monopoly pricing, market manipulation, and financial speculation.
We hear frequent reference these days to a distinction between the Wall Street economy and the Main Street economy. The difference is crucial.
Wall Street is in the business of using money to make money for people who have money without the burden of producing anything of value in return. Wall Street creates money out of nothing, engages in predatory lending at exorbitant interest rates, and uses its control of money to hold the public purse hostage to its demands. It is best understood as a criminal syndicate engaged in counterfeiting, usury, tax evasion, fraud, and extortion rackets—and should be treated accordingly.
Liberating Main Street
The Main Street economy is comprised of local businesses and working people engaged in producing real goods and services to meet real needs and providing meaningful, secure, family wage employment for the people of their communities. It is the logical foundation on which to build a new real wealth economy of green jobs, responsible community-oriented businesses, and sound environmental practices. Although devastated by the predatory intrusions of Wall Street corporations, it is now in revival as communities all across the nation rally to declare their independence from Wall Street and rebuild the community-serving economies they once knew.
No Wall Too Tall
Bringing down Wall Street may seem a daunting challenge to some of you. To get ourselves in the right spirit, I want to share an inspirational song by Raffi that he recorded to celebrate the launch of Agenda for a New Economy at the Trinity Wall Street Episcopal Church last January. It's called "No Wall Too Tall." Get up and dance with me as you listen to the words.
How many of you here grew up on Raffi's music or have children who did? Raffi is currently devoting his life to an initiative he calls Child Honoring based on the simple truth that a world that works for all the children will work for everyone.
A Three Part Strategy
So how can we bring down Wall Street's imperial tyranny?
We the people, as global civil society, are engaging this challenge on three strategic fronts:
We are changing the defining stories of the mainstream culture. It is a simple but rarely noted truth that every great transformational social movement begins with a conversation aimed at challenging a prevailing cultural story. The civil rights movement changed the story on race. The environmental movement changed the story about the human relationship to nature. The women's movement changed the story on gender. Our current task is to change the prevailing stories about the nature of wealth, the purpose of the economy, and our human nature. YES! Magazine and my most recent book Agenda for a New Economy are useful tools for organizing the necessary conversations.
- We are creating a new economic reality from the bottom up as millions of people the world over are working to strengthen locally owned human-scale business and family farms, developing local financial institutions, reclaiming farm and forest lands, changing land use policies to concentrate population in compact communities that reduce automobile dependence, retrofitting their buildings for energy conservation, and otherwise moving toward local self reliance in food, energy, and other basic essentials. The Business Alliance for Local Living Economies (BALLE) is building a national support system for these initiatives.
- We are changing the rules: Current law and public policy largely favor the Wall Street economy to the exclusion of Main Street economy. We must work together to promote and support political action at local, national, and global levels to change the balance in the favor of Main Street.
A New Economy Agenda
I'm currently focusing my energy on the New Economy Working Group, a partnership between Institute for Policy Studies in Washington DC, YES! Magazine, the Business Alliance for Local Living Economies, and the PCDForum. We are working to articulate a comprehensive New Economy agenda. Here are five essential elements:
1. Implement Living Wealth Indicators as the basis for evaluating economic performance: Because we get what we measure, we should measure what we want. We currently evaluate economic performance against GDP, which is an indicator of the rate at which the economy is extracting useful resources from nature, converting them to saleable products, and disposing of them as toxic waste into our air, water, and soils—all for the primary purpose of making rich people richer. And this is what we get.
Stock price indices, another favorite indicator, measure the rate at which people who own financial assets are increasing their economic advantage over everyone else.
Imagine how different things would be if we designed and managed the economy to maximize indicators of the health and vitality of our children, families, communities, and natural systems—while simultaneously reducing environmental burdens by redistributing available resources from destructive and non-essential uses to beneficial ones that improve the quality of life for everyone, create meaningful beneficial jobs, and heal the environment.
We can end war and convert to a peace economy; reorganize our infrastructure to eliminate automobile-dependence; curtail advertising and redirect those creative and media resources to education; end financial speculation and redirect investment to productive sustainable enterprises devoted to meeting community needs. This list is just a start. It is about setting sensible priorities.
2. Create a Real Wealth Money System: Last night Don Shaffer spoke of redirecting the flow of money from global to local financial markets and moving from complex, opaque, anonymous, short-term financial relationships to direct, transparent, personal, and long-term financial relationships. This defines our charge for redesigning and restructuring our systems of money creation and allocation.
Our existing Wall Street financial system centralizes the power to create and allocate money in an interlinked institutional system of mega-banks, hedge funds, private equity funds, the Federal Reserve, and captive regulatory bodies operating in secret beyond public oversight and accountability that I earlier described as a criminal syndicate.
The Bush and Obama administrations both pumped literally trillions of dollars of bailout money into the corrupt Wall Street financial institutions responsible for the current economic mess. Note here the essential difference between the bailout money and the Obama stimulus money. Bailout money goes to Wall Street financial institutions in the hope that some of it will trickle down to Main Street in the form of loans. Stimulus money bypasses Wall Street and directly funds the creation of productive jobs to create beneficial goods, services, and public infrastructure projects.
So imagine that instead of a bailout for the corrupt banks that caused the crash, the government had taken them over, broken them up, and spun off the pieces as individual community-based financial institutions—community banks, savings and loans, and credit unions. Some might be organized as private for-profits. Others as nonprofits or cooperatives. Some might be owned by state or local governments. All would function as properly regulated, community accountable public utilities.
Now imagine that the trillions of dollars that went to bailing out Wall Street banks had instead been added to the stimulus package to directly help homeowners facing foreclosure, create new jobs, and to fund education, health care, and public infrastructure. Further, imagine that the recipients of the stimulus money then deposited a portion of it as savings in these community financial institutions to be continuously recycled as low interest or no interest loans to grow local businesses, expand home ownership, and finance public investment. How different things might now be.
Here is a really radical idea: Let's federalize the Federal Reserve and make money supply management and banking oversight transparent and publicly accountable federal functions. Why should the federal government borrow and pay interest on money created with an accounting entry by private banks, thus condemning our children to perpetual debt slavery to private banks and foreign countries, when it is within the means of the government to make the accounting entry itself?
3. Share the Wealth: As noted earlier, we all do better when we share the wealth. So let's do it with:
- Income and employment policies that assure every person who needs employment access to employment that provides a living wage.
- Progressive taxation and public services policies that continuously recycle wealth from those at the top who have more than they need to those at the bottom who have less than they need.
- Land use and regional development policies that limit sprawl and support compact multi-strata development that prevents geographical division by class and race.
Ownership policies that eliminate the class divide between owners and workers by encouraging every owning person to do productive work and every working person to be an owner.
4. Favor Businesses Organized as Living Enterprises for which the primary business purpose is to serve the community and profit is a means, not an end. Cooperative, worker, and local public ownership models sensibly and appropriately link business interests to community interests. We can and should make them our favored enterprise models.
5. Change the Global Rules to Support Local Control and Regional Self-Reliance: Current global economy rules and institutions that put the economic rights of global financiers and corporations ahead of the economic rights of ordinary people, place-based communities, and even nations. They have it backwards. The rules and institutions of living peace economies properly support democratic self-determination at local, regional, and national levels, keep trade fair and balanced, favor local over global businesses, and facilitate the sharing of information and beneficial technology.
The goal is to shift the economic system's defining value from money to life, its locus of economic decision making from global to local institutions, its favored dynamic from competition to cooperation, and its primary purpose from growing the individual financial fortunes of the few to building living community wealth to secure the health and well-being of everyone. It is ours to so choose and create.
How to Engage
You will find further information on everything I've covered here in Agenda for a New Economy. Buy a copy, download a discussion guide from davidkorten.org, and organize a discussion group to engage your friends, colleagues, and neighbors in an exploration of the new economy alternatives.
People are always asking, "What else can I do?" I recommend YES! Magazine as the place to start. Each issue is filled with stories of possibility and ideas for action. Visit the "Path to a New Economy" section of the YES! website.
Part of growing up human is putting aside the ways of our childhood to embrace the more inclusive values and responsibilities of adulthood. Our time has come to grow up as a species coming of age on a small planet. This is the larger challenge before us. In a very real sense, it is about growing up spiritually to recognize and accept our place within the larger scheme of creation.
As we engage this challenging work in its many dimensions, we must constantly remind ourselves that we are privileged to live at the most dangerous—but also the most exciting—moment of creative opportunity in the whole of the human experience. We have the power to turn this world around for the sake of ourselves, our children for generations to come, and the continued creative unfolding of life on Earth. We are the ones we've been waiting for. Thank you.