(Photo:flickr/Michael Aston)
May 04, 2011
I'm sometimes called an economist because I write and speak about economic issues. The discipline for which I received my academic training, however, is organizational systems design. I view the economy through an institutional design lens.
As a Harvard Business School professor in the early 1970s, I taught the art of structuring human relationships in corporations to maximize profit. Partly, that involves getting the incentives right; it also involves culture, authority, communication flows, and a host of other influences subject to management intervention.
The same intellectual tools can be used to design the institutional structures of societies--either to consolidate the power and privilege of the ruling elites or to share power and facilitate creative, democratic self-organization directed to enhancing a community's well-being. Institutional systems can also be designed to maximize the rate of consumption of real wealth to create phantom wealth, or to meet the needs of all in balanced relationship with the biosphere.
A focus on designing economic systems to maximize private financial return has given us the Wall Street dominated system that drives a violent competition for resources; a global race to the bottom on wages, benefits, environmental standards; flagrant excesses for the few, misery for the many; and insecurity for all.
Worst of all, this system has no built in capacity to self-correct. Its decision makers are insulated from the social and environmental consequences of their decisions. Concerns for unemployment, family and community breakdown, collapsing fisheries, and melting glaciers find no place in their decisions. Indeed, the system rewards the decision makers most generously when their actions inflate financial bubbles and thereby assure eventual system collapse. In A Short History of Financial Euphoria, Keynesian economist John Kenneth Galbraith documents this pattern playing out in finance capitalism's repeated cycles of boom and bust over a period of more then 360 years.
Our design goal for the New Economy is a system that will self-organize toward:
- Earth Balance between aggregate human consumption and the regenerative capacity of Earth's biosphere. Achieving Earth Balance will require restoring our sense of place, reducing aggregate material consumption by eliminating wasteful and destructive resource use, and investing in restoration of healthy ecosystem function.
- Shared Prosperity through the equitable distribution of real wealth and opportunity to secure for everyone access to the essential means for healthy and fulfilling lives. Achieving shared prosperity will require recognition that no individual is born with a natural right to a greater share of the common heritage wealth of society or nature than any other and that more equal societies enjoy greater physical and emotional health, stronger families and communities, less violence, and healthier natural environments.
- Living Democracy through the active and equitable engagement of every person in making the political and economic decisions that bear on their health and happiness. It manifests the ultimate ideal of popular sovereignty--government of the people, by the people, for the people--and is built on the caring relationships of family and community. Its realization depends on acceptance of the moral responsibility of every individual to act with regard to the needs and well-being of others.
As we restructure our human economies to support these conditions, they will increasingly mimic and integrate with the biosphere's natural structures and processes.
Like the biosphere, the living economies we seek will self-organize within a framework of market rules. Rooted locally everywhere and dependent primarily on their own resource base, they will have built in incentives to optimize creative adaptation to local microenvironments. With the decision-making powers of ownership distributed among the community's members in their multiple roles as producers, consumers, and citizens there will be a natural incentive to internalize costs and manage resources responsibly.
The culture of a living economy recognizes the mutual responsibility of individuals to meet their own needs in ways that contribute to the well-being of the whole and thereby optimize their own well-being. Business enterprises are expected to do the same. Making a profit is recognized as essential to the health of the enterprise, but is not its sole or primary purpose.
These outcomes are wholly beyond the reach of an economic system in which the locus of power resides in global financial institutions that recognize only financial values and seek only individual financial gain.
They depend on complex processes of self-organizing adaptation that are possible only within place-based caring communities built around institutions that nurture and reward adult responsibility and link decisions to consequences. It is fundamentally a question of life-values and shared power, both of which are long standing human ideals that we now have both the imperative and means to put into practice.
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This article was written for YES! Magazine, a national, nonprofit media organization that fuses powerful ideas and practical actions. Licensed under a Creative Commons Attribution-Share Alike 3.0 License.
David Korten
Dr. David C. Korten is a former Harvard Business School professor, a member of the Club of Rome, a founding member of the Alliance for Ecological Civilization, president of the Living Economies Forum, author of the international best-selling books When Corporations Rule the World; The Post-Corporate World: Life After Capitalism; and The Great Turning: From Empire to Earth Community; and the white papers “Ecological Civilization” and “Eco-nomics for an Ecological Civilization,” which expand on the concepts presented here.
I'm sometimes called an economist because I write and speak about economic issues. The discipline for which I received my academic training, however, is organizational systems design. I view the economy through an institutional design lens.
As a Harvard Business School professor in the early 1970s, I taught the art of structuring human relationships in corporations to maximize profit. Partly, that involves getting the incentives right; it also involves culture, authority, communication flows, and a host of other influences subject to management intervention.
The same intellectual tools can be used to design the institutional structures of societies--either to consolidate the power and privilege of the ruling elites or to share power and facilitate creative, democratic self-organization directed to enhancing a community's well-being. Institutional systems can also be designed to maximize the rate of consumption of real wealth to create phantom wealth, or to meet the needs of all in balanced relationship with the biosphere.
A focus on designing economic systems to maximize private financial return has given us the Wall Street dominated system that drives a violent competition for resources; a global race to the bottom on wages, benefits, environmental standards; flagrant excesses for the few, misery for the many; and insecurity for all.
Worst of all, this system has no built in capacity to self-correct. Its decision makers are insulated from the social and environmental consequences of their decisions. Concerns for unemployment, family and community breakdown, collapsing fisheries, and melting glaciers find no place in their decisions. Indeed, the system rewards the decision makers most generously when their actions inflate financial bubbles and thereby assure eventual system collapse. In A Short History of Financial Euphoria, Keynesian economist John Kenneth Galbraith documents this pattern playing out in finance capitalism's repeated cycles of boom and bust over a period of more then 360 years.
Our design goal for the New Economy is a system that will self-organize toward:
- Earth Balance between aggregate human consumption and the regenerative capacity of Earth's biosphere. Achieving Earth Balance will require restoring our sense of place, reducing aggregate material consumption by eliminating wasteful and destructive resource use, and investing in restoration of healthy ecosystem function.
- Shared Prosperity through the equitable distribution of real wealth and opportunity to secure for everyone access to the essential means for healthy and fulfilling lives. Achieving shared prosperity will require recognition that no individual is born with a natural right to a greater share of the common heritage wealth of society or nature than any other and that more equal societies enjoy greater physical and emotional health, stronger families and communities, less violence, and healthier natural environments.
- Living Democracy through the active and equitable engagement of every person in making the political and economic decisions that bear on their health and happiness. It manifests the ultimate ideal of popular sovereignty--government of the people, by the people, for the people--and is built on the caring relationships of family and community. Its realization depends on acceptance of the moral responsibility of every individual to act with regard to the needs and well-being of others.
As we restructure our human economies to support these conditions, they will increasingly mimic and integrate with the biosphere's natural structures and processes.
Like the biosphere, the living economies we seek will self-organize within a framework of market rules. Rooted locally everywhere and dependent primarily on their own resource base, they will have built in incentives to optimize creative adaptation to local microenvironments. With the decision-making powers of ownership distributed among the community's members in their multiple roles as producers, consumers, and citizens there will be a natural incentive to internalize costs and manage resources responsibly.
The culture of a living economy recognizes the mutual responsibility of individuals to meet their own needs in ways that contribute to the well-being of the whole and thereby optimize their own well-being. Business enterprises are expected to do the same. Making a profit is recognized as essential to the health of the enterprise, but is not its sole or primary purpose.
These outcomes are wholly beyond the reach of an economic system in which the locus of power resides in global financial institutions that recognize only financial values and seek only individual financial gain.
They depend on complex processes of self-organizing adaptation that are possible only within place-based caring communities built around institutions that nurture and reward adult responsibility and link decisions to consequences. It is fundamentally a question of life-values and shared power, both of which are long standing human ideals that we now have both the imperative and means to put into practice.
David Korten
Dr. David C. Korten is a former Harvard Business School professor, a member of the Club of Rome, a founding member of the Alliance for Ecological Civilization, president of the Living Economies Forum, author of the international best-selling books When Corporations Rule the World; The Post-Corporate World: Life After Capitalism; and The Great Turning: From Empire to Earth Community; and the white papers “Ecological Civilization” and “Eco-nomics for an Ecological Civilization,” which expand on the concepts presented here.
I'm sometimes called an economist because I write and speak about economic issues. The discipline for which I received my academic training, however, is organizational systems design. I view the economy through an institutional design lens.
As a Harvard Business School professor in the early 1970s, I taught the art of structuring human relationships in corporations to maximize profit. Partly, that involves getting the incentives right; it also involves culture, authority, communication flows, and a host of other influences subject to management intervention.
The same intellectual tools can be used to design the institutional structures of societies--either to consolidate the power and privilege of the ruling elites or to share power and facilitate creative, democratic self-organization directed to enhancing a community's well-being. Institutional systems can also be designed to maximize the rate of consumption of real wealth to create phantom wealth, or to meet the needs of all in balanced relationship with the biosphere.
A focus on designing economic systems to maximize private financial return has given us the Wall Street dominated system that drives a violent competition for resources; a global race to the bottom on wages, benefits, environmental standards; flagrant excesses for the few, misery for the many; and insecurity for all.
Worst of all, this system has no built in capacity to self-correct. Its decision makers are insulated from the social and environmental consequences of their decisions. Concerns for unemployment, family and community breakdown, collapsing fisheries, and melting glaciers find no place in their decisions. Indeed, the system rewards the decision makers most generously when their actions inflate financial bubbles and thereby assure eventual system collapse. In A Short History of Financial Euphoria, Keynesian economist John Kenneth Galbraith documents this pattern playing out in finance capitalism's repeated cycles of boom and bust over a period of more then 360 years.
Our design goal for the New Economy is a system that will self-organize toward:
- Earth Balance between aggregate human consumption and the regenerative capacity of Earth's biosphere. Achieving Earth Balance will require restoring our sense of place, reducing aggregate material consumption by eliminating wasteful and destructive resource use, and investing in restoration of healthy ecosystem function.
- Shared Prosperity through the equitable distribution of real wealth and opportunity to secure for everyone access to the essential means for healthy and fulfilling lives. Achieving shared prosperity will require recognition that no individual is born with a natural right to a greater share of the common heritage wealth of society or nature than any other and that more equal societies enjoy greater physical and emotional health, stronger families and communities, less violence, and healthier natural environments.
- Living Democracy through the active and equitable engagement of every person in making the political and economic decisions that bear on their health and happiness. It manifests the ultimate ideal of popular sovereignty--government of the people, by the people, for the people--and is built on the caring relationships of family and community. Its realization depends on acceptance of the moral responsibility of every individual to act with regard to the needs and well-being of others.
As we restructure our human economies to support these conditions, they will increasingly mimic and integrate with the biosphere's natural structures and processes.
Like the biosphere, the living economies we seek will self-organize within a framework of market rules. Rooted locally everywhere and dependent primarily on their own resource base, they will have built in incentives to optimize creative adaptation to local microenvironments. With the decision-making powers of ownership distributed among the community's members in their multiple roles as producers, consumers, and citizens there will be a natural incentive to internalize costs and manage resources responsibly.
The culture of a living economy recognizes the mutual responsibility of individuals to meet their own needs in ways that contribute to the well-being of the whole and thereby optimize their own well-being. Business enterprises are expected to do the same. Making a profit is recognized as essential to the health of the enterprise, but is not its sole or primary purpose.
These outcomes are wholly beyond the reach of an economic system in which the locus of power resides in global financial institutions that recognize only financial values and seek only individual financial gain.
They depend on complex processes of self-organizing adaptation that are possible only within place-based caring communities built around institutions that nurture and reward adult responsibility and link decisions to consequences. It is fundamentally a question of life-values and shared power, both of which are long standing human ideals that we now have both the imperative and means to put into practice.
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