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11.18.2010 - 06:31PM

Category: Sustainability

Capitalism Is Dead; Long Live Capitalism! David Korten's Agenda for a New Economy

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By CSRwire Contributing Writer Francesca Rheannon

Talkback's Francesca Rheannon says the new, updated edition of David Korten's Agenda for a New Economy forges a strong vision of a new, democratic capitalism that can revive the economy and sustain humanity.

David Korten's Agenda for a New Economy: From Phantom Wealth to Real Wealth was first published just three days after Barack Obama's inauguration. Written in response to the financial meltdown that came to a head in the final months before the election, Korten had high hopes the new administration would be friendly to the kind of new economics the book advocates - rooted in local, green economies, distributive justice and priorities that favor Main Street (the "real economy") over Wall Street.

In the new, updated edition, reality has set in for Korten, as it has for many of Obama's supporters. The promise of "change we can believe in" was betrayed, the author notes, at the outset - by the appointments of Larry Summers and Tim Geithner to head up the Obama's economic team. As president he, the candidate who railed against Wall Street's abuses, brought in men who were deeply complicit in the system that created those abuses.

Korten is eloquent in his acid dissection of Wall Street's crimes against the real economy: "It operates as a criminal syndicate engaged in financial scams and extortion rackets that imposed unbearable costs on society while serving no beneficial function not better served in other ways." As succinct a summation as any I have seen.

The full force of economic policy supports the privileging of Wall Street, Korten says, with the Federal Reserve "allied with the U.S. Treasury Department and Wall Street banks to give the creation of Phantom wealth priority over the production of real wealth." Agenda for a New Economy was published before the Fed announced it's intention to do "quantitative easing," but Korten's words are apt. The "easing" aims to re-inflate the asset bubbles that led to the Wall Street meltdown in the first place. It brings to mind Einstein's definition of insanity.

But Korten is intent on more than critique. His book is a clarion call for a grassroots movement to do what the President and Congress seem unable or unwilling to do: to shut down Wall Street and usher in a capitalism that is truer to its original form than the rigged casino that replaced it. The capitalism Adam Smith championed and that built middle class prosperity and democracy is dead, Korten says; it's time to bring it back, reinvigorated and re-tooled for the 21st century, because "the planet cannot sustain capitalism as we know it."

Korten says the remedies are not to be found in either of the two prevailing schools of economic thought - neither the market fundamentalism of the deficit hawks nor the Keynesianism of the big stimulus-boosters that "addresses the underlying institutional, social and environmental foundations of the problem and therefore provide no framework for the needed system redesign."

But what's the alternative? I have struggled for years with the question whether capitalism - in any form - is compatible with a healthy, sustainable society. Communism certainly failed and "socialism" is so broadly defined, it's hard to know what it really means. I own my own business - and I like it. It doesn't seem possible to have a sustainable economy without the innovation and buy-in that comes with private enterprise. Private enterprise always seems to lead to ever greater concentrations of power--and back to oligarchy.

So it was with great interest that I read Korten's analysis of the publicly traded limited liability, private benefit corporation. Korten calls it "an inherently destructive anti-market business form." He parses the power relationships of an economic system as the relevant factor: both communism and capitalist oligarchy are rules by, of, and for an elite, rather than by, of, and for the people. They narrow innovation to what serves them and stifle all else. Think of how GE killed the electric car.

And by contrast, grok the cornucopia of innovation ushered in by the creative anarchy of the Internet. Imagine the Internet if it had been created by Comcast, or NBC, or even (best case scenario!) PBS.

The next relevant factor is to understand what true wealth is. It isn't money, Korten says. "Real wealth has intrinsic value, as contrasted to exchange value," things like land, labor, knowledge and physical infrastructure. The Internet, to stay with the example, could be one of the greatest creators of wealth of all time--and not make a penny for its users.

Debt is useful or harmful depending on whether it creates real wealth or "phantom wealth" - e.g., Korten says, "consumer debt and debt for investment in productive capacity." (A distinction Keynes would approve of.)

For Korten, a sustainable economic system must take life as a defining value. He advocates the state only granting charters of incorporation to companies that can demonstrate they fulfill a public need - as was originally intended in the first articles of incorporation in the U.S., drawn up in Massachusetts. The corporation must be responsible for all its costs - i.e. it must internalize all of them, including the environmental and social. Its power must be balanced by regulation and the empowerment of stakeholders - workers, citizens, consumers and the environment.

In David Korten's new economy, the financial system serves the real economy, rather than the other way around. (William Spademan in Massachusetts is creating a bank; the Common Good Bank embodies this idea.) People won't go into consumer debt, because they won't need to - they will receive a living wage, allowing them to live within their means. Responsible home ownership, Korten writes, is "best advanced by increasing job security, raising wages and maintaining stable housing prices."

The eminent good sense of this, as well as the recognition that it was common practice for decades, underscores just how far under the spell of market fundamentalism delusion our society has come. I'm old enough to remember life B.R. (Before Reagan), when the middle class was flourishing.

It was a time of high taxes on the rich, a large public sector, well-regulated utilities, solvent banks, good jobs, powerful unions, excellent and affordable higher education, and cheap medical care. It shows how far into insanity our economic system has gone since Reagan ushered in the age of deregulation.

The citizens' movement Korten calls for will, he hopes, move policy and private enterprise toward "local and national food independence based on an environmentally-friendly agriculture; local and national energy independence based on retrofitting and renewable energy technologies; trade that returns manufacturing jobs to America; infrastructure development for walkable, bicycle-friendly communities and public transportation; an invigorated middle-class; and finally, a true 'ownership society' with local ownership, cooperative ownership and other forms of community- and worker-owned enterprises."

This vision is not unique to David Korten - it's one a growing number of people are developing and writing about. But he has a knack for messaging it; and, it's a vision worth living for.

About Francesca Rheannon

Talkback's Managing Editor is Francesca Rheannon. An award-winning journalist, Francesca is co-founder of Sea Change Media. She produces the Sea Change Radio's series, Back to The Future, and co-produces the Interfaith Center of Corporate Responsibility's podcast, The Arc of Change. Francesca's work has appeared at SocialFunds.com, The CRO, and E Magazine, and she is a contributing writer for CSRwire. Francesca hosts the nationally-syndicated radio show, Writers Voice with Francesca Rheannon.

This commentary is written by a valued member of the CSRwire contributing writers' community and expresses this author's views alone.

Readers: What are your thoughts on Korten's "agenda"? Weigh in on Talkback.

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