By David Korten
As part of the New Economy 2.0 series
Few and fortunate are those whose lives have not been directly touched by the September 2008 Wall Street meltdown and its consequences. People want to understand what went wrong and how we can set it right. Yet the public commentary continues to center primarily on finger-pointing. Who knew what when? Which regulators were asleep at the switch, and why?
Most calls for action seek only to limit the excesses and deceptions of greedy bankers and complicit regulators. We have yet to engage a much-needed national conversation that addresses essential, yet unasked, questions. For example:
- Do Wall Street institutions do anything so vital for the national interest as to justify opening the national purse strings and showering them with trillions of dollars in order to save them from the consequences of their own excess?
- Is it possible the whole Wall Street edifice is built on an illusion that has no substance yet carries deadly economic, social and environmental consequences for the larger society?
- Might there be other ways to provide necessary and beneficial financial services with greater effectiveness and at lesser cost?
Ultimately, it comes down to a question of the values we believe the economy should serve. Should it give priority to money or life? To the fortunes of the few, or the well-being of all?
The existing Wall Street-led economy is highly effective and efficient at converting real living wealth to phantom financial wealth to make rich people richer. But it is a path to collective suicide. Our future and that of our children depend on replacing the values and institutions of the Wall Street economy with the culture and institutions of a New Economy designed to provide an adequate and satisfying livelihood for all people in balanced relationship to Earth’s biosphere.
I believe an honest public examination of these questions will lead to a unifying national political consensus that Wall Street institutions produce nothing of value to the society and fulfill no need not better served in other ways. They can and should be replaced with institutions that act like mature, caring adults and serve real needs in ways appropriate to the realities of the 21st century.
We cannot, however, simply let the Wall Street financial institutions collapse as would have happened in 2008 without the Federal bailout. Wall Street controls the creation and flow of the money that facilitates the economic transactions on which we depend for meeting most all our material needs. If its institutions suddenly shut down with no alternative in place, we would be left only the money in our pockets and instantly reduced to barter for most essentials of daily life, including food and water.
The process of shutting down Wall Street properly proceeds in parallel with action to put in place the institutions of a New Economy, including a new system for creating and allocating national currencies in ways more responsive to society’s needs.
Leadership for institutional transformation rarely comes from within the institutions of Empire that bring special privilege to the few and hardship to the many. It invariably comes from authentic grassroots movements that self-organize from outside the establishment to challenge the status quo and create alternative institutions that ultimately displace those that no longer serve.
Efforts to form a social movement to confront the Wall Street–Washington axis are handicapped, however, by the absence of a broadly shared vision of an economic system structured to achieve and maintain financial stability, ecological balance, prosperity for all, and full democratic participation.
As I will elaborate in a future blog post, the true alternative to the Wall Street capitalism that is imposing an intolerable burden on society is not totalitarian Soviet style socialism. It is a system of locally rooted, self-reliant market economies that honor true market principles, operate by clear rules maintained and enforced by truly democratic governments, and mimic the structure and dynamics of Earth’s biosphere.
This is the first of a series of blogs based on excerpts adapted from the 2nd edition of Agenda for a New Economy: From Phantom Wealth to Real Wealth. I wrote Agenda to spur a national conversation on economic policy issues and options that are otherwise largely ignored. This blog series is intended to contribute to that conversation.
About David Korten
David Korten (livingeconomiesforum.org) is the author of Agenda for a New Economy, The Great Turning: From Empire to Earth Community and the international best seller When Corporations Rule the World. He is board chair of YES! Magazine, co-chair of the New Economy Working Group and a founding member of Business Alliance for Local Living Economies (BALLE).
About New Economy 2.0
Visionary economist David Korten introduces a national conversation series, New Economy 2.0, on CSRwire Talkback based on his acclaimed book, Agenda for a New Economy, 2nd edition. For the next several weeks, Korten will summarize the main points and key lessons of each chapter of his book, leading from a dissection of what went wrong in the “phantom wealth Wall Street economy” to the presentation of a vision of a world of real wealth Main Street economies that support strong middle class societies, honor real market principles and work in partnership with Earth’s biosphere.
New Economy 2.0 envisions an economy in which life is the defining value and power that resides in people and communities. It contrasts with the popular New Economy 1.0 fantasy of a magical high-tech economy liberated from environmental reality and devoted to the growth of phantom wealth financial assets.
This exciting, new series is co-published by CSRwire and YES! Magazine.
The arguments presented here are developed in greater detail in Agenda for a New Economy available from the YES! Magazine Web store.