Week of 1.30.09
David Korten: Let Wall Street Fail
It appears that your computer does not have the Flash Player required to view NOW videos. Visit Adobe to download and install the latest version of the Flash Player.Do the measures proposed by the Obama Administration to rein in Wall Street go far enough? Not even close, says David Korten, author and co-founder of Yes! Magazine. Korten—author of the book "Agenda for A New Economy"—explains why he believes the Obama Administration should completely reinvent the financial sector.
Book Excerpt: "Agenda for a New Economy"
The Speech President Obama Should Deliver... But Won't
by David Korten
David Korten's new book Agenda for a New Economy: From Phantom Wealth to Real Wealth outlines an agenda to bring into being a new economy--locally based, community oriented, and devoted to creating a better life for all, not simply increasing profits.
In this special pre-publication excerpt, Korten summarizes his version of the economic address to the nation he wishes Barack Obama were able to deliver.
Barack Obama was elected to the U.S. presidency on a promise of change. Before his inauguration, indeed before his election, I drafted the following as my dream for the economic address he might deliver to the nation during his administration in fulfillment of the economic aspect of that promise. It is the New Economy agenda presented in the style of candidate Obama's political rhetoric.
I suffer no illusion that he will deliver it. He has surrounded himself with advisers aligned with Wall Street interests in an effort to establish public confidence in his ability to restore order in the economy. Because there has been no discussion of any other option, to most people "restoring order" means restoring the status quo with the addition of a job-stimulus package, and that is most likely what he will try to do.
This speech presents the missing option--the program that a U.S. president must one day be able to announce and implement if there is to be any hope for our economic, social, and environmental future.
Here is the address:
My administration came to office with a mandate for bold action at a time when our most powerful economic institutions had clearly failed us. They crippled our economy; burdened governments with debilitating debts; corrupted our political institutions; and threatened the destruction of the natural environment on which our very lives depend.
The failure can be traced directly to an elitist economic ideology that says if government favors the financial interests of the rich to the disregard of all else, everyone will benefit and the nation will prosper. A thirty-year experiment with trickle-down economics that favored the interests of Wall Street speculators over the hardworking people and businesses of Main Street has proved it doesn't work.
We have no more time or resources to devote to fixing a system based on false values and a discredited ideology. We must now come together to create the institutions of a new economy based on a values-based pragmatism that recognizes a simple truth: If the world is to work for any of us, it must work for all of us.
Corrective action begins with recognition that our economic crisis is, at its core, a moral crisis. Our economic institutions and rules, even the indicators by which we measure economic performance, consistently place financial values ahead of life values.
We have been measuring economic performance against GDP, or gross domestic product, which essentially measures the rate at which money and resources are flowing through the economy. Let us henceforth measure economic performance by the indicators of what we really want: the health and well-being of our children, families, communities, and the natural environment.
Like a healthy ecosystem, a healthy twenty-first-century economy must have strong local roots and maximize the beneficial capture, storage, sharing, and use of local energy, water, and mineral resources. That is what we must seek to achieve, community by community, all across this nation, by unleashing the creative energies of our people and our local governments, businesses, and civic organizations.
Previous administrations favored Wall Street, but the policies of this administration henceforth will favor the people and businesses of Main Street--people who are working to rebuild our local communities, restore the middle class, and bring our natural environment back to health.
We will act to render Wall Street's casino-like operations unprofitable. We will impose a transactions tax, require responsible capital ratios, and impose a surcharge on short-term capital gains. We will make it illegal for people and corporations to sell or insure assets that they do not own or in which they do not have a direct material interest.
To meet the financial needs of the new twenty-first-century Main Street economy, we will reverse the process of mergers and acquisitions that created the current concentration of banking power. We will restore the previous system of federally regulated community banks that are locally owned and managed and that fulfill the classic textbook banking function of serving as financial intermediaries between local people looking to secure a modest interest return on their savings and local people who need a loan to buy a home or finance a business.
And last, but not least, we will implement an orderly process of monetary reform. Most people believe that our government creates money. That is a fiction. Private banks create virtually all the money in circulation when they issue a loan at interest. The money is created by making a simple accounting entry with a few computer keystrokes. That is all money really is, an accounting entry.
My administration will act immediately to begin an orderly transition from our present system of bank-issued debt money to a system by which money is issued by the federal government. We will use the government-issued money to fund economic-stimulus projects that build the physical and social infrastructure of a twenty-first-century economy, being careful to remain consistent with our commitment to contain inflation.
To this end I have instructed the treasury secretary to take immediate action to assume control of the Federal Reserve and begin a process of monetizing the federal debt. He will have a mandate to stabilize the money supply, contain housing and stock market bubbles, discourage speculation, and assure the availability of credit on fair and affordable terms to eligible Main Street borrowers.
By recommitting ourselves to the founding ideals of this great nation, focusing on our possibilities, and liberating ourselves from failed ideas and institutions, together we can create a stronger, better nation. We can secure a fulfilling life for every person and honor the premise of the Declaration of Independence that every individual is endowed with an unalienable right to life, liberty, and the pursuit of happiness.
No government on its own can resolve the problems facing our nation, but together we can and will resolve them. I call on every American to join with me in rebuilding our nation by acting to strengthen our families, our communities, and our natural environment; to secure the future of our children; and to restore our leadership position and reputation in the community of nations.
This is an abridged excerpt from David Korten's new book, Agenda for a New Economy: From Phantom Wealth to Real Wealth, to be published by Berrett-Koehler, Feb 2009. This extract forms part of the YES! series, Path to a New Economy. An earlier version of this chapter first appeared as part of David's article in Tikkun, Nov/Dec 2008. David Korten is the author of the international bestseller When Corporations Rule the World and The Great Turning: From Empire to Earth Community. He is co-founder and board chair of YES! Magazine, and a board member of the Business Alliance for Local Living Economies.
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