It's Time to Build a New Economic Model
If we are to slow and ultimately reverse the social and environmental disintegration we see around us, we must change the rules to curb the pervasive abuse of corporate power that contributes so much to those harms.
Taming corporate power will slow the damage. It will not be sufficient, however, to heal our relationships with one another and the Earth and bring our troubled world into social and environmental balance. Corporations are but instruments of a deeper social pathology revealed in a familiar story our society tells about the nature of prosperity.
Empire Prosperity Story
The prevailing prosperity narrative has many variations, but these are among its essential elements:
- Economic growth fills our lives with material abundance, lifts the poor from their misery, and creates the wealth needed to protect the environment.
- Money is the measure of wealth and the proper arbiter of every choice and relationship.
- Prosperity depends on freeing wealthy investors from taxes and regulations that limit their incentive and capacity to invest in creating the new jobs that enrich us all.
- Unregulated markets allocate resources to their most productive and highest value use.
- The wealthy deserve their riches because we all get richer as the benefits of the investments of those on top trickle down to those on the bottom.
- Poverty is caused by welfare programs that strip the poor of motivation to become productive members of society willing to work hard at the jobs the market offers.
Earth Community Prosperity Story
Consider these elements of a contrasting life-serving prosperity story that looks to life, rather than money, as the true measure of wealth.
- Healthy children, families, communities, and ecological systems are the true measure of real wealth.
- Mutual caring and support are the primary currency of healthy families and communities, and community is the key to economic security.
- Real wealth is created by investing in the human capital of productive people, the social capital of caring relationships, and the natural capital of healthy ecosystems.
- The end of poverty and the healing of the environment will come from reallocating material resources from rich to poor and from life-destructive to life-nurturing uses.
- Markets have a vital role, but democratically accountable governments must secure community interests by assuring that everyone plays by basic rules that internalize costs, maintain equity, and favor human-scale local businesses that honor community values and serve community needs.
- Economies must serve and be accountable to people, not the reverse.
The High Cost of Making Money
It took me many years in my work abroad as a member of the foreign aid establishment to wake up to the fallacy of the Empire story--the idea that advancing economic growth by maximizing returns to money is the key to ending poverty and healing the environment. The epiphany came during a conference in Asia at which nongovernmental organizations were presenting case studies of the social and environmental consequences of large aid-funded development projects undertaken to promote economic growth. In case after case, the projects displaced poor people and disrupted essential environmental processes to produce benefits for those already better off.
Eventually I came to realize that conventional economic growth indicators rarely measure growth in human prosperity. Rather, they measure the rate at which the rich are expropriating the living resources of the planet and converting them to products destined for a garbage dump after a brief useful life. The process generates profits for people who already have far more money than they need while displacing people from the resources they need for their modest livelihoods. In summary, the primary business of the global financial system and the corporations that serve it is to increase the wealth gap. It works well in the short-term for the privileged few, but it is disastrous for the society.
We see the effects in the current state of the world. The market value of global economic output has tripled since 1970. By conventional reckoning, this means we humans have tripled our wealth and well-being.
Yet indicators of living capital, the aggregate of human, social and natural capital, tell a very different story. The Living Planet Index, an indicator of the health of the world's freshwater, ocean, and land-based ecosystems, declined 30 percent since 1970. According to the Millennium Ecosystem Assessment, 15 of 24 ecosystem services examined "are being degraded or used unsustainably, including fresh water, capture fisheries, air and water purification, and the regulation of regional and local climate, natural hazards, and pests."
Indicators of human capital--the skills, knowledge, psychological health, capacity for critical thought, and moral responsibility characteristic of the fully functioning person, and of social capital--the enduring relationships of mutual trust and caring that are the foundation of healthy families, communities and societies--point to equally unfavorable trends.
Even as living capital shrinks, the population that depends on it continues to grow. Meanwhile, the growing concentration of money means a few people are able to claim an ever-larger share of a shrinking pie of living capital to the exclusion of everyone else. According to a recent United Nations study, the richest 2 percent of the world's adults own 51 percent of all global assets. The poorest 50 percent own only 1 percent. This distribution of ownership is a measure of the global distribution of power--and the gap is growing at an accelerating rate. The power imbalance allows the privileged minority to change the rules to accelerate their expropriation of the declining pool of real wealth, which increases the hardship and desperation of those excluded. We are on a path to an increasingly violent last-one-standing competition for the Earth's final tree, drop of drinkable water, and breath of air.
By our measures of financial capital, we humans are on a path to limitless prosperity. By the measures of living capital, we are on a suicidal path to increasing deprivation and ultimate self-extinction.
Putting Life First
If there is to be a human future, we must bring ourselves into balanced relationship with one another and the Earth. This requires turning existing economic priorities and models on their head and making the values of the Earth Community story the foundation of our economy. We must:
- Turn from money to life as the defining value, from growing financial capital to growing living capital, and from short-term to long-term investing;
- Shift the priority from advancing the private interests of the few to advancing the individual and community interests of all; and
- Reallocate resources from supporting institutions of domination to meeting the needs of people, community, and nature.
The champions of Empire dismiss any such reordering of priorities on the ground that it will bring economic disaster and unbearable hardship. They ignore the simple fact that those results are already the lot of roughly half our fellow humans. The proposed reordering can avoid the spread of hardship and begin to alleviate the existing suffering.
Economic reallocation and democratization are no longer simply moral issues. They are imperatives of human survival and must replace economic growth and the pursuit of financial gain as the defining purpose of economic life.
The work of bringing forth a new economy devoted to serving the needs of our children, families, communities, and natural environments begins with building public awareness that there is an Earth Community prosperity story that offers a vision of hope and possibility for a positive future. Although a story so contrary to the prevailing Empire story is likely to be greeted with initial skepticism, the Earth Community prosperity story enjoys the ultimate advantage because it expresses the truth most of us recognize in our hearts: if our children, families, communities, and natural systems are healthy, we are prosperous. Whether conventional financial indicators like GDP or the Dow Jones stock index rise or fall is irrelevant.
The human species has reached a defining moment of choice between moving ahead on a path to collective self-destruction or joining together in a cooperative effort to navigate a dramatic turn to a new human era.
Rules for Conserving and Sharing
To get from where we are to where we need to go we must recognize that the market is an essential and beneficial institution for allocating resources in response to individual choices. But it is beneficial only so long as it operates by rules that maintain equity and competition and require players to internalize the social and environmental costs of their choices. And it is not sacred. Without responsible governmental oversight, the market can lead to highly destructive social pathology.
By its nature, the market creates winners and losers. Furthermore, the winners are often those most skilled in finding ways to pass social and environmental costs onto others. The winners increase their share of the resource pie, which increases their economic and political power to shape markets and rules to improve their future prospects. The result is a self-reinforcing spiral of increasing concentration of wealth and power. This supports the unjust hoarding and profligate consumption of resources by a privileged class. In an increasingly environmentally constrained world, learning to conserve and share resources is an essential requirement of social order and well-being.
Even with adequate regulation to minimize social and environmental abuse, the health of a market system also requires public intervention to recycle financial capital continuously from winners to losers. In the absence of such recycling, financial wealth and power accumulate in perpetuity, increasing the fortunes of a few family dynasties at the expense of democracy, justice, and social stability.
Recycling financial wealth to maintain a democratic allocation of access to real resources is, of course, totally contrary to the self-serving logic of corporate capitalism. Yet it is essential to democracy and social health, both of which depend on an equitable distribution of power, and an essential function of democratic government.
From a system-design perspective, a healthy society must either eliminate profit, interest, and for-profit corporations altogether, or use the taxing and regulatory powers of publicly accountable democratic governments to strictly limit concentrations of economic power and prevent the winners from passing the costs of their success onto the losers. This creates yet another system design issue. As government becomes larger and more powerful, it almost inevitably becomes less accountable and more prone to corruption.
Paul Hawken has correctly observed that big business creates the need for big government to constrain excesses and clean up the messes. To maintain equity and secure the internalization of costs, democratically accountable government power must exceed the power of exclusive private economic interests. The smaller the concentrations of economic power, the smaller government can be and still maintain essential balance and integrity in the society.
There will be less need for a strong governmental hand to the extent that we are successful in eliminating sociopathic institutional forms, making community-based economies the norm, and creating a public consensus that predatory economic behavior now taken for granted as "just human nature" is actually aberrant and immoral. Responsible citizenship may then become the expected business norm. There will always be a need, however, for rules and governmental oversight to deal with what hopefully will be a declining number of sociopathic individuals and institutions who seek to profit at public expense.
Equalizing economic power and rooting it locally shifts power to people and community from distant financial markets, global corporations, and national governments. It serves to shift rewards from economic predators to economic producers, strengthens community, encourages individual responsibility, and allows for greater expression of individual choice and creativity.
The Essential Choice
The human species has reached a defining moment of choice between moving ahead on a path to collective self-destruction or joining together in a cooperative effort to navigate a dramatic turn to a new human era. The profound cultural and institutional transformation that is needed goes up against the short-term interests of the world's most powerful people and institutions. The barriers to what we humans must now achieve are daunting. By any rational calculation, the needed transformation is not politically feasible. Yet it is essential to human survival and prosperity, which means we must set ourselves to the task of figuring out how to make the impossible into the inevitable.
David Korten is co-founder and board chair of YES! His latest book is The Great Turning: From Empire to Earth Community.