New Economy
David Korten

10 Common Sense Principles for a New Economy ... It’s time we the people declare our independence from the money-favoring Wall Street economy.

Burgess COMMENTARY

Peter Burgess

DAVID KORTEN

AUGUST 2010

10 Common Sense Principles for a New Economy ... It’s time we the people declare our independence from the money-favoring Wall Street economy.

Photo by Jo Christian Oterhals.

I find hope in the fact that millions of people the world over are seeing through the moral and practical fallacies underlying the Wall Street economy and—by contributing to the creation of a New Economy—are taking charge of their economic lives.

Here are ten common sense principles to frame the New Economy that we the people must now bring forth:

1. The proper purpose of an economy is to secure just, sustainable, and joyful livelihoods for all. This may come as something of a shock to Wall Street financiers who profit from financial bubbles, securities fraud, low wages, unemployment, foreign sweatshops, tax evasion, public subsidies, and monopoly pricing.
2. GDP is a measure of the economic cost of producing a given level of human well-being and happiness. In the economy, as in any well-run business, the goal should be to minimize cost, not maximize it.
3. A rational reallocation of real resources can reduce the human burden on the Earth’s biosphere and simultaneously improve the health and happiness of all. The Wall Street economy wastes enormous resources on things that actually reduce the quality of our lives—war, automobile dependence, suburban sprawl, energy-inefficient buildings, financial speculation, advertising, incarceration for minor, victimless crimes. The most important step toward bringing ourselves into balance with the biosphere is to eliminate the things that are bad for our health and happiness.
4. Markets allocate efficiently only within a framework of appropriate rules to maintain competition, cost internalization, balanced trade, domestic investment, and equality. These are essential conditions for efficient market function. Without rules, a market economy quickly morphs into a system of corporate monopolies engaged in suppressing wages, exporting jobs, collecting public subsidies, poisoning air, land, and water, expropriating resources, corrupting democracy, and a host of other activities that represent an egregiously inefficient and unjust distribution of resources.
5. A proper money system roots the power to create and allocate money in people and communities in order to facilitate the creation of livelihoods and ecologically balanced community wealth. Money properly serves life, not the reverse. Wall Street uses money to consolidate its power to expropriate the real wealth of the rest of the society. Main Street uses money to connect underutilized resources with unmet needs. Public policy properly favors Main Street.
6. Money, which is easily created with a simple accounting entry, should never be the deciding constraint in making public resource allocation decisions. This is particularly obvious in the case of economic recessions or depressions, which occur when money fails to flow to where it is needed to put people to work producing essential goods and services. If money is the only lack, then make the accounting entry and get on with it.
7. Speculation, the inflation of financial bubbles, risk externalization, the extraction of usury, and the use of creative accounting to create money from nothing, unrelated to the creation of anything of real value, serve no valid social purpose. The Wall Street corporations that engage in these activities are not in the business of contributing to the creation of real community wealth. They are in the business of expropriating it, a polite term for theft. They should be regulated or taxed out of existence.
8. Greed is not a virtue; sharing is not a sin. If your primary business purpose is not to serve the community, you have no business being in business.
9. The only legitimate reason for government to issue a corporate charter extending special privileges favoring a particular enterprise is to serve a clearly defined public purpose. That purpose should be clearly stated in the corporate charter and be subject to periodic review.
10. Public policy properly favors local investors and businesses dedicated to creating community wealth over investors and businesses that come only to extract it. The former are most likely to be investors and businesses with strong roots in the communities in which they do business. We properly favor them.

1. The proper purpose of an economy is to secure just, sustainable, and joyful livelihoods for all. ...

I agree with first sentence, but I think you needlessly demonize Wall Street financiers, few of whom profit from or desire the items on your list. A positive expansion of the opening statement would be more effective and convincing.

2. GDP is a measure of the economic cost of producing a given level of human well-being and happiness. ...

This is a very intriguing twist on the gross domestic product as an indicator of progress. Of course, what you are implying by this is the need to follow a new indicator which has two parts, the GDP as numerator and the GHI (gross happiness index) as denominator. (GHI/GDP). This would measure how efficiently a society can produce well-being and happiness. This would also make a nice proxy to measuring the sustainability of the national economy.

3. A rational reallocation of real resources can reduce the human burden on the Earth’s biosphere and simultaneously improve the health and happiness of all. ...

I realize that you’re using “Wall Street” as code for the current economic, political, and social realities in America, but I don’t think it serves you well here. It just doesn’t make that much sense. War is not a unique feature of the modern American economy. Our penal code has more to do with the way our democratic political system works than how our economy is structured. High advertising expenditures result from the interplay of freedom of consumer choice and firms competing freely in the open marketplace - two freedoms that society will continue to value. Some advertising certainly leads to higher quality of life - consider the advertisement that will make readers aware of your book.

4. Markets allocate efficiently only within a framework of appropriate rules to maintain competition, cost internalization, balanced trade, domestic investment, and equality. ...

I mostly agree with this, but I think the efficiency framework is inaccurate. Market regulation almost always implies a trade-off with market efficiency, but we do it anyway because in return we gain some social benefit. I would rather this principle be housed in a justice framework, as in: “Markets allocate justly only within a framework of appropriate rules...” I think the most important rule you’ve listed here is cost internationalization. The failure to accurately allocate the costs of negative externalities (or spillovers) is the primary culprit that makes our current economic system unsustainable. The least relevant rule is balanced trade. (And equality would be redundant in a justice framework.)

5. A proper money system roots the power to create and allocate money in people and communities in order to facilitate the creation of livelihoods and ecologically balanced community wealth. ...

Wall Street would say that it reallocates money from over-financed and underproducing entities (rich investors who otherwise keep their money stuffed in a mattress) to under-financed and highly-productive entities (e.g. Apple Inc., SKS Microfinance, etc.) But, given recent history, the expropriation of real wealth from the rest of society sounds more plausible.

7. Money, which is easily created with a simple accounting entry, should never be the deciding constraint in making public resource allocation decisions. ...

Disagree. You can create money with an accounting entry, but not wealth (i.e. new resources). Populist leaders have tried this and discovered that it leads to the devaluation of money (i.e. inflation) and, when taken too far, leads to hyper-inflation, which is catastrophic to society at all levels, but especially the poor. If you increase the money supply without some real underlying growth in the economy, you end up looking like Bolivia in the mid-80s, Yugoslavia in the mid-90s, or Zimbabwe a couple of years ago.

Rather than increasing the money supply (adopting an expansionary monetary policy), a more appropriate tool is an expansionary fiscal policy (of course investing in things with a real financial and social ROI like education and infrastructure), which implies running a deficit, which means it can’t be overused or our grandkids are screwed...they may already be.

7. Speculation, the inflation of financial bubbles, risk externalization, the extraction of usury, and the use of creative accounting to create money from nothing, unrelated to the creation of anything of real value, serve no valid social purpose. ...

You unfortunately contradict yourself here. You just suggested in principle #6 that we should use creative accounting to create money from nothing to serve a valid social purpose. That said, I agree that this sort of activity should be and can be reduced through appropriate regulation.

8. Greed is not a virtue; sharing is not a sin. If your primary business purpose is not to serve the community, you have no business being in business.

Amen, and amen! Maybe your list of principles should have just been this. Seriously.

9. The only legitimate reason for government to issue a corporate charter extending special privileges favoring a particular enterprise is to serve a clearly defined public purpose. ...

I want to agree, but economies of scale could never be reached if all the financial and legal risks had to be carried personally by business owners. The ability to reach an economy of scale to produce things like airplanes and computers that common people can afford could be seen as a public purpose.

10. Public policy properly favors local investors and businesses dedicated to creating community wealth over investors and businesses that come only to extract it. ...

Good.

I am a recent subscriber and am enjoying the magazine. I found YES after participating in the Trinity Institute, where you were a speaker. I bought your books and especially like the principle of 'change the conversation,' which leads me to a request.

What are the chances of inviting progressive cognitive scientists and linguists to a YES blog routinely . . . like every issue. If we are going to 'change the conversation' effectively, we are wise to embrace the latest insights of the brain.

Experts that come to mind are George Lakoff, UC Berkley; Joe Brewer, Cognitive Policy Works; Roy Eidelson, Eidelson Consulting; Eric Haas, Cognitive Strategies; to name a few.

They are powerful allies, whose values align with yours, and ARE changing the conversation. Please consider giving them a soap box next to yours.

Caring citizens are the solution for building trust for effective governance.

I have also started reading the yes magazine articles recently and am finding them very thought provoking.

Those open to new ideas, intrigued by words like sustainable development, application of scientific method for social concern, technological unemployement etc, can also visit
www.thezeitgeistmovement.com
www.thevenusproject.com

The author, while well-meaning, has not presented us with a mechanism to get from here to there. He is basically calling on people to stop being selfish and greedy, which the people making all the money and calling the shots, have no reason to do.

Instead, we must make some basic, simple, but profound changes to how the economy works:

1. 1. Set up a State Bank in all 50 states, as we have had in North Dakota since 1919. Author/advocate Ellen Brown has written extensively in these pages, so I won't rehash the argument here. Check out the public banking group here:
   http://groups.google.com/group/public-banking
2. 2. Replace all taxes on production: Sales, Wages, Capital, with taxes on Natural Resources, especially Land. As Henry George recognized in Progress and Poverty (1879) it is speculation on Land that ultimately leads to all major economic busts, causes the bulk of poverty (since Man cannot live, even a second, without Land, he must pay whatever the Landlord commands), stifles innovation, and despoils nature by holding good land for speculation, while marginal lands get exploited under urban sprawl.
3. 3. Directly fund vital needs with U.S. Notes, not Federal Reserve Notes, as Lincoln did to fund the Civil War, when NY Bankers wanted 35% interest. Greenbacks can be used to fund infrastructure, healthcare, education, and even, carefully, be used to pay off the debt - all without causing inflation, since we have too little of these things now (i.e. we have DEFLATION).

Building a Bridge to a New Global Culture -
http://www.nxtbook.com/[…]/index.php?startid=46

In a ground-breaking effort to overcome our global problems, Sustainable Land Development International (SLDI) has released the world’s first comprehensive sustainable land development best practices system. The SLDI Best Practices System helps to structure a triple-bottom-line (people, planet and profit) decision model - The SLDI Code™
http://www.sldi.org/images/[…]p%20system%20introduced.pdf

reply to Libertarian Posted by blackplateRCA's at Oct 07, 2010 07:43 PM

Im pretty sure in the Intro to the page, these 10 points are identified as 'guiding principles' not internal mechanics.Sort of a preamble. You should read the mans' books I think his idea of a 50% tax on advertising is a great one. That would really reduce the incentive to saturate the minds of citizens with propaganda (since i suspect you are a libertarian you cant disagree with the desire to reduce propaganda, no?). I looked at your 3 proposals too, and YEP! you are a Libertarian. Its all so simple. We get rid of all taxes, except taxes on land! then only the wealthy will own land and we can simplify a messy culture all the way back to 1066 BCE.

First, I am NOT a Libertarian. One look at what happened to that family in Tennessee who lost their home as firefighters stood idly by, because they had failed to pay a $75 annual fee, will tell you why.

A tax on Land, not on structures, would put more land into use, not less. It would free land from people who sit on it and make no productive use of it - that is, the landed gentry. There is half a trillion in land in NYC alone (based on UNDER assessments), enough and to spare, to pay for everything New Yorkers need, without taxing their production. It's just the opposite of what you fear. Read Henry George to find out the true result of the Single Tax.

I share some of Dr. Korten's frustrations with our current eco-political system.

To begin, I think we need to first address some basic needs, such as food and energy. If we can do that locally, then we can start with a strong and independent foundation to change the political landscape.

David Blume's work on multifeedstock ethanol, Community Supported Energy (CSE), and Community Supported Agriculture (CSA) may provide enough traction and a plan to get things going.

alcoholcanbeagas.com

Cheers, John Miao

David, while I appreciate that this is an abbreviated piece, I think it misses or misunderstands a few points.

I've posted my comments here:
http://mises.org/Community/[…]for-a-new-economy-quot.aspx

Loved your ideas and Yes! See my article on Purging the Phony Pillars of Power Politics

Your ten points are spot on!

Hey. Sure. It all sounds great. But the little detail you are missing is which freaking politicians do you want ENFORCING your little golden rules?

Do you want George Bush doing it?

What you need to be fighting for is a reduction in the size of the federal government to its intended size.

Behind the nice words is a GIANT FIST that will crush the little people using you as the polite excuse for doing it.

Freedom, Free markets, Capitalism are synonymous. They are the TRUE champion of the poor, the down trodden and even the environmnent.

The answer is NOT with Government. Period.

Sir. Please. REPENT of your cruel freedom hating tendencies and read about freedom.

I DARE ANYONE TO READ THIS SITE.

http://www.hawaii.edu/powerkills/welcome.html

POWER KILLS.

Then you should be fighting for each state to implement the kinds of things you want so I can be free to move to a state that fights for FREEDOM.

Where is the FREEDOM in this article/