Agenda for a New Economy: From Phantom Wealth to Real Wealth

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NEW EDITION, REVISED AND UPDATED Agenda for the New Economy provides the most fundamental and far-reaching critique yet published of what is really wrong in our economic system and the path forward to creating a new economic system that better meets human needs. This Second Edition updates the arguments and information throughout the book in the light of developments in 2009, and it offers a new chapter that shows how the 2009 programs of the Obama administration and other governments are not getting at the root causes of the system failures nor making the deep changes that are needed if we are to avoid ongoing economic, social, and environmental crises.

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1 LOOKING UPSTREAM

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A man was standing beside a stream when he saw a baby struggling in the water. Without a thought he jumped in and saved it. No sooner had he placed it gently on the shore than he saw another and jumped in to save it, then another and another. Totally focused on saving babies, he never thought to look upstream to answer the obvious question: Where were the babies coming from, and how did they get in the water?

ANONYMOUS

Our economic system has failed in every dimension: financial, environmental, and social. Moreover, the current financial collapse provides an incontestable demonstration that it is unable to self-correct.

Bloomberg News estimated in March 2009 that total federal bank bailout commitments and guarantees topped $12.8 trillion, nearly the equivalent of the total U.S. GDP.1 Yet private bank credit still wasn’t flowing into the real economy more than a year later.

The Bush administration’s response to the financial crisis focused on bailing out the Wall Street institutions that bore primary responsibility for creating the crisis; its hope was that if the government picked up enough of those institutions’ losses and toxic assets, the banks might decide to open the tap and get credit flowing again. It did not happen, because Wall Street is not in the business of financing the real economy.

 

2 MODERN ALCHEMISTS AND THE SPORT OF MONEYMAKING

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Speculators may do no harm as bubbles on a steady stream of enterprise. But the position is serious when enterprise becomes the bubble on a whirlpool of speculation.

JOHN MAYNARD KEYNES

The capitalist ideal is to create money out of nothing, without the need to produce anything of real value in return. Wall Street has turned this ideal into a high-stakes competitive sport. Money is the means of scoring, and Forbes magazine is the unofficial scorekeeper issuing periodic reports on the “richest people,” ranked in the order of their financial assets. The player with the most assets wins. Because the scoring is competitive, no player has enough money so long as another player in the game has more.

Making money with no effort can be an addictive experience. I recall my excitement back in the mid-’60s, when my wife, Fran, and I first made a modest investment in a mutual fund and watched our savings grow magically by hundreds and then thousands of dollars with no effort whatever on our part. We felt as if we had discovered the philosopher’s stone that turned cheap metals into gold. We got a case of Wall Street fever on what by current standards was a tiny scale.

 

3 A REAL-MARKET ALTERNATIVE

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Communism forgets that life is individual. Capitalism forgets that life is social, and the kingdom of brotherhood is found neither in the thesis of communism nor the antithesis of capitalism but in a higher synthesis…that combines the truths of both.

MARTIN LUTHER KING JR.

AMERICANS HAVE long been told that the only alternative to the rapacious excess of capitalism is the debilitating repression of communism. This sets up a false and dangerously self-limiting choice between two extremes, both of which failed because they created a concentration of unaccountable power that stifled liberty and creativity for all but the few at the top.

The alternative to both of these discredited experiments in centralized power is an economic system that roots power in people and communities of place and unleashes our innate human capacity for cooperation and creativity. We have a historic opportunity to bring such an economy into being. The key is the often-mentioned distinction between our existing Wall Street and Main Street economies.

 

4 MORE THAN TINKERING AT THE MARGINS

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We are told routinely that the first priority must be a strong economy. Yet, we know now that we should seek first a strong society, strong nature, and a strong democracy. Today’s economy offers little help in these regards. We must move beyond it. We need to reinvent the economy, not merely restore it.

JAMES GUSTAVE SPETH, FORMER ADMINISTRATOR, UNITED NATIONS DEVELOPMENT PROGRAMME

When economic failure is systemic, temporary fixes, even very expensive ones like the Wall Street bail-out, are like putting a bandage on a cancer. They may create a temporary sense of confidence, but the effect is solely cosmetic.

Unfortunately, even influential pundits who recognize the seriousness of the environmental and social dimensions of the current economic crisis generally limit their recommendations to a tune-up of the existing system. It is rare indeed to hear establishment voices call for a redesign of our economic institutions.

Jeffrey Sachs and James Gustave Speth are both influential establishment authors who in recent books present nearly identical statements of the need for action to reverse environmental damage and eliminate poverty. Their recommendations, however, are worlds apart. Sachs focuses on the symptoms and prescribes a bandage. Speth takes a holistic approach, looks upstream for the cause, and prescribes a cultural and institutional transformation.1

 

5 WHAT WALL STREET REALLY WANTS

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The Bankers own the earth. Take it away from them, but leave them the power to create money, and with the flick of the pen they will create enough money to buy it back again.

ATTRIBUTED TO SIR JOSIAH STAMP, DIRECTOR, BANK OF ENGLAND 1928–1941

The Wall Street money game is a power game as old as empire. And like Monopoly, the popular board game, the game isn’t over until the winner has it all. So what does Wall Street want? Everything. And the crash of 2008 did nothing to diminish that drive.

The basic question is whether our institutions should be designed to meet the needs of all or to facilitate the Wall Street drive to get it all. Wall Street’s answer is clear.

The Nobel Prize–winning economist Paul Krugman opens The Conscience of a Liberal with a personal reflection on growing up during the post–World War II years believing that a bipartisan political consensus framed by the New Deal of the Roosevelt administration was what America is about. Only when the New Deal consensus fell apart did he begin to see the deeper truth.

 

6 BUCCANEERS AND PRIVATEERS

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Advocates of capitalism are very apt to appeal to the sacred principles of liberty, which are embodied in one maxim: The fortunate must not be restrained in the exercise of tyranny over the unfortunate.

BERTRAND RUSSELL

The presidency of Ronald Reagan is commonly referred to as the Reagan “revolution,” which sought a restoration of traditional conservative values and free markets. The aggressive deregulation efforts begun under Reagan and carried forward by the Bush and Clinton administrations did indeed restore some traditional conservative values, but perhaps not the ones most U.S. conservatives intended.

Note that the term conservative originally referred to the monarchists who fought efforts to establish the democratic accountability of kings. As Wall Street was deregulated, the economy regressed to a state reminiscent of an earlier day when the seas were ruled by buccaneers and privateers.

Buccaneer is a colorful name for the pirates of old. The ultimate libertarians, they pursued personal fortune with rules of their own making. They were in their time an iconic expression of “free market” capitalism in its purest form.

 

7 THE HIGH COST OF PHANTOM WEALTH

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Financial capitalism is a system of irresponsibility and…is amoral. It is a system where the logic of the market excuses everything.…Either we re-found capitalism or we destroy it.

PRESIDENT NICOLAS SARKOZY OF FRANCE

“We have always known that heedless self-interest was bad morals,” said Franklin Delano Roosevelt in 1937. We know now that it is bad economics.

PAUL KRUGMAN

Wall Street’s relentless drive to have it all not only has had devastating economic, social, and environmental consequences but also has destroyed the integrity of money, created expectations that society has no means to fulfill, and sacrificed the health and happiness of nearly everyone. The full costs are beyond comprehension.

It is a curious thing that, unless we stuff it in a mattress, we expect whatever money we don’t immediately spend to grow in perpetuity without effort on our part. We do not expect the same of real wealth. Buildings must be maintained. Machinery must be replaced. Knowledge must be updated. The trust and caring of a community must be continuously renewed. Skills must practiced. Even wild spaces must be protected from predators, particularly human. All of these require a real investment of time and life energy. Effortless perpetual growth defies the physical law of conservation of energy. Only phantom wealth can grow effortlessly and perpetually.

 

8 THE END OF EMPIRE

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I think a pivotal point in our [human] story is the period of European expansion and colonization, which touched every single person on the planet and brought about the changes that we’re struggling with today. All our social movements since that time have been a response — the anti-colonialism movement, the struggle against slavery, the labor movement, women’s movement, the ecological movement.

CARL ANTHONY, Yes! Magazine

Look still further upstream beyond Wall Street — even beyond the money-is-wealth illusion — and we find the yet bigger picture — a five-thousand-year history of rule and expropriation by rulers intent on securing their privilege and pampering their egos by any means. Call it the era of Empire.1

In an earlier time, rulers were kings and emperors. Now they are corporate CEOs and hedge fund managers. Wall Street is Empire’s most recent stage, and hopefully the last, in this tragic drama.

Five thousand years is enough. This is an epic moment. We now have the imperative and the means as a nation and a species to end the era of Empire and liberate ourselves from a needless tragedy. Here is the larger story of what is at stake.

 

9 GREED IS NOT A VIRTUE; SHARING IS NOT A SIN

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The 2008–2009 economic crisis presents us with an enormous opportunity: to rediscover our values — as people, as families, as communities of faith, and as a nation. It is a moment of decision we dare not pass by.

JIM WALLIS

No man can serve two masters: for either he will hate the one, and love the other; or else he will hold to the one, and despise the other. Ye cannot serve God and mammon.

JESUS TO HIS DISCIPLES, MATTHEW 6:24

It is really quite simple: Society works better and life is more pleasant for everyone when people share and cooperate. Far from a new discovery, this has been a defining message of religious leaders down through the ages.

Humanity’s most celebrated teachers are those who spoke what others knew in their hearts to be true but were afraid to express because that truth contradicted the practice and often the words of those in positions of power. That is our situation today.

Speaking truth requires more courage than special talent. I find that my message resonates with many people, but not because I am revealing something astonishing or new. To the contrary, it is because I’m speaking what they already know to be true but have dared not express in public because it seems so at odds with conventional wisdom. As we each find the courage to give public voice to our inner truth, we empower others to do the same, and together we can change the world.

 

10 WHAT PEOPLE REALLY WANT

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At this stage of history, one of two things is possible: Either the general population will take control of its own destiny and will concern itself with community interests guided by values of solidarity and sympathy and concern for others, or alternatively there will be no destiny to control.

NOAM CHOMSKY

Empire’s greatest tragedy is the denial and suppression of the higher-order possibilities of our human nature. The culture and institutions of the Wall Street economy cultivate and reward our capacity for individualistic greed, hubris, deceit, ruthless competition, and material excess.

They communicate the message in both subtle and unsubtle ways that this is our human nature and that it is all for the good because individualism, competition, and greed drive economic innovation and growth. Our capacities for sharing, honesty, service, compassion, cooperation, and material sufficiency are denied and discouraged, even punished.

The touts of Wall Street would have us believe “there is no alternative.” Former British prime minister Margaret Thatcher gave it a name: TINA. To accept TINA is to give up all hope of a future for our children.

 

11 AT HOME ON A LIVING EARTH

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The wise and virtuous man is at all times willing that his own private interest should be sacrificed to the public interest of his own particular order or society.

ADAM SMITH

There’s a general tendency to presume people just act for short-term profit. But anyone who knows about small-town businesses and how people in a community relate to one another realizes that many of those decisions are not just for profit and that humans do try to organize and solve problems.

ELINOR OSTROM, WINNER OF THE 2009 NOBEL MEMORIAL PRIZE IN ECONOMICS

Adam Smith believed that our mature human nature is to be caring and responsible and to serve the greater interest of the community. Elinor Ostrom, the first woman to win the Nobel Prize in economics, and the first economist of either gender to win that prize for work on cooperation, notes that people engage in cooperative problem solving every day within their local communities.

We must now bring this caring and cooperative aspect of our nature to the fore, accept responsibility for our relationship with Earth’s biosphere, and restructure the institutions of the economy accordingly.

 

12 NEW VISION, NEW PRIORITIES

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We cannot manage the scale, complexity and dynamics of the 21st Century with the tools of the 20th. We are at a turning point in world history where new ideas, new values, new strategies and new institutional arrangements are needed. We must find the vision, the leadership, and the creativity to collaborate in developing constructive solutions to offer a decent future to present and succeeding generations.

R. MARTIN LEES, THE CLUB OF ROME

There is no place on an already overstressed living Earth for war, speculation in phantom wealth, advertising to encourage people to consume beyond their means and needs, paving over or otherwise taking productive land out of service, depleting or contaminating water reserves, or engaging in gratuitous displays of material excess. Yet a major portion of the current GDP is derived from or dependent on these activities. On a living Earth these are acts of suicidal insanity that of necessity must be strongly discouraged or prohibited.

We can and must reallocate to more beneficial pursuits the resources these undesirable activities expropriate.

 

13 SEVEN POINTS OF INTERVENTION

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Life or money: that is our choice. The current Wall Street system serves only money. Our task is to replace it with a New Economy system that serves life.

In this chapter, I identify seven critical system-intervention clusters around which citizen action can mobilize to hasten the dying of the old and the birthing of the new.1 The order in which the intervention points are presented defines a hierarchy of sorts, in that each item on the list provides a foundation for those that follow.

Living-wealth indicators provide the basic reframing of the New Economy’s purpose and values. That reframing becomes the basis for reorganizing the money system, which in turn creates a more favorable context for sharing wealth, making the transition to living enterprises, and restoring democracy and markets by breaking up big corporations. All of the above come together in local living economies organized as subsystems of their local ecosystems. New global rules create the necessary overarching legal framework to secure local democracy and prevent global corporations from stifling the development of local living economies by monopolizing economic resources and political power.

 

14 WHAT ABOUT MY. . .?

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A confidence trick or confidence game…is an attempt to defraud a person or group by gaining their confidence. The victim is known as the mark, the trickster is called a confidence man, con man, confidence trickster, or con artist, and any accomplices are known as shills. Confidence men exploit human characteristics such as greed and dishonesty, and have victimized individuals from all walks of life.

wikipedia, “confidence trick”

In my experience, the first reaction of most people to the call to shut down Wall Street is one of jubilant enthusiasm — a measure of the public outrage at Wall Street excesses. The second reaction is, “But what about my 401(k) retirement account?” The same question might be raised about our credit cards, mortgages, and medical, homeowners, and auto insurance.

In fact, the Wall Street way of dealing with each of these is a scam. Wall Street doesn’t develop its business plans to meet our needs; it develops its plans to place us in a position of dependence on Wall Street products that afford it the greatest opportunity to profit at our expense.

 

15 A PRESIDENTIAL DECLARATION OF INDEPENDENCE FROM WALL STREET I HOPE I MAY ONE DAY HEAR

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In a February 2010 interview with BusinessWeek, President Obama sought to reassure corporate America that he was on their team. “We are pro-growth. We are fierce advocates of a thriving, dynamic free market. But we do think that there have to be some rules of the road.”1

These words were less reassuring for those of us looking for signs that there is a New Economy vision lurking in our visionary president’s mind. Rules of the road are essential to prevent crashes, but if the road ends at the edge of a cliff and is populated by gas- guzzling SUVs with jammed accelerators and defective brakes, then rules to order the flow of traffic are not sufficient.

During the 2008 presidential campaign, the soaring rhetoric of candidate Obama led many of us to hope he would be the kind of president who would build a new road that skirts the cliff and populate it with safer, more efficient, and maneuverable vehicles.

During the heat of candidate Obama’s campaign, I drafted the economic address to the nation that I hoped he might give early in his administration as part of a commitment to deliver on his promise of change. It provided an overview of the New Economy agenda in the format of a presidential address in candidate Obama’s style.

 

16 WHEN THE PEOPLE LEAD, THE LEADERS WILL FOLLOW

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There is a tendency to think that what we see in the present moment will continue. We forget how often we have been astonished by the sudden crumbling of institutions, by extraordinary changes in people’s thoughts, by unexpected eruptions of rebellion against tyrannies, by the quick collapse of systems of power that seemed invincible.

HOWARD ZINN

It is time to stop trying to fix what can’t and shouldn’t be fixed, declare national and global independence from Wall Street, and get on with building the New Economy and the new institutions required to serve its financial needs.

Judging from the record to date, we cannot expect the leadership to come from either Congress or the Obama administration. As demonstrated all too clearly by the events both before and after the financial crash, Washington operates as a wholly owned Wall Street subsidiary. This can and must change, but it will happen only as an engaged citizenry mobilizes to demand it.

The idea of ordinary citizens being able to free democracy and the market from the grip of the Wall Street–Washington axis would seem a naive fantasy if not for the fact that we live in a unique historical time in which seemingly impossible transformations of unjust and deeply destructive relationships of power can and do occur on a global scale with heartening speed and regularity.

 

17 A VISIONARY PRESIDENT MEETS REALPOLITIK

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The basic facts of President Obama’s first year in office are well known. Given what he inherited — a devastated economy, record national and foreign debts, a mounting budget deficit, two expensive and unwinnable wars of occupation, Wall Street’s corrupting hold on Washington politics, and a take-no-prisoners far-right opposition in Congress — he merits high marks.

His continuation of the Bush administration’s bank bail-out prevented total financial collapse, and his stimulus package slowed the loss of jobs. He has attempted to moderate Wall Street bonuses, speculation, and credit card rip-offs. He has greatly improved America’s international image. He has recognized that global climate change is real and put it on the agenda for action. He has strengthened the ability of Americans to challenge discriminatory pay and increased health insurance for children of working-class families. He has put on hold new trade agreements that sell out public interests to corporate interests. He is winding down the war in Iraq. He pushed through much-needed health care reform legislation in the face of ruthless, unified opposition from those who believe they will gain political points if they cause his administration to fail.

 

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