Follow the Money

Seattle Green Festival 2011
Qwest Event Center
May 21, 2011

Presentation by David Korten

Thank you Alisa Gravitz for the generous introduction and for another magnificent Green Festival. A new economy is essential the human future—and  the Green Festivals define its leading edge in thought and action.

Note that during my presentation Kat Gjovik and Fran Korten will be passing around sign-up sheets for the David Korten and YES! Magazine e-mail newsletters. The David Korten newsletter will keep you up to date on my activities and thinking. The YES! newsletter will keep you up to date on all the many powerful ideas and practical actions that are shaping a positive human future throughout the United States and the world.

We live in an interesting time. Whether it turns out to be a curse or a blessing depends on us. As you may have heard, today is a special day—Rapture Day. This is the day the chosen are lifted from Earth, from this life, to go to an afterlife in a faraway place of peace and plenty to live in loving relationship free from hunger, want, disease, and violence. A beautiful vision.

But the rest of us will be left behind to fend for ourselves in a world of misery and violent devastation—or so the prophecy goes. Now the day isn’t over yet, but so far those of us here are the Green Festival are all still here and surely there is a lot of misery and violence in our world. So maybe there is something to the prophecy.

The good news is that those of us left behind have the opportunity to create in this life, a world of peace and plenty where all can live in loving relationship, free from hunger, want, disease, and violence. That is the world we are gathered here at the Green Festival to celebrate and to create.

You may have noticed in your program for today that I’m the warm up act for my friend, and colleague, John Perkins, better known as the Economic Hitman. John will be sharing what he has learned from his study with the indigenous shamans of Central and South America about a different, more credible and hopeful, prophecy—not about the end of the world, but about a new beginning.

It is the Aztec Prophecy shared by many indigenous peoples that 2012 will be a time of the awakening of a new human consciousness—opening the way to creating a new civilization grounded in the highest of our human possibilities rather than in our most debilitating pathologies. It will be a world of peace and plenty where all can live in loving relationship, free from hunger, want, disease, and violence. John will tell us more about that prophecy and what it means for our work in the here and now.

Two prophecies. One holds up a hope of escaping this world to connect with a patriarchal God in the afterlife, who will care for us as his children ever after. It is a story of separation, hope, redemption, and reunion—but as children in relation to a parent within a patriarchal framework.

The second prophecy foresees an awakening of a human consciousness of our integral connection to the spiritual unity of creation and of our sacred responsibility to bring ourselves into active positive relationship with one another and Earth’s living biosphere. It too is a story of separation, hope redemption, and reunion, but within a framework of adult responsibility.

The first calls us to condemn and flee this world. The other calls us to rejoice in the wondrous beauty and possibility of this world and to cultivate loving relationships with one another and with the larger community of life that sustains us in the here and now. It calls us to embrace the adult responsibilities that come with our species capacity for reflective consciousness.

We humans are confronting the reality of our nature as living beings—the reality that living beings, because of the way life manages energy, exist only in active relationships to other living beings—life exists only in community.

In a fit of adolescent hubris, we humans sought to liberate ourselves from the responsibilities of life in community. We have so confused individual autonomy with personal liberty that we have economies that reduce caring human relationships to soulless financial exchange. We have structured our physical space around buildings and auto-dependent transportation systems that wall us off from one another and nature. In isolation from nature we seek to dominate and control rather than to work with nature’s live serving generative processes.

Earth’s biosphere is organized into an exquisitely complex planetary-scale fractal structure that self-organizes everywhere in a locally adaptive process to optimize the sustainable utilization of available resources in support of life. All resources are continuously repurposed and recycled with zero waste. Redundancy and diversity optimize local adaptation, resilience and creative potential.

We have created a global economy that isolates people and communities from the sources of their food, energy, water, materials, manufactured goods and leaves them dependent on corporate controlled global supply chains that are wasteful, unstable, unaccountable, and environmentally and social destructive.

The underlying system structure and dynamics are in most every respect mirror opposites of those of the biosphere. Working in opposition to the biosphere, the global economy is maintained only by unsustainable dependence on a non-renewable fossil fuels subsidy. It is already failing and its ultimate collapse is only a matter of time. So long as the current economic system remains in place, there will be no recovery. We have paid a terrible price for our arrogance.

The separation from which we now seek to escape was by our own hand, not the act of a distant God, and so too our redemption must be by our own hand.

We must reorganize human economies to function as locally self-reliant subsystems of their local ecosystems. This requires segmenting the borderless global economy into a planetary system of interlinked self-reliant bio-regional living economies, each rooted in a community of place and organized to optimize the lives of all who live within the community’s borders.

Regional economies will meet most needs with local production using local resources in the manner of local ecosystems and benefit from trading their surplus with their neighbors in return for that which they cannot reasonably produce for themselves.

Millions of people around the world are already mobilizing to live this new reality into being.

There is an emerging parallel living buildings movement that is dealing with the physical/spatial dimension of this transformation. It is designing buildings to eliminate waste, feature natural lighting, and provide for onsite capture of rainwater, energy (wind, solar, and thermal) and organic matter (food scraps and human waste) for recycling and reuse, including for urban gardens (edible roofs and walls and built in green houses).

Water is used in the first cycle for drinking, dish washing, and showering; recycled for laundry and micro-flush composting toilets, and directed from there to onsite gardens from which it filters into the aquifer. Hot water, cooking, and space heating are integrated to optimize overall energy efficiency.

Integrating multi-purpose buildings into a larger multi-building neighborhood or district systems adds opportunities to develop public green spaces, community gardens, edible landscaping, small-scale poultry and livestock production, natural wetlands and living machine water purification to continuously recycle nutrients, water and energy.

Integrative projects also create opportunities to balance the utility loads of businesses, which generally have greater energy needs during the day, and residences, which have greater needs during evening and early morning. Bringing residences, employment, shopping, and recreation together in close proximity minimizes transportation requirements and facilitates the sharing of autos, bicycles, appliances, and tools, and community connections to mass transit, bike trails, and other transportation alternatives.

These are very practical dimensions of the human transformation now underway. Every aspect rebuilds active relationships of community between people and between people & nature.

By now you are probably wondering, “What does this have to do with the title of this session, ‘Follow the Money?’” Actually, quite a lot.

In a modern society in which most everything essential to a secure and happy life seems to depend on money, the flow of money takes on great significance. Where money flows there are jobs; where it doesn’t flow there are no jobs. Where it flows there is food, shelter, health care, and education. In a modern society, where it doesn’t flow there is starvation, homelessness, disease, and illiteracy. When shared it builds community. When not shared it creates isolation.

We have heard that money is the root of all evil. Evil is that which is destructive of life. So follow the money and you will see the source and consequences of the evil that threatens the viability of human societies and the biosphere.

Money however, is only evil when it becomes our master and confines us to lives of isolation. We can eliminate its evil dimension by restructuring the institutions of money to make money our servant—to serve the community of life rather than to destroy it.

This great work begins with some basic questions. What is money? Where does money come from? Who decides who gets it and for what purpose? Who decides who will make these decisions? What is the outcome?

The answers to these questions open a window into the importance of the structure of the institutional system that creates and allocates money. That structure determines where money flows, what it does—and ultimately whether the society prospers or self-destructs.

Money is a human creation. It is nothing but a number. Most of it is simply accounting entries in computer files. It has no existence, reality, or value outside the human mind. It is extraordinary that we, a supposedly intelligent species that prides itself on creating a great civilization based on popular democratic self-rule, allow money, a system of accounting entries, to rule our lives.

Has it ever struck you how absurd it is that as a society we have so much work that needs doing and at the same time, so many unemployed people who would love to be doing productive work? How absurd, that two of our defining problems are homeless people and vacant houses? We are told there is no money to put the unemployed people to work meeting unmet needs and to put the homeless into the empty houses. What a powerful demonstration of system failure.

We now know that when Wall Street collapsed in 2008, the Federal Reserve responded by creating $13 trillion out of nothing with a few computer key strokes and fed it into Wall Street by issuing short term credit, purchasing securities, and providing guarantees for securities. Wall Street recovered in a flash with record profits, bonuses, numbers of billionaires, and a re-inflated stock market bubble. And we have corporations holding record amounts of idle cash—all thanks to massive public subsidies.

When it comes to employing eager workers to meet essential needs, however, we are told there is no money. How stupid do the politicians who mouth such nonsense think we are? But then again, as a nation, we did elect them. I’m looking to a huge backlash in the 2012 election when the folks who elected these corporate shills realize they were conned. Think of it as part of the 2012 awakening.

There are many real world constraints to dealing with human needs, but for a society, money, which can be created with a simple accounting entry, should never be the defining constraint.

The proper goal is not to make money system less harmful, which is the focus of most current financial reform. It is to make the money system useful in serving our needs and actualizing our dreams of a better world. We can bring down Wall Street and replace the Wall Street controlled money system with a democratically accountable Main Street money system.

Let me begin the discussion of solutions with three recent quotations.

Sheila Bair, FDIC Chair, on March 16, 2011—

“In policy terms, the success of the financial sector is not an end in itself, but a means to an end—which is to support the vitality of the real economy and the livelihood of the American people.
What really matters to the life of our nation is enabling entrepreneurs
to build new businesses that create more well-paying jobs,
and enabling families to put a roof over their heads and educate their children.”

Martin Wolf, Financial Times chief economics commentator, April 20, 2010

“Financial systems are important servants of the economy, but poor masters.”

 

Mervyn King, Governor, Bank of England, said on October 25, 2010

“Of all the many ways of organizing banking, the worst is the one we have today.”

 

My attention is currently focused on producing a report soon to be released by the New Economy Working Group titled “A Real-Wealth Money/Banking System for a 21^st Century America.” The report lays out a framework for a fundamental money system restructuring.

We are experiencing a system failure reminiscent of the financial collapse of 1929, which was a consequence of similar financial excess. Ending the financial chicanery and creating a functional financial system responsive to 21^st century reality requires a program of system restructuring comparable in scope to that of the Roosevelt era.

The common sense goal of the restructuring we will propose is to create a money system that:

1. Makes credit readily available at favorable rates in response to local needs and opportunities for productive investments that build real community assets and enhance community health and happiness.
2. Supports family wage jobs with benefits that eliminate the need to borrow to support basic consumption needs.
3. Funds needed public investment in physical, social, and environmental capital.
4. Eliminates financial speculation, usury, and fraud.
5. Recirculates money within bioregional economies.
6. Manages the money supply to maintain full employment with minimal inflation.

The system of community banks, mutual savings and loans, and credit unions put in place following the Great Depression provides a basic framework for a system with a proven capacity to perform the above functions. It is a model still familiar to the generations of Americans who lived through the 1940s, 50s and 60s. It financed the United States victory in World War II, made us the world’s industrial power house, produced an unprecedented period of economic stability and prosperity, created the middle class that made America the envy of the world, and gave the United States its global edge in the Cold War. The Wall Street social engineering experiment with market deregulation that began in the 1970s transformed a system of banking and finance devoted to real investment to create real wealth to a system of banking and finance devoted to using money to make money for Wall Street players through unproductive trading and market manipulation.

The Wall Street take-over has created a little noted anomaly. Public subsidies and oversight programs were put in place in response to the Great Depression to support and secure a system of independent community banks that functioned as a well regulated public utility to provide essential financial services to real-wealth community economies. These programs included deposit insurance, mortgage guarantees, and liquidity support. It was a sensible and effective public-private partnership that served the public interest.

These once highly sensible government programs now guarantee and subsidize loosely-regulated too-big-to-fail private banks engaged in financing speculation, financial bubbles, usury, asset stripping, and investment fraud—activities that government should be regulating and taxing out of existence—not subsidizing. The result is a financial doomsday machine that drives toward ever more risky, unproductive, and destabilizing financial excess. The Wall Street money system will continue on this path until it is restructured, or the federal government’s financial capacity is exhausted and the entire financial system goes into terminal, unrecoverable collapse.

The goals of the proposed system restructuring are to:

1. Shift the locus of control over money creation and allocation from Wall Street to Main Street.
2. Assure public accountability and instill a culture of service and moral responsibility.
3. Direct the flow of money to productive real-wealth Main Street investments that create family wage jobs and produce essential goods and services in response to the self-defined needs of people and community.
4. Harness the Federal Reserve’s money creation powers to finance investment in essential public goods rather than to fuel Wall Street financial bubbles.

The forthcoming report from the New Economy Working Group will present a six part agenda for creating a 21^st century community-based and accountable money system.

1. Break up the mega-banks and implement tax and regulatory policies that favor community financial institutions. Give special preference to financial institutions organized as cooperatives or as for-profits owned by nonprofit foundations devoted to community wealth building. These institutions keep money circulating in the community rather than sucking it up into the Wall Street casino. The Move Your Money campaign is a key citizen initiative that call us to move our deposits and borrowing from Wall Street banks like Bank of America and Chase to local banks and credit unions. The results are already showing up in a major expansion in credit union deposits and lending across the country.
2. Establish state owned partnership banks that serve as depositories for state financial assets. These banks keep state funds circulating in the state by working with and through community financial institutions to co-finance local enterprises engaged in construction, agriculture, industry, and commerce. The North Dakota State Bank established in 1919 is a model. It is a major reason why North Dakota was relatively unscathed by the Wall Street collapse. State Bank legislation was introduced in four states in 2010 and in eight more states, including Washington State since January 2011.  The initiative here in Washington State is spear headed by State Representative Bob Hasegawa and backed by a citizen group headed by Cindy Cole and John Rapp. If you or anyone else connected with this initiative are here in the room stand up so people can see and connect with you.
3. Restructure the Federal Reserve to function as a true independent federal agency subject to strict standards of transparency, public scrutiny, audit by the General Accounting Office, and Congressional oversight. Its sole responsibility would be to manage the money supply. Responsibility for the regulation of banks and so called “shadow banking” institutions would be assigned to to a new regulatory agency established specifically for that purpose.
4. Direct all new money created by the Federal Reserve to a Federal Recovery and Reconstruction Bank, which would use these funds to finance critically needed public infrastructure projects as designated by Congress.
5. Rewrite the rules of global commerce to secure the right of each nation to regulate cross border financial flows, maintain balance and stability in international trade and financial relationships, and hold corporations operating in multiple countries accountable for complying with the laws of each country of operation.
6. Restore market and financial integrity by breaking up concentrations of corporate power, closing tax loopholes on billionaires and big corporations, and implementing policies that favor productive investment and render financial speculation and other unproductive financial games illegal and unprofitable. Many local actions are being organized in alignment with US Uncut to calling attention to corporate tax dodgers, including in Seattle, Olympia, Tacoma, Port Townsend, Bremerton, and elsewhere.

Numerous local alliances are forming between and among religious/spiritual, labor, and community groups in the Seattle area to advance popular education on the New Economy, strengthen the economy, and mobilize citizen action on the policy agenda. There is an organizing meeting this Wednesday evening led by John Hale. It will gather at 6:30 PM in the downstairs of St. Patrick Church at 2702 Broadway Avenue E.  John, are you by chance in the audience.

Critics will argue that the proposed actions represent unwarranted government interference in the market. In reality, Wall Street is a creation of government interference in the market.

Virtually every major Wall Street financial institution is a corporation created by a charter issued by government. The money that fuels Wall Street’s speculative frenzy originates with the Federal Reserve, a creation of government. And most Wall Street corporations would have gone out of business in the financial crash of 2008 if not for a massive bailout from the U.S. Treasury and the Federal Reserve. These are acts of government interference in the market and Wall Street as we know it would not exist without them. The recommended actions call on government to assume responsibility for the market distortions its actions have created and act to restore market discipline and integrity that the Wall Street/Washington political axis has destroyed.

Contrary to what “free” market fundamentalists would have us believe, to function optimally in the community interest, markets need rules to break up market distorting concentrations of power, keep ownership rooted in and accountable to the community, and assure transparency so that participants are fully informed about their choices.

All of these essential principles are violated by the deregulated Wall Street economy. All must be honored to create a democratically accountable system of money, banking, and finance required to support an economy that meets the needs of all in balance with the biosphere. It is possible. Implementing measures are supported by a growing national and international alliance.

Our common future depends on creating a democratically accountable money system that operates as our servant, not our master.

Leadership will not come from within the Wall Street-Washington political axis. It will come only through citizens acting in concert with their state and local governments to advance public education and a national conversation on the agenda outlined here.

We who work to bring forth a New Economy that works in cooperative alliance with Earth’s biosphere, engage in an epic undertaking. An ancient indigenous prophecy affirms that we have arrived at the moment of a Great Awakening. We have the power to turn this world around. We are the one’s we’ve been waiting for.

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David Korten is co-founder and board chair emeritus of YES! Magazine, president of the Living Economies Forum, and a founding board member of the Business Alliance for Local Living Economies (BALLE – now Common Future). His books include Agenda for a New Economy: From Phantom Wealth to Real Wealth, The Great Turning: From Empire to Earth Community, the international best seller When Corporations Rule the World, and Change the Story Change the Future: A Living Economy for a Living Earth.