The New Economy Challenge for Higher Education

Address to Education for Sustainable Development Conference
Stockholm, Sweden, January 29, 2010 

By David C. Korten

It is a delight to be here in Sweden among so many friends and colleagues and a privilege to be speaking to this important conference on Education for Sustainable Development. We humans are in the midst of a potentially terminal economic, social, and environmental crisis of our own making. Our economic systems are unstable, extreme inequality is tearing apart the social fabric, and Earth’s critical living systems are collapsing. We have gathered for this conference not to debate the seriousness of our situation, but rather to explore how our educational institutions can contribute to the solution.

I want to start by quoting from the preamble of The Earth Charter, a document that grew out of the 1992 Rio Earth Summit. It is a summation of conversations over several years involving thousands of persons representing the grand diversity of the world’s people and cultures. Its opening words frame the work at hand.

“We stand at a critical moment in Earth's history, a time when humanity must choose its future. As the world becomes increasingly interdependent and fragile, the future at once holds great peril and great promise. To move forward we must recognize that in the midst of a magnificent diversity of cultures and life forms we are one human family and one Earth Community with a common destiny.”

The Earth Charter Preamble goes on to make clear that we must not only recognize that we are one Earth Community, we must restructure our institutions in ways that allow us to function as a global Earth Community, a community of life.  And it tells us why.

“The dominant patterns of production and consumption are causing environmental devastation, the depletion of resources, and a massive extinction of species. Communities are being undermined. The benefits of development are not shared equitably and the gap between rich and poor is widening. Injustice, poverty, ignorance, and violent conflict are widespread and the cause of great suffering. An unprecedented rise in human population has overburdened ecological and social systems. The foundations of global security are threatened. These trends are perilous—but not inevitable.

The choice is ours: form a global partnership to care for Earth and one another or risk the destruction of ourselves and the diversity of life. Fundamental changes are needed in our values, institutions, and ways of living.”

Institutional change is perhaps the most important and yet most neglected of the crucial changes we must navigate. If we humans are to adapt to 21st century reality, we must restructure or replace the economic institutions of the 20th century that lock us into a dynamic of perpetual economic growth with institutions designed to support ecological balance, shared prosperity, and deep democracy—terms I will define in a few minutes.

This presents an unprecedented challenge for institutions of higher learning organized to prepare young graduates to succeed in a world that we must now put behind us. They are ill equipped to prepare people of all ages for their necessary roles in creating and staffing the institutions of a new civilization. They must rethink, retool, and reorganize.

The truly epic nature of the challenge is best expressed by placing it in its deeper historical and evolutionary context. For the past 5,000 years, we humans have been living in a cultural trance of our own making that alienates us from the land, our true human nature and our human place in the cosmos.

So who are we humans? From where did we come? For what purpose? And how did we get ourselves in such a mess? Here is how I understand the new story based on the data of science, the wisdom of indigenous people’s, and the teachings of Jesus and other mystics.

Hundreds of thousands of years ago, the integral spiritual intelligence that expresses itself through what we know as Creation embarked on a bold and risky experiment in reflective consciousness by bringing forth a species able to step back and to reflect on creation in awe and wonder and to participate as a conscious co-creator in the continued creative unfolding. We humans are that species.

Our reflective consciousness gives us the capacity to choose our future with conscious collective intent. It was a risky experiment, however, because the capacity for self-awareness gives us an ego that can run out of control if it forgets it exists only as part of a larger whole.

As our human consciousness was first awakening, our capacities for conscious self-direction grew. We learned to communicate through speech, master fire, domesticate plants and animals, and construct houses of skins, wood, stone, and dried mud. We developed the arts of pottery, painting, weaving, and carving. We undertook vast continental and transcontinental migrations to populate the planet and adapted to vastly different physical topographies and climates. We created complex languages and social codes that allowed for life in larger communities.

In our earliest days, we humans raised our children collectively in the clan, tribe or village, initiating them to the ways of life and the need to serve the community and to care for our Earth Mother as she, in turn, cares for us.

Then some 5,000 years ago, something went terribly wrong; we turned from the ways of Earth Community to the ways of Empire. It was a time of separation and forgetting. Community, partnership, and the celebration of life gave way to domination and violence. 

The few expropriated the wealth of the many. The masculine drove out the feminine. We worshiped our Sky Father, but turned against our Earth Mother.  We came to value the power to kill and destroy more highly than the ability to create and nurture life.

Conquest became the measure of greatness. Economies came to be based on servitude. With a few on the top and the many on the bottom, everyone was placed in competition with everyone else for the favored positions; the bonds of caring and sharing were broken. Money and power became the prime arbiters of relationships. The creative energy of the species was redirected from securing the well-being of the tribe and Mother Earth to advancing the technological instruments of war and the social instruments of domination.

Resources were expropriated by the winners to maintain the system of domination. The positions of power too often went to the most ruthless and psychologically damaged members of society.

If this discussion of Empire sounds familiar, it is for good reason. Although kings and emperors have been replaced by corporate CEOs and hedge fund managers, we are still living in the Era of Empire. Our institutions have evolved to grow the power and wealth of a small ruling class that in some respects lives even further beyond the reach of public accountability than the kings and emperors of an earlier time.

In the past 100 years, we humans have achieved a technological mastery beyond the imagination of previous generations. Yet, lacking in the wisdom of place and community that is the heritage of indigenous peoples, the consumer culture fabricated by the institutions of Wall Street has led us to forget what it means to be human and to deny our connection to the web of planetary life. The result is an ecological and social crisis that threatens the very survival of the species. The time has come to rediscover our humanity, reclaim the power that Wall Street institutions and their global counterparts have usurped, and bring ourselves back into balance with one another and with Earth — our living home.

Think of this as our final examination to determine whether we are a species worthy of survival. If there is to be a human future, we must reinvent ourselves and our institutions and do so at impossible speed. This is the challenge that our educational institutions must now engage.

We need a new vision for the human future that goes far beyond current policy proposals for adjustments in technology and market incentives. The values and institutions of the 20th century that led us to recklessly squander Earth’s abundance for the benefit of the few, were shaped by an economic mindset that reduces all values to financial values and all human exchanges to financial transactions for private financial gain. This mind set gave us collapsing environmental systems, unconscionable inequality, and rule by global corporations that operate beyond the reach of democratic accountability.

The economic systems and institutions of the 21st century must be designed to serve three very different outcomes: Earth Balance, Shared Prosperity, and Living Democracy. We properly turn to ecologists, not economists for guidance. The underlying principles of the new economy are ecological principles. They are central to the ecologist’s intellectual frame, but alien to the financial frame of most professional economists.

Ecological Balance: I call this spaceship management 101. The defining human imperative of our time is to bring ourselves into balance with Earth’s biosphere. This requires shrinking global GDP, starting with the most profligate nations while creating a planetary scale economic system that mimics the structure and behavior of Earth’s biosphere. Listen closely, because the following is key. Earth’s biosphere is segmented into countless self-organizing local ecosystems, each locally rooted, locally self-reliant, and exquisitely adapted to its particular place on earth to optimize the use of locally available resources in service to life. We must similarly organize our human economies as subsystems of their local ecosystems. To the extent that each local economy is in balance with its local ecosystem, the biosphere itself will be in balance.

Shared Prosperity:  As we act to reduce aggregate consumption and rebuild local economies that integrate with local ecosystems, we need to recognize that Earth’s bounty is the shared birthright of all living beings and learn to share it equitably for the benefit of all. It is the right thing to do and essential to our survival. It is also a necessary path to increasing human health and happiness. According to a massive body of public health research, societies that share wealth equally are healthier, have stronger families and communities, less crime and violence, and healthier natural environments than do less equal societies. Inequality creates psychological and emotional stress, including for those at the top, discourages sharing, and increases insecurity.  Societies that distribute wealth equitably also tend to be more democratic and more resilient in the face of crisis.

Living Democracy means exactly what it says:  living democracy as a daily practice of civic engagement. In living democracies, popular sovereignty is integral to the fabric of community life. Living democracies celebrate and affirm diversity within a framework of individual rights, community responsibility, and mutual accountability. Their political and economic institutions support local decision making within a framework of cooperation and mutually agreed rules. Shared power, shared resources, and shared prosperity go hand in hand.

The defining structural characteristics of economies organized to support Ecological Balance, Shared Prosperity and Living Democracy will be near mirror opposites of the structures of power and privilege that the current economy supports. Here are three key system design issues.

1.      Indicators. We currently use gross domestic product (GDP) and corporate stock share price indices as the primary indicators against which we evaluate economic performance, and we manage our public policies to maximize their growth. GDP is basically a measure of the rate at which we are turning useful resources into garbage and stock price indices are basically a measure of the rate at which rich people are getting richer relative to the rest of us while doing no useful work.

We get what we measure, so we should measure what we want by assessing economic performance against non-financial indicators of the health of people, community, and nature. Indicators like the Living Planet Index and the Ecological Footprint promoted by the World Wide Fund for Nature are an excellent place to start.

2.      Money system. Our present economic system centralizes and monopolizes control of the creation and allocation of money in the hands of a very few private banks that use this power to finance socially destructive speculation, asset bubbles, loan pyramids, and corporate buyouts, and to force working people and productive Main Street enterprises into debt slavery. The official money system is the operating system of the economy. It can and should be decentralized, localized, and managed as a public utility comprised primarily of locally rooted nonprofit or publicly owned community banks and credit unions providing basic financial services and funding productive local investment. Financial speculation should be eliminated either by legal prohibition or through the imposition of confiscatory taxes. For all the attention given to financial analysis, the money system is one of the least understood aspects of modern society and it gets little attention in university programs. Understanding money as a system of power and the implications for society should be considered an essential foundation of education for responsible citizenship to which every student should be exposed.

3.      Business Enterprises. The global economy is organized under the control of global mega-corporations with internal economies larger than those of most countries that are accountable only to absentee owners whose sole interest is financial return. The living economies of the future are properly organized around locally-owned small and medium sized living enterprises that root economic decision making in the community, treat profit as a means rather than an end, and define their purpose in terms of meeting community needs. Large corporations must be broken up and restructured as smaller worker or community owned businesses. Business schools that prepare managers to serve the financial bottom line of large corporations will need to reorganize to prepare managers for living enterprises.

When Money Rules

Modern money is perhaps the most mysterious of human inventions. It is nothing but a number of no substance or intrinsic worth. Yet in contemporary societies, money determines our access to virtually every essential of life. The decisions of those who control the creation and allocation of money determine the fate of nations and shape the boom and bust of economic life  They determine who among Earth’s people will have food, shelter, education, and health care and who will not.

It is all just numbers and creative accounting, but the system that generates and allocates these special numbers is the most effective and undemocratic of tyrannies, because its inner workings are largely invisible and therefore difficult for ordinary people to challenge. We may express outrage against the bankers who abuse the power the system gives them, but we generally take the system itself for granted.

The money system largely defies understanding, because it is based on illusions, beginning with the illusion that money itself is wealth and that people who make money are thereby creating wealth.

Economist John Kenneth Galbraith once famously observed that the process by which money is created is “so simple it repels the mind.” When you take out a loan from a bank, the bank opens an account in your name and enters the amount of the loan in its ledger. That becomes a liability on the bank’s accounts, offset by the corresponding asset of your promise to repay with interest. Two simple accounting entries and money magically appears from nowhere. This simple fact makes banking a very profitable business and is the key to the ability of the institutions of global finance to rule the world.

Mayer Amschel Rothschild, founder of the Rothschild banking dynasty once famously said, "Permit me to issue and control the money of a nation and I care not who makes its laws." 

Money created out of nothing unrelated to the creation of anything of corresponding value, is phantom wealth. In the United States, Wall Street has built a whole industry devoted to creating phantom wealth. They call it financial innovation. It is a form of theft and should be treated as such. Understanding how this works is essential to fulfilling one’s civic responsibility in a democratic society, yet it is rarely addressed in existing university curricula. 

Real Wealth

Real wealth has real intrinsic value: land, labor, knowledge, food, and knowledge are all examples. The most valuable of all forms of wealth are those that are beyond price: love, a healthy happy child, a job that provides a sense of self-worth and contribution, membership in a strong caring community, a healthy, vibrant natural environment, peace. None of these has any place on corporate balance sheets or in our calculations of Gross Domestic Product. Consequently, many of our ruling economic institutions have become highly efficient in converting real living wealth into phantom financial wealth.

From the standpoint of society, money is properly treated as a means, not an end. Rather than directing money to financial speculators and scam artists devoted to creating phantom wealth for personal gain, we must create new official money systems designed to effectively link underutilized resources to unmet needs to improve the health of our children, families, communities, and the natural environment. Such systems will necessarily be highly decentralized and publicly accountable to local people and communities.

Unfortunately, most students who graduate from our institutions of higher learning—even with degrees in economics—have no idea how the money system operates and no intellectual tools to address such questions.

Although I’m sometimes called an economist, I view the economy through the lens of an organizational systems designer. As a Harvard Business School professor in the early 1970s, I taught the art of structuring human relationships in corporations to maximize profit. Partly, it involved getting the incentives right; it was also about culture, authority, communication flows, and a host of other influences subject to management intervention.

The same intellectual tools can be used to design the institutional structures of whole societies either to consolidate the power of ruling elites or to share power and facilitate creative, democratic, self-organization directed to enhancing community well-being.

Understanding the nature and implication of such choices is essential to anyone who is going to provide effective leadership in creating the institutions of the future. Yet I am not aware of any place within our universities where the necessary skills are taught, except in business schools that teach their application for purposes contrary to the purposes our new institutions must be designed to serve.

This suggests something of the magnitude of the implications for our educational institutions.

For the most part, our existing educational programs and institutions are preparing their graduates for jobs in institutions destined to fail or be replaced. Not only must future graduates be prepared to serve institutions, for which we now have few models, that support ecological balance, shared prosperity, and living democracy, they must be prepared to create such institutions. It isn’t just about young people. The entire society must be retooled and re-skilled—immediately.

Few of our existing educational institutions, including our institutions of higher learning, are prepared for what they are now called upon to do. They are organized around narrowly defined academic disciplines, some of which bear major responsibility for promoting the cultural beliefs and institutional arrangements that got us into our current mess.

The academic programs of the future must produce citizens who think and act in terms of systems, not disciplines—and most particularly, citizens who think and act in terms of the needs, potentials, and dynamics of living systems.

A Three Part Strategy

Such a dramatic transformation of an institutional system so powerful and so deeply entrenched as the complex of economic power that is driving the neoliberal agenda would be unimaginable, except for the fact that millions of people are already engaged in making it happen. YES! Magazine, for which I serve as board chair, is devoted to telling the stories of these initiatives. You can find us at yesmagazine.org. The more intentional we are about the desired outcome and the change strategy by which we pursue it, the greater our prospect for success.

The emerging change strategy features three elements:

1.      Change the defining stories of the mainstream culture. It is a simple, but rarely noted truth. Every transformational social movement begins with a conversation that challenges a prevailing cultural story with a new story of unrealized possibility and ultimately displaces the old story through media and education outreach. The civil rights movement changed the story on race. The environmental movement changed the story about the human relationship to nature. The women’s movement changed the story on gender. Our current task is to change the prevailing stories about the nature of wealth, the purpose of the economy, and our human nature. Examination of our old and new versions of these stories should have a prominent place in the curriculum.

2.      Create a new economic reality from the bottom up, as millions of people the world over are doing in their efforts to rebuild local economies and communities.  They are supporting locally owned human-scale businesses and family farms, developing local financial institutions, reclaiming farm and forest lands, changing land use policies to concentrate population in compact communities that reduce automobile dependence, retrofitting their buildings for energy conservation, and otherwise working toward local self reliance in food, energy, and other basic essentials. This is the work for example of the Transition Towns Movement. In the United States, I serve on the board of the Business Alliance for Local Living Economies (BALLE), which is building a national support system for such efforts. Check it out at www.livingeconomies.org. People involved in these efforts are learning to create the institutions of the New Economy by doing it. Our universities should develop the capability to facilitate this process through the creation of community based social learning centers.

3.      Change the rules: Current law and public policy largely favor the self-serving and deeply destructive corporate-led global economy. That works well for the interests of big money. People and planet are better served by rules and policies that support local control and protect community interests. University programs in public policy can and should develop public policy programs that address this need.

Here are some other specific implications for our universities.

1.      Take down the walls that separate the university from the community. Engage university faculty and students in the social learning processes by which locally rooted human communities are learning to align themselves with the structures and processes of their local ecosystems. Place less focus on degree programs and more focus on continuing, life-long learning.

2.      Break down the disciplinary barriers and reorganize as interdisciplinary teams engaged in the study and design of critical institutional systems.

3.      Teach history as an examination of the large forces that have shaped history in search of insights into how large-scale social change happens.

4.      Replace existing economics departments with departments of ecology.  Include ecological economists in these departments, but put the focus on the ecology. Invite the conventional economists who currently staff most university economics programs to retire, retrain as ecological economists, or be assigned to teach economics as one of a number of courses on the intellectual history of the 20th century and where it went wrong.

5.      Feature courses on human developmental psychology that explore how the pathways to a fully mature human consciousness are shaped by differing cultural and institutional experiences.

6.      Replace the metaphor of the machine with the metaphor of the living organism as the defining intellectual frame and staff biology departments with new biologists who strive to understand life on its own terms rather than through the dead world lens of Newtonian physics.

We humans are engaged in a monumental work of reinventing our societies and ourselves. It is the most exciting intellectual challenge and creative opportunity in the whole of the human experience. We have the power to turn this world around for the sake of ourselves and children for generations to come. It requires rethinking and reorganizing our institutions of higher learning in the most fundamental ways. We are the ones we have been waiting for. Thank you.