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Human Rights | Ecosystems | New Economy | People vs corporations
America’s Deficit Attention Disorder
Money is the least of our problems. It’s time to pay attention to the real deficits that are killing us.
by David Korten
posted Aug 10, 2012
Photo by Peasap.
"Every generation has an incentive to borrow money from the future to spend on itself."
—David Brooks, The New York Times, Jun 4, 2012
[We can only borrow money from each other. The idea that weborrow money from the future is an illusion].
The political debate in the United States and Europe hasfocused attention on public financial deficits and how best to resolve them. Tragically,the debate largely ignores the deficits that most endanger our future.
In the United States,as Republican deficit hawks tell the story, “America is broke. We must cutgovernment spending on social programs we cannot afford. And we must lowertaxes on Wall Street job creators so they can invest to get the economygrowing, create new jobs, increase total tax revenues, and eliminate thedeficit.”
Democrats respond, “Yes, we’re pretty broke, but the answeris to raise taxes on Wall Street looters to pay for government spending thatprimes the economic pump by putting people to work building criticalinfrastructure and performing essential public services. This puts money in people’spockets to spend on private sector goods and services and is our best hope to growthe economy.”
Democrats have the better side of the argument, but bothsides have it wrong on two key points.
First, both focus on growing GDP, ignoringthe reality that under the regime of Wall Street rule, the benefits of GDP growthover the past several decades have gone almost exclusively to the 1 percent—with direconsequences for democracy and the health of the social and natural capital onwhich true prosperity depends.
Second, both focus on financial deficits, which canbe resolved with relative ease if we are truly serious about it; and ignore farmore dangerous and difficult-to-resolve social and environmental deficits. Icall it a case of deficit attention disorder.
To achieve the ideal of a world that secures health andprosperity for all people for generations to come, we must reframe the publicdebate about the choices we face as a nation and as a species. We must measureeconomic performance against the outcomes we really want, give life priorityover money, and recognize that money is a means, not an end.
What We Borrowfrom Each Other
To realistically address the nature of the public financialdeficits at the center of the current political debate, it is crucial to understandthe nature of money and debt. Money is just a number, a system of accountinguseful in facilitating economic exchange. A deficit occurs when expendituresexceed income. If, as a result, financial liabilities come to exceed financialassets, we go into debt. It is all basic accounting.
The key point, which the deficit debates rarely address, isthat one person or entity’s financial debt is another person or entity’sfinancial asset. We can only borrow money from each other. The idea that weborrow money from the future is an illusion.
The deficit-hawks recoil in horror and assure us that we canreduce government debt while leaving the financial assets of the richuntouched.
From a societal perspective, total debts and assets arealways in balance. Consequently, if we say that one person or entity hasexcessive financial debt, we in effect say that another has excessive financialassets. Reducing the aggregate financial debt of debtors necessarily requiresreducing the aggregate financial assets of the creditors.
In theory, we could instantly wipe away all financial debtsthrough a universal forgiveness, a modern equivalent of the ancient institution of theJubilee. The ancients recognized the significance of such action to restorethe balance essential to the healthy function of the human community.
The deficit-hawks recoil in horror and assure us that we canreduce government debt while leaving the financial assets of the richuntouched. It makes perfect sense in the fantasy world of pure finance in whichprofits and the financial assets of the rich grow perpetually even as growinginequality and wasteful material consumption deplete the social capital ofcommunity and the natural capital of Earth’s biosphere.
A viable human future, however, must be based on livingworld realities rather than financial world fantasies.
What We Stealfrom Future Generations
Real capital assets have productive value in their own right and cannot be created with a computer key stroke.
Any normally intelligent 12-year-old is fully capable ofunderstanding the distinction between a living forest or fishery and a systemof financial accounts that exists only as electronic traces on a computer harddrive. Unfortunately, this simple distinction seems to be beyond thecomprehension of the economists, pundits, and politicians who frame the publicdebate on economic policy. By referring to financial assets as “capital” andtreating them as if they had some intrinsic worth beyond their value as a tokenof exchange, they sustain the deception that Wall Street is creating wealthrather than manipulating the financial system to accumulate accounting claimsagainst wealth it had no part in creating.
Real capital assets have productive value in their own right and cannot be created with a computer key stroke. Themost essential forms of real capital are social capital (the bonds of trust andcaring essential to healthy community function) and biosystem capital (theliving systems essential to Earth’s capacity to support life). We are depletingboth with reckless abandon.
Social capital is the foundation of our human capacity to innovate,produce, engage in cooperative problem solving, manage Earth’s availablenatural wealth to meet the needs of all, and live together in peace and sharedprosperity. Social capital is depleted as individualistic greed becomes theprevailing moral standard and the governing institutions of society deprive allbut a privileged minority of access to a secure and dignified means of living.Once it is depleted, social capital can take generations to restore.
Biosystem capital provides a continuing supply of breathableair, drinkable water, soils to grow our food, forests to produce our timber,oceans teeming with fish, grassland that feed our livestock, sun, wind, andgeothermal to provide our energy, climate stability, and much else essential tohuman survival, health, and happiness. It is depleted when soils are degraded,oceans are overfished, rivers and lakes are polluted, forests cut down,aquifers contaminated and depleted, and climate stabilization systems disrupted.These natural systems can take thousands, even millions of years to restore.Species extinction is forever.
When we deplete Earth’s bio-capacity ... we are not borrowing from the future; we arestealing from the future.
According to the WorldWildlife Federation’s 2012 Living Planet Report, at the current rate ofconsumption, “it is taking 1.5 years for the Earth to fully regenerate therenewable resources that people are using in a single year. Instead of livingoff the interest, we are eating into our natural capital.” This is a path tonever-never land. Unlike with financial deficits, simple debt forgiveness isnot an option.
When we deplete Earth’s bio-capacity—its capacity to supportlife in its many varied forms—we are not borrowing from the future; we arestealing from the future. Even though it is the most serious of allhuman-caused deficits, it rarely receives mention in current political debates.
When we assess economic performance by growth in GDP andstock price indices, we in effect manage the economy to make the most money forpeople who have the most money. This leads us to the fanciful belief that as asociety we are getting richer. In fact, we are impoverishing both current andfuture generations by creating an unconscionable concentration of economicpower, depriving billions of people of a secure and dignified means of living, anddestroying the social and biosystem capital on which our real well-beingdepends.
With proper care and respect, biosystem capital can provideessential services in perpetuity. The reckless devastation of productive landsand waters for a quick profit, a few temporary jobs, and a one-time energy fixfrom Earth’s non-renewable fossil energy resources represent truly stupid andmorally reprehensible deficit spending. Evident current examples include tarsand oil extraction, deepsea oil drilling, hydraulicfracturing to extract natural gas, and mountaintopremoval coal mining The fact that we thereby deepen human dependence onfinite nonrenewable fossil energy reserves and accelerate climate disruptionmake such actions all the more stupid and immoral.
Financial system logic, which rests on the illusion thatmoney is wealth, tells us we are making intelligent choices. Living systemslogic tells us our current choices are insane and a crime against future humangenerations and creation itself.
FromBuilt-to-Loot to Built-to-Serve
The economy of a just and sustainable society needs a propersystem of money creation and allocation that:
Supports the health and productive function of socialand biosystem capital and allocates the sustainable generative output of bothto optimize the long-term health and well-being of all; and
Rewards individuals with financial credits inproportion to their actual productive contribution to living system health andprosperity.
The current U.S.money system does exactly the opposite. It celebrates and rewards thedestruction of living capital to grow the financial assets of Wall Streetlooters at the expense of Main Street producers—thus concentrating economic andpolitical power in the hands of those most likely to abuse it for a purelyindividualist short-term gain.
Wall Street
and the Ultimate Tyranny
Wall Street has perfected theultimate tyranny based on privatizing and monopolizing the power to create and allocatemoney. The earliest of human societies organized around systems of exchangebased on mutual trust and caring mediated by culturally determined norms ofreciprocity.
Eventually people learned they could benefit from more complexexchange systems using mutually accepted tokens of exchange such as shells orgold to mediate relationships with people from outside their immediate circle.
Money was initially mostly a convenience.As systems of production became increasingly complex and relationships becameever more monetized, however, it became essential to our individual ability toaccess food, water, shelter, waste disposal facilities, and most all the otheressentials of life. This gives those who control the creation and allocation ofmoney virtual life-and-death control of our lives.
That power now resideslargely with Wall Street institutions devoted to enriching the Wall Street 1 percentwhile reducing the 99 percent to debt slavery.
See the New Economy Working Group Report Howto Liberate America from Wall Street Rule for details andrecommendations for corrective action.
Wall Street operates as a criminalsyndicate devoted to the theft of that to which it has no rightful claim. Itthen bribes politicians to shield the looters from taxes on their ill-gottengains and to eliminate social programs that cushion the blow to those they havedeprived of a secure and meaningful means of livelihood. This brings us back tothe real source and consequence of excess financial debt.
Masters and Debt Slaves
In the big picture, the Wall Street 1 percent has divided societyinto a looter class that controls access to money and a producer class forcedinto perpetual debt slavery—an ancient institution that for millennia hasallowed the few to rule the many [See inset: “Wall Street and the UltimateTyranny”] .The immense burden imposed on the 99 percent by public debt, consumer debt,mortgage debt, and student debt is an outcome of a Wall Street assault onjustice and democracy.
The resulting desperation and loss of social trust accountfor the many current symptoms of social disintegration and decline in ethicalstandards. These include growth in family breakdown, suicide, forced migration,physical violence, crime, drug use, and prison populations.
Equality as a Crucial Variable
I grew up in Americaduring a time when we took pride in being a middle-class society without extremesof wealth and poverty. In part, we were living an illusion. Largeconcentrations of private wealth were intact and systemic discriminationexcluded large segments of the population—particularly people of color—fromparticipation in the general prosperity. The underlying concept that the goodsociety is an equitable society, however, was and still is valid. And from the1950s to the 1970s the middle class expanded.
Complete equality is neither possible nor desirable. Modestinequality creates essential incentives for productive contribution to thewell-being of the community. Extreme inequality, as exemplified by current U.S.society, is both a source and an indicator of serious institutional failure andsocial pathology.
British epidemiologist RichardWilkinson has compiled an impressive body of research that demonstratesbeyond any reasonable doubt that economic and social inequality is detrimentalto human physical and mental health and happiness—even for the very rich.Relatively equal societies are healthier on virtually every indicator ofindividual and social health and well-being.
In highly unequal societies, the very rich are prone to seekaffirmation of their personal worth through extravagant displays of excess.
In highly unequal societies, the very rich are prone to seekaffirmation of their personal worth through extravagant displays of excess. Theyeasily lose sight of the true sources of human happiness, sacrifice authenticrelationships, and deny their responsibility to the larger society—at theexpense of their essential humanity. At the other extreme, the desperate areprone to manipulation by political demagogues who offer simplistic analyses andself-serving solutions that in the end further deepen their misery. Governinginstitutions lose legitimacy. Democracy becomes a charade. Moral standardsdecline. Civic responsibility gives way to extreme individualism and disregardfor the rights and well-being of others.
To achieve true prosperity, we must create economiesgrounded in a living systems logic that recognizes three fundamental truths:
The economy’s only valid purpose is to servelife.
Equality is foundational to healthy humancommunities and a healthy human relationship to Earth’s biosphere.
Money is a means, not an end.
A New Political Narrative and Agenda
So long as money frames the debate, money is the winner andlife is the loser.
Runaway public deficits are but one symptom of a profoundsystem failure. They can easily be resolved by taxing the unearned spoils ofthe Wall Street looters, eliminating corporate subsidies and tax havens, andcutting military expenditures on pointless wars that undermine our security.
Joblessnesscan easily be eliminated by putting the unemployed and underemployed towork meeting a vast range of unmet human needs from rebuilding and greening ourphysical infrastructure to providing essential human services, eliminatingdependence on fossil fuels, and converting to systems of local organic foodproduction. If the primary constraint is money, theFederal Reserve can be directed to create it and channel it to priorityprojects through a national infrastructure bank—a move that avoidsenriching the bankers and does not create more debt.
In addition, we must:
Break up concentrations of unaccountable power.
Shift the economic priority from making money to servinglife by replacing financial indicators with livingwealth indicators as the basis for evaluating economic performance.
Eliminate extremes of wealth and poverty to create a truemiddle-class society.
Build a culture of mutual trust and caring.
Create a system of economic incentives that rewardthose who do productive work and penalize predatory financial speculation.
Restructure the global economy into a planetary systemof networked bioregionaleconomies that share information and technology and organize to live withintheir respective environmental means.
Within a political debate defined by the logic of livingsystems, such measures are simple common sense. Within a political debatedefined by conventional financial logic, however, they are easily dismissed as dangerousand illogical threats to progress and prosperity.
The Rio+20 debatehighlights a foundational and inherent conflict between the rights of nature,human rights, property rights, and corporate rights.
So long as money frames the debate, money is the winner andlife is the loser. To score a political victory for life, the debate must bereframed around a narrative based on an understanding of the true sources ofhuman well-being and happiness and a shift from money to life as the defining value.
A promising new frame is emerging from controversiessurrounding the recent United Nation’s Rio+20environmental conference. Wall Street interests argued that the best way tosave Earth’s biosystems is to put a priceon them and sell them to wealthy global investors to manage for aprivate return. Rather than concede the underlying frame to Wall Streetand debate the price and terms of the sale, indigenous leaders andenvironmental groups drew on the ancientwisdom of indigenous peoples to challenge the underlying frame. Theydeclared that as the source of life, Earth’s living systems are sacred andbeyond price. They issued aglobal call to recognize the rights of nature.
Thus framed, the Rio+20 debatehighlights a foundational and inherent conflict between the rights of nature,human rights, property rights, and corporate rights.
In current practice, based on the same financial logic thatleads us to treat financial deficits as more important than social andenvironmental deficits, we give corporate rights precedence over the propertyrights of individuals. We give property rights precedence over the human rightsof those without property. And we give human rights precedence over the rights ofnature.
We will continue to pay a terrible price for so long as weallow the deeply flawed logic of pure finance to define our values and frame thepolitical debate.
A New Europe is Possible—
So Why Go Back to the Old One?
When democracy is not determined by economic power, it is possible to imagine alternatives to “growth” and “austerity.”
There is no magic bullet quick fix. We must reframe thedebate by bringing life values and livingsystems logic to the fore and turning the prevailing rights hierarchy on itshead. The rights of nature must come first, because without nature, humansdo not exist. As living beings, our rights are derivative of and ultimatelysubordinate to the rights of Earth’s living systems.
Human rights come, in turn, before property rights, becauseproperty rights are a human creation. They have no existence without humans andno purpose other than to serve the human and natural interest. Corporations area form of property and any rights we may choose to grant to them are derivativeof individual property rights and therefore properly subordinate to them.
The step to a prosperous human future requires that we acknowledge life, notmoney, as our defining value, accept our responsibilities to and for oneanother and nature, and bring to the fore of the debate the social andbio-system deficits that are the true threat to the human future.
Replacing cultures and institutions that value money morethan life with cultures and institutions that value life more than money is adaunting challenge. Fortunately, it is also an invigoratingand hopeful challenge because it reconnects us with our true nature as livingbeings and offers a win-win alternative to the no-win status quo.
David Korten wrote this article for YES! Magazine, a national, nonprofit media organization that fuses powerful ideas and practical actions. David is the authorof Agenda for a New Economy, The Great Turning: From Empire to Earth Community, and theinternational best seller When Corporations Rule the World. He is board chairof YES! Magazine, co-chair ofthe New Economy Working Group, a founding board member of the Business Alliance for Local LivingEconomies, president of the Living Economies Forum, and a member of the Club of Rome. He holds MBA andPhD degrees from the Stanford University Graduate School of Business and servedon the faculty of the Harvard Business School.
Interested?
When Bankers Rule the World
How we can call out the myths, restructure the banking system, shut down the con game, and take back America.
The Path to Real Prosperity
Step by step we can reclaim for Main Street the economic and political power that Wall Street now holds and create a world that truly works for all.
How You Can Get Started Building a New Economy
No one of us can do it alone. If, however, we each contribute according to our distinctive gifts and circumstances, together we can turn the human course.
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