Dr. David Korten (livingeconomiesforum.org)
is the author of Agenda
for a New Economy
Great Turning: From Empire to Earth Community
, and the international
best seller When
Corporations Rule the World
He was recognized as an
Visionary in 2011
Editor’s note: This post was originally published by YES! Magazine, and is licensed under Creative Commons.To repost, follow these steps.
The current political debate in America hints at an unspoken, but
profoundly important choice between two radically different visions of
the path to prosperity for all.
- One vision holds that inequality is an essential and
beneficial precondition to unleash the economic growth needed to end
poverty and heal the environment. Freeing the rich from taxes and
cumbersome regulation will unleash a wave of productive investment, job
creation, and prosperity that eventually will trickle down to enrich us
- The other vision holds that inequality bears a primary
responsibility for the political, economic, social, and environmental
failures that threaten the future of America and the world. America
already has the world’s largest economy and one of the world’s highest
per capita income levels. Further growth for growth’s sake
is not the answer. Our priority need is to reallocate and redistribute
our economic resources to get the outcomes we really want.
Equality: The Evidence
British epidemiologist Richard Wilkinson has done an exhaustive
review of the evidence on the relationship between the distribution of
wealth and indicators of physical, mental, and social health across and
within countries. His research demonstrates that on virtually every indicator, more equal societies enjoy more positive outcomes than less equal societies.
Figure 1, below, graphs the results for the world’s high-income
countries. By a substantial margin, the United States ranks first in
inequality and has the worst outcomes on a range of indicators of
physical, mental, and social health (see also Wilkinson’s TED talk).
In relatively equal societies, modest differences in wealth and
privilege based on differences in real competence and contribution are
easy to accept as fair and justified. When, however, the differences
become extreme and the winners distinguish themselves primarily by their
willingness to engage in morally corrupt behavior for personal
advantage, there is an inevitable deterioration of the trust,
institutional legitimacy, and moral fabric essential to the healthy
function of individuals, communities, and society. That creates a social
deficit, from which it takes generations to recover.
Health and Social Problems are Worse in More Unequal Countries
Index: Life expectancy; math
and literacy; infant mortality; homicide; imprisonment; teenage births;
trust; obesity; mental illness, incl. drug and alcohol addiction; social
Source: Wilkinson & Pickett, The Spirit Level (2009), www.equalitytrust.org.uk
Figure 1: Equality and National Health
More Sucking Up Than Trickle Down
Wall Street interests would have us believe that the best way to deal with
the plight of the poor is to bring up the bottom by growing the economy from
the top down—the classic claim of trickle-down economics. When wealth and power
are concentrated at the top, however, the result is not trickle down. It is a
sucking up. Those on the top suck up the wealth and gorge on a spending spree.
Those on the bottom suck in their guts, tighten their belts, and fight for
From 1983 to 2008, total U.S. GDP grew from $6.1 trillion to $13.2 trillion
in constant 2005 dollars. Figure 2, below, shows the distribution of the total
wealth gain during this period. The wealthiest 5 percent of American households
captured 81.7 percent of the gain. The bottom 60 percent of households not only
failed to share in the overall increase, they suffered a 7.5 percent loss.
Figure 2: Who Captures the
Wealth Gain from Growth?
Current U.S. per capita GDP is $48,100 for every man, woman, and child
in the United States. This places us somewhere around seventh in the
world, depending on who is counting. We are bested only by countries
with comparatively tiny populations (Qatar, Luxembourg, Singapore,
Norway, Kuwait, Brunei)—four of them with a lot of oil.
If distributed equally, U.S. per capita GDP would translate into
$192,400 for a family of four. Our economy is already far larger than
necessary to provide for needs of all and provide a fair reward for
those who make distinctive contributions.
Contrary to the incessant mantra of economists, politicians, and
media pundits, economic growth is not the solution to what ails us. In
fact, sheer economic growth drives the need to chew up ever more of our
living Earth, creating an environmental deficit that compromises Earth’s
living systems to feed an economic system that fails to meet our most
basic needs because of an egregious misallocation of resources. Our
prime need is for a more intelligent distribution of the wealth we
have—giving social and environmental returns priority over financial
When Wall Street Interests Make the Rules
The sucking-up economy is no accident. More than 30 years ago, Wall
Street interests mobilized in the name of deregulation and market
“freedom” to rewrite the rules of finance in order to break the link
between contribution and reward; and to favor the bankers, big
corporations, private equity firms, and others in the business of
playing financial games to make money from money. They suppressed wages
and benefits for working people, reduced taxes paid by the rich, and
stripped away constraints on speculation and other financial games by
which those at the top increase their financial wealth without
contributing to the real wealth of society.
Wall Streeters now pride themselves on generating eye-popping profits
and bonuses through financial manipulation, deception, and extortion
while producing nothing of real value. As the wealth gap grows, so too
does the relative political power of the elites and thereby their
ability to rig the rules in the favor of yet greater wealth
Economic structures institutionalized by policies that favor growth
for the rich now virtually guarantee that the benefits of growth flow to
the top. There will be no economic recovery for the rest of us so long
as these institutions control our economy and our politics.
To understand how it works, we must recognize that in a corrupted
financial system it is possible to make a great deal of money without
contributing to the production of real wealth. Money itself is not
wealth. It is a system of accounts by which modern societies record and
balance our obligations to one another and allocate access to marketable
goods and services. When the money system allocates money fairly in
proportion to our individual contribution to the health and well-being
of our community, it is a beneficial mechanism essential to the function
of a complex modern society.
When access to the essentials of living—for example, food, water,
shelter, education, and medical care—depends on our individual access to
money, those who control the creation and allocation of money hold
tremendous power. The more corrupt the money system, the greater the
opportunity and incentive to abuse that power. The greater the abuse,
the faster the wealth/power gap spirals out of control.
The greater the power of those at the top and the greater the
desperation of those at the bottom, the more intense the competition to
improve one’s position on the wealth pyramid by any means—no matter what
the cost to the society. The financial logic of profit maximization
becomes the only logic. Concern for others and Earth’s living systems is
off the table.
The moral calculation is clear and simple: Be a winner or be a loser.
Experience the unbounded power and privilege of the winners or bear the
burden of desperate servitude to the winners’ arbitrary whims.
A Positive Federal Deficit Reduction Plan
To put ourselves on the path to a more egalitarian society will take
time and effort on many fronts. One immediate opportunity lies in the
debate about reducing the federal deficit. It provides one example of
how a high visibility debate can be reframed to raise public awareness
that we are in trouble not for lack of growth, but because of a massive
misallocation of economic resources.
A recent report
of the Institute for Policy Studies identifies 24 sensible fiscal
reforms that would eliminate the deficit, increase equality, deny the
Wall Street gamers their ill-gotten gains, and move us toward a balanced
relationship with Earth’s biosphere. These include new taxes on Wall
Street corporations, wealthy individuals, and pollution, and the
elimination of subsidies for environmentally harmful activities.
Together these recommendations would eliminate more than $572 billion a
year from the deficit and simultaneously increase equality, reduce
reckless financial speculation, and improve human and environmental
The report also identifies cuts in military spending that would save
another $252 billion and make us more secure. All together, the 24
reforms could make a win-win contribution of $824 billion every year
toward balancing our federal budget. In the process, we would take a
first step toward the larger goal of creating a New Economy based on ecological balance, equitable distribution, and living democracy.
For more than 30 years, Republicans have made their commitment to the
Wall Street vision abundantly clear. They are quick to condemn anyone
who hints at a need for redistribution toward greater equality as a
socialist looking for a free ride—ignoring the fact that those who
profit from unproductive financial games are the ultimate free riders.
Democrats are rather more inclined toward an equality agenda, but are
restrained by dependence on Wall Street donors and an obsolete national
ideology that says growth is the path to prosperity and the success of
the “wealth creators” benefits us all.
It falls to civil society to expose the nature, cause, and
consequences of the wealth gap and to define a policy agenda to achieve
financial integrity, close the gap, and resolve the financial, social and environmental deficits that
threaten our national and human future. The goal is not to give anyone a
free ride. It is to secure and expand the middle class and to assure
everyone an opportunity to contribute to our national prosperity and to
share in the benefits.
We must assure that the winners in the next election are politicians
receptive to this agenda. Regardless of who wins, however, our task
remains to build irresistible public support behind a framing vision and
agenda for a nation that lives up to its promise of providing a secure
and prosperous life for all who are willing work hard and play by the
The Wall Street elites will push relentlessly for more growth for the
1 percent and will back their demands with enormous financial power. We
must be prepared to counter with the even more powerful force of an
aware and engaged citizenry committed to creating an America that works
Photo by Yasin Hassan, licensed under Creative Commons.