Dr. David Korten (livingeconomiesforum.org) is the author of Agenda for a New Economy, The Great Turning: From Empire to Earth Community, and the international best seller When Corporations Rule the World. He was recognized as an Utne Reader Visionary in 2011.
The tell-all defection of Greg Smith, a former Goldman Sachs executive, provided an insider’s view of the moral corruption of the Wall Street banks that control of much of America’s economy and politics. Smith confirms what insightful observers have known for years: the business purpose of Wall Street bankers is to maximize their personal financial take without regard to the consequences for others.
Why has the public for so long tolerated Wall Street’s reckless abuses of power and accepted the resulting devastation? The answer lies in a cultural trance induced by deceptive language and misleading indicators backed by flawed economic theory and accounting sleight-of-hand. To shatter the trance we need to recognize that the deception that Wall Street promotes through its well-funded PR machine rests on three false premises.
Wall Street aggressively promotes these fallacies as guiding moral principles. Their embrace by Wall Street insiders helps to explain how they are able to reward themselves with obscene bonuses for their successful use of deception, fraud, speculation, and usury to steal wealth they have had no part in creating and yet still believe, as Goldman CEO Lloyd Blankfein famously proclaimed, that they are “doing God’s work.”
The devastation created by Wall Street’s failure affirms three truths that are the foundation on which millions of people are at work building a New Economy:
The critical distinction between making money and creating wealth is the key to seeing through Wall Street’s illusions.
Real wealth includes healthful food, fertile land, pure water, clean air, caring relationships, quality education and health care, fulfilling opportunities for service, healthy and happy children, peace, time for meditation and spiritual reflection. These are among the many forms of real wealth to which we properly expect a sound economy to contribute.
Wall Street has so corrupted our language, however, that it is difficult even to express the crucial distinction between money (a facilitator of economic activity), and real wealth (the purpose of economic activity).
Financial commentators routinely use terms like wealth, capital, resources, and assets when referring to phantom wealth financial assets, which makes them sound like something real and substantial—whether or not they are backed by anything of real value. Similarly, they identify folks engaged in market speculation and manipulation as investors, thus glossing over the distinction between those who game the system to expropriate wealth and those who contribute to its creation.
The same confusion plays out in the use of financial indicators, particularly stock price indices, to evaluate economic performance. The daily rise and fall of stock prices tells us only how fast the current stock bubble is inflating or deflating and thus how Wall Street speculators are doing relative to the rest of us.
Once we are conditioned to embrace measures of Wall Street success as measures of our own well-being, we are easily recruited as foot soldiers in Wall Street’s relentless campaign to advance policies that support its control of money and thus its hold on nearly every aspect of our lives.
In a modern society in which our access to most essential of life from food and water to shelter and health care depends on money, control of money is the ultimate instrument of social control.
Fortunately, with the help of Occupy Wall Street, Americans are waking up to an important truth. It is a very, very bad idea to yield control of the issuance and allocation of credit (money) to Wall Street banks run by con artists who operate beyond the reach of public accountability and who Greg Smith tells us in his New York Times op-ed view the rest of us as simple-minded marks ripe for the exploiting.
By going along with its deceptions, we the people empowered Wall Street to convert America from a middle class society of entrepreneurs, investors, and skilled workers into a nation of debt slaves. Buying into Wall Street lies and illusions, Americans have been lured into accepting, even aggressively promoting, “tax relief” for the very rich and the “regulatory relief” and “free trade” agreements for corporations that allowed Wall Street to suppress wages and benefits for working people through union busting, automation, and outsourcing jobs to foreign sweatshops.
Once working people were unable to make ends meet with current income, Wall Street lured them into making up the difference by taking on credit card and mortgage debt they had no means to repay. They were soon borrowing to pay not only for current consumption, but as well to pay the interest on prior unpaid debt.
This is the classic downward spiral of debt slavery that assures an ever-growing divide between the power and luxury of a creditor class and the powerless desperation of a debtor class.
Before Wall Street dismantled it, America had a system of transparent, well-regulated, community-based, locally owned, Main Street financial institutions empowered to put local savings to work investing in building real community wealth through the creation and allocation of credit to finance local home buyers and entrepreneurs.
Although dismissed by Wall Street players as small, quaint, provincial, and inefficient, this locally rooted financial system created the credit that financed our victory in World War II, the Main Street economies that unleashed America’s entrepreneurial talents, the investments that made us the world leader in manufacturing and technology, and the family-wage jobs that built the American middle class. It is a proven model with important lessons relevant for current efforts to restore financial integrity and build an economy that serves all Americans.
Two recent reports from the New Economy Working Group—How to Liberate America from Wall Street Rule and Jobs: A Main Street Fix for Wall Street’s Failure—draw on these lessons to outline a practical program to shift power from Wall Street to Main Street, focus economic policy on real wealth creation, create a true ownership society, unleash Main Street’s entrepreneurial potential, bring ourselves into balance with the biosphere, meet the needs of all, and strengthen democracy in the process.
For far too long, we have allowed Wall Street to play us as marks in a confidence scam of audacious proportion. Then we wonder at our seeming powerlessness to deal with job loss, depressed wages, mortgage foreclosures, political corruption and the plight of our children as they graduate into debt bondage.
Let us be clear. We will no longer play the sucker for Wall Street con artists and we will no longer tolerate public bailouts to save failed Wall Street banks.
Henceforth, when a Wall Street financial institution fails to maintain adequate equity reserves to withstand a major financial shock or is found guilty of systematic violation of the law and/or defrauding the public, we must demand that federal authorities take it over and break it up into strictly regulated, community-accountable, cooperative member-owned financial services institutions.
Occupy Wall Street has focused national and global attention on the source of the problem. Now it’s time for action to bust the Wall Street banking trusts, replace the current Wall Street banking system with a Main Street banking system, and take back America from rule by Wall Street bankers.
Dr. David Korten is board chair of YES! Magazine, co-chair of the New Economy Working Group, a founding board member of the Business Alliance for Local Living Economies, president of the Living Economies Forum, and a member of the Club of Rome. He holds MBA and PhD degrees from the Stanford University Graduate School of Business and served on the faculty of the Harvard Business School. Learn more about him at Living Economies Forum.