Seven Global Sources of Dysfunction and their Corresponding Corrective Actions

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A proposed policy framework by David Korten


Structural Sources of Dysfunction

Here are seven institutional sources of dysfunction.

1. The use of financial indicators like GDP and stock market indices to assess the performance of the economy. We currently see just how invalid these financial measures are. The economy is growing, but jobs aren’t. The Dow Jones is climbing, but wages are stagnant and foreclosures continue. Neither GDP nor stock prices is a valid measure of economic performance.

2. Wall Street control of the creation and allocation of money. As we monetize more and more of our relationships, most people never notice that this gives more and more power and control to people who control the creation and allocation of money.

3. Fiscal policies that support extreme and growing inequality in the distribution of income and ownership. Aren’t we glad that the politicians restored tax breaks for the very rich so they could continue to inflate their claims against the real wealth of the rest of us?

4. Absentee ownership is a defining feature of in the publicly traded, limited liability corporation. Publicly traded shares separate the power of ownership from the social and environmental consequences of its use.

5. The corporate charter is a license to create global-scale legally protected concentrations of economic power under unified management dedicated to advancing narrow and exclusive private interests beyond public accountability. Such institutions are both anti-market and anti-democracy.

6. Fragmented and dependent local economies leave people captive to the financial interests of distant institutions and persons with no concern for their well-being, and

7. Global rules put forward by institutions like the WTO created by elite interests to circumvent the institutions of democracy support all of these dysfunctions.

Corrective Action

We need to flip each of these seven sources of dysfunction around and translate them into seven positive structural changes:

1. Replace financial indicators like GDP with indicators of human- and natural-systems health as the basis for evaluating economic performance. You may have heard the discussions around Seattle of the Bhutan Happiness Indicator, which wonderful positive example.

2. Decentralize and democratize the money system so that it redirects the flow of money away from Wall Street speculators to productive Main Street businesses. Most of us in this room grew up at a time when we had a system of community banks, mutual savings and loans, and credit unions that were locally rooted and served local needs. But that system has been largely dismantled and transformed into too-big-to-fail Wall Street mega-banks dependent on government subsidies and protections that function as huge vacuum cleaners sucking the wealth out of communities. There is nothing esoteric about the banking system we must create. It looks rather much like the system we had not so long ago.

3. Implement tax, fiscal, and work place policies that distribute income and ownership equitably. That is not only essential to real markets; it is an essential foundation of democracy. Equitable societies are healthier, happier, more democratic, and avoid the excesses of extravagance and desperation.

4. Favor locally rooted ownership by real people who have a direct stake in the social and environmental consequences of the firm’s management decisions—people who are looking not for maximum financial return, but for a living return that includes a healthy community and a healthy natural environment. This means favoring cooperative, worker, and community owned enterprises and discouraging the absentee ownership model of publicly traded companies. It means recognizing that the primary purpose of business is to serve community needs. This presents our faith institutions with an epic challenge to rediscover and renew their prophetic mission and vision.

5. We need to create real markets and real democracy by freeing up both the market and our political system from domination by corporate monopolies that are both anti-democratic and anti-market. It is amazing how this gets flipped around so we forget that a real market economy looks a good deal more like a farmer’s market than an economy centrally planned and managed by Goldman Sachs, Wal-Mart and Monsanto to maximize the financial gains of absentee owners. We must break up concentrations of corporate power and bar corporations from competing with living human beings for political power.

6. Pursue local economic development programs that build diversified, self-reliant, energy efficient, democratically self-organizing local economies comprised of living-enterprises devoted to serving local needs by functioning as subsystems of their regional ecosystems. Our community based faith institutions can lend moral endorsement and organizational support.

7. Restructure global rules and institutions to support all of the above.

Three Elements of a System Transformation Strategy

I trust you recognize the epic nature of the challenge before us and its relevance to the prophetic mission and vision of our faith institutions. We have come to a moment in the human experience at which this transformation is both possible and imperative. We also have, for the first time, the understanding and communication technologies to make intelligent collective decisions as a species to achieve the systemic changes essential to our future.

The following are three elements of a system transformation strategy. Faith institutions have critical roles in relation to each.

1. Change the framing stories of the dominant culture to spread awareness of the society of love and caring that it is ours to create. Faith leaders can use sermons and religious education programs to expose the lies that limit our ability to envision societies based on love and cooperation and cultivate a shared cultural vision of human possibility in service to Creation's continued creative unfolding.

2. Grow the new reality into being.Faith leaders can encourage their congregations to participate in living the possible world into being in whatever ways are consistent with their means and passions. These include supporting support local businesses and helping to weave relationships among enterprises to rebuild our local food, money, building, and energy systems.

3. Change the rules of public policy to support the moral economy over the immoral economy. Faith leaders can frame and promote a moral politics that advances rules and policies supportive of the life-serving economies on which our collective future depends." (