A crop of new and recent books will improve your sustainability IQ while you soak up the sun at the beach.

Originally posted on the CSRwire website.

By CSRwire Talkback Managing Editor Francesca Rheannon

Memorial Day has come and gone and the summer season is upon us (even if it’s still formally a few weeks away). The crises in the economy and environment continue to amplify in the popular mind, enough to see a bumper crop in books addressing them. They range from scathing critiques and sobering predictions to prescriptions for positive change.

So grab your beach towel, sunscreen and umbrella, and pack your tote with a few of the following picks for summer reading.

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The calculus of the debt economy equals booms, busts and inequality.

As part of the New Economy 2.0 series 

By David Korten

The unrealistic expectation that money should grow effortlessly in perpetuity is more than an issue of unrealizable expectations. It combines with a Wall Street controlled debt-based money system to create an imperative for the economy to grow profits of bankers, and thereby the richest among us, to keep the financial system, and thereby the economy, from collapsing.

It is odd we experienced a financial collapse in 2008 because of a credit crunch, a shutdown on lending, at a time when the world was already awash in money. BusinessWeek’s July 11, 2005, cover story shouted “Too Much Money” and spoke of a savings glut. Its June 11, 2008, European issue reiterated the theme, “Too Much Money, Inflation Goes Global.”

Most discussion of the financial crisis focuses on the details and misses the big picture. First, much of the money was tied up in the Wall Street casino rather than facilitating productive activity in the real economy and was simply pumping up a phantom wealth bubble. Second, virtually every dollar in the system was borrowed, because in our money system, banks create money by lending it into existence. When this debt is used to inflate financial bubbles and support Ponzi schemes, eventual default is inevitable.

Third, Wall Street and the Federal Reserve are joined in an alliance to keep “wage inflation” below the level of growth in the real cost of living. This assures all benefits of productivity gains go to owners rather than being shared with workers. It also keeps inflation confined to financial bubbles that inflate the phantom wealth financial assets of the rich. Furthermore, it forces the bottom 90 percent of the population – the people who make their living by producing real goods and services – into debt at usurious interest rates to the top 10 percent to cover daily basic daily expenses. Inevitably, amounts owed exceed the borrower’s ability to repay. The lenders then stop lending and foreclose on assets of the desperate borrowers.

When a loan is repaid or goes into default, the debt is cancelled and the money supply shrinks by that amount. Most loans continue to be repaid, but if new loans are not being issued, the demand for real goods and services falls because people don’t have the money to pay for them. As demand falls, businesses lay off workers, who then join those pushed into default.

The problem appears to be a lack of money, even though the total money in circulation is far more than enough to cover real-wealth exchanges in a rational real-wealth economy. The money, however, is locked up in the Wall Street casino economy rather than circulating in the real Main Street economy. Pouring public bailout money into Wall Street serves only to re-inflate the bubble. It does nothing to revive the real economy.

Demand by Wall Street for the eventual repayment with interest of nearly every dollar in circulation means, that to avoid collapse, the economy has to grow to generate demand for new borrowing to put new money into circulation to pay the interest due to bankers on already outstanding loans. This demand for perpetual growth simply keeps bankers’ solvent results in a serious distortion of society’s economic priorities.

Rather than maximizing real well-being, policy makers are compelled to focus on avoiding economic collapse by growing the money economy. A debt-based money system can make sense when the credit funds real investment. When the credit funds current consumption and phantom wealth speculation, the result is ever-increasing debt, inequality, destruction of the natural environment, erosion of the social fabric and ultimate default.

We have for too long put up with a money system designed to grow the financial assets of rich people at the expense of assuring continuing cycles of economic boom and bust, confining billions to lives of desperation and reducing Earth to a toxic waste dump. We can do better.

Growth in GDP creates the illusion we are getting richer, even as we accelerate our material, social and spiritual self-impoverishment as a species. Fortunately for our common future, people everywhere are waking up to the reality and challenging conventional economic wisdom. They are focusing their attention on rebuilding their communities and local economies to improve human security, health and happiness without regard to how this impacts GDP, corporate share prices or other bogus indicators of economic well-being. It is an important beginning.

An obvious next step is to replace GDP and other financial indicators with indicators of the health of our children, families, communities and natural systems as the basis for assessing the economy’s performance. We may then notice that destroying living wealth to create financial wealth is an act of collective suicidal insanity and begin treating money as a useful tool for managing our economic choices rather than the end to be maximized.

About David Korten

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 is board chair of YES! Magazine, co-chair of the New Economy Working Group and a founding member of Business Alliance for Local Living Economies (BALLE).

About New Economy 2.0 

Visionary economist David Korten introduces a national conversation series, New Economy 2.0, on CSRwire Talkback based on his acclaimed book, Agenda for a New Economy, 2^nd edition. For the next several weeks, Korten will summarize the main points and key lessons of each chapter of his book, leading from a dissection of what went wrong in the “phantom wealth Wall Street economy” to the presentation of a vision of a world of real wealth Main Street economies that support strong middle class societies, honor real market principles and work in partnership with Earth’s biosphere.

New Economy 2.0 envisions an economy in which life is the defining value and power that resides in people and communities. It contrasts with the popular New Economy 1.0 fantasy of a magical high-tech economy liberated from environmental reality and devoted to the growth of phantom wealth financial assets.

This exciting, new series is co-published by CSRwire and YES! Magazine.

The arguments presented here are developed in greater detail in Agenda for a New Economy available from the YES! Magazine Web store.

Talkback Readers: If the economy depends on debt, and debt spells booms, busts and inequality, what is the remedy? How can we get from here to a more stable economy? Share on Talkback!

Out with the old, in with the new.

By David Korten

In his recent State of the Union address, President Obama emphasized the global competition for jobs. He pointed to the example of China and India educating their children “earlier and longer, with greater emphasis on math and science.” He brought both Republicans and Democrats to their feet to applaud his call for America to “out-innovate, out-educate and out-build the rest of the world.”

It was a politically unifying moment—and one that revealed how badly we have lost our way as a nation, not to mention how far our national economic and political institutions are from providing the leadership that we, and the world, now need.

A global competition for survival and dominance has given us a world divided between the profligate and desperate. It leads to the expropriation of ever more of the world’s real wealth to secure the privilege and extravagance of the few. Rededicating ourselves to this destructive path is not likely to produce a different result.

Hope for our common human future depends instead on global cooperation to create a world in which every child can look forward to a prosperous, secure and meaningful life irrespective of nationality, race or religion. This will require replacing economic policies and institutions responsible for Old Economy failure with policies and institutions of a New Economy—one based on positive life-values and a democratic distribution of power.

The following are seven critical sources of Old Economy failure—each paired with its New Economy solution.

1. Living Indicators. The use of financial indicators like gross domestic product (GDP) and the Dow Jones average to assess the performance of the economy gives priority to false values. We currently see just how invalid these financial measures are: GDP grows, but jobs don’t. The Dow Jones climbs, but wages are stagnant and foreclosures continue. Neither is a valid measure of the kind of economic performance we need.

Replace financial indicators like GDP with indicators of human- and natural-systems health as the basis for evaluating economic performance. The Bhutan experiment with a happiness index is an excellent start.

2. A Real Wealth Money System. Wall Street control of the creation and allocation of money concentrates the power to set national priorities in institutions that recognize no interest beyond their own profits. As we become ever more dependent on money to meet our basic daily needs, this control becomes ever more complete—and more destructive of all that we truly value.

Decentralize and democratize the money system so that it redirects the flow of money away from Wall Street speculators to productive Main Street businesses. We once 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 that suck wealth out of communities and depend on government subsidies and protections. There is nothing esoteric about the banking system we must create. It looks a great deal like the system we had before the start of banking deregulation in the 1970s.

3. Equitable Distribution. Wall Street political influence has produced trade, fiscal, workplace and social policies that create ever more extreme inequality by suppressing wages and eroding protections, services and safety nets for those who do productive work to increase profits for the owning class. Aren’t we glad 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?

Implement fiscal, workplace and social policies that distribute income and ownership equitably. Equitable societies are healthier, happier, more democratic and avoid the excesses of extravagance and desperation.

4. Living Enterprises with Living Owners. An ideology of market fundamentalism has embedded a belief in public culture that the sole purpose and responsibility of a business enterprise is to maximize financial returns to its owners. This belief, combined with a system of absentee ownership and instantaneous trading of corporate shares, encourages short-term over long-term thinking and strips corporate decision making of concern for social and environmental consequences. 

Recognize the primary purpose of any enterprise is to serve the needs of a living community. Favor living enterprises with living, locally rooted owners 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 natural environment. This means favoring cooperative, worker- and community-owned enterprises and discouraging the speculative public trading of corporate shares.

5. Real Markets/Real Democracy. The institution of the global corporation is designed to facilitate the creation of global-scale, legally-protected concentrations of economic and political power dedicated to extracting social, environmental and governmental subsidies to advance the exclusive and narrow private interests of financial elites beyond public accountability. This violates the principle of shared and distributed power foundational to democracy and a market economy.

Create real rule-based markets and democracy by breaking up concentrations of corporate power, barring corporations from competing with human beings for political power and implementing rules and incentives that support cost internalization.

6. Local Living Economies. Fragmented local economies dependent on global corporations for jobs and basic goods and services leave people and nature captive to the financial interests of distant institutions that have no concern for their well-being or accountability to their interests.

Pursue local economic development programs that build diversified, self-reliant, energy efficient, democratically self-organizing local economies comprised of locally-owned living enterprises devoted to serving local needs.

7. Supportive Global Rules. Global rules put forward by institutions like the WTO that are largely captive to corporate interests circumvent institutions of democracy to support the other six Old Economy dysfunctions.

Restructure global rules and institutions to honor and serve life values and local control.

Leadership in framing and popularizing a vision for a New Economy must come from We the People. We are the one’s we’re waiting for.

About David Korten

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 is board chair of YES! Magazine, co-chair of the New Economy Working Group and a founding member of Business Alliance for Local Living Economies (BALLE).

Talkback Readers: Give us your thoughts on the 7 steps – or add others you would like to see. Share your vision on Talkback!

As part of the New Economy 2.0 series 

By David Korten

It appears we are a nation addicted to debt. The current total of U.S. public and private debt is $57 trillion (2009). Of this total, $42.5 trillion is private household/business/financial sector debt and $14.7 trillion is federal/state/local government debt. Of the private debt, $13.5 trillion is household debt, 122.5% of annual disposable income. Of the total U.S. debt, $14 trillion is owed to foreigners. Current U.S. GDP is $14.3 trillion. So is this a problem?

Most of the money in circulation is created as credit when a bank issues a loan. By the nature of this system, no debt means no money. Now that would be a really big problem in an economy that cannot function without money.

More important than the size of the debt is the question of whether it is good debt or bad debt. So what’s the difference?

Let’s start with good debt. The underlying logic of a debt-based money-system rests on the assumption that the money banks create by issuing loans is invested in ways that expand society’s productive capacity and thereby the available pool of real goods and services.

It further assumes the benefits produced are shared equitably among all who contribute. The savers and investors who defer their consumption to build the bank’s capital reserves receive a fair share as interest. The bank employees receive a fair share as salary and benefits. The governments that provide the legal, social and physical infrastructure required to do business receive a fair share as taxes.

The problem facing the United States is most of our outstanding debt is bad debt. It was issued to fund consumption and phantom wealth speculation, and in aggregate cannot be repaid, because it is not backed by real assets.

This didn’t just happen. It is the result of bad public policies and can be corrected only by better policy choices. Let’s take a look at four examples.

Gambling Debt: Borrowing at interest to gamble on asset bubbles and loan pyramids can inflate financial asset statements, but produces nothing of real value and the assets can deflate in a heartbeat, leaving the loans unsecured and unpayable. This is a direct consequence of the financial deregulation that allowed Wall Street players to take control of the money and banking system and reorient it from financing investment in the real-wealth economy to financing speculation in the bubble economy.

Private Consumer Debt: Borrowing at interest to support current consumption beyond one’s income is a dead end. At issue here are policies relating to trade, unions, wages, employment, public services, and taxes that suppress the incomes of working people relative to the cost of living, while inflating the incomes of the investing class. This forces the majority of households to borrow from the investing class to cover basic consumption expenses.

Public Consumer Debt: Much of the current debate about debt centers on public debt. Borrowing by governments to invest in things like education, research, infrastructure and even temporary economic stimulus directed to creating jobs in the real economy builds the nation’s future productive capacity and is logical and sensible. Borrowing to fund war, tax breaks for the rich and current government operations is neither. Tragically, most of our public borrowing has been for the latter.

Foreign Debt: Perhaps the most dangerous of all bad debt is that owed to foreign countries to pay for current consumption beyond what we produce for ourselves domestically. Our foreign debt is largely a result of unsound trade policies that lead to outsourcing jobs in manufacturing, research and technology and increase our dependence on imports of manufactured goods, agricultural products and services. These policies also play a major role in driving down domestic wages and forcing households to borrow against their credit cards and home equity to meet basic consumption needs. They place our children in a position of potentially permanent debt slavery to the children of other nations, a very bad idea indeed.

Arguments focused on the size of the U.S. public debt will get us no place, unless we address the failed economic theories and policies that have mired us in all four of the major varieties of bad debt. To get out of this mess, we need policies that favor productive investment over speculation, living wages and quality public services over consumer debt, public investment in education, research and infrastructure over war and tax breaks for the rich, and domestic production over outsourcing and imports.

About David Korten

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 is board chair of YES! Magazine, co-chair of the New Economy Working Group and a founding member of Business Alliance for Local Living Economies (BALLE).

About New Economy 2.0 

Visionary economist David Korten introduces a national conversation series, New Economy 2.0, on CSRwire Talkback based on his acclaimed book, Agenda for a New Economy, 2^nd edition. For the next several weeks, Korten will summarize the main points and key lessons of each chapter of his book, leading from a dissection of what went wrong in the “phantom wealth Wall Street economy” to the presentation of a vision of a world of real wealth Main Street economies that support strong middle class societies, honor real market principles and work in partnership with Earth’s biosphere.

New Economy 2.0 envisions an economy in which life is the defining value and power that resides in people and communities. It contrasts with the popular New Economy 1.0 fantasy of a magical high-tech economy liberated from environmental reality and devoted to the growth of phantom wealth financial assets.

This exciting, new series is co-published by CSRwire and YES! Magazine.

The arguments presented here are developed in greater detail in Agenda for a New Economy available from the YES! Magazine Web store.

Talkback Readers: What policies can turn us from bad debt to good? Share your ideas on Talkback!

Is Goldman Sachs the best ‘scam’ ever?

By Joe Sibilia

Former Reagan Budget Director David Stockman, the architect of ‘trickle down economics’ (the theory that a few guys could make a ton of money and some of it would trickle down to the thirsty masses like drops of water on a hot day), called Goldman Sachs the ‘best scam in economic history’ on a PBS News hour special.

It seems Stockman took offense that Goldman could become a ‘banking holding company’ on a Sunday, borrow fed funds at just about zero interest rate on Monday and buy Treasuries Tuesday at 3% – 4% (with the same money they borrowed) and pocket the spread. He was further incensed that they would take money from the Federal Government (basically, you and me), watch what their clients were buying (or selling) and in split milliseconds in advance of their clients, ‘trade their own account’ and pocket the spread. America the Beautiful.

If a guy like Stockman thinks this is a ‘scam’, we must be making some headway. If your only objective is to make money, without concern for anyone or anything else, you’ll figure out a way. If that means manipulating the rules – fine. If that means taking taxpayer money – fine. If that means profiting from your own customers (at their disadvantage) – fine. People want brands that pay equal attention to business and social concerns and those that do, will thrive today and in the future. I don’t see any social concern being served in the Goldman example when almost 75% of their profits comes from ‘trading’.

What the Goldman Sachs Scam demonstrates is the imperative need to begin formalizing the process of measuring social, economic and governance activities of business (the U.S. SEC is dipping their toes in the conversation, but hasn’t formalized anything yet – even though many other countries are). Goldman’s activities would have been different if the ‘values’ and ‘rules’ were a little different. I want to form another ‘bank holding company’, get money from the taxpayers and just let the dollars flow through the U.S. Treasury, use technology to advance trade on what my clients are doing and make more money. Why does Goldman Sachs have exclusive rights to this scam? Is Goldman Sachs a scam or are they ‘playing the system’ for their own advantage?

About Joe Sibilia

As a visionary of the socially responsible business movement, Joe Sibilia is founder and CEO of Meadowbrook Lane Capital (MBLC), described by the Wall Street Journal as a “socially responsible investment bank” specializing in turning values into valuation.

He is also the CEO of CSRwire.com, the social responsibility newswire service that distributes and archives corporate social responsibility/sustainability news to journalists, analysts, investors, activists, academics, public relations and investor relations professionals worldwide.

Joe also founded the Gasoline Alley Foundation, a 501(c) 3 corporation that has incubated forty-three small businesses since 1985 and teaches inner city and/or underprivileged persons to be successful entrepreneurs using socially responsible/sustainable business practices while revitalizing inner city neighborhoods.

Through MLBC, Joe has worked with a number of Socially Responsible Companies and has been widely recognized for his work in attempting to take Ben & Jerry’s Homemade Ice Cream private, while creating a private stock exchange for CSR companies.  MBLC successfully preserved many of the founders’ social initiatives, and advancing the connection between good corporate citizenship and increased share value.

His long range plan for CSRwire is to establish a “platform for innovative revenue sharing applications advancing the ‘Movement’ towards a more economically just and environmentally sustainable society and away from single bottom line capitalism.”

READERS: What’s your Talkback to the question: Is Goldman Sachs the best ‘scam’ ever? Let us know, and we’ll respond.