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44 of 46 people found the following review helpful:
5.0 out of 5 stars
Visionary, February 4, 2009
"Agenda for a New Economy," by David Korten is a valuable discussion of how there needs to be paradigm shift in the way we view Wall Street and the structure of the overall economy. Korten builds upon some of the major themes of his previous book, "The Great Turning," in calling for an economic system that measures wealth less on the fiat currency system and more on families, communities, healthy children, and environmental health. There has been plenty written about the corruption of Wall Street and the inequality the system breeds, but very little has been offered in the way of giving folks a blueprint of sorts for an alternative system that values people over an unstable monetary system. That is, until now.
One of the more interesting points in the book is the discussion of the nature of wealth. Korten refers to the current measure of wealth as "phantom wealth,' in which he lays out a case for its replacement with "real wealth." He makes this case quite well. Korten even goes so far as to call for the elimination of Wall Street. This idea will likely shock most readers. The immediate response is to think, "This guy is off his rocker! He must be naïve. Can that really happen?" Korten, a former business professor at Harvard, is no lightweight when it comes to economic theory. In "Agenda for a New Economy" Korten harkens back to the original ideas espoused by the father capitalism, Adam Smith. What we have now is not the same type of market system envisioned by Smith. Adam Smith would be shocked at all the tinkering and smoke and mirrors engrained in the current system. Korten elaborates on the many virtues of getting back to the basics of a market economy and true capitalism. He terms his vision as the replacing of Wall Street with "Main Street."
Korten gives a loose blueprint for restoring the economy and making it viable long-term. His vision is focused squarely on the development and nurturing of families and communities as opposed to the nurturing of the ultra-wealthy and corrupt. In the process, the environment and public health will be strengthened to a degree never before seen. It is a bold vision that some people may scoff at as being unrealistic, but Korten, no stranger to development, has seen first-hand around the world how his ideas can be put into place. He is now challenging readers to boldly start thinking about and discussing where to go from here.
"Agenda for a New Economy" should be read by every policy maker and citizen in this country. It is filled with sound examples, historical context, and economic theory. It explains the nature of the sputtering engine powering the economy and what needs to be done to radically rebuild the engine. I urge everyone to read this book and tell everyone you know to read it. You may not agree with every single idea in this book, but I guarantee that you will think hard about every idea. I think that was the intent of Korten, and to that extent this book is a complete success.
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21 of 24 people found the following review helpful:
5.0 out of 5 stars
Impressive!, February 12, 2009
Korten begins by asking "What do Wall Street institutions do that is so vital that it justifies spending trillions to save them from their own excesses?" "Might there be other ways to provide necessary and beneficial services with greater effectiveness and at lesser cost?"
Our government has come to believe it should no longer be concerned with producing real wealth - goods and services with utility; instead, we can grow our economy faster with less exertion by securitizing real assets and pumping their value up. Unfortunately, asset bubbles create only phantom wealth that increases the claims of the holder to a society's existing real wealth, and dilutes the claims of everyone else. We need to move from a Wall Street focus (making money, using global financial capital) to a Main Street focus (creating livelihoods, using local/national capital).
In 1950, manufacturing accounted for 29.3% of U.S. GDP, vs. financial services' 10.9%. By 2005, manufacturing contributed only 12% to GDP and financial services were at 20.4%. By 2008, financial services was the largest U.S. economic sector.
Achieving this required removing restrictions on debt/equity ratios, consumer interest rates, lending practices (eg. special charges), relaxing financial reporting standards, and creating financial conglomerates. In 2006, U.S. financial sector debt (largely financial institution loans to other financial institutions to leverage their financial speculations, totaled $14 trillion - 32% of U.S. debt, and 107% of U.S. GDP. (This was money NOT available to improve production.) When Lehman Brothers collapsed, it was leveraged 35:1.
In 2007, the 50 highest-paid investment fund managers averaged $588 million in annual compensation - 19,000X that of the average worker. The top five each took home over $1.5 billion. These looted funds should have been serving as reserves to cover their high-stakes bets.
From 1980 to 2005, the top 1% increased the share of taxable income from 9 to 19%, facilitated by trade policies, hiring illegal immigrants, and accounting tricks to understate inflation's impact on indexed wages and Social Security increases. The World Bank and IMF loans boosted big corporate projects that offered lots of scamming opportunities; their failure brought the rich more opportunities through prescribed remedies of selling the nations' natural assets, opening borders to foreign imports, and privatizing public assets and services.
A recent United Nations University study found the richest 2% own 51% of the world's assets, vs. the poorest owning only 1%. Financial assets of the richest 1% in the U.S. total $16.8 trillion, vs. our $13.8 GDP and total federal expenditures of $2.7 trillion.
Korten's recommendations: Full-cost market pricing (includes subsidies, pollution, injuries), assessing fees and prohibitions to make Wall Street theft and gambling less profitable (eg. outlaw selling, insuring, borrowing against assets one doesn't own, taxing trades), tax hedge fund earnings as ordinary income (not capital gains), rebuild the economy for greater self-reliance, make the U.S. wealth distribution more equitable, and require the Treasury Dept. to take over failed banks - not just loan them money.
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31 of 37 people found the following review helpful:
3.0 out of 5 stars
Interesting, but fanciful, February 17, 2009
This book, by the author's admission, was hastily put together to provide commentary on the collapse of Wall St in the Fall of 2008 and the subsequent federal bailout and to advocate for a dramatic shift to a real wealth economy. It is indisputable that collectively Wall St created a massive financial asset bubble, or "phantom wealth," based on a huge pyramid of debt created by inter-firm lending and the selling of securities based on either nonexistent or questionable assets. Most can agree that it is simply unconscionable that the top fifty investment managers raked off fees of $30 billion in 2007 alone, as though their actions were entirely legitimate. It's hard to disagree that Wall St in its current operational mode is basically a criminal syndicate. But is the author's call for the elimination of Wall St, rather than propping it up and altering it, more fanciful than realistic?
The author provides no estimates of the costs to tens of millions of average people who have been forced to create retirement portfolios in 401k accounts if Wall St is shut down. He dismisses those writers and economists who advocate for the re-regulation of the financial sector, although he recognizes the benefits of regulation in the decade of the 1950s.
The author's mission is far more than to criticize Wall St. Following on his previous work; he decries the fact that corporations, in their new globalized form, have become so powerful that they literally shape our lives. Corporations pushed for so-called free-trade agreements, which in actuality was a means to hollow out our manufacturing base, while shipping millions of jobs overseas. It is corporations that fight against environmental regulations, preferring to pass the impact of their products and production on to the rest of us. It's not as though the citizens of this nation agree that those are beneficial developments.
But again, is this not a failure of regulation? Enforceable labor and environmental standards could have been a part of trade agreements. Mileage and emissions standards could have been set and enforced after the first oil crisis in 1975. The FDA could have the power to really protect us against harmful medications and contaminated food. Much of the power of corporations is political, achieved primarily through contributions and lobbying. However, the notion that a corporation is a "person" with political rights is totally absurd. Only real people should participate in a democracy, not artificial entities. Shutting corporations out of direct participation in the political process would have huge and immediate consequences.
The author essentially wants to break up huge corporations and return to a "real-wealth" economy where businesses are locally owned and operated. Real-wealth, in the author's way of thinking, "is a healthy, fulfilling life; healthy, happy children; loving families; and a caring community within a beautiful, healthy natural environment. It ... affirms our inherent worth and service. It is a peaceful world." A real-wealth economy is sustainable: resource depletion and environmental degradation are foremost concerns. Furthermore, such an economy and way of life are something that "we" all want.
However, the author makes no attempt to assess the existence of the social harmony and wisdom that would be required to drastically revamp our way of life. In fact, a strong case could be made for the diminishment of said characteristics over the last thirty years. The rise of the Republican greed society has occurred with the tacit approval of a huge portion of society, regardless of how that may be rationalized. It appears that the new President's room to maneuver in this environment is highly limited. How much change is really wanted?
The author has a "12-Point New Economy Agenda." A lot of it has appeal, but to enact any of it will require the political will and power of the general public. Instead of permitting corporations to essentially exist in perpetuity, their charters should be subject to revocation on clear indications of public disservice. We need to restore our economic sovereignty by rational trade policies. Workers should be empowered within firms to participate in decisions impacting them and the community, as well as the enterprise. Of course, the vast disparities in wealth and income need to be addressed if a real sense of community is to be achieved. Contrary to the author, Wall St and corporations, sufficiently regulated, can fit in an economy where citizens have the upper hand.
Certainly, most of us share in the author's alarm that our economic institutions, as well as a government controlled by those entities, are creating an unsustainable and unpleasant future for most of us. But this book, other than pointing out Wall St and corporate excesses and wishing for a more people-friendly future, provides no help in describing a path by which we can get from a society dominated by a self-interested, wealthy social layer to one where the average person can expect a life-enhancing future.
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