DAVID KORTEN.
The Occupy Wall Street protests have achieved a remarkable breakthrough. They have penetrated the filter of the corporate media and captured the imagination of America and the world. They have focused attention on Wall Street banks and corporations as the primary threat to U.S. and global prosperity and security. And they have sparked a much-needed conversation on the economy"s values, purpose, and structure.
It is now up to all of us to build on the opening this movement has created to liberate Main Street from Wall Street.
Wall Street is the symbolic center of an economic system that works for the 1% at the expense of the 99%. It uses its outsized financial and media muscle to corrupt government and deepen the divide. Over the past thirty years, virtually all the benefit of U.S. economic growth has gone to the richest 1% of Americans. Effective tax rates for the very rich are at historic lows and many of the most profitable corporations pay no taxes at all.
Despite the crash of 2008, the financial a.s.sets of America"s billionaires and the idle cash of the most profitable corporations are now at historic highs. Forbes magazine"s list of the world"s billionaires set two records in 2011: total number (1,210) and combined wealth ($4.5 trillion)-equal to the German GDP. The biggest challenge facing America"s 1% is figuring out where to park all their cash.
Most of the individuals and corporations that hold the cash have lost interest in long-term investments that build and expand strong enterprises. Corporations are using their stores of cash primarily to buy back their own stock, invest in off-shoring American jobs, acquire control of other companies, and pay generous dividends to shareholders and exorbitant bonuses to management. The substantial majority of trades in financial markets are made by high-speed computers in securities held for fractions of a second to manipulate the market and profit from minor variations in stock prices. While business pundits refer to this trading as investment, it is not. Investment puts people to work in productive enterprises that build a strong economy.
Our banking industry and corporations did not always behave this way.
America is a tale of two economies. The Wall Street economy is accountable only to faceless financial markets and devoted to financial deception, manipulation, and speculation to maximize financial returns to its most powerful players. The Main Street economy is directly accountable to real people who have a natural interest in building healthy communities with thriving local economies and natural environments.
It Was Cla.s.s Warfare, and Wall Street Won.
After Wall Street drove the nation into the Great Depression of the 1930s, the Roosevelt administration enacted significant financial reforms. Those reforms put in place a system of money, banking, and investment based on community banks, mutual savings and loans, and credit unions. We had laws that prohibited one bank from owning another and severely limited the number of branches a bank could operate. These inst.i.tutions provided loans to individuals and financial services to Main Street businesses that employed Americans to produce and trade real goods and services in response to community needs and opportunities. Corporate shares were held by individuals who knew the companies they owned.
The Main Street economy, which Wall Street interests now dismiss as quaint and antiquated, financed U.S. victory in World War II, the creation of a strong American middle cla.s.s, an unprecedented period of economic stability and prosperity, and American world leadership in industry and technology. It also made the American dream of a secure and comfortable life in return for hard work and playing by the rules a reality for a substantial majority of Americans.
In the 1970s, Wall Street interests mobilized to use their financial and media power to re-establish control of the economy. It was cla.s.s warfare, and Wall Street won.
Their primary targets were the regulations that limited the size and function of banks and other financial inst.i.tutions. Step by step they transferred the power to create and allocate credit from locally owned, independent Main Street financial inst.i.tutions-community banks, mutual savings and loans, and credit unions-to Wall Street inst.i.tutions that had no particular interest in investments that create community wealth.
Wall Street inst.i.tutions quickly developed a more profitable business model. The model has come to feature excessive fees and usurious interest rates for ordinary customers, financing speculation, luring the unwary into mortgages they cannot afford, bundling the resulting junk mortgages into derivatives sold as triple-A securities, betting against the sure-to-fail derivative products so created, extracting subsidies and bailouts from government, laundering money from drug and arms traders, and off-shoring profits to avoid taxes. Much of what provides profits to Wall Street either is, or should be, illegal.
Banking That Works for Everyone.
The consequences of these activities are legion and have prompted hundreds of thousands of protesters to pour into the streets across the United States and the world. The effects include the erosion of the middle cla.s.s, an extreme concentration of wealth and power, a costly financial collapse, persistent high unemployment, ma.s.sive housing foreclosures, collapsing environmental systems, the hollowing out of U.S. industrial, technological, and research capacity, huge public and international trade deficits, and the corruption of our political inst.i.tutions. Wall Street has profited at every step and declared its experiment with deregulation and tax cuts for the wealthy a great success. It argues that to fix the mess created by this experiment, we must grant more of the same.
Our economy depends on Wall Street inst.i.tutions only because those inst.i.tutions got the rules rewritten to give themselves control over much of the nation"s money and productive resources. Every need we now depend on those inst.i.tutions to fulfill can be better served by inst.i.tutions with strong roots in Main Street.
Here are six steps we can take to liberate Main Street from Wall Street and build a democratically accountable economy based on sound market principles.
1. Reverse the process of bank consolidation and rebuild a national system of community-based, community-accountable financial inst.i.tutions devoted to building community wealth. Break up the mega-banks into independent, locally owned financial inst.i.tutions backed by tax and regulatory policies that favor community financial inst.i.tutions.
2. Implement appropriate regulatory and fiscal measures to secure the integrity of financial markets and the money and banking system. Such measures properly favor productive investment, limit banking inst.i.tutions to basic banking functions, and render financial speculation and other unproductive financial games illegal and unprofitable.
3. Create a state partnership bank, modeled on the state Bank of North Dakota, in each of the fifty states to serve as a depository for state financial a.s.sets. Such banks can use their funds to spur community investment by partnering with community financial inst.i.tutions within the state on loans to local home buyers and locally owned enterprises engaged in construction, agriculture, industry, and commerce.
4. Restructure the Federal Reserve to limit its responsibility to managing the money supply, subject it to federal oversight and public accountability, and require that all newly created funds be applied to funding green public infrastructure. a.s.sign what is currently the Fed"s responsibility for the regulation of banks and so-called "shadow banking" inst.i.tutions to specialized regulatory agencies with clear public accountability.
5. Create a Federal Recovery and Reconstruction Bank (FRRB) to finance critical green infrastructure projects designated by Congress. Fund this bank with the money that the Federal Reserve creates when it determines a need to expand the money supply. Rather than introducing the new money into the economy through Wall Street banks, as is currently the Fed"s practice, introduce the money through the FRRB to fund projects that directly and immediately serve the common good. This reform makes funding available for critical projects without drawing on tax revenues.
6. Rewrite international trade and investment rules to encourage national ownership, self-reliance, and self-determination. Bring international rules into alignment with the foundational a.s.sumptions of trade theory that the ownership of productive a.s.sets belongs to citizens of the country in which those a.s.sets are located and that trade between nations is balanced. Hold corporations that operate in multiple countries accountable for compliance with the laws of each country of operation.
Given the government"s failure to restructure the banking system, another financial crash is a near certainty. That will be a defining moment. We need to be prepared with a plan to transform the money and banking system from one that benefits only the 1% to one that benefits all.
We need not, however, wait for the next crash. Citizens of all walks of life can act immediately to advance public understanding of the issues raised here, move accounts from Wall Street to Main Street financial inst.i.tutions, promote cooperative or nonprofit ownership of financial inst.i.tutions, and advocate legislation to restructure the system.
None of the steps in this six-part agenda will be easy. The forces aligned to maintain the status quo are formidable. But Occupy Wall Street and the 99% movement have created a new conversation that could lead to change with a speed and on a scale that previously seemed unimaginable.
David Korten is co-founder and board chair of YES! Magazine and co-chair of the New Economy Working Group. He is the author of Agenda for a New Economy and the international best seller, When Corporations Rule the World. This chapter is based on the report, "How to Liberate America from Wall Street Rule," which is available for free at neweconomyworkinggroup. org/report/how-liberate-america-wall-street-rule.
CHAPTER 11.
A FAIR TAX SYSTEM:.
THREE PLACES TO START.
CHUCK COLLINS.
Over the last half-century, we"ve witnessed a dramatic shift in who pays taxes. The responsibility has moved off the very wealthy and onto the middle cla.s.s, off the global corporations and onto small businesses, and off the federal government and onto state and local budgets.
According to a new report from Wealth for the Common Good, an organization that I co-founded, the wealthy have received ma.s.sive tax cuts, not only under President George W. Bush but for decades before his election. The top 1% of taxpayers, those with incomes of $500,000 or more, have seen their share of income paid in federal taxes decline from 60 to 33.6 percent between 1960 and 2004. During President Bush"s eight years in office, Congress expanded tax cuts to Americans with incomes over $250,000, adding another $700 billion to the national debt.
Meanwhile, the share of household income that middle-cla.s.s households pay in federal taxes actually increased slightly, from 15.9 to 16.1 percent.
Congress has failed to close tax loopholes for global corporations, allowing thousands of profitable U.S. companies to pay no corporate income taxes-at all-between 1998 and 2008. For example, General Electric generated $10.3 billion in pre-tax income in 2009, but ended up paying nothing in U.S. taxes.
Global corporations dodge taxes by setting up subsidiaries in countries that have low or no corporate income tax. They claim their profits are made there, which allows them to avoid paying U.S. taxes, while asking the American people to pay for their losses. A small business has to compete against companies that unfairly utilize such loopholes.
When big corporations and high-income individuals don"t pay their share, the bills get pa.s.sed to the middle cla.s.s and our debt grows. That"s hard to appreciate until things start to hit home in the form of cuts to public schools, veterans" services, ma.s.s transit, and thousands of other services on which we depend every day. Our public service commons have been chronically underfunded for the last forty years.
Reversing the tax shift would not only reduce the tax burden borne by the bottom 70 percent of taxpayers; it would also allow us to make long-overdue investments in upgrading our aging public infrastructure and defending the commons.
In the United States, we tend to take for granted the advanced commons (public infrastructure, property, and knowledge inst.i.tutions) that our ancestors built. We"re like fish who swim in an ocean of publicly funded services without seeing the water around us. Taxes are the way we pay for this healthy common heritage, ensuring that they exist for the next generation.
Here are three things you can do to support the commons: 1. Join your local occupation, or start a new one. Bring a sign showing how you feel about unfair taxation and talk with fellow protesters to find ways to bring this issue to light.
2. Help close overseas tax havens. Business for Shared Prosperity and Wealth for the Common Good are enlisting investors and small businesses to speak out against tax haven abuse. Go to businessagainsttaxhavens.org to learn more.
3. Support a financial speculation tax. A modest financial speculation tax on Wall Street transactions would raise over $150 billion annually in urgently needed revenue. See the campaigns page at wealthforcommongood.org for more information.
Chuck Collins is a senior scholar at the Inst.i.tute for Policy Studies where he directs the Program on Inequality and the Common Good. This chapter first appeared on YesMagazine.org on April 12, 2010.
CHAPTER 12.
HOW TO CREATE LIVING-WAGE JOBS THAT ARE GOOD FOR THE PLANET.
SARAH VAN GELDER AND DOUG PIBEL.
Officially, the "Great Recession" ended in the second quarter of 2009. For some people, the recovery is well under way. Corporate profits are at or above pre-recession levels, and the CEOs of the two hundred biggest corporations averaged over $10 million in compensation in 2010-a 23 percent increase over 2009.
But for most Americans, there"s no recovery. Twenty-five million are unemployed, under-employed, or have given up looking for work. Forty-five percent of unemployed people have been without a job for more than twenty-seven weeks, the highest percentage since the Bureau of Labor Statistics started keeping track in 1948.
American workers have become expendable to many of the corporations that run the economy; NAFTA and other trade deals opened the floodgates to outsourcing. Other jobs are being eliminated, or hours, pay, and benefits are being cut.
As corporations ama.s.s greater power, wealth, and influence, they successfully lobby for tax breaks and federal subsidies and set the national policy agenda. And as long as they continue to cut jobs, the economy will not have sufficient demand to recover.
Real Solutions.
Leaders in both parties tell us growth is what"s needed, but the evidence suggests growth alone won"t help. GDP has grown steadily, but since the official end of the recession, virtually all of the new income has gone to corporate profits, according to a May report by the Center for Labor Market Studies at Northeastern University. None of the increased GDP has gone to boost wages and salaries.
More importantly, since World War II, growth has been built on cheap energy. Now the easy-to-pump oil is nearly used up, and the cost of extraction is rising. At the same time, we"ve used up the Earth"s capacity to absorb climate-changing gases and other forms of pollution. Changes in the delicate balance of atmospheric gases are already disrupting the climate, and extreme weather events are happening with increasing frequency.
So how do we create an economy that provides dignified livelihoods to all who are willing to work, without undermining the natural systems we, and our children, rely on?
A real solution requires a vision that is both humble in terms of the material wealth we can expect and ambitious about the fairness, mutual support, and quality of life we can build.
That means building our local economies so they can sustain our families while also sustaining the natural world, which we rely on for our future.
1. Local Economies, Local Ecosystems.
Strong local and regional economies are the way to build a sustainable and resilient recovery. Small businesses actually create more jobs and innovation than big corporations, and entrepreneurs with long-term stakes in their local environment and economy have both the means and the motivation to protect them. There are many simple ways individuals and communities can support the transition back to local economies.
* Buy local goods and services and keep money circulating in the Main Street economy, where new jobs are most likely to be created.
* Bank local, too. Credit unions, community-rooted banks, and state banks invest in the local economy, instead of siphoning off our bank deposits to use for global speculation.
* Start with strengths. Build economies from the gra.s.sroots up, starting with existing a.s.sets, whether that"s a vibrant local arts scene, farmland, or a hospital.
* Use wasted resources. Instead of demolishing and landfilling obsolete buildings, disa.s.semble them and sell the components. Other common wastes: used clothes and books, unharvested fruit trees, and church kitchens that could be health department certified for food processing start-ups.
* Do it cooperatively. Home health care workers, house cleaners, grocery store clerks, and laundry workers have all become worker-owners of successful cooperatives.
* Allow communities to control their resources. Community-controlled forests are more likely to be sustainably managed; sustainable agriculture is more labor-intensive but less polluting. Sustainable and fair practices create jobs that last while boosting local resilience.
* Keep ownership human. When owners are workers, customers, or the community at large, an enterprise can operate in accordance with multiple values, such as human well-being, the good of future generations, and ecological health.
2. Redefining Middle Cla.s.s.
To live within our means as we approach the end of the era of cheap energy and seemingly limitless growth, we"ll need to produce and consume less stuff. That may mean less paid work available, at least in some sectors of the economy, so it makes sense to share those jobs and work fewer hours.
A shorter workweek could benefit those who are working too much while opening new jobs for the unemployed. Productivity increases when workers aren"t overstretched. Profits now going to the wealthiest 1% could be distributed to workers so they could afford to work fewer hours and have more time for the rest of life.
Working less also means we have more time to do things for ourselves and for our neighbors. These informal exchanges among neighbors help reweave a community fabric that has been badly frayed by overstressed lives. Once you get the tools to repair your bicycle, you can fix other people"s bikes or teach them how. When you"re canning jam, it"s easy to make some extra for gifts and exchanges.
With a strong community DIY ethic, people can live with less money, so they can afford to spend less time at a job and more on building the rich networks and practical skills that will enhance our resilience in an uncertain future.
3. Build People Power.
We are still a wealthy country. We could use our tax dollars to put Americans to work replacing obsolete energy, water, transportation, and waste systems with green infrastructure that can serve us in the resource-constrained times ahead.