David Korten on the conflict/choice between Wall Street and Main Street

This is a brilliant and incisive summary of the crucial differences between the current bankrupt capitalist model (as also portrayed in the recent film Inside Job which won Best Documentary) and a viable real-market alternative.

In America we are taught from birth that capitalism is synonymous with markets, democracy, and individual liberty. Whatever its flaws, the only alternative is communism, or so we are told. This sets up a false and dangerously self-limiting choice between two economic models both of which create concentrations of power that stifle liberty and creativity for all but the few at the top. Communism is dead. As we now look for solutions to our current economic crisis, the relevant distinction is not between capitalism and communism, but rather between Wall Street and Main Street.

The Wall Street economy is centrally planned and managed by big banks and corporations for which money is both means and end. The primary goal is monopoly control of markets, physical resources, and technology to maximize profits and bonuses. Main Street economy is comprised of local businesses and working people who self-organize to provide livelihoods for themselves, their families, and their communities producing real goods and services in response to community needs. Main Street exemplifies the market economy envisioned by Adam Smith; Wall Street is the antithesis.

The stronger the relations of mutual trust and caring and the more equitably power is distributed, the more the market becomes self- policing and the less need there is for formal governmental intervention. Smith believed that people have a natural and appropriate concern for the well-being of others and a duty not to do them harm. He also believed that government has a responsibility to restrain those who fail in this duty. Smith and the political economists who followed in his tradition developed an elegant theory of the market’s capacity to self-organize in the community interest based on a number of carefully articulated assumptions, including the following:

  • Buyers and sellers must be too small to influence the market price and must honor basic principles of honest dealing.
  • Income and ownership must be equitably distributed.
  • Complete information must be available to all participants, and there can be no trade secrets.
  • Sellers must bear the full cost of the products they sell and incorporate it into the sale price.
  • Investment capital must remain within national borders, and trade between countries must be balanced.
  • Savings must be invested in the creation of productive capital rather than in speculative trading.

These are the characteristics of a real market economy. Wall Street capitalism violates them all.

Published on Wednesday, February 16, 2011 by YES! Magazine

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