'How is it that our nation is awash in money, but too broke to provide jobs and services? David Korten introduces a landmark new report, "How to Liberate America from Wall Street Rule."'
The dominant story of the current political debate is that the government is broke. We can’t afford to pay for public services, put people to work, or service the public debt. Yet as a nation, we are awash in money. A defective system of money, banking, and finance just puts it in the wrong places.
Raising taxes on the rich and implementing financial reforms are essential elements of the solution to our seemingly intractable fiscal and economic crisis. Yet proposals currently on the table fall far short of the need.
A newly released report of the New Economy Working Group, coordinated by the Institute for Policy Studies in Washington, DC, goes beyond the current debate to call for a deep restructuring of the institutions to which we as a society give the power to create and allocate money. How to Liberate America from Wall Street Rule spells out the steps required to rebuild a system of community-based and accountable institutions devoted to financing productive activities that create good jobs for Americans and generate real community wealth.
Over the past 30 years, virtually all the benefit of U.S. economic growth has gone to the richest 1 percent 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 financial crash of 2008, the financial assets of America’s billionaires and the idle cash of the most profitable corporations are now at historic highs. Their biggest challenge is figuring out where to park all their cash.
Unfortunately, most of those who hold the cash and the corporations they control have lost interest in long-term investments that build and expand strong enterprises. The substantial majority of trades in financial markets are made by high-speed computers in securities held for fractions of a second. Business pundits still refer to this trading as investment. It bears no resemblance, however, to the investment required to put people to work rebuilding a strong America.
Corporations are using their stores of cash primarily to buy back their own stock, acquire control of other companies, invest in off-shoring yet more American jobs, and pay generous dividends to shareholders and outsized bonuses to management.
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