A Better Future with Globalization? 
Interview with DAVID KORTEN 
By Alexander M. Dake

 

Over the last decade we have seen tremendous economic growth and a technology boom in the US and Europe, but also growing tensions about the advent of globalization. Globalization means many different things to different people: the world becoming smaller through means of communication; a spreading of Western influenced entertainment and capitalistic culture; but also environmental issues such as global warming and a widening gap between rich and poor, North and South. One of the most vocal and intellectual opponents of the economic consequences of globalization is David Korten. Since Alexander Dake’s interview with Korten, demonstrations and activities against globalization have become commonplace at annual meetings of the international financial organizations and of international political summits. After September 11 the globalization debate entered a quiet phase, but maybe that is just the quiet before the global storm.

David C. Korten has 30 years of international field experience as a writer, teacher, and consultant on development management and alternative development theory, which he brings to bear in numerous works such as the well-known When Corporations Rule the World. He has Ph.D. and M.B.A. degrees from the Stanford University Graduate School of Business, was a faculty member of Harvard University's graduate schools of business and public health, staff member of the Ford Foundation and advisor to the United States Agency for International Development.Well-respected in the development community, Korten's publications are assigned reading in universities throughout the world. After fourteen years of residence in Southeast Asia, followed by a period in New York City, Korten and his wife, Frances reside in Washington State. There she is Executive Director of Yes, a Journal for Positive Futures, while he is the founder and president of The People-Centered Development Forum. Despite his impressive credentials as representative of the American economic and intellectual establishment Korten emphasizes that his many years in the developing world convinced him that the traditional economic model not only cannot solve the current worldwide crisis in economic and social development, but also is the cause of it.

AD: Are your attacks on capitalism and its consequences based on pure economic principles or are you using political ideology? 

DK: Both, but there is also a spiritual perspective. And each of these perspectives comes to the same conclusion, which is that our global economy is out of control and performing contrary to basic principles of market economics. It is certainly against any political vision of a just world. From a spiritual perspective it is a denial of life and of the values of life and living systems. Actually I find the economic perspective the most interesting, because it attacks economics on its own grounds.

AD: Can you elaborate on the economic perspective? 

DK: We are being told that globalism is the key to economic progress and efficiency and the triumph of the market over communism. My claim is that we do not have a market economy, but a capitalist economy. Capitalism and the market are presented as synonymous, but they are not. Capitalism is both the enemy of the market and democracy. Capitalism is not about free competitive choices among people who are reasonably equal in their buying and selling of economic power, it is about concentrating capital, concentrating economic power in very few hands using that power to trash everyone who gets in their way. That is not what Adam Smith envisioned. The first principle of the market economy is that it is comprised of many small buyers and sellers, which implies a substantial degree of equity. Another fundamental market principle is that costs are internalized in the producer’s price. The whole thrust of global capitalism is almost the opposite, by externalizing costs as much as possible: get as many public subsidies as possible, and pass off other costs to workers and the environment and anything else. This is not a market, and definitely not a democracy. The basic principle of democracy is one person one vote and in the capitalistic society, we have one dollar one vote. It is interesting to note that the 200 richest people have more assets than the 2 billion poorest.

AD: If you look at the US economy, which is your main target in your writings, it has experienced the longest economic boom in the last decade [which abruptly ended in 2000]. Mainstream economists use that decade and statistics from the UNDP  that there has been a worldwide poverty reduction over the last 50 years as evidence that the capitalist system and globalism is working. What is your view on those “successes”?

DK: Global competition is about winners and losers. Till two years ago it seemed that the US was winning. Before that it appeared that Asian Tigers like Malaysia and Thailand were winning. If we go back some years Japan was the winning economic power. So, there is enormous instability in the global economy with a shift of winners and losers. It is a gross error to pick up on short-term statistics, to make judgment about the viability of one set of policies or another. If you look internationally over the last 50 years there have been improvements in the third world, but in the last 20 years the reverse has happened, with debt crises and increased poverty. The most dramatic indicator is the increase in inequality: the ratio of income of the wealthiest 20% to the poorest 20% was 30:1 in 1960; it was 61:1 in 1991; by 1994 it went up to 78:1. Moreover, statistics can be deceiving: the growth of jobs in the US in the 90s was due to many part-time jobs, with no benefits and generally low pay.

AD: Are you denying that the US economy experienced a real economic boom in the 90s?

DK: It depends on how you define an economic boom, but clearly only a small minority really benefited from that boom. If you look at the US economy over the last 15-20 years wages have been stagnating or even declining. Where there was an increase in US household income, that was because more people were working more hours, not because of an improvement in pay. Only the top 10% of the US working population actually improved its income. Wealth creation was even more skewed: between 1989 and 1997 86% of the increase in the stock market went to the top 10%, with 42% going to the top 1% alone. 

AD: Are you attacking the mainstream economists purely on the basis of these statistics?

DK: No, because there is another distortion at work with economists. They assume that if the GDP is higher, the people are better off. That does not look at specific pockets of poverty in developing countries. My own experience in the third world was that even if people started to make more money, the cost of living and housing increased often faster than the wages. In order to find solutions to the increased poverty around the world, it is absolutely essential to keep the bigger picture in mind. Because many parts of the world are in such chaos, the US is perceived as a refuge. Money flows into the US, and inflates US assets, and allows the US to have a monstrous trade deficit. That means we are consuming more than we are producing. And what we are producing are predominantly financial assets, i.e. bubbles as we have seen in the Asia crisis and with the Internet and technology crash. When the bubble bursts, liabilities remain and a crisis starts. It remains to be seen how the US will go through the current period. But in the past, US companies have been able to increase their profits through downsizing in the US, through colonizing other people’s resources, and through the increase of globalization.

AD: Economists and financial analysts seem to have a bad record on predicting downturns or crashes, as we have seen with the Asian crisis and the Internet bubble. You have been quoted in the early 90s that you thought the Asian miracle to be superficial. Can you explain that?

DK: There was this dual economy developing in Asia. On the one hand, you have the sprawling airports, with duty free shops, luxury hotels and limos. That looks definitely like progress since the 60s. On the other hand, behind the façade, the majority of people struggled to get food on the table, have housing, transportation and schooling for their children. The more the modern economy grows, the harder life becomes for these average citizens: roads are built for cars, but the majority of people will never be able to afford a car; dams are built and thousands and thousands of people are being displaced and losing their livelihood; golf courses are built and only a handful of people will ever afford a membership. This problem relates to the question of money and to the understanding of the nature of money. Money is not wealth. Money is a claim on wealth. What we see with all these financial bubbles is that it is perfectly possible to make money without creating wealth. Money is a number. Real wealth is in food, fertile land, buildings, or other things that sustain us. 

AD: But we need a measure whether it is money or statistics. How can we use those statistics if they are not really measuring what they are supposed to measure, i.e. wealth, economic well-being, quality of life etc.?

DK: First of all we should forget about GDP. Whether GDP goes up or down is irrelevant to the things we should be caring about. If our definition of progress is that the wealthy are getting wealthier, than we can measure progress in terms of corporate profits and stock prices. But we can also take the radical view that the test of an economy has to do with the extent to which it is providing everybody with a decent means of living. I find the so-called real world indicators, i.e. quality of air, water, plants, and animal life, also of great importance. This does not point to a socialist economy, but is about organizing the economy in ways that put people to work, give them the opportunity to build a livelihood, and increase the prospects of a beneficial future for them and their children.

AD: But again how do we measure quality of life?

DK: There are some initiatives about redefining GDP, but so far very little development. There is a movement which deconstructs GDP output: for instance the more guns you sell to children the more you grow, the more oil spills have to be cleaned up the more you grow, and that is supposed to be beneficial. Is it? The professional study of economics has become ideological brainwashing. It is a defense of the excesses of the capitalist system. It is clear that economists are making value judgments about these numbers. But when other more forward-looking economists try to develop new measurements, they are being accused by the mainstream of making value judgments. You can look at the state of the world’s fisheries, increasing deforestation, upsetting of the climate, the growing numbers of refugees. These are all indicators that help describe the full picture of the welfare of society and mankind.

AD: In your book Corporations Rule the World you describe financial transactions such as leveraged buy outs, mergers & acquisitions, asset stripping, currency arbitrage, etc. as part of what you call the financial rogue system. Proponents of these financial transactions, however, would say that these transactions help create more efficient markets, better prices for producers and consumers, and thus serve a positive function in our economy.

DK: The fact is that these bankers and traders are taking claims of wealth out of the system; they are not doing any productive work. In the field of currencies, currency arbitrage is actually a tax on people who exchange currencies for real reasons, such as travel, investments, etc. So what would be the benefit?

AD: Paraphrasing these proponents, they would say that the result is more stable currencies, instead of volatility. They also would claim that restructuring companies and selling assets results in stronger, more stable companies.

DK: You would need to look at each individual company to determine whether the company actually is becoming stronger. Obviously there are companies where management sits on its hands and something needs to be done. However, there are also companies with well-operating management, good company policies and responsible business practices. Still, if the stock price is low the bankers can make a case that that company is not well run. As long as you have a system that is based on the rational that if you are making money you are thereby making a contribution to society, these financial rogue practices will continue. 

AD: What is your view on European societies, where they treasure their welfare state, but also have a strong internationalist tradition of support for international institutions such as the World Bank and the WTO?

DK: I would call this internationalism a kind of “naïve liberalism,” because the WTO and free trade in the end support the strongest forces, and that is Wall Street’s way of business. Europeans say they are proud of their social fabric, of strong rights for workers and the weak in society. What I would tell the Europeans, but also the Asians and the Latin Americans, is: keep the excesses of Wall Street out of your system. Wall Street sees a social fabric or social contract as inefficiencies, which need to be removed. In the US, most progressives start to see the differences between internationalism and economic globalization. Don’t misunderstand me. I am in favor of increased communication and cooperation between countries, but it is more important that each country becomes responsible for its own actions, its own communities, its own economies, before starting to integrate in large regional or global supranational organizations. From that standpoint, places like the US are too big. More humane societies are usually smaller, like the Scandinavian countries and Holland, where it is much easier to reach consensus and cooperation. 

AD: What do you think then about further expansion and integration of the European Union?

DK: The EU will face problems similar to the US: an increasing gap between the citizens and decision makers in Brussels and a perceived or even real lack of democracy. The Euro is a case in point. Money is a mechanism for control. The further it gets removed from any kind of democratic process and the more it gets controlled by a small group of elite decision makers, the more it can become an instrument against democracy and free markets. We should be moving toward local currencies not global or European currencies. Not exclusively, but the bulk of our local economy should be covered by local currencies, which is more efficient than having global currencies which lose connection with reality in the markets, shops and communities of the people.

AD: You quote regularly Robert Kaplan [writer of the article The Coming Anarchy  in the Atlantic Monthly] where he describes the situation in Africa with poverty, wars, chaos and diseases as the future for the whole Third World. Do you agree with his dire prediction?

DK: If you ask me to make a prediction that is one thing, if you ask me what the possibilities are, that is another thing. There is evidence of changes in perception by the people and even by several politicians. An example is the growing influence of the citizens groups (i.e. labor, environmental, churches, small manufacturers, consumer groups, students) that are against “free” trade and the unchallenged power of the WTO and the Bretton Wood institutions. This became clear in Seattle in 1999, Washington and Prague in 2000 and the subsequent anti-globalization protests. This is a real shift. It is somewhat reminiscent of what happened in the Soviet Union: internal pressure is rising and suddenly it can break through old structures. There is a huge shift taking place in the global awareness in the last 5 years with strong views about globalization and the power structures of major corporations. Look also what is happening in discussions about our food supply as evidenced by the mad cow disease or the GMOs and the acknowledgment that global warming is actually happening. More and more surveys in the US are indicating a change in values taking place among consumers, who become more concerned about quality of life, food, health and the environment. This has not yet crystallized in political trends or power shifts, but the momentum is building. If I would need to make a prediction I still believe Kaplan’s scenario is very plausible. It could become a scifi scenario where the world is organized in protected enclaves for the privileged people and an outside “Kaplan” world, where poverty, despair and disease flourish. The gated communities in the third world and in the US are already a sign of this development. 

AD: Do you think the necessary changes will come from the people and not the political parties?

DK: There is no visible sign that the current politicians in the US are willing to see the need for change. There are actually very few US politicians who have integrity and vision. Al Gore tried to capture that position, but lost his credibility when he defended NAFTA against Ross Perot in 1992, and never managed to get his credibility back during his tenure as Vice President, let alone during the election campaign. It will take some time before a politician will capture the imagination of the American people and have the vision and understanding to do what is necessary for a better future for the people of America and the world.

Books by this author:
When Corporations Rule the World  
The Post-Corporate World: Life After Capitalism
Globalizing Civil Society: Reclaiming Our Right to Power
Getting to the 21st Century: Voluntary Action and the Global Agenda 



Relevant websites:
People-Centered Development Forum 
911:Our time to choose,” a recent article by David C. Korten 
Yes! A Journal of Positive Futures 

© 2002, A.M. Dake

 

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