'Development is a sham'
Business corporations and the consumer ethic which they promote are the driving force behind the push for growth and the consequent devastation of the earth’s finite resources. In their relentless search for profits corporations are ultimately responsible only to their investors. Their overriding goal is to maximize short-term returns. And since capital is rarely rooted locally, investment decisions are detached from their consequences. The rights and freedoms of corporations now take precedence over the democratic rights of peoples and nations – and of the earth itself. So a key step towards a green economy involves gaining control over private corporations.
With a doctorate in business administration from Stanford University and a comfortable middle-class family background David Korten is not your usual critic of big business. He taught at both the Harvard Graduate Business School and the School of Public Health before working for the Ford Foundation and the US Agency for International Development in Asia for 20 years. In 1992 he returned to New York City and set up the People-Centred Development Forum, a global citizens network dedicated to the creation of just, inclusive and sustainable societies. Since then he has become a major critic of corporate power and what he calls the ‘all-consuming, increasingly self-destructive obsession with the pursuit of money’. Wayne Ellwood spoke to him in his New York office.
David, you’ve spent a lot of time working in the Third World, especially in Asia. How did that experience influence the way you look at standard notions of ‘development’ and ‘progress’?
Being overseas really forced me to be much more conscious of basic questions. The assumption was not that a country had already arrived economically, but that we were trying to ‘develop’ it to some point. That raised questions about what we mean by development and whether progress was really being made on things that matter. It took me a long time before I realized that development is really a sham.
In the Philippines, where I was for ten years, 60 per cent of the population lives in absolute poverty while glitzy shopping malls for the wealthy abound. Those gross inequities and the same basic dynamic are repeated everywhere.
After you became disillusioned with official development agencies you started working with non-governmental organizations (NGOs). What kind of creative alternatives have you found there?
My experiences left me convinced that real development depends on people’s ability to gain control of and use effectively the real resources of their communities (land, water, labour, technology and human ingenuity and motivation) to meet their own needs. The more economic power becomes highly-concentrated and detached from any local interest, the more likely it is to be used to benefit the global power holders at the expense of larger community interests. Local resources are more likely to be used to serve the needs of people when markets and the ownership of capital are local.
NGOs can have an important role in building local economies and in advocacy for policies that strengthen local control. But not all NGOs are created equal. There’s a big difference between those that are part of the system and whose very existence is premised on charity and those civil-society organizations that are working for real change. If you look at the whole aid system you see it is an instrument for advancing the corporate agenda by making people more dependent on the global economy, by shifting their production away from local needs to producing for export and by shifting control of their resource base from local people to foreign corporations.
Corporations are the main proponents of the orthodoxy of economic growth. They say the solution to poverty is to stimulate growth and create more wealth for everyone.
There is little evidence that economic growth alleviates poverty. Since 1950 the world’s total economic output has increased five-fold while the number of people living in absolute deprivation has doubled. That growth has pushed human demands on the ecosystem beyond what the planet is capable of sustaining. And that does two things: it accelerates the rate of breakdown of the planet’s ability to regenerate its natural systems. And it intensifies the competition between rich and poor for the resources that remain. I now believe that what GNP really measures is the rate at which the economically powerful are expropriating the resources of the economically weak in order to convert them into products that quickly become the garbage of the rich.
Corporate spokespeople and their government supporters claim that free trade and open markets are the only way to have an efficient market system. The approach seems to be that ‘business knows best’.
The modern corporation is specifically designed to concentrate economic power and to protect the people who use that power from liability for the consequences of its uses. Free-trade agreements like NAFTA and GATT are not really trade agreements at all. They are economic integration agreements intended to guarantee the rights of global corporations to move both goods and investments wherever they wish – free from public interference or accountability. Corporate power really lies in this ability to manipulate communities and markets in their own interest.
As corporations replace workers with technology they gain even more clout. Local governments are now forced not only to give large corporations tax breaks but to subsidize directly their operations as well. This is what global competition is really about – communities and workers competing against one another to absorb ever more of the production costs of the world’s most powerful and profitable companies.
Is sustainable growth possible?
In my view ‘green growth’ is really an oxymoron. In a deregulated market economy global corporations are accountable to only one master, a rogue financial system with one incessant demand – keep your stock price as high as possible by maximizing short-term returns. One way to do that is to shift as much of the cost of the corporation’s operations as possible onto the community. The goal is to externalize costs and privatize gain.
A green corporation simply can’t last in our unregulated market where competing companies are not internalizing their costs. If you do attempt to ‘green’ your business you’ll soon be bought out by some corporate raiders who see an opportunity to externalize the costs and make a short-term killing.
Do you see any means of putting people back at the centre of economic activity?
It’s fundamental to democracy and to a market economy that neither works effectively or fairly unless you have significant equality in economic power. And that comes from having a stake in ownership. The foundation of any alternative economy has to be based on worker-owned enterprises, co-operatives, small local businesses and so forth.
We need to break up large concentrations of economic power, re-establish the connection between investment returns and productive activity and root the ownership of capital in people and communities engaged primarily in local production to meet local needs. We need a vision of a global system of localized economies that reduce the scale of economic activity and link economic decisions to their consequences.
Can you give me some concrete steps you would take.
Well, for one thing we need to reject any trade agreement that’s written by industry. We need a very different set of principles in our international agreements: one that honours and protects the rights of local people to decide who they want to trade with and on what terms, rather than protecting the rights of corporations to do whatever they want, irrespective of the wishes of local people. We also need fiscal measures to help achieve a redistribution of wealth through progressive taxation – like very high rates of taxation on very short-term capital gains.
If an investor has made gains over a period of five to ten years then they’ve likely been engaged in some kind of productive activity and there may be an argument to give a tax advantage as an incentive. But gains made in the short term, from a few seconds to a few months, are not a productive contribution. They’re pure extraction and they should be taxed away and the funds put to some public use.
If you look around the world there seems to be little challenge to the current economic model.
That is true at the level of governments. Politicians and the corporations and financial institutions to which they are beholden are unlikely to provide leadership towards needed reform. Instead, we need to look to civil society and grassroots political movements. The system may seem impregnable but I am constantly amazed at the extent to which ordinary people respond to critiques of the way it is functioning.
There is an implicit understanding that we have pushed the earth’s social and environmental systems beyond their limits of tolerance so that a small minority of the world’s people can consume far more than their rightful share of the world’s wealth. The industrial era (and modern corporations have been the cornerstone of that era) is exhausting the human and natural resource base on which our lives depend. It’s still hard for us to imagine alternatives yet our situation is one in which we have no choice but to realize that we’re not going to correct the system by minor tinkering at the margins. It calls for very fundamental and radical changes.
David Korten is the author of When Corporations Rule the World (Kumarian Press, 1995) and the founder of the People-Centred Development Forum, 14 E 17th St., Ste 5, New York, NY 10003 Tel: 212 620-7137, Fax: 212 242-1901.
©Copyright: New Internationalist 1996
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