Agenda for a New Economy, Part I - The Case for a New Economy

If we look upstream for the ultimate cause of the economic crisis that is tearing so many lives apart, we find an illusion: the belief that money—a mere number created with a simple accounting entry that has no reality outside the human mind—is wealth. Because money represents a claim on so many things essential to our survival and well-being, we easily slip into evaluating economic performance in terms of the rate of financial return to money, essentially the rate at which money is growing, rather than by the economy’s contribution to the long-term well-being of people and nature.

We can trace each of the major failures of our economic system to the misperception of money as wealth: the boom-and-bust cycles; the decimation of the middle class; families forced to choose between paying the rent, putting food on the table, and caring for their children; the decline of community life; and the wanton destruction of nature.

Once the belief that money is wealth is implanted firmly in the mind, it is easy to accept the idea that money is a storehouse of value rather than simply a storehouse of expectations, and that “making money” is the equivalent of “creating wealth.”  Because Wall Street makes money in breathtaking quantities, we have allowed it to assume control of the whole economy—and therein lies the source of our problem.

Financial collapse pulled away the curtain on the Wall Street alchemists to reveal an illusion factory that paid its managers outrageous sums for creating phantom wealth unrelated to the production of anything of real value. They were merely creating claims on the real wealth created by others—a form of theft.

Our hope lies not with the Wall Street phantom-wealth machine, but rather with the real-world economy of Main Street, where people engage in the production and exchange of real goods and services to meet the real needs of their children, families, and communities, and where they have a natural interest in maintaining the health and vitality of their natural environment.

Ironically, it turns out that the solution to a failed capitalist economy is a real-market economy much in line with the true vision of Adam Smith. Building a new real-wealth economy on the foundation of the Main Street economy will require far more than adjustments at the margins. It will require a complete bottom-to-top redesign of our economic assumptions, values, and institutions.

Chapter 1, “Looking Upstream,” spells out what it means to treat causes rather than symptoms and why getting our assumptions right is important.

Chapter 2, “Modern Alchemists and the Sport of Moneymaking,” looks at the reality behind Wall Street’s illusions and the variety of its methods for making money without the exertion of creating anything of real value in return.

Chapter 3, “A Real-Market Alternative,” contrasts the Wall Street and Main Street economies and puts to rest the fallacy that the only alternative to rule by Wall Street capitalists is rule by communist bureaucrats.

Chapter 4, “More Than Tinkering at the Margins,” spells out why the “adjustment at the margins” approach favored by establishment interests cannot stabilize the economy, reduce economic inequality, or prevent environmental collapse.