Plenary Presentation by David C. Korten to the Peoples’ Summit 1997 (TOES97)
Denver, Colorado, June 20, 1997
Welcome to the Peoples’ Summit 1997—the real economy summit. You know,
those guys meeting in that other economic summit in the Denver library have a
strange idea about democracy. There you have the Heads of State, Foreign
Ministers, and Finance Ministers of just eight countries — Canada, France,
Germany, Italy, Japan, United Kingdom, United States, and Russia. They are
presuming to craft policies with far reaching implications for the lives of ever
single person on this planet. Yet even most of the world’s democratically
elected leaders — to say nothing of ordinary citizens—are excluded
from their meetings.
Here at the People’s Summit, where our discussions are open and public, we
will be sharing the stories of real people who are organizing at local,
national, and global levels to reclaim control of their economic lives and to
counter the devastating growth in inequality, exclusion, social breakdown, and
environmental destruction being experienced everywhere on the planet.
Those folks at the other summit will present a very different picture of the
world’s condition and reach quite different conclusions. They will predictably
issue a communique affirming their commitment to the neoliberal agenda of free
trade, market deregulation, privatization, and the dismantling of social safety
nets as pathways to prosperity. They will surely call for measures to
aggressively advance the implementation of this agenda in every region of the
world— giving special attention, no doubt, to Japan, the former Soviet
Union, Africa, Latin America, and China.
This is, of course, the very same agenda that participants in the People’s
Summit will be identifying as the causes of exclusion, rapidly growing
inequality, falling wages, economic insecurity, and the failing legitimacy of
our democratic institutions.
One might well wonder whether the G-7 participants live in the same world as
the rest of us. The obvious answer? No they don’t.
We come to the Peoples’ Summit from the real world where people are
struggling to keep a roof over their heads and food on the table. A world of
economic exclusion, insecurity, and a deteriorating quality of life.
Those who gather for the other summit live in a world of high finance, multi
million dollar incomes, and the corporate power brokers who bought their
elections. Their world is booming. But they live at such a distance from the
needs and realities of the real world of people, families, and communities —
they no longer realize there are interests other than those of big
In addition they are burdened by a serious intellectual handicap. First,
they have no idea that there is a critical difference between a market economy —to
which they pledge their commitment—and a capitalist economy—which is
what their policies in fact serve.
Second, they don’t realize that there is a major difference between making
money and creating wealth. Money is just a number of no intrinsic value, which
by social convention gives those who hold it a claim on the real wealth of
people, community, nature, and technology.
Unmindful of these distinctions, the G-7 participants see no contradiction
in promoting an economy centrally planned by global mega-corporations in the
name of freeing the market. Nor do they see the folly of creating an economy
that punishes the working people who create real wealth while rewarding
speculators and predators who make huge amounts of money at the expense of the
rest of society.
It is with these incapacities of our supposed political leaders in mind,
that we have here convened a People’s Summit, a real world economic summit, to
share and advance citizen agendas for creating a world that works for all
people, for the planet, and for all living things —a world that measures
progress not in terms of growth in corporate profits and stock prices, but
rather in terms of real improvements in the lives of real people—and
especially in the lives of those most in need.
We meet here in the knowledge that if there are to be solutions to the
global economic crisis wrought by the policies of the G-7, the OECD, the WTO,
the World Bank, the IMF, and the other elitist institutions of the global
economy, these solutions will have to come from civil society— from people
like those of us.
I want to suggest to you a radical proposal. Since both capitalist and
communist economic models have failed us, let’s try something different. Like
say — a market economy.
Just in case anyone here shares the illusions of the G-7 leaders that the
disaster we now have is a market economy, let us be clear that we live in a
capitalist economy — which means an economy ruled by big capital — by
people who have lots of money. The claims of its massive propaganda machinery
not withstanding, a capitalist economy dominated by monopolies, oligopolies,
media control, and corporate owned politicians is elitist, anti-market, and
I have in mind something more like the populist sort of market economy that
Adam Smith wrote about. And for old dead economist, I think he had a pretty good
idea. Consider four principles fundamental to a real market economy.
1. The market must be comprised of small buyers — and small sellers who
compete on the basis of price and service for customer favor. No unearned
monopoly profits or trade secrets. A real market economy also implies a
substantial degree of economic equality among its participants—no one of
which can be large enough to dominate the others. These sound like pretty good
ideas to me. Why not give them a try?
They certainly offer a stark contrast to the capitalist economy the G-7
leaders are promoting where of the world’s 100 largest economies 51 are
corporations. Where the sales of the world’s 200 largest corporations are equal
to 28% of total world GDP. And where hardly a day goes by without announcements
of new mergers creating ever larger corporate giants and further limiting market
competition. Bear in mind that the market internal to a corporation is not a
free market economy. It is centrally planned to maximize the returns to
And what of this level playing field so dear to the hearts of Neoliberals?
There are now 477 billionaires in the world, up from only 274 in 1991. Their
combined assets are roughly equal to the combined annual incomes of the poorest
half of humanity — 2.8 billion people. We have no language adequate to
describe the obscenity of such extreme inequality — and it is a direct
consequence of the market deregulation and globalization that the G-7 leaders
want to push even further.
2. A second principle of a market economy. The full costs of production must
be born by the producer and reflected in the price of the product. This is
essential to efficient market allocation and another very good idea.
The current profits of most global corporations depend more than anything on
their ability to pass their costs onto the rest of society by pitting people and
communities against one another in a race to the bottom. The externalization of
costs takes many forms, including the bidding down of corporate taxes. Paul
Hawken is doing a study for Mother Jones Magazine in which he concludes
that corporations in the United States currently receive more in DIRECT public
subsidies than they pay in total taxes.
Then there are the costs imposed on society by the products corporations
sell. For example, the health consequences of the cigarettes from which the
tobacco companies profit cost the U.S. public an estimated $53.9 billion a year.
Ralph Estes estimates that in the United States alone, corporations each year
pass on to the society more than $2.6 trillion in externalized costs from their
operations and products, roughly 5 times the amount of their profits.
In short, the big corporations that manage our economy are a very expensive
economic burden — as their very existence depends on massive direct and
indirect subsidies. I think it is time to give market principles a chance. That
would mean demanding that any for profit corporation that can’t pay its way go
out of business the way the god of the market intended. If we from time to time
have need of a business that requires and merits public subsidies that’s fine.
But that business should be owned by and accountable to the public that pays the
subsidy. Public subsidies for private profit may be the capitalist way. But it
is a fundamental violation of basic market principles. I say let’s give market
principles a chance.
3. A third, seldom acknowledged, market principle is that capital must be
locally or at least nationally rooted. Neoliberals are fond of citing Adam
Smith’s argument that the market functions as an invisible hand to translate the
decisions of self-interested individuals into outcomes that serve the public
good. Now there’s only one sentence in the 900 pages of The Wealth of
Nations that refers to the invisible hand, and it is very specific that it
is by a natural preference for supporting domestic industry that the
entrepreneur promotes the larger good. Smith clearly believed investment should
Similarly, the theory of comparative advantage regularly cited by free trade
proponents assumes that investment capital is confined within national borders
and that trade between countries is balanced. Of course in our present global
capitalist economy trillions of dollars move across national borders at the
speed of light without regulation and the G-7 leaders are pushing hard for a
Multilateral Agreement on Investment that would further limit any public
oversight of such speculative and destabilizing flows. I favor a market
approach. Make capital national and keep trade balanced.
4. And the fourth principle. A strong, effective, and democratically
accountable government is essential to maintain the conditions under which
markets can function efficiently. Government must limit the growth of firms to
maintain the competitive nature of local markets, provide a regulatory framework
to require cost internalization, protect local capital from outside predators,
keep trade balanced, and provide for public goods.
I believe these basic principles of a market economy are highly consonant
with the values and vision for a better world that most of us bring to this
Summit. Small firms that pay their own way without direct or indirect public
subsidies. Local ownership. Equality. And efficient democratically accountable
governments to set the rules. What a stark contrast to a global capitalist
economy comprised of giant corporations that demand massive public subsidies,
create obscene inequality, know no allegiance to any people or place, and
displace people from the political process.
So let us be perfectly clear as we proceed with our deliberations. If we
chose to reject the capitalism of the G-7, the World Bank, the WTO, the OECD,
the IMF, and the Multilateral Agreement on Investment it does not mean we are
against markets and democracy. To the contrary, we are rejecting their
capitalism, because it is anti-market and anti-democratic.
David C. Korten is the author of When Corporations Rule the World, Kumarian
Press (1-860-233-5895) and Berrett Koehler Publishers (1-415-288-0260), chair of
the Positive Futures Network, publishers of Yes! A Journal of Positive
Futures (1-206) 842-0216, and president of the People-Centered Development