Cooperative Education: Lighting the Way to a New Economy

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By David Korten

Presentation to Association of Cooperatives Educators

Cleveland, Ohio

July 28, 2010

I've been greatly looking forward to being with you here in Cleveland to be part of this redirection of ACE. Cleveland is a city with a national reputation for being both a symbol of the failures of the Old Economy and a beacon of hope and possibility for the just, sustainable cooperative New Economy we seek to create.

The implications for cooperative educators of the challenge of creating cooperative economies based on networks of cooperative enterprises are both exciting and daunting as they require moving beyond the accustomed work of educating leaders in the formation, governance and management of individual cooperative enterprises. We are a small gathering, but there are individuals in this room with the potential ti make a major contribution to turning the course of our national economy and thereby the nation.

The future of the human species turns on the outcome of a current contest between the forces aligned behind two competing economic systems designed to serve sharply conflicting purposes. One is the greed driven, money serving corporate ruled Old Economy, commonly known as the Wall Street economy. It is in the final stages of suicidal collapse for the simple reason that it measures its success exclusively in terms of the financial profits it generates for the already rich without regard to the broader economic, social, environmental, and political consequences. The other is the emerging cooperative, democratic, community rooted, life serving New Main Street Economy now being built by ordinary people on the foundation of what remains of our Main Street economies. The New Economy is grounded in cooperative principles and measures success by its ability to secure adequate and meaningful livelihoods for everyone in balanced relationship to Earth's biosphere. These two economies are in fundamental opposition to one another in terms of purpose, values, and institutional structure.

Ownership is key. The old economy features absentee ownership concerned only for profits. The new economy features living ownership with a natural interest in responsible service to the community and assuring a healthy local environment.

The old economy cannot survive. It has already irreparably undermined the very foundation of its own existence. Indeed, it would have already collapsed of its own weight if not for massive public subsidies. It continues to fail us economically, socially, environmentally, and politically. The economic failure is manifest in the Great Recession brought on by Wall Street financial excesses that have stripped tens of millions of middle class Americans of their jobs, homes, and retirement assets and plunged many into poverty and despair. Trillions of dollars in public bailout money, have temporarily revived Wall Street, but there is virtually no prospect of a broadly based revival for Main Street without a significant redirection of economic policy that is not going to come from the Wall Street Washington political axis. It must come from we the people, as the leadership in challenging illegitimate concentrations of power always has.

The Old Economy's social failure is manifest in extreme and growing inequality that is unraveling America's social fabric. Even before the financial collapse, a tiny minority of executives and financiers experienced soaring incomes and accumulated grand fortunes as wages for working people stagnated despite rising productivity gains. Poverty has risen to a near thirty-year high. Social mobility has declined, millions lack health insurance, schools are failing, prison populations are swelling, employment security is a thing of the past, and Americans workers put in more hours than workers in any other high income country at the expense of family and community life.

The Old Economy's environmental failure driven by its addiction to endless, mindless economic growth in consumption is disrupting Earth's climate patterns, reducing Earth's capacity to support life, and creating large-scale human displacement that further fuels social breakdown.The Old Economy's concentration of wealth and power bears major responsibility for the failure of our political institutions by reducing democracy to a weak, shallow, and corrupt charade and stripping government of the capacity to provide effective corrective leadership in dealing with the Old Economy economic, social, and environmental failures.

When I step back and look at the incredible mismatch between the institutions of the Old Economy that currently define our values and resource allocation priorities as a society, I find myself wondering whether we humans are victims of some very bad cosmic practical joke.

Imagine with me the Greek Gods on Mount Olympus. They've gathered in council to discuss what to do about those arrogant little humans down on that little planet called Earth who think they are so damned special and are striving to acquire God like powers without proper respect. Zeus, the ruler of the sky says, "I propose that I just wipe them out with a bolt of lightening." The Gods debate this idea for a bit. Eventually, Hermes, the god of commerce and cunning, says, "Zeus, that old bolt of lightening thing is too easy and isn't it a bit crude. Let's make it more interesting. Let's set up these humans to destroy themselves. I've got a cool idea. It involves a little illusion. I have the power to induce a trance that will make the humans perceive money, which really is nothing but a number, as real wealth, as the real prize, as the measure of individual accomplishment, and of the power and glory of the nation state. This will lure these foolish humans into a fatal competition to see who can acquire the most money by converting the real living wealth of their planet into financial assets that are in fact nothing more than numbers in a computer. They will soon be destroying each other and ultimately their planet's biosphere and we will be rid of them by their own hand. It would be so much more amusing than a simple bolt of lightning? Most of the Gods applaud. Hestia, Goddess of home and hearth protests, "These humans are basically good creatures with remarkable potential. We should not destroy them for our own amusement. Besides, they are much to smart and dedicated to their families and communities to fall for that silly trick. It won't work. Aphrodite, the Goddess of love and beauty said "I agree with Hestia, surely they will see through the illusion and love will triumph in the end. Let me awaken that love and we will see that they are capable of much good." But Ares, the god of war and Hades, God of the underworld, over rule Aphrodite and Hestia. Ares said, "Let Hermes have his fun. It will provoke more war, which will indeed be entertaining." Hades added, "And they will begin the torment of their souls even before they arrive in Hades to suffer eternally for their arrogant stupidity. I love it." Hermes induced his trace and unfortunately we foolish humans fell for it. It isn't over yet.

There is some very good news. As you know, millions of people are waking up from the trance and engaging in rebuilding their local economies and communities based on principles of caring and cooperation. Accelerating this awakening depends on a national scale program of education in cooperative economics as a form of cultural deprogramming. The cooperatives movement could yet prove Aphrodite and Hestia right. The outcome is in our hands.

For more than three decades Wall Street interests have been using their influence over the institutions of the media and academia to induced the equivalent of Hermes? diabolical trance by advancing a program of ideological indoctrination in bogus economic theories and values that would have us believe: The myth that it is our inherent human nature to be individualistic, materialistic, greedy, competitive, and violent? The illusion that we live on an open frontier of limitless resources that are free for the taking to grow the economy. Have you ever wondered at the logic of those who say we have to destroy the environment so we can accumulate enough wealth to save it? The belief that money is wealth, money defines the value of life, making money is our highest human calling, and everything related to money is best left to the market Each of these ideas is both false and morally bankrupt. They are the foundation of false and morally bankrupt economic theories that justify a system of ruthless competition for individual private gain that has led to an obscene concentration of wealth and power and the unrestrained expropriation and consumption of natural wealth. Contrary to what the proponents of market fundamentalism would have us believe:

· The human brain is wired to support creativity, cooperation, and life in community. That is our nature. The prevalence of materialism, greed, competition, and violence common in modern society is a symptom of severe cultural and institutional dysfunction.

· We humans inhabit a wondrous but finite living planet with a self-organizing biosphere to which we must adapt our lives and economies by mimicking nature's ways.

· Money, unrelated to the creation of anything of real value, is phantom wealth, an accounting chit that has no intrinsic value, indeed no existence outside the human mind.

In a mature belief system, life is the true measure of value and money's only legitimate use is in life's service. An obsession with making money is a sign of psychological and social dysfunction. With proper rules, the market is an essential and beneficial partner of an active civil society and democratic government each in its appropriate role. Absent proper rules, the market becomes a capitalist weapon of mass destruction. These are foundational truths underlying the possibilities of the economy we seek to create and they are the foundation of the economic theory in which we must now educate the American public as part of our program of cooperatives education. Our effectiveness in this work depends on recognizing the significance of our work and the nature of our time.

I think here of our experience at YES! Magazine. When we founded YES! some 15 years ago, we thought of ourselves as part of a fringe movement dedicated to keeping alive the possibility of a better world based in part on an alternative economy. The times have changed. The imperative for transformational change is increasingly clear and the momentum to achieve it is building among civil society groups. We now define our role at YES! in terms of advancing the powerful ideas and practical actions that are defining a new mainstream. It is a major shift and any of you who have followed us over the years have surely noticed the difference.

I sense that the cooperatives movement is going through a similar transition from perceiving itself as a fringe initiative peripheral to the mainstream economy to recognizing its role in defining a new economic mainstream. We see it happening in the exciting cooperatives initiatives here in Cleveland that we will be visiting this afternoon. It is reflected in the encouraging agreement between the United Steel Workers in this country and the Mondragon cooperatives of Spain. I believe the future of the labor movement is in worker ownership. I gather the Steel Workers recognize this and eagerly await their presentation later this morning.

The economic power of cooperatives is one of the most under reported stories of our time. They are major players in farm supply and marketing biofuels, grocery, arts & crafts, healthcare, childcare, housing, transportation, education, financial services, rural electricity, telephone, and water. As cooperatives educators you know the statistics. Nearly 30,000 U.S. cooperatives operate 73,000 places of business, own more than $3 trillion in assets, generate nearly $654 billion in revenue, provide more than 2 million jobs, and pay $75 billion in wages and benefits, and have some 350 million members. Even taking into account double counting, given that the entire over 18 population of the United States is only 232 million, we can be confident that a substantial majority of American adults are owner/members of one or more cooperative associations. Cooperatives are already an important backbone of the existing economy.

It is time to build public recognition of the significance of the cooperative sector and make it a centerpiece of national economic policy. As you know, the public hears a whole lot more about the Wall Street economy than about the cooperative economy. It is curious, given that a substantial majority of Americans own a membership share in a cooperative. By contrast, only 21% of American households directly own a share of corporate stock. The percentage of households who either hold a share of stock directly or through a mutual fund or retirement account is only 49%. Thus we may conclude that substantially more people have an ownership stake and personal interest in a cooperative than in a Wall Street corporation. These simple facts suggest that cooperatives have enormous potential political, as well as economic clout. The cooperatives movement must now mobilize to actualize that potential.

The values and institutions of the Old Economy drive it to self-organize toward accelerating economic instability, environmental destruction, concentration of wealth, and political corruption. Our common future depends on displacing it with a New Economy defined by values and institutions that drive the system to self organize toward three attractors: ecological balance, equitable distribution, and living democracy. To achieve Ecological Balance we must reduce aggregate human consumption to bring our species into balance with Earth's biosphere. To reduce aggregate consumption while meeting the material needs of all the world's people, we must achieve an Equitable Distribution of Earth's real living wealth, which in turn can be achieved and maintained only through Living Democracy, a process of active bottom up popular economic and political participation that goes far beyond the ballot box.

This work calls us to declare our independence from Wall Street and engage the practical work of rebuilding our Main Street economies based on a profound transformation of cultural values, institutional power, and ways of living. We must shift the economic system's defining value from money to life, its locus of decision-making power from global corporations and financial markets to local people and communities, and its defining purpose from making money and growing profligate consumption for the few to supporting healthy, joyful living for everyone.

The relationship between money and life is key. In the old economy, life is expected to serve money. In the New Economy, money is expected to serve life. We seek to create living economies comprised of living enterprises accountable to living owners that self-organize through living markets to serve living communities. As you probably noticed, these ideas align well with the work of the cooperatives movement and are deeply at odds with the values, ideas, and purposes of the ideology of market fundamentalism espoused by Wall Street capitalists and their allies.

We were raised in America to believe that capitalism is synonymous with a market economy, democracy, and human liberty. Turns out it isn't true. The term capitalism was originally coined to refer to an economy in which ownership of the means of production is monopolized by a small financial elite for its exclusive benefit to the exclusion of the interests of the rest of the society. That is the true meaning of capitalism. It is what we have and the consequences are clear.

As Wall Street so clearly demonstrates, capitalism seeks monopoly control of every aspect of daily life to manipulate markets and extract monopoly profits. It then uses its ill gotten financial gains to circumvent democracy and hold politicians hostage to Wall Street interests. Far from being the champion of markets and democracy, capitalism--rule by big money--is the mortal enemy of both.We were also raised to believe that the only alternative to rule by Wall Street capitalists is to sacrifice our individual liberty to rule by Communist bureaucrats. We are not supposed to notice that in fact the obvious alternative to capitalism is what capitalism promises, but does not deliver: real democracy and a real market economy, which as described by Adam Smith looks a whole lot more like a local coop economy than an economy centrally planned and managed by Goldman Sachs, WalMart, and Monsanto.

Real democracy and real markets both depend on people taking control of their lives to create and grow from the bottom up political and economic institutions responsive and accountable to their needs and preferences. This sounds rather like a living market economy comprised of cooperative enterprises.If we humans are to bring ourselves into balance with one another and a living Earth, we must reorganize our human economies to function as locally self-reliant subsystems of our local ecosystems. This requires segmenting the borderless global economy into a planetary system of interlinked, self-reliant regional economies, each rooted in a community of place and organized to optimize the lives of all who live within their borders.

As part of our indoctrination in market fundamentalism, we have been taught to see life as a brutal competitive struggle for food, sex, and survival, perhaps to justify our imperial brutality to one another. Although life's competitive elements contribute to its dynamism, competition is only a subtext to the larger story of life's extraordinary capacity for cooperative self-organization. The secret to life's success is found in the trillions upon trillions of cells, organisms, and communities of organisms engaged in an exquisite dance of continuous exchange with their living neighbors. Each maintains its own identity and health while contributing to the life of the whole. Each balances its own needs with the needs of the larger community. Its dominant underlying dynamic is one of cooperation. Indeed, it seems that life perfected the art and science of cooperative organization and management long before humans came on the scene.

As cooperatives educators you are the masters of the application of these principles to human organizations. The time has come to expand your reach exponentially. Your knowledge is crucial to the human future. You may at this point be feeling a little overwhelmed. You are likely thinking about the power of Wall Street and its ability to thwart even modest reforms, let alone an economic transformation of the magnitude I've outlined here. If you are not feeling at least a bit overwhelmed maybe you haven't been listening.

Before I turn to outlining the strategy for how we get from our present predicament to the economy we need to create together, it is time to get up and release a little joyful exuberance dancing to our New Economy theme song, "No Wall Too Tall," originally recorded by my troubadour friend and colleague Raffi to celebrate the original launch of Agenda for a New Economy. Listen closely to Raffi's inspiring lyrics.

Its time to bring down the wall and declare our independence from Wall Street. So here is what's involved.

The larger change strategy to which we are all contributing has three primary elements: first, change the cultural stories that frame our understanding of the nature and purpose of the economy and its defining institutions. Call that cooperative education.

Second, create a new economic reality based on cooperative principles from the bottom up.

And third, change the rules of the game to favor community rooted, environmentally responsible cooperative enterprises. Let's take each of these elements one at a time.

I give a lot of attention to changing cultural stories in my role as board chair of YES! Magazine, because changing the culture's defining stories is central to our YES! mission. We have observed that every transformational social movement begins with an idea that spreads through a conversation to challenge a prevailing cultural story and ultimately displace it with a new story of unrealized possibility. The civil rights movement changed the story on race. The environmental movement changed the story about the human relationship to nature. The women's movement changed the story on gender. Economic transformation depends in part on changing the prevailing stories about the nature of wealth, the purpose of the economy, and the possibilities of our human nature. Much of your work as cooperatives educators contributes to changing the economic story by raising awareness of the nature and potential of enterprise organized on the basis of cooperative principles and by working from the bottom up to increase the numbers and strength of cooperative enterprises that are in turn creating and demonstrating the possibilities a new economic reality. The large goal is to create a global system of human-scale, interconnected Local Living Economies that function in harmony with local ecosystems, meet the basic needs of all people, support just and democratic societies, and foster joyful community life. I forsee an important alliance here between the cooperatives movement and the Business Alliance for Local Living Economies (BALLE). The vision I have just outlined is a quotation from BALLE's vision statement.

The larger work includes reorienting land-use patterns and transportation systems to reduce auto dependence by concentrating population in walkable, energy-efficient, multi-strata communities; retrofit buildings for energy efficiency; and rebuilding local productive capacities based on closed-loop production and consumption systems that reduce long-distance shipping, eliminate waste, increase energy efficiency and build local self-reliance in the production of food, energy, and other basic essentials. As we live the New Economy into being, we change the prevailing economic story in a very material way, while simultaneously creating a political base to support the third element of the strategy, changing the rules of the economic game. Current law and public policies at local, national, and global levels consistently favor the Wall Street economy over the Main Street economy.

Changing the rules to favor Main Street will require effective political mobilization, a process to which cooperative businesses potentially contribute important moral authority. I want to use the remainder of my time to outline some of the policy issues as they relate to indicators, money, income, ownership, and global rules. Let's start with indicators. GDP is essentially a measure of how fast money is flowing through the economy. Using it as society's leading indicator of economic performance results in a vast range of distortions. We get what we measure, so let's measure what we want.Children are society's most vulnerable members. If you know the rates of infant mortality, sexual abuse and violence against children, child poverty and malnutrition, and teenage crime and pregnancy, you have a remarkably clear picture of society's state of health. Other useful indicators of community health include high school graduation rates, the percentage of jobs that pay a living wage with benefits, the unemployment rate among people seeking a paid job, average commuting times, attendance at farmers' markets, and involvement in community service. For natural systems, there are indicators of air quality, rates of soil runoff, biodiversity, the amount of CO2 in the atmosphere, and the size of fragile fish, bird, and frog populations. Such indicators can be used at local as well as national and global levels.

As we move forward to replace financial indicators like GDP, with living wealth indicators such as those I have mentioned, we will see more clearly the benefits of reallocating real-wealth resources from the military to health care and environmental rejuvenation, from prisons to rehabilitation, from suburban sprawl to compact communities, from automobiles to public transportation, from fossil fuels to energy conservation and development of sustainable energy sources, from mining to recycling, from advertising to education, and from financial speculation to financing local entrepreneurship. This brings me to the Money System. If we cut through the smoke and mirrors, the basic money system issues become quite straight forward. Speculation and usury, which are primary Wall Street's primary businesses, serve no beneficial social purpose.

Contrary to Wall Street topsy-turvy ethical code: greed is not a virtue and sharing is not a sin. We need a financial system that makes credit readily available at favorable rates to Main Street businesses that create family wage jobs producing real goods and services. We need to make credit scarce and expensive for Wall Street speculators and predators. If we get clear on what we want as a society, it really isn't all that complicated.Imagine how different our national economic situation would now be if at the time of the Wall Street crash the federal government had taken over failing Wall Street banks to break them up and restructured them as local independent, cooperatively owned and managed community banks and credit unions in the business of funding responsible local homeowners and businesses.

Actually, something more like what we used to have. Then imagine that instead of pouring trillion of dollars into the Wall Street bank bailouts the government had directed that same money to economic stimulus spending targeted to local businesses, governments, and nonprofits putting people to work addressing the priority needs of our communities. Those dollars could now be working to rebuild our local food systems, green our homes and buildings, build our solar and wind energy capability, create recycling facilities, roll back suburban sprawl, and provide our children with a quality education and our families with affordable health care--with a preference for cooperatively owned enterprises. We are talking literally trillions of dollars that went to bail out Wall Street that could instead have gone to rebuilding Main Street. The money so spent would now be flowing into local banks as deposits and savings that would be relent back into our communities to keep the Main Street economy thriving. Wall Street pulled off the biggest bank robbery in history. Then there is that little matter of wealth distribution.

In a finite world of limited real resources, the only way to meet the needs of everyone is to distribute income and ownership equitably through policies that support living wages, progressive taxation, quality public health and education services, and broad participation in home and business ownership. Equitable participation in income and ownership is, by the way, an essential foundation for democracy, for a real market economy, and for good mental and physical human health. Again think cooperatives. Ownership: The idea that profit is the defining purpose of the business enterprise is a moral abomination. The proper defining purpose of any legitimate enterprise is to serve the needs of the community in which it operates. Corporations that are publicly traded by absent owners looking for quick speculative gains or are owned by predatory asset stripping Wall Street private equity funds are great examples of how enterprise ownership should not be structured. Cooperative and worker owned enterprises owned by people who live in the communities in which they are located and have a natural interest in their community's social and natural health are much more likely to be committed to operate responsibly in service to the community. They should be favored by public policy. Much of the New Economy work is local. The vision, however, is global and ultimately we need global rules that limit the rights and size of individual corporations, support local ownership and balanced trade, set fair and stable commodity prices, and internalize the true cost of goods and services in their market prices--all in line with sound market principles.

Everything I've discussed here and much more is addressed in the newly released 2nd edition of Agenda for a New Economy now on sale at the conference bookstore. I hope you may find it a useful tool in your work as cooperative educators. We will be posting discussion guides and other popular education materials in the next few weeks on the website of the New Economy Working Group.

Creating a global system of human-scale interconnected Local Living Economies that function in harmony with local ecosystems, meet the basic needs of all people, support just and democratic societies, and foster joyful community life is an epic, even audacious undertaking. The future of humanity lies in the balance. I find hope in the fact that we stand beside millions of people the world over who are rising to this great challenge. Now is the hour. We have the power. We are the ones we've been waiting for. Thank you.


David Korten is co-founder and board chair of YES! Magazine, co-chair of the New Economy Working Group, president of the People-Centered Development Forum, and a founding board member of the Business Alliance for Local Living Economies (BALLE). This presentation summarizes themes from his most recent book, Agenda for a New Economy: From Phantom Wealth to Real Wealth, second edition. His other books include: The Great Turning: From Empire to Earth Community, and the international best seller When Corporations Rule the World.

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