I just finished a spellbinding book:  "The Day the Bubble Burst:  A Social History of the Wall Street Crash of 1929."  Could it happen again?  Never in the same way, since legislation in the 30s established regulations outlawing the specific excesses that led to "Black Tuesday," including the disturbing practice of buying stocks with up to 90% borrowed money.  Still, no one knows the future...
         Media pundits today tell us that the economy is "robust," and on "stable ground."  It isn't.  The illusion of economic health is completely dependent on the rapacious depletion both of Natural Capital--groundwater, topsoil, petroleum, fisheries, forests, and a stable climate--and of Human Capital, as people are used up and thrown away in third world factories, while here at home constantly increasing "productivity" demands push us ever closer to the breaking point.
         Pundits also said things were rock solid in early 1929.
         There are other similaries between then and now:  through the 20s, the rich got lots richer and the poor poorer, "investment" was largely for pure speculation rather than for a stake in some productive enterprise, and there was massive personal debt.
         We are living on borrowed money and squandered resources.  Eventually, accounts will be tallied and bills presented.
         Wholistic entrepeneur Paul Hawken (whose recent book "Natural Capitalism" I look forward to reading) is optimistic--not that the current system will survive, but that we will successfully adapt.  We'll have to, he says--not just because it's right, but also because it makes economic sense:  "it's cheaper to take care of something--a roof, a car, a planet--than to let it decay and try to fix it later."
         Our current yardsticks mask diminishing Natural Capital while creating an illusion of economic health.  The economy (Gross Domestic Product, GDP) "grows" whenever we spend money--even if it's to clean up oil spills, build new prisons, litigate more lawsuits, or provide more medical treatment for tobacco, alcohol, and diet related health catastrophes.  If we hope to measure quality of life, these expenditures are surely minuses, not plusses.  Board feet from a clearcut forest are counted as plusses, but the loss of that forest is not counted as a minus.  An organization called "Redefining Progress" (www.rprogress.org) has developed the Genuine Progress Indicator (GPI), which shows an overall steady decline in quality of life since the mid 1970s.  The GPI has been mostly ignored by major media, while Jennings, Rather, and Brokaw continue cheerleading for rising production and a booming stock market.
         Along with Paul Hawken, another great writer on these matters is David Korten, whose impressive credentials include 5 years teaching at Harvard Graduate School of Business and 8 years with the U.S. Agency for International Development.  Korten says that:
         "The real nature of money is obscured by the vocabulary of finance, which is doublespeak.  We use the term "investors" for speculators, whose gambling destabilizes global financial markets.  We use the terms "money," "capital," "assets," and "wealth" interchangeably--leaving no simple means to differentiate money from real wealth.  Money is a number.  Real wealth is in food, fertile land, buildings, or other things that sustain us.  Lacking language to see this difference, we accept the speculators' claim to "create wealth," when they expropriate it."
        Computers and globalization of exchange enable an astronomical two trillion dollars to change hands each day in world financial markets.  Korten says the vast majority is "purely speculative money looking for quick returns when the boom is on and safe havens when the bubbles are bursting."
         In a 1998 speech, Korten outlines how speculation created bubbles, then bursts in '97 in Thailand and '98 in Russia, with speculators playing "take the money and run" and/or calling for government bailouts.  The typical scenario:  removal of trade barriers can encourage a large influx of foreign money into a country, in the form of loans and stock investments.  Prices are driven up, and those invested in local productive enterprises see that returns will be higher with
stock and real-estate speculation--so true enterprise is "decapitalized" and local money siphoned into a speculative frenzy while domestic production falls.  Dependence on imports for basic needs increases; further loans are sought.  Export income declines, and with it the possibility of paying off the now skyrocketing foreign debt.  Seeing their money at increasing risk, the foreign interests start cashing out, local banks can no longer afford local loans, and the meltdown phase
begins...
         A.P. Giannini--who from San Francisco founded the Bank of America--was an admirable character in the 1929 drama.  Banks had previously catered to only the rich, but Giannini created a network of branch banks to serve "the little fella."  Furious and frustrated when Wall Street speculation destabilized financial markets, Giannini was horrified when regular people borrowed massively to buy stocks "on the margin" in hopes of instant wealth.  Even well before Black Tuesday, many were ruined when their gambles failed.
         Financial maneuvers can look like a complex game, and powerful Wall Street figures are sometimes called "players."  Such games, however, can seriously impact all of us--1920s speculation triggered a crash that doomed thousands of banks and led to the bread lines of the Great Depression.  The crash also facilitated Hitler's rise in Germany, which had been dependent on loans from American financiers.  When this money evaporated, Germany faced bankruptcy and further humiliation, while Hitler offered the nation a way to feel "strong" again.
         The riveting movie "Wall Street" dramatizes how big-time players can impact real people, as the ruthless speculator played by Michael Douglas ruins a previously stable airline company, swindling lots of regular folks out of their livelihoods and pensions.  Our local nightmare with Pacific Lumber could easily have been featured in the same movie:  corporate raider Charles Hurwitz completed a "hostile takeover" of PL in 1985.  It was a "leveraged buyout," "leverage" meaning borrowed money.  Through junk bond king Michael Milken, Hurwitz sold hundreds of millions worth of "high yield" bonds, using the proceeds to aggressively buy PL stock until his Maxxam corporation owned the company.  Now saddled with massive bond debt and needing to make huge payments on those bonds, Hurwitz began voraciously chopping the previously carefully managed forests, with little regard for the future health of those forests or the Humboldt economy.  Eventually, he was richly rewarded by the taxpayers in the Headwaters deal.  Through manipulations of corporate titles, this money would remain under Hurwitz control and would not go to the bond holders even if Maxxam-controlled PL goes belly-up and defaults on the bonds.  "Some rob you with a six gun, some with a fountain pen."
         The Pacific Lumber saga is one of many covered in the powerful, shocking, and grippingly readable book "Den of Thieves," which documents the shady, greedy, workaholic exploits of Milken, Ivan Boesky, and others, culminating in the interwoven junk bond, insider trading, and Savings & Loan scandals of the 1980s.  Milken was ultimately sentenced to 10 years in jail.  He served 22 months under minimum security, and walked away with approximately a billion dollars.  (In 1993, Milken was diagnosed with advanced prostate cancer; he became health-conscious and is now an outspoken advocate of vegetarianism, having hired a personal chef with whom he has coauthored two cookbooks.)
         A refreshing alternative in finance is personified by billionaire Warren Buffett, who maintains a modest lifestyle in his hometown of Omaha Nebraska.  Uninterested in the "quick killing," Buffett researches companies thoroughly.  If the "business fundamentals" are sound and he respects the management and likes the price, he may buy a company's stock.  If so, he considers himself "married" to that company and will probably hold the stock for many years--investing in the business rather than seeking profit from short term fluctuation of stock prices.  I hope the kings and queens of finance join Buffett in taking a longer view of things, and reject the current obsession with maximal immediate gain.
         Still, the world would be better off if some of Buffett's companies simply didn't exist.  Buffett loves Coca-Cola, but while in Guatemala in 1995, I was saddened to see poor people with rotten teeth swilling Cokes, which weren't cheap by local standards.  Our business geniuses should have better things to do than push such garbage around the world.  As Buffett himself says, "something not worth doing is not worth doing well."
         We treasure freedom and fear the "central planning" of Soviet-style communism, but often overlook the fact that corporate capitalism is itself an extreme example of central planning--increasingly so as mergers and acquisitions concentrate power within progressively fewer companies.  David Korten points out that "...the power of a corporate head to dictate policy and action within the corporation's internal economy would have made any Soviet planner green with
envy."  It's sobering to note that of the world's 100 largest economies, over 50 are not nations, but corporations.
         Instead of dictatorial central planning, I join Korten and Hawken in advocating more democracy and a market economy.  Korten says that "in a healthy market economy, enterprises are human-scale and predominantly locally owned."  Despite Guatemala's many problems, I saw a thriving market economy characterized by unique small shops and a bustling open air market in every town.  All it took to join the local economy was something to sell.  Here, it's illegal in most places to set up a chair on the sidewalk and sell onions.  Consequently, we who wish to buy onions usually turn to large supermarket corporations.  Our rules favor the big boys.
         While I plead guilty to sometimes villainizing rich guys or stock market scoundrels, it's crucial to remember that the problem is not mainly with people, but with a system which feeds on and perpetuates itself.  In Korten's words, it's "an institutional system of autonomous rule by money and for money that functions on autopilot beyond the control of any human actor and is unresponsive to any human sensibility."
         Wow, those are frightening words.  It's time now for some of us Davids to take aim at this Goliath, and for others of us to fashion new ways to live so we'll be ready when this monster takes its inevitable fall.
 
 
 

        Some of David Korten's writings can be found at the website for the People-Centered Development Forum.
        Here's the site for "Redefining Progress."
        Some other relevant links can be found at the end of my earlier article, Taking Responsibility.