Money is the least of our problems. It’s time to pay attention to the real deficits that are killing us.

^[1]written by David Korten*, Member of the Club of Rome

The political debate in the United States and Europe has focused attention on public financial deficits and how best to resolve them. Tragically, the debate largely ignores the deficits that most endanger our future.

In the United States, as Republican deficit hawks tell the story, “America is broke. We must cut government spending on social programs we cannot afford. And we must lower taxes on Wall Street job creators so they can invest to get the economy growing, create new jobs, increase total tax revenues, and eliminate the deficit.”

Democrats respond, “Yes, we’re pretty broke, but the answer is to raise taxes on Wall Street looters to pay for government spending that primes the economic pump by putting people to work building critical infrastructure and performing essential public services. This puts money in people’s pockets to spend on private sector goods and services and is our best hope to grow the economy.”

Democrats have the better side of the argument, but both sides have it wrong on two key points.

• First, both focus on growing GDP, ignoring the reality that under the regime of Wall Street rule, the benefits of GDP growth over the past several decades have gone almost exclusively to the 1 percent—with dire consequences for democracy and the health of the social and natural capital on which true prosperity depends.

• Second, both focus on financial deficits, which can be resolved with relative ease if we are truly serious about it; and ignore far more dangerous and difficult-to-resolve social and environmental deficits. I call it a case of deficit attention disorder.

To achieve the ideal of a world that secures health and prosperity for all people for generations to come, we must reframe the public debate about the choices we face as a nation and as a species. We must measure economic performance against the outcomes we really want, give life priority over money, and recognize that money is a means, not an end.

What We Borrow from Each Other

To realistically address the nature of the public financial deficits at the center of the current political debate, it is crucial to understand the nature of money and debt. Money is just a number, a system of accounting useful in facilitating economic exchange. A deficit occurs when expenditures exceed income. If, as a result, financial liabilities come to exceed financial assets, we go into debt. It is all basic accounting.

The key point, which the deficit debates rarely address, is that one person or entity’s financial debt is another person or entity’s financial asset. We can only borrow money from each other. The idea that we borrow money from the future is an illusion.

[Read more] ^[2]

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David Korten wrote this article for YES! Magazine ^[3], a national, nonprofit media organization that fuses powerful ideas and practical actions. David is the author of Agenda for a New Economy ^[4], The Great Turning: From Empire to Earth Community ^[5], and the international best seller When Corporations Rule the World ^[6]. He is board chair of YES! Magazine ^[3], co-chair of the New Economy Working Group, a founding board member of the Business Alliance for Local Living Economies ^[7], president of the Living Economies Forum ^[8], and a member of the Club of Rome ^[9]. He holds MBA and PhD degrees from the Stanford University Graduate School of Business and served on the faculty of the Harvard Business School.