Category: A sustainable economy

Then one day, the first batch of IOUs comes due. But guess what? The person who scribbled his name on the IOU can’t pay me back right now. In fact, lots of the borrowers can’t. I try to hush this embarrassing fact up as long as possible, but pretty soon you get suspicious. You want your million dollars back — in cash. I try to sell the IOUs and their derivatives that I hold, but everyone else is suspicious too, and no one buys them. The insurance company tries to cover my losses, but it can only do so by selling the IOUs I gave it!

So finally, the government steps in and buys the IOUs, bails out the insurance company and everyone else holding the IOUs and the derivatives stacked on them. Their total value is way more than a million dollars now. I and my fellow entrepreneurs retire with our lucre. Everyone else pays for it.

This is the first level of what has happened in the financial industry over the past decade. It is a huge transfer of wealth to the financial elite, to be funded by US taxpayers, foreign corporations and governments, and ultimately the foreign workers who subsidize US debt indirectly via the lower purchasing power of their wages. However, to see the current crisis as merely the result of a big con is to miss its true significance.

I think we all sense that we are nearing the end of an era. On the most superficial level, it is the era of unregulated casino-style financial manipulation that is ending. But the current efforts of the political elites to fix the crisis at this level will only reveal its deeper dimensions. In fact, the crisis goes “all the way to the bottom.” It arises from the very nature of money and property in the world today, and it will persist and continue to intensify until money itself is transformed. A process centuries in the making is in its final stages of unfoldment.

Money as we know it today has crisis and collapse built into its basic design. That is because money seeks interest, bears interest, and indeed is born of interest. To see how this works, let’s go back to some finance basics. Money is created when somebody takes out a loan from a bank (or more recently, a disguised loan from some other kind of institution). A debt is a promise to pay money in the future in order to buy something today; in other words, borrowing money is a form of delayed trading. I receive something now (bought with the money I borrowed) and agree to give something in the future (a good or service which I will sell for the money to pay back the debt). A bank or any other lender will ordinarily only agree to lend you money if there is a reasonable expectation you will pay it back; in other words, if there is a reasonable expectation you will produce goods or services of equivalent value. This “reasonable expectation” can be guaranteed in the form of collateral, or it can be encoded in one’s credit rating.

Any time you use money, you are essentially guaranteeing “I have performed a service or provided a good of equivalent value to the one I am buying.” If the money is borrowed money, you are saying that you will provide an equivalent good/service in the future.

Now enter interest. What motivates a bank to lend anyone money in the first place? It is interest. Interest drives the creation of money today. Any time money is created through debt, a need to create even more money in the future is also created. The amount of money must grow over time, which means that the volume of goods and services must grow over time as well.

If the volume of money grows faster than the volume of goods and services, the result is inflation. If it grows more slowly — for example through a slowdown in lending — the result is bankruptcies, recession, or deflation. The government can increase or decrease the supply of money in several ways. First, it can create money by borrowing it from the central bank, or in America, from the Federal Reserve. This money ends up as bank deposits, which in turn give banks more margin reserves on which to extend loans. You see, a bank’s capacity to create money is limited by margin reserve requirements. Typically, a bank must hold cash (or central bank deposits) equal to about 10% of its total customer deposits. The other 90%, it can loan out, thus creating new money. This money ends up back in a bank as deposits, allowing another 81% of it (90% of 90%) to be lent out again. In this way, each dollar of initial deposits ends up as $9 of new money. Government spending of money borrowed from the central bank acts a seed for new money creation. (Of course, this depends on banks’ willingness to lend! In a credit freeze such as happened this week, banks hoard excess reserves and the repeated injections of government money have little effect.)

Another way to increase the money supply is to lower margin reserve requirements. In practice this is rarely done, at least directly. However, in the last decade, various kinds of non-bank lending have skirted the margin reserve requirement, through the alphabet soup of financial instruments you’ve been hearing about in the news. The result is that each dollar of original equity has been leveraged not to nine times it original value, as in traditional banking, but to 70 times or even more. This has allowed returns on investment far beyond the 5% or so available from traditional banking, along with “compensation” packages beyond the dreams of avarice.

Each new dollar that is created comes with a new dollar of debt — more than a dollar of debt, because of interest. The debt is eventually redeemed either with goods and services, or with more borrowed money, which in turn can be redeemed with yet more borrowed money… but eventually it will be used to buy goods and services. The interest has to come from somewhere. Borrowing more money to make the interest payments on an existing loan merely postpones the day of reckoning by deferring the need to create new goods and services.

The whole system of interest-bearing money works fine as long as the volume of goods and services exchanged for money keeps growing. The crisis we are seeing today is in part because new money has been created much faster than goods and services have, and much faster than has been historically sustainable. There are only two ways out of such a situation: inflation and bankruptcies. Each involve the destruction of money. The current convulsions of the financial and political elites basically come down to a futile attempt to prevent both. Their first concern is to prevent the evaporation of money through massive bankruptcies, because it is, after all, their money.

There is a much deeper crisis at work as well, a crisis in the creation of goods and services that underlies money to begin with, and it is this crisis that gave birth to the real estate bubble everyone blames for the current situation. To understand it, let’s get clear on what constitutes a “good” or a “service.” In economics, these terms refer to something that is exchanged for money. If I babysit your children for free, economists don’t count it as a service. It cannot be used to pay a financial debt: I cannot go to the supermarket and say, “I watched my neighbor’s kids this morning, so please give me food.” But if I open a day care center and charge you money, I have created a “service.” GDP rises and, according to economists, society has become wealthier.

The same is true if I cut down a forest and sell the timber. While it is still standing and inaccessible, it is not a good. It only becomes “good” when I build a logging road, hire labor, cut it down, and transport it to a buyer. I convert a forest to timber, a commodity, and GDP goes up. Similarly, if I create a new song and share it for free, GDP does not go up and society is not considered wealthier, but if I copyright it and sell it, it becomes a good. Or I can find a traditional society that uses herbs and shamanic techniques for healing, destroy their culture and make them dependent on pharmaceutical medicine which they must purchase, evict them from their land so they cannot be subsistence farmers and must buy food, clear the land and hire them on a banana plantation — and I have made the world richer. I have brought various functions, relationships, and natural resources into the realm of money. In The Ascent of Humanity I describe this process in depth: the conversion of social capital, natural capital, cultural capital, and spiritual capital into money.

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But putting aside for a moment the actual intent, details and results of the global bailout offers, it is their very extent that shocks, and shows — in a stark, harsh, all-revealing light — the brutal disdain with which the national governments of the world’s “leading democracies” have treated their own citizens for decades.

Beginning with Margaret Thatcher’s election in 1979, government after government — and party after party — fell to the onslaught of an extremist faith: the narrow, blinkered fundamentalism of the “Chicago School.” Epitomized by its patron saint, Milton Friedman, the rigid doctrine held that an unregulated market would always “correct” itself, because its workings are based on entirely rational and quantifiable principles. (See John Cassidy in the NY Review of Books for more.) This was of course an absurdly reductive and savagely ignorant view of history, money and human nature; but because it flattered the rich and powerful, offering an “intellectual” justification for rapacious greed and ever-widening economic and social inequality, it was adopted as holy writ by the elite and promulgated as public policy.

This radical cult — a kind of Bolshevism from above — took its strongest hold in the United States and Britain, and was then imposed on many weaker nations through the IMF-led “Washington Consensus” (more aptly named by Naomi Klein as the “Shock Doctrine”), with devastating and deadly results. (As in Yeltsin’s Russia, for example, where life expectancy dropped precipitously and millions of people died premature deaths from poverty, illness, and despair.)

According to the cult, not only were markets to be freed from the constraints placed on them after the world-shattering effects of the Great Depression, but all public spending was to be slashed ruthlessly to the bone. (Although exceptions were always made for the Pentagon war machine.) After all, every dollar spent by a public entity on public services and amenities was a dollar taken away from the private wheeler-dealers who could more usefully employ it in increasing the wealth of the elite — who would then allow some of their vast profits to “trickle down” to the lower orders.

This was the cult that captured the governments of the United States and Britain (among others), as well as the Republican and Democratic parties, and the Conservative and Labour parties as well. And for almost thirty years, its ruthless doctrines have been put into practice. Regulation and oversight of financial markets were systematically stripped away or rendered toothless. Essential public services were sold off, for chump change, to corporate interests. Public spending on anything other than making war, threatening war and profiting from war was pared back or eliminated. Such public spending that did remain was forever under threat and derided, like the remnants of some pagan faith surviving in isolated backwaters.

Year after year, the ordinary citizens were told by their governments: we have no money to spend on your needs, on your communities, on your infrastructure, on your health, on your children, on your environment, on your quality of life. We can’t do those kinds of things any more.

Of course, when talking amongst themselves, or with the believers in the think tanks, boardrooms — and editorial offices — the cultists would speak more plainly: we don’t do those things anymore because we shouldn’t do them, we don’t want to do them, they are wrong, they are evil, they are outside the faith. But for the hoi polloi, the line was usually something like this: Budgets are tight, we must balance them (for a “balanced budget” is a core doctrine of the cult), we just can’t afford all these luxuries.

But now, as the emptiness and falsity of the Chicago cargo cult stands nakedly revealed, even to some of its most faithful and fanatical adherents, we can see that this 30-year mantra by our governments has been a deliberate and outright lie. The money was there — billions and billions and billions of dollars of it, trillions of dollars of it. We can see it before our very eyes today — being whisked away from our public treasuries and showered upon the banks and the brokerages.

Let’s say it again: The money was there all along.

Money to build and generously equip thousands and thousands of new schools, with well-paid, exquisitely trained teachers, small teacher-pupil ratios, a full range of enriching and inspiring programs.

Money to revitalize the nation’s crumbling inner cities, making them safe and vibrant places for businesses and families and communities to grow.

Money to provide decent, affordable and accessible health care to every citizen, to provide dignity and comfort to the elderly, and protection and humane treatment for the mentally ill.

Money to provide affordable higher education to everyone who wanted it and could qualify for it. Money to help establish and sustain local businesses and family farms, centered in and on the local community, driven by the needs and knowledge of the people in the area, and not by the dictates of distant corporations.

Money to strengthen crumbling infrastructure, to repair bridges, shore up levies, maintain roads and electric grids and sewage systems.

Money for affordable, workable public transport systems, for the pursuit of alternative sources of energy, for sustainable, sensible development, for environmental restoration.

Money to support free inquiry in science, technology, health and other areas — research unfettered from the war machine and the drive for corporate profit, and instead devoted to the betterment of human life.

Money to support culture, learning, continuing education, libraries, theater, music and the endless manifestations of the human quest to gain more meaning, more understanding, more enlightenment, a deeper, spiritually richer life.

The money for all of this — and much, much more — was there, all along. When they said we couldn’t have these things, they were lying — or else allowing themselves to be profitably duped by the high priests of the market cult. When they wanted a trillion dollars — or three trillion dollars — to wage a war of aggression in Iraq, they found it. Now, when they want trillions of dollars to save the speculators, fraudsters and profiteers of greed in the global market, they suddenly have it.

Who then can believe that these governments could not have found the money for good schools, health care, and all the rest, that they could not have enhanced the well-being and livelihood of millions of ordinary citizens, and helped create a more just and equitable and stable world — if they had wanted to?

This is one of the main facts that ordinary citizens around the world should take away from this crisis: the money to maintain, secure and improve the lives of their families and communities was always there — but their governments, and their political parties, made a deliberate, unforced choice not to use it for the common good. Instead, they subjugated the well-being of the world to the dictates of an extremist cult. A cult of greed and privilege, that preached iron discipline to the poor and the middle-class, but released the rich and powerful from all restrictions, and all responsibility for their actions.

This should be a constant — and galvanizing — thought in the minds of the public in the months and years to come. Remember what you could have had, and how it was denied you by the lies and delusions of a powerful elite and their bought-off factotums in government. Remember the trillions of dollars that suddenly appeared when the wheeler-dealers needed money to cover their own greed and stupidity.

Let these thoughts guide you as you weigh the promises and actions of politicians and candidates, and as you assess the “expert analysis” on economic and domestic policy offered by the corporate media and the corporate-bankrolled think tanks and academics.

And above all, let these thoughts be foremost in your mind when you hear — as you certainly will hear, when (and if) the markets are finally stabilized (at whatever gigantic cost in human suffering) — the adherents of the market cult emerge once more and call for “deregulation” and “untying the hands of business” and all the other ritual incantations of their false and savage fundamentalist faith.

For although the market cult has suffered a cataclysmic defeat in the last few weeks, it is by no means dead. It has 30 years of entrenchment in power to fall back on. And the leader of every major political party in the West has spent their entire political career within the cult’s confines. It has been the atmosphere they breathed, it has been the sole ladder by which they have climbed to prominence. They will be loath to abandon it, once the immediate crisis is past; most will not be able to.

So remember well the lessons of this new October crash: The money to make a better life, to serve the common good, has always been there. But it has been kept from you by deceit, by dogma, by greed, and by the ambition of those who have sold their souls, and betrayed their brothers and sisters, their fellow human creatures, for the sake of privilege and power.

Chris Floyd is an American journalist and frequent contributor to CounterPunch. His blog, “Empire Burlesque,” can be found at www.chris-floyd.com.

As a consequence, the approach to hunger as a problem resulting from a growing disparity between “excessive population” and insufficient food supply should inevitably lose momentum. It is not that an aggregate quantity of individuals (population) is too large in relation to food supply. There is an unequal distribution of abundant food among countries and social groups. This inequality, quite often reinforced by waste of food determined by the market, brings about scarcity that specifically affects deprived individuals – the poor.

However, the environmental debate has favored reformulation and resurgence of the Malthusian problematic. Again, certain social hazards, making up what is understood as an environmental crisis, are presented as resulting from differences between growth rates of population increase and the rhythm of regeneration of the material base for development. Therefore, the environmental crisis has also often been defined in terms of aggregated quantities. Its recurrent expression has been a tendency towards natural resource scarcity – biodiversity, water resources, capacity to absorb greenhouse gases, etc. Once again the large quantitative aggregates are blamed for the crisis: for some, the level of economic growth; and for the Neo-Malthusian environmentalists, the population increase that supports that growth, particularly of the poor layers of society.

Here again we should note that underlying the aggregate pressure on the resource base, one will find clear evidence of distributive inequality in access to the planet’s natural resources. There is no lack of data to clarify this issue, from the Worldwatch Institute’s statistics to the “counter-statistics” of the New Delhi Center for Science and Environment. For example, a Dutch baby consumes several dozens times more energy and material resources than an Indian baby. Therefore, if there is excessive quantitative pressure on planetary resources, it would be perfectly localized among social groups who concentrate economic power – the wealthy.3

How can it be explained that a theory so devoid of empirical evidence should remain in the public debate? This is our challenge – to understand what makes it possible to present the environmental problem as associated with, or even more, resulting from excessive growth (biological) of the poor population. Neo-Malthusianism has not pointed to the struggle against poverty through distributive social policies but instead to controlling the quantity of poor individuals. It seems to have the intention of preserving poverty, although in the amount that is believed to be socially desirable. This is expressed as the number of poor compatible with a territory’s “ecological” possibilities, conceived and measured in terms of “carrying capacity”. Thus, it seems important to research intellectual instruments, discourses, and concepts – such as “carrying capacity” – which uphold diagnoses that obfuscate essential dimensions of social life and indicate policies that only legitimate and perpetuate inequalities.

The current notion of territorial “carrying capacity” requires a great effort of abstraction regarding concrete conditions of social life. The goal of such effort is to suggest a determinant relationship between a territory’s “ecological” conditions and its population. Thus, for each territory, with its given natural conditions, there would be a limited population; going beyond this limit would degrade the environment. However, this affirmation makes the following assumptions:

a) All economic activities developed in the territory are geared to the consumption of its inhabitants. Therefore, there is no production for export. In addition, it would be necessary to assume that all consumption of material goods by those inhabitants is from local production. Therefore, there are no imports from outside the territory. Thus, unless a closed economy without any exchange with external economic agents is assumed, there is no point in imagining a determinant relationship between a territory and the size of its population.

b) There is equal consumption of material goods among the territory’s inhabitants. In the famous equation I=PAT4, disseminated by Paul Ehrlich and other Neo-Malthusian authors, the aggregate pressure on resources is expressed by total population multiplied by the average consumption per inhabitant. In this approach, the important aspect is aggregate economic pressure. However, the variable population was introduced basically to justify population control. Thus, to reduce pressure on resources, the important thing would be to reduce resource consumption by the rich, not to diminish the total number of inhabitants, including those whose consumption is very low, or in the Neo-Malthusian proposal, especially those who consume very little.

c) The territory is homogenous, without internal biophysical variations and, therefore, with no potential for differentiated uses. Taking into account the biophysical diversity of each territory implies the acknowledgement of a possible diversity of sociocultural forms of territorial occupation and improvement with different population dynamics associated with them.

d) The forms of territorial appropriation and use are not constants in time. They change with different technological trajectories and distinct patterns of material efficiency. Therefore, one cannot think of a fixed population size associated with the given “natural” conditions of each territory, as these conditions are undergoing continuous change over time, along with the techniques through which societies appropriate their resources and environments.

e) It assumes that the territory has only a utilitarian purpose, being appropriated exclusively for material production. This means not considering the gamut of all possible significations attributed by societies to their territorial spaces, given the diverse values and cultural practices within different societies. Thus, for the same biophysical configuration of a territory, an infinite number of productive techniques, practices or significations can result in diverse spatial and temporal forms of appropriation and use of resources. Consequently, to this infinite number of cultural forms of appropriation correspond also distinct population dynamics. Thus, for a territory of multiple significations and uses, it is not valid to establish one single possible population size.

Therefore, ignoring the complexity of the real world is the essential condition for maintaining the “carrying-capacity” concept. It assumes the de facto existence of a homogenous territory, disconnected from the global economy; and the de facto existence of an “average man” in the consumption of natural resources. It also assumes that techniques and biophysical conditions in the territory do not evolve over time, and that the environment is used only for appropriation with utilitarian goals, devoid of quality and meaning determined by culture, and expressed only by a certain number of imaginary useful services provided to a population also imaginary in its homogeneity and size.

Only such an effort of disconnecting from social reality allows Brazilian big landholders to claim that indigenous rights legislation allocates “too much land to few Indians”; or representatives of an “ecological authoritarianism” to affirm that there are “too many social rights” when referring to the capacity of rich countries to support immigrant workers. That is because any formulation of the environmental issue made exclusively in quantitative terms ignores the diverse meanings and uses the multiple social actors attribute to the environment. It is reduced to the exclusive quality that the dominant economic agents attribute to the environment and to what they take from it.

[Translated by Jones de Freitas, edited by Phil Courneyeur]
1 cf. P. Dasgupta, “The Population Problem: Theory and Evidence,” in Journal of Economic Literature, vol. XXXIII (12/95), pp. 1879-1902.
2 “Indeed, average income and food production per head can go on increasing even as the wretchedly deprived living conditions of particular section of the population get worse, as they have in many parts of the third world.(..) The sense that there are just “too many people” around often arises from seeing the desperate lives of people in the large and rapidly growing urban slums – bidonville – in poor countries, sobering reminders that we should not take too much comfort from aggregate statistics of economic progress,” cf. A. Sen, “Population: Delusion and Reality,” The New York Review of Books, vol. XVI, n.15, Sept. 22, 1994.,p. 67.
3 We know that a more sophisticated formulation of the environmental issue would abandon the simple quantitative approach and would introduce the problematic of models of production and consumption, technological patterns, and the mode of wealth accumulation. However, in order to understand the Neo-Malthusian approach to the environmental issue, we shall continue our dialogue with the current outlook of quantitative pressure on resources.
4 In the equation I=PAT, I is the impact of human pressure, P is population numbers, A is the level of resource consumption and T, the technology used.

Henri Acselrad is Professor at the Rio de Janeiro Federal University Institute of Research and Urban and Regional Planning (IPPUR). He worked for four years at IBASE — the Brazilian Institute for Social and Economic Analysis, one of the leading Brazilian environment and development NGOs — where he continues to be a collaborator. He was one of the key organizers of the NGO Global Forum parallel to UNCED, and organized the book Environment and Democracy edited by IBASE in 1992.

Many believe that the prevailing corporate form focuses on maximizing profit for stockholders at the expense of other stakeholders – specifically employees, the community in which it operates, and the natural environment. Even corporations that strive to integrate corporate social responsibility (CSR) into their operations face constraints on their ability to pursue deep social responsibility, primarily as a result of the fiduciary obligations of their boards of directors.

The inadequacy of the rigid line between for-profit corporations and tax-exempt organizations has been highlighted by two different movements which have gained momentum in the last decade. For-profits are beginning to pursue social missions like nonprofits, and nonprofits are taking on profitable subsidiaries much like for-profits.

The emergence of these two movements raises questions about the adequacy of existing corporate forms. Are there significant limitations to for-profit and nonprofit models that prevent organizations from successfully blending profit making with social mission?

There are many proposals being floated and experiments underway today. As yet, it is unclear whether any of the proposals can create large-scale change quickly.

On the nonprofit side, the various types of hybrids do work. However, social enterprises are hobbled by many legal constraints, including a seemingly arbitrary designation of what is considered tax-exempt revenue, and the labyrinth of legal rules that regulate their activities. In addition, nonprofits are required to articulate a fairly narrow public purpose in their articles. They also lack access to financial markets, relying instead on philanthropy.

Incorporating more for-profit business principles into certain types of revenue-generating nonprofit models will serve the nonprofit community well. Yet nonprofits on the whole remain a very small percentage of the overall economy and will never have the power to effect widespread change.

On the for-profit side, the problems inherent in new voluntary or mandatory charters could frustrate their effectiveness. Proposed new forms – incorporating profit-making with social mission – may work for small-scale for-profits. Yet the ‘legacy problem’ represents one of the great challenges of retaining that social mission over time. Many socially oriented for-profits find that their social mission is dependent on founders’ fervor, and when founders retire or sell, their social legacy is often lost as more traditional owners and managers take over.

Federal or state governments could offer a possible solution by passing a law to create a new corporate form which would embed social purpose into the DNA of future corporations. This new form could be structured as either a for-profit charity, a socially conscious corporation, or some combination of both. Such hybrid models have both strengths and weaknesses.

One example of of this approach is the model proposed by the Minnesota State Legislature in 2006 through the Minnesota Responsible Business Corporation Act. Under the act, a corporation would have the ability to designate itself as a Socially Responsible Corporation, using the letters ‘SRC’ after its corporate name rather than the standard letters ‘Inc.’ The aim of the legislation is to create a design that integrates a dual focus on both financial success and social responsibility.

The legislation includes the following features:

(a) In determining the best interests of the corporation, directors and officers must consider (in no particular order of importance), the interests of the corporation’s stockholders, employees, customers and creditors; the ‘public interest’; and the long-term as well as short-term interests of the corporation and its stakeholders.
(b) Employees will elect 20 percent of the board of directors, and an additional 20 percent of seats will be reserved for public interest directors (who are also required to balance the interests of all stakeholders).
(c) If publicly traded, corporations will be required to issue an annual ‘Public Interest Report’ along with their annual report.
(d) The board is required to provide opportunities for stakeholders to provide advisory input at regular stakeholder meetings and through a web site or email listserve.
(e) The corporation is required to train its officers, directors, and employees regarding the special duties to stakeholders.
(f) To prevent courts from overriding the legislation, the law explicitly carves out the application of the common law of agency, under which the officers and directors are required to act almost solely in the interests of the stockholders by maximizing the corporation’s profits.

Despite its benefits, companies that chose the new form may face a lack of flexibility, possible conflicts with future business plans, and more limited access to capital markets. Also, an external regulation (even one that is voluntary) may require greater ongoing enforcement costs.

None of the various forms or legislation proposed so far will serve as a viable option for the multinational corporations that are the most powerful forces in the world today. New hybrids and social enterprises are likely to be used primarily to expand the nonprofit community.

Where the business case for CSR is compelling, the operations of larger, for-profit corporations can be transformed significantly by the adoption of CSR principles. In addition, we must be optimistic that boards and management (with court approval and guidance) will exercise their business judgment in expansive ways that embrace the concerns of stakeholders, broadening company mission beyond a sole focus on return on investment for stockholders.

However, there are two fundamental issues with sole reliance on the existing corporate tools. First, Corporate Social Responsibility initiatives are not likely to stimulate change fast enough to address the major issues facing us today. The current fiduciary duties have evolved though legislation and judicial activism over the past 100 years. Second, given that CSR has only recently been embraced fully by certain large multinational corporations, it is too early to tell if an increased emphasis on employees, community, and the environment can serve to change the fundamental way a corporation operates – primarily because the stockholder remains the sole legally recognized stakeholder.

What changes may serve to effect the greatest transformation of the corporation most quickly?

First, instead of relying on modifications of charters or the creation of hybrids, legislation should create new fiduciary duties – covering both public and private corporations – that favor employees, the community, and the natural environment. The legislation must be federal or adopted nationwide, although one or two states could serve as pilots for the new regime.

The largest obstacle will be creating a means for the board and management to weigh the different and often diverging interests of stakeholders effectively when making decisions.

To ensure accountability, the legislation must include clear metrics to measure the impact of the corporate actions on various stakeholders. One proposal is the analytic hierarchy process developed by Thomas Saaty, which would create a matrix decision-making tool to help in balancing financial and non-financial stakeholder interests.

Second, governments should take action to increase corporate disclosure and accountability on environmental issues. Universal disclosure requirements should be adopted by the world stock exchanges, with NASDAQ, NYSE, AIM and the Tokyo Stock Exchange taking the lead. The effect of a corporation’s actions on all stakeholders – including the local and world community, employees, and the natural environment – clearly should be included in the definition of ‘materiality’. Stockholders would then be able to evaluate such factors, the expanded impact would be understood more widely, and connections between social impact and long term profitability would become clearer. Enforcement would be critical. Corporations would need to face real and substantial penalties for failure to disclose according to the new guidelines. Fortunately, such a disclosure framework already is being developed through the Global Reporting Initiative sustainability reporting guidelines.

Third, it is vital to recognize that redesigned corporate forms are not the only route to creating corporate responsibility, particularly when quick change is needed. Also needed are new government regulations, particularly to address environmental degradation and climate change. Governments should regulate the environmental impact of all economic actors (including government and quasi-governmental entities), not just private corporations. And they should impose a uniform burden on all companies operating in the U.S., to minimize the likelihood that firms will re-incorporate off-shore to avoid compliance (recognizing that the extra-territorial extension of U.S. laws will not be well received on the international stage and will face enforcement complexities.)

The challenges presented by the inadequacies of current corporate legal forms can and must be solved, for the 21^st century will require corporate forms that incorporate a responsibility to a wide range of stakeholders, not just to stockholders alone. There is a clear case to be made for the creation of new corporate forms, yet the complete answer to the puzzle is not yet fully in hand. Many promising alternatives are already in play, but the ferment of existing experimentation needs to continue, as new ways of thinking about innovative corporate designs continue to evolve.