Since governments abandoned the gold standard, banks have broken their social contract with governments and pursued their own wealth and the wealth of the 1% at the expense of the 99%. Wealth disparities have always been large, but they have become obscene and show no signs of changing. We have a capitalist economy where those with the most money have the greatest say. It does not have to be this way.
Wealth disparities of the size we have today lead to a stagnating society with less wealth and economic activity. It leads to exploitation and the destruction of the natural environment as fewer and fewer people care for and become custodians of the land and natural environment. We can change this by building a democratic economy and changing the way we introduce new money into society.
Governments and citizens can stop capitalising interest and fees on loans and allow community groups, including the government, to introduce new money to build or buy community assets. Banks can participate in issuing the new money but only under the strict conditions of creating or purchasing community assets. A community is defined as a group of more than fifty people who use community assets. The groups can be spread nationwide, but the community collectively owns the assets. The existing system remains — except banks never capitalise interest or fees.
Assets and people can move freely between groups, provided both groups agree to the move. The assets are divided into shares, and each share is attached to a particular asset if there are many separate assets in the group. Each asset has a custodian selected by the group to be responsible for the asset. The assets earn money, and the earnings go to the group, which divides the earnings between shareholders as more shares and losses as fewer shares. All shareholders must sell a proportion of their shares to other members each month, and all members who use the assets must pay to use them. Part of the payment is to buy shares from other members who must put them up for sale. New members can enter the group as investors by purchasing any available shares.
Individuals can still lend money to banks, and banks can rent existing money from savers to borrowers as they do today. However, banks cannot rent new money to borrowers as they do today.
The Reserve Bank determines the speed of money circulation by specifying how quickly assets exchange hands within different groups. This is determined by the minimum number of shares each holder of shares sells each month.
This economic system will minimise the cost of the financial system and reduce the amount of money circulating, leading to an efficient economy defined as the least amount needed to produce goods and services. We can expect the long-term productivity to double for all systems that adopt the approach.
Summary
A Democratic Economy addresses wealth inequality and the high cost of the financial system. The core idea is to shift the creation of new money from banks to community groups, subject to government oversight, focusing on building community assets rather than private profit. The system reduces the cost of finance, increases economic efficiency, and fosters a more equitable distribution of wealth by limiting the power of banks and promoting community ownership. The model involves a share-based system for asset ownership and usage within communities, with the central bank regulating the speed of money circulation. It will lead to improved economic productivity, a more equal distribution of wealth and societal well-being by increasing the median income of any community that adopts it.
Read Low-cost Local Dynamic Capital Markets for more information.
