Accounting for New Capital

Every time a business receives money for its products, there is a profit or a loss, and the amount varies with each sale. Knowing each sale's exact profit or loss is difficult, so profit and loss are calculated periodically. Earnings on Capital are calculated and distributed as dividends to the business owners.

Equity Capital is expensive to operate, and Capital exits the Community.

All the profit and all the new Capital goes to investors, but is it fair? Shouldn’t some go to the buyers and workers because the investors keep all the old shares on which they can generate more profits? Workers have contributed their labour, and buyers have contributed the cash, yet the owners get all the new value, keep the old and take the cash profits.

Community Capital addresses the issue by having the Community of buyers, investors and workers as collective owners. On each sale, the investors agree to sell an estimate of new Capital to the buyers or workers. There is no change to investor income, but there is an agreed sale of a share of ownership.

Community Capital retains Capital and automatically sells investors' Capital.

A Community of buyers, workers and investors agree on how to distribute profits and new Capital. They agree to periodically adjust prices and Capital value to maintain the profits. The communities are relatively small, and people can move between similar communities for little or no cost. The Communities get economies of scale by using similar processes and sharing knowledge.

Community Capital costs much less to operate than ownership or Equity Capital and hence generates more profit for a given output. The extra profit comes from removing the need for Capital markets, the cost of stagnating or uninvested Capital, the cost of renting money to transfer Capital, and economies of scale with easy distribution of innovations.

Community Capital is a more efficient way to distribute Capital than Equity Capital and will outcompete and replace it. Doing so will voluntarily change the economy of a community that adopts it into a sharing, circular and sustainable economy.

The Emergent Properties of Community Capital

Community Capital removes the need for Capital Markets as they currently exist. Instead of a market, the buyer buys directly from organisations offering Capital. There is no need for market makers as the price and returns on Capital for the business are fixed. Buyers receive the same return under the same conditions. The savings from fixing Capital prices and no Capital markets are at least half the asset's value. The savings are shared between buyers and sellers.

Product markets still exist, with the benefits of free market competition that encourages innovation.

Community Capital builds Public Capital as it localises Capital, and particularly in cities, it reduces the opportunities for fraud and exploitation of others. Companies and individuals have mutual ownership, building strong bonds of mutual dependence. This applies to all organisations, including countries.

Everyone becomes an investor and receives a continuous stream of income or products from their investment that is more than double the return of existing financial industry offerings.

Every buyer has reserves of Capital they can use to even out changes in income.

Workers build Capital in their skills, and they can collectively negotiate their salaries and work across employers with all the benefits of full-time employment.

Governments that issue currencies reduce their need to tax and more functions are handed over to state and local governments.

Finally and most importantly, we move from an economy that makes profits by increasing sales to an economy that makes profits by reducing and keeping costs down through less consumption of nature's assets.

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Kevin Cox

Kevin works on giving individuals control over their online information - particularly their financial information with local communities.