Capital is the assets owned by an entity. Investor Capital is assets owned by the company shareholders that produce goods and services, while Community Capital is assets owned by the consumers of goods and services.
The value of Investor Capital comes from the profit of goods and services produced by the assets. The returns on Community Capital comes from the savings made from asset use. The Capital is in the form of payment for goods and services where the return on investment is a discount depending on the investment time.
The cost of goods and services are in two parts: the operating costs and the capital costs. Production costs are direct, while Capital costs are the cost of providing the Capital to the business plus a return on investment.
Community Capital is Capital owned collectively by a community of investors and consumers. Traditionally Capital is stored as the cost of buying the assets, and we call that Ownership Capital. When Capital changes ownership, there is a significant cost associated with the change. Community Capital removes the cost of ownership change because it only extends the payments system. In particular, Interest Costs, Capital Gains, Depreciation, Insurance, Real Estate, and other ownership charges all become unnecessary and are replaced with other more straightforward and lower-cost mechanisms.
The higher the Capital Value compared to operating costs, the greater the savings, and for many modern goods and services, the savings are greater than operating costs. It means Community Capital can halve the cost of goods and services by changing from Ownership to Community Capital. Changing is relatively low-cost and straightforward, meaning communities can reduce the costs of goods and services with few changes to business information systems.
A further saving happens by dividing communities into “local communities” where local can be geographically based, product-based, or other closeness characteristics. Local communities are often lower-cost because it costs less to move products and services within a local community.
Another saving of Community Capital is accuracy in the measurement of value. The commodity price is a precise measure compared to profit from ownership. Ownership profit is imprecise and subject to many external forces, while Community Capital is stable within a community. It can vary across communities, but a community of communities produces similar prices across communities.
The organisation of an economy with Community Capital looks radically different. Economies of scale come about through standardisation of processes and exchange, but organizationally the system seems like a living organism rather than a machine where bigger is better.
A Renewable Energy Example
Community Capital keeps value generated by Capital within the Community that created it. With intelligent buildings, the Community can calculate the savings made in each building. The occupants pay back the Community Capital according to the savings they achieve. The Community protects itself by funding projects that save money. Occupants will work to make the best use of the investments because they get the greatest benefit the more they save.
A House Example
A house can be owned by shareholders or owned by the occupant. In both cases, assume the occupant pays all the direct costs of living in the house. The cost of occupying the place is the rent paid to shareholders, which is the cost of Capital plus the cost of the return on investment. In contrast, the cost with Community Capital is the cost of the return on investment as there is no transfer of ownership. With shareholder capital, the shareholders continue to own the Capital while the occupier pays for it plus its use but does not get any of the Capital.
Community Capital and Inflation
Community Capital where the return on investments comes from savings rather than increased sales increases productivity and is not inflationary but allows economic growth without inflation and is the opposite of stagflation.
