Economic Sustainability

Kevin Cox
4 min readSep 27, 2024

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Humans survived by working together to share their surpluses with other humans who reciprocated. The tit-for-tat algorithm expresses this strategy for group survival: Each person starts by giving something to another when they can, and if the receiver reciprocates, they keep doing it.

In the modern world, an individual has a high chance of survival if they live in a reciprocating community and have money.

An economy that operates this way will become sustainable as it will sustain its members. Unfortunately, the financial system has gone down a different path, and the economy and the natural world it depends on have become unsustainable. The financial system is unsustainable because profits (or money surpluses) are not shared. Businesses share goods and services, but profits are not explicitly shared. Instead, we rely on taxes on profits to redistribute money surpluses, which is problematic and expensive.

It means too much money is created, accumulates with the wealthy, stops moving, and is not used to find better ways of using resources while stopping most people from participating in the economy to their full capabilities. We need less money, more investment, faster money, and more people looking for better ways to use resources for less money.

It Starts with Money Creation

Governments create most new money by agreeing to allow banks to debit loan accounts and balance the debits with credits in another bank account. The loan accounts are debt, and banks lend to people and businesses who can repay the debt. Since their invention, banks have taken money but have lent out more than they have, so it seems a sensible way for governments to create more money.

Unfortunately, this is a very expensive way to create money, and it is only available to people and businesses that already have money. It is unsustainable because it creates more money than necessary and is only available to a few.

New money creation today is close to zero cost. It becomes expensive when you have to pay it back and when you have to pay interest on it. It comes from the profits of investors who charge extra to buyers of goods and services produced with the assets created by the loans. The money to pay for the new money comes from the investors' customers — not the investors themselves. The people who pay for the new money are not those who make a profit from it.

Loans are unnecessarily expensive because banks debit interest and fees on bank loans but do not recognise that debiting a loan also pays the interest or fee. This makes the new money through loans more expensive and is passed on to the customers.

The banking system works well when the money is rented and already exists. Interest is fine when it is treated as rent. Interest is not okay when treated as a return on investment, as returns on investment are profits, and profits come from existing money where the buyer pays more than it costs to produce.

Pretending that new money is the same as old money is foolish. Society does not have to pay for new money; it can be invested without paying it back or destroying it through a loan. New money should be invested to be more efficient and increase the investment available to the community. No interest should be paid, and the assets created should remain the property of the community that created them.

This means governments can reduce taxes to provide community services by making more new money available for investment.

Instead of loans, banks can rent existing money and change — with community consent- how they distribute new money.

New money should be spent on building new assets, especially new knowledge and public infrastructure, which is available to all in a community. These are the things we now collect taxes to provide. Such things are education, research and development, infrastructure like roads, hospitals, and public transport. The distribution should be widely distributed but focussed on local community organisations — like housing cooperatives, local government, and community-owned facilities.

Community assets will be built by private companies but owned by the communities they serve.

Possible Outcomes

Education will be free and available to everyone who wants it.

Research and Development in areas of need will be funded, with any profits from the R&D going back into more R&D, so it becomes self-funding.

Not-for-profit community organisations could be funded, provided the assets created are owned by and maintained by those who use the facilities.

Those who do not have adequate shelter and housing should be funded to help them provide it for themselves through local permanent asset markets.

Sharing commercial profits with customers will prove a compelling low-cost business model. Increasingly, businesses will revert to small, local, coordinated businesses across the wider community, distributing wealth so more people can participate in the activities.

Communities will naturally reduce the long supply chains of the current economic system, making economic activity vibrant with many customers who have funds to purchase the locally produced goods and services on offer.

Paying for use and making user communities custodians of assets and knowledge will encourage competition and innovation, rapidly increase a community's wealth, and reduce the amount of money needed to exchange goods and services.

Survival

If we and our neighbours have reserves of money and assets to help us through hard times, we each have a better chance of survival. Spreading new wealth across communities instead of restricting it to the already wealthy makes communities productive by increasing the rate at which money moves and involving more people in productive activities.

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Kevin Cox

Kevin works on empowering individuals within local communities to rid the economy of unearned income.