The world's economies are dominated by unfair markets and will make the earth uninhabitable for humans. Economies are extractive with increasing consumption regardless of the environment. The problem is the old one of allowing money to create more money without increasing goods and services. It is called usury or rentier capitalism.
Investors put in Capital and create profits, and they also, through double-entry bookkeeping, create new Capital that they keep along with the profits. Profits appear on the Profit and Loss, while new Capital appears on the Balance Sheet. Owners of Capital receive the profits, and they also receive the future Capital Gains. Capitalist systems use free markets to give buyers a share of the profits as lower prices. Unfortunately, free markets are rare and difficult to manage. Fortunately, there is a bookkeeping solution.
One solution to the problem is with Capital which is fair to both buyers of products and owners of Capital.
Instead of the New Capital going to the business owners, the New Capital goes to the buyers who supplied the money. This is both fair and less costly to operate.
Implementing it is straightforward, and the emergent properties of the resulting economy are surprising. Buyers are not shareholders and owners but are custodians of the commons. It means there has to be a different form of Capital calculated at the time of sale. We call this Community Capital as it belongs to the Community collectively, with members of the Community acting as custodians.
Implementation requires no changes to conventions even though the financial system’s rules, regulations and conventions support capital accumulation rather than capital reuse. Equity Capital is treated as a share of ownership of assets rather than a share of the products from the assets. Instead of treating Capital as ownership of the assets, we treat it as ownership of future products produced by the assets and leave the ownership of the assets with the organisation. This can be achieved by any company with a change in their constitution and the book-keeping adjustments to implement the change.
Read Interest, Capital gains, Profits, and Rent are good, and accounting can make them better.
Read more at Efficient Capital Distribution and Community Capital Algorithm.
Possible outcomes at A Survival Economy.
