"Give a man a fish, and you feed him for a day. Teach him to fish, and you give him an occupation that will feed him for a lifetime." Chinese Proverb
"Receive charity, and it lasts a day. Provide ways to invest, and it lasts for years." Economic Proverb
Two ways to provide the funds for low-income people are:
- Tax the wealthy and give to the poor or give the rich tax breaks if they give to charity.
- Share the investment profits between investors in assets and the buyers of goods produced by the assets.
Taxing is unpopular, and receiving charity is demoralising and uncertain. Both are unpopular with givers and receivers.
When a buyer purchases goods, it creates a profit or Capital. Capital goes to the Investors and Owners of a business. An alternative is to share the Capital between Investors and Buyers as Investor Capital and Buyer Capital.
In Free Markets with many buyers and many sellers, the "Invisible Hand" gives buyers a share of the profits with reduced prices. Unfortunately, many markets are natural monopolies with no choice and no invisible hand. Investors in businesses become shareholders and receive all the profits from trading. Without enforced regulation, buyers rarely receive a share of the profits.
Investors must make a profit; otherwise, there is no point in investing. However, buyers should know they are getting a fair price. If buyers become joint owners in a business, they will have a seat at the table when the organisation makes pricing and investment decisions.
One way for buyers to become joint owners is to transfer part of the profit from each sale to the buyer as Capital. The profit share does not immediately become Capital with a profit entitlement. It happens after Capital investors receive their return on Capital and relinquish some of the Capital. With the return of Capital to investors, the assets they represent still exists in the company. The released Capital can go to buyers in proportion to their purchases and their time of purchase.
Many buyers cannot all have a voice, so they group themselves into smaller organisations. Representatives from the organisations can have a voice at the table.
Markets work when buyers have a choice. If they cannot choose suppliers, they could choose the small buyer organisation they join. The organisations have the freedom to use the profits in different ways, so providing alternatives.
The approach works for community infrastructures such as roads, hospitals, schools, water supply, energy supply, communications systems, IT platforms, and public transport. It also works well for non-monopoly businesses with standard commodity products or services. These include superannuation bodies, banks, real estate, and insurance companies.
Implementing a system of buyer choice and shared ownership costs little to implement. The reason is that the business processes all remain the same. The difference is the addition of the buyer's voice at the decision table via the transfer of Capital. With today's technology, adding a buyer's voice already happens with user feedback and citizen's juries, focus groups, surveys and polling. The difference with buyer Capital is the strength of the voice.
Regulated industries could be the first place to start. The regulated sectors, like electricity distribution, banks, water supply, roads, public transport, and health, have the structures to administer buyer Capital. The proposed change will reduce the cost of administration and increase the productivity of Capital. Those savings will more than pay for sharing Capital with buyers.
For example, converting a government-owned monopoly to buyer Capital means consumers can purchase all the government debt and save the community the cost of debt.
The idea can extend to any everyday utility — like social media. As consumers use social media, they gradually acquire buyer Capital and have a voice at the table of investment decisions.
Stable Capital Markets with Buyer Capital
This article started with the proposition that addressing poverty is to provide a way for the poor to gain wealth. However, the method applies to all and not just the poor. All buyers can become wealthier and do it in a way where we all rise, and no one is left behind.
The use of Capital creates wealth. We can all become wealthier if we create wealth without destroying the assets that make wealth. There are limits to wealth from the physical world, and we have reached many of those limits. However, we are not limited to the intangible products of the mind of knowledge, entertainment, and feelings of wellness.
Buyer Capital acts as a counterbalance to Investor Capital to prevent runaway consumption of limited physical resources. It can replace consumption with runaway development of knowledge and wellness to increase the wealth of all communities within the constraints of the physical world.
Investment Capital is driving us to extinction. We can redeploy it to save us from extinction. Indeed the appropriate use of Capital may now be the only way to keep the planet livable.
Who loses?
The most surprising part of the approach is that no one need lose. We can have a growing economy and a liveable planet if consumption stays within physical boundaries. The economy grows by using excess Capital to reduce consumption for the same value. For example, we can become wealthier by using electricity to produce more goods and services or richer by using less electricity to make the same goods and services.
No one will lose if all have a voice at the decision table. If we don't, those whose voices are silent will almost always lose out.
An economy has to fit within the physical world, but it is not of the physical world. It is an invention that humans created, and it is an invention that humans can change. It is an invention that destroys the planet as a place for humans to live, but it may yet keep the earth liveable. Keeping the world liveable is a win for all. Making it unliveable means everyone loses.
Administering Buyer Capital
Buyer Capital is owned collectively by buyers in an organisation. However, the least expensive way to administer Buyer Capital is by the business in which the Capital resides. Companies administer Investor Capital, so it is sensible for them to administer Buyer Capital.
The cost of administrating Buyer Capital is close to zero as successful organisations already have successful payments systems. Buyer Capital is a small addition (not change) to payments systems. Shareholder systems are an extra cost, and setting up Share Trading systems are even more expensive. However, the significant savings of Buyer Capital is the elimination of the cost of money.
Loans earn interest, and when paid by a Company, interest removes Capital and the return on Capital. Buyer Capital can give a return on investment as a discount on goods and services. Discounts do not withdraw money, and the Buyer Capital remains in the business with the new buyer.
When Buyer Capital comes into a business, it remains there. Investor Capital comes into a business, and it wants a return on investment and its Capital back. Both the return of Capital and the extracted return on investment are a loss of Capital to the business.
For community assets, we want the Capital to remain in the business, and we want the returns on investment to stay with the community. Hence, Buyer Capital is the most efficient way to finance community assets. It is also the most efficient way to fund any commodity business.
The approach can work with other stakeholders, especially workers. When workers get paid, they could also receive Worker Capital and have a voice at the table.
Regenerating Business and Government Enterprises
Company and Government failures are wasteful and expensive. Society needs better ways to rejuvenate economic entities. Buyer Capital provides one way. It brings Buyers to the decision table, and the cost to the business of Buyer Capital is lower than Investor Capital.
Buyer Capital circulates within a business and rejuvenates it to meet its customers changing needs. Most companies live by slogans to meet customer demands, listen to customers' needs, and be customer-focused. However, when the crunch comes on making decisions on investment, the Investors get priority. Planned obsolescence wins out against making a product repairable. Polluting the atmosphere and leaving it for the next generation wins out over increasing costs but reducing pollution.
- Buyer Capital can rejuvenate a business that needs new Capital or suffers from debt and interest payments.
- Family businesses that wish to pass it on to the next generation can use the approach.
- Businesses that wish to become worker-owned and operated can reduce operating costs.
- Governments seeking to balance budgets and reduce welfare costs can use the approach.
- Buyer Capital can be a cheaper approach to consumer loyalty than shopper dockets, everyday rewards, or frequent flyer points.
Summary
Where markets do not provide buyer choice, profit sharing with lower prices is unavailable. Buyers can share lower prices if they can invest in the business with prepayments for goods and services. Buyer choice comes from selecting the group of buyers a prepayment buyer decides to join. Prepayments are Buyer Capital.
Buyer Capital costs less to administer than Investor Capital and will influence business outcomes. The lower cost means more Capital is available for investment. With stakeholders at the decision table, no one is left behind. Profits will increasingly come from activities of the mind with little impact on the physical environment. The change can be swift and may keep the planet liveable.
