The main cause of the disparity between the rich and poor is dysfunctional Capital Markets. One way to reduce the disparity is to make Capital Markets cheaper to access, allow universal participation, and increase the rate of new investment. The poor will become richer by increasing their share of new wealth rather than redistributing old wealth.
Community Capital Markets resolve conflicts, is zero cost to operate and use a known price of Capital. It spreads ownership across the community and reduces the disparity between rich and poor. The approach applies to all types of businesses, including government and cooperatives. It works the same for Private Capital, Community Capital and Government Capital.
Private Ownership of assets ensures someone is responsible for looking after the assets. In addition, Private Ownership means those responsible for looking after the assets get benefits from the assets. The system works well, but sooner or later, the owner no longer wants the asset or receives a benefit from the assets, and they wish to transfer Ownership. Ownership is often contested and expensive to transfer, creating costs that could be invested to produce more goods with fewer resources.
Community Capital Markets reduce the distribution cost to zero, minimises conflicts, and resolve those that arise at the time they occur. Community Capital Markets fix the price of Capital and adjusts the returns on Capital and the cost of products rather than adjusting the Capital. It does this by the buyer of products purchasing a little Capital from existing owners as well as the products.
This does not remove regular Capital Markets, but it sets the price of Capital and guarantees a liquid Capital Market. The greater liquidity means Capital moves at least double the speed of traditional Capital Markets, resulting in more investment and less stagnate Capital. It spreads Capital ownership to buyers and reduces the cost of operating Capital Markets to zero.
The amount of Capital sold in any period is 50% of earnings before interest and tax. The amount purchased by buyers is proportional to the amount paid. Many buyers will want a discount rather than Capital, and there can be an arrangement for the buyer to receive a discount instead of shares.
Community Capital Markets perform the same function of setting a fair price in a free market with many buyers and sellers, but it does it automatically for a single business. Free markets still operate and compete with markets funded by Community Capital Markets.
Community Capital Markets recognise that humans are mortal, and they take custody of assets and pass them on to others rather than own them for eternity. They turn ownership into custodianship, increasing the care and nurture of assets.
The approach spreads Custodianship to all buyers of products and, if widely introduced, will reduce income and wealth disparities in each community that adopts the approach.
It works with all existing private, cooperative and government businesses, including collecting taxes. It is a way to share the profits from “the Commons” with a relatively small, low-cost accounting change.
Turning Every Business into a Capital Market
Markets in products work by having many sellers and buyers free to choose between each other. Buyers are free to choose from whom they buy, and sellers are free to choose to whom they will sell. Choice makes the difference.
Community Capital Markets turn every business or asset into a component of a Free Capital market. They do it by stabilising the price of Capital and creating a liquid market for every business. This creates the building blocks of a market. Today’s Capital Markets are money markets — not investment markets. Capital Markets of businesses or assets operate as a market should. Investors choose what they will invest in, and businesses choose which investors they will do business with.
These new Capital Markets remove an immense cost burden from the economy. The burdens are:
- The cost of monetising assets with debt to make the asset tradeable.
- The cost of operating markets, like stock and real estate markets, to set monetised asset prices.
- The cost of insurance to cover the cost of getting the price of money wrong.
- The cost of inflation from creating more money than needed.
- The cost of stagnating Capital sitting in overpriced assets.
- The cost of the mal-distribution of wealth limiting the participation of most people in Capital Markets.
The total cost burden is at least as much as the value of all investments and possibly much more.
However, the main benefit comes from having a minimum-cost Capital Market, which means we choose investments not by the return on money but by the value and costs of the products and services created for buyers.
Implementing a Community Capital Market
One way to implement a Community Capital Market is for a business to set a fixed profit target of earnings and to work towards it. Each second, investors receive their return, which is recorded in the value of their shares. Once a month, every investor has to sell 50% of their profit to buyers of products. This is recorded in the buyer's share allocation.
Separately buyers and sellers can buy and sell using the set price.
Every month the business adjusts the value of Capital according to the actual cash flows and the agreement of shareholders, including new buyer shareholders.
Capital Share Markets trading share script representing a company is redundant if the Company can buy and sell shares directly. Community Capital Markets make shares a product of buying and selling bits of the Company. Share markets were needed when there was a delay in collating sales and costs. The technology of the Internet and the ability of computers to do calculations for close to zero cost change what is possible.
Capital Share Markets have lasted because much economic theory is built around money generating money over time. This was needed because of communication delays in the real world. Those communication delays have gone, and there is no longer the need to let money generate money. We can and will still do it, but it is no longer needed. Removing it creates the savings listed above. Those savings can be shared between investors and buyers.
Government use of Community Capital Markets
Government businesses are typically monopolies, and governments go to considerable lengths to make government services operate as though they existed in a market.
With Community Capital Markets, government businesses — like taxation, roads, hospitals, education, defence, and prisons, can be financed through Community Capital Markets, bringing choice into the Capital market and reducing taxation and government debt to finance infrastructure.
While governments pay for the services with taxation, the services go to consumers, and they can be deemed to pay for the services and notionally receive shares or a stake in the business. They cannot sell their stake, but it does give them a voice, along with community investors, in the business through representation on the governing boards of the business.
