Sharing Profits from Capital
Some disparities in income and wealth are inevitable in any community, but significant differences lead to unstable societies and conflict. According to the OECD, they also lead to lower wealth.
Modern economies have significant wealth disparities because owners of Private Capital share few of the profits from Capital with their customers. Public Capital transfers 50% of the Capital component of the profit to consumers and turns consumers into owners of Capital.
Today governments address wealth disparity by taxing profits and moving money and services to the poor.
Another way to reduce wealth disparity is for governments to provide Non-distributing consumer cooperatives with Public Capital to invest in income-producing assets so consumers will acquire Capital through their everyday expenditures.
Increasing Public Wealth with Public Assets
This article outlines how Public Capital reduces wealth disparity with community-owned Car Parking.
Typically governments encourage investment by directing grants, concessions, and land to private operators of Car Parking. The operators and government share the profits from Car Parking through taxes and parking fees. The Car Parks provide a service to the community and give wealth to the few who profit from the Capital created from taxes.
Alternatively, the government sells Car Parks to those in the community who park their cars. Those community members will profit from the Capital, repay the government the invested money, and give the government a return on investment.
Let us assume a Car Park costs ten million to build, has operating costs of one million a year, and has a million hours of parking a year. To cover the operational costs will mean a parking cost of a dollar an hour. Selling the Car Park to a private operator who receives their money back over ten years with an interest rate of 10% means parking charges of $2.63 an hour.
If a Non-distributing cooperative purchased the Car Park with Public Capital, the parking charges would be $2.00. Each year the parking members of the Cooperative would increase their combined wealth by $500,000 in Public Capital, which they could use for parking or other purposes. The government would receive their money back over 20 years.
If the government provided a cooperative with $10 million in Public Capital, there would be no increase in government debt, and the government would receive $500,000 a year in repayments for 20 years.
Public Capital increases the wealth of a community compared to Private Capital with lower prices for parking. It is possible because the government creates new money for zero cost, and Public Capital creates more assets without an interest charge. Significantly the new wealth accumulates with the general public and is not funnelled to the already wealthy. Wealth and income disparities will still exist, but the discrepancies will decrease. All this will happen with a reduction in taxes and increased community wealth.
The government can use Public Capital to build any infrastructure, including housing and renewable energy. If used for housing, it will reduce the cost of buying a home by 50% and solve the housing affordability crisis without lowering the wealth of existing homeowners. If used for renewable energy, the cost of electricity would drop by 30%, and the wealth of households would increase by 50% of the amount they paid for electricity.
The government can eliminate existing debt in the same way. Selling Public Capital to pay taxes will remove the burden of interest payments while providing a reliable income to savers.
The existing system of Capital earning money is expensive and leads to inefficient Capital use. Capital tends to sit still, with its earnings going to those who own it, leading to Capital stagnation. In contrast, Public Capital earns more by eliminating rent on money. Eliminating Those who produce and those who consume share the increased earnings equitably.