Community Capital is Efficient Capital

Kevin Cox
5 min readAug 22, 2022


When a business makes a profit, it creates Capital. The money to pay for the Capital comes from consumers, but consumers do not share in the Capital. All the profit goes to the owners who retain the Capital that created the profits. They do not share the new Capital with the consumers who paid for it.

When it comes time to sell Capital, investors use Capital Markets.

Capital Markets are unfair, and because they are unfair, they are inefficient. The inefficiency comes from restricting Capital markets to a few people who have accumulated Capital. Enforcing those restrictions is expensive, and ultimately consumers bear the costs. Also, those with the most Capital can always outbid those with less, further increasing the price of Capital.

Asset price inflation and accumulating Capital in overpriced assets create inefficiencies. Excessive accumulated Capital is unused and does not work to generate more profits.

Another inefficiency comes from investing in creating more Capital rather than reducing costs. For example, marketing budgets increase while researching ways to reduce expenses stagnates.

This submission to the Productivity Commission provides further information on the productivity of Community Capital.

A solution

A solution is to give a share of the profits created from consumer money to the consumers who supplied the money. Companies use this idea for marketing to increase sales. They do it because they know it increases sales and does not reduce their profits. It accounts for the popularity of subscription services, everyday rewards, shopper dockets, a free coffee for every ten purchased, and frequent flyer points.

Community Capital, where any consumer can invest by prepaying for goods and services, is a scalable way to raise Capital while increasing profits by sharing the profits with consumers. Consumers receive prepayments each time they purchase goods and services and hence share in the profits from Capital. Community Capital provides a return on investment by prepayments attracting a discount depending on when the buyer uses the Capital.

Emergent Properties of Community Capital

Community Capital will double the amount of investment from a given amount of Capital. Community Capital profit comes by decreasing prices, leading to lower asset values and prices. Profits come by finding ways to produce goods and services for less cost, increasing productivity.

Community Capital leads to consumers banding together to reduce costs further. The groups can collaborate with other groups to further reduce costs, so the competition is positive rather than destructive. All can win.

Importantly, all members of society can share in the profits from Capital, not just those who already have Capital.

The system is regenerative rather than exploitive, where investment leads to greater productivity rather than increased consumption.

In summary, the increased value of Capital comes from removing the inefficiencies created by the financial system and its Capital Markets.

Measuring Success

We measure success by comparing the returns on investment between Community Capital, Equity funding and Loan funding.

A simplified example shows the returns on investment and who gets them. Assume we have the same project financed with equity, loans or consumer finance. The investment is $100,000. Equity finance gives a 5% dividend to shareholders; loans provide a 5% interest rate, and consumer capital gives a 5% discount on the electricity supply. The business makes a 20% profit on the assets it purchases, and the assets do not depreciate but earn the same each year.

In all three cases, the financial outcomes appear the same. They all make a 20% profit and distribute a 5% return. However, who gets the return and what happens to it changes, making a big difference.

In the equity case, the shareholders get a 5% return, and the business invests the money or keeps it in cash reserves. All the profit goes to the shareholders even though the consumers supplied the money. The shareholders get $5000, and the capital value goes up by $15,000.

In the loan case, the bank gets a 5% return, plus it gets back payment on the loan capital. Let us assume this is 15% of the remaining profit. The 15% destroys part of the Loan, and the capital value of the business goes up by $15,000.

With Community Capital, the consumer pays 10% less if the annuity returns go for 20 years and the business invests all the profit. The ownership of the 20% reinvestment goes to the consumers who paid for the goods and services. The investor consumers' capital drops by 5%.

Community Capital Savings

Community Capital saves the cost of dividends and interest. The savings are invested and owned by the consumers who paid the money. Dividends, interest and Capital gains are rent payments on Capital. Community Capital removes rent on Capital and hence makes the Capital more productive. Significantly it spreads the profits from businesses across the Community.

Equity and Loans treat money like an asset that is owned and rented out. Not everyone can buy equity or loans to use or rent, so equity and loans are regulated. Community Capital is available to everyone and offers investors a return on investment with lower prices earned by paying for goods and services. Community Capital does not eliminate assets or Capital markets but is lower cost because the returns on Community Capital are fixed, stable and reliable and are discounts earned by the Capital, not rent from ownership. Community Capital is invested in reducing costs, not increasing sales.

Community Capital moves with each payment, and it does not require a change in ownership. Changing Equity or Loan ownership is expensive and happens infrequently. It means Community Capital is used at least twice as often as Equity and Loan Capital giving greater opportunity to earn from investments. Community Capital eliminates the need for expensive Capital markets to establish the price of Capital.

Any community will benefit from switching existing businesses from Equity and Loans to Community Capital. It will increase community wealth by freeing up static Capital and allowing more investments to reduce costs. Governments can use it to get better value from taxes and existing Community or privately owned infrastructure.

Replacing some taxes with Community Capital

The government can replace some taxes by selling Community Capital with a discount of 3%, which is adjusted each quarter by the inflation rate. Suppose the Reserve Bank needs to increase the money supply. In that case, it can create Community Capital with a zero discount and no inflation adjustment and supply it to unprofitable community-owned enterprises. The government would decide who gets the Capital.

Compensation for Stranded Assets

Governments sometimes compensate owners of stranded assets with an asset swap. Assuming the government decides a Coal mine is to close, it can pay the organisation and the Community it supports by supplying Community Capital to both the Coal mine and the Community. In consultation with the government and the Coal mine, the Community decides how to invest the Capital.

Repayment of Previously Sold Assets

Governments sometimes decide to resume land or previously sold oil and gas exploration rights. Supplying the funds as Community Capital ensures the compensation returns to the Community as assets rather than giving organisations and individuals cash compensation. It is the equivalent of an asset swap for Stranded Assets.



Kevin Cox

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