Giblin and Doctorow in ChokePoint Capitalism say, “we have structured society to make rich people richer at everyone else’s expense”. They then list how Capitalists do it in the Creative Industries and supply some solutions. This article gives a general solution to the problem that complements their solutions.
Wealthy organisations use share capital markets to hide profits from unearned income and exploitive commercial practices. This article outlines an alternative share market that makes exploitation difficult to hide and gives victims the agency to stop it when it occurs. It creates an economic system that rewards those who do rather than those who own.
Capital an Accounting Invention
Capital is an invention to assist double-entry bookkeeping. When a business adds up all the cash receipts and subtracts all the cash outgoings, they call the difference a profit or loss. Accountants transfer this amount to the Capital or wealth account. When investors put money into a Company, it goes to the Capital Account, and investors own a share of the Capital. As the business trades, money goes in and out of the Capital account, and the book value of shares goes up and down.
Trading shares happens on stock markets removed from the Company Accounts. The trading establishes the price of shares independently of the book value. Trading a bookkeeping share artefact to set a share price is an expensive, easily manipulated, opaque system that allows the wealthy to hide unearned income and find other ways to game the system.
Community Capital Markets, with prices based on the Capital book value, is a reliable, transparent, minimum-cost and difficult-to-game marketplace for shares in any size or type of organisation.
Community Capital Markets
The price of all goods or services includes the cost of Capital and the cost of production. When we pay for something, we pay for using Capital and the cost to produce the goods. We receive the goods but don’t receive any of the Capital. The free market is meant to give us reduced prices as an alternative to receiving Capital. Unfortunately, this rarely happens because large corporations use Chokepoint Capitalism techniques to block and eliminate competition and the choice necessary to allow free markets to operate.
A business creates new Capital by generating a profit. Profits are necessary for people to offer a service; otherwise, there is little point in doing it. What if, instead of giving people lower prices, we gave people a share in future profits via a shareholding? Doing this is an alternative to reducing prices in a marketplace, as the larger the profit, the more shares the buyer receives. It doesn’t remove competition, and it replaces expensive share markets.
Shares give the holders a voice in the boardroom to influence choices made on behalf of shareholders. Today the investor's voice drowns out all others. With CCMs, buyers acquire shares along with goods and services. Employees can receive shares as part of the payment for their time. Suppliers can accept shares as part of the payment for the service. Governments can receive shares for investment grants. Shareholdings will change, and the strength of voices will change dynamically and mirror the use of the goods and services.
Shareholders are members of other organisations. A business can accept another organisation’s shares as payment for their services or buy shares to obtain a voice. It will build a robust interdependent transparent network of replaceable entities. Governments and others can model the effects of a changing environment and shocks to the system. Governments play a crucial role as all organisations interact with the tax system and use government services. With CCM shareholdings, their influence is visible and transparent.
Importantly CCMs will enable competition within local communities.
Operating a Community Capital Market
The profit the Company wishes to make is fixed and determines the price of shares. A shareholder resolution is needed to change it. Having a fixed share price removes the need for a Share Market to set the price.
Every month a percentage of every shareholder’s shares is put up for sale in an open market. Every month buyers of goods and services buy shares based on the value of their purchases in the goods and services market. Trading is zero cost.
Having a fixed price simplifies share trading, and the compulsory monthly transfer of a percentage of shares to buyers who purchase goods and services creates a liquid market.
A Community Capital Market for Creatives
Say I want to write a book about Community Capital Markets and publish and sell it. I would look around for a community of authors who had set up a Community Capital Market for similar books. I would ask the community if I could join their platform. They arrange to evaluate the proposal and agree or disagree with taking the book.
Assume I have already purchased several other books from the group, so I have a small shareholding that has entitled me to look at their success. I cannot see individual book sales, but I can see the overall pattern. They agree to take me on. If they hadn’t, I would look for another group that might take me on, and if I couldn’t find one, I would join a community that helps create new Community Capital Markets or, as a last resort, start my own.
The community would have contact with other communities of reviewers, designers, promoters, etc., in Community Capital Markets. Many of these people may accept shares in my book for payment, and when they receive money from me, I will get shares in their business.
When the book was ready, we would look for distributors and promoters who were also part of a CCM. When the book was finally sold and became a best-seller, all the people who had helped me would have shares in my book. My shares in the book would be the agreed amount of effort I had put into the work.
The distribution of profits would go in proportion to the effort put in by the different parties. There would be no choke points of middlemen.
Summary
Community Capital Markets transforms business assets into a Commons with shareholder custodians of designated assets. The markets are transparent and equitable, providing wealth to all community members. They cost little to operate and increase the volume of investment, making any Community adopting them wealthier. They make it difficult for the rich and powerful to game the system with techniques like ChokePoint Capitalism. They are available for all economic entities where money exchanges hands and will turn economies into designs that adapt and change with the environment. They may keep the planet liveable.
References
Stock Markets Compared to Community Capital Markets
Fractal Scaling of Community Capital Markets
Wealth and Income Inequality with Fair and Unfair Markets
Distributing Capital to Community Groups
