Capitalism is an economic system characterized by private ownership of the means of production, in which goods and services are produced for profit in a competitive market.
The book The Price is Wrong—How Capitalism Won’t Save the Planet argues that capitalism's current implementation is not conducive to saving the planet. However, this note proposes a straightforward change in the distribution of new money, which can lead to significant environmental benefits.
Today, governments create new money by licensing banks to distribute it through loans that the recipients use to make a profit. Banks only lend money to people who already have money or can guarantee they can repay it. Profits happen when an entity sells goods or services for a higher price than it costs. Profits do not generate money. Rather, they redistribute existing money. Money is made when the government permits a bank to debit an account with money that does not yet exist. This form of Capitalism produces more money but not necessarily more wealth, whereas wealth creation is more goods and services for the same amount of money. It produces more money because the lenders get the borrowers to pay all the finance costs, and the lenders only pay if they cannot repay the money. The result is a Zipf distribution of wealth where there are many people with no wealth, a few with a lot of wealth, and an ever-decreasing wealth of natural resources.
Governments can foster a culture of innovation and knowledge creation by redirecting new money towards education, research, and development. By using new money to help save the planet, starting with the shift to renewable energy, this shift can significantly contribute to wealth creation and economic sustainability, leading to more goods and services for the same amount of money.
Another way to increase wealth is to ensure that profits are reinvested in creating more goods and services rather than being distributed to shareholders. This can be achieved through a system called Permanent Asset Markets. In this system, consumers purchase a share of the assets used to generate profits with each sale of goods and services. All the profit collected is then reinvested to produce more assets. Shareholders receive a share of the new assets rather than more money. They can sell their assets and get more money, but profits are only directly distributed to shareholders if the assets are sold to other community members.
It is remarkably easy to evolve the existing system by each sale of goods and services by buying a share of the assets of half the profits and the goods and services. Governments can dictate what assets must be shared and what assets shall be built with new money. The operations of companies and people’s jobs remain the same, focusing on creating more goods and services. However, fewer people will be employed in finance, real estate, and insurance as the emphasis shifts towards wealth creation through production and innovation.
The changes will result in a new distribution of wealth, a Poisson distribution, which ensures that everyone has some assets, with fewer in the “long tail of wealth.” Unlike the Zipf distribution, this lop-sided normal distribution offers a fair and equitable system that can reduce the consumption of natural resources, providing a sense of reassurance about the system’s fairness and keeping the earth habitable.
In summary, governments can use money to generate more money for a few, or we can invest money to produce more goods and services for the same money and spread the wealth created across the whole community.
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