Steve KelseyIn this thought experiment let’s speculate on what a civilisational wealth based economy might look like.
Civilisational Wealth is intelligence applied to base matter. Physics doesn’t have a definition of intelligence yet, nor a means of measuring intelligence as a physical quantity, and so we need to use an analogue. Although we can’t measure intelligence as a physical property we can measure energy intelligently applied to base matter. A unit of Civilisational Wealth is X energy intelligently applied to Y matter and is measured in Joules per Kg.
Work is the process of embedding intelligence in base matter. Work produces Civilisational Wealth.
The Civilisational Wealth produced can be represented by coin. One unit of Coin is in one to one correspondence with one unit of Civilisational Wealth. Therefore the community coin is backed by a physically meaningful quantity ensuring its value.
Initially this sounds similar to money backed by a commodity like gold. However, unlike commodity backed money, the money supply grows with the production of Civilisational Wealth. As the production of Civilisational Wealth increases, the amount of coin increases in lock step. This avoids both the inflation problem inherent in fiat currency and the limitations on growth inherent in a fixed commodity based currency.
We can model how Civilisational Wealth and coin flows through a community with reference to the flow diagram below.
The creator of Civilisational Wealth is the issuer of community coin. There is no need for an intermediary like a bank. A worker creates Civilisational Wealth which travels to the market. At the same time coin to the equivalent value is registered with the community budget. The community budget is the ledger that records all Civilisational Wealth produced by members of a community.
The worker is also a consumer as noted by the green link in the flow diagram. When the worker wishes to purchase some product from the marketplace they draw down coin from their portion of the community budget and ‘spend’ the community coin on the Civilisational Wealth they need. As the Civilisational Wealth is purchased from a vendor coin is deleted from the budget allocated to the worker and recreated in the budget allocated to the vendor.
Precedents
There are deep precedents for the proposed relationship between work, wealth and money. 5000 years ago in Uruk, the worlds first civilisation, workers received clay tokens with abstract representations of the value of wealth they had produced. The value was represented by equivalent wealth symbols, e.g. a sheaf of corn or bowl of rice.
The token is issued after the worker has produced a quantity of civilisational wealth. The clerk who issued the token recorded the amount of wealth produced on the blank token and recorded the value in a ledger. The worker could then take this token to the market and exchange it for goods, the components of civilisational wealth, produced by other workers.
The token was accepted in the market because the vendor knew it had the value of the work done represented by the mark made in the clay. The token could be used by the vendor to purchase stock or personal needs. The value of the work was transferable.
Jump 5000 years to today and the modern day mortgage forms a contract for work to be done in the future. For this binding promise of work to be done the bank issues money to allow the mortgagee to purchase the property. The mortgage is a contract linking a quantity of money to a quantity of work to be delivered. The work to be delivered is producing wealth in the future that is (usually more than) equivalent to the wealth represented by the property.
As with our Sumerian example, the production of wealth is represented by money, which only has value due to its convertibility to real wealth.
Security
How do we manage all the relevant security issues for money issued without the authority of a state licensed bank? Cryptocurrency has concepts that would benefit the model under consideration.
The distributed ledger method used by cryptocurrencies could be employed to provide security for the community coin. The community ledger is not a single physical ledger but a database copied and distributed amongst the community. The database copies are updated and verified regularly. Should there be any attempt to change a database entry this would be detected and corrected to respect the consensus. This ensures that an accurate unfalsifiable record of coin would be maintained.
The community can employ blockchain techniques to record work and consumption as a series of immutable record of transactions. In this model, the proof of work required by a digital currency could be replaced by physically verifiable proof e.g by the exchange of encrypted identities. This approach relieves some of the limitations of digital currency where the proof of work verification demanded by a trust-less system is provided by extensive computation. This computation currently limits both rate of coin issue and transaction speed.
Smart contracts of the form made available by the Ethereum network could form the basis of control of the use of coin to ensure the linkage of coin to Civilisational Wealth is maintained. Using smart contracts will enable coin to be differentiated by function.
As an example, one requirement of a community economy is the ability to invest in future wealth, e.g. improvements to infrastructure, the creation of new business etc. Smart contracts will enable the issue of coin backed by the delivery of future civilisational wealth. This investment coin can be isolated from the community economy to ensure its issue does not dilute the value of community coin in daily use.
The investment coin can be used to purchase resources and materials to meet the investment goals. As the project proceeds the value of the investment coin is converted to community coin by the work done. The new coin is allowed into the community economy because it is fully backed by the civilisational wealth created. The differentiation, issue and conversation of investment coin to community coin can all be controlled by smart contracts.
Money as code can be explored in more depth in this blog titled Thinking Money.
A Community driven Economy
A community is more than wealth generation. A community consists of producers who create the wealth, service providers who are not directly involved in wealth creation, and dependents, people who have no active role in the community due to age or health. A well run community will budget for the care of all its members.
A well run community will ensure:
- All community members can have a secure, healthy and dignified life
- The role of worker/producer will be highly attractive to community members
- Essential service providers like security and healthcare workers will be well rewarded.
- The community economy will provide ample opportunity for innovation and growth
Learning from history, it is important that we avoid the inefficiency of a command economy as well as the extreme inequalities generated by the current neoliberal model. We need an economic model that provides all members of the community with their needs and incentivises and rewards productivity and innovation.
The natural way to reward workers is by measuring their contribution to the generation of Civilisational Wealth. The jobs market within a wealth based community will most likely function in a similar way to the market we see today, but with greater reward going to the more productive roles.
Community members in a producer role working within a highly productive environment, e.g. a factory, will produce more Civilisational Wealth than a producer working in less productive environments. This will incentivise productivity in wealth creation which is a highly desirable goal.
The value to the community of service roles will vary. Healthcare professionals, emergency services and security services have a greater value to the community than retail or administrative roles and will need to be rewarded sufficiently to attract people.
Services are activities that do not produce Civilisational Wealth but are needed by the community- e.g. healthcare or personal care, administrative and legal services, arts and entertainment. These services are also offered to the marketplace and can also be purchased by coin. By receiving coin in return for the services they provide the supplier of services receives an income that they can then spend.
Civilisational wealth backed coin can circulate through the economy freely enabling a full service economy to develop on the foundation of a wealth building economy.
Consensus Services
Some community needs are required for the smooth functioning of a community. They are a combination of infrastructure and services that need to be planned for and funded communally. For example water supply, sanitation, power and transportation infrastructure are better managed at a communal level.
The infrastructure projects can be tackled on the same basis as any innovation project. Investment coin can be issued against the planned future wealth represented by the new infrastructure. As the infrastructure project progresses, workers and suppliers are ‘paid’ by converting Investment coin held on the community ledger to new community coin. The new coin is ‘paid’ into the worker’s share of the community budget. The Investment coin is then removed from the project budget.
Community services that are not consumer items can be costed by reference to equivalent services in the marketplace.
Community Passive Income
To ensure community members have a secure, healthy and dignified life a passive income is provided to all members of the community. This is an income derived from a proportion of the Gross Community Product ( G.C.P). The passive income is scaled to ensure all members needs are met to an acceptable standard. An initial modelling exercise suggests the budget for a community passive income can be as high as 20% of G.C.P. While maintaining a growth of circa 2% to 4%.
This may seem an excessive sum if you are used to the constraints of our current fiat currency neoliberal model. However this is more a matter of perception than reality. Let’s take a brief look at two communities operating under conventional economic constraints, two Birminghams, one in Alabama and one in the UK.
Birmingham Alabama Metropolitan Area, also known as Birmingham-Hoover.https://en.wikipedia.org/wiki/Birmingham_metropolitan_area,_Alabama The metropolitan area has a population of 1.1M people (2019 survey) and a GDP of circa $62.8 BN. For this comparison we can consider GDP roughly comparable to added value, or Civilisational Wealth.
The average salary for this area is $33,000. However, if we spread the GDP of $62.8 BN equitably across the population we find that average income would double to $57,090 per head of population. A family of two adults and one child would have a household income of $171,270 versus the current $58,000. The difference between todays average and the Civilisational Wealth model is the degree of inequality prevalent. It is important to reflect that the average income disguises substantial differences in income. By definition at least half of the population receive less than the average figure.
If we were to consider asset wealth we would find that both the sums involved and the degree of inequality.
Birmingham, England, has a population of circa 1.2M and a GDP ( GVA) of £24.1BN, $32.49BN. The average household income is £29,400, $36,639. For a family of two adults and one child an equitable distribution of Civilisational Wealth would be £73,227 or $98,725.
From this comparison it is clear that up to 20% of GDP for a passive income distribution is affordable without impacting on a communities growth or economic stability. How that is to be achieved in todays political environment is not a subject of this blog.