So what is capital? Capital =
Scarcified supplies (in one sense of the term). We study capitalism:
Our 1st assumption is this:
All “non-financial entities” are, in
general, increasingly in debt, and poorer than the increasingly few moneyed people.
With that, our thought exercise
begins: Say, a builder of
housing sees that 100 people enter a newly built city, and want houses to live in – so he moves in to build.
This city is settled by people whose
wealth distribution is typical. That is, there are some rich, and more poor,
and the rich have more to spend on housing.
The first 30 houses that our builder
builds, are big houses for the richest 30 of the 100 residents – these big
houses give, to the builder, a return on investment (“ROI”) of 500% – the
builder gets back 5 times the wealth he had invested to build the big houses.
When the builder runs out of these richest customers, he builds smaller big houses for
the next 20 of 100 “upper-middle class” people; ROI he receives = 100%, say.
Next - smaller homes for the next 30 of the middle class;” ROI he gets = 50%.
Then, having run out of such wealthy customers, he turns to the last 20, the
poorest of the newcomers in the city. Say, he tries a house for the 81st
person; he finds that his ROI is merely a very low figure (as per first
assumption) – say only 7%.
The poor man can give 107$, if buying a house that cost 100$ and 1 year to build – how can this outdo
how, the same money, in the hands of the bank, can give 108$ in that 1 year?
That $8 – the money received if you,
as a banker, send it out as a loan – is greater than the poor twenty peoples’ $7 margin – and
that is at the crux of understanding capitalism.
It’s all about
the law of usury, which directly causes the scarcity of goods.
The building finance
advisor says: “The Company is in debt (as per Assumption 1)! A loan costs 8%
interest – how does a ROI of 7% for these customers appear logical?
If we take a loan, and invest 1000$
in houses for these poor, we get: 1070$. But we must pay 1080$ to the bank! You call a
loss of 10$ a profit? Build not any more houses.
Wait for “market demand” (i.e. a
“ripe” scarcity of houses).
Now, focus the limited money capital
on a healthy sector, like the growing,15% ROI car sector!
Mothball (retire) all builder
units!"
Thus, due to systemic scarcity thus imposed, only say 80 out of 100
houses will exist, because: to serve the poor is just unprofitable relative to
the way money “serves itself” by usury, which causes money to attract towards
itself 8%, say, more than its value per year, as per the characteristically
absurd and destructive, erosive “law of usury.”
Growth rate of population may be 0
per year. Yet even after 200 years, we’ll see that the number of houses is
still only 80 per 100 - Though this
example was about buildings, the trend of market dysfunction here demonstrated – holds generally for all of the
“sectors” of the capitalist economy. That is the proof for how scarcity must
exist in capitalism, how it defines capitalism, as proven in this “mothballing”
company.
Silvio Gesell made this point with
his 1916 masterpiece Natural Economic
Order through Free Land and Free Money:
“Houses and machinery are
“real” capital. They do not collect interest as bank deposits, but they collect
it for their owners. This power does not, however, lie in the characteristics
of such things, but in how money prepares the conditions necessary for their collection of
interest. Money alone is basic capital. All other capital is dependent on the
characteristics of the existing form of money; they receive the title of
nobility [scarcity], the title of “real capital,” from money. Deprive money of the
privilege of forbidding workers to build new houses, tear down its barrier
between the worker and the capital he needs, and the supply of such things will
increase until they lose the characteristics of capital. That statement is
monstrous – one must be very sure of one’s reasoning to make it – that the
houses, factories, ships, railways, theatres must necessarily be capital,
merely because money is capital! Is it possible that this mighty ocean of
capital, at least a hundred times as great as money-capital, yields interest to
its owners only because money yields interest? That sounds improbable! But the improbability
decreases if we reflect upon the antiquity of money, upon how for 4000 years
money has, artificially, regularly and automatically restricted construction,
so demand has always exceeded supply, and houses, for this reason, are still
capital; they are just not being built due to unprofitability. And the
improbability disappears if we think of the thousand economic crises; that
free-capital worth billions would have been constructed but for enforced
unemployment. The absence of money permits all real capital to exact interest.” Some claim
"scarcity is necessary" (as "humans are evil and inherently
lazy") or that it "causes progress". No; scarcity causes
perverted technological development (e.g. proliferation of highly
cost-ineffective wind turbines over more cost effective technologies like ocean
current turbines, cars and roads
over personal electric helicopters. Scarcity is a
sadistic mechanism not necessary for real progress (that indeed is not because
of but despite scarcity... to say “rat race causes competition which inspires
people to do good and causes progress”… is the most wrong thing that can be said; it has been the curse and tragedy of man. Thus “capitalists”,
in the name of capitalism, deny objects to others only so that they can create
an unfair market (where capital is artificially given an advantage over resources) -- mainly so
that they can exploit public labour, resources, and genetic quality (as in the
Babylonian marriage markets) etc. and pick up good stuff for cheap.
Thus capitalism is about ganging up
to cause scarcity of objects, to “profit” without working; that is why, as Proudhon said, “Property is
theft”, as you are charging
rent for its use on others who are denied the ability to transact their way
into ownership of objects.
Cost cutting, like the use of plastics,
while imposed by
scarcity,
is neither progress nor healthy.
And what about the climate change
caused by scarcity, when people, in a bid to survive for example cut 8% more trees than the year
before just to stay alive... 8% or, GDP growth rate, is roughly a function
of prevailing interest rates. Scarcity is combined with the wastage of resources by the
few e.g. energy for full-hall AC or
inefficient computer farms for illogical things like crypto mining. Trade is good, but parasite friendly
economics is not; it is a perversion of culture acceptable only to a few.
As Wörgl showed, alternatives are possible! Bart K Ikink: “The council not only carried out all the intended works, but also built new houses, a reservoir, a ski jump and a bridge. The key to its success was the fast circulation of the scrip money, fourteen times higher than the Schilling. This increased trade and employment. Wörgl demonstrates that the economy can do well without more debt if money keeps circulating”.
The alternative
is not communism but a Gesellian demurrage-like money based economy. But there
is strong opposition from the rich because it ceases their free lunch.
Nevertheless, a
demurrage and maybe an e-demurrage is the future of money. And about land, it
must be redistributed, as it was historically taken by use of force, but now
force is outlawed; we’re told to smile at the landed peasants and their
unscientific extensive farming, in the name of national brotherhood! The land
must be shared…
“Gesellian Money concept” is a fair money, with a mechanism to make money competitive with its counterparts on the other side of the transaction i.e. goods and services (which have significant costs (time/perishability/space or storage etc. costs) w.r.t money – this makes the economy absurd –inducing a popular tendency to worship and guard (rare) money (rather than spending it on the things one needs to buy, which would be the hallmark of a functional economy). When the economy is absurd, it is characterized by the choking of money supply resulting in most potential transactions getting aborted i.e. failure of economy or money -- whose only real design necessity is enabling transactions (easier than barter).
The utility of a normalized money has been empirically verified in Worgl, Austria, but this Gesellian experiment to save the economy, nature, and humankind, was harshly aborted by the lack of intelligence displayed by the Austrian Supreme Court, which brought a sudden stop to the experiment, single-handledly derailing the economic recovery of the Germanic[1] areas[2], in the middle of the Great Depression.
A summary of the problem with usury (money worship based) capitalism ->
A famous data from ca. 2010 (?) was this, that the top 1% of rich people, “own”/are in possession of nearly 50% of all wealth (including, absurdly, land, which falls into the capitalist religion, the system of superstitions regarding “capital”).
The owners of vast capitals (e.g. locked forts lacking maintenance, barren or fallow farmlands owned by inbred aristocratic jesters) – are in a funny situation.
They don’t even use their wealth (they can’t, it’s impossible, it’s merely theoretical in nature); there is far more potential/unlockable wealth in the world than it seems – this was the most crucial among the many insights that Gesell had to convey.
For example, the rentiers have bought all land, only to use them as golf courses, or leave them fallow (towards barren desert) and say, “land is less, rent must be high”.
How exactly and why is usury bad? The criticism of Usury-culture or “capitalism”... this phenomenon has little to do with terms like “trade”, “free market” etc. Capitalism has everything to do with the term capital, which is why it is called “capitalism”. In particular, it is about scarcity of capital imposed on the innocent masses, and how this needless, imposed scarcity.
Also, it is useful to think of a light-handed free land mechanism to enable redistribution of land among people who can develop it more competitively (more intensive agri, fruit trees instead of veggies etc.)
I have also thought that incorporation of gesellian money with certain e-money principles (not in my view incl. blockchain) may be a more perfect solution for the times due to ease of software simulation of things like demurrage rot, which makes it much easier to implement without need of, for example, a clerk who sticks time stamps on money to update value, the solution Gesell had proposed.
That can be clumsy and not needed for today.
In this case we need to create a virtual market in which this money will be regulated to be fair (e.g. 0 inflation, availability for transactions etc.)
This will be a more perfect economy e.g. automatic rather than limited/manual selection of most competitive vendor.
The idea of fair land seems not very well explained in the Natural Economic Order (at least the pages I read), but -- developing from other thinkers including Proudhon who notes “property is theft” -- I understand the correct thing to do, is -- not as crazy or totalitarian as Soviet Collectivization -- but the lowering of land allotment priority to fools who are mismanaging and desertifying land (e.g. landed peasants (zamindars) locking and reducing land to eroded fallow or abusing it as low yield seasonal farming, slash and burn and other ignorance-based, low water based "agriculture" that decrease land availability (most of it is currently barrenized and locked up, so the mental disease forbids any life, animal, man, or plant, from even growing there!)
Thanks & regards,
Comments
Post a Comment