An alternative economic structure

*(Preface: This is an essay I wrote, explaining a possible alternative to modern capitalism. I hope someone will read it and contact me about working on making it happen!)*

The purpose of this essay is to briefly introduce a hypothetical, internet-based participatory economic structure which I am calling the Declarative Credit System. It is similar to modern Political Capitalism, except with one structural revision, which yields a system oriented to favor individual consumers rather than wealthy private interests. To understand this revision (& it’s implications), we should first discuss some of the ideology behind Political Capitalism.

Value is a word that has developed many meanings and implications in the modern era, often obscuring its more fundamental definitions. For the purpose of this essay, I will discuss value as it relates directly to economic value.

When it comes to trade, the “value” of any object falls into one of two categories; these are Practical value and Social value. Practical value is relatively simple to understand and explain. The amount of work that can be achieved because of a certain object, or the degree to which that object simplifies complex tasks, is its practical value. Practical value typically relates directly to the physical world. Karl Marx refers to this kind of value as “Use-Value”.

Social value can be assigned to physical objects, but derives none of its value from the physical world. The social value of any object depends only on the ways in which a society uses that object, and the general agreements that are made about it. Social value is conceptual- it is created in the mind, and only exists so long as there are human beings who recognize it. Adam Smith and Karl Marx refer to this kind of value as “exchange-value”.

An example of Social Value is Price. Often, a commodity will cost a certain amount of money to produce, but the Price at which it is sold will be higher (or lower) that that cost. The price of any object depends on what people think about that object at the time of transaction, and is rarely determined strictly by it’s practical value. Price is a form of Social value, and it is assigned to objects by people who want to exchange with one another.

Practical value is widely understood. But what is Social value, and how can one measure it? We can begin by establishing a definition of Society.

All societies have two things in common with one another; that they are created through the participation of a large group of specific human beings, and that they create a set of relationships that define how the members of that society interact. Whether the relationships include a lord and a serf, or a judge and a jury, the relationships exist to define how people interact with one another.

Societies are not the only example of this social phenomenon. Any assembly of people can be made to create well-defined relationships between its members. Businesses, churches, and unions are but a few examples that bear the same characteristics. By creating a set of relationships and roles, these assemblies of people can more easily interact, coordinate their efforts, develop, progress, and prosper as a whole.

There is a third characteristic that is more easily seen in smaller social assemblies such as businesses; this is that any assembly of individuals can be recognized as an independent social entity, capable of interacting within a society in the same way that an individual can interact in society.

So, we can now easily find a definition of Society, as a phenomenon. A Society is an entity capable of social action and interaction, composed of every single participating member, and existing separately from any particular member, which exists to create a network of relationships through which the members can interact with one another to ensure common prosperity and well-being.

Looking closely at this definition, we find some interesting ideas. Being “an entity capable of social action and interaction”, societies have been given the power to make decisions and take action, which gives them certain responsibilities. With the power to interact, comes the responsibility to interact in the ways most beneficial to oneself and one’s environment. However, because any society is “composed of every single participating member, and existing separately from any particular member”, the responsibility to act in a beneficial way does not lie on any particular member or group of members (regardless of their role in the society), but instead lies with the society itself, as a social entity separate from every member.

This point may be confusing; since any society is by nature conceptual and non-physical, how can it have responsibilities, which are different from the responsibilities of the law-makers or governing members? To answer this, we should remember that societies are structures, networks of relationships. The responsibilities of any society are really the responsibilities of every member participating in those societies, and they all bear responsibility equally. But what are those responsibilities?

Those responsibilities are understood best by considering the function of any society, which is “to create a network of relationships through which the members can interact with one another to ensure common prosperity and well-being.” Since the fundamental function of any society is to create a medium through which members can interact with one another, the fundamental responsibility of any society is to ensure that all its members have the opportunity to interact with one another.

There is a concept which has been popular in Western culture for many hundreds of years, which accurately describes the true nature of these “societal responsibilities”. This concept is Right. The term “Right” developed many implications in the 20th century, ranging from civil rights to animal rights to intellectual property rights. But, this type of Right, where certain governments pass certain laws which give certain people certain abilities at certain times pertaining to certain activities, is not what we are discussing. By definition, any & every society owes an obligation to every member to ensure the ability to interact with other members. This obligation exists regardless of the laws, traditions, or institutions of any society in particular. This obligation is a right that is owed to every citizen equally, which is the right to interact. The form of social interaction that is most immediately relevant to prosperity and well-being is Trade, so it can be said that every society owes every citizen the equal right to trade. This right is owed because it is implied in the very definition of society, and so is called Implicit Right.

Every citizen of every society is equally owed, implicitly, the right to trade.

Trade, in the modern world, is the exchange of commodity value for monetary value. Commodity value is exchanged from one person to another person, and instead of receiving commodity value immediately in return, the seller receives a credit unit which allows them to purchase the same amount of commodity value from another seller at a later time. No value is ever lost, only replaced by credit. This credit unit is strictly conceptual, and relevant only for trade within the society that issued it. It has no practical value, only social value; in many cases, this money does not even physically exist, but instead, the information necessary to its existence is simply stored and traded online.

This practice, which is the basis of modern Capitalism, developed from systems that used commodities like gold as semi-conceptual, semi-physical monetary units. As a consequence, our society still retains some of the arcane systems that were necessary to allow those ancient economies to function.

The most obvious system that has been inherited from older, commodity-money based economies is the governmental/banking monopoly over money production. In the days of gold coins, it was entirely necessary for large institutions such as governments to coordinate the minting process, and equally necessary for large institutions like banks to coordinate the accounting system used to keep track of those gold coins. Today, we no longer use commodities as our monetary unit, we simply use numbers inside a global digital accounting system. We no longer require this governmental monopoly over money production, we only require an electronic, internet-based accounting system to help us coordinate real-world exchange using conceptual credit units.

Now, let me introduce the Declarative Credit System. It is an internet-based, participatory economic structure through which Capitalist interaction, trade, development and coordination can occur. This system uses a social credit unit very similar to the Dollar, except that this unit (which is called V, for Value unit) is not created in large amounts by a government or by a bank, and then distributed to a society. It is created in small amounts, throughout the economy, by individual transactions between producers and consumers. The act of purchase is the act of money production; credit units (or V), being conceptual, are created by individuals who purchase real-world commodity value.

In the Declarative Credit System, producers create commodity value in the form of either goods or services, and offer it to consumers in a unidirectional transfer of commodity value. In exchange, the consumer can make an official declaration that the producer is now (because of the transaction) in possession of a certain amount of social credit (V) equivalent to the value of the commodity sold. The producer can then use those V to purchase a comparable amount of commodity value from other producers.

Our current economic model uses this exact same process to produce money (Dollars). Except, it can only happen one way; dollars are only made when the Federal Reserve buys Government Bonds from Congress. I am proposing that we continue to use this same system of money production, except that we expand the right of money production to all individuals participating in the economy. Money will still be produced by purchase; except that it won’t only be government bonds which are purchased, it will be regular commodities like food.

In this way, the value of V is backed not by gold, nor by government bonds, but by the commodity value that particular producers have provided for their society or community. The amount of V present in the economy is determined solely by how much commodity value has been produced, and how many transactions have taken place. The quantity of V owned by any one person is linked to the degree to which that person has participated in and provided for their society or community.

V has no practical value at all, as it has no physical component, and is only information stored online which is used to facilitate interaction and exchange of commodity value. It is a unit of social credit, created in the act of purchasing commodity value. It is created by declaration of its existence, which is why the system is called the Declarative Credit System.

Because every society owes the Implicit Right to Trade to all citizens equally, and the ability to trade is linked directly to the ability to produce money, then all citizens have an equal right to produce money in the act of transaction. This means that in any single transaction, the individual who is purchasing commodity value has the right to produce just as much V as does any other individual in any other transaction.

Here, there is a definite, finite amount of Social Value around which the value of a single V can be determined. For simplicity, the Declarative Credit System uses 1% of the total social credit that any individual is entitled to produce in a single transaction as equal to the value of a single V. Therefore, by definition, any individual can produce 100 V, or 100% of the value entitled to them by the Implicit Right to Trade, in a single transaction. To engage in any transaction calling for more than 100 V, that individual will need to have accumulated sufficient V in previous exchanges to pay for the commodity being purchased.

Capitalism, the efficient & successful system of interacting organizations, which uses the coordination of mass production to provide for many people with little labor, can thrive using the Declarative Credit System. Capitalism requires monetary value to be able to produce any commodity value- Money, in a sense, is the fuel for the capitalist engine. After all, the current economic crisis is nothing more than the consequence of a massive shortage of monetary value in the face of staggering amounts of debt. Without money, production must stop. The Declarative Credit system establishes the direct injection of money into the economy, regulated directly by commodity production. In fact, commodity production and money production are connected to one another on the most fundamental level, and regulate one another.

However, under the Declarative Credit System, only individual people have the right to produce money. Because society exists separately from all individuals as the sum total of all members, the same definition can be made for any assembly of people, such as a business or research group. These entities, made up of all its members, can interact on a social level, but are fundamentally not same as individuals, and therefore are not owed the same rights as individuals. Businesses, and other organizations, cannot declare V; only individuals are entitled to that right.

This way, businesses will still be driven by the incentive of profit. Businesses and corporations are not entitled to the production of money; but they don’t need to be, because they produce commodities, and sell them to accumulate money. They can continue (as they do today) to develop increasingly advanced & efficient means providing commodities to their society, so that more Monetary value can be obtained in the process. This will be a much easier task, because consumers will be producing Monetary value and exchanging it for the Commodity value being produced by businesses.

It is because Money is scarce in our economy that businesses must resort to dangerous, deceptive, or environmentally toxic production practices to maintain a profit.

The main requisite to the implementation of this system is an online forum through which trade can occur, and where the accounting system related to that trade can exist. Since trade is a social networking phenomenon, this forum can be similar in design to many of the social networks that have exploded across the internet in recent years, like Facebook or Evolver. There would need to be mechanisms by which individuals can create unique user profiles, store data regarding past transactions, and be able to transfer V between one another as commodity value is exchanged either in the physical world or through the internet. Of course, this requires that all consumers and producers have internet access at the time of exchange, but this sort of connectivity already exists in many stores and supermarkets.

The digital system which supports the accountancy necessary to a free, participatory economic structure such as this one would not even need to be restricted to a single website; it could take the form of an application, which interfaces with the digital accounting system, which can be integrated into other social networking sites, or even personal digital devices like Iphones.

Once established, this forum of free trade and economic democracy can facilitate the international coordination of the human race in an effort to extricate itself from the burden of maintaining arcane monetary systems at the price of millions of lives and the health of the planet.

It can of course serve as a complementary currency; the more people can satisfy their basic needs (such as food) through Declarative transaction, the less dollars they will spend, and the more opportunity will be available to diminish one’s personal debt.

This new economy can make use of the seemingly limitless waste output of our current society, which eschews uncountable resources as “trash”, which could be otherwise re-purposed or recycled into new, viable, and quality commodities. These resources can be used to build machines of production based upon exchange of commodity value through the exchange of Declarative Social Credit, or social credit units that are created through individual declarations. Furthermore, this effort could use a far more dynamic and valuable resource; the creativity, ingenuity, and will to adapt & progress that all humans are endowed with, amplified by the connective influence of digital social networking.

It’s important to note that what I am proposing is not specifically about the system described above. The credit units don’t have to be called V, they could be “internet money”. The point is, our generation has the capacity for so much more coordination and cooperation than any generation prior to ours, due to the Internet. We can either not take advantage of the tools available to us, and remain trapped in an economic oligarchy (as we are today), or we can continue the already-existing trends to create an economic democracy, where the right to live, thrive, & trade are always guaranteed, and if anyone becomes exceedingly wealthy, it is not at the price of any other person’s life or freedom.

The central concept is this: if people are free to trade with one another, on their own terms, without debt or scarcity of money, prosperity will follow. By prosperity, of course, I do not mean GDP or stock value or wealth; I mean Life and Happiness.

This new capitalism will eliminate the demand for low prices, because money will never be scarce. Large corporations will no longer have the competitive edge over small-scale businesses and local economies, because their advantage is derived from their ability to satisfy the current consumer demand for decreased spending. Local economies will thrive because consumers will no longer have to support only that which they can afford; they will support whatever supplier of commodity value they see as having the highest quality & reflecting the most fair production process. The ability of any individual entrepreneur to pursue a radical new idea will skyrocket; and most importantly, our source of prosperity (money) will no longer be controlled by a few, wealthy private interests. This new economy will ensure that no individual is ever without the ability to purchase some few fruits of their own society, and would return the power of demand to consumers who no longer need to spend their lives in the pursuit of money.