Day 196: Market Mechanisms and Equal Money

This blog is in response to a comment made on the ‘Logistcs’ Goal on the EM Homepage:
http://equalmoney.org/goals/15-logistics   http://equalmoney.org/goals/15-logistics

Goal: Logistics

In the Equal Money System, the Banking System Infrastructure will become the Logistical System that manages and Allocates resources and goods to Each Individual in the World on an Equal Basis. And your bank card will become your Life Card, which you will swipe every time you Draw Goods and Services from the Global Life Support System. The Logistical System will make sure that each person receives their just dues and at the same time will prevent abuse and exploitation. Each person will have access to the Global System to review the current Status of Available Resources and to vote on effective distribution and allocation – and to place preference selections and make suggestions.

Comment:

"I do believe this market-absent socialism has already been proven impractical and inefficient. Especially when coupled with a form of direct-democracy type resource management such a system would surely be impossible, if not impossible then at least impractical and doomed to fail. A market mechanism, even a socialist one, is necessary, and will allow for efficiency. Command and Control, especially decentralized command and control, is a doom driven system. You need to include some form of market mechanism in order to make this successful.

Response:

There will still be a Market Mechanism in place within both Equal Money Capitalism and Equal Money. The Market Mechanism in place within Equal Money will merely replace the variables that the drive Supply and Demand in a way that actually benefits Human Life and the Planet as a whole. The Market Mechanism will thus be an holistic / ecological one – where the conditions which require to be in place to ensure a life of Dignity will signal/drive the Demand and in the Economy and whereby Supply will respond accordingly within taking into consideration Earth’s capacity to provide resources. This implies that in terms of resource distribution the priority will be placed on Needs over wants – and once needs are taken care of we look at what else is available to provide for people’s wants within the principle of sustainability and prevention of consequence (eg. where the providing for wants does not come at the expense of another).

It is then not so much a ‘Market-Force’ driving the Economy but a ‘Life-Force’ within placing Life as the principal point to be honoured.

For more information, please read:

Day 171: Life-Force and Expression in Equal Money Capitalism
Day 173: Supply, Demand, Business and Scarcity in Equal Money Capitalism
Day 175: The Economic Problem and Equal Money Capitalism
Day 180: The Word 'Capitalism' in 'Equal Money Capitalism'
Day 184: The Relationship between Ecology and Economics in Equal Money Capitalism

Related articles

• Day 173: Supply, Demand, Business and Scarcity in Equal Money Capitalism
• Day 195: Moneyless Societies and Equal Money Capitalism
• Day 171: Life-Force and Expression in Equal Money Capitalism
• Day 175: The Economic Problem and Equal Money Capitalism
• Day 181: Applied Equality in Equal Money Capitalism

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Day 168: The Future of Integrity with Equal Money Capitalism

Note: The EMC is an entirely new project that was started a week ago. We’re at the moment in the phase where we are brainstorming by answering questions. It’s a messy process – but an effective one to get all the relevant points addressed. So – also note that points will evolve and change as we go as we are not setting things in stone, but on a journey towards designing the EMC. The principles upon which EMC is based are laid out in the previous blog-posts. From those principles, we work our way towards what life in EMC would practically be like and how the system will function from an economic perspective.

Money in EMC

Q: What will money be backed by? will anything give it its value...or is that not necessary?

A: Life value will back money -- Labour backs money - which is your capital - that is why the money supply will increase and decrease according to population as each one requires to have an income that recognises their life value and that allows them to live a life worth living.

Q: In terms of printing money and the paper and money that costs, rather turning everything digital ?

A: Yes - digital - let's not kill trees for no reason.

Politics in EMC

Q: Who will sit in governmental positions? no more elections?

A: Politics will largely remain the same as within the EMS proposal - so, yes - there will still be elections. To read up on this point, please read: http://equalmoney.org/wiki/Politics

Q: will we vote on every decision directly through internet? Or still elect once every 5 years and they can do whatever they want after elected?

A: This will be organised in the same was as presented in the Equal Money System wiki: direct democracy - everyone is directly involved in policy making

What about those who provide services instead of goods?

Q: How do people earn an income from jobs that don't produce a product that is purchased, or will everyone need to do a job that produces something to be bought? Or does compensation also happen as paid from the government not just consumers purchasing products?
A: Any value that is added, whether through providing goods or services, will be compensated. So – the same principle applies to employees in companies that produce goods and employees of companies that provide services – the price of the good or the service is determined in such a way that all participants receive a fair share of the profit so that all end up with an equal income. In terms of those working for the government or providing government services – they will also receive an equal income – this is the purpose of taxation.

How to Ensure Full Employment?

Q: How do we make sure everyone is employed; will we have to create meaningless jobs like in the army – dig a hole, cover a hole? 

A: There are many jobs that require to be done that aren't being done at the moment - the Earth is barely taken care of. Remember that a company’s responsibility will extent further than merely the production of goods and services. Each company will have a Compassion and an Environmental Department.

Compassion Departments are a social function. Such departments will assist, for instance, with giving care to the elderly, organising and providing daycare, assisting victims of natural disasters and so on. Individuals whose jobs within the production process are replaced by technology, will instead be employed within the Compassion Department of the company and continue to receive their income.

Environmental Departments of a company fulfil the function of giving as one would like to receive. Companies will use resources from the Earth and will likely create pollutants that affect the environment. The Environmental Departments are in charge of giving back to the Earth in terms of assisting the environment to renew the resources that were taken, for instance, through tree-planting, creating dams, etc. Furthermore, it will assist within mitigating or stopping the negative effects of pollutants, such as, for instance, water or air purification.

Once everyone is employed and all meaningful jobs are being done - we decrease working hours. For instance, if a job requirement is 8 hours, 2 people can do 4 hours each. Also - people don't have to work for 60 years of their lives - we can go on retirement when we are 30-40.

Related articles

• Day 163: Equal Money Capitalism - Redefining Profit
• Day 167: Harmony and Equilibrium within Equal Money Capitalism
• Day 166: Corporate Social Responsibility in Equal Money Capitalism
• Day 165: Equal Profit Share and Equal Money Capitalism
• Day 162: EQUAL MONEY CAPITALISM - The Way Forward
• Day 259: Give Happiness, Get Happiness

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Day 61: The Consumer Price Index (CPI)

The consumer price index – or short ‘CPI’, is used to measure changes in the price level of goods and services purchased by households, and is also used to measure inflation.

To measure the CPI, a study is done that investigates what the ‘average’ household (of the particular country for which the CPI is being measured) buys / spends money on in terms of goods and services. We are in essence working with an imaginary shopping basket/cart which has a whole bunch of stuff in it which is supposed to represent what a typical household spends money on.

When constructing the CPI, a few things are taken into consideration:

• Goods and services which should be in the ‘basket’
•  What weight should be assigned to each good/service (to  indicate its relative importance in the basket -- eg. Food over perfume)
• What base year is going to be used
• What formula is going to be used
• Prices have to be collected each month to calculate the value of the CPI for that month (as it gets published monthly)

For the first two points, in-depth surveys are undertaken to determine the relative weights, and the goods and services which should be included. Since this type of research is quite time-consuming, it only gets done every five years or so.

The base year reflects the year within which the initial survey/study was done to establish the CPI, and will be the year to which other CPI’s will be compared to.

Let’s look at a simplified version of the process:

In Country X consumers only purchase water and bread, where the ‘average’ consumer will purchase 10 bottles of water and 5 loaves of bread in a given period of time(“years”). Next we look at the prices for these items within each time period.

Year	Price of water	Price of bread
2005	$1	$3
2006	$2	$4
2007	$3	$5

Now we calculate each basket’s cost per time period:

2005: (10 x $1) + (5 x $3) = $25
2006: (10 x $2) + (5 x $4) = $40
2007: (10 x $3) + (5 x $5) = $55

Next we pick a base year, and calculate the CPI – we’ll use 2005 as our base year.
The CPI for 2005 is ($25/$25) x 100 = 100              (cost now/cost base year) x 100
The CPI for 2006 is ($40/$25) x 100 = 160
The CPI for 2007 is ($55/$25) x 100 = 220

To see how much prices increased from time period to time period – we simply subtract a 100 (= base year index) from the comparison year. So if we are using 2007 as our comparison year, we can conclude that the prices increased 120% from 2005 to 2007.

Different CPI’s will be measured for different expenditure groups such as: pensioners, urban wage earners, different provincial/metropolitan areas etc.

Since food, energy, housing and mortgage rates will usually take up quite a bit of ‘weight’ within the ‘basket’ – changes in the prices concerning these will have the biggest impact on changes in CPI.

The CPI gives a good indication in terms of increasing prices, but you can’t use it to measure the cost of living, since the CPI works with a ‘fixed basket’ – while the cost of living will change as people will substitute items for one another as prices move higher / lower (so for instance, if coffee becomes more expensive and tea cheaper, people will start substituting coffee with tea, and so try and maintain the same expenditure level, rather than just going with a ‘fixed basket’ and being non-responsive to price changes). The CPI also does not take into account the introduction of new items. If for instance internet was just introduced in the year 2006 in Country X, it would not yet be included in the CPI for the next couple of years until a new basket survey is done, and so internet prices would not be accounted for until the new survey is done. Another point which is not covered is that of quality. If bread became more nutritious but cost the same, the cost of living would remain the same while living standards would go up.

There's not much to this point, it's just one of those things we've made up to 'measure' and 'evaluate' our economy' while in no way whatsoever measuring anything real, since our economy is all about infinite growth. 

Since we're living in a world of major inequality, the CPI will also in most cased not really be representative -- as with any 'average', you're just drawing the two polarities together (extremely rich and extremely poor) and so you're not really working with anything which really represents the 'cost of living' within this world, since the majority of people are not living an average life -- but a life of misery. This 'misery' is easy to hide away in averages as the abundance of the rich will quickly "balance" this misery out in numbers. When looking at for instance per capita income, you are also working with averages. So if you have ten people in a group, and 9 out of ten earn $1000 per year and one of the ten makes $100 000 (eg small wealth elite scenario) -- you get a per capita income of $10 900, which is the 'average', but completely not representative. And so with any model in economy where one work with 'averages' you're always working with a misleading picture which will always portray things to be better for the "average person" than what they really are.

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Day 19 - Starvation is Murder - Part 2: Feedback

This blog is a response to a comment made on "Day 17: Starvation is Murder".

Thanks for a really interesting article and really highlights how possible it could be to eradicate poverty and the suffering that comes with it. I wonder if it would be useful to highlight which are public and private expenditures as public expenditure can be directed from one thing to another with policy and the amount stays the same as it come from a fixed source eg. tax. Whereas private expenditure is often individual and variable, for example if everyone stopped buying cosmetics everyone in the cosmetics and attached industries would lose there jobs, stop paying tax, take up welfare/services and so there would not necessarily be the same amount of money left to transfer to other more important things. Anyway I would be really interested to hear your thought on this

It would make a difference in terms of where the money comes from -- public or private expenditure -- as you pointed out. Though, within this blog I merely touched upon one of the many aspects within our current economic system which reveals the values we as a society place upon certain outcomes or goods -- which when reflecting upon it, are quite irrational from a broader perspective when looking at the current state of the world, and the abhorrent conditions many find themselves within.

When looking at the issue from a different angle, it does not really matter where the money comes from (public or private), as the essential point is that we are living in an economic system with distorted values. The expenditures listed, reflect the dynamics between supply and demand which is one of the base fundamental systems in our economy. The problem already starts right there, where a person's demand is necessarily linked with their ability to pay for the goods/services wanted or needed (and the fact that there's no differentiating between a 'want' or a 'need' in itself is also problematic). This results in skewed supply and demand curves which determine how much and at what price particular goods and services should be provided -- as they only answer to the demand/wants/needs of those who have money and does not reflect the needs/wants from the whole population in question. This would then (partially) explain the expenditure figures. If everyone's wants and needs were taken as a valid demand, no matter what the state is of a person's income -- these figures would be quite different and the various industries, sectors and markets involved would then restructure themselves according to these new sets of values.   

This in itself is however not a complete solution, as now obviously those with low income / no income still dont have the means of accessing the goods and services they need/want. For this a system ought to be in place, where the Basic Income Grant is a cool first point of implementation, to provide those people with a disposable income. Such a system would however still not be a permanent solution, as there are still so many other points in place in our current economic system which would ultimately render this change ineffective -- yet it's a good start to begin with.

The solution that I propose is that of the Equal Money System, which is a more broader encompassing perspective/solution to our current economic system (than for instance the BIG porposal). You can read up about it here: www.equalmoney.org and feel free to join the forum @ www.equalmoney.org/forum for discussion.

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