Counterbalance Economics Summary


Key Concepts


Equal opportunity for all is a must-have and can be used as a lens to determine the level of democracy in a society. If we could implement Equal Opportunity for All, that would be one of the biggest wins for all Australians. However, we need to rebalance our Economic, Political and Judicial Power systems to provide a better distribution of wealth and reduce the level of inequality in society. Since employment and income are the key mechanisms used to distribute wealth in our society, focusing on this area will give us the best chance to achieve that goal.














Human Rights Article 23.1 states that ‘Everyone has the right to work, to free choice of employment, to just and favourable conditions of work and to protection against unemployment’. 


Professor of Economics at the University of NSW, Richard Holden, writes in his 2018 publication 'Australia’s 5% jobless rate is not Full Employment

'What level of employment constitutes “full employment”?

Economists used to say that a 5% unemployment rate was "full employment".


Unless they have studied economics, most Australians would not realise that when economists and politicians talk about full employment, they are not talking about everyone who wants a job being able to get a job. Professor Holden believes we need a certain level of unemployment to prevent wage-push inflation.*  







Our Question is:









More unemployment is on the horizon, assuming we maintain the current trajectory. According to an important report published by McKinsey Global Institute in 2017: 'A FUTURE THAT WORKS: AUTOMATION, EMPLOYMENT, AND PRODUCTIVITY' (p8), anywhere up to 50% of current jobs could be automated within the next 20 years.

















The Australian Council of Social Services (ACOSS, Inequality 2019), believe that the problem with excessive inequality is that it is harmful to society as a whole, not just for the people experiencing it.















Counterbalance Economics model is the name given to the model we are advocating for and these are the issues the model is trying to address:


1. If the Government or market provided a job for everyone who wants one, it would create wage-push inflation.* 
2. If the Government tried to increase wages or unemployment benefits, that too would be inflationary.
3. If wages are increased beyond a certain point, employers would be forced to sack workers to remain solvent.



Therefore, we need to find or develop a better way to transfer wealth that will allow 100% employment and an increase in wages without the unwanted consequences.


Current Economics Systems have Failed - The reason both enterprise capitalism (Neo-liberal economics)** and social capitalism (Keynesian economics)*** have failed is because they're both working with a structurally flawed tool, money. Using the first model, money causes inequality, using the latter, it causes inflation (Heywood 2013, 145).














Cash - cash is money in the physical form of currency, such as banknotes and coins


Cheque - is a document that orders a bank to pay a specific amount of money from a person's account to the person in whose name the cheque has been issued

Digital Currency - is centralised, meaning that a transaction within the network is regulated in a centralised location, like a bank

Cryptocurrency - is decentralised, and the regulations inside the network are governed by the majority of the community

Timebanking - is an alternative currency or exchange system where the unit of account is the person-hour or some other time unit

Countertrade – sophisticated barter system used for international trade through an exchange of goods rather than by currency purchase

Contra-deal - is where a business will exchange their own goods and services for the goods and services of another, usually without the exchange of money

Barter - exchange (goods or services) for other goods or services without using money

Inflation - an increase in prices and a fall in the purchasing value of money


Power System - A leadership approach in which influence and power tends to flow from the coach to the athlete in one direction only


Direct Democracy - Democracy without representation, where those entitled to decide do so in sovereign assemblies, and where committees and executives are selected by lot rather than elected (See Swiss model, as example)


The different forms of currency and how they are used serve to show that there is more than one way to trade goods and services. Each of the methods outlined have been developed to solve a particular problem. Contra-deal credits are no different.


Contra-deal credits (CC)**** act like a counterweight which re-balances and corrects the structural issues of money. The re-balancing occurs because CC’s are structured differently and cannot inflate - they are created and they are consumed. The outcome is a more efficient and more humane form of capitalism which can minimise or eliminate most market and government failures.*****














50:50 Split of the profit – The idea behind the 50:50 split:

This is seen as the fairest distribution of windfall (profit), as shown in the dictator game experiment carried out by Daniel Kahneman (a psychologist who shared the Nobel Prize in Economics in 2002), Jack Knetsch and Richard Thaler using students.

















(Hubbard et al. 2015, 154).                             


It is also postulated that at the 50:50 point, parties are the 'least unhappy' and therefore there is the least amount of resistance to proceed with an endeavour, where one party is providing all the money and the other party is providing all the labour. This is important, because if we are to implement an alternative model of payment (the CC), it will have to be accepted by the majority for it to be implemented effectively.

This is also why the Counterbalance Economics system advocates for the Average Weekly Earnings (AWE - $1,633 p/w) amount to be paid to those working as Community Enterprise Employees. 


Employing 100% of those who want to have a job – As mentioned earlier, Economists used to say that 5% unemployment was considered full employment. 'Attempts to stimulate the economy, or cut interest rates to get the unemployment rate below 5% was therefore seen as pointless because it would merely stoke inflation. Which is why the 5% rate has been referred to as NAIRU – the 'Non-Accelerating Inflation Rate of Unemployment.’

In order to stop the upward wage-thrust that would ensue after providing a job for everyone who wanted one using the current form of money, we would do the following:

  • Set the minimum wage payable at $85,000 p/a (the current AWE), payable in CC;
  • Employees would be given the choice of being paid at the current rate in $AUD or receiving the increase in CC;
  • All employers with employees who currently earn less than $85,000 p/a and who elect to be paid in CC's, would receive a 100% wage subsidy, which means that both businesses and employees would be better off.

    Businesses would be asked to provide the equivalent of the wages saved as goods & services to Community Enterprise Employees. Anyone being paid in CC is deemed to be a Community Enterprise employee. Businesses will be credited for the cost of the material used to create goods and services as outlined in the discussion paper (Malliaros & Hall 2019, 8).


There are currently around 56,000 charities providing services that should be provided by the government, or by the market (ACNC 2020). In other words, the NFP sector is there to pick up the slack created by market and government failures. All of these activities would become Community Enterprises (CE)****** and the unemployed would be employed in activities that support the community in this way.

The structural differences between the Contra-Deal Credits and $AUD are what creates the Counterbalance to the current economic system. This is also what allows zero unemployment (excluding frictional unemployment)******* to be implemented, regardless of what phase the business cycle is in.


The Contra-Deal Credits (CC) uses the Timebanking model and takes it to another level. There are three key advantages of using Timebanking as the basis of the CC and they are:

  1. Timebanking is already acknowledged as an alternative currency by the ATO;
  2. Time is the way we currently measure how much an employee is owed for their labour;
  3. The new currency can be started almost immediately, as it is already in existence in its most basic form.


The key differences are:

  • Each minute will instead equate to one $AUD;
  • This money will be pegged to the AWE which means that each minute is currently worth around .72c
    ($1633 / 38)/60 = .72c (to be reviewed annually);
  • To keep the roll-out and use of the CC as simple as possible, it is recommended that items sold for $AUD or CC, be sold at the same price;
  • Once CC money is spent, it is spent and cannot be used to buy any more goods/services;
  • An individual can save CC and accumulate them, but cannot borrow against them;
  • Because CC money is a complementary currency, individuals cannot use it to buy assets that
    generate either CC or $AUD. Only the Co-Operative that houses all the Community Enterprises can do that. Therefore, any assets created or bought using CC belong to the business structure housing the Community Enterprises. The CE employee who buys something in CC is essentially paying rent to the Australian Co-operative for the good or service being used. Once the good or service has been consumed, or the member has finished using the item, it is returned to a Community Enterprise warehouse to be lent out again (further details are provided in the section titled “cooperative” in the Discussion Paper (Malliaros & Hall 2019, 15).
  • The government would mandate the CC as legal tender and it would have to be accepted by businesses;
  • Every Australian will own 1 share in the Australian Co-operative that owns all the Community Enterprise
    assets. This means that although they won’t own the stuff they buy, they’ll own the ever-increasing value of
    the assets owned by the Co-operative like utilities, telecommunications, hospitals, schools, farms, water, etc.

CC's will allow you to buy a car, or a meal at the local café, just as you do now. Once you have consumed the meal, or are ready to update your car, just sell it back to the Co-operative for CC's at the current market value and buy a new one. Furthermore, you will pay for items using a bank account that contains your CC's and you'll be able to spend it using a Debit Card in the same way you currently spend $AUD.

Also, given that you will be guaranteed an income each week, 4 weeks paid leave each year, ten days’ sick leave and superannuation for your retirement, there’ll be no need to hoard the money you receive. The increased income coupled with the reduction of concern about the future will mean that you can spend what you earn on whatever you want which will further boost the economy.

Conclusion

The Counterbalance Economic system allows us to overcome the key issues relating to employment which will then allow anyone who wants a job to have a job! Implementing the system described along with our other key policies, will reduce inequality and finally allow us to achieve the goal of Equal Opportunity for All!


All ideas and policies are based around the Counterbalance Economics Model as outlined in the Discussion Paper (Malliaros & Hall 2019).



Asterisk Definitions Key:


* Wage Push Inflation - A variant of cost-push inflation that attributes the origin of inflationary pressures in the economy to increases in nominal wages.


** Enterprise or Neo-liberal capitalism (like the US) is known as ‘pure capitalism’, as articulated by Milton Friedman and others is where the economy is managed by the market (Heywood 2013, 134).


*** Social capitalism – an attempt to ‘marry market competition with social cohesion’ and where the economy is managed to a greater or lesser degree through government regulation (Heywood 2013, 134).


**** Contra-deal is defined as a Barter arrangement between two parties who exchange goods or services without any cash changing hands. Contra-deal Credits (CC) is a Digital Currency, similar to Bitcoin and will be issued as payment to all Community Enterprise employees.


***** Market and government failure is a situation where the market fails to produce or provide enough of a good or service to fulfil demand. Government failure is where their intervention leads to more market failure or where government policy fails to rectify the market failure (Hubbard et al. 2015, 170).


****** Community Enterprise (CE) - in the Counterbalance model, there are 2 types of business activities. For-Profit activities & activities that benefit society where the motive isn't to maximise profit for stakeholders. These activities are called Community Enterprises. CE's are designed to fix community, environmental & market failures. Not for Profits would therefore become Community Enterprises, fully funded to ensure they're achieving Key Performance Indicators.

  

******* Frictional unemployment - Short-term unemployment arising from the process of matching workers with jobs.
Seasonal unemployment arises due to factors such as weather, variations in tourism and other calendar-related events. Structural unemployment is unemployment that arises from a persistent mismatch between the skills and characteristics of workers and the requirements of jobs (Hubbard et al. 2015, 223-224).

The Counterbalance Economic system
allows us to overcome these issues and allow
anyone who wants a job to have a job!

Implementing these strategies will reduce the
inequality in our society and allow us to achieve

Equal Opportunity for All!



If you have any questions, feel free to Contact us, or go to our FAQ page.

        


References


Heywood, A. (2013). Politics. Basingstoke: Palgrave Macmillan.


Hubbard. (2015). Market Failure and Government Failure. In INTRODUCTORY ECONOMICS (A Custom Edition) (p. 170).  



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