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). Contra-deal credits (CC)*** act like a counterweight which re-balances and corrects the structural issues of money. 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 is that 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. In this
experiment, students were split into pairs of allocator and recipient and the allocators were given only two
possible divisions of $20: either $18 for themselves and $2 for the recipient or an even division of $10 for
themselves and $10 for the recipient. One important difference from the ultimatum game (an earlier version
of this game), was that the recipient was not allowed to reject the division. Of the 161 allocators, 122 chose
the even division of the $20. Because there was no possibility of the $18/$2 split being rejected, the
allocators must have chosen the even split because they valued acting fairly' (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 a new model of
payment (the CC), it will have to be accepted by the majority in order for it to be implemented effectively.
This is also why the Average Weekly Earnings (AWE) amount is used as the minimum benchmark.
Employing 100% of those who want to have a job – According to Richard Holden, Professor in Economics
UNSW in ‘Australia’s 5% jobless rate isn’t Full Employment’, ‘Economists used to say that it was 5%. That’s
because even if the job market was so tight that employers couldn’t get workers, there would always be
some unemployment. Some completely unsuitable people wouldn’t get jobs and some people would be
counted as unemployed even when they were moving from one job to another.
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, we would do the following:
The business 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.
Contra-deal Credits (CC) – Contra-deal Credits is a Digital Currency, similar to Bitcoin and will be issued by
the Government as payment to all Community Enterprise employees.
The structural differences between the Contra-Deal Credits and $AUD is 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:
The key differences are:
CC will allow them to buy a car, a toothbrush, or a meal at the local café, just as they do now. Once they’ve consumed the meal, used up the toothbrush, or are ready to update their car, they just give it back to the Co-operative and get a new one. Further, they will pay for it using a bank account that contains their CC and they’ll be able to spend it using a Debit Card in the same way they now spend $AUD.
CC are structured differently and therefore cannot inflate. They are created and they are consumed. Also, given that people will be guaranteed an income each week, 4 weeks paid leave each year, ten days’ sick leave and superannuation for their retirement, there’ll be no need to hoard the money they receive. The increased income coupled with the reduction of concern about the future, will help to increase the amount being spent on consumer goods which will further boost the economy.
The CC and CE working in tandem would automate the use of fiscal policy by automatically injecting more
or less credit into an economy via the jobs created and wages paid to the CE employees.
All Policies are based around the Counterbalance Economics Model as outlined in the Discussion Paper (Click Here)
*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 by the Government 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 fulfill 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 maximising 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.
If you have any questions, feel free to contact us or go to our FAQ page.
Image by Mona Tootoonchinia from Pixabay