The world is going through a crisis, due to a constant change in the social model. In the economic environment, we hear different proposals to change the economic model: a circular economy, a common good economy, a blue economy, and so on.
What is the best approach? To deepen in this matter, we must know well the successes and failures of the economic models we have had. Let’s talk about the Circular Capitalism, a scientific capitalism.
To ease the understanding of this article, we recommend you to read our previous articles:
When we talk about economic systems, basically we have two options:
- Capitalism and,
- Communism.
The Socialism is not an economic system, but a variation of the capitalist model. Since it is based on a FIAT monopoly money. Both the capitalism and the communism have good and bad effects. With the fall of the communism in the old URSS during the nineties and the capitalist crisis of 2008 (that many consider as the fall of the capitalism), we must ask:
- Is there any alternative option?
That’s why in this article, we are going to propose an economic-financial system, which is really an alternative to the Capitalism and Communism, framed in a new integral vision of the human being purpose, and the society.
See the article: Purpose of the new society and definitions
Scientific Basis of Our Model
If you have followed our articles, you will see that we talk about that all the problems are solved by:
- Applying the scientific method with love. Hence, what proofs are there of this new model to function?
Singapur, a small capitalist country of 5-million people, under the leadership of the late Lee Kuan Yew, in just 20 years it passed from being a poor country to a worldwide power. Singapur has implemented a raw version of our model.
The change of the educational model in Singapur was a basis, just as we say it. The government of Singapur set an investment fund, with which a whole series of industries were developed, applying what we call in this article:
- A healthy capitalism, where the financial power of the State strengthens the productive power of the entrepreneurs. In a transparent environment and zero-tolerance for the corruption (death penalty).
It is a documented and acknowledged fact that when abandoning the communist economic model, China, a big country with 1.400-million of inhabitants, started to base on the Singapore model to produce an impressive advance on:
- The Chinese people’s quality life in the last 20 years. It got out from the poverty billions of human beings. Likewise, other countries such as Vietnam and Estonia have copied part of the Singapore’s capitalist model.
What we have done is polishing, improving and integrating a model, which has shown to be the most successful in:
- Providing prosperity to the citizens.
Failures of the Dominating Economic Models in the World
-
Capitalism
- The only value is the money, the capital. It does not take into consideration any nature nor the human being. It has shown to be highly destructive for both nature and human values.
- Commercialize everything. For instance:
- A river means drinking water for the sale.
- The sand means a commercialized input for the construction.
- A woman is an object to sale merchandise through the commercialization of the sexual desire.
- The concentration of the capital in just a few people (the bankers). This makes that the new entrepreneurs, to concrete an idea, must submit to that wealthy elite. Since every idea requires some capital to develop it.
- It makes powerful groups which are owners of the capital pop up, take control of the production and communication means, and take advantage of it, to selfishly:
a. Overwhelm.
b. Buy.
c. Dissuade or,
d. Eliminate the emerging competition. With the purchase or bribery of the communication means.
This wealthy elite has the power to guide the thought of the crowd, who innocently ignore the plots of the power behind each news.
2. Communism:
- It strives for equaling all human beings. By curtailing the unique features of an individual, omitting the truth that each person is different, both in their needs and abilities.
- It strives for imposing rules to the human being, curtailing the freedom, the self-determination, and the liberty.
- It doesn’t consider the profits as a motivating production force.
There is a joke about people who went through communism that says:
- “The different between the capitalism and the communism is that when plundering the stores, in the communism they are already empty”.
Current Economic Problems
As we want to propose an economic-financial system that works, it must take into consideration, not only the successes and failures of the previous economic systems but also it must:
- Solve the economic-financial problems that are impacting the most in the present. Such as:
a. The speculative money and,
b. The loss of jobs for automation.
Both expressions of the same design problem.
The Problem of the Money
Here, we explain the simplest way possible, the mystery that has bypassed the economy graduates for more than two centuries (not all). We shouldn’t despise it, it is a topic difficult to understand.
The money is created through the following equation:
D= C + I
Debt= Capital + interest.
The Capital is all the existing money.
The Interest is the money that the bankers gain and,
The Debt is what people, companies, and governments must pay in the future.
If you understand this simple equation, we can see that since there only exists C, it implies that D is unpayable. Hence, the citizens, companies, and government, must be continually asking for new loans (on average, not all). It increases new debts, to be able to pay the interests to the banker.
With a simple search on the Internet, we can check that the governments of all the countries have gigantic debts that they will not ever be able to pay them all (even though the politics and the press say the opposite) http://nationaldebtclocks.org/.
Let’s remember that the debts of the governments are paid by the citizens with taxes. And a growing debt is a constant pressure to increase them. If you wonder, why each year the politicians debate about it? Now you know the answer.
The same problem of the money, we can see it from another angle, expressed for the first time by the engineer who became an economist, C.H. Douglas in 1920, with the name of the “Theorem A+B”:
- If there only exists the money, the companies pay it in salaries and incomes. Hence, there is not enough money to buy all the products the companies manufacture.
The origin of all this is that:
- The companies are mechanisms for multiplying the money and the capital. But they are not the source of money since it is primarily the credits granted by the Banks.
Example:
In an island, there only exists a Company that manufactures all the necessary goods for a person. And these add $300 in a month. If the company pays $299 to some employee, it gains $1 when selling all the production. This employee will never be able to buy from the company all the goods needed, and it will never sell everything that is produced.
Hence, there are just 3 options so that the employee can buy everything needed:
- The employee can ask the banker for a loan of the missing amount (that $1).
- The company asks the banker for money and then raise $1 to the employee.
- The company increases the productivity and exports its products to other islands.
Obviously, the most suitable option is number 3. But what would happen if the same problem existed in all the other islands?
By understanding the “Theorem A+B”, we can comprehend why all the countries are interested in making international commerce agreements. And it explains why all the companies, citizens, and governments of the so-called First World, are so in debt, EVERYONE!
Going back to the first equation, we see that “C” is the capital and the money gotten as a result of the work. It is what the company pays you at the end of the month, and C is also the money the banks create when they grant a loan. They are two types of different money since it is originated in a different way. But when they are flowing in the society, they are indistinguishable with each other, it is impossible to recognize if some money is the result of the work or a loan. For more details about the creation of the money by bank loans click here.
The problem of the money, the capitalism problem, is not that the Banks make money from nowhere. Because this is the main benefit of the capitalism, it lets you enjoy the sum of your future work in the present. That is, it lets you enjoy a house today while you are paying it with 15 years of work.
The problem is that just a minority gets the benefits from the:
- Interest payments.
- Work of all the citizens, of all the production companies and the governments.
It is an interest that only benefits a small group of the population:
- The bankers. For a simple work, a simple accounting fact, just for writing numbers in an account.
That is the secret of the great fortune and power of the bankers. Then, we understand that the money is an accounting phenomenon (one of its 7 features), highly manipulable, that enslaves a whole country for the benefit of a minority.
That is why, whoever controls the creation of the money (the banker), will have the destiny of the nation. There are proposals to solve this money problem, such as:
- positivemoney and other older proposals, like Silvio Gesell’s (1.918), which has been implemented successfully in Worgl (1.930) and then it died from success.
The problems in the society due to the money are remarkable. And many have strived to solve it, but they don’t quite understand what the money is about. Hence, they haven’t dug into the root of the problem, they created bad solutions. Just as the case of the communism, in which Karl Marx said that:
- The problem was between the workers and the entrepreneurs. A MISTAKE!
- And so many others have expressed that the problem is because of using the money. Therefore, they proposed to eliminate the use of the money. ANOTHER MISTAKE.
Money is not bad, it is a technology developed by the human being to facilitate the exchange of the goods and services. And it is necessary for the spread of the commerce. The bad thing about the money is:
- As an economic-financial system, only the interests benefit the bankers. When instead, the correct thing should be that the interests would benefit all the society.
Our proposal is that these interests must be shared with all the society through the distribution of a Universal Minimum Income and Basic Insured Salary.
The Problem of the Employment
Just as we see with the problem of the money, the companies require having a good productivity (a greater production using a lesser amount of resources). The enhancements in the efficiency of the product manufacturing cause the decrease in the number of work hours required for such task. That is:
- The automation, informatization and, robotization of the production, create unemployment, undoubtedly.
In a society substantially automatized, its companies will be able to produce the same amount of products the society needs, employing fewer people, who when not having any job they will not have incomes, producing the paradox that there won’t be enough people with a purchase power that enables them to buy the products the automatized companies produce.
Here is a big dilemma that some have argued that the automation creates new employments. It is not completely true, yet it does create new ones, such as the programmer of the automatons. For each one of the new jobs created, it eliminates much more than the previously existing ones. If it wasn’t like this, it wouldn’t be profitable and the companies wouldn’t invest in automation. Why spend more if producing the same?
The truth is that:
- Decades ago, if it wasn’t for the industry that promotes the consumerism, and the employments of friction (not contributing directly or indirectly to the production of goods and services), for instance, the bureaucracy and the financial speculation, the majority of the population would have been unemployed.
Giving money to the people, wouldn’t it cause inflation?
The main cause of inflation is not a matter of the quantity of money, just as some economics theory books say. Because as we see today (2017), the USA and Europe print per person 50 times more money than Venezuela. But the inflation is minimum in the USA and Europe, while in Venezuela is 100 times bigger.
The main cause of it is:
- The rejection of the local currency.
- The Venezuelan people reject their own currency as a saving mode. Instead, the Americans and Europeans save money in their own currency.
The inflation is the tax all the citizens pay for the wrong management of the finances of the State. But the question has a basis, and that is why we propose:
- A Universal Minimum Income which is one-third of a Universal Basic Income. And adjusting the amount to avoid a possible inflation.
The Ideological Problem of the Economic System
The job problem we have highlights the existing design and ideological problem:
What is the purpose of an economic system?
Producing goods and services for the society, or Hiring people?
If we say that the purpose of the economy is:
- To produce goods and services for the society. Then the main thing is the goods and services (quality of life). And the employment is a secondary effect (slavery) to achieve the main aspect.
If we say that the purpose of the economy is:
- To create employments. Then the main thing is having a job (slavery), and the production of goods and services (quality of life) is a secondary effect.
Saying that the economic system is:
- To create jobs by producing goods and services. It is equal to putting a wagon in front of the horse. That is why the technological unemployment is a severe problem in the current economical design.
The correct thing to do is:
- First putting the horse to pull the wagon. In this way, the technological unemployment is not a problem, but instead, something desirable.
Now this question pops up:
- If there are products and services for everyone, but not all have Jobs. Where do the unemployed people get the money to buy the goods and service?
The money comes from a minimum universal income Universal Minimum Income and Ensured Basic Salary, as a generational rent, a citizen dividend due to the improvements in the productivity of the past generations (cultural heritage). Paid initially to the women and the older adults. And then adjusting the age to avoid a lack of production.
This ideological confusion drifts into what many believe to be the solution of the employment problem:
- Creating more companies, for then, creating more job sources.
Even though it is true there is space to:
- Innovate.
- Improve, and
- Develop new products and services.
Indeed, this is what boosts the consumerism that wastes and destroys the natural resources of the planet. And ultimately, it pushes the countries to the war, an organized sabotage with the purpose of creating job positions, building what was destroyed. That is why the banks finance both sides of a war:
- Getting enormous benefits from the destruction. And then to start creating a vicious slavery circle with the construction.
The Solution
Basis. A Healthy Capitalism
In a previous article, we explained the 2 fundamental laws of the economy:
- Gain.
- Competence.
And with these two laws we build a real “market” that allows the citizens to enjoy a high quality with low prices. This is the healthy capitalism, that produces plenty of products. But we should be careful, the human beings are highly prone to distort the 2 laws of the economy, to create a “Market” that favors the interests of our friends.
Since the human being is selfish and fascist. Citizen Stewardship and Fascism. Therefore, it is difficult to find a country, that implements in a TRANSPARENT way the two fundamental laws of the economy. But if we see, the countries which apply those two laws (in a clear and pure way) reflects a place where people have the highest quality life.
The Circular Capitalism
Before continuing, it is necessary to insist that this proposed model will really work out with a change on:
- The educational system. Ten Principles of the New Circular Education.
- Or at least, the acceptation by all the citizens of the need to change the educational system.
Since trying to change the society without changing the selfish perception of the citizen will only result in:
- A worse damage for the society. By creating a new elite that uses the system to enslave the rest of the population.
The model proposed separates the money creator and destructor function (monetary function) from the administrative function of the money (financial function), which enables making commitments to:
- Integrate many antagonist factors, that are exclusionary in the current economic model. Such as the case of the full employment vs the automation.
In the current model, if we automatize, we produce unemployment. In the new model, the automation produces more free time for everybody.
Principles of this Economical Proposal
- It separates the function of the money creation (monetary), from the money administration function (financial). The monetary function corresponds to the State, through the new Central Bank. While the financial function is performed by the citizens in new local banks of the State.
- It enables a sustainable economy. That in scenarios of little growth, no growth or downturn, it remains stable.
- It integrates harmoniously in the indicator system of a country, in which the economic, human and ecological values are quantifiable in a precise way.
- It allows a global reality of the continual technological development. Tending to the full employment and the increase of the automation in the production.
- It enables the economic freedom of an individual. As well as the achievement of the economic, human and, ecological objectives of the country.
- It enables a greater efficiency. In the use of the human and natural resources.
Functions of the Central Bank
- The function of that bank is creating the money that the State will invest, and destroying the money received by the credit payments and taxes.
- It helps the bank offices achieve their goals. Through the coordination and infrastructure tasks.
- It creates the money that will be granted in the universal basic income program.
The New Local Bank. A Business Center, Employment and Insurances
Purpose of the Local New Bank
Being a center for the business and employment, with a set of advisors about the:
- Business.
- Finance.
- Marketing.
- Informatics.
- Robotics,
- And so on, which mission is to make successful each financed idea.
In this way, the failure of any idea will be a shared responsibility. And the success, a common achievement.
The economic and technical savings in the production, due to the technological advances, will be translated into fewer prices of the products due to the competition.
Functions of the New Bank Offices
It is the union of the local bank, the Chamber of Commerce, the employment office, the insurance company, and the planning office of the municipality.
- Giving loans to projects that perform the planned activities in the municipality, state or national goals.
- Giving loans to companies, persons, and associations will finance any type of business available. After a careful feasibility study, sustainability and profitability. Constituting a support towards the progress and development of the country.
- It will provide insurances. A cooperative-like, meaning that it establishes a proportional quote, covering the accident rate of the area, in the set period. With incremental rates for clients highly prone to accidents.
- It will not provide credit to the consumerism. Except for the purchase of the necessary goods and expensive ones, such as the main house, or for doing superior studies.
Features of the Bank System
- The owner of the bank is the State, the country, as well as the gains. And loss of it will affect the whole population, not like today, where the gains are assigned to a few ones. But the loss is charged to the population.
- The fractionated reserve system or legal reserve. Hence the reserve will be 100%, not like today, in which the deposit money is actually a loan, of free recuperation, and prone to be confiscated in the case of a bankruptcy.
- It has an office in each locality where necessary to improve the quality of the service and competitivity. It will be administered by the companies, private associations, to further the diversity. Audited by the personnel of the main head office, and by the citizens, through the Internet.
- It will charge interests because of the loans. With the purpose of recovering the expenses generated by its processing, and a considered “acceptable” gain by the Company or association that administer the branch. It may be interests of the range from 1.0-0.1%.
- Every person or association will have a bank account. In this new system totally integrated.
- The deposits of the savers will not produce interests, nor charges for the usage of the platform, for making electronic payments and transfers. Unless it is necessary.
- The usage of the bank platform for the payment of the sales will be charged at a rate of minimum interest that covers the costs for the use of it. That is, the points of the sale will charge a minimum percentage. Currently it is 1%, while in the new model it is 0.2% or less.
Relation With the State
The Central Bank creates the necessary quantity of money for:
- Performing a whole series of programs, activities. To achieve the economic, human and, ecological goals, that the State with the active participation of the citizens has previously defined in harmony with the ones of the community, town, state, or nation.
The collaborative competition is furthered, between the State and the Entrepreneurs. Because a program, such as the health or education program, that normally is an activity performed by the State, may be assumed by the private Company. In this way, we leverage the initiative of the entrepreneurs in these activities. While the State maintain its role of supervisors, but leaving in the hands of the citizens the decision of going to a public institution, or a private one.
For a more technical study, we recommend you to reed the issue title The Chicago Plan Revisited
http://www.imf.org/external/pubs/ft/wp/2012/ wp12202.pdf
The Companies
The purpose of the companies is:
- Satisfying the needs of the local or global society.
- Obtaining a benefit during the process, framed by this gain inside a balanced equilibrium among the three types of indicators:
1. Economic.
2. Human.
3. Ecological. There won’t be employment agencies anymore.
The presentation of balances at the end of the year of the Company will depend on the three types of indicators aforementioned. Audited by organizations of citizens trained in this type of tasks. With total transparency on the Internet of this audit.
The Citizens
The education of the citizens is a key element in our new economic-financial model. Since for avoiding the:
1. Bureaucracy.
2. Fascism.
3. Distortion of the fundamental laws of the economy.
4. The prize or sanction of the companies.
The participation of the citizens will be necessary through the purchase or not of their products. That is why all the products and services must have a tag, indicating the company and product performance, with respect to the three indicators indicated before.
A good example of such indicators is being implemented in Europe by Christian Felber and the movement “The economy of the common good”:
http:// www.gemeinwohl-oekonomie.org/sites/default/files/ EBC-Manual%20basico%20sobre%20los%20criterios%204.0.5.pdf
A severe imbalance, unfavorable for the human and ecological indicators will be significantly featured in the product tag.
Notes
- There is a change in the conception of the work. Currently it is a disguised form of slavery. Moreover in the new economy it is a moral duty, and a great honor. In the current society it is considered as an employment, doing any activity that generates money. In the new society, the employment is what makes the citizens contribute positively to the society.
- It is necessary to limit the maximum salary of an employee in the State, such as the president or his/her ministers, to 3-5 times the minimum wage. So that the government feels what it is like living with a minimum salary, and pushing it to increase it. The companies will not have that limit, that is to encourage the entrepreneurship.
Final Words
The scientific capitalism could be defined as an innovative mixture of:
- The capitalist and socialist models.
Leveraging the positive parts of both, and getting rid of all the negative features of it. Fully adapted to the technological reality, and to the scientific development of the human being. It deepens the democracy when giving power to the citizen able to vote continually each time that person uses his/her money consciously.
And just as Singapur showed it, it can be implemented in diverse ways. Even without requiring a public bank, since it can be implemented in a private way by the citizens themselves:
