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Social Positivists

 teaching the church about human rights 

The Bakery Exchange Scenario

Jill makes good bread. Her skill is an asset that creates value for the shareholders of an Exchange. The assets that go into making bread are the property of Jill but the activity of making and distributing bread to shareholders creates value that generates equity for the community. Jill’s talent creates value or equity in the Exchange. Jill’s value to the Exchange serves as the basis on which shares are issued. These shares represent the equity of the Exchange. Shares are produced based on the value of Jill as a skilled baker. These shares are used as money in the Exchange.

John is a mechanic. If John is the only mechanic in the group, it does not make sense for him to sell the tools of his trade to the Exchange. He would be the only customer. However, if the group were larger and there were several mechanics involved then it would make sense for the individual mechanics to pool resources to lower costs and risk. If John sold his tools to the Exchange in order to give other mechanics tools to work with he would be reimbursed for contributing these assets and be given equity equal to the equity created by the value represented by the tools.

Ownership is not about personal power and control. Ownership is about creating specialization and therefore prosperity. Ownership is not a legal position but an economic one vis-à-vis an asset in an economy. Ownership is about linking responsibility with authority. An entrepreneur is a specialist. Entrepreneurism is about finding ways to do things in a specialized way within an economy and community.

John is a mechanic, so it makes sense for him to have and control the tools required for his trade. A charitable organization would see this makes sense. It also means that should he need additional equipment to do the work that the community needs doing it makes sense for the Exchange to provide John with additional tools and equipment. Why would those who will benefit from his expanded line of services refuse to make it possible for John to perform these other jobs? Having someone to fix members cars increases the equity of the community.

If the required tools and equipment are present in the Exchange, meaning if other entrepreneurs have the equipment needed transferring these assets to John does not alter the asset mix of the Exchange but it increases their value and thus the equity of the economy and the equity owned and operated by the entrepreneurs that compose the community. The assets are simply transferred from the account of one member to another member’s account. The transfer increases the economic activity of the Exchange. Tools that may have been idle are turned into wealth-creating assets for they allow John to expand his line of services.

When one acquires a stake in an Ecumenic Exchange one is no longer dependent on what bankers think of your character or business sense.

Gladys has few resources. She is a single mother of two small children and is willing to baby-sit and do housecleaning. None of the members in the local community are well off and under normal circumstances would find it difficult to hire and pay Gladys. However, investors in an Exchange find it is to their benefit to hire Gladys if they need her services. Exchanges pay all investors according to the same scale so even though the world considers her work unskilled labour Gladys gets paid the same rate for her work as other investors get paid for theirs. Services get compensated at the same flat rate. Exceptions are made if investors feel a higher rate of compensation is justified due to specific circumstances. Wage disparities will fade away. A lawyer may require a higher rate of compensation than other service providers over the short term. These issues are resolved as they arise. Over-time as the system evolves and more people are born into the program wages will settle towards a common level.

Bill is a handyman and does odd jobs. Gladys needs some plumbing work done. Gladys does not need units of the domestic currency to have Bill fix her plumbing problems. She does not need any money at all, which is good under normal circumstances Gladys would not be able to afford Bills regular rate. Gladys pays Bill in ecumens. The Exchange credits Bill’s account with the amount he earned by working for Gladys. The Exchange debits Gladys’s account for the same amount that Bill’s account is credited. The amounts are denominated in ecumens; these are a unit of account that are created, as needed to reflect changes in equity. Bill’s work creates equity and ecumens are issued according to the amount of equity created by Bill’s services.

If a paper currency is provided the accounts of each shareholder are credited with the amount of ecumens provided. Paper money allows the economy to function on a kind of Petty Cash accounting.

Gladys can buy bread, get her home and car fixed based on the equity she represents to the Exchange (as given by her cash on hand). She as a human being is valuable to the Exchange. The equity she represents allows her to obtain what she needs. The Exchange works to help her realize her full potential because she is an asset to the Exchange. 

Gladys does not purchase services from the shareholders of the Exchange based on her credit worthiness. Gladys may be unemployed and broke when she joins. She purchases goods and services on the credit worthiness of the Exchange itself. Sellers are willing to sell to Gladys not because they trust Gladys. There is no need to trust Gladys or know Gladys or be aware of her credit worthiness. The Exchange backs the currency so the seller only needs to know the community is creditworthy.

It is important that we take all the time needed to understand how Exchanges decentralize the economy. Ecumenic Exchanges brings people together but not under the terms of a hierarchy. Liability accounts create risk. It has been taught that with opportunity comes risk. Some say the greater the opportunity the greater the risk but certainly the opposite is not true. If one does not understand that the purpose of an Exchange is to unite the right and eliminate liberalism the casual observer will look to where the risk is and question if the benefits compensate for the risk.

If there was any risk the Exchange could not function as an agent for decentralization.

Bill does not need to badger Gladys for payment nor get paid up front. No matter Gladys financial situation sellers know they will be paid. The community guarantees payment. The Exchange credits the sellers account so the seller is able to engage in economic activity. What this means for Bill and others is that Bill can buy goods and services on the strength of the credits he earned working for Gladys.

The Exchange pays Bill using shares issued based on the equity created by the job Bill just completed. All economic activity creates value and all value can be expressed as equity. Equity quantified in multiples of it self and issued in the form of shares are issued as a currency.

When Gladys hires Bill she is not creating debt in the way debt is understood by banks. Bill working for Gladys creates value. If Gladys has a house and Bill works on the house his work increases the value of the house, this increased value is expressed as an increase in the equity of the asset as well as an increase in the assets of the community and world. If Bills work is valued at $800.00 then the house has increased in value by $800.00. The Exchange can now credit Bill with the equity his work created. He can now transfer this equity to someone else and in exchange obtain goods and services from others.

The goods and services available to Bill provide Bill the security he needs to sell his services to any shareholder in the Exchange.

Bill never needs to hesitate when selling his skills. Ecumenic Exchanges always guarantee payment and always has the means to make its payments because it is the claim on its assets that gives the Exchange the equity needed to pay its bills. This shares all risk that would exist in the free enterprise system. Risk absorbed by the charitable organization for charities are the only organization able to eliminate economic risk.

Conventional businesses that have large capital flows in the upward or downward stream may choose to create an Exchange as a kind of Trust Fund equal to the value of goods and services that flow between buyers and sellers. A business that risks $5000.00 selling goods to its customers may find it convenient to create an Exchange for facilitating exchanges between it and its customers. 

The supplier and its customers set up an Exchange capitalizing it with $5000.00 held in trust. All purchases and sales are done by and through the Exchange. Buyers and sellers are represented by accounts with the Exchange. Single Entry Bookkeeping as used by an Exchange eliminates the need to transfer funds back and forth or up and down the product stream. The Exchange turns separate businesses each representing a specific risk into a single pool of assets. Exchanges absorb risk because the risk is contained in the Exchange. A buyer cannot default because everything bought and sold and all debits and credits are contained in the same pool of assets.

The entire product stream is contained within the parameters of the Exchange, so all the economic activity is part of the same economy. Exchanges create a closed system. A farmer who grows crops and feeds his family and livestock and breeds his livestock and saves the seeds from his crops cannot lose money within this process anymore than could a group on an island. Bankruptcy and business losses are a result of dividing a production stream into individual components. Competition divides and compartmentalizes risk and thus increases risk.

Instead of a glassmaker selling bottles to a bottler as a unique economic unit the glassmaker transfers assets to another component of the production process and is credited the value of the transfer. Those who need bottles get bottles as a simple transfer of assets in exchange for equity. All shareholders represent equity to the Exchange that is all shareholders represent value to the rest of the shareholders. Each shareholder can acquire assets by giving up equity.

The bottler takes possession of bottles and obtains debits. This means the bottler has given up equity. The glassmaker gives up bottles and accepts shares in the Exchange as payment as credits. This means the glassmaker has acquired equity. If conventional currencies are obtained, they are traded for shares (ecumens) in the Exchange. The secret to eliminating risk is to share it. All shareholders of the Exchange share the risk by exchanging their exposure for equity in the Exchange.

Conventional money obtained by the Exchange is used to pay down the conventional debt of shareholders. The Exchange takes over shareholder debt, debiting shareholder accounts with the value of the debt and uses cash on hand to pay off shareholder debt.

Instead of the bottler trying to squeeze concessions out of the distributor and so on, the distributor and retailer share in a combined effort to reduce overall costs.

The bottle maker attempts to supply bottles in a timelier fashion and in a manner that fits with the usage needs of the bottler because both the glassmaker and the bottler are shareholders in the Exchange and benefit as the Exchange equity increases. This is the same as saying businesses prosper as the community prospers. There is more to be gained from paring down costs for the whole chain than there is to be gained by one part exploiting the rest. Whatever profits are made are shared so it pays the entire chain to work towards the lowest over-all costs. Exchanges create a closed loop where inputs equal outputs. Exchanges work as the early depictions of the economy as presented in textbooks say an economy ought to work. Exchanges are free markets in the ideal sense and co-existent with a local economy.

It pays the Exchange to keep commercial operations going. If a business is not producing goods and services that are needed its assets are re-assigned to other uses. An exit strategy is always in place.

Supporting a business when its closure will cascade costs throughout the community may require extraordinary steps be taken. If it costs more to close a business than to keep it open the community is better off if it continues to support the business.

Maintaining the operational services of a struggling retailer who is the sole supplier to a small satellite community may require another retail account to serve as a sub-station or drop off point where the distributor can leave extra product for the smaller store to pick up as needed. This enables the small store to get re-supplied at more frequent intervals than the distribution company can provide. What is important is the value created in the Exchange not the value of a single account. The entire production and distribution and consumption system is a single system. All open loops and waste are eliminated, and the system made as efficient as possible.

The market would see the struggling retailer as a liability and shut it down.

Canada Post and other nationalized services are constantly under attack by private interests who wish to take over the profitable routes whilst leaving the outlying areas to the national service or without any service at all. This makes sense according to the market but not to the community or the nation it is in. People have to get their mail and it does not serve the interests of the nation to deny services to people because the cost of delivery is higher to them than elsewhere. The profits made delivering to dense populations helps offset the cost of delivery to the outlying regions. The service is provided because the people and the nation need it. Finding ways to do this in the overall lowest cost per unit is the goal of decentralizing services. Servicing the fewest customers for the highest profit gives us Globalism.

National governments look at is what is best for the nation. It may make economic sense to move everyone into a single city (economies of scale could be captured) but from another perspective to empty the nation of people to make things efficient is not really a rational strategy. Efficiency is good but it is not the reason the economy exists.

The best-case scenario from the perspective of a Capitalist is for a private company to service the densely spaced accounts and leave the public to fund the widely spaced accounts.

When a business is shut down the costs of running the operation are ended for the owner. The workers who lose their job are a cost, but they are a social cost not a business cost and they are not a cost that is recorded anywhere. The unemployed do not have an account. Indeed, the company recorded them as a liability and having divested itself of employees the company lowers its liabilities. Yet the cost of living has not really changed substantially for these men and woman. Yet, if they do not sign on with some government program they effectively disappear off the national books.

What Exchanges do is to keep unemployment costs on the books. To do otherwise is not rational. The Law makes such actions appear rational and as a consequence creates a division in society. Some think the business owner has the right to shut down a failing business others think this is unfair on the workers. Thus, our energies are spent in fighting over who is entitled to what instead of dealing with the real issue which is why does this division exist in the first place. Society does not escape the cost of unemployment by closing down a business. If the community needs the product and the jobs it may be cheaper to keep the factory running at a loss than absorbing the costs of closing the business down. It may make more sense to close it down in stages as assets are shifted elsewhere and consumer needs are met using alternative sources.

It is unrealistic to put the entire cost encountered from closing down a business onto an individual when the business has to be profitable to stay afloat. The profitability of a company is really the responsibility of a community and the costs of failure is a cost borne by the community. An unprofitable company cannot by definition, live up to what might be considered its moral obligation to the community and its workers. 

A business by itself cannot eliminate risk. No business owner has the authority to make the decisions that would eliminate risk. A business is privately owned in a legal sense and yet no individual can alone maintain business solvency. Why ought the business owner face the responsibility represented by the costs of bankruptcy? Businesses are subject to all kinds of risk not all of them foreseeable or insured against. The more costs the business must absorb the more likely it will collapse. If society must bear the cost of business failure, then it also has the right to expect a share in the management of the company to ensure it does not fail. Governments create programs that both help businesses and workers, but government programs invariably increase costs and therefore risk. Business owners are aware of this, but the only other solution was to not help, and this was never a realistic option.

Unemployment insurance is a liability for businesses and an expense for the nation, but the situation is like Canada Post delivering letters to the far North. It does not make economic sense to deliver letters to such remote locations, but it does not make sense not to either. If the nation is dependent on the minerals extracted by northern community’s then ensuring they receive mail is simply a cost of doing business that is borne by the nation. It may cost more to deliver mail to the far north but it is just a cost of doing the business called Canada.

Canada Post does not exist to make money. In one sense it exists to increase the equity that is Canada. Canada Post is just a department in the national business. Brought up in a culture that sees ownership as a property of economic entities it is hard to think of ownership as a conditional relationship. The idea that profits are immaterial in the present business environment is difficult to accept. Canada Post exists as a service to Canadians to make the country work better and to make the nation profitable not any one part or sector. When an accountant sees that it costs 50 times more to deliver a letter to a remote community than what the customer pays it appears that the resident of the far north is being subsidized. The far North is viewed as a liability that ought to be removed.

Governments record liabilities and yet are required to subsidize various sectors of the economy. Government tax cuts serve to keep struggling sectors going by taxing solvent businesses. To an accountant or hard-nosed businessman every business ought to pay its own way. Many see government funding as akin to communism. To some extent State assistance does follow the Communist adage: “From each according to his ability to each according to need.” Any assistance beyond preventing an untimely death is considered by many to constitute a statist agenda. Ayn Rand became a cult figure by promoting a philosophy of rugged individualism a position reminiscent of Niccolò Machiavelli’s “The Prince”.

Niccolò Machiavelli (1469-1527), Italian statesman and writer, whose work The Prince (1532) advises that acquiring and exercising power may require unethical methods.