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Value-based economies

Most of the problems encountered in modern society can be attributed in some way to money. Poverty is a result of having too little or no money and the dangerous balance of power that leads to oppression is a result of too much money at the disposal of too few people. Money can be manipulated in ways which accumulate debts and its distribution is grossly uneven.

This is because money is a fictional token of value. The value is assigned to the token so that even the value is fictional because the tokens have no intrinsic value. But we have become so addicted to this concept that, even when we are looking for alternatives that will take the dangerous levels of power away from the banks, we look to alternative versions of exactly the same thing: local currencies. The heart of this idea is in the right place but the level of innovation does not go nearly far enough.

We must ask: what do we want our economic model to do for us? Forget, for the moment, the idea of a unit of exchange and look at the essential role of economic models. We want to ensure that every member of society is individually rewarded for their contribution to society. That's it. We want to ensure that the members of society have access to the benefits of society and that each individual earns the right to those benefits.

The unit of exchange was a good idea when it was introduced around 700BC... but surely we have moved on somewhat since then! Basically, money is simply an abstract version of the barter system. It is a very simple concept despite the complexities that now apply to economics that manipulate the ways in which transactions can be undertaken to such a degree that even the fictional face value of money is volatile.

The mistake, of course, is in assigning a fictional 'token' value to something that (a) has no intrinsic value and (b) can be freely exchanged. This applies equally to local currencies.

In 2009, Gordon Brown made a speech about what he referred to as a "value-based economy".  The speech itself was little more than hot air flatulating in spin and soundbites from a dying dinosaur. Nothing new was on offer. But the term "Value-Based Economy" struck a chord with me. What entities have true, intrinsic value? People, products and services. What I am proposing here is a complete departure from the idea of a unit of exchange. Instead, I propose fixed units of value linked directly to the services and products that society needs and the people who provide them. The main difference between this concept and the unit of exchange concept is that money is essentially a very simple (and primitive) concept that has become extremely complex in application. What I propose is complex (and more sophisticated) in essence and extremely simple in application.

All businesses must have a "bottom-line", which is the point at which the business breaks even with no losses or gains. Society, too, must establish a "bottom-line" but with a slightly different angle. Society's bottom line must be assured survival for everyone within the community. If we fall below that level (and we are currently WAY below that level), society is on a downward path to extinction. Above that level, society is in a state of growth. That bottom line is where society ticks over with neither loss nor gain and, as with any business, this level is not indefinitely sustainable but it must be our starting point.

So the bottom line is that the community provides adequate housing, adequate nutritious food, serviceable clothing, clean water, energy for heating, cooking and lighting and access to public transport, education and public health care for every family or single member of the community by default. No one has to earn this. This, of course, will require considerable manpower and resources and this must be assigned a value. Value is based on need, time and take up.

Because the 'need' element is assessed as essential, this is assigned the highest level of value. Because the take-up will be 100% of the community, this is also afforded the highest level of value. Each of the resources is also linked to a fixed value rated as essential. This calculates as a given figure. Every individual employed in the provision of these essential services will have a base value linked to their identity according to the level of skill required to perform their roles. This Base Value figure is then used to calculate the value of one hour of working in the provision of the service. Each hour worked earns a given number of Redeemable Value Points (RVPs) established by the base value of the individual.

RVPs can be 'spent' in return for other, non-essential services such as more exotic foods, more stylish clothing, nicer homes, entertainment and so on. However, for these to be of any value, these non-essential products and services must be available and this is where  entrepreneurial skills and innovation come into force. A good business idea is set out with an estimated percentage of the community likely to use the products or services. The value to the community is assessed and the idea is awarded a provisional base value. This figure identifies how many RVPs can be generated in order to procure the resources necessary to establish the business. A provisional base value is then assigned to each of the personnel according to the level of skill. After a year, the business is reviewed and given a fixed base value according to performance and this is reflected in the fixed base value of each of the personnel.

Businesses can grow and individuals are rewarded for their input. RVPs can be redeemed by 'purchasing' services or products and this is how it would work:

(A) wants to buy a computer from (B)'s computer store. The computers are supplied by (C) computer manufacturers. (A) chooses a computer priced at (X) TVPs. The price is the base value of the product and will always remain a fixed price. The store deducts (X) RVPs from (A)'s base value account. This does not affect the base value of (A) but simply reduces the number of available RVPs. The base value account is not a 'bank account' because there are no banks as such. (A) is his or her own bank in this respect. The appropriate number of RVPs is then added to the base value account of the store. When the store has its annual review, the number and value of transactions are calculated to provide a new base value for the business, which is then fixed for another year. The base value of each individual working in the store is then adjusted accordingly. When (B)'s computer store restocks from (C) computer suppliers, the value of the transactions are transferred to the supplier.

In this way, businesses grow according to their value to the community and personal wealth grows according to value to the community. This provides an incentive to every business and individual to provide as much value to the community as possible. However, the base value can never be transferred. RVPs are simply records linked directly to the businesses or individuals to which they apply. They cannot be loaned or borrowed (or stolen). One cannot gamble with them or trade with them as is done with international currencies. They have no intrinsic value and exist only as a record of earned entitlement to products and services.

This takes banks out of the equation. This takes taxation out of the equation. Value cannot be manipulated in the way that money is and value is not volatile but fixed.

With our current system, the price of a loaf of bread can vary from one day to the next according "market forces" but its value always remains constant. The value of a loaf of bread is the same now as it was in Biblical times. Value is reality whereas "price" is a fluctuating fiction. We cannot continue to be at the mercy of an economy based on a fluctuating fiction. it is unsustainable, to which the current economic crisis testifies.

It takes imagination to look at a heap of stones and see them as loaves of bread. It takes insanity to starve because we don't have enough stones!

This idea is just a basic possible alternative to illustrate that we can live in a moneyless society and still enjoy the prospect of reasonable wealth but without the fear of crushing poverty. Businesses can still enjoy growth but without the dangerous levels of corporate power currently exercised by companies that pollute and exploit with only the interests of their shareholders to consider. There may be many other workable alternatives and I don't doubt that others will have other ideas and better ideas. The only rule is that economies must be based on true value.

Why is gold valuable? Because it is scarce.
Does it matter that it is scarce? No
Why does it not matter that it is scarce? Because gold is too soft for most applications of metal and it is too heavy for practical use. Its use is limited to jewellery and, in small quantities, to technology.
So what is the value of gold to society? Minimal
So why is gold valuable?

In real terms, iron has far more value to society than gold because it has more essential uses. Glass is far more valuable to society than diamond because it has more essential uses and on it goes. The market value of minerals such as diamonds and gold are volatile because their value is fictional. Their real intrinsic value is minimal. So a currency based on something like the Gold Standard is also a fiction. We must base our economy on stable values that do not fluctuate with market forces

Tags: alternatives, economy

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Replies to This Discussion

Permalink Reply by Heather K on December 27, 2010 at 3:19pm

Interesting discussion on community currancy being 'value based' rather than 'scarcity' based!

Anyone interested can also network with folks on the Fourth Corner Exchange group at:

http://transitioninaction.com/group/fourthcornerexchange

 

Permalink Reply by William Crumley on January 31, 2011 at 9:11am

Ron, You are right. Thought you might be interested in a book I wrote and and i do. Bill Crumley

 

I have a new website you may be interested in. www.workforpeace.info

The website tells of a book I wrote "WHY WE ARE ALWAYS BROKE: things we need to know about the economy"

 

The book traces the ongoing economic impact of wars and examines the international banking institutions set up after World War 1 and World War 2. The website asks Are we completely at the mercy of these gigantic banks or do we have alternatives?

 

In addition to suggesting local alternatives the website looks at a few of the local solutions which have not only worked well for local communities but have had impacts on a broader scale. This includes the work done by the people in the Hiroshima Peace Institute, the work of a small school in southeastern Tennessee, and work done by a school in Los Angeles California. The website allows you to connect to these sites. It also gives 2 extended accounts of the book.

 

The book can be ordered through Amazon or directly from the author. To contact Amazon www.amazon.com when the site comes up hit "books" and type in Why We Are Always Broke

 

To contact the author:

bcrumley1936@yahoo.com 337-923-4281

P. O. Box 278 Charenton, La. 70523-0278

 

I hope you find the website worthwhile bill crumley

 

Permalink Reply by Colorado.CA on January 31, 2011 at 3:51pm

Hi Ron -

I was trying to figure out this paragraph: "Because the 'need' element is assessed as essential, this is assigned the highest level of value. Because the take-up will be 100% of the community, this is also afforded the highest level of value. Each of the resources is also linked to a fixed value rated as essential. This calculates as a given figure. Every individual employed in the provision of these essential services will have a base value linked to their identity according to the level of skill required to perform their roles. This Base Value figure is then used to calculate the value of one hour of working in the provision of the service. Each hour worked earns a given number of Redeemable Value Points (RVPs) established by the base value of the individual.:

 

The 100% figure vexed me a bit - are you saying that 100% of a persons "output" or resources generated by him/her goes to essentials?  In that case, there is no extra output that a person could expend for art, music, recreation, pleasure, etc., right? 

And doesn't this system you've proposed take for granted that the natural resources provided by the earth are automatically the available to all citizens in this system equally?  So there is no "my land" or "my timber" or "my water?"  What portion of the earth is allocated to other species needs?  Do they figure into your value system?  In what way?

Oh - also - not everyone can physically make a contribution to society, and certainly not everyone's contribution could be considered equal - a physicians contribution (imho) would be superior to a drug-addicted, do-nothing, high school drop out's contribution (by this I mean someone who is a drain on resources rather than a giver of resources).  [[Please, don't anyone take offense to these two characterizations - we all know that they exist in our society, so let's not pretend they don't.  There are some people who are just destructive - to themselves and to society.]]

These are just some questions that popped into my head.  I'm not challenging you or your idea, just curious.

Permalink Reply by Ron Tocknell on January 31, 2011 at 5:36pm

The 100% figure relates to the level of take-up in the community of an essential service or commodity. By default, we can assume that vital services will be used by everyone so the value to the community is assessed on that. The ideal society provides the basic essentials for every member of the community whether they fulfill a role or not... but only the basics are a right. The rest has to be earned. The value of a person's contribution to society is assessed either on the necessity of the service or the percentage of the population served. Not everyone will need life saving treatment but those who do must have it. So, although the take-up may only be about 10%, the value is based on the necessity. An entertainment facility that is enjoyed by everyone will be based on the 90-100% take-up although it is not a necessity.

These figures are arbitrary just to give an idea of how the economy can be based on values rather than revenue.

"And doesn't this system you've proposed take for granted that the natural resources provided by the earth are automatically the available to all citizens in this system equally?  So there is no "my land" or "my timber" or "my water?"  What portion of the earth is allocated to other species needs?  Do they figure into your value system?  In what way?"

Natural resources also have a value. I don't think they should be "owned" but our exploitation of them has to be responsibly managed. That management has a value.

Yes a physician's contribution is of a higher value than a drug-addicted drop out and' consequently, a physician would have access to more non-essential goods and services. Many drug-addicted drop-outs are a result of poverty, poor education and poor upbringing (by parents who were the result of poverty, poor education and poor upbringing etc.) I know this is a generalisation but let's not pretend that these factors don't exist either. By adressing poverty and education for all, many of these root causes will eventually cease to be an issue.

We will always have problems with those who kick against society and I am not proposing a solution to everything... then again, money does not provide a solution to everything either. Law and order is another issue.

The essence that I am proposing here is that, if the benefits of society are distributed according to value to society, it would be considerably more stable. There are wealthy people who contribute nothing to society. I am not saying this is true of all wealthy people but those who make money by dealing in money and speculating are not actually making anything. They are simply manipulating a fiction. We're advised (quite wisely) against building on foundations of sand... yet sand is real. Our whole society is based on a foundation of a fluctuating illusion. A dollar doesn't really mean anything. Its value is assigned as a token. In short, we are pretending that a dollar is equal in value to whatever costs a dollar. Its intrinsic value is equal only to that of a rectangle of paper.

I am not pretending this is a thoroughly thought-out "solution". I haven't proposed any solutions. Only ideas to ponder and enlarge upon. What we do know is that a financial economy does not work. More people may share that view with the current financial crisis but, in truth, it never has worked. Only 25% of the earth's population experience having at least a little money to spend on non-essential items. 75% scratch a living or die. Most crime is for money, corruption is for money, exploitation is for money and yet, in real terms, the stuff doesn't even exist. There has to be an alternative.

 

You say you're not challenging my idea. Why not? It's full of holes! It needs to be challenged. But not in defense of the old system. It needs to be challenged in pursuit of something better than we have.

Permalink Reply by Mary Saunders on February 4, 2011 at 6:45pm

I have proposed a bean-based currency, on truthout.  The number of vegans is increasing so much.  

 

I also contemplated a currency based on small solar-cells, since energy and communication are pretty important to humans.  It was said that in the rough times in Kenya, phone cards were valuable.

 

The movie Forks Over Knives was going to have a brief premier in Portland and move on, but it was so popular it has been held over and has generated well-attended potlucks for discussion.  

 

I don't object to a market basket of goods, but valuing necessities would seem better to me, and if the government is going to decree statistics, they should at least have the decency to add the cost of maintaining them into the figures:  taxes, government-enforced monopoly utility rates, etc.

Permalink Reply by Ron Tocknell on February 4, 2011 at 10:29pm
Clearly any kind of transition from the norm is going to be difficult. I am not suggesting for a moment that I have offered any kind of a solution. I'm just coming up with ideas for alternatives. But then, innovation begins with a dream. Creative invention is the ability to reverse-engineer a dream. I think maybe we should begin with what do we want? If we begin with what we think we might be able to get, we're aiming pretty low. What we want humanity and future societies to be is our aim. How is what we figure out en route
Permalink Reply by David Eggleton on February 5, 2011 at 6:52am

Good stuff, Ron.

I just want to point out that in a few sentences you mentioned two ways forward, both of which properly involve the imagination of a condition not present.  The first:  reverse-engineering.  The second: figuring out how en route.

The imagined condition must be dynamic, not static, so I prefer and advocate the second way forward.  It offers each living person a role:  answering what do I want for other beings one step at a time.  The other way does not and cannot provide the necessary variety of roles; not we but a privileged new organization for the purpose put men on the moon.

I invite you to join this group, where such ideas are at home.

Permalink Reply by Christopher Tidman on February 5, 2011 at 8:42pm

What we have now is private ownership of money.  The owner of the money can charge interest to anyone borrowing it.  If money was owned by the Government (read public) it would be loaned out from a central bank interest free and most of the problems that we have now would be eliminated.  Just for fun I started the North America Party and have a site onlinenap.ning.com  where I have posted a few blogs, one of which is a primer, and reasons, for a better banking system.

Now that the US has lost its Reserve Currency status we just may be able to introduce a world dollar owned by everyone and therefore interest free.  It would make it possible for debtor countries to get out of debt. The banks would be set up differently.

Permalink Reply by Michael Gutierrez on February 7, 2011 at 10:21am

Hello Ron-

 

Could you compare and contrast the concept in this idea of a value-based economy vs resource-based economy as described by the Zeitgeist Movement?  They have obvious similarities but I am trying to wrap my head around the two concepts side-by-side.  It seems to me that they are takes on the same basic idea but maybe I'm missing the nail head all together.

http://www.thezeitgeistmovement.com

 

"The basic pursuit of The Movement is to begin a transition into a new, sustainable social design called a “Resource-Based Economy”."

Permalink Reply by Ron Tocknell on February 7, 2011 at 11:06am
Yes. This is pretty much the same thing. The concept is nothing new but the idea of letting go of the old system is scary to many. I'm just fishing for other people's ideas in making a system workable.
Permalink Reply by Christopher Tidman on February 7, 2011 at 7:46pm

The entire world is trapped in the current banking system so nothing will change until The banking system destroys itself.  This will happen because of interest which is a positive feedback loop.  This makes the whole thing unstable and creates the cycles in which some people can legally steal from the losers.  The people who benefit from it don't want a change and the ones  on the bottom can't change it, but eventually we have too many people who have become psuedo bankers and there aren't enough people at the bottom to support the pyramid.  We will have to create some new kind of entertainment.

Resource based is really just a different way of controlling the use of resources.  In the US nothing happens unless some rich person with the control of money can do something that will make him richer.  In China (call it whatever you want) the people in power can invest the resources of the country in projects that benefit a larger segment of their population.  They are currently building great big well designed cities.  These are large construction sites without inhabitants.  Imagine what it would be like to live in a well designed city with fruit trees in your back yard, where you can walk to work or shopping, where buildings take advantage of solar heat and you didn't need a car because of excellent, designed from the ground up, public transport .  Can't see that happening in the US. and the only real difference is who controls the money.

Permalink Reply by Jackson W Barnett on February 10, 2011 at 5:01am

What an interesting thread! Thanks for starting it, Ron.

I'm a big fan of the idea that the economy must be redesigned to support our visions of a sustainable, fulfilling and just earth community. I'm reading through http://www.neweconomyworkinggroup.org, which I find excellent. Perhaps some of us will find inspiration there as well.

I like the idea of ranking needs essential to health and continuance, both human and non-human, as most valuable and "luxury" items as less valuable. I'm a little squishy on how people are "valued". Any sort of top down determination seems ominous to me.

One idea I like is expressed in time money (http://www.transaction.net/money/timedollars/, http://hourmoney.org) -- the idea that all humans have equal value, regardless of what they do... What they do is less important than that they do it. I see flexibility in the idea too; a street-sweeper and a doctor may agree to a non-1:1 exchange rate if they wish, at the time of the exchange. Free and egalitarian; democratic if you prefer.

Here are a couple more concepts or sites that may offer useful tools along the way: "Sufficiency economics" (this phrase just struck me; I found this), this and this.

I agree that imagining the result we want first, in as much detail as we can manage, and then backcasting to where we are now, is the best way to create it. (First thought, then word, then deed.)

Is that what we'd like to do here?

Be well...

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