When Adam Smith wrote The Wealth of Nations, he was careful to stay objective when speaking of the economics of different industries and different ways of making a living. But one strong stand that he did take was against those who live off the rent of inherited land, and take wealth out of the system without providing anything in return. I am going to take a similar stand, albeit one that Adam Smith would probably disagree with, and say the same thing about those who buy and sell goods for a profit.
In Smith’s time, merchants generally were providing a real service. They bought goods in one place, brought them to another, and sold them at a higher price. While this might not be the same type of productivity as actually producing goods, enabling the flow of goods around the economy is nonetheless something that should be rewarded. Now, however, most who buy and sell things are providing no such service. One of the largest sectors in our economy, the financial industry, is fundimentally based on transactions where traders buy something in the stock or commodities market, wait anywhere from a few minutes to a few years for the price to go up, and then sell it in the very same market where they bought it. There are arguments to be made that the stock market provides capital to emerging companies that allows them to grow when they might not otherwise be able to, and this is occasionally the case. But on the whole, this type of buying and selling does nothing for the availability of goods, and it adds an incredible volitility to our economy, which those who participate in it often make very handsome livings by pulling money out of the economy when it could be going to far more productive use.
With the introduction of the Market in a technosocialist economy, the availability of goods ceases to be a problem. Merchants are no longer needed to discover new products in India and bring them across seas to the court of France. Any product produced in a technosocialist society is immediately available to all potential buyers on an equal footing with all other products. Therefore, it no longer makes sense for people to earn their living through the buying and selling of goods without improvement of them. Similarly, because having a single Market makes the standard “buy a bunch of something in one place and sell them individually somewhere else” model more or less impossible, such profits would have to come by buying goods and holding them for extended periods of time until the price went up, taking them out of useful circulation for the duration. This is certainly not something we want to encourage.
At the same time, however, we do not want to limit the right of someone who has purchased something from the Market to resell it once he no longer requires it for himself. If we restrict secondary sales we risk people simply throwing away things they no longer need, leading to increased waste and a lessened availability of goods. What compromise can be made? It’s actually fairly simple. There is no restriction on a citizen’s right to resell something he has purchased, he simply will not be able to recieve a greater amount in Contribution credit than was initially charged to his Consumption score when he bought it if he has not owned it for at least ten years. While this might seem radical, there is actually precedent for it in our current system.
Housing is both a basic necessity of life and a potentially rewarding investment opportunity in our modern economy. Most state and local governments want to encourage people to own their own homes without subsidizing those who are simply buying and selling property to make money without relying on it for shelter. To encourage people to build equity in their homes and to give residents an interest in the condition of their neighborhoods, income from the sale of a home is frequently taxed at a lower rate than some other types of income. But to make sure that this benefit does not encourage speculation in the real estate market, this lower tax rate generally does not apply to properties sold less than two years after they were purchased.
What I am suggesting certianly goes much farther than that, but it is still broadly in the same category of policies. It gives those who purchase goods with a genuine intention of using them the opportunity to recoup their investment if they keep them in good condition, without creating the opportunity for speculators to abuse the market and reap profit without productivity.
One thing that I need to make very clear is the difference between profit and added value. This is something Smith goes into in great detail and that is frequently misunderstood by the modern public. What Smith explained so elegantly was the difference between rent, wage, and profit. A farmer who plants $100 worth of corn seed and harvests $3500 worth of corn might at first glance be thought to be making an enormous profit, but this is not really the case. That $3500 sale price is made up not only of the cost of the seed corn but also includes the use of the land for the growing season, and the labor of the farmer in planting his crops. Even if he owns his own land and provides all of his own labor rather than paying someone else for either of those components, they are still a part of what makes up the price of the corn.
To bring it into a more familiar context, let’s go back to our friend Fred the craftsman. Fred has just bought several yards of fabric from the Market, for which 15Csv have been charged to his Consumption score. If Fred simply resells the fabric, he will not be able to earn more than 15Ctv towards his Contribution score. But he can use that fabric to make a messenger bag and three hats, and when he puts those goods on the Market he can earn as much for them as purchasers through the Market are willing to pay. He will probably earn considerably more than 15Ctv, but that difference will not be profit, it will be wages for the labor and creativity involved in turning the fabric into usable goods. As long as the goods are being improved in some way, there is no reason that the person improving them should not earn wages for that improvement.
While it’s not entirely related, the other topic that I would like to cover in this essay is credit and the advancement of capital to those who cannot afford to have the materials for a project charged to their Consumption score until the project is complete and they recieve their Contribution credit for it. This is one of the primary justifications for the financial sector and one of the more frustrating perpetuators of economic inequality. If we prevent people from earning money by lending money to others, and thus prevent the widening of the gulf between those who can make money simply by having it and those who must now pay even more for something to cover the costs both of the item and of the financing for it, we also prevent the foundation of new businesses by those who are not already wealthy.
Luckily, in technosocialism we are dealing with a post-currency economy, and this is not a problem. We do not need individuals or institutions to lend money, the capital can be lent directly by society itself. But we still need to come up with a way to prevent abuse of the system and make sure that those taking out “loans” do not gamble unwisely with their society’s resources.
We’ve already more or less covered the process for building factories, civic projects, and other large capital-intensive projects, but how is the process handled when an individual is looking for a small quantity of materials to produce goods on an individual level? Let’s say that Fred wants to upgrade to a new sewing machine. In general, Fred keeps his ratio high enough that this sort of occasional significant purchase should not be a problem for him, but for whatever reason in this case he would rather spread this particular purchase out over several months. There are a couple of ways that this could be accomplished.
Firstly, if he needs the new machine for a specific project, he could pre-sell the work that he intends to do with the new machine. If he has regular customers who he knows are interested in hats with a particular embroidery pattern on the brim and he needs the new machine to accomplish that, they can commit ahead of time to their purchase, and the cost of the new machine is split up and charged to their Consumption scores rather than Fred’s. They would then recieve a hat without any Consumption charge once Fred has the machine and has made the hats. Fred meanwhile would have no Consumption charge for the machine, but would also recieve no Contribution credit for the hats.
Another option would be for him to set up a payment plan. Citizens can choose, when buying something through the market, to have the Consumption value charged to their account immediately or to spread it out over as much as three months. They can do this without needing any outside approval, and the only restriction is that the total Consumption charge must not be enough to push their ratios below 1.0 if it were to be put on their account at the time of purchase. The goal with this type of “consumer credit” is to enable customers to make large purchases without taking a large immediate hit to their Consumption score while not allowing consumer debt to get out of hand. As we have mentioned before, life for those with a ratio below 1.0 can be quite difficult and we do not want anyone to find themselves in that position because they were extended too much credit.
A third option, if he needs to spread the charge over more than three months, would be to seek assistance from a business credit committee. Somewhat similar to a jury or a building approval committee, it a panel made up of randomly selected citizens, this time from the pool of citizens who have sucessfully completed long term payment plans. This panel then reviews Fred’s request, his business plan, and his Consumption/Contribution history and approves or rejects his requested payment plan extending up to 48 months. Longer-term loans than that are not allowed, because it is too difficult for citizens to know ahead of time that they will be able to maintain their ratios appropriately. Because the flexibility of citizens and their freedom to make and alter choices is one of the core principles of technosocialism, it is important not to create institutions that encourage long term financial committments that could later prevent them from making the choices they wish to make. A purchase so expensive that a consumer would need to spread it out over more than four years is most likely a purchase that is too expensive for that customer to make. (For more detail on how this might work in relation to housing, one of the primary reasons modern consumers take on long term debt, see the chapter on Real Estate.)
My point in this essay is not to gang up on the financial industry. It is a popular target for both the left and the right, particularly in recent years as the danger it poses to our economy has become clearer. But under our current system, it is necessary. Without profit and interest-bearing loans, our current economy would grind to a halt. But rather than blindly rail against the banks like the stoned leftist some readers probably take me for, or blindly supporting them like those who realize their necessity in our current system, I am attempting to design a new system in which they are no longer nessessary. The closer we can get to rewarding only genuine productivity in our society, the more productive and efficient that society will become.