In this twelfth and final post in our series on money structure and function I relate some personal thoughts on the ramifications of the knowledge I have gained concerning how money does and can work.
Closing Thoughts
When I was introduced to double-entry bookkeeping in the 1970s while managing co-op housing apartments, I was struck by, and was never given a satisfactory answer to, why equity appeared on the expense (liability) side of the balance-sheet equation: Assets = Liabilities + Net Equity.
It has only been recently as I studied money from the point of view of the community that I recognized that the reason for this is that equity is a liability (debit) toward the user community commons that has no claimant, resulting from income that is in excess of expenses. That income can therefore be privatized and taken by the current claimant 'owner' as 'equity' (a credit) when books are closed out. This is the essence of what makes Capitalism work.
Again, us unwitting partners are drawn into this paradigm because it is the only way to assure that we can feel able to meet our expenses as we age and can no longer contribute as much to an economy as we need, where the community doesn't care for its own. In the bottom-up economy, the money currently spent on military and other 'security' can instead be available for true security of the people.
A bit of history of the word equity is appropriate here.
The concept of equity dates back to English law in the Middle Ages. A separate equity court system was set up to provide relief and fairness to those who were not protected by the common law. Equity is still a part of English, and American, law.
However the first use of this term in accounting as a replacement name for profit in the profit-loss account was in 1904, according to the Oxford English Dictionary. As late as 1896 Cayley's Principles of Book-Keeping by Double Entry, a classic of the time, used the term profit-loss.
One has to surmise that the term 'equity' was adopted as a replacement for 'profit' in 'profit-loss' at a time when Populists were protesting the great profits of the industrialists, in order to equate profit with fairness. Equity, used in this sense, is just another term for unearned income.
Some theorists distinguish between rentier income and profit. Generally unearned income in business is seen as legitimate; it is seen as the result of productive action, no matter how much of a surplus is produced,. Rentier income is seen as the result of no productive action. From the point of view of monetary theory that includes the pivotal place of the user community, this distinction no longer exists. Both transfer money from the user community to the money-authority community.
We must confront the institutional habits and structures that allow and promote accumulating these takings of unearned income; interest, profit, equity. All of these are transfers of money, value and power from the user community to the money-authority community. We must learn that there are other ways to get the satisfaction of recognition than through monetary wealth. This is an issue in any top-down economy.
The concept of the legitimacy of unearned income accumulation by persons and subgroups of the population is the root of capitalism. The inequality baked into this concept must be acknowledged in order that an economy of provisioning, rather than profit, can come about. Let us live in enoughness.
New ways of perceiving our place on the commons that is this earth, sharing it with all of the rest of the life here, will also be a necessary part of the transition. We will all be required to seek and find a new relationship with the earth, learning that we are stewards of the earth, not owners of pieces of what is in reality a community commons.
Those of us who are the unwitting partners mentioned earlier will have to learn to interact with and depend on the community rather than feeling the necessity of individual accumulation of money for our retirement. We need to acknowledge that our personal accumulation of money is privatizing value from the current user-community account as well as the resources of the earth, and accumulating it for our personal use through the top-down money model.
Less work will be necessary for the operation of the economy when the production of surpluses to support militarism and imperialism become unnecessary. Those among us who are retired may also find new ways to contribute, appropriate to our time, energy, and abilities.
Again, those who have gained immense amounts of money and physical wealth through their position in the top-down economy and therefore control the economy have to be dethroned, by extinguishing the monetary wealth that they have accumulated through unearned income, and re-allocating physical assets that they have accumulated, again through unearned income, to the commons. This will be a very painful but necessary process for those who have accumulated more than their fair share.
Those who live on and/or work the land that they occupy may see little change, unless they have more than they need to produce their livelihood and contribute to the community. Their relationship to the land will turn more toward their stewardship responsibility balanced with their usership rights, rather than unlimited ownership rights.
Various countries have had and do have systems for usufruct (usership) land tenure. Just a few examples: Poland has such laws currently. While the Crown traditionally owned all land in England, peasants were also traditionally given usufruct land rights.
Mexico had the Ejido system before the coming of the Spaniards, and has practiced usufruct land tenure, when left to its own heritage, since. In the most recent change, that practice was largely eliminated by stipulations in the North American Free Trade Agreement that the ejidos be privatized.
As a result of this agreement the minifundistas (small farmers) got into debt, because more money was going out of their communities than was coming in, and land ownership has been consolidated. Capitalism does everything it can to get rid of institutions that impair its narrative.
Final Words
The down side to this analysis, if it is one, is that it depends on we the people learning and practicing working together across what are now lines of difference, to figure out how to take care of each other as well as the earth and its great variety of life that supports us.
Democracy requires democratic institutions as well as democratic citizens that operate them. Without either one, the overall system will fail.
The old unwritten law is that the more freedom we have, the greater is our responsibility to each other and the earth. We have to learn to be stewards and caretakers of each other and the earth that has supported us, so that the earth can continue supporting us, along with all of the rest of the life here.
In peace, Paul Krumm
