An empowering mode of production
Distributing the power that comes with access to our society’s surplus resources
1. The Status Quo
Access to capital equals power
- There is no shortage of good ideas to improve how things are done – there is a shortage of access to resources to make them become reality.
- One who has the right to extract profit, rent and interest of a society has access to capital, i.e. has the power to shape this society.
- If this right is in the hands of a few, power is in the hands of a few.
- If this right is in the hands of the many, power is in the hands of the many.
Concentration of capital and power
The root of the problem
The underlying mechanism of passive income through profit, rent and interest extraction
The question is how do people get so rich and powerful. And although the answer in fact is quite obvious a lot of the proposed solutions do not tackle the root of the problem. The only way to concentrate so much power is passive income: the extraction of surplus value in form of profit, rent and interest.
If you look at the above distribution curve, it is quite obvious, that there is an exponential function causing this distribution over time. Simplified, it is this one:
Capitaltime = Seed Capital * Rate of Profittime
This obviously does not mean that everyone who has capital automatically is able to increase his wealth with this formula. But in average this is how it works. And obviously if your seed capital is zero and you multiply it with a certain rate of profit – well it still stays zero. And this is why you see that diagram up there and why you see the world around yourself.
We could go a lot more into detail here, but there already are a enough resources on that topic.
2. A short critique of past solutions
Now we go through some of the past and present proposed solutions to the inequality in our current system, with a focus on how they are dealing with the distribution of power and surplus.
The problem with this model (or one of them) very briefly summarized: It does not really distribute power but shifts it from the capitalistic class to the administrative class of the socialist state.
Redistribution through unions, Social Democrats, welfare state wealth tax, basic income and suchlike
The idea is quite simple: wealth and power are distributed unequal, so let’s redistribute it! The problem with the mentioned solutions is that they tackle the extent of the inequality or the symptoms of it. They do not end the underlying mechanisms that led to it. They might be able to lessen the concentration of wealth and power for a while but since they did not take away the source of power of those with access to capital, the capitalist class will always be able to regain the power it lost for a while.
Example 1 „Redistribution through a radical wealth tax“
If you would take all wealth there is and redistribute it completely equally without ending the mechanism of profit extraction, it would only take a while until you end up with the same old exponential curve of wealth distribution. The first few persons to gain a little bit more money through their economic activity would be able to reinvest that surplus as capital, gain a passive income in addition to their actively earned one, thus gaining access to even more capital to reinvest and so forth.
Example 2 „Unions & Welfare State“
They try to take power without trying to get access to the capital and resources. They try to get a bigger share of the surplus produced but don’t question the mechanism that the capitalists gets to extract it at all.
This makes them stay vulnerable, since the bulk of the resources plus the right to passive income leaves the capitalists in a far more powerful position.
This is covering the idea of „Social Business“ as in „Let’s redirect a percentage of our profit to charity/good stuff!“:
While being well-meant, it again does not go to the root of the problem. Even if the rate of profit is lower then, there still is one giving the shareholders a right to passive income, which, as was covered before, is the underlying mechanism of exponential inequality.
An even worse misunderstanding is thinking that entrepreneurs who are giving away some (or even a substantial part) of their wealth to a good cause would be essentially them giving away some of the power that they gained through their wealth. It is no such thing – in contrast: In doing so it’s them who decide what is „a good cause“ and depending on the wealth they have accumulated that can be a very powerful position.
Take the Gates Foundation as an example. But do keep in mind, that you we are doing the same thing with our „money for charity“ – just on a smaller scale.
When you look at how the surplus is distributed, most consumer-owned cooperatives are pretty similar to joint-stock companies. You put in capital and get a part of the surplus, either in form of dividends or lower prices.
The idea is obvious and tempting: Merging the role of the worker and the capitalist into one: the shareholder-worker. They get paid their wages plus the surplus their business makes.
The problem with that classical cooperative model is often overlooked and not as obvious as with the ones before but no less essential. Since it still includes the capitalist right to surplus extraction, it is reproducing the exact same mechanisms that produce the inequality that we have right now. The only difference being that the inequality would be between groups instead of between individuals.
Let’s imagine two brewery collectives: One group has enough capital to build up a big brewery and a skilled marketing & sales team, the other has enough capital to start a micro-brewery. The micro-brewery collective makes enough money to pay themselves a living wage, the other collective pays themselves a living wage and starts to make enough surplus to gather capital that can be reinvested and gives them the power to decide in which new projects or collectives to invest. Now we have one group of people that is able to have a say where our society is heading and one that has no say in that at all: One with growing access to capital & one with no access at all.
3. The proposed CommonsFund-Coop model
An empowering mode of production
- The idea is to take the cooperative model of worker’s ownership & governance, but end the relationship between being a (co-)business-owner and the right to extract the surplus it produces.
- Surplus being what is left of the revenue when all costs & reserves are covered and everyone got a fair salary for their work
- The decision over what a fair salary is, is taken in the coop and always transparently communicated to customers and the CommonsFund-Platform.
- Instead of going into the pockets of the cooperative members it goes into a CommonsFund .
- This CommonsFund is governed equally by all people who contribute to it according to their possibilities.
- The CommonsFund cannot be accessed for private withdrawals.
- It is used to fund new CommonsFund-Coops, which in return are expected to also channel their eventual surplus into the fund.
- Everyone gets to distribute the same amount (available funds⁄number of people) to the projects of their liking. (One person, one vote)
- Anyone can apply for funding for an economic and/or social commons project.
This puts everyone involved -and anyone is welcome to become involved- in the position to co-shape the direction in which we are heading as a society.
Pluralistic and distributed network
Our goal is to distribute the power that comes with the right of distributing the surplus / investment capital of our society. That implies that the networks governance is distributed, not centralized and just as important: There can be pluralistic objectives in what to do with the available funds. Neither we nor any committee set any agenda that the projects have to follow other than to radically empower everyone involved to distribute a fair share of our society’s available surplus/investment capital and prevent this power from being in the hands of a few.
There are only three general rules as a result:
- Outer Equality: No private accumulation of investment capital. No passive income (= profit-extraction) – neither for founders nor shareholders. Surplus revenue is channeled into the CommonsFund. Everyone has an equal say in where this capital is invested.
- Inner Equality: CommonsFund-Projects and CommonsFund-Coops are composed of equal members.
- Transparency of accounting (salaries, etc.) and of the inner organization.
There is a longer catalogue of smaller rules but they are all pretty straightforward results of these general rules.
A lot of this network and the „certification“ it gives is built on trust and transparency rather than control, e.g. there is no limit to what a „fair salary“ can be, only the obligation to make transparent how much a collective books as salaries and how much it books as surplus.
Since there are probably just as many people who see this as the right way as there are people who think there has to be more control, we decided to build a governance structure that enables both groups to implement their ideas.
The idea is to have an umbrella organization with an absolute minimum level of rules and control. There is no committee, group or gathering that can implement additional rules that are effective for the whole network. But it is possible to propose additional rules and control systems. People can voluntarily join these additional contracts (and the associated „certificates“) and thus form sub-organizations under this umbrella.
For the „umbrella-organization“ and it’s certificate we plan to lay out a set of simple and clean rules (that implement only the above general rules), defined in a contract. You have to sign this contract in order to become a member of the network and call your cooperative a CommonsFund-Coop.
This contract implements a court of arbitration, which is the only instance which is able to exclude a member from the network again. It works as follows: if a certain amount of members has the opinion that another member does not follow the rules in the contract, they can call this court. It consists of one „judge“ that is appointed by the accusers, one that is appointed by the accused and a third, neutral one that is appointed by the first two. This court only has two powers: 1. To exclude a member from the network and 2. in case the coop in question was funded by the CommonsFund and is now running as a for-profit entity, the court can reclaim the funding the coop received.
The funding system & the platform
The distribution of the available funds will happen through an online platform. On this platform people can suggest new project and their need for funding (start-up funding or constant funding). In order to unlock the funding-mode, a project proposal and their financial planning has to get an approval by a certain number of existing CommonsFund-Coops. The distribution then happens similar to a crowdfunding platform. A project is funded as soon as it hits it’s funding goal.
The available funds are first split up by an algorithm that calculates how much money a month was coming in at a stable level over the last year, this amount is the „Available monthly fund“ and the eventual rest is the „Available one-time fund“. Those get divided by the amount of members and is put into their distribution-account.
Additionally it will be possible to fund projects with your personal money, just like on a crowdfunding-page.
If a project has eaten up the funding it asked for and is not able to finance its operation anymore or a coop is not making enough revenue to stay in business or is otherwise broke, there is no automatic rescue button or an implemented solidarity mechanism. If an existing project needs funding again, it has to ask for it and is only supported if enough members of the network actually want to support it – and if there is enough funding available. This makes the system very resilient. It is almost impossible for the network to go into debt and fail. The worst thing that can happen is a standstill, a phase without expansion.
If an existing coop wants to become a member it has to through the same steps as the ones applying for funding: They have to get approved by a certain number of existing CommonsFund-Coops. This ensures that only coops who are in line with the principles of the contract and are ready to implement the needed transparency are able to join the network.
In addition to the people who become members of the network because they joined it together with their coop, it is possible to join the network as an individual. To become a member, all you have to do is doing the same thing with your income as the people in the CommonsFund-Coops do: Deciding for yourself, how much of your monthly income you would consider a „surplus“ that you have on top of what you really need for a living. This amount -which can also be zero- is your contribution to the CommonsFund, which you are able to reconsider every month.
In doing so you make sure that you, you’re neighborhood, city and in the end as many people as possible can equally co-decide on which direction we are heading.
Relationship to its capitalist surrounding
Surplus-free zone inside the network
Since everyone inside the network is giving their personal „surplus“ into the CommonsFund there is no need to collect a surplus on the prices for goods and services when they are exchanged between each other.
If a Member does not have enough income for a livelihood, then it is an unnecessary burden to pay the extra-money, so that the CommonsFund-Coop can make a surplus to give away.
If a Member has more income than he/she needs for a livelihood, it is an unnecessary detour for the CommonsFund-money to go through the CommonsFund-Coop, since he/she is putting it there anyway.
Same principles apply for projects & coops in the network.
Setting prices including surplus when trading with the capitalist surrounding
This helps to grow and eat into the capitalist sphere and there would be no point in paying surplus prices when trading with this sphere and not taking surplus prices at the same time. And since we are not a closed network, anyone is welcome to join the surplus freezone, if they are willing to contribute to the CommonsFund according to their possibilities.
This is also applied to any intelectual „property“: The CommonsFund-Coops will use licenses that ensure free access for other CommonsFund-Coops as well as for noncommercial use while excluding or charging For-Profit-Corporations / Cooperatives.
Other proposals that might well integrate
Multi-stakeholder Cooperative / Open Cooperative as a base model
Instead of implementing the worker-owned as base model for governance and ownership of a CommonsFund-Coop, it would be interesting to think about how to integrate a multi-stakeholder model.
- It might be hard to find clear and simple rules that define whether or not the coop in question is a multi-stakeholder coop.
- The goal of the umbrella organization is intended to have the minimum set of rules, one of the reasons for that is to include, welcome and make possible as many different approaches of internal organization as possible.
- Having a sub-organization and certification and thus making it optional to have a multi-stakeholder governance model
FairCoin or other currencies
That’s kind of a given. Would be interesting to see how and when to include.
Mutual Credit System like CASX
Also kind of a given. Would be interesting to see how and when to include.
In this Case it would be interesting if there is an interest to run eventual PlatformCoops as CommonsFund-Coops