Wednesday, August 11, 2010

Questions on Goodwill Capitalism

Before going into more details of how a GeeCee Economy will work in real life - I am going to address some questions and concerns raised from my previous posting on Always On - over a hundred and fifty comments and questions were raised. I have tried to combine them into easily manageable groups and questions here

If I have to introduce the essence of Goodwill Capitalism to someone, what would it be?

Essence of the GeeCee Economy is to free businesses from social responsibilities like employee health and retirement benefits, so that they can respond to evolving market conditions with competitive agility and flexibility. It also guarantees unfettered access to healthcare, education and nutrition to every citizen, if and when they need them - thereby freeing people to capitalize on their resourcefulness, skills and knowledge to innovate, invest and invent - and finally, it will reduce the impact of the legislative and political branches of government on matters related to social welfare, health and education so that the implementation would be efficient and fiscally responsible.
The best way to achieve this is by separating the processes and tools for wealth creation from the processes and tools for developing social infrastructure and well being. The transport mechanisms for the two different process and tools are the two currencies, Money and GeeCees respectively.
The result will be near 100% full employment and phenomenal growth spurt in the markets - which in turn will fund the GeeCee Economies.

So, why do we need a new system?
In conceiving the idea of Goodwill Capitalism, I am trying to address what I perceive to be an urgent social dilemma facing our modern civilization:
Should society look on passively as a large segment of its residents have no means to live, even as it guarantees the right to life for everyone? If not, then can society guarantee basic necessities of life to every resident WITHOUT taking away ANYONE's personal quality of lifestyle choices?
As long as we are working within the current constraints of the monetary system, I believe that balance cannot be achieved without compromising the right to life for some over quality of lifestyle for others. In a money based market economy, private enterprise has never placed serious emphasis on solving social problems and governments have been very inefficient in solving them. That is where Goodwill Capitalism or whatever we choose to call it, will provide two separate but transformable currencies for conducting commerce - one to guarantee and sustain basic necessities of life leaving the other (money) to  create wealth and quality of lifestyle. It is important to note that Goodwill Capitalism is not just about rewarding good deeds - it is about empowering individuals and entities to choose the values they cherish and reward ANY products or services that enhances or delivers those values.

Why now?
As an advanced society, we have reached such a high level of complexity and inflexibility that every additional improvement in our quality of life can only be achieved by paying a very high marginal cost in terms of environment, natural resources or infrastructure. This is clearly evident in the way our financial system is structured. Money can no longer service the needs of the modern civilization in it's existing form alone. However, instead of creating alternate forms of generating prosperity, we have developed a patchwork of systems such as financial derivatives, market exchanges and banking systems (fractional reserve banking, is a case in point) - all of them layered on top of monetary system so that a collapse in any one of those layers could easily trigger the collapse of the entire system. This is not the first time where advanced civilizations become increasingly complex that they collapse on themselves. Anthropologist and historian Joseph Tainter has explained this phenomenon very well in his 1988 book The Collapse of Complex Societies. Money in its current form has outlived its usefulness. Because even after digitizing money to a large extent, it is still severely constrained by its physical and material origins.
What has changed now to make a new system possible? The technology has progressed, communications and connectivity levels have broadened and we can have a digital currency unconstrained by any physical formats, that can be ubiquitous and unique at the same time.
But the most significant reason is that culturally we have begun to accept and monetize social capital.

Why do we need an additional currency? Why not find a way to use the same currency to achieve what GeeCees are set out to do?
Money in its current form is essentially a metric for material wealth. Its sustained impact on human psyche cannot be ignored and cannot be changed. Historically, money has been the means to accumulate wealth and power. The proverbial "invisible hand" that is supposed to regulate the market forces in free market capitalism, did not always work as expected. Because to be a real power player in a money based market economy, many other aspects beyond intelligence, hard work, rational thought and selfish interests seem to have played a significant role - things like corruption, deceit, violence, wars, even timing and often times pure luck - things that often eluded the majority of aspirants or things that many actually avoided on the basis of honoring ethical principles and common values.
It is in this state that the majority of the free market participants find themselves - trapped within their own boundaries of convictions, principles, religion, country, values, knowledge and time but yet their innate skills and talents are still worthy enough to produce much more than what the opportunities allow them to - because in order to break out and produce more using their best skills - often means to risk everything, their future, their conveniences and their values. Consequences of failure or so devastating and long lasting that fear of failure keeps many from even trying. It is true that of all the economic systems, capitalism is the best option available where given enough time, spanning many, many generations, more and more nations and their people would rise above the poverty line and enjoy some level of basic quality of life and lifestyles. But as long as money is the only form of currency, this economic system can never guarantee that everyone of these entities, be it individuals, businesses or countries, will be allowed to participate with one hundred percent utilization of their naturally gifted individual resourcefulness, talents and skills.
A lot of these limitations have been because money has been backed by seriously limited resources such as gold or other precious metals (which by that very definition is rare or limited) and more recently by a nation's promise (fiat currency). This has resulted in phenomenol and unfettered build up in debt, be it at national level or at individual level. Therfore,  instead of gold or money, what we really need to build up now is social or human capital - something we all closely relate to and value immensely. Human capital is the capital that is created out of our ingenuity, service, knowledge, usefulness, nobility, goodness and potential. It is personal, it is individual, it is unique and it is profound in that it is backed by living and breathing humans and not by some metal. And as long as they are living, their social and human capital will be backed by the goods and services that they produce and the knowledge and skills that they possess. All of which can be delivered upon demand - which by itself is significant in the modern day service and knowledge oriented economy. Best of all, it is built up on shared values that are also lasting. Until now, this capital has been ephemeral in nature. But with digital currency, we should be able to record (or preserve) and track human capital along with it's lifecycle from its inception onwards and use it as an exchange in commercial and social transactions. That is why we need GeeCees, an alternate currency backed entirely by human capital. 

Since we cannot get rid of money without severly disrupting the global economy, it will continue in it's current role, to provide incentives for wealth building and accumulating property. However, GeeCees will be used to build the nation's human capital, untethered by market manipulations.

How does Goodwill Capitalism comply with the basic tenets of Free Market Capitalism?

Laissez Faire (and implicitly, Smaller Government)
When wealth creation activities are decoupled from life sustaining activities the need for government control over market activities no longer exists - except when it concerns national security, infrastructure and to protect life, liberty and property. Businesses operating in the Goodwill Economy have greater incentive to operate honestly and to work within the rule of law, so that governments can focus less on regulating and more on maintaining law and order. Even in addressing complicated issues such as energy, environment or climate, the free market in a GeeCee Economy has more incentives, opportunities and means to innovate and try newer and safer products than in the current money based economy, where the myopic emphasis on the bottom line and shareholder returns forces corporate strategy and policies.
As such, government function will be limited to security, infrastructure and basic amenities. Consider that almost 60% of the current National budget is allocated to funding and servicing of Welfare Programs, Medicaid and Medicare.  Then there is additional staff required to oversee and regulate those programs as well. In a GeeCee Economy all of those programs will go away.
Just imagine, there will be no government run schools and there will be no public health centers. Agree that the GeeCee system itself will need funding to upkeep its own administration, regulation and oversight. Of course GeeCee Economy itself being a computerized system will also require its own staff and infrastructure. But that would a fixed cost and will be just a very small percentage in comparison with the current federal, state and local social programs.

Freedom of choice (to choose quality of life)
Actually, lets examine what kind of freedom we really have in the current system. All I know is that everyone growing up in the system accepts one law and that is to understand that all choices have consequences and that you are accountable for the choices you make. Apart from that, what kind of freedom of choice do we really have? Can you live wherever you want? Can you take a vacation whenever you need one? Can you take a sabbatical from work for a few months in order to be with your child when they need you most , maybe to help with their emotional or personal issues - or do you just watch helplessly from your tight work schedule, as your child goes into depression or even slowly regress into drug addiction? How often do you see people choosing professions not because it is their passion but because it can guarantee them long term financial security and a consistent lifestyle?
Take the example of retirement benefits. People live frugally for most of their lifetime, always saving for the future and planning for a better lifestyle after their working life is over. But, what kind of a choice is that? Here is a system that forces all of its citizens to make huge sacrifices for most part of their early lives hoping that nothing bad will happen to the economy to bust their nest eggs when they really need it. And then time and again we have seen that either because of the vagaries in the financial markets or because of natural disasters or more commonly because of changing market conditions, all that they had worked for and saved for ends into nothing . Therefore, at a time when you planned to have it most, you lose that very same freedom of choice for reasons that are not once-in-a-lifetime occurrence or a perfect storm but probably because of any one of the commonly recurring disruptions in nature, market conditions or political climate. What kind of freedom of choice is that?
In a GeeCee Economy, where there is no dependency between wealth creation, lifestyle choices and quality of life, people will be free to make their choices that impact their lifestyles without impacting their quality of life, all within the constraints of market conditions, family obligations and responsibilities. There is an implicit incentive provided in the GeeCee System that fosters a cohesive family structure - but there is more freedom to live the lifestyle you choose, there is more freedom to plan and live your life anyway you want.
Consider education for example. In a GeeCee economy, there will be no public schools at any level. Every school will be privately run. Possibly in the early transition period, seeding money for infrastructure may be provided from public funds. But every school has to compete for students. And parents will have a choice to pick the best schools for educating their children, no matter how expensive it is - because they can pay with money if they can afford it or pay with earned GeeCees or even borrow as many GeeCees as they need to. If that is not an example of freedom of choice, what is?

Demand and Supply:
When the only choice to transact commerce, namely money, is limited in supply and difficult to accumulate - it is impossible to have a completely free market solely governed by the laws of demand and supply. We have seen repeated instances of market manipulation of prices simply by manipulating demand and supply - using mechanisms like hoarding, slowing down production, monopoly practices, dumping the market, insider trading, speculation in options trading and many other practices. And then there is the manipulation of market conditions using the legislative power of the government - using laws that restrict trade, subsidies, government regulations and controls, controlling money supply and foreign exchange is a good example . What is more disturbing is that it is very common to see the markets being manipulated in this way, particularly when the product or service in question is of very high significance or life sustaining - consider health care, oil, energy and food (agricultural produce). True forces of demand and supply only works when the goods or services are of casual or insignificant value to our quality of life - think of diamonds, clothes, cars etc.. Show me a product or service that is of extreme importance to our lives, and I can show you a hundred laws controlling its production, its distribution, manufacture or even consumption and I can also show you a selective few from the market players who have used short cuts and loopholes to manipulate the demand and supply and thereby control the prices of those goods and services .
In a GeeCee Economy, there may be more wheeling and dealing trying to categorize products and services as life sustaining or even to remove them from that category - but the incentives to manipulate the demand and supply markets will no longer exist. There will still be attempts to manipulate the supply chain - but its impact on our lives would be voluntary and minimal. If something is life sustaining then the market is assured of an unlimited and well funded consumer base and the market gets a chance to earn goodwill out of the situation that it can capitalize elsewhere in the supply chain. If something is not life sustaining, then the market is free to play the market without impacting everyday quality of life.

Right to own property, Maximize Profits, Competitiveness
GeeCee economy will not prevent anyone in any way from owning properties or businesses from maximizing profits - because there are no restrictions in how you run your business or what you do with your earnings - particularly how you earn money. Yes, there are restrictions on how you earn your GeeCees - but those restrictions do not impact what you do with your money - which can always be used to purchase property. There might be a concern that for businesses involved in producing life sustaining goods and services, these restrictions will constrain them from maximizing profits or remaining competitive. But in reality, GeeCees actually increase their competitiveness and maximizes profits. Their products and services are no longer required to be subsidized. They can charge any price (in money and in GeeCees) because there are no shortage of consumers. Their pricing strategy will only be governed by their intent to maximize profits and to remain competitive - rather than by government stipulations and program restrictions. If customers cannot pay the price with their money, they pay with their Earned GeeCees. If that is not sufficient and they still need to consume the life sustaining goods or service, then they can always borrow the GeeCees. Whats more, the government will reimburse their GeeCees with money if they cannot circulate them in the market. Therefore if you look closely, GeeCees will help business not only to grow but also to remain competitive and shield from market manipulations.

As for the market not directly involved in producing life sustaining goods and services, nothing changes - actually, GeeCee economy will improve market conditions for them because there will be more money in circulation and Earned GeeCees will also add to the consumer purchasing power. Emerging markets and new technologies can operate competitively from an early stage helping the market to self-regulate, particularly in the areas where the social and environmental impacts are long term and not easily tangible.Grishms law - cheap money destroys dear money:
Finally, the question often brought up is that - are GeeCees a form of Cheap money? Is it freely available for distribution and circulation? The answer is no, it is not. All GeeCees can only be borrowed or earned. There is no free GeeCees. From the time that someone borrows GeeCees - to pay for their education, health care or nutrition - the repayment clock starts ticking. They have a limited period of time to start repaying it or to engage in activities that will service those borrowed GeeCees. For example, the repayment clock might be set for 6 months from the day that they borrowed GeeCees to look for a job or be engaged in a productive activity - either in an industry of their choice (a choice that they can make at the time of borrowing the GeeCees) or what ever is immediately available. If they have made a choice in a line of work that they don’t have experience at all, then they have six months to get trained in that profession.

In general, the factors that push people to borrow GeeCees for their sustenance could be widely varying - illness, accident, family problems, professional burnout, downturn in business, changing professions or layoffs or such and every time, the individual borrower may set up their own repayment parameters as to how long they expect to be in that situation or even the profession they would prefer to return back to work for repayment, or choose the industry or even location that they are interested to get back to work in. In other words, they can chart out their roadmap to fiscal recovery each time they borrow GeeCees.
In a GeeCee Economy it will be much easier to stay productive and employed - because the constraints on businesses that are hiring and on the worker who is seeking work - are minimal if not none. Constraints such as long term employment, benefits, insecurity etc.. will not be significant, if non-existing. And self imposed constraints such as professional bias, personal bias, distance, enjoyable work etc can be tolerated because they can be made temporary by looking for alternatives. In other words, because of the fact that employees and employers do not have to consider long term impact of their relationships, people may quickly get back into workforce just to begin their repayment process, while they continue to look for better and more conducive employment opportunities. All this increases the chances of repayment of Borrowed GeeCees. 
Secondly, there is an interest on the borrowed GeeCees that has to be paid. Even if the interest is very low and fixed, its very existence and application is an incentive to repay early. GeeCee economy offers many opportunities to repay debts and therefore there will be a natural tendency to repay them early and move on with our lives. For example, there will never be an age limit for earning a living in the GeeCee Economy - because people can earn GeeCees by providing well needed services in the family, neighborhood or even in the commercial establishments. In our current system, there are fewer opportunities and fewer ways to repay debts and therefore debts keep growing until one has to file for bankruptcy putting the lender as well as the borrower at risk. That in turn hurts the economy.
Another way to accumulate GeeCees is by earning them. By that very definition, the recipient of Earned GeeCees has to have engaged in some act or deed that is of some value to the donor or their business or family. At the same time such an activity might not be revenue generating and therefore may not attract monetary compensation, but still warrant payment with Earned GeeCees. In order to limit GeeCee transactions more meaningful and productive, there is a high fee on all GeeCee transactions - which makes giving away GeeCees for nothing, a bad move. Think of this tax as a consumption tax. The donor has received some goods or services from the receiver and therefore has to pay the consumption tax or sales tax. The receiver does not have to pay any tax on the transaction, until he uses his earned GeeCees to consume some other goods or services.


  1. not yet been through the all the posts but the idea of GCs seems very intriguing but also apt for our highly commercialized times. i'm working for a company that's always so short of money that many of the projects I want to work on just has been stranded. I see no way out of this predicament other than having some mechanism like GCs.

    e.g we've found very good vendor for our website redesign but need to spend around $6000 for which sanction is highly unlikely. Another proposal to get a document management system is also in limbo since last 2 years. If the vendors would accept to barter their product/service for something that we could offer and hence benefiting both of us.

  2. Cashflow problems are typically reflective of mis-management or a bad business model. In general, Goodwill Capitalism will help individuals, businesses and governments to fund activities or programs that may not directly be related to revenue generation but are deemed necessary for sustaining the core values or identity of what they stand for or committed to be in the community they operate - and thereby indirectly do help them sustain and grow.