TOWARDS THE SOCIAL ECONOMY
From the Economy of the Production to the Social Economy
1.- ABOUT THE ECONOMIC SYSTEMS
We can observe in the societies an energetic cycle. The societies need to capture External Energy, which we will name Primary, and they will use it in order to capture External Secondary Energies (raw materials). Combining them, they will generate, by means of their Transformation Tools (industries), Internal Energy (goods). These goods will be distribute, by means of the Distribution tools, through the whole system. The process appears in the following scheme:
We see then that the Social System must include:
- Primary Capture Tools (PCT): They capture the Primary Energy that the system needs. They must deliver this Primary Energy to all the Tools in the System.
- Secondary Capture Tools (SCT): With the input of Primary energy, these Tools must capture and deliver Secondary Energy (raw materials) to the Transforming Tools.
-Transforming Tools (TT): They (the companies) receive Primary and Secondary Energy, and combine them to create Internal Energy (goods), which deliver to the Distribution Tools.
- Distribution Tools (DT): They receive Primary Energy from the PCT and Internal Energy (Goods) from the Transforming Tools, which they distribute to the rest of the system.
As we see, it is an OPEN CYCLE. The economic system captures external energies that provide to the structure the possibility of preserving and being continued this way capturing external energies, in a cycle potentially endless.
This is a very similar cycle than the one we can observe in the biological systems. But the economic cycle differs from them because complements itself with an inverse flow: the flow of money.
We can represent this flow of the following way:
Let´sobserve that, while the flow of energies is opened, the economic flow is closed. The money DOES NOT GO OUT of the system.
This has as a consequence that, theoretically, the flow of money might remain constant. It must fulfill an only condition: the income of money in each of the nodes ( PCT, SCT, TT, DT ) has to be superior, in order that the economic flow is not interrupted, to the exits. We will obtain therefore the following affirmations:
It is enough to add up these increases to see that the result is zero (it is a closed circuit). We can conclude that it exists, at least theoretically, the possibility of a perfectly static System, with a quantity of Money constant.
2.- ABOUT THE CREATION OF MONEY.
But the economic system is not static. It evolves, and it does it in different form from the biological systems. Not jumping from generation to generation and dying in the middle. The society, without dying, evolves improving any of the described Tools. It can do models to increase the efficiency in the apprehension of External Energies (primary and secondary), and also it can make models, and execute them, to improve the production and management of its Internal Energy (goods).
Two procedures exist for this:
- To improve the efficiency in the generation of the existing products. It is possible to do this by increasing the production for unit of External Primary or Secondary Energy.
- To create new Internal Energy. New useful goods for the system.
Both processes increase the Internal Energy of the system. Theoretically, as we have seen, it would be possible that the Money in circulation was remaining constant, though the increasing of value in its correspondence with the Internal Energy (the same quantity of Money would be equivalent to more Internal Energy). But the model that the economic cycle has implemented consists in corresponding the creation of more Internal Energy with the creation of more Money. Thus, we can establish a relation as the following one:
In other words: a relation exists between the Energies in the system and the total sum of Money that circulates along the system. It is not claimed that such a relation is of equality. Among other things, because we are adding DIFFERENT ENERGIES. But the relation exists, and that increasing the Energies of the system will be corresponded by increasing the quantity of Money.
We are not considering in this model the possibility of accumulating Money on the side of any of the Tools, with the speculative processes that this allows. This exception made we can affirm that, nowadays, the creation of Money in the economic system associated to the increase or improvement in the production of Internal Energy is carried out by the banks.
The system is the following one:
The bank receives a quantity of Money from an individual A. Let's say 100 €. The bank receives similar quantities from many individuals, and has discovered that is not probable that all of them claim their Money simultaneously. So it is safe to reserve a part of this quantity, for example 10 € from each individual, always available for returns, and be confident to lend the other 90 to an individual B.
We see that the quantity of existing Money has increased: The individual A thinks that he owns 100 € (which is true), whereas the individual B has 90 in his pocket. The existing money has passed from 100 to 190 €. Money has been created.
The process, in addition, continues: the individual B moves his 90 € to a second bank, which repeats the operation giving 81 € to an individual C ... etc. The phenomenon is known as The monetary multiplier.
Consciously or not, under this process, to be efficient and not to generate inflation, is implied that it has to be associated with some increase of the Internal Energy. May be, as we have said, by improving the efficiency in the production of that Internal Energy (generating more Internal Energy with the same quantity of Primary and Secondary Energies), or just creating New Internal Energy (new goods).
We see then that, in our scheme of the economic cycle, we must add an entry for the NEW MONEY, and that this entry is associated to the Transformation Tools. Money will be created as long as new Internal Energy is created.
3.- THE ACCOUNTING DECEIT.
Up to the moment we have spoken, exclusively, in terms of Internal Energy. We have not distinguished GOODS from SERVICES. Let's observe now that when we realize the necessary accounting to start a new company we bear in mind, we have, on one hand, the "productive investment". For example the machinery that we will need to create this new good.
And, on the other hand, we will bear in mind the "non productive investment". The associate expenses. We will need an administration, will need a cleaning service, will need safety...
The key point of this article, its fundamental reason, is to show that THIS IS CORRECT IN TERMS OF THE FLOW OF MONEY, BUT NOT IN TERMS OF THE ENERGETIC FLOW: to distinguish between productive and not productive investment has turned out to be, obviously, very useful in economic terms, but it is a tremendous deceit. An energetic deceit.
It is considered that the incomes come because of the productive processes. And if something is not included in these processes, is an expense. This way of thinking accepted, it is considered interesting to invest in machinery to generate a new product, even though, "unfortunately", it has to support the expense of maintenance, safety, etc.
But without maintenance, without safety, the good could not be produced. Maintenance and safety are indispensable for the production of that Internal Energy. They are needs of the production of Energy. Then, maintenance and safety have a value, an equivalence in terms of Internal Energy. More Energy will be produced with them. They are Internal Energy.
In other words: all the processes associated with the generation of a product have an equivalence in Internal Energy, let's speak about "goods", or let's speak about "services".
Happily, the one who requests a credit to a bank has in mind both aspects of the creation of Internal Energy. Then, Money is created to cover all the aspects of the generation of Internal Energy.
Let's imagine a bank that offers a credit to a company. A software company, for example, that wants to create a product of great value. The investment is small, but they are afraid that other companies may steal the idea. Then, they have considered to create a big safety department. The bank trusts in the product, and trusts in its commercial interest. So is ready to create Money to make a lending for the sufficient quantity to cover the computer needed equipments. But, invoking that this part of the process is not productive, it grants a credit to create software product, but it does not give a cent for the safety that it needs. Is this a rational act?
It is not, and the bank, when creating Money for the process, will do it contemplating the global needs: the productive ones as those of maintenance and safety. The bank has created Money both, for the generation of the product and for the generation of the service.
We can go a step beyond, and observe that the banks do not distinguish, when creating Money, if the company will devote it for goods or for services. A bank can CREATE Money for a managerial project that will make a NEW GOOD, but also will CREATE Money for a company that will generate a NEW SERVICE.
The bank will do it as long as the new goods or services generate New Internal Energy for the System, let´s speak of a company that makes cookies, or a company that offers jumps from a bridge with an elastic string.
Since the first case seems to be clear, let's speak about the second: the company that offers jumps from a bridge with an elastic string offers a new service. The bank has created money that will be in use with this aim.
Well, we will suppose that the clients will use this service because it relaxes them from their labour tensions, allowing them to be more efficient in their return to the work.
That is to say that the service exists, and the bank has created Money to finance it, because the system has increased its efficiency and, by doing so, has increased its Internal Energy. The correspondence between the creation of Money and the increase of the Internal Energy in the system is kept.
With this creation of Money destined to a service, as with the creation of Money destined for new goods, the Money continues flowing without never escaping from the System. And it does not distinguish, this is the most important thing, to what type of Internal Energy is equivalent. It is possible that some processes concentrate more Internal Energy than others, and they will be rewarded with bigger concentrations of Money. But all the created Money has an equivalence in Internal Energy.
But let see now what happens if we extend this concept to the national economy.
In our economic scheme at least an element is absent: a part of the money in circulation is removed by the governments to offer what are considered to be public services.
Those services are related with the following needs:
- The need to continue capturing external energy in the future and transforming it in Internal Energy (Investment Tools)
-The need to repair or adapt the system to changing conditions (Homeostatic Tools)
-The need to protect the system against other systems (Defense Tools)
So we find in our country:
Investment tools: professors (education), scientists, artists…
Homeostatic tools: health, justice, police, social assistance
Defense Tools: national security.
But –and this is extremely important- It happens to be that, because of the described deceit of the accounting, these services are considered to be, exclusively, an expense.
And probably they are from the point of view of the flow of the money, but certainly they are not in terms of creation of Internal Energy. Because all of them generate Internal Energy.
Is the police an expense? Certainly not! without it the Social System would turn into a chaos. Then the police, identically to the safety department in the software company, has an equivalent, a value, in Internal Energy.
And the same thing we can say when speaking about health, justice, education...
Both, the safety man in the software company, and the policeman who controls the traffic in the street in front of that company, generate Internal Energy. But there is a big difference between them:
While the economic system has created Money for the first one, the second one, erroneously, is considered to be exclusively an expense. And Money has not been created for him.
Social Investment, Homeostatic and Defense Tools do not produce directly Internal energy, but they are essential in order to obtain Future Energy, or in order to continue obtaining Energy in spite of the trend to disorder of the system (entropy), or in order to avoid others taking advantage of our Energy in our prejudice.
If these functions exist apart from the "private circuit" of the economy is not because they do not generate Internal Energy, but because, due to their characteristics, it is more efficient to delegate their use to a general administration. But this administration, this common manager, generates Internal Energy, and therefore, has the “right” to create New Money, associated with this generation.
And, in consequence, identically to the process for which Money is created for the safety of a private company, Money should be created associated with this energetic increase, accepted a rational use of it: Money created when it is considered that it will generate an increase of the Internal Energy.
In other words:
THE CURRENT PROCESS OF CREATION OF MONEY IS INCOMPLETE AND INSUFFICIENT.
As a company uses Money created by a bank to generate more Internal Energy, the governments should create Money to satisfy these needs, with the precise functionality.
The consequence of this terrible mistake produces a strange and inexplicable paradox: a society that produces in an increasingly efficient way Internal Energy, perceives this increase of its efficiency not as an opportunity, but as a threat. When a company demands 5 instead 10 workers to produce the same good (the same quantity of Internal Energy) this, which objectively represents a social benefit, acquires the appearance of a menace...
But investing in Investment and Homeostatic Tools is not only a benefit. It is a need. The Social System (considered as global) has arrived to the point to act senseless or as a robust system. This means to do the necessary efforts to become really robust by predicting the menaces and acting in consequence. To consider itself eternal means that any investment in this direction has a value in Future Energy, the Energy that this investments will allow to locate, capture and transform in Internal Energy. That is the main value of mobile phones, artificial intelligence and Internet, and this value, this energetic value, has not been fully introduced in the Economy: money has not been created according to it.
How to do this?
4.-FROM THE ACTIVATION OF THE OFFER TO THE ACTIVATION OF THE DEMAND.
For what we have seen until now, traditionally it has been thought that the engine of the productivity is the generation of new, more abundant, and/or more efficient Internal Energy. And it works because it is coherent
The engine of the economic system is the innovation. The companies (in the production or services sector) go to the banks to be financed. The banks CREATE Money with which they finance the companies. The companies look for funding as long as they have, or they think they have, the possibility of creating new Internal Energy - a more abundant good for unit of external primary or secondary Energy, or a good that is, simply, new Internal Energy-. The system is very effective, since the banks monitor that the Money obtained to feed the Transformation Tools is compensated by the increase of the Money coming from the Distribution Tools. That is the evidence that the created Internal Energy is accepted by the system, is useful to it. And the New Money flows through the system.
In this way it is avoided to create Money generating products that are not interesting for the Social System.
The companies that generate the more demanded products are the winners. The process is, in general terms, more or less Darwinian.
In parallel, it has been chosen to collect, in all the productive levels, a percentage of the flow of money to destine it to Social Services, considering them to be not productive (they do not have equivalence in Internal Energy).
Is this the only way to do things? We may accept that the exposed model makes sense, and is efficient, when the producible goods are limited. That is to say, during the industrial era that has characterized the last 200 years. The bottleneck is presumed to be placed in the productive capacity. But, what does happen when the innovation has come to such a point that the productive system might be capable of producing more products than the Social System is absorbing? Is it possible to do things in a different way?
We will consider also that mobile phones, artificial intelligence and Internet mean the access to a robust social living system, and any money created in that area –locating, capturing and creating Future Interal Energy- has an equivalence in such Future Energy. A value. And that future value can be, and must be, activated today.
We will depart from this premise: THE USE OF THE MONEY IS ALWAYS ENERGETICALLY EFFICIENT. That is to say: we will not differ between goods and services, since we will think that in both cases the use of the Money is rational and so, as we have seen, generator of Internal Energy.
And we will accept that useless services do not exist. A company that offers the service of jumping from a bridge with an elastic rope will obtain benefits because the ones who decide to pay for this service consider that they will unload tensions, and will feel with more force to confront their work the day after. That company, therefore, provides Internal Energy, as it does a nourishment company.
Equally we will accept that the department of administration of the company of software, the safety department or that of maintenance, contribute all of them to create actively Internal Energy for of the system. All of them do it, in strict sense, in the same way than the productive machinery.
In other words: we will not make differences in the analysis of the use of Money in the Cycle of goods and in the Cycle of services (Investment, Homeostatic or Defensive Tools). It will be considered to be a not energetically efficient use of the money only when used for sending a package indefinitely between A and B without never opening it, or if a policeman is destined to monitor a desert. Any other activity that generates a reasonably useful good or a service will join the economic cycle, with equal consideration, since it will have an equivalent in the increase of Internal Energy of the system.
Accepting this, we will begin by considering if it is possible to increase the production of goods without harming the competition.
The current situation seems to indicate it. A CRISIS OF DEMAND exists: THE PRODUCTIVE STRUCTURE CAN PRODUCE MORE.
Confronted with this situation, we will understand that an optimization of the productive system is possible. And then, in consequence, it is possible to generate Money in the sector of Social Services. Money that, rationally used, will correspond to an increase of the Internal Energy. And now we will include in this process the public administrations and, in general, those services that, creating Internal Energy, do it without establishing a closed accounting, since the new Internal Energy that they create is diluted in the society without direct return.
Accepting that we will accept that WE CAN CREATE Money for this sector.
But that will be only one aspect of the question. At the same time, we will report to banks and companies that a new demand is expected. And only once foreseen the satisfaction of this demand we will start the process.
Hereby, we see that IT IS always POSSIBLE TO CREATE MONEY AND DELIVER IT TO NEW SOCIAL SERVICES, GENERATORS OF FUTURE ENERGY, AS LONG AS THE GENERATION OF INTERNAL ENERGY (INTERMS OF GOODS) BE GUARANTEED IN THE CORRESPONDING QUANTITY, avoiding inflation.
As long as the competition in the creation of those goods is guaranteed, the creation of wealth will be obtained without inflation. It is necessary to measure carefully the quantity of Money that will be necessary to create to deliver to the Transforming Tools for every unit dedicated to the purpose.
Always having this in mind: the social living system goes to extinction or robustness. The first option is possible, but irrelevant in terms of action: we have consumed almost every resource of fossil energy and the Future appears as our only option. In this (increasingly robust) future, all the Institutions and processes that guarantee such a future must be created.
This means the inevitable creation of every social institutions and networks that ensure such a future. But also the creation of internal social systems in which that Future Energy (that will tend to infinite) is enjoyed.
And we can, and we must, enjoy that Future Unlimited Energy now, by activating the offer to the possible limit in every moment.
A salary (or a million) is destined for elderly persons care. This Money WILL BE CREATED. It is predicted, by means of the suitable studies, what new consumption of Internal Energy will take place, and that will be reported to companies and banks, who will manage the creation of these goods.
Magic? It can seem so from the study of the economic cycle, but it is not if we observe the energetic cycle. We Simply have increased the Internal Energy, which will be used in new services.
May be this was not possible at the beginning of the industrial era, when the aptitude to produce goods was scanty, but it is now, when the bottleneck does not exist in the production of goods. The productive capacity is bigger than the used.
Among the reasons for suffering inflation we find the following one:
· Demand pull inflation: when the general demand of goods increases, without the productive sector having time to adapt the quantity of goods produced to the existing demand.
But we will act with order: we will inform the productive sector of the upcoming new demand. Even more, we will be able, if necessary, to offer a high degree of precision about that demand (by doing studies on the preferences of expense of those to whom we will give the created Money).
According to this perspective, the limit of the creation of Money for Social Services (elders' care) will be found in the limit of the productive system: it will be possible to create Money as long as we be capable of activating the productive system, not more.
The limit to the process will be found in the aptitude of the productive processes to satisfy the new demand in competition, that is to say, without creating inflation.
How much Money can be created hereby?
It is not easy to answer this, but we do not depart from zero:
In the last ten years there has been created a global real-estate bubble. This bubble has been a gigantic machinery of CREATING Money, and inflation has not been the main problem.
This provides a good clue.
The difference now is that we can create this money not in a chaotic manner, but associated with social aims. Destined to a radical, deep improvement of the society and the attention of its short, average and long term needs.
And thus we will be putting the Money to the service of the society, and not the society to the service of the Money
Though, there is, at least, one but:
The process will generate more exigency of primary and secondary energies.
Here we meet a problem: the problem is the energetic current limitation. This limitation causes processes of concentration in its possession (see article). That limitation turns the energy and the raw materials into speculative goods. IF they it were not limited, it would be possible to stimulate the economy as much as we wish. But they are, so the process can activate speculative processes in these sectors, which are the ones that truly cause inflation, as we saw in recent years.
So it is a priority to invest in the conversion of energy and raw materials in goods of unlimited appearance. And this has to be a global effort. And meanwhile, to focus the creation of social money on the processes that need less external energy. Always foreseeing and activating the mechanisms for which this money will find internal power in form of goods capable backing the new needs without losing the competitiveness.
But we observe with pleasure that these processes coincide –not surprisingly- with the “cycle of services”: Investment and Homeostatic Tools that cover a wide range of social needs: education, research, health, justice, elders' care, artistic, cultural and scientific projects, etc.
Nowadays, the process of creation of Money is the following one: the banks lend (create money) to those capable of creating more efficient goods (goods created with a minor quantity of external energy, or new goods).
This generation of new goods activates the economic cycle
This model has proved to be efficient historically, optimizing the production and orientating it (rewarding it with monetary returns) towards the creation of those goods that the society demands.
Nevertheless, the model presents a serious structural fault: it considers certain social services to be exclusively an expense, and therefore it does not create money for them.
In consequence, The ECONOMIC SYSTEM is not allowing the massive movement of the workers from the productive sector to that of the social services In works that ensure and enjoy the robustness of the social system.
And this way, the unstoppable increase of the productive efficiency, which at first should appear as a benediction (since less workforce is needed to produce the same), is perceived as a threat.
In the last ten years this lack of creation of Money has been solved by means of an over-excited procedure of inflation of the demand through the real-estate bubble. This bubble has allowed that the demand was kept in parallel to the productive capacity, but of untid form and with a poor social utilization.
It is possible to order this procedure of creation of demand, and must be ordained, BY CREATING MONEY DESTINED FOR A WIDE RANGE OF SOCIAL FUNCTIONS.
Due to the limitation of External Primary and Secondary energies, and observing their consistent tendency to enter into speculative processes, this model can be furthermore specified, looking for functions that consume little External Energy. And then we find health, justice, education in general, activities of leisure and culture, social assistance, etc. Assuming a rational use of this process, this creation of Money will correspond with the creation of Internal Energy for the system.
Let's jump from the Economy of the Production to the Social Economy. Let's provoke a social massive movement from the productive sector, in which less workforce is needed, to the social services, increasing enormously the collective enjoyment.
To do so, the Central Banks (European Central Bank, FED, etc.) MUST CREATE the suitable money and DELIVER IT TO THE GOVERNMENTS in order that THEY CREATE thousands or millions of social works, preferably in sectors that do not need great consumption of external primary and secondary energies. And these sectors are, precisely, education, justice, medicine, art, culture, investigation (research) or attention of patients or disabled persons. This must be carried out, obviously, by means of social agreements.
Before, the Central Banks will have to do two things: first, to value what increase of the production is possible supporting the competition, to evaluate how much money must be create with the described purpose. And, at the right time, to advise about the upcoming new demand to companies and banks, favoring the credit mechanisms to satisfy it, avoiding this way the inflation. And to keep a permanent feedback with regard to these variables.
The limit of this process will be found in the limit of the production system.
This, inevitably, will create certain pressure on the primary and secondary energies, authentic reason of the inflation problems. As long as they are indispensable and, at the moment, limited and not renewable, they are and they will be a source of speculation. The states should have, as a priority, to invest in the overcoming of that limitation. It is suggested the energy of fusion, based on the hydrogen, with unlimited appearance, as an horizon to reach to solve the provision of External Primary Energy.
It is foreseen that this source of energy is clean. The generation of this –unlimited- primary source of energy will redefine, hopefully, the availability of External Secondary Energies.
ABOUT THIS MODEL:
- It does not consider that it exists stores energy (patrimony) in any of the agents.
- It does not consider other (speculative) processes of creation of money (stock exchanges, etc.)
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