188.8.131.52 Working Cash Assets
In the new socio-economic system, the
enterprises in a shareholding-social or humanistic form of ownership of the
means of production will have collective monetary assets. Enterprises in private
ownership may keep, according to their own will, their own status and,
accordingly, their cash assets and resume business activity autonomously under
the principle of the capitalistic market based form of doing business.
In the western world, interest rates are already very low because only a small raise in interest rates can lead to a chain of bankruptcies that would destroy the western economy. On the other hand, a small reduction of the interest rate would virtually abolish the interest rate and profits on borrowed money. Slightly lowering the interest is in fact the end of capitalism.
By the disappearance of interest, banks would lose their basic function of earning rent on the basis of accumulated money. They would no longer be profitable enterprises, but could perform in the community the function of individual and social bookkeeping of the commodity-monetary transactions. Aided by computer technology, banks may keep records of the state of property of the population, records of earnings and expenditures of the population, and of those pertaining to the commune's economy.
In the classical economic system, consumers without cash borrow money to purchase commodities. Monetary loans burden the price of commodities with the interest rate determined by the market. Beside that the longer the repayment term of a loan, the higher the interest rate and, therefore, it is in the interest of the consumer to repay the loan as early as possible.
By introducing a system on non-interest bearing loans it will be necessary to set up a new system of monetary distribution that will in trading and financial terms be as efficient as the classical interest bearing lending. Since the quantity of working capital is large, but also limited, it may happen that such capital will not be sufficient to cover the needs of all beneficiaries. In this regard, the working capital needs to be distributed among the beneficiaries in the function of turnover time, which may be presented by the following formula:
C-of working capital =
The working capital beneficiary who repays the borrowed money in a shorter time will realize a larger C-of working capital. All larger working capital coefficients will ensure non-interest bearing credit financing by the commune, irrespective of the quantity of the assets claimed, as long as the working capital fund shall have become exhausted.
The system predicts a higher attraction of money to the economy that envisages a shorter time of turnover of commodities. This is understandable, because the money repayment is faster and may be again used for lending. The production that, in a period of a one-month payment accounting, finds a ready market will by the described distribution system be able to use an unlimited quantity of cash assets, as it will be practically repaying the same promptly.
The economy, collectively owned by the commune's population uses the commune's working cash assets according to its needs, and is bound to repay the borrowed amount of money within the accounting period. The economy can repay the working cash assets provided if gets paid for the produced goods or, to say it more precisely, if it produces the commodities the society needs. In the case that producers fail to sell produced commodities they will not realize a sufficient profit. If the profit is, nevertheless, higher than the quantity of working capital spent, enterprises will still be deemed to operate relatively positively as they are able to repay the working cash assets. The lesser-realized profit in the accounting period will reduce the income of workers.
If the realized profit falls below the amount of used working cash assets, the enterprise then registers a loss in working cash assets. Toleration of such a situation would lead to the reduction in the amount of cash assets in the commune's money fund, and producers would have difficulties to renew production. It goes without saying that no economic system can tolerate financial indiscipline and so neither can the commune can. Therefore, the commune introduces the system of measures for bearing responsibility. In the new system all workers are accountable for the loss of money and compensate such losses collectively by means of past labour points.
The production intended for an unknown consumer needs not be placed immediately on the market. In that case, the turnover of commodities may last longer than the one-month accounting period, and the enterprise may realize less profit than the working capital amount spent in the accounting period. However, as each enterprise operates on a continued basis, it may realize, on the basis of the collection for the goods produced in an earlier past period of production, the necessary profit and ensure the repayment of working capital.
The responsibility of workers needs to be taken independently of cyclic monthly oscillations of profits. If regulation of the responsibility for different realized profits were required on the basis of the monthly accounting of an enterprise, unnecessary and inconvenient oscillations in rewards to and in sanctions of workers would take place according to current the solvency of the enterprise. Distribution and taking past labour points should be performed once in a yearly accounting period.
Over the one-year period each enterprise takes the working capital as many times as it needs it, and repays it after realizing profit on the market. If such an enterprise fails to repay within one year the entire working capital, then the difference between the borrowed and repaid assets shall be subtracted from the holding of past labour points of all workers, proportionately to the coefficient of responsibility. In the case of losses of an enterprise, a higher coefficient of responsibility of workers brings a larger loss of past labour points and a lower income. And vice-versa, a lower coefficient of workers’ responsibility, in the case of cash losses of the enterprise, brings along a smaller loss of the quantity of past labour points, and a smaller decline in the level of income. The initiator of the wrong decision to borrow will be additionally sanctioned by bad evaluations given by workers and special commissions. In this way, borrowing entails a great responsibility of the whole collective, which is a precondition for productive production. The technique of adding and taking income based points is presented in detail in the chapter: “The Development of Economy”.
Each loss in the economy reduces the amount of money in the working capital fund of the commune. It may be assumed, however, that in the system that efficiently conducts the responsibility in business operation the losses will be small and the commune will renew them by the purchase of new money by way of past labour points and by the increase of profits in the productive companies of commune.
Non-realization of the envisaged profit due to natural catastrophes such as earthquakes, floods and fires, need not be deemed as losses in the economy. Such losses would be covered by the commune's reserve money fund.
Naturally, the quantity of working assets in the commune's reserve fund is always limited and it may happen that some producers do not get the necessary working cash assets. It is impossible for the economy to produce without working cash assets, and plants would need to be closed down. The commune envisages for such cases a reserve source from which working capital assets will be allocated. Such a reserve source is the fund intended for the development of the economy. If some enterprises even in such cases do not manage to receive the needed working capital, they can seek it from existing banks, but of course with the market interest rate.
However taking into account that the working capital will become distributed without interest, the holders of accumulated money will no longer be able to take loan commission. Holders of accumulated money will in this way be interested in having their money exchanged for past labour points. In this way, the commune will realize more cash assets for non-interest bearing lending to the economy and consumers.
It is worth saying in the end that irrespective of the extent to which the economy will be associated, the market economy will never be insensitive to oscillations in trends. By tightening the requirements concerning risk-bearing that will result from the work competition, the failures of producers may be markedly inconvenient. In this regard, producers will have to seek a higher degree of certainty in doing business and find it in the production for the known consumers.
Associated producers will question the consumers about their needs and will gradually organize the production in line with the orders to be received. When the consumption is known in advance, the economy can successfully organize its activity, and the work competition will allow the most successful realization. Such an economy would generate conveniences to the society; however, it has to be noted that it would be a decreasingly market and increasingly planned economy.
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November 13, 2013