In this essay, we will summarize the model presented in Another Now, a proposal for a post-capitalist society. This summary is also available in video format (see video embedded below). However, the essay is definitive.
In 2020, Yanis Varoufakis, professor of economics, former Greek finance minister, co-founder of DiEM25 and the Progressive International, general secretary of MERA25, and member of parliament in Greece, published the book Another Now: Dispatches from an Alternative Present. The book discusses an alternate history where humanity broke with capitalism after the 2008 financial crisis. It’s a brilliant book, highly readable, inventive, and likely to appeal to general audience, so I recommend that you read it. This essay will present an abstract summary of the model found in those pages.
Before we begin though, some clarifications are needed.
Firstly, this is not a summary of the book Another Now. Another Now is written in a science fiction format with a lot of dialogue between characters with different opinions. In the book the characters find themselves in contact with another reality i.e Another Now, a post-capitalist reality. The details of that new society are scattered throughout the narrative. So I’m only going to present that alternate reality here. I will not say anything about the characters. And for the most part I’m not going to summarize the arguments made in the book, just the conclusions.
Secondly, this is only a summary of the economic model of Another Now. I’m not going to discuss activism, strategy, and transition, even though these topics are discussed in the book and they are crucially important.
Thirdly, this isn’t a review, analysis, critique, or endorsement. I will only provide an exposition of the model.
Brevity is the reason for the foregoing. Those are topics for another date.
Lastly, this essay emphasizes accuracy and completeness. However, it will be very clear and will make extensive use of illustrations. If you follow you’ll understand and by the end you’ll be an expert in Another Now.
Now, before we dive into the details I want to quickly give you the gist of Another Now. It’s a kind of socialism. There’s a big emphasis on properly functioning markets, on worker self-management, on radically reforming finance (especially through a public payment system), on international economic institutions, on the public ownership of land, on digital data rights, and there is extensive use of sortition for regulation and governance.
If you haven’t come across the word ‘sortition’, it means picking people at random (sorting people). You can use many different words: sortition, lottery, by lot. Effectively it means picking people at random. And this is the technique which was used predominantly in the Athenian democracy.
The main headings for the essay are as follows. I grouped the proposals in Another Now into five main categories:
- Production Units & Regulation
- Digital Information
- Land & Immigration
- International Trade and Development.
Before moving systematically through those headings, I want to give you a global picture of the model. Production units are divided into a nationalized sector, a worker-owned sector, and a domestic economy. And these production units are regulated by Social Accountability Juries. The central bank has a very important role, with a public payment system, local digital currencies, a private credit system, and each resident having an account at the central bank (broken into three sections with different functions). People have full property rights over their digital information and its use is controlled by a Sovereign Data Fund and micro-payment system. Land is publicly owned and is governed by County Associations, and immigration is managed regionally. Lastly, there’s a relation between the nation state and other states through the International Monetary Project, which regulates international trade and economic development.
Don’t worry, I don’t expect you to understand this yet. All will be explained.
1 – Production Units & Regulation
We will discuss:
- Ownership and Distribution
- Worker-Owned Firms – Ownership & Pay
- Worker-Owned Firms – Organization
Ownership and Distribution
Let us first address ownership and distribution.
There is a nationalized sector, a worker-owned sector, and a domestic sector.
Nationalization is only briefly mentioned in passing in the book. Varoufakis says that the utilities were nationalized in the Other Now. Usually ‘utility’ refers to services like sewage, electricity, rubbish collection, and so forth. However, in Another Now does this apply to, for example, health, education, transport, and energy? I’m not sure. Given what I know about Varoufakis’ politics, I would say that these sectors would also be nationalized.
In Another Now, there is no share market. What does that mean? Let’s say there is a furniture company O’Neill’s Furniture and I don’t work there. I cannot purchase a share in O’Neill’s Furniture because there is no share market (there’s no stock market, if you’re more familiar with the word ‘stock’). Only the people who work in that company can own a share in it. So a share in a company becomes like a library card, a ballot paper, or a club membership card: a non-transferable token of membership which bestows certain rights on the beholder.
In the worker-owned sector, these firms engage in commodity production, that is they produce goods and services for market exchange. These firms do not pay wages, they only pay returns to capital to the workers (see the next section). The economy uses money, and this is money as we would recognize it. It is not labour tokens or labour time, it’s just money.
The domestic economy isn’t much discussed in the book but I’m including it here to remind that it does exist. What do I mean by ‘domestic economy’? When you wash your dishes, when you take care of a family member, when you grow strawberries in your garden, this occurs within the domestic economy. The domestic economy is usually not considered part of ‘the economy’ because it is non-monetary production which is, historically speaking, ‘women’s work’.
Worker-Owned Firms – Ownership and Pay
Let’s examine the ownership structure of a worker-owned firm. For example, the ownership of this firm is divided four shares. There are four workers and each worker owns one share. There are no workers who own more than one share. Each co-op member, i.e. each worker owning one share, is entitled to an equal rate of basic pay, the opportunity to receive a bonus, and one vote in all important matters of the firm which are decided by an all-member vote.
The Disjointedness Criterion is used to determine who owns a share and who doesn’t own any shares. We will discuss this in the Worker-Owned Firms – Organization section.
Now let’s consider the income of Worker 1 in a worker-owned firm. The income of Worker 1 is divided into two main fractions: basic pay and bonus. Basic pay will most likely make up the vast majority of their pay. Let’s say that is €50,000.
How is the basic pay determined? There’s a basic pay fund for the whole firm and that is divided equally between all share-holders (i.e. co-op members). So, if there is a basic pay fund of €1,000,000, and there are 20 worker-members and hence 20 shares, then each worker will receive a basic pay of €50,000.
How is the bonus determined? There is a bonus fund for the firm, the extent of which is decided by an all-member vote. The bonus is variable across members. In principle, Worker 1 could receive no bonus, or they could get the entire bonus fund to themselves. The bonus that Worker 1 receives will be proportional to the number of merit points which they are allocated. Merit points are essentially brownie points which Worker 1 receives from their colleagues. For example, if Worker 1 receives 5% of the total merit points, they will receive 5% of the total bonus fund.
Varoufakis addresses the problem of reciprocal arrangements. What stops you and me from making a secret agreement that you will give me all your merit points and I will give you all my merit points, so that we will both get plump bonuses? In the firm, there is some information system which everybody in the firm can see which displays who is giving merit points to whom. This information system could be a webpage on the company intranet (or a complex of lasers, as in the book). In Figure 1.2, the lines between W1, W2, W3, W4, etc, indicate merit points being transferred from one worker to another. The thickness of the line represents the number of merit points transferred. Clearly, the lines connecting Worker 1, 2, and 3 are very thick, perhaps indicating a reciprocal arrangement. In a large firm with many workers, it would not be difficult to use software which could automatically detect reciprocal-seeming transfers above a certain threshold, thus not requiring a human to pore over a prohibitively complicated graph.
Worker-Owned Firms – Organization
Each firm must pay a corporation tax, which is a tax on revenue not profits. After paying that tax, the firm will have revenue to distribute between its activities, split into fixed costs, research and development, basic pay, and bonuses. Fixed costs include equipment, licenses, utilities, rent (land tax), and interest.
The allocation of revenue after corporation tax will be decided by an all-member vote. In general, all issues of strategic importance will be decided by an all-member vote.
What is an ‘all-member vote’? Everybody who owns a share in the company is a worker-member of the cooperative. Hence, in an all-member vote, all the worker-members vote. Any of those workers can put forward a business plan for the company to be voted on by everybody else using ranked-choice voting. Or submit other proposals of strategic importance.
There is no formal hierarchy within the firm membership. As far as I can tell there are no managers at all, not even elected managers. Organization is fluid; people can choose to work on whatever projects they want. And Varoufakis says that firms are typically small, having less than 300 staff, due to the absence of share market.
Hiring ultimately requires an all-member vote, so does firing. If I want to make somebody a worker-member with a share, that needs to be approved by all other members. For example, I can’t unilaterally bestow membership on 10 of my friends because that dilutes the basic pay of others. Similarly for firing, that requires an all-member vote.
There is no personnel department, and before the all-member vote hiring is an informal process directed by an ad hoc recruitment team. Similarly for firing, an all-member vote is preceded by an informal investigation conducted by an ad hoc committee (though I hope there are formal rules governing that process of investigation).
Who gets a share? In the book a couple illustrations are given to motivate the question. The first is a plumber who fixes a pipe. Should that plumber be given a share in the company because they fixed that pipe or should they be given a one-off fee for the service they provided? The second is a café which is owned and managed by two people. They want to hire a waiter. Should they pay that waiter wages or should that waiter get a share in the company? To resolve this conundrum the Disjointedness Criterion is introduced. This criterion is used “to distinguish between value production that requires teamwork and value that can be created and measured individually”. Thus, by this criterion, it is decided that the plumber is paid a one-off fee and the waiter is given a share in the café.
To compensate for some of the vagaries of the market, a Socialworthiness Index is used. This is an index meant to go beyond mere exchange value, beyond mere market price, to incorporate human flourishing, community, a sustainable relationship with the biosphere, and so forth. The Socialworthiness Index is used by citizens’ juries which judge companies, and if the companies fall below a certain threshold the juries can take punitive action. I have re-named these juries Social Accountability Juries because it is a more descriptive name (although maybe ‘market accountability juries’ would be even better).
There is one Jury per company. Jury 1 pertains to Company 1, Jury 2 pertains to Company 2, Jury 3 pertains to Company 3, and so on. Periodically each of these Juries will provide a social rating of their designated company using the Socialworthiness Index.
Let’s observe the operation of Jury 1, which pertains to Company 1.
Firstly, who sits on Jury 1? When Company 1 is legally registered, a stakeholder community is formed. What is the stakeholder community? It is constituted by customers, people affected by the firm in some way (perhaps those who live nearby), anyone who wants to join. This stakeholder community resides online, so it is a digital stakeholder community. To appoint Jury 1, people are chosen at random from this digital stakeholder community. An algorithm biases the process toward fair participation by different groups in society but effectively it is a lottery. Also Jury 1 is formed on a regional basis, it pertains to a particular area, so there could be several Social Accountability Juries overseeing Company 1 in different regions.
Periodically Jury 1 rates Company 1, and this rating uses the Socialworthiness Index which is standardized. Each Jury does not make its own idiosyncratic measurement, there is a standardized system for the whole state. If Company 1 falls below a certain threshold on that index – let’s say the company is dumping toxic chemicals into a local river – a public inquiry is held and that inquiry is empowered to deregister Company 1. Either through dissolving the company entirely or putting it to tender so some other person or group can have the opportunity to operate that company and use its assets. The idea is that the mere threat of Social Accountability Juries being able to dissolve companies will keep them in check. But, if necessary, they can be dissolved.
2 – Finance
We will consider:
- The Central Bank – PerCap
- The Central Bank – Governance & Inflation
- The Central Bank – Jerome (Public Payments System)
- Private Credit
- Local Currency
Tax in Another Now is very simple. There are two taxes: Corporation Tax and Land Tax. That’s it, there are no other taxes.
Corporation tax is on revenue, not profit. Today they tend to be on profits. Note that revenue is much larger than profit. Varoufakis gives a nominal figure of 5%.
We will discuss the Land Tax in detail in the Land section.
Central Bank – PerCap
Central banks are state institutions which issue the national currency and regulate the financial sector. In Another Now, every resident has an account at the central bank.
What does that mean? Today, you and I don’t have accounts at the central bank. We can only open an account at a private bank, and in turn that private bank has an account at the central bank.
In Another Now that account is called your Personal Capital or PerCap for short. Please remember that terminology. That PerCap account can accrue interest from the central bank. Your PerCap is divided into Accumulation, Legacy, and Dividend, accounts.
These three accounts are separate and they have distinct functions.
Accumulation is your ‘normal’ account. That’s where your work income goes, from your share and your bonus. Your interest income will go there if you lend money to other people and companies. And anything else will go there. For instance, if you sell your car to somebody, the money you get from selling your car will go into Accumulation.
Legacy is a large trust fund which every resident receives. The book gives the figure of $100,000 US. While everybody can receive it, there are conditions. Firstly, you must be an adult and, secondly, you must have a plan for its use.
Dividend is an unconditional basic income, a monthly stipend which every resident receives. The amount is related to the recipient’s age. Why is it called Dividend and not unconditional basic income? In short, it’s a rhetorical framing designed to overcome resistance due to the conventional work ethic. It is a dividend which you receive from the total capital of society, to which you’re entitled because you are a member of society and you contribute to the capital of society in some immeasurable way.
Central Bank – Governance and Inflation
The central bank is governed by a Citizens’ Monetary Assembly. How is this assembly appointed? In a pattern which will become very familiar, there is a pool of residents in the country and the monetary assembly is drawn from that pool using a lottery. Again, using an algorithm which takes account of the representation of different groups. Hence everybody in the country will have some chance of being appointed to the Citizens’ Monetary Assembly.
The Citizens’ Monetary Assembly will implement the central bank charter. In that charter is an inflation target. For example, if the central bank has an inflation target of 7% per year and measured inflation is running at 30% per year, what does the central bank do? The central bank increases the interest rate accruing to PerCap accounts (your account at the central bank). The idea is that this will encourage a high saving rate and hence lower spending. Equally if the inflation target is 7% and inflation is running at 0%, the interest rates can be decreased.
Furthermore, the Dividend which each person is awarded in their PerCap account can be increased. In principle, this could also be decreased. What I gather is that increasing and decreasing interest rates would be the first resort and adjusting the Dividend would be the second resort.
Central Bank – Jerome (Public Payments System)
The central bank operates a public payment system called Jerome (named after St. Jerome, the Christian patron saint of libraries & librarians). This is very important.
Jerome uses a digital public ledger like a blockchain, which allows transactions to be anonymous while making the total amount of money in the system transparent. The intention of the latter is to stop the central bank from being able to furtively issue or otherwise transfer large quantities of financial assets to political allies or lobbyists.
There are no service charges or fees, so if I transfer money from my PerCap account to yours no fee will be incurred. This is a public service rendered by the central bank.
What is the role of public credit? We have seen that public banking has a very important role in providing a transparent and gratis payment system, in providing every resident a PerCap account, and the Legacy and Dividend payments. But what role does public banking have in providing credit, both personal and investment? I’m not sure.
Varoufakis posits that these changes to the financial system, namely the elimination of the share market and the use of the Jerome public payment system, have made large, dominant, financial vehicles obsolete. Retail banks, commercial banks, and investment banks, are obsolete.
Any individual can lend their PerCap. You can do this peer-to-peer, through an intermediary, or through a credit union.
In any case, let us consider an illustration of the private credit system in Another Now. All transactions are made via Jerome, through the central bank. Individuals can lend to each other peer-to-peer. How do companies obtain credit? Four ways. Individuals can lend directly to companies, and individuals can lend to companies through intermediaries (e.g. trading apps such as Degiro) Companies can lend to each other.
Furthermore, individuals can pool their PerCap to form a credit union, which in turn can lend to individuals and to companies. Note that these credit unions operate strictly on a loanable funds model. What does that mean? If Credit Union 1 is going to make a loan of €10,000 to Company 3, it can only do that if there have already been deposits made equalling at least €10,000. It operates much like a piggy bank. Isn’t that already how banks lend? No. Banks today operate on a fractional reserve system (or ‘endogenous money’), where banks do not require deposits to make loans. Essentially, when a bank creates a loan it marks up a spreadsheet, and in doing so creates money. A private bank today would make a loan to Company 3 of €10,000 regardless of the value of deposits it had already accumulated.
Another important point is that if Credit Union 1 makes a loan to Company 3, this is not an equity loan. An equity loan would be where Credit Union 1 acquired, say, 2% of the shares of Company 3 in exchange for a €10,000 loan. In Another Now, Credit Union 1 cannot purchase a stake – buy shares – in Company 3 because there is no share market. Only workers in Company 3 can own shares in Company 3. So Credit Union 1 can make a loan of €10,000 to Company 3, but it can only do this to make interest on that loan.
Any lender can charge interest. In the book, it is perhaps suggested that interest is simple interest (a flat fee) rather than compound interest (an exponentially growing sum). However, I’m not sure.
We have seen Jerome, the digital public payments system operated by the central bank. These digital tools are provided to any group who wants to make a local currency, resulting in local governments issuing their own local currencies. Why would they do that? To keep value in the locality. Exchange rates are set by the central bank and these exchange rates are used to regulate the flow of wealth between regions.
In Figure 2.6, there is a state and its central bank which issues the national currency and operates the public payments system.
Regions within that state issue their own local currencies. Consider, for example, Region 1. Region 1 creates its own local version of Jerome, Local Payment System 1, and using this it creates Local Currency 1, a digital currency. Similarly for Region 2, for Region 3.
There is an exchange rate between each of those local currencies and the national currency, set by the central bank. For example, the exchange rate between local currency one and the national currency is two. Two units of local currency exchange for one unit of national currency. These numbers can be manipulated to regulate the flow of wealth between regions. Let’s say that Region 1 is quite deprived compared to the rest of the country. The central bank can make it expensive to convert Local Currency 1 into national currency to encourage people in Region 1 to keep value locally, in order to stimulate local investment and consumption to try to promote economic development. The corollary is that national currency can be cheaply converted into local currency, causing money to flow from the surrounding economy into Region 1, again promoting economic development.
3 – Digital Information
Full property rights for personal data are legislated through a Digital Rights Act. Data cannot be used as a free input for commodity production.
There is a micro-payment system called Penny For Your Thought. To use your data, app developers must obtain your consent then pay you. This in turn stimulates a new business model where users actually pay to use apps, because the user becomes the customer rather than the product.
There is also a Sovereign Data Fund, owned and operated by the state. All data, public and private, is stored anonymously on Sovereign Data Fund servers. To use this data, companies must pay a royalty for a license. The Sovereign Data Fund is used to harness economies of scale. Certain things can only be done with huge pools of data, so-called big data.
Let’s examine this system in more detail. Developer 1 is trying to develop an application.
They can access the Sovereign Data Fund, pay a royalty and access that data.
What if Developer 1 wants to use your data your data specifically? They use the Penny for Your Thought micro-payment system.
In Figure 3 are listed a number of individuals: Person 1, 2 … 6, 7. Each person has associated with them many types of data, labelled Data 1, 2, 3 … N. For example, Data 1 are health data, Data 2 are location data, Data 3 are purchasing preferences, and so on.
Developer 1 must use Penny For Your Thought before they access your data. They must obtain your consent for each type of data desired.
Person 1 does not give consent for Data 3, but they do give consent for all the other types. Person 2 does not consent for any of their data to be used, so Developer 1 will not be able to access any of Person 2’s data. Similarly, Person 3, 4 … N set their own data preferences.
Since Person 1 has consented to some data being used, Developer 1 can use it. However, they must pay Person 1 for it. Thus, Developer 1 sends money to Person 1 and Person 1 sends data to Developer 1.
It’s unlikely that Person 1 will obtain very much money from this this transaction. However, from the perspective of Developer 1, who might be trying to obtain data from 10,000 or 1,000,000 people, obtaining data could become expensive very quickly. Since data is no longer a free input, businesses are incentivized to move towards a different model, where the users actually become customers who must pay for goods and services rather than being themselves the product sold to behavioural manipulators.
4 – Land & Immigration
We will survey the following headings:
- Land – Ownership & Control
- Land – Social Zone
- Land – Commercial Zone
Land – Ownership & Control
In Another Now, all land is publicly owned. And it is owned on a regional basis by regional Ground Commons Authorities, called gComms for short. Each land authority is governed by a County Association which is responsible for zoning and social housing.
Who sits on a County Association? You have probably guessed by now: the County Association is appointed by lot from a pool of local residents.
Let’s look at the County Association in more detail. It is responsible for zoning land. Land is divided into two main zones: social and commercial. Socialis broken into residential and other.
Commercial land is further zoned into residential and business zones. And all commercial occupants must pay a rent to gComms, the local land authority.
Land – Social Zone
Focusing on the social zones, there are residential and non-residential sections. Occupants in a social zone don’t have to pay any rent, and social housing is allocated by the County Association.
Figure 4.2 shows a social zone within a particular county. Here all of the units in this social zone are tenured, meaning that those allocated social housing are secure in their occupancy of that unit until either they die or move away.
Let’s say that another unit becomes available. Somebody dies, moves away, or a new building is built. People will apply to the County Association to occupy that available unit, which will be allocated by lot. Every applicant will have the same base probability. However, this base probability will be modified by the evaluation of an interview with the County Association. A good interview will augment your score, a bad one might not increase your score at all. Furthermore, your chance of being allocated that unit is inversely proportional to your PerCap, i.e the system is biased towards people who have less money and biased against people who have more money. The idea being that those who can less afford commercial housing have a greater chance of obtaining social housing.
Land – Commercial Zone (PASS)
The commercial zones are split into residential and business sections. All commercial occupants pay rent to gComms, the local land authority. And this is done through the Permanent Auction Subletting System (PASS). This rent is used by the local government to fund social housing.
Let’s consider the PASS in detail.
Consider particular commercial property – say, a house – and its occupant. The occupant, like all occupants of commercial zones, must pay a rent to gComms. There are a few questions. Firstly, how is the level of rent decided? Secondly, how is the occupant decided? We’ll answer those questions now.
Every year the commercial occupant must self-declare the market value of the property. They add this declaration to a public listing of all properties in their region. This is the PASS website, basically the gComms website, the local land authority website. This self-declaration of the market value is what determines how much rent they pay to gComms. For example, in Figure 4.3 the occupant values the property at €100,000. The rent is a fixed fraction of whatever they declare, for example 25%. Therefore, the rent paid to gComms is 25% of €100,000, or €25,000 per year.
What stops the occupant from severely underestimating the market value? For example, declaring the value to be 4 cents and thereby only paying 25% of 4 cents, or 1 cent per year.
The answer is as follows. Any prospective occupant is entitled to bid for a commercial property. The highest bidder gains the right of occupancy.
The PASS website hosts a virtual bidding room. Imagine a prospective occupant bids €80,000 for the property. That bid is compared to the market value declared by the current occupant, which is €100,000 in this case. The comparison is favourable to the current occupant because €100,000 is worth more than €80,000. So the current occupant stays in the property and they continue to pay rent to gComms.
However, let’s say that the prospective occupant ups the ante. They bid €400,000, which is a bigger number than €100,000. Therefore, the property changes hands and the new occupant pays a rent to gComms. Their larger bid secures them the occupancy of the property, however because their bid is so big they must now pay a very big rent. The rent was €25,000 before and now it is €100,000. As such, in the commercial property market there is constantly a tension between trying to bid high enough to obtain the property but low enough that the rent is serviceable.
Immigration is not managed by the central state, rather it is managed by regional government. A prospective migrant applies, say, to Region 4 for a visa. Specifically, they apply to the County Association which governs the gComms of Region 4, and the County Association grants or denies the visa.
If a migrant obtain a visa for Region 4, they can apply for social housing in Region 4 like any other resident. The process is the same. There is a lottery, the base probability of which is modified by an interview (a remote interview, in this case).
5 – International Trade and Development
Our discussion will spread over these headings:
- International Monetary Project & Kosmos
- Currency Auctions Directorate
- Trade Imbalance Levy
- Surge Funding Levy
- International Redistribution and Development Depository
Another Now features a system of international economic institutions: the International Monetary Project (IMP), Kosmos (K), Currency Auctions Directorate (CAD), a couple of trade levies, and the International Redistribution and Development Depository (IRDD). This is somewhat similar to what John Maynard Keynes proposed in the original Bretton Woods conference of 1944. It is important to remember, though, that Keynes’ design was rejected by the American delegation and was not implemented.
International Monetary Project (IMP) and Kosmos (K)
The purpose of the International Monetary Project (IMP) is to balance trade between states and fund sustainable development internationally. To this end it uses the Kosmos (K), a new unit of account. Each state has an account at the IMP and the Kosmos is used as an accounting unit of international trade.
Consider the example shown in Figure 5.1, wherein State 1 and State 2 trading. These could be states trading or importers and exporters within those states. Let’s say that State 1 is Germany and State 2 is the United States of America. Germany wants to purchase wood axes from the USA, how do they do this?
The axes are listed in US dollars because they’re produced in the USA, and the importer in Germany has euro to spend because they’re in Germany. How is this exchange made? The International Monetary Project converts the euro into Kosmos and then back into US dollars, using some exchange rates which the IMP sets (explained in the next section). Fine, but why can’t the euro just be directly converted into dollars? What is the function of the Kosmos? The answer is to keep track of international trade.
Every state has an account at the IMP which records the trade of each state (i.e. the aggregate trade of all entities legally designated as residing in that state). The Kosmos functions as a universal unit of account to facilitate the measure of international trade. Without this universal unit of account, trade would have to be measured using many different currencies. Here we see State 1 imports 200 Kosmos worth of goods, i.e. 200 Kosmos worth of axes. By implication, State 2 exports 200 Kosmos worth of axes. In this way, the IMP can keep track of how much each state is trading in terms of Kosmos.
One further remark on trade surpluses and deficits. Imagine this trade pattern continued indefinitely, rather than being one transaction of many. In that case, State 1 is in trade deficit, which means it is importing more than it exports in terms of Kosmos; and State 2 is in trade surplus, which means it’s exporting more than it’s importing in terms of Kosmos. By the procedures of the IMP, both states will be penalized (as discussed in the Trade Imbalance Levy section).
Currency Auctions Directorate
How are the exchange rates set between national currencies and the Kosmos? These are set by the Currency Auctions Directorate (CAD), a division of the International Monetary Project. Every day states and private actors buy and sell different currencies through the CAD.
In Figure 5.2, State 1, 2, 3, and 4, are buying and selling euro, dollars US, yuan, pounds sterling, etc. The job of the Currency Auctions Directorate is to set exchange rates, between these currencies, between each currency and the Kosmos, such that supply and demand for each currency is as close to matched as possible, i.e such that these exchange rates are market clearing prices.
Trade Imbalance Levy
We saw earlier that states in trade surplus or deficit are penalized. This penalty is the Trade Imbalance Levy, which is applied automatically by the IMP by deleting Kosmos from that state’s account at the IMP. The magnitude of the levy is proportional to the magnitude of the trade deficit or deficit.
Consider the example shown in Figure 5.3. The Trade Imbalance Levy is set at 10% of the magnitude of the trade surplus or deficit. For simplicity, State 2 only exports, State 5 only imports, and State 1, 3, and 4, have balanced trade (that is, for example, the imports of State 1 equal its exports).
Thus, State 2 has a trade surplus and State 5 has a trade deficit and as such State 2 and State 5 are penalized. Each of them pay the Trade Imbalance Levy to the IMP. The IMP will delete Kosmos from State 2’s account at the IMP and delete Kosmos from State 5’s account at the IMP. How will the levy be calculated? Let’s say that State 2 has a trade surplus of 100 million Kosmos (they 100 million Kosmos more of goods/services than they export). Then the levy is 10 million Kosmos, and so 10 million K are subtracted from State 2’s account at the IMP. Similarly for State 5 which has a deficit of 100 million Kosmos, the levy is 10 million K.
Surge Funding Levy
There is another levy: the Surge Funding Levy, which penalizes excessive international financial flows (financial flows across national borders). Again, this levy is applied by the IMP by deleting Kosmos from the state’s account at the IMP. The levy is activated above a certain threshold and the levy is proportional to that financial flow (i.e. transfer of money per unit time).
In Figure 5.4, State 1 transfers money into accounts in State 2, representing a financial flow between State 1 and State 2. The levy threshold is set at 150 million Kosmos per second and the levy is set at 20% of the financial flow above that threshold (my numbers).
The flow between State 1 and State 2 is 200 million Kosmos per second, which is in excess of the Surge Funding Levy. Thus, State 1 is penalized. The flow between State 1 and State 2 is in excess of the levy by 50 million Kosmos per second (i.e. Excess = Actual Flow – Threshold Flow, Excess = 200/s – 150/s = 50/s). Therefore at a levy of 20%, 10 million Kosmos per second are deleted from State one’s account at the IMP (20% of 50/s = 10/s).
If I understand this correctly, State 2 would not be penalized but I’m not sure. If State 2 isn’t penalized it is because the Surge Funding Levy is introduced is to avoid predatory financial flows, for example where State 1, which is rich, funnels money very quickly into State 2 creating speculative bubbles and crashes, then withdrawing with the loot.
International Redistribution and Development Depository (IRDD)
The last institution is the International Redistribution and Development Depository (IRDD), which is more or less a rejigged World Bank. The Trade Imbalance Levy and the Surge Funding Levy are directed into the IRDD account. So, if a levy removes 1 million Kosmos from State 1’s account at the IMP, then 1 million Kosmos the IRDD account is marked up by 1 million Kosmos.
IRDD funds are used for investment in the sustainable economic development of poorer regions, which could mean investment in poorer nation states or regions within a given nation state. Those are investments in the green transition, public health, and so forth, as well as investment in sustainable migration. Regions which grant visas to migrants could be entitled to some IRDD funding in order to make this a smooth process. In order to make this a process which is not economically detrimental to that region receiving migrants but rather is economically neutral or economically beneficial.
Something very important to note, because I said the IRDD was a rejigged World Bank, is that these investments are transfers of money, grants not loans. The money is given not only is interest not paid but nothing is paid. Moreover, IRDD grants do not carry ‘conditionalities’ requiring ‘structural adjustment’ (austerity and asset stripping).
Figure 5.5 condenses the foregoing into a single diagram. A number of states and trading blocs are engaged in trade with one another. This trade is mediated by the International Monetary Project using the Kosmos, with exchange rates set by the Currency Auctions Directorate. State 3 has a trade deficit and Trade Bloc 2 has a trade surplus, so they are penalized with the Trade Imbalance Levy. State 1 has an excessive financial flow into State 2, so State 1 pays the Surge Funding Levy. In turn, these levies flow into the International Redistribution and Development Depository, that rejigged World Bank which provides transfers rather than loans. The IRDD invests in poorer regions to promote sustainable development and invests in regions receiving migrants to promote sustainable migration.
We have summarized the economic model of Another Now across the main headings of production units & regulation, finance, digital information, land & immigration, and international trade and development.
To re-visit the global picture of the model presented at the beginning of this essay, examine Figure 6.
Production units are split into a nationalized sector, a worker-owned sector, and a domestic sector. There is no share market thus only those who work in a firm can own it. Each worker-member owns a single share with equal basic pay, variable bonus, and equal voting rights. There are no bosses. Worker-owned firms produce commodities which are bought and sold with money. Enterprises in the nationalized and worker-owned sectors are regulated by Social Accountability Juries, which are appointed by lot and have the power to dissolve enterprises if they fall below a certain threshold on the Socialworthiness Index.
The central bank has several important functions. Each resident has an account at the central bank divided into three separate accounts, Accumulation, Legacy, and Dividend. Accumulation is a normal current & savings accounts, Legacy is a large trust fund, and Dividend is an unconditional basic income. Financial transfers are made using the Jerome public payment system, which is a blockchain-like digital public ledger connecting accounts at the central bank. A private credit system uses Jerome, where lending can be peer-to-peer or through organized financial vehicles and loans can be made for interest. Local governments issue their own local digital currencies. The central bank pursues an inflation target by adjusting PerCap interest rates and the Dividend.
There are two taxes, a corporation tax on revenue and a land tax.
The Digital Rights Act legislates full property rights over personal data and the use of data is regulated by the Sovereign Data Fund and the Penny For Your Thought micro-payment system.
All land is publicly owned on by regional Ground Commons Authorities, each of which is governed by a County Association appointed by lot. Land is divided into social and commercial zones. Social housing is allocated via lottery. Commercial property is allocated via the Permanent Auction Subletting System (PASS), where each occupant self-declares the market value and the highest bidder obtains the property. All commercial occupants pay a rent to gComms which is a fixed fraction of the declared market value. This rent is used by local government to fund social housing.
Immigration is managed regionally, with the County Associations deciding to grant or deny visas. Migrants granted a visa can apply for social housing like anybody else.
Lastly, trade is mediated by the International Monetary Project, with its Kosmos unit of account. The Currency Auctions Directorate sets the exchange rates between national currencies and the Kosmos via daily currency auctions. The Trade Imbalance Levy penalizes trade surpluses and deficits, and the Surge Funding Levy penalizes excessive international financial flows. These levies are transferred to the International Redistribution and Development Depository which invests in sustainable economic development poorer regions and in sustainable migration in regions which grant visas.
This essay (and its video companion) is part of a series of summaries and analyses of post-capitalist proposals. It will be updated after an interview with Yanis Varoufakis.
Do leave a comment. I’m genuinely interested in hearing your thoughts, including constructive criticism. I hope to gradually build a community around this blog (and the associated After The Oligarchy YouTube channel) where we can have illuminating discussions and learn from each other.
Y. Varoufakis, Another Now, 2020.