SDK wrote:Okay, trying to understand this here.
- Individuals put their money in banks, presumably because it pays some interest.
- The bank lends that money to cooperatives expecting to make more interest so the bank can turn a profit (the cooperative pays back the loan plus interest from their profits).
- If the cooperative fails, the bank gets the money back from the cooperative's assets. If the cooperative doesn't have enough assets (which is very likely in the case of a start-up) they get that money from... who?
Banks can take a loss. They charge interest at inflation + risk.
SDK wrote:You said "banks and insurance companies take on the risk itself" (presumably insurance the bank is paying for?), which I think means they get the money from no one, right? The bank just eats the loss, or their insurance does. Seems to me, that just means they'll just need to charge higher interest rates to make sure they get their money back.
The model I'm personally in favor of, but by no means the only possible model, is one where every loan is insured 100% by the borrower (this is for the sake of decentralized fiat currency). The bank would lend out at inflation, and have no real risk. The insurance company would be responsible for recovering the money, and the banks would just be concerned about customer service.
SDK wrote:You also said that "[the entrepreneur] can take on some of the risk if they want, but they don't have to", so if a bank wanted to charge a lower interest rate on the condition that you cosign against your personal wealth, that be allowed, right?
Correct. You may also choose to co-lend if you have money.
SDK wrote:I think I might not be understanding the fundamental difference between what you're describing here and capitalism. Seems like there are two main differences:
1) All businesses must be cooperatives, owned equally by the workers.
2) All land is owned by "the community" and is rented rather than owned by businesses and private citizens.
Businesses would be democratically owned by workers or consumers, yes; it's still a market system, so not much changes in that regard. There are many models for land ownership; some are occupation based, but I prefer one where it is rented.
SDK wrote:Could you define what role the community plays in this system, apart from land ownership/taxation through rent? Are they the lawmakers as well? What levels of government exist in this system, and is there a level of government above the banks?
The community is just the people. Government, I'm not too concerned about. Most everything about market socialism can work in our society today with our laws, or even an anarchist system of government.
SDK wrote:I was under the impression that you were thinking this system was meant to address some injustice; I'd been presuming that was wealth inequality. Is that the goal?
If so, I don't really see how that is addressed, exactly. Seems to me that a successful company will be making more money, therefore their workers will be making more money. Let that simmer for a century or so, and I imagine you could end up with great inequality, especially if individuals are not taxed directly, but are allowed to have personal wealth (just no land).
Most of our inequality is not from wages, it's from property income. Most of our wage inequality is caused by direct attempts to limit opportunity for the sake of creating profits. If your rand is rented, you can pay our a social dividend that pays everyone equally, and the more centralized the ownership the more equal the wealth overall. Democratically owning the businesses, either as workers or consumers, means that you have more equal power over the business. For the most part, the incentives of capitalism - people seeking to make more money than they can make by working a regular job - are what cause the inequality.