Capital as Commons : Investment with ‘r = g’

The Capital/Income ratio in Europe, 1870/2010

The neoliberal ‘ethic’ and practice is fueling increasing economic inequality around the globe. We are seeing ‘economic divergence’ as policy design weighted by lobbies creating conditions for a society that is fundamentally divided into an upper percentile of “”have’s”, and the greater majority of labouring and suffering human beings.

How can ethical investors work with the Commons to create conditions for ‘convergence’, the condensation of the gap, and minimisation of socio-economic inequality?

Tailored investment funds can act to stem divergent increase in wealth inequality, acting rather as engines of convergence mobilised by a coherence between the ethical investment community and entrepreneurial coalitions working in partnership with the state according to the logic of the Commons.

In his recent work Capital in the Twenty First Century, Piketty shows that the current economic process of moving toward greater economic inequality, and ultimately economic divergence, is based on the on the fact that the current rate of return on capital increasingly exceeds national economic growth, currently by close to seven fold, a trend which is steadily intensifying. This sustains and compounds economic division with return on capital enriching the investment class, who increasingly capture resources and the means of production, creating a global context of an artificial scarcity that steadily actualises itself in real scarcity, as a result of the destructive effect of the process on the well being of both people and the planet.

To address this situation, I am proposing a new form of investment fund based directly on this observation. This fund creates a space for people, socio-environmental enterprise, the state, and private investors to work together for the enhancement of the common good. Its main ingredient is essential to the nature of the fund:

‘r = g’

The rate of return on capital investment being equal to, does not exceed the national rate of economic growth.

This ‘convergence strategy’ acts to counter increasingly divergent economic inequality. The architect Christopher Alexander, in his magnum opus ‘The Nature of Order’ noted that in creating something it is imperative to look at its particular scale, and to make sure that the new piece coherently reinforces the immediately smaller, and the immediately larger scales. With “r=g” the common well being increases proportionately to the return on capital, forming an ethical basis for a ‘Commons-Partner-State’ relationship.

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