It was a morning in mid-March 2019 that the newscasters finally admitted that we were in a global economic depression. It wasn’t an overnight event, it was just the culmination of a slow slide that began in late 2018.
In the US we would ask, “didn’t we just go through this?” and it would be correct to ask that question. However, this country and others didn’t deal with the systemic flaws that had affected their economies and politics. Effectively, the United States used a tool called “quantitative easing”, which was also known as printing money, to ‘buy’ stability in the system. That could be done because the dollars weren’t tied to anything tangible, so the Central Banks could just move ‘digital currency’ into the reserves of their banks to keep the economy going. There didn’t seem to be any sufficient willpower, either from a political, business, or citizen group, that seemed to want to fix the systemic flaws…it ‘appeared’ to either be unfixable, or that it was much easier to let the system collapse and then start again. The bankers forgot that money was a common utility of exchange used by the public, like water or sewer services. Without a tangible medium of economic exchange or a sewer system, the Community is left in a precarious situation. The bankers, investors, and corporations only valued cash as a resource, and the governments failed in their responsibility to protect it.
In time we came to realize in late 2019 that the main causes could be thought of in terms of two areas or ‘vector’s. One vector was the continuing instability in many nation-states around the world. Countries such as Greece, Austria, Eritrea, or Puerto Rico couldn’t stave off the bankruptcy of the country. Many countries had very unhealthy Debt-to-GDP ratios, which meant that there debt levels were too high in comparison to the earnings of their economy. As the creditors closed in on a country and attempted to institute austere budgetary reforms, the citizens revolted. These creditors represented financial and other corporate interests. In many cases, bargaining for the debt was not agreed to by the citizens, but only by the governmental leaders at the time.
Another nation-state instability dealt with other countries, such as those that were artificially created at the end of the Colonial Period after World War II (which created India, Pakistan, Israel, etc.) and which could not contain their changing nationalistic, racial, and economic demographics, such as in Spain and Belgium. Scotland continued its quest for independence and left the United Kingdom. These countries split, but the resulting economic chaos created a contagion made of market insecurity that rippled through the already weakened global market structures. Thus fell one hammer blow.
The operations of the Corporations were the second primary vector. Corporations as designed were not bad or evil, but they became too large for the fragmented political systems to deal with them. They did what they were designed to do: they allowed groups of investors to come together and participate on large-scale projects that one business owner or partnership couldn’t do, such as building an airport or providing large-scale medical services. A side-effect to this legal and organizational creativity is that it allowed rich people to get richer, while those who did not have large investments or who were wiped out in the many previous recessions remained poor. The great common rallying cry of those pre-Meltdown times dealt with the opposition to the richest 1%, because the difference between the richest 1% and the rest of the 99% grew wider each year. One of the primary methods that led to this happening was that corporations did not ‘die’ if they remained economically viable. Therefore the corporations were able to accrue resources generation after generation, until they held most of the financial resources, and the resulting political power. It was not a system that engendered the feeling of community to say the least.
Even though the economies were just muddling about, corporations were able to still create exponential growth. Much of this was spurred on by the adoption of new technologies, both in the amount and capability of new products, but also in the continued personnel and expense erosion as technology became programmed in to handle routine business affairs. Larger companies didn’t need fifty people to process purchase orders because the procure-to-pay cycle was automated. People didn’t need fifty telephone operators because they dialed their own calls and switching software handled the rest of it. This bottom-line growth translated to earnings which resulted in piles of cash. Looking for places to invest, global investors started to pull up the prices of investments through a demand-pull methodology.
This demand-pull of available cash from corporate earnings created large investment requirements. A mere 5% net income on $100 million in sales created an average of an additional $5 million in free cash. Multiply this by all the global companies at the time and it was a large demand group, especially given the strength of the dollar relative to other currencies. Thus the prices of investments did not match the underlying economy, and the two became dissociated. The economy remained flat, and the market soared to over 27,000 on the US Dow market before the corporations began their sell-offs. This sell-off triggered the related sell-off from automated trading systems of mutual and retirement funds. Even though the trading markets closed for three-day periods, when they reopened the steady drop continued. There was not a mechanism that the banks or trading firms could utilize that would stop the meltdown. The meltdown of the Chernobyl reactor seemed like a walk in the park compared to this event (on a global basis). The second hammer fell.
To say that there was local, national, and global disruption was to yell an understatement as loudly as you could. People donated time to keep the Internet available, but it was spotty at best. With limited Internet availability, the crypto currencies also became worthless. As money became worthless, bartering and trading came back. The fiat currencies were valueless, much like the Confederate paper money at the end of the American Civil War. Gold, silver, copper, and bartering became the modes of exchange again. ‘Going local’ became the necessity for almost everything. Some people thought it was funny to mention the word ‘corporation’ because inevitably someone would let off a string of verbal expletives about corporations. While corporations weren’t they only cause of The Meltdown, everyone knew that their political systems were corrupt and ineffective…just look at what happened to Rome two thousand years ago. As in America, any time you have a government based on two houses over government over three branches (executive, judicial, and legislature) where the legislature is in opposition to itself based on ideologies and where corporate lobbyists were provided significantly more influence than ordinary citizens, then of course the government will be corrupt, ineffective, and unable to respond rapidly to changing conditions. All large governments in the world failed and were replaced during The Meltdown. These failed governments were eventually replaced by a network of interconnected local systems. Since governments were already tarnished, corporations were only naturally the recipients of peoples’ anger.
Since there was a business necessity to the corporate legal structure, people developed the NewCorp. All NewCorps were only allowed to be not-for-profit, with their mission statement referencing first their responsibility to their community, and then after the first reference they could focus on their business. People understood that making a normal amount of profit was fine, but not at the expense of the community. The NewCorp could keep cash reserves of up to the operating expenses for one year plus reserves for special infrastructure projects.
The NewCorp had the unique feature in that it was organized into two distinct halves of operation: the Operating Area and the Infrastructure Area.
The first half was the Operating Area. Investors could not invest in this area, it was reserved for Networked Contributors, what in 2015 were called employees and contractors. The Networked Contributors were paid in wages and royalties, or by invoice for vendors. However, based on the performance of the company, and after allowing a reasonable return for investors’ funds ( up to +/- 10%) for the Infrastructure Area and reserves, the remaining funds are paid to the Networked Contributors (not including vendors). Wages are paid during the inter-month, but royalties are paid quarterly for up to five years based on a declining scale. This provided value to the contributors that created the benefit for the organization, and based on the value lasting more than one period of time, that royalties continued after separation from service or the end of the project. The amount of royalties, and the appropriate level of reserves were to be set by the Board of Directors of the organization. The combined wages and royalties of any Networked Contributor would not exceed 10x the average wages and royalties of all Networked Contributors.
The second half of the organization was the Infrastructure Area. This was the place for investors to channel their resources. This area was responsible for the creation or purchased of long-term fixed assets, research and development, and trademark issues. After The Meltdown, and with the NewCorp structure, there weren’t really any residual profits to distribute as stock investments had done, so investments changed to a primarily bond structure of investment vehicle. Investor’s funds that were not utilized to purchase assets were retained in the Infrastructure area, but they couldn’t exceed the value of the Reserve for the Operating Area. This was to prevent the run-away cash accumulations that contributed to the The Meltdown.
As a note, and after much debate, it was decided that a member of the Board of Directors could not be an Investor or a Networked Contributor to maintain transparency and fiduciary responsibility. All business entities greater than one person (sole proprietorship) became NewCorps including partnerships. During the prolonged recovery we found that ‘less was more’.
As a note you may wonder why the term Networked Contributors came into use? In the future we saw the terms of employee and contractor as demeaning, and that these people were available for work in many organizations. So for the time that they were in our ‘network’ we called them Network Contributors.
This new corporate structure has served us well. It has enabled us to continue to rebuild. There have been many changes as we work to avoid the problems of the past, without creating new ones. There is more involvement, less isolation..but we had to go through hell to get to this point. Sometimes the system becomes so immovable that it has to break in order to break free. Life is better is for everyone now.
This of course is just a story about a series of events and is of course, hopefully, just hypothetical. However, the change in corporate structure and focus could greatly help to alleviate current social problems.