This article was originally published on Medium here: https://kevin-34708.medium.com/improving-the-well-being-of-canberrans-114b1538f8a0.
Every six months in Canberra, the wealth of the richest ten per cent of the population increases by the total wealth of the poorest ten per cent. For most people, wealth and wellbeing are correlated; increase a person’s wealth, and, more often than not, their wellbeing will increase. It follows then, that the fastest way for the Australian Capital Territory (ACT) Government to increase the wellbeing of Canberrans would be to implement policies which address the obscene disparity of wealth in the community.
While wealth and income are related, the discrepancy between different groups in income does not reflect the disparity in wealth, and incomes change slowly. It takes six years for higher-income people to increase their income by the total income of the lowest-income people. The difference in the rate of increase between wealth and income comes from government policies which transfer income via taxes on profits and income. Governments transfer income but not wealth, rather, they tend to do the opposite.
Levelling increases in wealth per person across society will make the greatest difference to the wellbeing of Canberrans at the fastest rate. The underlying reasons for the increasing disparities in wealth lie in how the financial system operates. In a free market cash economy, businesses share profits with lower prices to buyers. However, in a free market economy, profits from capital are not shared, with lower prices but are taken by the owners of the capital. The free market does not share profits from capital. Read an economy based on reciprocity to see how an alternative economic system could work.
.One approach for businesses to increase their profits and share them with customers, reducing disparities of wealth, is through the use of community capital markets (CCM). In a company set up under a CCM, when a buyer purchases a product they also receive 50% of the profit from the sale as shares in the company. The seller is an existing shareholder in the company, and within the CCM they are required to sell a designated percentage of their shares each month. This allows for greater movement of capital and distribution of wealth among shareholders. Read a Self-Regulating Efficient Market to see an example of how a company with a monopoly on the market, like Icon Water, the ACT’s water and wastewater public utility, can set fair prices and increase revenue to the ACT government. Changing government policy to require Iconwater and Evoenergy to use community capital, paired with government incentives on community batteries, could reduce wealth disparities and the cost of operating these businesses. However, the greatest benefit to the Canberra community will come from making housing affordable for all.
The ACT government could budget a small amount of money to assist an existing body corporate to combine their properties and make all the properties affordable for their occupants, including renters. At the same time, this would offer self-managed superannuation funds the opportunity to invest and return an indexed allocated pension for twice as long as the best superannuation fund. Read Build to Rent and Buy (BTRAB), which outlines the approach, to learn more. The barriers to adoption are regulatory, which is why government assistance is required. Current tax, rental, and finance regulations are based on the assumption that landlords do not share the profits from ownership and that an owner must purchase a property in full, not acquire equity through a rent-to-buy scheme. This leads to the slow movement of capital, the higher costs for renters associated with a build to rent and buy scheme,, high insurance costs, and unnecessary real estate expenses.
Once one CCM is in place, I argue that most housing in Canberra will move to local CCMs, as the cost of operating markets and the increase in capital utilisation halves the lifetime cost of owning a house while increasing the returns to investors. For a low cost, the ACT Government can trial Community Capital and make significant changes to community wellbeing. Through these policy changes the government can increase everyone’s wealth at an equal rate. Although some wealthier people may object, most people will agree that policies which evenly increase wealth across the community will benefit the greatest number of people without harming any. These policies and greater distribution of wealth will improve the wellbeing of Canberrans. All benefit, and no one is left behind.
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