Forum Post: Public Capital

When all capital is privately-owned, those with capital prosper… those without do not. Without access to capital, the poor have few choices and must remain dependent on those who do. The poor cannot afford to invest in the education needed for a high paying job and must remain dependent on those offering minimum wage positions. The poor cannot afford to buy their own home and must remain dependent on those who offer rental housing. The rich, on the other hand, can rely on these disadvantages of the poor and capitalize on them. The rich can use their capital to exploit the productivity of minimum wage workers and make huge profits for themselves. The rich can use borrowed money and the rental income from their tenants to acquire apartment buildings and housing properties for themselves. By denying the poor access to capital, the rich can control markets and acquire fabulous wealth for themselves.

But what if all capital assets were publicly-owned and equally accessible to everyone to use? (please hold back your suspicions of communism for a moment, and let me explain) If we simply traded the idea of exclusive-private ownership, for the idea of exclusive-private user-ship, none of our rights to enjoy a private and exclusive use of any major asset would change in the slightest. We could still use a house, or a car, or an office for as long as we desired without any fear whatsoever that someone else could take it away from us.

All major assets would be given a durability rating when they are designed and manufactured. The rating would identify how long each asset is expected to last under normal conditions. Rather than paying the entire production cost of a major asset upfront, consumers would only be required to pay the monthly depreciation costs of any major assets they use.

Imagine the freedom that this would bring. To find a place to live, you would simply contact a real estate agent to find out which homes or apartments were vacant. Once you found one you liked, you would simply move in. No downpayment, no interest, no expensive rent to pay to a profit-hungry landlord… just the true depreciation cost of your usage. If the house you occupy cost $270,000 to build and it was rated to last 60 years, the monthly depreciation cost would be $270,000 divided by 60 years, divided by 12 months (per year), which equals $375 per month. To use and depreciate the house, you would be required to pay just $375 a month. Not bad considering a traditional 25 year mortgage on a $270,000 house with no down payment would currently cost you about $1,575 a month (at 5% interest). Similar savings would apply to your cottage, motor home and car payments.

The cost of using commercial assets would fall just as dramatically as housing costs. Switching to public capital would generate enormous savings on buildings, machinery and equipment… and since businesses would no longer need profits to finance capital assets, all of these savings would be passed along to consumers in prices.

But the switching to public capital would also cause changes in the markets. Quality would become a much more important factor since better quality assets would have a longer durability rating. If the house you occupy cost $270,000 to build but it was rated to last 100 years, the monthly depreciation cost would be $270,000 divided by 100 years, divided by 12 months (per year), which equals $225 per month. So a better quality home would actually cost less to use than a "economical" home in our current marketplace. Even if the additional cost of better quality materials and methods raised the total production cost of a 100-year house to $360,000, the monthly depreciation cost would be only $300... still $75 less than the 60-year $270,000 house above.

If you decided to move, you would no longer have to wait to sell your house. You would simply inform the real estate agent of your plans. The agent would arrange to have a qualified appraiser visit the property. If your occupancy caused only a normal depreciation of the asset, you would be free to leave. If you trashed the place, you would be liable for the repair costs. If you improved the value of the property, you would receive a refund. Replacing private capital with public capital would bring an unheard of level of freedom to everyone.