Although we are employing new financial protocols and shifting from money-production to value co-creation, there may be some value in examining what the current moneyflows are with our tradition system of exchange and taxation. We have a simple algorithm to track subjective enumeration, whereas in the current system our money is distributed in a complex network of exchange including governmental taxation. So, how do we go about tracking where the money goes? Let’s follow the money!
Let us track how money moves based on some simple items:
- apple (natural things which grow in the uk)
- banana (natural things which grow somewhere else in the world)
- wooden toy (made in the uk)
- electronic gadget (made somewhere else in the world)
- beer (made and distributed throughout the uk)
- petrol (imported from outwith the uk)
- laptop (manufactured and bought from another country)
So, the first six items are bought and sold in this country, whereas the last is bought from a trader outwith the uk.
Some generic questions which may guide us in determining where our money goes:
- how much goes to the company?
- how much to the employees?
- how much for logistics?
- how much for buildings and shops?
- how much goes to owners as profit dividend?
- how much goes on tax?
apple (natural local produce)
A bag of apples from tesco cost anywhere from 21p per apple to 30p.
How is this money distributed? If Tesco gets 21p of my money for an apple, who gets this money? I’d like to think that the check-out person and the shelf-stacker got some, and the people who transported the apple to the shop do too. There may be intermediary markets, but let us consider that tesco has a direct relationship to the farmer — how much do they get for the apple? And in terms of the farming, how much goes to the farmer, and how much to the farm-hands who harvested the apples, and indeed, how much goes to the people who sowed the seed in the first place? Then there’s the tax — what are the tax points? Each employee is taxed, the transportation is taxed, are there any points for VAT? And this apple may benefit from government subsidies, and may even benefit the owners of tesco in terms of “profit”.
We can not get into such extreme detail, but it would be instructional to get as much of a system answer as we can. After all, it would be nice to know how everyone is remunerated in the supply chain from the apple tree to the specific apple going into your mouth. We are particularly interested in seeing how money flows between individuals and organisations and between organisations. We are interested in noticing if there is such a thing as “leakage of moneyflow”, such as we find in water loss between the reservoir and our taps (which incidentally ranges from 10% for efficient cities to 50% in poorer countries or those countries with aging infrastructures).
These questions are beyond our remit here. This is our first iteration. We need ball-park figures. Looking at Tesco’s Annual Report 2011 and 2012), we can gather some simple figures:
- in 2011, revenue per fulltime equivalent employee in the UK was £200k
- in 2011, profit per fulltime equivalent employee in the UK was £15k
- in 2011, (corporate?) tax was £0.9b
- in 2011, actual fulltime equivalent employee wages and salary globally was £15k
(A passing note: the accounts are static. Wouldn’t it be more useful to have a live, dynamic database, and one could query specifics? For example, I had to calculate the last stat myself based on the numbers in the reports. Accounts should be a searchable and dynamic system — and this is exactly what we will have with an ecological economics system. It is as feasible as the trick that Google has performed, conducting a “live” (or daily at least) search of the internet. We have the opportunity of replacing our out-dated static financial account, with so much static corporate structure, with a dynamic con-current event, and any query is a live instant. We are replacing static complexity of corporate structure with a dynamic p2p complexity.)
A basic way of interpreting the numbers is that out of the network of people who comprise Tesco, say 200,000 fulltime-equivalents in the UK, each person helps generate a revenue of £200k, thus generating the full revenue of £40b for the network in 2011 in the UK. In the current system, salaries range from £15k to £15m for the executives (there are pages of stats on the remuneration of directors and executives and it is not entirely clear what they earn in sum), which derives a financial gearing ration of 1:1000. But there is a problem in how this money is distributed which can be shown through a simple game.
You have a cake, and you give it to two children equally. How do they do it?
The answer is, as you probably know, the person who cuts it is not the person who chooses which slice they get. The chances are, the person who cuts it will then cut it as fairly as they can.
Of course, this reality-experience can get more complicated when we increase the number of participants beyond two, opening up potential politics — but what we are looking at here is a system which encourages fairness. And in terms of Tesco and most companies, the individuals who are deciding on who gets what slice are the individuals who are cutting up the cake — they cut the cake and get first pick of the slices. And even the board of advisors brought in to regulate this process are mostly executives from other companies. We have a kind of “executive aristocracy”. Fairness will never evolve from this set up.
This is not to say that we want a complete equality in the distribution of revenue. After all, some people are making decisions that are resulting in massive gains for the company, deciding on the location of a new store, for example, down to, deciding what items are packed in what shelves. So, it is reasonable for some individuals to be remunerated higher for their efforts, insight, genius even. But wouldn’t it make more sense for this to be evaluated by people, and not by position? I wouldn’t mind knowing that someone attracts £15m because their decision led to all of us benefiting by billions. Such individuals would be the distributed executive.
So, ecological economics enables this. Not only in terms of the choices people make about who they invite (using mttp, the equivalent of a secure income), but also how they evaluate one another’s engagement (using sea, the distribution of profit).
A final observation, the amount of organisational complexity of Tesco is extraordinary. I read once that supermarkets were one of the modern wonders of the world for its sheer complexity. P2p networks based on technology provided by the internet (which is simply an application of Tim Berners-Lee’s http), promises an equivalent complexity and richness without the artificial complexity of proxies such as “companies”. One concern that comes to mind, however, is ownership, or what companies’ term assets. Can such a rich networked complexity occur from individuals “owning” specific trucks or even “isles” of the supermarket in the same way we have gardeners of wikipedia pages? I do not think we are currently capable of this scale of social self-organisation, no matter what the expert pundits say. We need to learn how to trust one another, to be able to engage in consensus dynamics, otherwise any hope of large scale p2p networks will collapse under its own inefficiencies.
bananas and other produce/products
It will not serve us to examine the other produce as we originally set out. We are not in a position to track the chain of supply for any item, apple, banana or computer. Can we even answer what happens to the money for a 21p apple? From the crudest interpretation, the apple represents the revenue of Tesco, which means that 1.5p goes to the checkout person (as a representative of all employees), 1.5p goes to the owner, and the remaining 18p goes… somewhere else? We can say transport, property etc etc, but if we were to examine the costs for this, eg the cost of a new truck, we would simply see that money would be going to the people who made them. Like the question about the world and turtles, the economics world is held up by employees, and it has employees all the way down.
Petrol does remain interesting. Even a cursory look at fuel costs, we can see that the situation is rather extreme. I just paid 135.9p per litre, of which about 49p goes to the fuel importer and 5p to the garage you buy it from, and a massive 82p goes to the government as duty tax as well as the recent addition of VAT of around 23p. Astounding. Terrifying.
A milestone for ecological economics will be to apply the protocols to mapping petrol costs. Although the government is getting an astounding amount of money from drivers, they are in effect subsidising a huge number of businesses by maintaining the road infrastructure. But even then, I don’t think that justifies such a large cut of people’s hard-earned cash.