Chris Cook on Value in a Mutual Credit World

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"This is the third in a series of interviews that will accompany a book I'm writing, that will be published by Chelsea Green - an employee-owned company, and part of the new economy that book is describing, built around a mutual credit core."


"And there will be new institutions that deal with this? People don’t want to go round searching for partners to do deals with.

Chris Cook: Just as now, you’ll have people who make markets, in a sense. People who take a risk – but probably quite a minimal risk – and that’s a value-adding profession actually. There have always been people who have been prepared to come in and buy and sell – like merchants, or brokers.

* So there would be a relationship with people or organisations, in the same way that people have a relationship with a bank or a building society today?

I think what you’d see is something rather like a local stock market – literally – where people put their needs and wants – for example, I want to sell 5000 rental credits, what am I bid? The beauty of a rental credit is that people will always buy it at any price below face value, because that means they can cash it in at the full value. If I’m the occupier of a property, and there’s somebody out there selling £1 rental credits for 95p, I’m going to buy them, because I can then cash them in for £1 worth of rent. This is the beauty of having a returnable credit as an asset.

I guess that people are going to say ‘that sounds really complicated. I just want something simple to save for my old age’. Is it going to be as complicated as it sounds. Is it going to be useful for ordinary people?

You asked a complicated question – ‘how’s it going to work?’, which is like asking ‘how does the market work?’ There is a simple solution – that yes, you will have people who will enable you to cash out – very easily. And that can be explained in as much detail as you’d like.

* So we’ll have to see what emerges, and what kind of institutions develop as time goes on?

When you say institutions, it makes me think of organisations. What I’m saying is PEOPLE – will be there who will do that.

* Are you also saying that you see the opportunities for profitable investments in capitalism shrinking?

Very simply put, I think we’ve reached a point – I call it ‘peak rent’. When you consider that only 18% of retail rents are being paid on time, you realise that there’s a crisis. I don’t think most people realise how big a crisis it is. All of these shops – Arcadia, Debenhams, shopping malls everywhere – they’re not paying the rent. Why? Because they can’t. As Michael Hudson says, ‘if debt cannot be paid, it won’t be paid’ – that was in 2008. Now, if rent cannot be paid, it will not be paid. And the thing with rent is that it’s demanded, whether you can pay it or not. Now we’ve reached a point where systemically, there’s too much rent in the system. So the question for landlords is ‘would you rather have 100% of nothing or a smaller percentage of something?’ The new thinking that’s emerging is about production sharing leases, about shops that are sharing the rent with the landlord. That’s been happening with British Airways at the airports for a considerable time. The richest landowner in Norway got to that position because he charges an affordable rent and shares the revenues above that. It’s both ethical, because of the risk sharing; and it works. It’s not a new concept – in fact it’s a form of Islamic finance.

* So you see these use-credits as a way to bring investors over to this new economy, this new mutual credit / use credit system, as a way of being able to invest at all in future?

Well if you’re getting negative returns, and there’s something safe that will give you a positive return, yes. But there’s another important point here – and that’s the question of affordability. Now, with debt, the poorer the person is, the less creditworthy they are, and therefore the less likely that they can pay. It’s a vicious circle. Whereas with affordability – if the rental stream is genuinely affordable – maybe it’s limited to a certain percentage of someone’s income – then by definition, it’s more likely to be paid. And if that’s the case, it lowers the risk, so an affordable rental stream, being more likely to be repaid, is an extremely attractive asset class, for pension investors – all these people who are currently getting negative returns will be queueing up to invest in genuinely affordable rent, because that gives them a security of investment that they’re looking for – it’s a positive return. I’m sure you’ll be saying that a zero rent is infinitely affordable. So there’s a limit to this. But even a zero rent, if you get your capital back, is still better than a lot of people are getting now.

* So it sounds as though there’s going to be much less scope for wealth accumulation and concentration?

Yes, because there’s less ‘something for nothing’. That leads to the accumulation of wealth. But this model goes from a zero sum, or a negative sum game, to a positive sum game. That’s why I’m so optimistic about the future, because I think that capitalism, in its current form, will eat iself, disappear up its own posterior. You hear a lot of neoliberal rhetoric about cost-cutting – but what’s the biggest cost of all? It’s the cost of something for nothing being paid to rent-seekers. So if we can start to say that high rents are not going to be paid, so let’s come up with a new settlement, on a more sustainable basis – I think we’ll see, not a redistribution, because that will be resisted.

* A pre-distribution?

Pre-distribution is the word I was looking for." (