Thursday, 21 January 2016

Moses' Economic System

An economy based largely on credit and interest such as ours, is always likely to have cycles of boom and recession. In other words, instability. Many modern investment strategies directly depend on that instability in order to derive profit.

For example, we invest in property, shares or commodities - and without improving the asset at all, we expect to make a profit, simply because we hope the price will move, in a direction that favours us when we re-sell, not the next buyer.

That means we're depending on instability in order for our wealth-creation strategy to work. It means the buyer's gain is not equal to the seller's advantage - and that's what we depend on.

It means we hope to gain more for our asset than we paid for it, without having improved it, while someone else has to pay more for our asset than we did even though its intrinsic value has not changed.

Moses' Law on the other hand forbade charging interest to fellow-citizens - only to foreigners. Under that system an economy would have had almost no foreign debt or trade deficit. And prices would have stayed pretty much stable, unless there was a physical cause such as famine.

So wealth-creation strategies would have to have been different to a lot of our modern strategies. Instead of sitting and waiting for price instability and hoping its direction was in their favour, their strategy would have to have assumed prices were going to remain the same.

Since interest wasn't allowed, partnerships would have been more common than borrowing. A business partner always has more vested interest in the success of a venture than a creditor.

Assets would often have to have been improved in some way before a profit could be made upon selling. That would have kept more people in employment. It would also have kept assets improving in real terms, not just 'improving' in price.

Every transaction would have been an equal win-win for both seller and buyer - not a case of the buyer paying more than the seller originally paid for the same unimproved asset.

In other words, their economic activity didn't breach the principle of love - yet at the same time maintained private property rights, free will and the right to profit.

(But modern investing actually often hopes that instability will allow the seller's gain to be greater than the buyer's, which isn't quite as 'loving'.)

And land-inheritance was to remain perpetually in the family-tribe (except city land) - it could only be leased for a term, not permanently sold. Under that system, owning your own home wouldn't be quite the far-fetched dream it is today.

Meanwhile, interest payments would have kept flowing into the economy from overseas lending, keeping the nation's balance of payments always in the black.

The boom/bust cycle would hardly have been. You wouldn't have heard King David talking about 'the recession we had to have'.

Instead they would be 'the head and not the tail - above only and not beneath’.

No comments:

Post a Comment