The first steps towards recovery of the national economy should be based on the following four basic postulates:
- state, corporate and citizens debt restructuring;
- removal of payment gridlocks;
- introduction of a dual currency system;
- changes to the tax system which would favour individuals and national entities over companies.
In order to achieve this, a legislative framework is needed which would prepare the ground for:
- General restructuring of all the loans taken by individuals and companies by way of radical reduction of interest and adoption of individual repayment schedules for principal amount, taking into account material conditions of the debtor and his family;
- Elimination of payment gridlocks by introducing a system of free national factoring, to be joined on a voluntary basis;
- Establishment of a state finance institute to carry out research on introduction of a dual currency system, i.e. introduction of a national non-convertible currency which would serve as local money;
- Introduction of General Guaranteed Income (GGI) for every citizen, at first amounting to PLN 100.00 paid weekly in the local currency. GGI would be tax-free and not subject to debt collection.
- Granting wide autonomy to self-governments so that they could manage their budgets effectively by:
- creating municipal banks,
- issuing local money or creating a system of virtual accounting,
- creating “white economic zones”, i.e. zones exempt from income tax and VAT. In such “white economic zones” mainly small-scale retail and service providers would operate.
- Gradual elimination of anonymity of business entities through:
- introduction of tax credits for legal persons whose shareholders are only natural persons or
- increasing income tax for legal persons in which at least one shareholder is a legal person.
- Introduction of flat-rate turnover tax collected from chain supermarkets.
Re A. General restructuring of loans.
- Establishing a state-owned bank and supplying it with the money from NBP [National Bank of Poland].
- Creating incentives to transfer deposits from commercial banks to the state-owned bank.
- Gradual elimination of commercial banks (as a result of lost deposits).
- Taking over of loans by the state-owned bank.
- Re-negotiating loan agreements with the view of interest reduction and adapting the repayment schedule to the financial conditions of the debtor and his family.
The above scenario will not cause any economic or financial disturbances because the amount of money on the market will not be increased; only the deposits and loans from commercial banks will be transferred to the state-owned retail bank.
The next step would be the possibility to withdraw the debt (loan) money from circulation and to replace it with real money, which will be equivalent to disappearance of the banking sector.
Banks will be replaced with financial institutions; their role will be limited to keeping the deposits and granting loans.
Re B. Elimination of payment gridlocks.
Factoring is a financial service which consists in receiving from the factor payment for the sold goods, upon submission of the sale receipt. The factor makes payment on behalf of the recipient and then collects the amount due from this recipient, i.e. the purchaser of goods. The entrepreneur who applies deferred payment terms does not wait for payment and therefore he is not at risk of losing his financial liquidity. Factoring is a very expensive service. Taking factoring over by a state-owned entity and the lack of payment for the service will automatically eliminate payment gridlocks. It can also serve as a kind of protection against the domino effect if a single company goes bankrupt.
Once a wide range of entrepreneurs, who are both purchasers and suppliers, is included in factoring and once a clearing unit replaces the real money, factoring becomes a multilateral barter: a proven way to eliminate payment gridlocks.
Re C. Establishment of a state finance institute.
Development and implementation of a dual currency system means building a new structure alongside the existing economic and financial system, based on national, interest-free and non-convertible local money. A local national currency which is devoid of its cumulative function will successfully bridge the purchase gap, i.e. the gap between the GDP value and the total annual income of people and companies. According to the Western estimates, in developed countries this gap constitutes between 44% and 48% of GDP.
A local currency complements the amount and value of the national exchange intermediary, that is Polish zloty, and as money which “burns” it:
- boosts prosperity,
- releases production capacity,
- remains in the country,
- supports export activity because the imported goods can be bought only using the resources coming from export,
- stimulates cooperation and collaboration between state entities,
- keeps in the country the profit earned in the local currency by foreign entities,
- promotes elimination of unemployment by boosting mutual exchange of goods and services.
Introduction of local money may be carried out by financing public works, all kinds of social assistance and payment of GGI.
An optimal solution would be to introduce nationwide local currency. A separate institute established to this end should work on this matter.
With the current state of technology, the local currency may function both in the cash or non-cash form.
There is no risk that controlled introduction of local currency will cause inflation because the amount of money is regulated by the mechanism of monetization of goods. Money is based on the economic parity.
Re D. Introduction of GGI.
Granting to every citizen, from infants to the elderly, certain, small amount of money awarded unconditionally and unexceptionally will improve the sense of economic security of every family, increase the birth rate and reduce unemployment. The frequency of payments (weekly) will speed up money rotation. Making payments in the local currency will prevent money from leaving the region. The proposed amount is lower than the minimum subsistence level but since it is exempt from tax and not subject to debt collection it may ensure life at the level of minimal existence. Observation of economic phenomena and social effects should in the long run allow for gradual increase of the GGI amount.
Re E. Granting wide autonomy to self-governments.
Establishment of municipal banks will allow for financing municipal or regional investments and for defining the preferred direction of regional development.
Creating “white economic zones” will improve competitiveness of local enterprises and will limit the demand for imported goods. It will also lead to stimulating the development of certain areas of economic activity.
Re F. Elimination of anonymity of business entities.
Elimination of anonymity of business entities means elimination of hidden monopolization, and the consequential price dictate. It is a way to restore competitiveness by giving competitive entities an opportunity to mark their distinct nature. The system which allows a legal person to be a shareholder in another legal person obscures the ownership rights. This situation can be prevented by either amending the Commercial Companies Code or, much easier, by transforming the tax law into a law which favours entities managed by natural persons.
Re G. Introduction of flat-rate turnover tax collected from chain supermarkets.
This point does not require any commentary.