One recurring theme in this short review of types of investment is the way in which once a method leaves behind the personal, or becomes divorced from the local, it becomes exploitative. All these approaches have their strengths where they are generated by real relationships. The problems start once they fall into the hands of large scale bureaucracies.
So, gifts become grants (gifts with strings), loans become easy credit and equity becomes shares.
Equity on the local scale is where someone with finance invests in an enterprise so that their investment rises and falls with the fortunes of the enterprise. The finance might come from someone who is a sleeping partner or better from a partner who is able to lend their experience to the enterprise.
The style of conversation that parallels this approach is reflection. This is where a genuine attempt is made by all to view the matter at hand from the point of view of the other. A simple equitable arrangement where one person invests in another's enterprise means that both will share the failures and successes of the enterprise. On any small scale, this will be the key to the success of the partnership.
Although shares are a species of equity it is not hard to see they are equity with the relationships taken out. The focus is not on the success or failure of the enterprise; this is left to others who make decisions in the interests of the share-holders. Shares are brought and sold with no regard for the fortunes of the shared enterprises. The credit crunch is in part a result of this distancing from reality - as the trade in shares has become more complex, their connection with reality becomes increasingly tenuous.
But in essence, a genuine equity relationship is for mutual benefit and is not a form of exploitation, such as found where interest is charged. To go further along this road is to enter a different understanding of the economy and I will describe this in my next post.
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