The International Hub:

The economic model, profit-making and

increase of the international capital market

 

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Economic growth: the financial management of development in the new reality - 1

The Global Economic Reset: New Economic Model - 1

The increase of the international capital market - 2

Profit model 3

New economic mechanisms: the implementation of the IMF's strategy - 6

Model of functioning of the Digital companies 8

 

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Economic growth: the financial management of development in the new reality

 

The current diversity of technologies, innovations and reforms has changed the economic paradigm: the world has moved from a rational economy to an economic system with immanent irrationality.

The previous supply and demand model and the management of financial policies have given way to deterministic chaos, generated by a multitude of spontaneous shifts, fluctuations and transformations.

 

Traditional models of directive (deterministic) governance become ineffective under the new economic dynamics.

 

According to the International Monetary Fund (IMF), today's policy uncertainty, historically high debt levels, rising financial vulnerabilities, and limited policy space could further undermine confidence and growth prospects. To ensure economic growth, Now is the time for policymakers to act to rebuild policy space, strengthen resilience, and implement structural reforms in the field of governance and capacity development.

 

 

The Global Economic Reset: New Economic Model

 

According to IMF Managing Director Christine Lagarde, there is a global economic reset caused by the total renewal of the main productive forces of society (Industry 4.0, IoT, VR / AR, AI).

 

New dimensions have emerged in the economic space: Digital Economy & Digital Money, Sustainable Development Goals (SDG), knowledge management systems. This opens up opportunities and generates new economic, non-economic and civilizational senses and motivations.

 

In accordance with the Law of Requisite Variety by W. Ashby, the increasing complexity of the environment requires an increase in the dimension of the control system. In economic terms, this means the need for international development programs that would ensure the transition to a new economic model (new economic ontology) by creating new institutions, models and forms of governance.

 

The definition of a new economic model can be formulated in the society-law-economy format:

-       Society: democratic individualism + digital property + socio-economic network.

-       Law: civil law + financial law + digital law.

-       Economy: digital property + digital companies + digital trading (digital promotion of goods and services) + Industry 4.0 + Artificial (cognitive) intelligence.

 

The transition to a new economic model should ensure the reduction of transaction costs in the economy, expand the industrial base, create new sources of value (capital assets), ensure the growth of industry, the real sector and productive employment, harmonize technological development and the environment, and ensure the fight against climate change.

 

Today's industrial institutions operate in a two-dimensional economic ontology "law - finance" and are based exclusively on the direct positive feedback ("supply - demand", "Input - Output", "inflation - discount rate"). Creating a management system for the growing diversity based on multiple feedbacks is possible only in the three-dimensional economic ontology law - finance - Internet, which implies the institutionalization of the Internet.

 

The new economic model needs new institutions and new management models, based on the Poincaré model, proved by G. Perelman. This model determines that only three-dimensional, closed and cohesive space is homeomorphic to the surrounding world.

 

The International Hub meets today's needs for the institutionalization of innovation, including compliance with the Poincare-Perelman model, which provides legal governance in the face of uncertainty and multiple transformations.

 

 

The International Hub project

 

The draft Agreement to Establish the International Corporation (Hub) for the Management of Sustainable Development Projects (hereinafter - the Agreement, the International Hub) was developed by a team of authors of the Consortium.

 

The International working conference was held to discuss the text of the Agreement. At present, the draft Agreement has been approved by the Ministry of Justice of Ukraine. Consortium activity on establishment of the Hub and the International Conference were supported on behalf of Ms. Federica Mogherini, Vice-President of the European Commission, High Representative of the Union for Foreign Affairs and Security Policy. The technological platform of the Hub has passed a large-scale pilot operation in Ukraine, which allowed to determine the social, psychological and technological features of the transition to a new economic model, as well as effective mechanisms for promoting products and services to world markets.

 

 

The increase of the international capital market

 

The International Hub provides capacity development and promotion of economic growth in accordance with the IMF Managing Directors Global Policy Agenda (https://www.imf.org/en/Publications/Policy-Papers/Issues/2018/10/10/gpa-am102018-rising-risks-a-call-for-policy-cooperation). This is achieved on the basis of digital industrialization, the development of a strategic framework for the Digital Economy, solving sustainable development problems, the operationalization of the new governance framework for the infrastructure, projects to build resilience to natural disasters, etc. As a result, the International Hub project expands the international capital market.

 

National income according to the Kondratiev formula (N. Kondratiev. Problems of economic dynamics. .. ) can be defined as E = m √AK, where E is the national income or Gross Domestic Product (GDP), A is the number of working-age population, K is the national capital and m is the level of the institutionalization of basic innovations in their quantitative impact on the economy.

 

To ensure a high level of institutionalization of innovations m, it is necessary to deploy an investment frame, which includes: 1) investment system for the realization of highly profitable projects, risk-free sustainable development projects that use innovations in combination with new senses, concepts and motivations; 2) an effective system for promoting goods and services to world markets; 3) the market of individual capital.

 

Today's market is characterized by the use of horizontal economic models and in the near future will lead to the deployment of global investment platforms with opportunities for investment regulation and feedback management. The deployment of such platforms is consistent with the Investment Plan for Europe (Juncker Plan) in terms of stimulating small and medium-sized businesses (individual capital market), and also complies with the IMF Global Policy Agenda in terms of inclusive policies and help members enhance resilience and raise growth prospects, according to the Communiqué of the Thirty-Eighth Meeting of the IMFC.

 

The market of individual capital is aimed at ensuring the best possible individual contribution to economic development and provides economic inclusion, which minimizes the manifestations of radicalism, separatism and populism in society.

 

Institutionalizing the market of individual capital (for example, in the form of registering digital companies and opening bank accounts) would provide the global growth of the capital market.

 

 

Profit model

 

Let us describe the profit opportunities for all institutional participants of the Hub.

 

In accordance with Article IV, Paragraph A of the draft Agreement, the Hub is composed of: the Public Forum, the Governing Board, the Council of Corporate Investors, the Council of Expert Designers, the International School of Digital Economy and Sustainable Development, the Secretariat.

 

The main participants also include digital companies as holders of digital property in accordance with Article IV, paragraph E, subparagraph viii of the Agreement, and banks of the countries parties to the Agreement that serve digital companies.

 

These orthogonal contours correspond to the cybernetic theory and Viable System Model (VSM) of Stafford Beer (who implemented the CyberSyn project in Chile), who indicated the need for at least 5 control loops for system stability.

 

 

Profit of the Public Forum

 

The profits of the participants of the Public Forum are shaped by the dynamics of the processes (trends) that do not obey the principle of cumulation in the sense of fundamental connections (according to Kondratiev). That is, all participants can achieve profit from access to the rapidly changing conjuncture and digital management, which digital company personnel are engaged in. An example of such a market today is the growing (but not institutionalized) market of freelancers.

 

At the same time, the digital consumer market is a safe environment for using new digital financial instruments: cryptocurrency, ICO (Initial Coin Offering crowdfunding for startups), smart contracts. The difference between these digital financial instruments is that they operate beyond national borders in the global market and can work not only with small amounts, but also with micro-sums and micro-investments (quantum investments).

 

The digital consumer market can generate financial flow, which provides long-term prospects for the development of the banking and financial system, as well as for the corporate sector of the economy.

 

The Public Forum aimed at discussing projects to achieve Sustainable Development Goals will enable the deployment of highly efficient VR/AR applications (for example, such as Virtual Geographic Environments). This greatly simplifies the implementation of large-scale infrastructural and geo-natural projects, transferring the projects themselves to the category of smart projects (by analogy with smart contracts). Smart Projects change management models and models of social behavior towards combining the resources of business, government and society to achieve the Sustainable Development Goals. This is extremely important, since todays projects, implemented by business, government and society, are financed separately because of the lack of mixed management platforms.

 

 

Profit of the Governing Board (profit of the international organizations and countries participating in the Hub)

 

The Governing Board represents the International organizations and countries that are founders of the Hub. Therefore, the profit of the Governing Board is, first of all, the profit of the member countries of the Hub, which is formed from the following components.

 

Stamp duties (profits from the annual registration of digital companies). Assuming that the minimum possible number of digital companies may reach 10% of Facebook accounts, social networks and AliBaba (3+ billion), it is 300 million participants. With a registration fee of $100 per year, the total income of the countries will be $30 billion annually. In general, the size of the annual stamp duty can be determined by each country independently.

 

The interest of countries in the Hub is also expressed through the job creation. It is assumed that 300 million digital companies will be created on the future-line platform and among them, for example, 190 million non-resident companies. Considering that a digital company must have a digital manager-resident of the participating countries (which can serve 10 digital companies), the number of jobs for such countries will be 19 million (jobs with high qualifications and income). In today's declining markets, this number of jobs will ensure long-term growth.

 

The country's income according to the Kondratiev formula is defined as E = m √AK, where E is the national income or Gross Domestic Product (GDP), A is the number of working-age population, K is the national capital and m is the level of the institutionalization of basic innovations in their quantitative impact on the economy. That is, m is the main indicator of the national budget growth.

 

So, all this increase national income: inclusion of digital assets into the turnover, opening accounts for Digital companies in banks of member countries, effective promotion of goods and services, as well as increase of jobs.

 

The profit of the International organizations is determined from the profit of the Hub, which is governed by the Charter of the Hub.

 

 

Profit of the Hub

 

The Hub receives profits from the implementation of projects, from the promotion of goods and services to world markets, advertising, traffic generation, maintenance of copyright, etc. The level of profit is commensurate with the profits of the world's leading Internet companies, and, taking into account the management of projects, it exceeds it.

 

Profit of the Council of Corporate Investors

 

The Council of Corporate Investors receives a profit from attracted investments and financial management of Hub projects.

 

Profit of the Council of Expert Designers

 

The profits of the Council of Expert Designers, among other things, also include the copyright transferred to Hub and implemented in Hub projects.

 

Profit of the International School of Digital Economy and Sustainable Development, the Secretariat

 

At the discretion of the Governing Board, training and project management may be non-profit. In this case, financing is carried out from the profit of the Hub. Mixed forms are also possible, providing the commercialization of the learning processes and the maintenance of Hub projects.

 

Profit of the Digital Companies

 

Digital companies are the main institution for fixing and managing digital property, which arises in the digital space of the Internet. A digital company has a large number of sources of profit that arise as a result of the legal personality of a digital company (economic subjectivity), as well as due to the information right (copyright): digital management, digital entrepreneurship, digital transactions, digital communications, digital learning, digital intelligence.

 

Profit from infrastructure projects

 

As an example of infrastructure projects for sustainable development we can cite the modernization and reconstruction of bridges built more than 50 years ago. On the one hand, such projects require significant financial resources. From the other hand, to control the processes of engineering, construction, quality control and maintenance the new model is needed that will ensure the inclusive interaction of multiple stakeholders (government, business and society) with contractors.

 

Such projects can only be financed through the rapid development of the Digital Economy, which generates significant part of the value added and provides expanded tax base for both macro- and micro-transactions. At the same time, it is possible the joint (crowdfunding) raising funds from governments, business and society to finance projects.

 

 

Profit from engineering geo-natural projects

 

Profit from engineering geo-ecological projects is determined by a significant decrease in payments by insurance companies and government expenditure incurred from man-made disasters and natural disasters, which makes it possible to channel these funds into the economy for development purposes.

 

Given the well-known forecasts, the greatest threats today are: lack of drinking water, desertification, rising sea levels as a result of melting glaciers.

 

For example, arid regions and deserts occupy 41% of the Earths land. More than 2 billion people live in these areas. Under the threat of land degradation is 110 countries. The amount of lost income due to desertification and land degradation is $ 42 billion annually. The UN declared 20102020 the United Nations Decade for Deserts and the Fight against Desertification.

 

Therefore, one of the leading projects of the Hub may be a project to deploy the global engineering network of geo-ecological reservoirs. This project will not only solve the problem of drinking water and the fight against desertification, but also deploy the system of complex geo-ecological control of biodiversity, food and climate security on the basis of monitoring of climate indicators and engineering management of the network of natural reservoirs. The project will create many related activities (agricultural production, resorts, tourism), will improve the welfare of society and economic sustainability, as well as increase the viability of natural ecosystems.

 

 

Profit of the banks (serving digital companies)

 

The International Hub acts as a systemic platform-attractor for integrating banks into any economic processes for servicing offline, online and virtual transactions, as well as macro- and micro-transactions. The Hub integrates bank accounts, banking products and applications with economic processes.

 

The banks' profits in the Hub are defined as income from financial and settlement services for: digital companies, crediting the systems of promotion of goods and services, and implementation of infrastructure projects.

 

 

New economic mechanisms: the implementation of the IMF's strategy

 

The main purposes of the International Monetary Fund (IMF) are: to ensure the stability of the international monetary system, to facilitate international trade, promote employment and sustainable economic growth, help to reduce global poverty as well as to contribute to the development of the productive resources of all members as primary objectives of economic policy.

 

The activity of the Hub allows to achieve the following strategic issues presented in the Communiqué of the Thirty-Eighth Meeting of the IMFC (https://www.imf.org/ru/News/Articles/2018/10/10/ communique-of-the-thirty-eighth-meeting-of-the-international-monetary-and-financial-committee):

-       to create conditions to mitigate risks and enhance confidence in international trade due to the integrity and coherence of the financial, monetary, social and information systems on the macroeconomic level;

-       to identify the determinants (indicators) of economic policy that contribute to strong and sustainable economic growth and investment;

-       to provide advancing financial and structural reforms for lifting potential growth and employment and strengthening resilience, 

-       to avoid procyclicality; and raise the quality of infrastructure and workforce skills;

-       to provide free, fair and mutually beneficial promotion of goods, services and investments for economic growth and job creation;

-       to work for a globally fair and modern international tax system based on the Digital Economy;

-       to implement the Sustainable Development Goals (SDGs);

-       to improve resilience to, and deal with, the macroeconomic consequences of pandemics, cyber risks, climate change and natural disasters, energy scarcity, conflicts, migration, and refugee and other humanitarian crises;

-       to ensure the enhanced engagement on governance, including corruption, and the operationalization of the new digital governance framework; the development of a strategic framework for social spending; and work on the digital economy, infrastructure governance, demographic shifts, and gender and inequality issues.

 

 

Conclusion:

 

Retrospective analysis shows that the long-term economic advantage is given to states where new technological and social achievements are concentrated, increasing the efficiency of socio-economic development (Kondratiev-Wallerstein model). Such a socio-technological advantage today is the leadership in the institutionalization of digital space, which makes it possible to overcome the crisis caused by a sharp reduction in the surplus value in the industrial sector of production, social dissatisfaction and the need for new governance frames.

 

Establishment of the International Corporation (Hub) for the Management of Sustainable Development Projects opens a window of new opportunities:

 

1)     Due to the institutionalization of digital property, the project provides a significant expansion of private property, which is a fundamental mechanism for economic growth. Digital property creates a strategic frame for the Digital Economy and new governance models.

2)     The project aims to create a Global Climate Change Management System based on engineering geo-ecological projects. Such a system is today a system-forming factor of economic growth aimed at improving the quality of human life, harmonization of business, nature and society, as well as to increase resilience to natural disasters.

3)     The project implements the principles of democratic individualism, which, acting as the ideological and socio-economic basis of democracy, are capable of absorbing various ideological and socio-economic world models of the industrial age.

The project will provide further leadership for the ideas of democracy in the world and expand the democratic foundations of global economic and social relations.

 

 

 

 


 

Model of functioning of the Digital companies

 

 

 

Model of monitoring of economic indicators of Digital Company

 

 

Indicators of the economic potential of the company: 2018

N

Name

Norm

Months

01

02

03

04

05

06

1.

( )

50

40

43

39

42

47

51

2.

( )

5

4,50

4,90

4,30

4,70

5,10

5,20

3.

( )

1

0,70

0,65

0,55

0,73

0,79

0,82

4.

()

0,02

0,018

0,018

0,019

0,019

0,017

0,021

5.

( ...)

0,3

0,27

0,28

0,27

0,31

0,32

0,29

6.

(..)

15

14,00

14,50

13,80

13,90

14,80

14,70

7.

(..)

0,265

0,250

0,252

0,251

0,257

0,254

0,253

8.

- (..)

0,2

0,180

0,185

0,192

0,195

0,193

0,197

9.

(..)

2,5

2,100

2,225

2,600

2,452

2,340

2,314

10.

- (..)

400

370

350

380

387

415

392