If the gearbox breaks down, does the owner chip the engine?

This is exactly how today’s economy is being “repaired.” What is startling is that it’s happening worldwide. For decades, until around 1990, it was taken for granted that two-thirds of the income in wealthy nations went to wages and one-third to capital owners—one of Nicholas Kaldor’s so-called “stylized facts.” Today, only about 58% of income goes to workers’ wages. That is the “gearbox failure.”

And the engine chipping? We read about these solutions every day: innovation, higher-quality education, reforms (often a euphemism for the gradual erosion of workers’ rights), support for startups, tax cuts... When thinking about today’s economy, we should keep three concepts in mind: Competition, the Klondike Effect, and the Consumption Ceiling. These help us better understand how the economy actually functions.

Competition is a concept that must be constantly emphasized. It is the essence of today’s economy—a race between states, regions, firms, employees, and even consumers themselves. Like any competition, it produces winners and losers. Mario Draghi’s plan to improve Europe’s competitiveness is highly ambitious. But “competitiveness” only helps future winners; it reshuffles the ranks of the successful, nothing more. Draghi is attempting to “chip the engine,” pushing the European economy toward higher growth. The United States, by contrast, has evaluated the situation differently. Seeing themselves as struggling in the competition, they have tried to limit it—through tariffs. This protects domestic producers but raises prices for the losers: employees, who are also consumers. Without any compensation, the result is similar to that in the EU—support primarily for the winners.

Faster GDP growth should be a good thing, right? After all, it reflects economic performance. To understand where the real problem lies, the second concept helps us: the Klondike Effect.

The Klondike Effect allows us to better understand which part of the economy is failing and why. The failing part is the one that brings little or no profit: the low-wage sector. EU funds are certainly beneficial. They bring money into lagging regions, but they have little chance of keeping that money there. For a simple reason: they are euros, which by their nature circulate freely and cannot be confined to one place. And that is the core problem. You build roads, schools, hospitals, infrastructure—but if money starts leaving the region because local firms cannot compete, all those investments will eventually lose their value. The EU considers the transfer of billions of euros a fulfilled obligation. But it has not solved the underlying problem.

Does restarting regional economies mean there should be a car plant in every district? Certainly not. Nor will there be a diamond mine in every district. Naturally, districts do not possess such resources. But each district should be given the opportunity to utilize its local resources, support them, and encourage consumers to prefer them. Local firms must also be given a fair chance to trade with other regions—not face “predators” that overwhelm all competition. The consumer who, by buying the predator’s goods and services, enables their dominance, ultimately becomes the loser. Over time, firms in the district—where these consumers could have been employed—will disappear, relocating to cheaper areas or abroad.

The solution? A complementary digital currency. A currency that can be retained within a district—at least to a significant extent—and distributed via UBI (Universal Basic Income). The goal is to artificially trigger the Klondike Effect.

The Consumption Ceiling helps us better understand inflation. Naturally, a digital currency and UBI immediately raise concerns about inflation. The common view is that “more money” causes inflation. Some economists, however, argue that inflation is driven by a shortage of goods. If a district’s production capacity can meet the growing demand of consumers with higher purchasing power, the consumption ceiling for goods and services will gradually be reached. The result? An increase in savings. Even if more money flows into the district economy, pressure on production will not rise at the same pace. Prices will begin to stabilize, and the threat of inflation will diminish. The key question is: can current production capacities handle rising demand? Can they expand quickly enough? This can be tested if the complementary digital currency is introduced unevenly across districts, starting at small scales. It is designed so that inflation can be monitored in real time and analyzed across specific categories of goods and services.

In my previous text, I also proposed a possible solution. It involved a complementary currency managed and controlled by a university—or a network of universities—rather than the state. Universities have the necessary expertise. Professors do not rotate every four years, and the system would be less exposed to political cycles. More importantly, the system should enable fair trade between regions worldwide. It would not be limited to national trade within a single country. However, cooperation with individual states remains important. They would decide whether the complementary currency is permitted within their territory and would need to accept partial tax payments in this currency (to be spent exclusively within the given district). However, they would not be able to alter the system’s parameters. By cooperating with states, this model differs from existing cryptocurrencies, which tend to avoid state oversight. In other words, the currency is designed for the 99% of people who have no need to hide their income from the state.