WARNING: Binary economics promotes new thinking to benefit all individuals, economies and societies. It has nothing to do with ‘investment opportunities’ and the like purporting to make use of interest-free loans in some way. Such ‘opportunities’ are only too likely to be Ponzi schemes and scams.

Binary economics is the expression of a new universal paradigm or new understanding of reality that creates a new economics, a new politics, a new justice and a new morality.[1]

It addresses the big environmentalThe Modern Universal Paradigm - cover issues (e.g., by enabling clean, cheap energy generation — tidal lagoons and deep-water turbines).  Moreover, it  is very relevant  to resolving the consequences of globalisation and the technological shift which smash out traditional, secure, well-paid jobs and then substitute the insecure, low-paid, temporary, part-time, zero hours contract jobs of the ‘gig economy’.   As a result, there has developed  a heavily indebted ‘precariat’ (Guy Standing).

Forwarding economic democracy as well as political democracy, binary economics ensures that, over time, all individuals come to have ownership of, and access to, efficient productive capacity and the benefits thereof.  In this way it makes certain that every individual has a genuine income.  Thus,  for example, those who, unpaid, today care for others, will have income.  Without the new modern universal paradigm — which is relevant to all societies including modern Islam — there will be no peace, nor an end to colonialism and racism.

Rather than homo economicus, the basic principles of binary economics are  homo reciprocans and homo co-operans.

Quick Technical Summary of Binary Economics
1. Commercial banks to lend (at interest), as they wish, only their own money and, with permission, that of depositors.  The commercial banks (via a rise to 100% banking reserves) are not allowed to create new money.
NB. This creates a limited pool of money enabling reasonable interest rates to be paid to depositors.  Overall, over time, binary economics eliminates interest from most of the productive economy but is unable to do so in the area where the private sector (and that includes Islamic Finance) demands interest.

NB.  Today, the banks create 95% of the money they lend out of nothing by simply pressing computer buttons.  Interest and administration cost are added and the money is then NOT lent for the spreading of productive capacity to everybody in society — instead, it goes into rising asset prices and putting everybody into debt.

2. Central (or National or European) Bank interest-free loan money is issued for the spreading of wide-ownership productive capacity (and thus the associated consuming capacity), over time, to every person in society. 

This is using society’s money supply for everybody’s benefit and is counter-inflationary because new, efficient widespread productive (and consuming) capacity comes into existence while the money which created it is repaid and cancelled.   N.B.  Growing inequality is because most people are denied access to productive capital.    

Image result for social housing

  Social housing

The interest-free loan money also enables central and local government to build public capital, social housing and environmental projects at one half or one third of the existing cost.

3. The Central Bank interest-free loan money is administered by the commercial banks taking account of:-

  • collateral (or a substitute for collateral)
  • ability to repay
  • whether or not the investment widely spreads economic ownership. 

For this lending the banks are only allowed to make a reasonable administration charge.

4. The Central Bank need only make a  periodic check on commercial banks to ensure that the interest-free loan supply is being used specifically for the spreading of efficient productive capacity.
Any commercial bank abusing the privilege of administering the interest-free loan supply (for the benefit of everybody in society) will lose that privilege.

A detailed diagram of the main binary mechanism can be found on the History page.

Meaning of ‘binary’ as in ‘binary economics’

‘Binary’ means ‘composed of two’ — there are two factors in wealth creation (labour and capital) and so two ways by which people may genuinely earn a living (via a job and/or via capital ownership). 

People generally think that all, or most, wealth creation is done by humans. However, ever since the start of the Industrial Revolution, wealth has been more and more created by capital instruments (e.g., machines, technologies, patents, buildings — anything which is non-human, capable of providing an income and which is not necessarily owned by everybody).

Sometimes, of course, humans do a large part, even all, of the wealth creation but, today, the capital instruments do most (and sometimes all) of the creation as in automated processes and factories which are continually smashing out the old, steady jobs and substituting insecure, temporary, low-paid ones (the ‘Gig’ economy).Related image

Binary economics, however, understanding what really does do the creation of wealth, ensures that, over time, EVERY person comes to have an independent capital holding (producing a good, steady income) which is in addition to, and separate from, any income they may, or may not, get from their labour.

Binary Basic Income

Crucially, therefore, binary economics provides a Basic Income but one which is different from other forms of Basic Income in that binary interest-free financing actually develops the productive side of an economy in an efficient way while, at the same time, spreading widely to individuals the results of the production thereby ensuring a genuine balancing of supply and demand.

As a result, the binary Basic Income (unlike other forms of Basic Income) comes from a genuine improvement and strengthening of the economy linked with a widespread distribution of the resulting income.

Summary of Binary Economics

In its economics aspect, binary economics is a market economics whose markets work for everybody.  Furthermore, it upholds private property but private property (and the associated income) for everybody, not just the few.[2]  A summary might be “a justice which creates efficiency and an efficiency which creates justice.[3]

An alternative summary is “the use of national bank-issued interest-free loans, administered by the banking system, for the development and spreading of various forms of productive (and the associated consuming) capacity thereby creating a balance of supply and demand with producers and consumers being the same people (as required by Say’s Theorem) and forwarding social and economic justice.

No subsidy is involved. Existing money (e.g., a bank’s capital or, with permission, the deposits of customers) may be lent in ways including interest. However, newly-created money MUST be lent interest-free for developing and spreading the real economy to  (and ensuring proper housing for) every individual in the population.

In its intent to involve people in ownership and participation, binary economics has affinity with Distributism; with the worker cooperatives of the Emilia-Romagna region of Italy and the Mondragón Cooperative Corporation of Spain; and with the work of Gar Alperovitz and others.

Three quick illustrations of binary economics

Philadelphia Waterworks and Museum. Source: Jeannine Keefer

A quick illustration of binary economics is the interest-free funding for low-cost social housing, a waterworks, bridge, sewage works, road or hospital — the use of national bank-issued interest-free loans halves, even quarters, the cost.


Two more illustrations are:-
   * a halving or more of the usual cost of micro-credit for poor people
   * the enabling of any individual in the population (from a baby to a retiree) to become a shareholder in one of the great corporations — the shares would be full-payout ones thereby creating a considerable income for the holder.

Full pay-out shares

Binary economics defines ‘full payout’ shares as net of reserves for depreciation, research and development. 

The earnings of full payout shares are expected to be five to nine times existing earnings.

Source of funding is ultimately future earnings

NB The financial savings of individuals are not used as the source for funding the full-payout shares — the source of the interest-free financing is ultimately the national bank and repayment comes out of future earnings.

The national bank is used as the source of the loans for the shares to emphasise that the national money supply is NOT that of a mere private grouping (as is the case with banks today) but is society’s money supply which (although funnelled through the banking system making an administrative charge) can be interest-free for the purposes of an efficient, just economy. Indeed, where the financing of new productive capacity is concerned, interest is not necessary.

Binary policy results in national bank-issued interest-free loans being available for the purpose of development and spreading productive (and so consuming) capacity to every individual in the population thereby enabling producers and consumers to be the same people and, at the same time, forwarding social and economic justice.

In practice there would be two rates of interest — interest-free (for the binary purposes as above) and interest-bearing. Economies should not be reliant on foreign financial capital and so national bank credit should be used with capital controls being available if needed.

Binary economics is fundamentally different

Binary economics is fundamentally different from all forms of conventional economics (be they expressions of right-wing, centrist or left-wing theory).[4]  Thus, unlike most mainstream economics, binary economics accommodates belief in God, unicity and ethics.[5] It directly addresses the main environmental issues; does not assume that humans only follow their own immediate short term self interest; ends economic colonialism; appeals to people of faith and of good faith;[6] and does not assume that humans (as distinguished from capital instruments) do all, or nearly all, of the physical creation of wealth.[7]

Binary economics is not a “third way” between capitalism and socialism: it expresses a new paradigm. Binary economics co-operates with, and supports, anybody who understands the uses of the national bank-issued interest-free loan supply.

As a study, binary economics is not reductionist,[8] does not ignore the imbalance in power relationships between people,[9] and does not assume that extensive poverty is inevitable. (NB. 55% of the world’s population lives on under $3 per day: every day an estimated 25,000 people die from the effects of dirty water).[10] Being concerned with social justice and economic justice it also notes that allegedly successful ‘free market’ economies show symptoms of profound failure — thus figures from the 2004 Census show that one fifth of Americans live on under $7 per day.[11]

Image result for poor Americans

            Poor Americans

Moreover, this happens in a country which is the richest in the world and which claims to be the embodiment of a perfect, efficient and just ‘free market’.  Furthermore, America spends over 18% of its national income on health (as compared to 10% in the UK) and with longevity outcomes inferior to those of the UK and France. Forty eight million Americans have to rely on food stamps.

Main cause of poverty

Binary economics establishes that lack of access to productive capital (in various forms) is the main cause of poverty and of structural imbalance in a market economy so that producers and consumers are not same people with consequent imbalance of supply and demand and a general inability to further social and economic justice. Moreover the institution of interest (as distinct from administration cost) operates as a giant hoovering operation sucking up wealth from the poor and transferring it to the rich.

It follows that productive capital must become as widely spread as possible. Furthermore, productive public capital (e.g., waterworks, sewage works, roads, bridge, hospitals and housing) must be spread and human capital developed via the provision of education and interest-free loans. All newly-created money must be interest-free and used for the purpose of developing and spreading efficient productive capital to all people in the society.

Binary economics addresses weaknesses in the current economic system

Binary economics addresses a number of weaknesses in the current economic system which are dismissed by conventional economics as being of no, or low, importance. The weaknesses include:–
   * almost all of the modern money supply is in the form of interest-bearing debt created and owned by the banking system.  (In the UK over 95% of the money supply is created in this way: there are similar percentages in other countries).[12]
   * the present money supply is generally not directed at productive (and the associated consuming) capacity but instead goes into derivatives, rising asset prices, consumer credit and putting everyone — individuals, towns, corporations, towns, cities, countries — into ever-increasing debt.[13]
   * at present two lots of financing are required to keep the system going — one lot for production and a separate lot for consumption. The two lots are continually inflationary whilst, all the time, more and more loan money must be created (by the banking system) if the whole economic and financial system is not to collapse. Inflation is inevitable with the present system.  (NB.  Binary financing (which is called simulfinancing) requires only one lot of financing and is counter-inflationary).
   * forms of productive capital remain narrowly owned and there is no policy to spread the ownership of productive (and the associated consuming) capacity throughout the population[14]
   * people do not have their own independent incomes
   Image result for never-ending debt* the practices of the IMF and World Bank which deliberately trap countries into never-ending debt; keep productive capital (and associated consuming power) narrowly owned; and, in an abuse of power, are generally bent on ripping off the wealth of poor countries
   * in practice, economic colonialism
   * in practice, racism

Binary economics redresses those weaknesses. Thus economic colonialism is ended by allowing countries to have control over their own money supply, control over their own assets, and freedom from international debt. No country should ever borrow foreign currency; instead all countries should always use their own currency. Moreover, opposition to racism has little meaning unless it is manifested in practical, everyday material improvement and binary economics provides this by spreading ownership thereby enabling the spreading of the associated incomes.

Binary economics does not expropriate or take: rather it enables everybody to build.

The binary competence

Indeed, over time, on market principles, binary economics enables all individuals to build an independent basic income or binary competence. The competence (the word can be traced back to Jane Austen, Alexander Pope and William Shakespeare meaning property or means sufficient for the necessaries and conveniences of life; sufficiency without excess) is defined as:-
a capital estate large enough to supply sufficient current consumer income to support at least one half of an affluent life style (measured in the context of what society as a whole can efficiently produce).

Figures contained in a 1998 study by Northeast Ohio Employee Ownership Center, Kent State University, Ohio and a 2005 study from the Center for Economic and Social Justice, Washington, D.C., indicate (2005 figures) that, aged sixty five, an adult would have a binary income of about $26,000 and a capital accumulation of at least $200,000 with both figures continuing to increase after the age of sixty five.[15) Today those figures would be much higher.

Along with the competence, of course, individuals will also be free to gain income from their labour as now.

As part of binary policy to develop capital ownership for each member of the population there is no estate duty (or Inheritance Tax) on death ON CONDITION THAT the estate devolves in such a way as to spread capital estates, and therefore capital ownership, to more individuals. If it does not do so, then there is a graduated tax.

Other characteristics of binary economics

Binary economics is of particular importance in a world where, increasingly, more of the physical contribution to production is being done, and will be done, by machines and near-robots.[16]

           Automation — bread

With binary economics national debt is lessened and national unity encouraged.

Binary economics creates a stable economy and associated financial system which is not subject to unsustainable booms and resulting crashes. 

In binary economics there is no expropriation (as there can be in socialism, for example).

Moreover, because people come to have sufficient income from their own independent capital estates, much less redistribution is necessary (for example, by taxes in order to fund forms of government spending including welfare benefits). Because there is much less redistribution there is much less taxation.

Binary economics cannot be inflationary: it is counter-inflationary and wealth-developing and spreading.  A suitable descriptive word might be ‘doeflation‘. Nor can it lead to a global financial crisis of the sort now threatening economies and markets.                                                              

Binary economics upholds the periodic political vote but deepens democracy by creating economic democracy.  This is done by ensuring that all individuals have the everyday freedom and control over their lives stemming from an independent economic base.[17] 

N.B.  Binary economics is NOT Modern Monetary Theory, ‘Social Credit’ or ‘Islamic Finance’

Binary economics is NOT Modern Monetary Theory (or similar theory e.g., ‘Social Credit’) which creates (‘prints’) debt-free (non-repayable)  money and does NOT put it into the productive economy and its spreading.  MMT ends up creating inflation,  a maladjusted economy, concentrated capital ownership and loss of real earnings. 

Alternatively, when large amounts of interest-bearing money are borrowed and not put into the productive economy and its spreading, the negative consequences are the same. 

And binary economics is NOT ‘Islamic Finance’ which pretends to eliminate interest but, by using devious legal contracts, in practice has interest rates greater than most Western finance.    Moreover, it does not spread ownership. 

Conventional economics compared with binary economics – see separate page

Brief summary

A brief summary is that binary economics results in:-
    * capital ownership for all individuals in the population so that they produce (and thus earn) independently of whether or not they also have a conventional job

    * housing for all people
    * free markets
    * an efficient wealth creation including a balancing of supply and demand
    * structural economic and social justice
    * no inflation
    * proper encouragement of small and start-up businesses
    * sharing and participatory structures
    * a strong ethical sense imbuing everything
    * a general end to riba/interest (but banks may lend their own money at interest for non-binary purposes)
    * an end to economic colonialism
   * public and environmental capital projects
   * a direct connection between money and the real economy

There is also:-
    * an increase in political freedoms and a deepening of democracy
    * policy to unite inhabitants who have different linguistic, religious, geographical and ethnic backgrounds

In particular, over time, binary central bank-issued interest-free loans enable a government to refrain from increasing the National Debt and enable the ownership of an economy to remain in local hands.

Trisakti University, Jakarta, Indonesia

Binary economics is beginning to be taught in universities. As a completely new paradigm, binary economics could not be understood (and thus taught) in the UK.  It therefore had to be taught abroad.

The first such teaching (by Rodney Shakespeare) was on the Islamic Economics and Finance postgraduate program at Trisakti University, Jakarta, Indonesia. Trisakti is famous as the birthplace of the 1998 Indonesian reformasi revolution and contains plaques and memorial recording the student deaths.  It is the biggest private university in Indonesia and second only to the main state university in prestige.

Visual summary of binary economics

New Monetary Reform Diagram


1. Robert Ashford & Rodney Shakespeare (1999) Binary Economics – the new paradigm.
2. Norman Kurland, Dawn Brohawn & Michael Greaney (2004) Capital Homesteading for Every Citizen: A Just Free Market Solution for Saving Social Security.
3. Robert Ashford & Rodney Shakespeare (1999) op. cit.
John H. Miller ed. (1994) Curing World Poverty: the New Role of Property.
There are five Justices at
4. Robert Ashford (1990) The Binary Economics of Louis Kelso: the Promise of Universal Capitalism (Rutgers Law Journal, vol. 22 No.1. Fall, 1990).
5. Rodney Shakespeare (2007) The Modern Universal Paradigm.
6. Rodney Shakespeare, (2007) op. cit.
7. Robert Ashford (1990) op. cit.
Robert Ashford & Rodney Shakespeare (1999) op. cit.
8. Rodney Shakespeare, (2007) op. cit.
9. Rodney Shakespeare, (2007) op. cit.
10. “Over a fifth of the world’s population still live in abject poverty (under $1 a day), and about one-half live below the barely more generous standard of $2 a day.” Technical Report of the High-level Panel on Financing for Development (United Nations, Dec., 2000).
11. William Shanley Poverty in America: American Dream Now a Nightmare for Millions? One in Five Lives on Less than $7 per day Global Research, April 23, 2007
12. Rodney Shakespeare & Peter Challen (2002) Seven Steps to Justice.   Also Money creation in the modern economy by Michael McLeay, Amar Radia and Ryland Thomas of the Bank’s Monetary Analysis Directorate.  Bank of England Quarterly Bulletin 2014, Q1.
13. Rodney Shakespeare (2007) op. cit.
14. Norman Kurland, Dawn Brohawn & Michael Greaney (2004) op. cit.
15. Rodney Shakespeare (2007) op. cit.
16. James S. Albus (1976) Peoples’ Capitalism -The Economics of The Robot Revolution.
17. Louis Kelso & Patricia Hetter Kelso (1986 & 1991) Democracy and Economic Power – Extending the ESOP Revolution through Binary Economics.

See also About the Author

Next page: History

Gary Lineker is best-paid star again, but women close gap