Rachel's Democracy & Health News #887 [Printer-friendly version] December 28, 2006 CAPITALISM 3.0, PART 2 [Rachel's introduction: Here we continue our review of the important, thought-provoking book, Capitalism 3.0, by Peter Barnes. Part one of this review can be found here.] By Peter Montague Peter Barnes describes our current economic system as capitalism 2.0 or "surplus capitalism," because its main problem is finding buyers for the gushing fire hydrant of goods that the system so easily produces. Barnes says surplus capitalism has three evident faults -- it is devouring creation, it is producing ever-widening disparities between rich and poor, and it largely ignores the needs of future generations. Barnes proposes to solve these three problems not by abandoning capitalism but by giving it a software upgrade -- turning it into capitalism 3.0. Peter Barnes believes that the corporate sector of the U.S. economy and culture has grown so large and powerful that it cannot be regulated or made "socially responsible" to any significant degree. In this regard the book is deeply pessimistic about the future of democracy and of the viability of the natural world. During the 19th century, the corporation evolved into an institution legally required to fulfill a single purpose -- to provide a steady return on investment capital garnered from strangers. This they do exceedingly well. As a result, since 1830 corporations have grown exponentially and without limit. Now fully 2/3rds of U.S. gross domestic product (GDP) is created by the largest 500 corporations. (pg. 22) As part of their natural behavior, corporations privatize our common wealth, extracting whatever they need from nature, community and culture -- and they externalize their costs by dumping wastes into the environment, minimizing their tax contributions, and reducing pay and eliminating health-care and pension benefits for workers to the extent allowed by law. (In Barnes's view, the corporate globalization project is largely driven by a relentless search for cheap labor. For a brief period in our history, labor unions provided a countervailing power to the corporations, but Peter Barnes believes that that time is gone, presumably forever.) Using the basic strategy of privatization and externalization, corporations have consolidated wealth for a fortunate few -- the 5% of Americans who now own more wealth than the other 95% combined. (pg. 27) (Barnes does not say so, but, importantly, the structure of the modern transnational corporation is the antithesis of democratic decision-making. As a secondary, unanticipated result of the corporate ascendancy, all the institutions of our culture have fallen under the influence of the corporate elite -- including legislatures, the judiciary, and the executive branch, but also the mass media, our schools and colleges, churches, elections, workplace policies and conditions, foreign trade, foreign policy, the military. Almost without exception, all the institutions of our culture are now disciplined by a hierarchical corporate perspective, and by the narrow corporate quest for ever-growing wealth.) Because the corporate sector cannot be reined in to any significant degree, Peter Barnes believes, we must create an entirely new sector within the economy to act as a counterbalance to corporate influence. This he calls the "commons sector" and it would be created by "propertizing" the commons but NOT privatizing the commons. The commons would be "propertized" by giving everyone shares in it -- shares they receive at birth and own, but which they cannot sell, trade or pass on to their heirs. By "the commons" Barnes means, 1. Nature, which includes air, water, DNA, photosynthesis, seeds, topsoil, airwaves, minerals, animals, plants, antibiotics, oceans, fisheries, aquifers, quiet, wetlands, forests, rivers, lakes, solar energy, wind energy... and so on; 2. Community: streets, playgrounds, the calendar, holidays, universities, libraries, museums, social insurance [e.g., social security], law, money, accounting standards, capital markets, political institutions, farmers' markets, flea markets, craigslist... etc.; 3. Culture: language, philosophy, religion, physics, chemistry, musical instruments, classical music, jazz, ballet, hip-hop, astronomy, electronics, the Internet, broadcast spectrum, medicine, biology, mathematics, open-source software... and so forth. (pg. 5) In Barnes's software fix for capitalism, the mechanism for managing common property would be the trust -- an ancient legal mechanism that is widely used in the modern world. Barnes proposes creating "common property trusts" to manage the newly-created common property rights. A trust is a legal arrangement whereby one party (a trustee) manages an asset (the "trust property") for the benefit of a third party (the trust beneficiaries). The trustee's sole duty is to manage the trust property for the benefit of the beneficiaries. Corporations using the commons would pay for the privilege, some of the proceeds being paid to living beneficiaries as income. But importantly, the trustees of the commons would operate under a strict legal code requiring them to manage the trust for its long-term productivity and survival. Trustees would be elected (or appointed) for long terms, similar to the way many judges serve today. The position of trustee would be an important one; trustees would be respected, perhaps even venerated. This commons sector would be managed according a set of principles, which would vary somewhat depending on whether the asset was limited (nature) or inexhaustible (ideas and cultural creations). Here is the short version of the management principles: 1. Leave "enough and as good" in common -- a phrase first used by John Locke, who argued that it's OK to privatize some parts of the commons so long as "enough and as good" is retained in common ownership. "Enough" of an ecosystem would mean enough to allow it to regenerate itself and remain healthy. 2. Put future generations first. Trustees of common property would be accountable to future generations (and could be sued by the present generation if they were obviously failing in this duty).(pg. 75) 3. The more the merrier. Private property is inherently exclusive; common property is inherently inclusive. For example, social security and Medicare are efficient and fair because they include almost everyone. 4. One person, one share. "In the case of scarce natural assets, it will be necessary to distinguish between usage rights and income rights. It's impossible for everyone to use a limited commons equally, but everyone should receive equal shares of the income derived from selling limited usage rights." 5. Include some liquidity. Whenever possible, common property owners should receive some income from their share of ownership. People would notice -- and care about -- common property if they received income from it. But common property rights could not be traded or sold or passed to offspring. They are a birthright that stays with an individual for life. In addition to creating "common property rights" and trusts to manage them, Peter Barnes suggests that we extend the list of birthrights we all receive free at birth. The Constitution presently guarantees each of us several birthrights -- free speech, due process, habeas corpus (though Congress recently revoked this 700-year-old birthright for some of us), speedy public trials, and secure homes and property. Barnes wants to add three additional birthrights to this list: (a) An annual dividend (cash) paid by each common property trust to every shareholder. Businesses using common property would pay the relevant trust for the privilege of doing so, and the resulting cash would be distributed to everyone who holds a share. To cite but one example: firms trading shares on a stock exchange would pay for the privilege of doing so because a stock exchange only works because the community has created conditions allowing it to work -- the community creates some of the value and so a common property trust should receive some of the benefits. (b) A start-up stake -- a lump sum of cash received at birth, which would stay invested until age 18 at which time the individual could use it for any purpose. (Example: In England every child born after 2002 now gets a trust fund seeded with $440 -- $880 if the child is in the poorest 40% of families.) (pg. 109) (c) Health risk sharing. In the U.S., social insurance principles have been applied to the risks of old-age poverty, temporary unemployment, and disability. The U.S. remains the only capitalist democracy that has not yet applied these principles to the risk of ill health. Barnes favors the Canadian system which is "incredibly simple," much cheaper than the U.S. system, and provides health care and peace of mind to all Canadians. (pgs. 113-114) In his semi-final chapter, Barnes describes a set of institutions that already exist somewhere, but which could be used much more widely. The goal, he says, is to produce the most happiness with the least destruction of nature. So here's an incomplete list ** Land trusts. Beside the agricultural land trust in Marin County, California (described last week), Barnes points to the Dudley Street neighborhood in Boston where a land trust owns 600 new and rehabbed homes -- all with a cap on resale prices -- plus gardens, parks and playgrounds. ** Surface water trusts -- The Oregon Water Trust acquires surface water rights to protect salmon and other fish. Similar trusts have appeared in Montana, Colorado, New Mexico, Texas, Washington, and Nevada. ** Groundwater Trusts. In San Antonio, Tex., the Edwards Aquifer Authority limits groundwater withdrawals by issuing permits. ** Community Gardens -- The American Community Gardening Association lists 70 major cities with community gardens. ** Farmers' markets -- There are now nearly 4000 farmers' markets operating in 50 states. ** An American Permanent Fund -- this one does not yet exist. Barnes says it would be "the centerpiece of the new commons sector proposed in this volume. It's a way to fix, or at least ameliorate, capitalism's flaw of concentrating private property among the top 5% of the population." The American Permanent Fund's income would initially come from selling pollution permits (chiefly carbon dioxide). As Barnes envisions it, the sale of pollution rights would create income at first, some of which would be invested in buying stock in corporations. As the trust ratcheted down allowable pollution, return on corporate shares would replace lost income from pollution rights. Every individual in the nation would get an annual payout from the trust, establishing the important principle of one person, one share. ** A spectrum fund -- by which the airwaves (the electro-magnetic spectrum that carries radio and TV signals) would be set up as a trust, with everyone as beneficiary. No more free ride for the big media corporations. It is well-established that the public owns the airwaves -- why should the public not benefit by charging annual rent for their use? Suffice it to say that this is a book rich with interesting new ideas -- or old ideas offered in a new context and a new light. As Bill McKibben says, "It's an indispensable book on a critical topic. You may not agree with everything Peter Barnes proposes, but we all can benefit by engaging in the debate that this book so skillfully draws us into." So in closing I want to contribute to the debate this book will provoke. Here are two questions the book raises for me: a) Given the influence of modern corporations over all our institutions -- and given the single purpose that makes them so "efficient" and, at the same time, so destructive of nature and of democracy -- how can we hope to insulate trustees of the commons from corporate influence? b) Given that the human footprint on the Earth is relentlessly expanding, in effect crowding out the other creatures whose existence is essential for the proper functioning of the biosphere (upon which we ourselves depend), how can a system that requires perpetual corporate growth be sustainable? The American Permanent Fund is based on annual growth of corporate profits -- but such growth is demonstrably destroying the biosphere, so we obviously require a steady-state economy, not an endlessly-growing economy. Indeed, on a finite planet, an endlessly-growing economy is a physical impossibility. What will a steady-state economy look like and how can the corporate form as we know it accommodate to this new requirement of our survival? Perhaps the most important point to make in closing is that some of the ideas in this book might well be applied to a steady-state economic system that was, by its nature, fundamentally different from capitalism 2.0 (which requires perpetual growth on a finite planet). In this sense, Peter Barnes's ideas might well outlast capitalism 2.0 and even 3.0 -- and might even outlast the corporate form itself -- as the requirements of the biosphere begin to discipline our thinking and entirely new steady-state economic forms emerge. In sum, this is a book to take with you on the long haul ahead.