Rachel's Democracy & Health News #886, December 21, 2006


[Rachel's introduction: A provocative new book, Capitalism 3.0, aims to diminish the power of corporations by establishing a new "commons sector" within the economy -- creating new institutions to form a countervailing force.]

By Peter Montague

Books full of new ideas are rare, but here's one worth chewing on: Peter Barnes's Capitalism 3.0. The book is original, readable and provocative. It will definitely hold your attention.

But let's get one thing straight. Despite the title of his book, Peter Barnes is no radical. He is an entrepreneur and investor who co- founded Working Assets, the telephone company. He says, "As a businessman and investor, I've benefited personally from the primacy of capital and am not keen to end it." (pg. 24) On the other hand, he recognizes that, "Capitalism as we know it is devouring creation. It's living off nature's capital and calling it growth."(pg. 26) So, "to save capitalism from itself," (pg. 66) the book offers a whole slew of new ideas. the goal of which is to give capitalism a "software upgrade" to fix what Barnes sees as the system's three major flaws: (1) its disregard for nature; (2) its disregard for future generations; and (3) its disregard for the poor.

Barnes's analysis of the problem is succinct: the history of capitalism reveals two threads: the decline of "the commons" and the rise of the corporation. These two threads are linked because corporations make money largely by taking things from "the commons" (or dumping wastes into the commons) without paying compensation to its owners (all of us).

By "the commons" Barnes means "all the things we inherit or create together," which none of us owns individually. The commons is like a river with three forks:

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)

The commons is a set of assets that have two characteristics: they're all gifts, and they're all shared. (pg. 5) Taken together, all the assets in the commons are our "common wealth." Furthermore, the commons are essential and indispensable; they provide sustenance for everyone. If we fail to protect them, we're sunk.

Barnes points out that, "There's another quality to assets in the commons: we have a joint obligation to preserve them. That's because future generations will need them to live, and live well, just as we do. And our generation has no right to say, 'these gifts end here.' This shared responsibility introduces a moral factor that doesn't apply to other economic assets: it requires us to manage these gifts with future generations in mind." (pg. 5-6)

Our economic system (which Barnes called "capitalism 2.0, or "surplus capitalism") is destroying all three forks of the commons river, and the destruction is happening in two ways:

(1) corporations are "enclosing" (privatizing) the commons (bottling water and selling it, for example; or using the airwaves without paying the owners (all of us) anything; or taking our common-heritage stories, such as Snow White, copyrighting them, and selling them back to us);

(2) corporations are trespassing on the commons by "externalizing" their costs -- dumping toxic wastes into air and water, for example.

Enclosure (privatization) and externalizing give a one-two punch: both activities create corporate profits, simultaneously diminishing the commons.

Because of this one-two punch, and because corporations grow ever- larger without limit, capitalism creates three serious problems:

1. Nature is being destroyed.

2. Enormous inequalities have arisen -- the rich keep getting richer, leaving everyone else behind. Today the wealthiest 5% of us owns more than the other 95% of us. This makes a mockery of democracy, and of the idea that we all start life with similar opportunities;

3. Happiness is in short supply. Despite the enormous capacity of corporations to produce wealth (by enclosing and trespassing into the commons), people say they are no happier now than they were 40 years ago. Surplus capitalism has speeded up life, and made many of us insecure about our future. So what's the point of all this economic activity if it isn't improving people's quality of life? "We need rest, relaxation, and time for companionship and creativity. Surplus capitalism can't give us enough of those things," Barnes points out.

Now we get to the meat: Barnes says these problems cannot be fixed by government regulation, taxation, or public ownership. Government is too easily corrupted by money and power; Barnes sees no way around this harsh reality.

** Regulatory agencies are routinely captured by the people they are supposed to regulate.

** Green taxes will never be set high enough to make a difference, and besides they disproportionately burden the poor.

** Public ownership is no guarantee that an asset will be managed for the benefit of future generations, nonhuman species, or ordinary people -- just look at the way grazing rights and mineral rights on public lands have been mismanaged for more than 100 years. The state does not promote the "common good" -- it rewards the wealthy and the powerful.

"We face a disheartening quandary here. Profit-maximizing corporations dominate our economy. Their programming makes them enclose and diminish common wealth. The only obvious counterweight is government, yet government is dominated by these same corporations." (pg. 45)

The old counterweight to corporate power -- organized labor -- has been "decimated" and the other counterweight -- the mass media -- have been turned into corporate mouthpieces. Campaign finance reform will not work because, "Occasionally a breakthrough [has been] made in campaign financing -- for example, corporations are now barred from giving so-called soft money to political parties -- but corporate money soon finds other channels to flow through. The return on such investments is to simply too high to stop them." (pg. 47)

Barnes goes on to explain (chapter 4) why corporations can never be made "socially responsible," can't be made less destructive by "free market environmentalism," and won't be reformed by massive programs of libertarian privatization.

This is a bleak picture, indeed, but one that longtime Rachel's readers will probably greet with a nod of the head.

Peter Barnes's solution? A 30-to-50-year strategy:

"Throughout American history, anticorporate forces have come to power once or twice per century.... it may take a calamity of some sort -- another war, a depression, or an ecological disaster -- to trigger the next anticorporate ascendancy, but sooner or later it will come. Our job is to be ready when it comes."

"What constitutes readiness? Three things, I believe," says Peter Barnes:

** First, we must have a proper view of government's role. That role isn't to run the economy, or even to manage the commons directly; it's to assign common property rights to trustworthy guardians who will.

** Second, we must have a plan to fix our economic operating system, not just to put patches on symptoms.

** Third, we must recognize that the duration of any anticorporate ascendancy will be brief, and that we must use that small window to build institutions that outlast it." (pg. 47)

Barnes's basic idea is "to fix capitalism's operating system by adding a commons sector to balance the corporate sector." The corporate sector can't be fixed or controlled by government, but perhaps it can be counter-balanced by creating a large and robust "commons sector" as part of the next phase of capitalism, which Barnes calls capitalism 3.0.

Barnes points out that, when we try to put a monetary value on the commons, it far exceeds in size the totality of private wealth. The commons is an enormous asset that we presently allow corporations to use free -- they take valuable goods from it and the dump their garbage into it, all for free. Barnes believes that, if we could create "property rights" in the commons, and then charge corporations for using the commons we could revolutionize the way the commons are viewed and treated; we could create a stream of income for all citizens, most especially benefiting the poor; and by strictly controlling access to the commons, we could protect them for future generations and for nonhuman creatures.

We already have many good examples of property rights in common assets. The Alaska Permanent Fund, is an example Barnes likes. As oil is extracted from the ground in Alaska, a small tax goes into a special fund, which is invested in stocks and bonds. Each year, every citizen of Alaska receives a check in the mail from the Permanent Fund, valued at roughly $1000. To someone who makes $50,000 per year, that $1000 may mean little; but to someone who earns $10,000 per year, that bonus can make a real difference.

Barnes's point is to create a set of "common property rights" -- rights owned by all of us. He wants to "propertize" but not "privatize" the commons, on the model of the Alaska Permanent Fund. Another example is MALT, the Marin Agricultural Land Trust in Marin County, Calif. Family-owned sheep, dairy and cattle ranches in Marin -- on the close northern edge of San Francisco -- have managed to remain in the ranching business by selling conservation easements to MALT. Ranchers give up the right to develop their land, and the public gets a lasting pastoral landscape and a viable agricultural economy. Some 40,000 acres has been preserved by MALT -- about one-third of all the agricultural land in the county.

In his next-to-last chapter, Barnes describes a whole range of institutions -- many already functioning well -- that embody common property rights for the purpose of protecting our common wealth.

By establishing common property rights, Barnes would create a "commons sector" within the economy. He envisions it growing very large and thus providing a countervailing force to the corporate sector. This large commons sector is what would distinguish capitalism 3.0 from our present economy. (More details -- and some questions -- next time.)