Book: Peter Barnes. Capitalism 3.0: Enriching Ourselves By Enhancing Our Commons, Berrett-Koehler, 2006.
It is also available at the excellent On the Commons blog, where it is downloadable for free in pdf format.
URL = http://capitalism3.com/
See also: http://onthecommons.org/files/Capitalism_3.0_Peter_Barnes.pdf
From the publisher:
"Our current version of capitalism — the corporate, globalized version 2.0—is rapidly squandering our shared inheritances. Now, Peter Barnes offers a solution: protect the commons by giving it property rights and strong institutional managers.
Barnes shows how capitalism — like a computer—is run by an operating system. Our current operating system gives too much power to profit-maximizing corporations that devour our commons and distribute most of their profit to a sliver of the population. And government — which in theory should defend our commons — is all too often a tool of those very corporations.
Barnes proposes a revised operating system — Capitalism 3.0 — that protects the commons while preserving the many strengths of capitalism as we know it. His major innovation is the commons trust—a market-based entity with the power to limit use of scarce commons, charge rent, and pay dividends to everyone.
Capitalism 3.0 offers a practical alternative to our current flawed economic system. It points the way to a future in which we can retain capitalism's virtues while mitigating its vices." (http://capitalism3.com/)
Capitalism 3.0 as third stage of capitalism
"Capitalism 1.0: The original “free-market” or “laissez-faire” capitalism that has produced phenomenal growth as well as massive negative externalities in the form of poverty, environmental destruction, and periodic currency crises. The societal response to these crises led to …
Capitalism 2.0: A more regulated stakeholder capitalism in which the major areas of negative externalities are addressed through social security systems, labor unions, international labor and environmental standards, Federal Reserve banks, etc. All these institutions are designed to do the same thing: limit the “free” markets such that negative externalities are minimized.7 While the main focus of capitalism 1.0 is on growth, the main focus of capitalism 2.0 is on redistribution in order to sustain society as a whole. The problem with capitalism 2.0 is twofold: one, it never really worked outside the boundaries of the OECD countries. And two, it does not appear to be working to mitigate the current global externalities. Which brings us to our current transformational phase, moving toward …
Capitalism 3.0: An (as-yet-unrealized) intentional and inclusive eco-system economy that upgrades the capacity for collaboration and innovation in all sectors and systems." (http://www.ottoscharmer.com/docs/articles/2009_SevenAcupuncturePoints5.pdf)
The main point about the evolutionary stages of capitalism is that each system is based on a different state of awareness among its players.
In capitalism 1.0, it is an ego-system awareness: “It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own self-interest,” as Adam Smith put it so eloquently. “We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages.”
In capitalism 2.0, this self-interest is widened and mitigated by the self-interest of other stakeholders that organize for collective action to bring their interest to the table through labor unions, government, non-governmental organizations, and so forth.
In the emerging 3.0 stage of our economy, there is a shift of awareness that extends the natural self-interest of the players to the entire eco-system. Eco-system awareness means having the ability to operate with a mind that perceives a problem from all of the perspectives in a given social-ecological system (rather than only from one’s own) and to internalize the concerns and issues of the other players in one’s own decision-making.
This internalization of the externalities of other stakeholders is already starting to happen in many places today. For example, sustainable supply chain projects, fair trade consumer movements, and conscious investing are extending their reach from a narrow (personal or corporate) ego-system awareness to an eco-system awareness that includes players along the whole value chain." ((http://www.ottoscharmer.com/docs/articles/2009_SevenAcupuncturePoints5.pdf))
"His basic argument is deceptively simple. Our private well being is rooted in a foundation of common values, our common-wealth. This takes on three dimensions: nature, community, and culture. This commonwealth is "the dark matter of the economic universe - it's everywhere, but we don't see it." (66) Taken together, these are the commons, the ecological and cultural water within which we human fish swim.
But modern institutions are blind to these values and so unintentionally parasitize them, weakening their vitality and turning them into private values where they can no longer perform the functions needed ultimately to guarantee even private well-being. Corporations in particular, but other modern institutions as well, are gradually destroying our common-wealth. To inject my own comment, in the modern world what is not visible theoretically does not exist. We are taught not to notice what does not fit our preconceptions. What does not exist is of course unimportant. There is no sense of humility, modesty, or mystery in this attitude, and the price we have paid for our arrogance and egoism is high and promises to get much higher.
Barnes initially illustrates his point by examining how trust and liquidity, both essential for economic success, are not properties of businesspeople, but of the culture within which they operate. For example, when a business goes public its share value grows 30% simply from increased liquidity, constituting a "socially created bonus." (68) Throughout Capitalism 3.0 Barnes gives many more examples taken from nature, our communities, and our culture.
Unfortunately, in our present system of 'Capitalism 2.0,' the rights of capital trump all other values. To give an example of my own, while there is enormous concern among so-called "property rights defenders" over 'takings,' where regulation in the service of common values reduces the monetary income a person might make from land, there is a deafening silence over 'givings' where public effort or even the simple growth of society leads to increased financial value. 'Givings" are invisible to these people.
Barnes illustrates corporate capital's parasitical relationship to our common-wealth in a chart comparing Disney stories taken from the public domain and turned into enormous profit, and stories Disney has added to the public domain. There are 17 of the former, ranging from Aladdin to The Wind in the Willows. There are none of the latter, for whenever enough time elapses so a Disney story might enter the public domain, they get the law changed to protect their monopoly. Disney takes but never gives.
To preserve a long term environment good for both our common-wealth and our private-wealth, the commons should trump capital. But how?
Trusts The answer is in expanding and deepening the role of trusts in our society. Barnes recognizes the importance of institutionalized property rights in making a complex society possible and is wisely skeptical of politicians' and bureaucratic administrators' capacity to look out for the common good. But, as he points out, "Nothing requires them to be locked in profit maximizing hands." (72) "Propertization" he emphasizes, need not be privatization.
Trusts are already designed to protect different kinds of commons, and have long proven their worth. But their full implications have not been explored. Among private citizens different kinds of trusts have been developed and perfected for beneficiaries where trustees are responsible for their protection. I myself am a trustee for education trusts for my nieces and nephew. At the government level Barnes describes the Alaska Permanent Fund as a successful state trust institution channeling a portion of Alaska's petroleum income to all state residents.
As a key example, Barnes describes the Trebah Garden Trust in Great Britain. Trebah Garden is a wonderful beauty spot governed by a trust with over 1000 voting members. The photo at the top of this post is from the Trebah Trust. About it, he writes:
"If we think of the world as an assemblage of gardens - that is, of ecosystems in which humans play active roles - the Trebah model becomes extremely interesting. It illuminates both a process by which natural gifts can shift from private to common ownership, and an institutional model - the trust - for managing such gifts as permanent parts of the commons." (83)
Trust managers must give their primary loyalty to beneficiaries, and are obligated to preserve the trust's principle, even if they can disburse income derived from that principle. They are required to operate with full transparency so that beneficiaries can easily see what decisions are made, and why. In this respect they differ radically from both corporations and government, both of which generally fear transparency. In the case of trusts charged with preserving values indefinitely, each generation is obligated to pass them on undiminished to the next. These principles are enforceable by law.
There are many such trusts. The National Trust of England, Wales and Northern Ireland governs over 600,000 acres with a voting membership of over 3 million. It is over 100 years old. Scotland has a similar trust of its own. In the US there are over 1500 Trebah like units. The Nature Conservancy, America's largest, while not democratically run like Trebah, is responsible for over 15 million acres (over 23,000 square miles). Common property trusts can cover a wide range of values, and Barnes describes two very successful ones near his home in northern California: the Marin Agricultural Land Trust and the Pacific Forest Trust. For more general information on land trusts in the US, see The Trust for Public Land.
I was particularly delighted by this section because Barnes had independently hit upon a model I had developed as a reform proposal for our grievously mismanaged national forests. See for example here and here.
But for Barnes, Trusts are more than simply ways to preserve natural values, important as that is. They also offer a way to keep the commonwealth of a society, or of humanity as a whole, from being siphoned off into corporate coffers, or simply dissipated because it is not valued. Barnes thus picks up a challenge first addressed long ago by Henry George, that much of the value of land often has nothing to do with the owner's actions and everything to do with the society wherein it is situated. Why, then, should the owner get all the gain and society pay all the price?
Economically efficient use of the commons for private purposes requires paying rent. Rent paid for use of the commons can be paid as dividends to members of society as a whole, which while benefiting all, would disproportionately benefit the poor who are most taken advantage of in this time of rampant crony capitalism and national kleptocracy. (97) As I read this part of Barnes' analysis I was again surprised and delighted because I had explored similar themes in my own book Persuasion Power and Polity especially in Part III, a Theory of Contractual Federalism (249-359). Alas, for both myself and the ideas therein, the book was never reviewed. Barnes discussion will be reviewed many times. Maybe my own efforts will finally get some attention? A man can always hope.
But Barnes sees the implications of this model more broadly than I have, applying it across the board as an institutional alternative to the most troublesome ecological, social, and cultural challenges of our time. He has made what I regard as the vital conceptual breakthrough, freeing us from being trapped trying to solve serious problems while encased within institutions and ways of thinking that prevent us from doing so. Indeed, one of the most ambitious implications of his model is a way to create a truly long term institutional framework able to address the most frightening ecological issue of our time, global warming. That alone is enough to make the book valuable. But as I hope I have shown, there is even more there." (http://blog.beliefnet.com/apagansblog/2007/04/capitalism-30---a-wonderful-book.html)
Peter Barnes on Natural Capitalism
“Since the 18th century, and especially since the collapse of communism, we’ve been living in a world increasingly driven by the `need’ to maximize return on capital. The rationale for this obsession is that, if risks taken by capital owners aren’t rewarded first and foremost, capital will sit idle and wealth won’t be created. As a businessman and investor, I’ve benefited personally from the supremacy of capital and am not keen to question it. But as a citizen, I have to note that too much kowtowing to capital is both dangerous and unnecessary. It’s unnecessary because, in this day and age, we have a capital surplus that’s mostly wasted on speculation. And it’s dangerous because it leads, willy nilly, to the destruction of nature, community and other time-honed sources of well-being. That’s the `tragedy of the market,’ and unless we fix it, we’ll see ever-greater human misery and ecological ruin, even while GDP increases. How do you fix a system as vast and complex as global capitalism? And how do you fix it gracefully, with minimum pain, disruption and coercion? The answer is: you do what Bill Gates does. You upgrade the operating system.
If you think of the economy as a huge spreadsheet, with each cell representing a producer, consumer or property owner, you can see that the behavior of the whole is driven by the algorithms, or mathematical instructions, in the cells.
Our current operating system is dominated by three algorithms and one starting condition. The algorithms are: (1) maximize return to capital; (2) the price of nature equals zero; and (3) property income is distributed on a per share basis.
The starting condition is: the top 5 percent of the people own more property shares than the remaining 95 percent.
These algorithms and the starting condition stimulate the production of goods and services, but they also have non-trivial side effects: they devour ecosystems, widen inequality and distract us from truer paths to happiness. This is no accident; any economic system whose calculus is to maximize return to a small minority, while paying nothing for nature, is bound to create these effects.
If our current operating system is the cause of our ills, we can hardly expect it to fix them. Tinkering at the edges — a new regulation here, a new law there — won’t make much difference. What will make a great difference is new algorithms in the cells. This isn’t as big a deal as it might seem. It doesn’t require abolishing the present algorithms, expropriating any property, raising taxes or expanding government. Nor does it mean replacing the existing operating system in one fell swoop.
Rather, it means gradually elevating some currently under-used algorithms to greater strength so they can counter-balance the currently dominant ones. If this is properly done, our economic machine on its own — without persistent government intervention — will, over time, respect nature, reduce inequality and increase our personal well-being.
What algorithms to elevate? I’d nominate four: (1) preserve common assets, such as gifts of nature, for future generations; (2) live off income from shared gifts, not principal; (3) distribute income from shared gifts on a one person, one share basis; and (4) the more the merrier.
Each of these algorithms already exists, and institutions that embody them are popular and work well. Land trusts like the Nature Conservancy preserve millions of acres. Thousands of foundations and endowments live off income without dipping intyo principal. The Alaska Permanent Fund — a giant mutual fund set up with revenue from North Slope oil — pays all Alaskans equal yearly dividends, simply on the basis of residence. The Internet is a classic non-depletable commons that grows more valuable as more people use it.
The challenge as I see it is first to imagine, and then to build, new institutions to manage currently unprotected pieces of our shared inheritance. Unlike the joint stock corporation, these new economic actors wouldn’t strive to maximize profit; instead, they’d follow one or more of the algorithms noted above. Nor would they be accountable to profit-seeking shareholders; they’d owe legal loyalty to future generations, living citizens equally, and, when appropriate, the larger biotic community. Over time, they’d constitute a `commons sector’ that would both contain and enhance the market sector.
One immediate consequence of this upgrade would be a hike in the price of nature; guardians of over-burdened ecosystems would no longer allow free and unlimited private use. Another consequence would be a flow of property income not just to private shareholders and fortunate Alaskans, but to all Americans as a matter of right. I call this upgraded operating system Capitalism 3.0 and view it as a third stage in the evolution of capitalism.”
Peter Barnes on the Commons
This is an excerpt from a lecture at the Schumacher Society:
“First of all, the commons consists of stuff we share. That is to say, whether it is a street or a river or the air or the vast store of human knowledge–none of these belongs to you or me or private corporations. They are something we share in one way or another.
Second, the commons consists of stuff we inherit. It is not made up of anything that you or I or some corporation makes. One can present a very good case that if you make or invent something, it should be your private property, at least for a while. This is an entirely appropriate way of rewarding people and businesses for value they create and risks they take. But air and water and ecosystems and DNA and language and legal as well as political institutions are not made by any individual or corporation. They are gifts we inherit, either from nature or from the collective efforts of millions of humans.
Third, the commons consists of stuff we must pass on to future generations. Just as we receive the commons as a gift, so too we have a moral obligation to pass this gift on to our children in at least as good condition as we received it. If we can add to it, improve it, so much the better. At a minimum we must not degrade it, and we certainly have no right to destroy it.
Fourth, the kinds of things that tend to be commons are not small; they tend to be large, and they tend to be spaces or systems–natural systems or social systems. Within these spaces and systems there can be private pieces: for example, many pieces of the Internet or of a watershed may be privately owned. But the Internet and the watershed as whole systems are commons, and we share them. The systems, if not all the pieces, are parts of the commons.
And fifth, let me dispel two myths that have obstructed clear thinking about the commons for many years. One is the myth that all commons are inherently self-destructive. This myth is largely the result of a 1968 essay called “The Tragedy of the Commons” by the late biologist Garrett Hardin. Hardin assumed that there is basically only one kind of commons: the unfenced pasture or waste dump with no management system, areas to which individuals can add animals and wastes freely and at will with no limitation. As a result destruction can result. What Hardin overlooked is that there are many kinds of commons and many ways to manage them. For example, you can put a fence around a pasture or you can put a fence around a waste dump and charge a dumping fee; you can have fishing and hunting limits and sell licenses. There is no tragedy if a commons is treated properly.
The other myth is that a commons must always be free and open to anyone who wants to use it. In an uncrowded world, this would be the ideal way to run a commons, but in a crowded world, such as the one we now inhabit, we must not allow unlimited dumping into the air, the water, and the soil. We must put limits on the uses of many of our commons: on the noises we allow into the shared spaces around us, on hunting and fishing, cutting of trees, posting of billboards. We can charge tolls for parking on city streets, for using congested highways, and for driving into the center of cities such as London. All these are legitimate management tools to protect and preserve different kinds of commons.
There are numerous reasons why the commons is so important. We all know why the market is important: it produces and distributes the vast array of goods and services that characterize our high-consumption society. What the commons does for all of us is less obvious–in part, I should note, because the commons never advertises!
1. For most of human existence the commons supplied everyone’s food, water, fuel, and medicines. People hunted, fished, gathered wild fruits and herbs, collected firewood and building materials, grazed their animals in common pastures, and farmed on common lands. In other words, the commons was the source of basic sustenance. This is still true today in many parts of the world, and even in the city where I live, San Francisco, there are people who fish in the Bay, not for sport but for food.
2. The commons is the source of all natural resources and nature’s many replenishing services. Water, air, DNA, seeds, topsoil, fire, electricity, minerals, wild animals, domesticable animals, edible plants, healing plants, solar energy, wind energy, water power, forests, rivers, ultraviolet protection, climate regulation, biodiversity, and much more. These are all parts of the commons.
3. The commons is our ultimate waste sink. It recycles water, oxygen, carbon, and everything else we excrete, exhale, and throw away. It is the place where we store, or try to store, the toxic residues of our modern industrial system.
4. The commons holds and disseminates humanity’s vast accumulation of science, art, customs, and laws. It is the seedbed of all human creativity. As Isaac Newton said, “If I have seen further it is by standing on the shoulders of giants.” Without the open sharing of ideas, there would be no religion, science, mathematics, philosophy, children’s games, musical instruments, dances, jazz, hip-hop, fashion, sports, democracy, universities, libraries–the list goes on and on.
5. The commons is essential to human communication. We talk to one another with shared symbols and languages that are the living products of many generations. Most of the spaces we communicate through–the air that carries sound, the visual environment we use for traffic signs and billboards, the vast global web of wires and switches we call the Internet, the electromagnetic waves we use for radio, TV, and cell phones–are parts of the commons.
6. We use the commons whenever we travel from place to place, whether by land, water, or air. If we could not use the commons in this way, we would be prisoners in our private homes.
7. We rely on the commons for our sense of community. The commons is the village tree, the public square, Main Street, the neighborhood, and the playground. In addition to families, it’s the glue that holds us together.”
Invitation to action
Chapter 10: What You Can Do 155
"To build Capitalism 3.0, we each have a unique roles to play:"
- Wage earners;
- Commons entrepreneurs;
- Religious leaders;
See our entries on Natural Capitalism and the Commons
Read Peter Barnes on Trusts and Common Property
Hear the podcast with Peter Barnes on Capitalism 3.0