Common Wealth Trusts
Peter Barnes responds to the concerns that his proposals and above article have generated:
* Q: Are common wealth trusts a panacea?
A: Not at all. We need many other institutional innovations. But for the crucially important tasks of administering a sustainability budget and providing income security to everyone, common wealth trusts are the best tools available.
Q: Are common wealth trusts guaranteed to work? Can’t they be corrupted?
A. Common wealth trusts are not guaranteed to work perfectly and in all cases, but they will do many jobs we need done better than profit-maximizing corporations and plutocratic government.
Of course, like any other human institution, they can be corrupted, but our task is to build on the long tradition of trusts’ accountability to beneficiaries to make them as incorruptible as possible.
Q: Can common wealth trusts be created by citizens acting independently, or is government action—and hence a political movement—required?
A: Both methods are required. A trust for almost any purpose can be organized under existing law. The challenge is gaining control over a common asset. That requires either government assignment of property rights and/or a lot of money (private or public) to buy them. In either case, a movement is essential.
Q: If government action is required to assign property rights or finance their acquisition, doesn’t the fact that government is dominated by corporations make such action extremely unlikely?
A: At the moment, yes. But it is possible that, following a major crisis of some sort, corporate domination will temporarily falter. At such a time, there will be an opportunity for non-linear change. We must use that opportunity to create institutions that can stand on their own after the crisis ends and corporate domination of government returns. We need to create such autonomous, accountable institutions because we can’t expect government to be more than briefly free of corporate domination.
Q: What about the relationships between local, regional, national, multinational and global trusts?
A: This is a murky area, but generally, the rule of subsidiarity should apply.
Q: How do we think beyond wealth for humans and include the interests of other species?
A: The short answer is by proxy. When trusts that manage an ecosystem are legally accountable to future generations of humans, that means they are responsible for leaving the ecosystem in as good or better condition for the next human generation as it was when the living generation “inherited” it, with the ultimate goal of making it sustainable indefinitely. “As good or better condition” includes biodiversity. The determination of what that means in terms of human usage limits and restoration would be based on peer-reviewed science. Trustee decisions that fall short of this responsibility (again, using scientific criteria to compare past and present parameters of the ecosystem) could be challenged in court.
In other words, future generations of humans can serve as a pretty good proxy for non-human species—certainly much better than corporate shareholders, living voters, or wealthy political donors.
Q: Aren’t common wealth trusts just a “hack” of capitalism that fails to adequately challenge the power of multinational corporations?
A: I think of common wealth trusts not as a “hack” of capitalism but as evolutionary jiu-jitsu. It is true they leave a lot of power in the hands of corporations, but (a) we need to give those corporations some room to do business, and (b) the trusts would impose boundaries on corporate invasions of the commons, boundaries locked in by property rights.
The trusts would also create an equal distribution sector of the economy that partially offsets the wealth-concentrating effects of the corporate sector. One can hope that, over time, the boundaries around the commons as well as the size of the equal-distribution sector will grow.
Q: Wouldn’t it be better to use revenue from common wealth trusts for public and environmental purposes than for dividends?
A: I am not opposed to using some of the value of common wealth for public purposes, but I would rather do that by taxing dividends than by usurping them. If dividends are taxed as ordinary income, and tax rates remain progressive, the poor will keep most of their dividends while the rich will surrender a higher percentage. Overall, tax revenue in the US would increase by around 25% of the dividends, which our governments could then use as they see fit.
There is no guarantee, of course, that the tax revenue would be effectively spent. But in thinking about this, it is very important to remember that the ecological effectiveness of common wealth trusts rests much more in their boundary-setting power than in the use of their money. (email, August 2015)
The record for existing Common Wealth Trusts, by Tom Bowerman
1. The Alaska Permanent Fund is a direct dividend returned to all citizens of the State of Alaska derived from a rent against oil extraction. Although it generally fits the definition of a guaranteed basic income, in reality it falls short due to sizable annual fluctuations, low of $331 in 1984 to high of $3269 in 2008, $1305 in 2009. The fluctuation is caused by variations in investment returns from the $34 billion fund, which vary dramatically annually; the dividend would be $1300 / year if the find yielded a steady 6% annual return or about 3% of the average annual state income. Economist Scott Goldsmith gives a reasonable overview in: The Alaska Permanent Fund Dividend: A case study of implementation of a basic income guarantee (2010) (www.iser.uaa.alaska.edu/Publications/bien_xiii_ak_pfd_lessons.pdf). This study suggests two weaknesses for climate stability policy. First is that the oil revenue dividend is expended mainly as conventional consumption, and, second, it creates a citizen demand for more income and hence extraction of fossil fuel to keep the revenue dividend coming. There is no evidence of contribution to climate stability.
2. Since 2012, California's Cap and Trade program has been collecting dividends on auctioned allowances to emit greenhouse gasses. The California emission cap declines each year so that about 3% fewer allowances are allocated with each passing year - signaling that allocations will become more valuable each year. This simulates large emitters to invest in emission reductions rather than putting it off. Furthermore, this 2015, the annual revenue is expected to exceed $2.5 billion. These funds are dedicated into two broad categories: 25% to ameliorate detrimental impacts on dispossessed low income sectors affected by the policy or climate change, the remainder as state capital investments in renewables, conservation, public transportation, and research to transition California away from climate destabilizing economic activity. The early evidence of this program is that low carbon infrastructure investments are occurring rapidly from both the free market responding as resistance to the cost of emission allowances, and state investments in low carbon infrastructure choices." (http://www.greattransition.org/publication/common-wealth-trusts)
Sovereign wealth funds, vs basic income, vs common wealth trusts
"While Alaska is the only state to use its public fund to directly provide a level of universal basic income, other states do use the revenues they generate to fund a variety of social services (primarily public education). In Texas, for instance, revenues from the Texas Permanent School Fund—which acts similar to a Common Wealth Trust in that it directly owns and manages millions of acres of land in perpetuity—support public schools in every county and city both through direct transfers and bond guarantees. Revenues can also be used for other interesting public purposes. In Alabama, for instance, roughly 10 percent of the annual income from the Alabama Trust Fund is invested in the Forever Wild Land Trust Fund, a fund established by voters in 1992 to purchase, maintain, and protect natural areas of the state—similar, at least in its environmental orientation, to a Common Wealth Trust, albeit governed by the state rather than an independent non-profit.
In my opinion, this raises the question as to whether it would be more effective or even more equitable to distribute revenues from a public fund or Common Wealth Trust as universal basic income (as suggested by Barnes and is done in Alaska) or in other social or environmental ways. On the one hand, there is no indication that a basic income alone will provide the means or incentive for citizens to move to more environmentally sustainable practices. (It has not done so in Alaska). Moreover, for individuals at higher wealth and income distributions, a universal basic income could possibly serve to further increase patterns of consumption that undermine ecological sustainability. Accordingly, using revenues from Common Wealth Trusts for other public and environmental purposes may prove to be more effective at increasing environmental sustainability and reducing social inequality, at least in the short-term.
On the other hand, a universal basic income could have the not insignificant benefit of uniting people across classes behind the Common Wealth Trust idea, making it more attractive and resilient politically. This can be seen in the popularity and profile of the Alaska Permanent Fund, by far the most well-known of the American public funds in existence. This could be particularly important if the Common Wealth Trust concept expands beyond resource (and particularly fossil fuel) extraction to other areas, as Barnes suggests.
A related question concerns the critical concept of local community economic stability. Many cap-and-dividend (or fee-and-dividend) proposals envision some sort of conscious, planned effort—for both political and economic reasons—to reinvest proceeds from the program in local economies that are currently reliant on carbon intensive industries. The same would likely have to apply to the Common Wealth Trusts, especially an atmosphere trust (auctioning off the rights to dump carbon in the air) or mineral trust (charging to extract fossil fuels and other minerals from the ground). This suggests a broader conceptualization of Common Wealth Trusts beyond simply non-profit actors independent of the state that distribute proceeds equally to all. Rather, they likely would have to interact in some way with a democratically responsive and participatory economic planning system based on the goals of local economic stability, ecological sustainability, and social equity. Moreover, with issues as complex as climate change and ecological sustainability—to say nothing of local economic stability in a massive continental system such as the United States—such a system would likely have to be dynamic and evolve over time. This, in turn, raises fundamental questions regarding the structure, ownership, and governance of Common Wealth Trusts and their relationship to democratic politics.
These issues only become more acute when we consider that, as many environmentalists and others have pointed out, truly addressing climate change in any sort of equitable way will require a redistribution of resources from (and/or greater sacrifices by) richer countries that developed on the back of carbon emissions to poorer developing countries that have traditionally been low-emitters. Instead of providing all U.S. residents with dividends of up to $5,000 (as Barnes suggests), one alternative might be that Common Wealth Trusts would, for a time, be used to invest in renewable energy infrastructure in communities destabilized by a decline in fossil fuel extraction and/or sent overseas to help developing countries grow their economies in a less carbon-intensive direction." (http://www.greattransition.org/publication/common-wealth-trusts)
Towards a biodiversity of ownership models
"The mechanism he (Peter Barnes) suggests—a trust, holding common assets for the benefit of future generations—is powerful and simple. Trusts are likely well known only to persons of wealth; it is worth noting that they are how wealthy families protect assets for their own future generations and, as such, are instruments that are sturdy and have a long tradition to call upon in the law. To take this tool and turn it to our own uses—uses that promote the public good—is a stroke of genius. Property rights are the most well-defended part of our legal system. It is territory that the Left rarely thinks to claim as its own, and Peter is wise to do so. In so doing, he stakes our claim to the high ground long occupied by the financial elite.
I appreciate the point that these trusts give future generations “representation in our economic system,” which is easier than giving them representation in our political system. Many of us think of ownership as a fact, and fail to recognize it has a design. Currently, representation in our economic system is reserved to the elite who own substantial assets; the more stock you hold, the more votes you have inside a corporation, for example. But it need not be so. Peter envisions trusts in which we all would be represented – and so would future generations. Recognizing that we can redesign something as fundamental as asset ownership is powerful territory for transformation. We all can benefit from becoming more conversant at this design table.
Why are property rights so important? History and analysis here would help. I would invite Peter to speak in more sweeping language, about entering a new age. Property is foundational to every economy—from family ownership of farms in the Age of Agriculture, to the wealth of Robber Barons in the Industrial Age, to the wealth of the 1% in the Age of Finance, where we now find ourselves.
One age builds upon the last. We do not go back, but carry forward the former ages in new ways. In the industrial age, we industrialized agriculture. In the age of finance, we financialized industry. As we move into a more ecologically sensitive era, we will need to ecologize finance. And we will need to socialize it—make it more inclusive, less elite. Peter is showing one powerful way to do both.
Redesigning the social architectures of our economy is a vital part of transformation—as vital as redesigning the physical architectures of our energy and product system. Peter is a foremost architect in this important work.
I have one quibble with the piece. Peter speaks as though common wealth trusts will be THE one property/ownership design counterbalancing corporations. My sense is we are instead entering an era with a multiplicity of ownership designs – a time of biodiversity in social architecture, beyond the monoculture of the corporate form. Peter references my work, mentioning worker-owned businesses, wind guilds, cooperatives of all kinds, and so on. But he does not integrate these other forms of broad-based ownership into his vision of the future. Instead, his diagram (and analysis) shows two institutions—trusts and corporations—with government balancing the two. I think instead we will see a multiplicity of models. By drawing the boundary of “acceptable” models more broadly (if only through a sentence or two), Peter could position his work/theory inside a larger landscape, showing himself a natural ally of many other players seeking economic transformation." (http://www.greattransition.org/publication/common-wealth-trusts)