Contributory Resource Use
Typology of Resource Use
Neutral Resource Uses
If a resource use neither improves nor diminishes the resource, open access (lack of all property arrangements) should be the rule. Thus, for example, by breathing the air, an individual causes no damage. He does at this moment add carbon dioxide to the air, but this is part of the global carbon and oxygen cycles which maintain both the quantity and the quality of the air. Air for breathing must therefore remain an open-access resource if we are to ensure the least possible scarcity. Although nobody has yet claimed ownership over the air we breathe, our access to clean air is seriously curtailed by pollution. Thus, keeping air to breathe as an open-access resource demands that air pollution be strictly limited, at the cost of the polluters. Costs of pollution control should be passed on to the consumers who buy the products of polluting industries, so that they pay the full costs of production.
Another resource use that causes no impact on the resource is the act of walking from one place to another. The resource that is being used is the surface of the earth, and the use is locomotion. Wherever pedestrians do not destroy some resource on the earth’s surface (such as a farmer’s crop, flowers planted for their beauty, somebody’s reasonable sense of privacy, or the breeding grounds of a rare or endangered species), their passage should not be restricted. Conversely, because they can cause serious damage, motor vehicles should be confined to roads designated to them (as they normally are). Another use of the earth’s surface that causes no damage is resting or sleeping. Unless somebody chooses to sleep in a location where it causes real obstruction to others, she should be left in peace. A homeless person seeking a place to rest should not be harassed! In many cases, the same piece of land can be treated as private property for production purposes, and as openly accessible land for the purpose of walking or resting. For example, there can be public rights of way in a timber reserve, and, in many countries, people can walk along and sometimes across privately owned fields as long as they do not damage the crops.
Drinking water from a river or lake, or from a well operated by a handpump or a bucket pulled by hand, in no way impairs the availability of that water for others, either in quality or quantity. Therefore, drinking from openly available sources should not be restricted. This means that no charge should be exacted for this resource use, and drinkable water should not be polluted. However, in the case of distribution systems that provide piped water to households or businesses, charges can reasonably be exacted for transporting and distributing the water. There should also be charges for consumptive or polluting water uses, in order to cover the costs to either replenish or clean the water. For these uses, the water should be treated as a form of common property (this is discussed in more detail below, pp. 172-4).
Sunshine and wind, which remain unaffected by human exploitation, are and should remain open-access resources. However, the structures needed to capture solar or wind energy can and should be somebody’s property, as also the land on which they are installed. Ownership may be vested in individuals, cooperatives, or private companies as part of the private sector of the economy.
Enjoying scenic beauty and silence are two non-consumptive resource uses, as long as they do not require extensive travel or the fencing off of large pieces of private property. These two kinds of enjoyment have often become the privilege of elites because access to quiet places of scenic beauty has been impeded by a variety of scarcity-generating institutions, such as urban sprawl, ugly architecture that fails to harmonize with the landscape, private property that is so extensive that it impedes access to the entire landscape, and transport systems geared exclusively to private cars. These scarcity-generating institutions must be altered in order to allow everyone to enjoy scenic beauty and silence. However, this principle should not lead to the idea that all forms of noise-generation should be outlawed! People have a legitimate wish to enjoy themselves in ways that may appear noisy or ugly to some others, to celebrate with loud music, or to otherwise express themselves through noise. Appropriate compromises may need to be negotiated.
Closely related to the enjoyment of scenic beauty is the enjoyment derived from being in the “wilderness,” a landscape minimally affected by human resource uses, or from studying the animals and plants found there. There are powerful reasons to protect such places from human depredation, in order to preserve a wealth of species and potential human knowledge. However, such protection must always recognize the needs of people who already live in these areas, as well as their contributions to knowledge, natural resource protection, and the art of living. Here, some kind of common property regime should be implemented to protect biologically valuable areas, ensuring that everyone concerned is treated equitably and can participate in decision-making (for some approaches to this issue, see Brosius, Lowenhaupt Tsing and Zerner 2005).
Rivalrous Resource Uses
We are now left with “rivalrous” resource uses that are consumptive and/or polluting—that is, they may reduce the amount or the quality of the resource. These are the resource uses that must be regulated in order to ensure that the resource is preserved rather than depleted, and where it is important to institute various forms of property rights.
In respect of rivalrous resource uses, we need to ask the second question on the flowchart (Figure 8.1): is the resource in question renewable or nonrenewable?
Renewable resources can be managed such that they can be maintained in perpetuity. Technically, this is not usually very difficult to do, but ensuring that existing incentives actually favor sustainable and equitable use can be daunting. Non-renewable resources, on the other hand, can raise difficult questions of how to balance the needs of the present with those of the future in the face of probable depletion.
The exploitation of non-renewable resources, including such things as minerals, rocks, and fossil fuels, can impose scarcities on others in three major ways: by causing environmental impacts, by depleting a resource, and by monopolizing a resource. The environmental impacts can best be addressed via property rights in clean air and water and other assets that may be affected by pollution, rather than via property rights in the mineral resource itself. The scarcities involved in monopolizing or depleting a resource can, however, be addressed through property rights in that resource. In general, these scarcities are greatest if exploitable concentrations of the resource are to be found in only a few places, and if the demand for the resource is great relative to supply—or, in other words, when it is possible to reap large rents, unearned income derived from monopolizing a scarce resource. The most important question regarding non-renewable resources thus concerns the magnitude of rents relative to the regional or national economy (question 3 in Figure 8.1). Some non-renewable resources, such as granite and sand, are so abundant that depletion can be ruled out—in such cases, private appropriation of the rather limited scarcity rents may be allowed while ensuring that common pool resources, such as clean water, are protected.
Some rather less abundant minerals (such as some metals) are used in ways that allow a large degree of recycling, which reduces concerns about ultimate depletion, even though comparative costs may currently favor mining over large-scale recycling. It may also be possible to substitute other resources for some non-renewable minerals that are being depleted. In such cases, we need not be very concerned about depletion of the resource, but monopoly rents can be very important. In the case of minerals that cannot be recycled or where the total amounts accessible in the Earth’s crust are quite limited compared to demand, however, depletion is an important concern. The most important such mineral is oil, which is not recyclable if it is used as an energy source, and which yields enormous rents.
To whom are the rents to be paid? In other words, who is to own the resource? For example, how should the revenues obtained from mining oil in Aceh be shared among people in this province, in Indonesia as a whole, among the oil corporations, and potential others (such as governments of importing nations which impose fuel taxes)? Since nobody can justifiably claim to have a greater right than others to something no-one has produced, I would argue that ownership of non-renewable resources should be widely shared—for example, among the citizens of a nation in the case of scarce and patchily distributed resources that yield the largest rents, or among residents of a county or district in the case of more abundant and evenly distributed resources, which nevertheless generate large rents relative to the local economy.
Fees paid by mining companies for the privilege of exploiting a scarce non-renewable resource would then be destined in principle to benefit all the people of the country—for example, by funding more widespread education or by paying out direct royalties (as further discussed on pp. 167-71). This would require the institution of a representative, publicly accountable body that would govern the process whereby private companies bid for mining rights, and the distribution of the resulting revenue. Such an institution would reduce the corruption that often exists in granting resource extraction rights, and might therefore raise the costs of mining. This would ensure not only that more of the revenue remained in the country, but also that there would be more incentives for conservative resource use, recycling, and the search for alternatives. Companies bidding for the rights to extract resources would bid at a level that assures them a reasonable profit, including the potential to search for new, hitherto unknown mineral deposits. Hence, private enterprise would still get its due rewards, but the prices for natural resources would more effectively incorporate their scarcity value. This is economically beneficial because, in theory, economists argue that increasing scarcity of a non-renewable resource leads to increasing prices, and thus the market itself will ensure that people reduce their use of a resource as it is depleted. This theoretical relationship is only actualized, however, if an appropriate institutional structure is in place.
In addition, complementary strategies, such as eliminating radical monopolies in transportation, are also needed in order to reduce consumption of mineral resources, because increased price is a tool of scarcity and we must search for abundance-generating mechanisms to achieve our ends.
Turning to renewable resources, the next question (question 4 in Figure 8.1) is whether the resource is “excludable”—that is, whether the resource can be effectively divided into discrete management units, with most direct impacts of its use being confined to the unit where they are generated. For example, air that is used as a disposal site for wastes (through air pollution) cannot be subdivided into units, because the air moves freely. Surface waters can, to an extent, be divided into management units, such as drainage basins, but environmental impacts will clearly extend beyond any management unit, because pollution and sediments travel downstream beyond the drainage basin into the sea. Some of the impacts of agricultural land uses remain confined to the site (such as local depletion of soil nutrients), but others extend to various distances beyond (for example, soil erosion and groundwater withdrawal can have significant off-site effects). In such cases, we have to clearly define the spatial spread of various impacts, and accordingly develop varying ownership regimes for various resources.
A resource that cannot be subdivided into self-contained management units and is used in rivalrous ways, such as air or water used as a sink for pollution, must be treated as common property. This implies that no individual can claim the right to appropriate some portion of clean air or water, and foul it up or be paid not to pollute it. Such an action would constitute theft. Just as we do not require cost–benefit analysis to conclude that theft of private property should not be allowed (even if the thief makes better economic use of the stolen property than the owner did), we can conclude that theft of clean air or water should likewise not be allowed. Within limits, the degradation of common property resources may still be allowed, but only as a privilege obtained in return for some kind of payment.
In spite of the indivisibility of air and water, management units do have to be created in practice, but it is important to understand that they are not self-contained.
Thus, for example, the atmosphere knows no national boundaries, but regulation has to occur within administrative boundaries humans have created. Since there are now various pollutants which pose problems on a truly global scale, the global atmosphere could logically be treated as a global commons, governed by an institution which sets goals and standards of atmospheric quality on a global level (as advocated by Simms, 2005, for example). National governments would then implement plans to reach these goals within their borders, and might further subdivide responsibilities on a territorial and/or functional basis. As a common property resource, the global atmosphere would have to belong to all humans equally, which means that the global governing institution would have to be accountable to all people equally in order to enjoy full legitimacy. No institutional mechanism has yet been devised to ensure such accountability, but given the growing number of threats to globally shared resources, it may be time for such an innovation. Even in the absence of legitimate, democratic global institutions governing global commons, however, it is possible for national or international institutions to fill in the gap at least on a regional basis. Thus, air quality (within administratively defined borders), lakes, drainage basins, semi-enclosed seas, and even large parts of the ocean can be treated as common property resources. For example, the Mediterranean Action Plan aims to clean up the Mediterranean, recognizing that its waters are shared by people belonging to 20 countries, and that the whole region will benefit if pollution is reduced (Dardis and Smith 1997). If this region is cleaned up, it will cease to contribute to the pollution of the Atlantic Ocean. If similar programs are undertaken in other hotspots of marine pollution, the global problem of marine pollution can be substantially reduced. Global conventions, such as MARPOL (the International Convention for the Prevention of Marine Pollution from Ships), will then be needed primarily to deal with pollution on the high seas. Considerable progress has also been made in some river drainage basins, such as that of the Rhine, as a result of international cooperation (see Shmueli 1999). At the regional level just as at the global level, however, it is important to ensure that institutions charged with managing common resources are democratically legitimated, and are not captured by the interests they are supposed to control.
In the case of resources that can be divided into discrete management units, the next question (question 5 in Figure 8.1) concerns the number of management units into which they can be divided without impairing management efficiency. Sometimes, the number may be very small, particularly for utilities, transportation and communication networks, and facilities for the production of specialized high-technology manufactures (for example, factories producing large commercial airplanes and specialized military hardware). In such cases, there is an extremely strong tendency toward oligopoly or monopoly control. It bears pointing out that an oligopoly at a global or national scale may involve monopolies at smaller scales if competitors have divided up the market geographically, and thus a full analysis will have to take all spatial scales into account. For example, there can be many electric utilities, water supply companies, sewage treatment facilities, and garbage disposal companies in a country, but all of these services are usually best organized on a territorial basis, meaning that any one area is served by only one company (these have often been referred to as “natural monopolies”).
Regardless of whether these facilities are owned by the public or private entities, there is a great danger of the monopolistic creation of scarcity, either through charging excessively high rates or not delivering adequate quality. In such cases, a third alternative would consist of ownership by the customers. The customers would have an interest in efficient service delivery but not in maximizing profits; their ownership would thus offer the opportunity to obtain the best of both worlds, of private and public ownership. Institutions would have to be devised that allow customers to exercise effective ownership rights; perhaps customer/shareholder representatives could exert the same rights as shareholders and their proxies in conventional corporations. Similar arrangements might be organized for oligopolies in sectors which are not “natural monopolies.” Some relevant ventures have been organized along these lines: for example, health insurance was first organized in the nineteenth century as small-scale non-profit ventures run by the insured people; only later were these centralized under state or private-sector leadership, with professionalized management that often became remote from the needs of the insured. In some cases, formal structures allowing the insured to control management still exist, but do not actually encourage participatory control in practice—for example, because effective oversight requires the devotion of many hours of work on a purely voluntary basis. The question in such situations is how to alter the institutional structures so that they can promote meaningful participatory management.
Even if a “natural monopoly” is owned by its customers, there is still a need for public oversight because the collective interests of customers might be at variance with the interest of the public as a whole or of future generations. For example, a customer-owned water utility might be concerned with the quality of the water delivered to its customers, but be less concerned with downstream water quality affecting other users or the ocean. Public oversight would have to reflect the interests of those most likely to be ignored by the owners of the monopoly or oligopoly. In the case of the military industry, the main customer of which is the government and the product of which is supposed to be national security, public oversight would have to recognize at minimum every taxpayer’s and citizen’s right to be represented. Of course, not everyone would be able to actually engage in that oversight, which means that some kind of delegation of responsibilities would have to occur.
In contrast to those resources subject to “natural monopolies,” many other resources or assets allow a multitude of management units. Examples include land used for agricultural production (farms, forestry), urban land and buildings used for housing, and the assets of all kinds of small and mediumsized businesses. Here, the final question (question 6 on Fig. 8.1) is whether private property of these assets is compatible with equity. If it is, then private property leads to the least possible scarcity; if not, management as local common property resources or cooperatives is preferable. Some examples may help clarify this point. Forests, grazing lands, or irrigation facilities used by many members of a village community often play an essential role in rural livelihoods. They are used in ways that are potentially both depleting and degrading, which means that open access is not a feasible alternative. They can be divided into discrete management units, of which there can be very many in a single country, and even within a local administrative unit. The most serious adverse impacts of their use tend to be felt within the immediate area, and thus it is not necessary to manage them as national or global commons.
However, if they are treated as private property, only a few individuals within the village will profit from them, at the cost of increased scarcity for the rest of the village and intensified conflict over resource use. It is thus usually most appropriate to manage such resources locally as a common property resource. On the other hand, the assets of small businesses (including agricultural farms) and individuals’ or families’ own houses or apartments should be protected as private property. These are discrete management units, of which there is a multitude even within a small town, and the owners of these units do not create scarcity for others by virtue of their ownership rights.
Cooperatively and individually owned assets may, of course, exist side by side, as when some of the land in a village is held privately, and other land by groups of owners. For example, the Deccan Development Society promotes cooperatives consisting of groups of poor women in the state of Andhra Pradesh, India, without challenging the private property rights of other landowners (Agarwal 2003).
Likewise, numerous worker-owned businesses (the Mondragon cooperatives) exist alongside privately owned businesses in the Basque country of Spain (Kasmir 1996; Gibson-Graham 2006). E.F. Schumacher (1975: 274 ff) described the Scott Bader Company, which the founder, Ernest Bader, had transformed into an enterprise owned by the “Scott Bader Commonwealth,” a non-profit organization owned by the employees, which distributed half of its income among the employees, and supported charitable projects with the other half. This company still exists, selling polymer resins in the capitalist marketplace (see its website, http://www. scottbader.com/pub.nsf). Institutional pluralism of this kind allows people to learn from each institution’s successes and failures and thus develop better institutions.
The transformation of the Scott Bader company from an individually owned to a collective enterprise has been due to the altruistic vision of its owner, and the success of the Mondragon cooperatives in Spain has depended greatly on historically evolved conditions in the Basque region (as well as the original initiative of a small number of individuals). Similar transformations can be encouraged elsewhere by policies that make it easier for employees to form cooperatives and to buy out firms. In addition, inheritance laws could be modified in such a way that passing on a company to its employees would be burdened with far fewer taxes than passing it on to the owner’s descendants. Although market liberals would oppose this policy, it accords well with liberal justifications for property as reward for one’s work (both the work of the deceased owner, as well as of the current employees). Furthermore, the children of a business owner are not necessarily the most qualified persons to run an enterprise, just as the son of a monarch is not necessarily qualified to take over leadership of a kingdom. If the owner’s children have proved their leadership qualifications by being involved in management, they would receive a share of an employee-owned company in proportion to their own involvement.
A situation that is rather more difficult to resolve occurs where the potential number of discrete management units is very large, but the actual number is small. Examples include agricultural plantations employing large numbers of workers, many manufacturing enterprises, and chains in the service sector (such as chain restaurants, hotels, and retail stores). Agricultural plantations and factories often enjoy a status as a near-monopoly employer and/or landowner in an area, undermining the bargaining power of workers, while service sector chains can undercut local competition, leading to serious scarcity. Perhaps it would be possible to develop taxation or regulatory regimes to make these kinds of businesses less profitable than their smaller competitors, thus gradually leading to a deconcentration of the respective economic sectors. In many cases, agricultural plantations have had to be broken apart forcibly through land reform in order to give opportunities to large parts of the agricultural population. Simply reforming policy environments so that they hinder, rather than facilitate, the creation of monopolies could have major positive impacts.
In summary, resource-use rights should be designed to ensure that resource uses which improve or at least do not degrade a resource are both encouraged and protected from any potentially degrading resource uses. Resources that for any reason must be shared among many users (whether for reasons of environmental sustainability or of social equity, or because they simply cannot be divided) should be treated as various forms of common property. Finally, resources that can be managed in small units with widely dispersed ownership should be treated as private property or worker-owned cooperatives, allowing for the free play of the market. Questions of economic efficiency and how to refine each kind of property institution are subordinate to these fundamental considerations. Any ideology that claims that only one form of property will solve all problems will lead us astray: we need no radical monopoly of private property, state property, or any other kind of property."
- Book Source: Wolfgang Hoeschele. The Economics of Abundance: A Political Economy of Freedom, Equity, and Sustainability.