Global Commons and Common Sense
Essay: Global commons and common sense. Jorge Buzaglo. real-world economics review, issue no. 51
"The question still hovers around who belongs to the commonwealth. Who composes the commonwealth? Wich commonwealth is relevant? Which commonwealth is the legitimate owner of the natural resources? These questions will acquire increasing relevance with rising expected rents accruing from rapidly increasing scarcity, and the resulting wars for the control of resources. Many wars, and perhaps most current and planned wars, are about the control of resources — oil in particular. The unfortunate fact is that there is no factually legitimate form of exclusive/exclusionary ownership. All forms of privately or nationally restricted forms of property are contestable, and in fact often contested. The only stable, uncontestable form of resource ownership is collective ownership by the global society, according to clear and effective rules of use, acceptable to all. And again, the often avoided question of the equal distribution of dividends must be considered simultaneously.
So we have here introduced three critically important areas of common resources that are in great need of being globally regulated: greenhouse gas emissions, international liquidity, and natural resources.
"With Kant’s or Spinoza’s logic, if everybody were allowed to emit greenhouse gases as much as I can, I should not emit more than the globally sustainable average. That is the only sustainable way in which my individual action can be universal law and adopted by the rest of humankind. Or in Spinoza’s terms, as a rational human being, I do not desire to pollute the atmosphere at a level that would be unsustainable if also achieved by the rest of humankind. When it comes to the election of rules and systems for the allocation of rights, the only effective rational choice for every individual on the planet is the norm of equal emission rights for all.
This ethic of reciprocity and cooperation is most probably the result of millennia of observation and experience of human conflict. Game theory arrives at similar conclusions in the analyses of games that are repeated an unlimited number of times, and where the participants can be thought to learn through experience. In infinitely iterated games, history, learning, context and negotiation can bring solutions that are more desirable than mutual or collective destruction."
(after detailing a proposal for fixed equal quota's, the author continues:)
Achieving this type of market-based solution to climate change would involve of course grand institutional innovations. The point of departure of Peter Barnes’ (2006) institutional analysis is the ‘tragedy of the commons.’ Resources without clearly defined rules of utilisation or ownership tend to be overexploited and eventually exhausted. If, for instance, the atmosphere were owned by a Waste Management Inc., it would charge dumpers a fee and limit emissions.
However, even for neoliberals, a privately owned atmosphere is unthinkable. Barnes suggests instead endowing the management of the atmosphere to a trust. If instead of Waste Management Inc., a trust owned the sky there would be a bonus: every citizen would get a yearly dividend check. This is not just a dream: since the 1980s in the US such an institution, the Alaska Permanent Fund, manages that state’s oil resources and distributes dividends among its inhabitants.
The solution is thus to develop strong institutions that have ownership rights over common resources. This is an important insight, but ignores the fact that global warming is a global problem. The atmosphere is a global good, and the tragedy is being played out on the world stage. A system whose rules are followed by just a few and whose legitimacy is not recognised by all is not an effective system. Think if the world’s three billion poor find it legitimate for them to achieve the same greenhouse gas emission levels as the rich... The Kyoto Protocol was a first attempt at constructing a governance structure for the atmosphere. It must be recalled though, that the Kyoto protocol is not global. It covers at present not more than 30 percent of global emissions and a much smaller share of the global population — neither the US nor the developing countries participate. Similarly, the effective part of the EU’s emission rights system represents only 8 percent of global emissions (Nordhaus 2006).
Management of global resources requires global instruments. Even if ineffectual when partially implemented at the local or national level, Barnes’ idea of a climate trust fund might be a powerful initiative at the global level. What could indeed be effective is an atmosphera.org, a global trust fund with the mandate of managing the atmosphere on behalf of future generations and of investing its revenues in social programs and environmental projects worldwide, according to the equal rights principle.
This type of scheme would attract the developing countries, and also answer two objections commonly raised by the rich countries. First, it is suggested that a large share of the incomes accruing to poor countries could end in the pockets of corrupt officials and politicians. Second, it could also be possible that these incomes, even in the absence of corruption, might not benefit the poor — in many countries, public expenditures only increase the bias of an already unequal income distribution. A global, independent trust with clear mandate, power and accountability should see to it that the scheme is free from corruption and that its revenues benefit the ‘carbon-poor.’
If mandated by nation states, such an institution could even bypass local governments, and operate a somewhat futuristic direct global monitoring and redistribution scheme. With present-day computing and storage capabilities, (almost) every citizen on earth could have a ‘CO2 credit card’ — e.g. coupled to a bank credit card — on which the CO2 (equivalent) content of consumption is drawn. Periodically, the card would be credited with the amount corresponding to CO2 consumption below the overall emission right, and debited for consumption in excess of the general quota. A system of virtual or real tâtonnement would regulate the price of the emission right so as to equate supplies of CO2 under-consumers with demands of over-consumers.
A universal system of individually allocated carbon quotas is clearly superior in that the ‘commons’ nature of the problem underlying it is explicitly incorporated in the mechanism — an important trait in itself. But of course, also in the case of nationally allocated emission rights or a global CO2 tax, the equality principle should be incorporated into the dividend rules." (http://www.paecon.net/PAEReview/issue51/Buzaglo51.pdf)
"The UN Commission of Experts headed by Joseph Stiglitz recently made a similar proposal; to lay the groundwork for a Global Financial Regulatory Authority as the main instrument for the formulation of reforms of the global financial system (UN 2009: 15). According to the Commission, global financial supervision should ensure the safety of financial products — financial regulators should be mandated to ascertain the safety and appropriate use of financial instruments and practices. Global regulation should also be comprehensive — all types of financial institutions (including credit rating agencies) and instruments (including derivatives) should be supervised and regulated.
In my view, a World Financial Authority should have the clear evolutionary objective of becoming a World Central Bank. The function of a future World Central Bank should be to create and distribute liquidity to ensure global equity, stability and growth. In the same way as global regulation should limit CO2 emissions and other contaminants, regulation of global financial commons should limit ‘toxic asset’ creation, fraud and illicit financial flows (such as flows related to drug and arms trafficking, tax evasion, and illegal capital flight). Regulation of financial commons should generate global trust and liquidity in an equitable, stable and efficient manner.
There are several extant instruments and ideas that the World Financial Authority could immediately start with. The first is the expansion of the IMF ’s Special Drawing Rights (SDR) composed of all currencies participating in the system, as suggested since the 1960s by many developing countries and several international documents, and most recently by China’s central bank director. The Commission of Experts headed by Joseph Stiglitz proposes a New Global Reserve System, ‘what may be viewed as a greatly expanded SDR’ (UN 2009: 11).
Second, a greatly expanded SDR system under World Financial Authority management should help to definitively cancel the onerous debts of developing countries, once their legitimacy has been checked and their ‘non-odious’ character has been proven by the Authority. This should be the initial task of a permanent Sovereign Debt Restructuring Mechanism — a body proposed by UN (2009: 16).
Third, in the transition towards a global common currency — the natural evolutionary heir of a successful SDR system — the World Financial Authority should introduce the ‘Tobin tax’ on foreign currency transactions, as a main policy instrument for reducing volatility and instability in financial markets, increasing economic policy sovereignty, and removing the recessive bias introduced by unregulated financial flows. The ‘financial commons’ perspective of a World Financial Authority would imply that Tobin tax revenues, as emmission rights and/or carbon tax revenues, should be distributed according to the equal rights principle. James Tobin (1996: xvii), suggested that the tax rate ‘should not exceed 0.25% and perhaps should be as low as 0.1%.’ He estimated that at the 0.1% rate the revenue yield would be (in 1995) $94 billion. Since then and until 2007, the volume of foreign exchange transactions worldwide has increased by a factor of 2.5 (BIS 2007), so that today the revenue yield at a 0.1% rate should be somewhere between $200-250 billion a year.
Fourth, the Financial Authority should promote new rules for liquidity creation by all central banks. Equal rights to the commons of global trust and liquidity imply that in addition to international allocation of SDR, Tobin tax and other financial resources according to per capita shares, credit expansion at national levels should also follow an even pattern. Also within countries should liquidity and credit creation follow a per capita basis. A source of inspiration might be David Schweickart’s economic democracy model (Schweickart 2009; see also 2002), which allocates financial resources to a network of regional and local banks, each region getting its per capita share (adjustable by US Congress). Schweickart’s ideas are thought for application in the US, but short of a total breakdown of the multilateral financial system and a return to strictly limited capital movements, it seems that the real future of the financial commons idea is at the global level, managed by a democratically instituted and controlled body such as the World Financial Authority. As Barnes’ ideas on US emission rights, Schweickart’s are plausible and viable only at the global level." (http://www.paecon.net/PAEReview/issue51/Buzaglo51.pdf)
"Peace and security could be compared to financial trust, in the sense that both involve a feeling of confidence. In the case of peace and security, it involves the very basic feeling of confidence in the own physical integrity and survival. As an animal species, there is an innate instinct for humans, when pressed, to attempt to achieve security through violent means. Technical development seems to have set a logical limit to that tendency. The optimal method of playing the repeated game of Chicken — the ultimate form of the game in a nuclear world — is to cooperate and play a socially optimum strategy according to a ‘social norm.’ But in the iterated game of Chicken, it might be rational to practice ‘brinkmanship.’
By itself, a global commons approach to the global economic crisis would simultaneously increase peace and security in the world. A context of shared governance for increased global economic justice would bring down the level of conflict at all levels. A crucial ingredient of that context is reduction of US military expenditure. That means reduced conflict levels and reduced costs for maintaining peace and security, on the one side. On the other side, this means common responsibility and common financing of security.
The attempt by countries to achieve peace and security through the use of force ultimately increases overall insecurity. The only sustainable way of solving the collective security problem is for states to clearly comprehend the ‘commons’ character of the problem, and to arrive to a multilaterally shared approach to security." (http://www.paecon.net/PAEReview/issue51/Buzaglo51.pdf)
"In the general competition for the exhaustible resources of the oceans, countries have built huge fishing fleets, often by subsidisation of new investment. The oceans are being rapidly depleted. The majority of fisheries’ stocks are fully exploited. Fish stocks have col-lapsed in nearly one-third of all ocean fisheries — fisheries collapse is defined as catches dropping below 10% of the recorded maximum (Worm et al. 2006). All commercially valuable world fish stocks could completely collapse by 2048. As in the case of atmosphere, an international agreement and a new institution are needed, in order to regulate the use of ocean fisheries and other resources of the seas. The global commons perspective suggests the creation of tradable fishing rights entitling fishermen to a portion of the sustainable global catch. These rights to fish a certain amount are not permanent or hereditary or based on tradition (as in the case of similar systems in countries as e.g. Iceland), but auctioned off periodically, annually for instance.
As is the case of emission rights, fishing rights should be global — fish move freely. As in the case of emission rights, they should also be equal for all; there are no bases for particular privileges. Citizens of both land-locked countries and countries with large ocean coasts and platforms should have the same rights. Fishing rights should be administered in a fashion similar to the atmosphere, by a specific entity, and the revenues distributed according to equal per capita shares." (http://www.paecon.net/PAEReview/issue51/Buzaglo51.pdf)
Sub-surface or Underground Commons
"Most governments use different types of taxes, royalties and license fees (ground rents) in order to capture part of the rent produced. In most countries oil is a collectively owned resource, and underground resources in general are prima facie considered as belonging to the commonwealth. This fact, reflected by most national legislations, suggests that underground resources are naturally seen as the common property of the commonwealth. What is not reflected in most natural resource legislations is the legal consequence of collective ownership, i.e., equal allocation of dividends.
There is no internationally agreed and accepted concept of legitimacy when it comes to the property of the vast amounts of wealth which happen to be beneath the soil where a particular person or group of persons happen to be. As in the case of the atmosphere, the only stable, legitimate distribution of property rights for underground resources is the common property of all. Both the logic of conflict and the human moral imperative reflected in most ethical traditions suggest the equal rights solution. Natural resources should be owned by all humankind, and managed for the common good of present and future generations. ‘All humankind’ should mean democratic, transparent, accountable power elected by all. Until such a power might be formed, a global foundation with clear mandate, power and accountability could be a transitional solution. For the use of natural resources (including land, as in the old Spinoza proposal), users should pay a rent (or tax, or quota rights) substracting the part of value added not contributed by labour or entrepreneurship, that is, the part which corresponds to natural differential productivity, and representing the ‘productivity’ of Nature, to be appropriated by the global commonwealth. It is important to include as a fundamental part of the scheme that, reflecting the global ownership of natural resources, the proceeds or dividends should accrue equally to all." (http://www.paecon.net/PAEReview/issue51/Buzaglo51.pdf)