Common Wealth Trusts

• see also: Common Wealth Trusts as Structures of Transition

Discussion

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." (email, August 2015)

Sovereign wealth funds, vs basic income, vs common wealth trusts

Thomas Hanna:

"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." (Great Transition website, via email, August 2015)

Towards a biodiversity of ownership models

Majorie Kelly:

"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." (Great Transition webiste, email August 2015)