and the Alaska Permanent Fund
As we think about what America is trying to do in Iraq, it is worth thinking
about who it is that is going to reap the benefits of the oil under Iraqi sand.
Should it be a few Iraqis? Should it be a few American corporations and their
shareholders? Should it be all the people who live in the districts where
the oil is pumped? Should it be all the people of Iraq? Who should decide?
Similarly, when America invests in rebuilding Iraq's infrastructure, who benefits?
Is it accurate to say that everyone who lives in the areas served benefits,
or is there another, more precise, answer to that question? Does the answer
to that question depend on whether the homeownership rate is 10%, 50% or 90%?
Does the answer to that question depend on whether 10% of businesses are conducted
on properties owned by those who operate them, 50% or 90%?
In America, urban land is a very valuable resource, often more valuable than
land that can be mined for its natural resources. Who should benefit from increases
in its value? Who should be able to privatize the rent on urban land, be it
Iraq's or America's? Is is acceptable for individuals to pocket the land value
if they are local residents? Is it acceptable for individuals to pocket the
land value if they are foreigners? Is it acceptable for corporations to pocket
the land value? Does it matter whether those corporations' shareholders are
locals or foreigners?
Is there a handy alternative to the value of land or natural resources being
privatized? Absolutely! Shift taxes off work, off trade (sales), and off
buildings, and instead place the tax burden on land and on natural resources.
use any less of either one, but instead of a few individuals pocketing
something they didn't create, all of us will benefit — equally. And
we'll all benefit from a healthier economy.
Alaska's approach, to invest a portion of the oil proceeds for the future
for the people of Alaska, is a sound one. Alaska already has low taxes, because
much of the cost of state government is coming from oil revenues. And with
powerful representatives in the Senate who see that Federal money is spent
in ways that benefit Alaska's property owners, Alaskans tend to be in a good
Alanna Hartzok: Earth
Rights Democracy: Public Finance based on Early Christian Teachings
Alanna Hartzok: CITIZEN
DIVIDENDS AND OIL RESOURCE RENTS
... This equitable and
successful public finance approach was eventually
undermined by private banking institutions. Now taxpayers nationwide
subsidize the irrigation needs of agribusiness. Self-financing
development projects reduce the necessity for debt finance, so do not
contribute to the profits of rent-seeking institutions. These
exploitative institutions which concentrate wealth in the hands of the
few will continue to sabotage this policy approach until sufficient
numbers of people have a better understanding of the land ethic of koinonia and this fundamental
approach to securing the human right to the earth.
One of the best examples of the beneficial results of an ethic
of koinonia in natural resources is to be found in the state of Alaska where an "earth rights" constitution
gives ownership of the oil and other natural resources of the state to the
citizens of Alaska on an
equal basis. The Alaska Permanent Fund invests the state's oil resource
rents, the interest from which funds cash dividend payments directly to
all adults and children resident in the state at least one year.
The Permanent Fund ended fiscal year 2004 on June 30 with a 14.1
percent return and a total value of more than $27.4 billion, according
to currently available Alaska Permanent Fund Corporation figures. More
than $24,000 per person have been distributed to citizens of Alaska
since 1982. Note that Alaska is the only state in the US wherein the
wealth gap has decreased during recent decades.
The Alaska Permanent Fund is an innovative and important model
resource rents for citizen dividends, but with worldwide oil production
nearing peak, it is the opinion of this writer that oil resource rents
had best be directed to the development of renewable energy
technologies. The electromagnetic spectrum, geo-orbital zones, and
surface land values would be a more appropriate source of rent
distribution as citizen dividend payments.
Had the land problem been addressed in the south after the Civil
more equitable distribution of wealth and overall prosperity would have
been the likely result. It can be instructive to review this earlier
effort to secure land rights in America. read the whole article
Abstract: Citizens of
Alaska have been receiving
individual dividend checks from an oil rent trust fund since 1982.
Norway¹s citizens receive substantial social services and invest
oil rents in a permanent fund for the future. Nigeria has yet to
establish a similar fund for its oil revenue stream. This paper
explores the oil rent institutions of Alaska, Norway and Nigeria with
a focus on these questions:
- Are citizen dividends from oil rent funds
currently or potentially a source of substantial basic income?
oil rent funds the best source for citizen dividends or should CDs be
based on other types of resource rents?
The paper recommends full use
of information and communication
technologies for transparency in extractive resource industries,
that resource rent from non-renewable resources should be invested in
socially and environmentally responsible ways and primarily in the
needed transition to renewable energy based economies, and that oil
and other non-renewable resource rent funds should transition towards
capturing substantial resource rents from surface land site values
(ground rent) and other permanent and sustainable sources of rent for
possible distribution of citizen dividends. read the whole article
Mason Gaffney: Cannan's Law
Some successes entail barriers
to immigration. Alaska
early on set out to limit its social dividend to citizens with five
years prior residence in Alaska. It immediately lost out to the
ghost of Madison. In Zobel v. Williams (1982) the U.S.S.C. called
this provision a barrier to interstate migration, and struck it down.
Alaska's annual oil dividend survived, but were it not for Zobel
might be much higher than today. Meantime, Alaskan landowners pay no
property taxes. Land cannot immigrate, but there goes the dividend,
and Anchorage is the most sprawled city in North America.
... read the whole article
Nic Tideman: Improving
Efficiency and Preventing Exploitation in Taxing and Spending Decisions
The efficiency of the competitive equilibrium requires that the sharing
of the pre-development rental value of land (that part of the rental value
of land that is not accounted for by local public goods) and the value
of other natural opportunities be unaffected by migration or political
If the distribution of the returns to natural opportunities depends on
where people live or on political competition, then efficiency will fall
of inefficient location decisions and rent seeking losses. For example,
if the returns to oil in Alaska are divided among the people who live in
then people will move to Alaska inefficiently to share in the bounty. If
the distribution of the returns to natural opportunities depends on political
competition, then there will be rent-seeking losses from such competition.
A non-exploitive and reasonably efficient local public sector is thus possible
competition among communities. ... read
the whole article
James Kiefer: James Huntington and the ideas of Henry George
Henry George, author of Progress and Poverty, argued that, while some forms
of wealth are produced by human activity, and are rightly the property of
the producers (or those who have obtained them from the previous owners by
voluntary gift or exchange), land and natural resources are bestowed by God
on the human race, and that every one of the N inhabitants of the earth has
a claim to 1/Nth of the coal beds, 1/Nth of the oil wells, 1/Nth of the mines,
and 1/Nth of the fertile soil. God wills a society where everyone may sit
in peace under his own vine and his own fig tree.
The Law of Moses undertook to implement this by making the ownership of
land hereditary, with a man's land divided among his sons (or, in the absence
of sons, his daughters), and prohibiting the permanent sale of land. (See
Leviticus 25:13-17,23.) The most a man might do with his land is sell the
use of it until the next Jubilee year, an amnesty declared once every fifty
years, when all debts were cancelled and all land returned to its hereditary
Henry George's proposed implementation is to tax all land at about 99.99%
of its rental value, leaving the owner of record enough to cover his bookkeeping
expenses. The resulting revenues would be divided equally among the natural
owners of the land, viz. the people of the country, with everyone receiving
a dividend check regularly for the use of his share of the earth (here I
am anticipating what I think George would have suggested if he had written
in the 1990's rather than the 1870's).
This procedure would have the effect of making the sale price of a piece
of land, not including the price of buildings and other improvements
on it, practically zero. The cost of being a landholder would be, not the
sale price, but the tax, equivalent to rent. A man who chose to hold
share," or 1/Nth of all the land, would pay a land tax about equal
to his dividend check, and so would break even. By 1/Nth of the land
land with a value equal to 1/Nth of the value of all the land in the
Naturally, an acre in the business district of a great city would be worth
as much as many square miles in the open country. Some would prefer to hold
more than one N'th of the land and pay for the privilege. Some would prefer
to hold less land, or no land at all, and get a small annual check representing
the dividend on their inheritance from their father Adam.
Note that, at least for the able-bodied, this solves the problem of poverty
at a stroke. If the total land and total labor of the world are enough to
feed and clothe the existing population, then 1/Nth of the land and 1/Nth
of the labor are enough to feed and clothe 1/Nth of the population. A family
of 4 occupying 4/Nths of the land (which is what their dividend checks will
enable them to pay the tax on) will find that their labor applied to that
land is enough to enable them to feed and clothe themselves. Of course, they
may prefer to apply their labor elsewhere more profitably, but the situation
from which we start is one in which everyone has his own plot of ground from
which to wrest a living by the strength of his own back, and any deviation
from this is the result of voluntary exchanges agreed to by the parties directly
involved, who judge themselves to be better off as the result of the exchanges.
Some readers may think this a very radical proposal. In fact, it is extremely
conservative, in the sense of being in agreement with historic ideas
about land ownership as opposed to ownership of, say, tools or vehicles
or domestic animals or other movables. The laws of English-speaking countries
uniformly distinguish between real property (land) and personal property
(everything else). In this context, "real" is not the opposite
of "imaginary." It is a form of the word "royal," and
means that the ultimate owner of the land is the king, as symbol of the people.
Note that English-derived law does not recognize "landowners." The
term is "landholders." The concept of eminent domain is that
the landholder may be forced to surrender his landholdings to the government
for a public purpose. Historically, eminent domain does not apply to
other than land, although complications arise when there are buildings
on the land that is being seized.
I will mention in passing that the proposals of Henry George have attracted
support from persons as diverse as Felix Morley, Aldous
Huxley, Woodrow Wilson, Helen Keller, Winston
Churchill, Leo Tolstoy, William
F Buckley Jr, and Sun Yat-sen. To the Five Nobel Prizes authorized
by Alfred Nobel himself there has been added a sixth, in Economics, and
the Henry George Foundation claims eight
of the Economics Laureates as supporters, in whole or in part, of the
proposals of Henry George (Paul Samuelson, 1970; Milton
Friedman, 1976; Herbert A Simon, 1978; James Tobin, 1981; Franco Modigliani,
1985; James M Buchanan, 1986; Robert M Solow, 1987; William
S Vickrey, 1996).
The immediate concrete proposal favored by most Georgists today is that
cities shall tax land within their boundaries at a higher rate than they
tax buildings and other improvements on the land. (In case anyone is
about to ask, "How can we possibly distinguish between the value of the land
and the value of the buildings on it?" let me assure you that real
estate assessors do it all the time. It is standard practice to make
the two assessments
separately, and a parcel of land in the business district of a large
city very often has a different owner from the building on it.) Many
moved to a system of taxing land more heavily than improvements, and
most have been pleased with the results, finding that landholders are
to use their land productively -- to their own benefit and that of the
public -- if their taxes do not automatically go up when they improve
by constructing or maintaining buildings on it.
An advantage of this proposal in the eyes of many is that it is a Fabian
proposal, "evolution, not revolution," that it is incremental and
reversible. If a city or other jurisdiction does not like the results of
a two-level tax system, it can repeal the arrangement or reduce the difference
in levels with no great upheaval. It is not like some other proposals of
the form, "Distribute all wealth justly, and make me absolute dictator
of the world so that I can supervise the distribution, and if it doesn't
work, I promise to resign." The problem is that absolute dictators
seldom resign. ... read the whole article
Peter Barnes: Capitalism
3.0 — Chapter 3: The Limits of Government (pages 33-48)
Limits of Public Ownership
Because of historical circumstances, America has a long tradition of public
land ownership. When Europeans first arrived, North America was held in
common by an assortment of tribes. As these tribes were dispossessed, the
federal government acquired their territories. Some of the federal holdings
were given to states as they entered the union. Though most of what the
federal and state governments owned was then sold cheaply, much was retained.
Today, nearly a third of the land in the United States is government-owned.
To say that land — or any asset — is “government-owned,” however,
isn’t to say it’s managed on behalf of future generations,
nonhuman species, or ordinary citizens. Consider what the federal and state
governments have done with the lands they own.
Outside of Alaska, about 5 percent of government-owned lands have been
designated as wilderness. In such areas, humans may enter on foot but not
use motorized vehicles. Mining, logging, and hunting are also prohibited.
On the other 95 percent of government-owned land, private and commercial
use is regulated by various agencies. National forests are managed by the
U.S. Forest Service, grazing and mineral lands by the Bureau of Land Management,
hunting and fishing by the U.S. Fish and Wildlife Service.
As a general rule, politics — not fiduciary duty — determines
what uses are permitted and what prices are charged. A classic example
is the Mining Act of 1872, under which private companies can stake claims
to mineral-bearing lands for $5 an acre, and pay no royalties on the minerals
they extract. Every attempt to reform this antiquated law has failed because
of the mining companies’ political clout.
In the same vein, the U.S. Forest Service has for decades been selling
trees to timber companies for below-market prices. On top of that, it spends
billions of tax dollars building roads in virgin forests so timber firms
can harvest the people’s trees. This is, of course, economically
irrational and a huge subsidy to private corporations. It also addicts
Americans to cheap forest products and destructive logging methods. These
practices occur because the Forest Service is not a trust committed to
ecosystem preservation, but a politically influenced agency dedicated to “multiple
use” of government-owned forests.
There are exceptions to this dismal pattern. One involves trust lands
given by the federal government to states. Such gifts began with the Land
Ordinance of 1785, which reserved one square mile per township for the
support of public schools. Later, the Morrill Land Grant College Act of
1862 gave more land to states to support colleges of agriculture and mechanics.
And in 1954, Congress gave Texas title to oil-rich coastal lands, providing
that all revenue from them be placed in an endowment, or permanent fund,
that generates income for public schools forever.
Today, twenty-two states hold about 155 million acres in trust for public
schools and colleges — which is to say, for future generations. Like
the federal government, the state trusts lease much of their land for oil
drilling, timber cutting, and cattle grazing. The trusts’ duty is
to preserve not the land itself but the income streams it generates. This
creates beneficiaries (educators, students, parents) who monitor the land
managers closely. One result, according to University of California professor
Sally Fairfax, is that state trust lands are better managed than federally
owned lands. Whereas the U.S. Forest Service “has been hiding the
ball on cash flows and returns to investments for most of this century
. . . the state trust land managers know how to keep books and make them
public.” Further, even though the state trusts aren’t bound
to protect ecosystems per se, they tend to do so because they have a long-term
An interesting variant of the typical state land trust is the Alaska
Permanent Fund, created in 1976 to absorb some of the windfall from leasing state
land to oil companies. The aim was to create an endowment that would benefit
Alaskans even after the oil is gone. To this end, the Permanent Fund invests
in stocks, bonds, and similar assets, and off the earnings pays yearly
dividends to every resident. Originally, the dividends were to be allocated
in proportion to the recipients’ length of residence in Alaska, with
old-timers getting more than newcomers. But the U.S. Supreme Court ruled
that, because of the Equal Protection clause of the Fourteenth Amendment,
Alaska couldn’t discriminate against newcomers that way. The dividend
formula was then changed to one person, one share.
THE ALASKA PERMANENT FUND
Under Alaska’s constitution, the state’s natural resources
belong to its people. Jay Hammond, Republican governor of Alaska in the
1970s, took this provision seriously.When oil began flowing from the North
Slope, he pushed for royalties to be shared among Alaska’s citizens.
Many battles later, the legislature agreed to a deal: 75 percent of the
state’s oil revenue would go to the government as a replacement for
taxes.The remaining 25 percent would flow into the Alaska Permanent Fund,
and would be invested on behalf of all Alaskans equally.
Since 1982, the Fund has grown to over $30 billion and paid equal yearly
dividends to all Alaskans, including children (see figure 3.1). In effect,
it is a giant mutual fund managed on behalf of all Alaskan citizens, present
and future. Even after the oil runs dry, it will continue to benefit everyone.
Economist Vernon Smith, a Nobel laureate and libertarian scholar at the
Cato Institute, has called it “a model [that] governments all over
the world would be well-advised to copy.” ... read
the whole chapter
Peter Barnes: Capitalism
3.0 — Chapter 5: Reinventing the Commons (pages 65-78)
There’s nothing about property rights, however, that requires them
to be concentrated in profit-maximizing hands. You could, for example,
set up a trust to own a forest, or certain forest rights, on behalf of
future generations. These property rights would talk as loudly as shares
of Pacific Lumber stock, but their purpose would be very different: to
preserve the forest rather than to exploit it. If the Lorax had owned some
of these rights, Dr. Seuss’s tale (and Pacific Lumber’s) would
have ended more happily.
Imagine a whole set of property rights like this. Let’s call them,
generically, common property rights. If such property
rights didn’t exist, there’d be a strong case for inventing
them. Fortunately, they do exist in a variety of forms — for example,
land or easements held in perpetual trust, as by the Nature Conservancy,
and corporate assets managed on behalf of a broad community, as by the
Alaska Permanent Fund.
Some forms of common property include individual shares — again,
the Alaska Permanent Fund is an example. These individual shares, however,
differ from shares in private corporations. They’re not securities
you can trade in a market; rather, they depend on your membership in the
community. If you emigrate or die, you lose your share. Conversely, when
you’re born into the community, your share is a birthright.
I recognize that, for some, turning common wealth into any kind of property
is a sacrilege. As Chief Seattle of the Suquamish tribe put it, “How
can you buy or sell the sky, the warmth of the land?” I empathize
deeply with this sentiment. However, I’ve come to believe that it’s
more disrespectful of the sky to pollute it without limit or payment than
to turn it into common property held in trust for future generations. Hence,
I favor propertization, but not privatization. ... read
the whole chapter
Peter Barnes: Capitalism
3.0 — Chapter 7: Universal Birthrights (pages 101-116)
Dividends from Common Assets
A cushion of reliable income is a wonderful thing. It can be saved for
rainy days or used to pursue happiness on sunny days. It can encourage
people to take risks, care for friends and relatives, or volunteer for
community service. For low-income families, it can pay for basic necessities.
Conversely, the absence of reliable income is a terrible thing. It heightens
anxiety and fear. It diminishes our ability to cope with crises and transitions.
It traps many families on the knife’s edge of poverty, and makes
it harder for the poor to rise.
So why don’t we, as Monopoly does, pay everyone some regular income — not
through redistribution of income, but through predistribution of common
property? One state — Alaska — already does this. As noted
earlier, the Alaska Permanent Fund uses revenue from state oil leases to
invest in stocks, bonds, and similar assets, and from those investments
pays yearly dividends to every resident. Alaska’s model can be extended
to any state or nation, whether or not they have oil. We could, for instance,
have an American Permanent Fund that pays equal dividends to long-term
residents of all 50 states. The reason is, we jointly own many valuable
Recall our discussion about common property trusts. These trusts could
crank down pollution and earn money from selling ever-scarcer pollution
permits. The scarcer the permits get, the higher their prices would go.
Less pollution would equal more revenue. Over time, trillions of dollars
could flow into an American Permanent Fund.
What could we do with that common income? In Alaska the deal with oil
revenue is 75 percent to government and 25 percent to citizens. For an
American Permanent Fund, I’d favor a 50/50 split, because paying
dividends to citizens is so important. Also, when scarce ecosystems are
priced above zero, the cost of living will go up and people will need compensation;
this wasn’t, and isn’t, the case in Alaska. I’d also
favor earmarking the government’s dollars for specific public goods,
rather than tossing them into the general treasury. This not only ensures
identifiable public benefits; it also creates constituencies who’ll
defend the revenue sharing system.
Waste absorption isn’t the only common resource an American Permanent
Fund could tap. Consider also, the substantial contribution society makes
to stock market values. As noted earlier, private corporations can inflate
their value dramatically by selling shares on a regulated stock exchange.
The extra value derives from the enlarged market of investors who can now
buy the corporation’s shares. Given a total stock market valuation
of about $15 trillion, this socially created liquidity premium is worth
roughly $5 trillion.
At the moment, this $5 trillion gift flows mostly to the 5 percent of
the population that own more than half the private wealth. But if we wanted
to, we could spread it around. We could do that by charging corporations
for using the public trading system, just as investment bankers do. (For
those of you who haven’t been involved in a public stock offering,
investment bankers are like fancy doormen to a free palace. While the public
charges almost nothing to use the capital markets, investment bankers exact
The public’s fee could be in cash or stock. Let’s say we required
publicly traded companies to deposit 1 percent of their shares each year
in the American Permanent Fund for ten years — reaching a total of
10 percent of their shares. This would be our price not just for using
a regulated stock exchange, but also for all the other privileges (limited
liability, perpetual life, copyrights and patents, and so on) that we currently
bestow on private corporations for free.
In due time, the American Permanent Fund would have a diversified portfolio
worth several trillion dollars. Like its Alaskan counterpart, it would
pay equal yearly dividends to everyone. As the stock market rose and fell,
so would everyone’s dividend checks. A rising tide would lift all
boats. America would truly be an “ownership society.” ... read
the whole chapter
Peter Barnes: Capitalism
3.0 — Chapter 10: What You Can Do (pages 155-166)
To build Capitalism 3.0, we each have unique roles to play. I therefore
address the final pages of this book to a variety of people whose participation
is critical. ...
Everyone wants your attention. Channel 5 is on line 3 and a powerful lobbyist
is at your door. It’s hard for you to see the forest for the trees.
What can I possibly tell you?
What I want to tell you is, there’s a fork in the road. On one side
lies capitalism as we know it; on the other, an upgrade. You must decide
which branch to take. Your choice has vast ramifications. Very possibly,
the fate of the planet is in your hands. Trillions of dollars are also
at stake. I want you to be courageous. I want you to choose the upgrade.
But that isn’t what one says to a politician. What one says is,
we need to reduce our dependence on foreign oil, create jobs in America,
and protect the environment. All those things cost money, and government
doesn’t have enough. But here’s what government can do.
- First, delegate to an independent authority — something like
the Fed — the power to cap U.S. carbon consumption. That way,
when energy prices go up (which they inevitably will), you won’t
get blamed. Also, make sure the carbon authority pays dividends, like
Fund. Then, when checks are mailed to your constituents, you can take
- Second, talk about jobs and energy independence in your speeches.
And push for an American Permanent Fund financed by sales of pollution
a few years, thousands of people in your district will be installing
new energy systems and cashing dividend checks. You’ll be a hero.
- Finally, tell your donors not to worry. You’re a low-tax, small-government,
pay-as-we-go kind of person. You think the environment should be protected
through market mechanisms. You favor an ownership society in which every
American has a tax-deferred savings account and no child is left behind.
What’s particularly nice about Capitalism 3.0 is that we can install
it one piece at a time. We needn’t shut the machine down, or delete
the old operating system, before installing the new one. Indeed, we’re
not even replacing most of the old operating system, which is fine as it
is. Rather, we’re attaching add-ons, or plug-ins, that allow for
a gradual and safe transition. A formula for describing this is:
Corporations + Commons = Capitalism 3.0
Like the governor of James Watt’s steam engine, these add-ons will
curb our current engine’s unchecked excesses. When illth of one sort
gets too great, the new bits of code will turn the illth valve down, or
give authority to trustworthy humans to do so. If money circulates too
unequally, the new code will alter the circulation, not by re distributing
income but by pre distributing property. It will make similar adjustments
when there’s too much corporate distortion of culture, communities,
or democracy itself.
What’s also nice about the new operating system is that, once installed,
it can’t be easily removed. That’s because it relies on property
rights rather than government programs that are subject to political ebb
and flow. If you have any doubt about this, consider the staying power
of Social Security and the Alaska Permanent Fund, both of which distribute
periodic payments that have attained the status of property rights. Social
Security is over seventy years old and has never been cut once; in 2005,
it survived a privatization campaign led by President Bush. Similarly,
the Alaska Permanent Fund, now more than twenty-five years old, repelled
an attempt in 1999 to divert part of its income to the state treasury.
And, for businesspeople, here’s the best part: Capitalism 3.0 will
preserve the driving force of American capitalism, the profit-maximizing
algorithm. It will do this not only by leaving the algorithm alone, but
also by giving all Americans, via the American Permanent Fund, a financial
stake in its success. All Americans will benefit both from nature’s
health and from the health of corporations. ... read
the whole chapter