Common Property Trusts

Peter Barnes: Capitalism 3.0 — Chapter 6: Trusteeship of Creation (pages 79-100)

A trustee isn’t the same thing as a steward. Stewards care for an asset, but their obligations are voluntary and vague. By contrast, trustees’ obligations are mandatory and quite specific. Trusteeship is thus a more formal and rigorous responsibility than stewardship.

Trusts can be in charge of financial as well as physical assets. In this chapter, my concern is natural assets — gifts we inherit from creation. One of my premises is that each generation has a contract to pass on such gifts, undiminished, to those not yet born. If we are to keep this contract, someone must act as trustee of nature’s gifts, or at least of the most endangered of them. The question is, who?

The candidates are government, corporations, and trusts. I argued earlier that neither corporations nor government can fulfill this function; they’re both too bound to short-term private interests. That leaves trusts.

Common Property Trusts

The Trebah Garden Trust isn’t a rarity. Across Britain, the National Trust — a nongovernmental charity founded in 1895 — owns over six hundred thousand acres of countryside, six hundred miles of coastline, and two hundred historic buildings and gardens. It has over three million members who elect half of its fifty-two-person governing council (the other half are appointed by nonprofit organizations that share the trust’s goals). In the United States, there are now over fifteen hundred Trebah-like trusts, protecting over nine million acres. On top of that, the fifty-five-year-old Nature Conservancy protects more than fifteen million acres.

Let’s posit, then, a generic institution, the common property trust. It’s a special kind of trust that manages assets that come from the commons and are meant to be preserved as commons. Common property trusts manage these assets first and foremost on behalf of future generations. They may have secondary beneficiaries, such as public education or residents of a particular locale, but such living beneficiaries take backseats to the yet-to-be-born. These trusts carry out their missions by owning and managing bundles of property rights. Here are two examples from my own backyard: the Marin Agricultural Land Trust (MALT) and the Pacific Forest Trust (PFT). The demise of family farms and the loss of open space around cities are seemingly unstoppable trends. Yet in Marin County, just north of San Francisco, family-owned dairy, sheep, and cattle ranches have survived. A big reason is that ranchers there have an option: selling conservation easements to MALT.

A conservation easement is a voluntary agreement between a landowner and a trust that permanently limits uses of the land. The owner continues to own and use the land and may sell it or pass it on to her heirs. However, the owner gives up some of the rights associated with the land — for example, the right to build additional houses on it or to clear-cut trees. The trust that acquires the easement makes sure its terms are followed by the current as well as future owners.

In Marin County, MALT has preserved nearly forty thousand acres of farmland by buying conservation easements from ranchers. This represents about a third of the land currently farmed. The ranchers receive the difference between what the land would be worth if developed and what it’s worth as a working farm. In effect, they’re paid to be land stewards and to forgo future capital gains.

Most of MALT’s money comes from public sources. What the public receives isn’t an old-fashioned commons of shared pasturage, but a lasting pastoral landscape and a viable agricultural economy. That’s not a bad alternative to suburban sprawl.

In much the same way, the Pacific Forest Trust acquires what it calls working forest conservation easements from private woodlands owners. Some of the easements are purchased, others are donated by owners in exchange for tax benefits. Here again, owners keep their land but agree to forgo nonforest development and to harvest trees sustainably.

PFT’s goal is to protect not only forests themselves but the many species that live in them, as well as the ecosystem services — such as clean water and carbon absorption — that forests provide. As with MALT, some of PFT’s money comes from public sources. In return, the public gets healthy forests for considerably less than it would cost to buy and manage them outright. ... 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 assets.

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 hefty fees.)

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