So too in a market economy. When two property rights come to the same intersection,
one has to trump the other. Either capital can fire labor, or labor can fire
capital. Either my right to pollute trumps your right not to be polluted,
or vice versa. As they say in Hollywood, someone must get top billing.
But who? Marjorie Kelly has written a brilliant book called The Divine Right
of Capital. By divine she doesn’t mean God-given. She means that, under
our current operating system, the rights of capital trump everything else.
The rights of workers, communities, nature, and future generations — all
play second fiddle to capital’s prerogative to maximize short-term
gain. This hierarchy isn’t the doing of God or some inexorable law
of nature. Rather, it’s a result of political choice.
The question of who gets the top right in any society is always an interesting
one. Invariably, the top dogs in any era assert that there’s no alternative.
Kings said it three hundred years ago; capital owners say it today. They
hire priests and economists to add moral or pseudoscientific credence to
their claims. The truth, though, is that societies choose their top right
holders, and we can change our minds if we wish.
Kelly locates many places where capital’s supremacy is written into
our codes. Corporate directors, for example, are bound by law to put shareholders’ financial
gain first. If a raider offers a higher price for a publicly traded company
than its current market value, directors have little choice but to sell,
regardless of the consequences for workers, communities, or nature. Similarly,
it’s the fiduciary duty of mutual funds, pension funds, and other institutional
investors to seek the highest returns for their shareholders or beneficiaries.
This duty is embodied, among other places, in the Employee Retirement Income
Security Act of 1974. Although the language of the act sounds innocent enough — a
pension fund manager, like any trustee, “shall discharge his duties
. . . solely in the interest of the participants and beneficiaries” — it
results, ironically, in the financing of many workers’ retirements
by investing in companies that shift other workers’ jobs overseas.
Throw in the WTO and NAFTA, and the rights of capital stand comfortably astride
everyone else’s. ...
Trusts are centuries-old institutions devised to hold and manage property
for beneficiaries. The essence of a trust is a fiduciary relationship. Neither
trusts nor their trustees may ever act in their own self-interest; they’re
legally obligated to act solely on behalf of beneficiaries.
Trusts are bound by numerous rules, including the following:
* Managers must act with undivided loyalty to beneficiaries.
* Unless authorized to act otherwise, managers must preserve the corpus of
the trust. It’s okay to spend income, but not to diminish principal.
* Managers must ensure transparency by making timely financial information
available to beneficiaries.
These rules are enforceable. The basic enforcement mechanism is that an
aggrieved beneficiary or a state attorney general can bring suit against
a trustee. When that happens, the trustee must prove she acted prudently;
if there’s any doubt, the trustee is fined or fired. As Supreme Court
Justice Benjamin Cardozo once put it: “A trustee is held to something
stricter than the morals of the marketplace. Not honesty alone, but the punctilio
of an honor the most sensitive, is the standard of behavior.”
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. ...
Think, for example, about carbon. At present, our economic engine is emitting
far too much carbon dioxide into the atmosphere; this is destabilizing the
climate. We desperately need a valve that can crank the carbon flow down.
Let’s assume we can design and install such a valve. (I explained how
this can be done in my previous book, Who Owns the Sky? It involves selling
a limited quantity of “upstream” permits to companies that bring
fossil fuels into the economy.) The question then is, who should control
Unfettered markets can’t be given that responsibility; as we’ve
seen, they have no ability to limit polluting. So we’re left with two
options: government or trusts. Government is a political creature; its time
horizon is short, and future generations have no clout in it. Common property
trusts, by contrast, are fiduciary institutions. They have long time horizons
and a legal responsibility to future generations. Given the choice, I’d
designate a common property trust to be keeper of the carbon valve, based
on peer-reviewed advice from scientists. Its trustees could make hard decisions
without committing political suicide. They might be appointed by the president,
like governors of the Fed, but they wouldn’t be obedient to him the
way cabinet members are. Once appointed, they’d be legally accountable
to future generations.
Now imagine a goodly number of valves at the local, regional, and national
levels, not just for carbon (which requires only one national valve) but
for a variety of pollutants. Imagine also that the valve keepers are trusts
accountable to future generations. They’d have the power to reduce
some of the negative externalities — the illth — that corporations
shift to the commons. They’d also have the power to auction limited
pollution rights to the highest bidders, and to divide the resulting income
among commons owners. That’s something neither the Fed nor the EPA
These trusts would fundamentally change our economic operating system. What
are now unpriced externalities would become property rights under accountable
management. If a corporation wanted to pollute, it couldn’t just do
so; it would have to buy the rights from a commons trust. The price of pollution
would go up; corporate illth creation would go down. Ecosystems would be
protected for future generations. More income would flow to ordinary citizens.
Nonhuman species would flourish; human inequality would diminish. And government
wouldn’t be enlarged — our economic engine would do these things
on its own.
One final point about valves. It’s not too critical where we set them
initially. It’s far more important to install them in the right places,
and to put the right people in charge. Then they can adjust the settings.
Accountability and Democracy
The question I’m most often asked about commons trusteeship is: How
can we be sure trustees won’t succumb to corporate influence, just
as politicians have? My answer is that, while there can be no guarantees,
the odds of escaping corporate capture are much better with trustees than
with elected officials.
The key reason is accountability. In the world of corporations, accountability
is quite clear: directors must be loyal to shareholders. In the world of
government, accountability is less clear. Elected officials must uphold the
Constitution, but that’s about it. If there are conflicts between workers
and employers, polluters and pollutees, voters and donors, or future generations
and current ones, whose side should politicians be on? There are no requirements
or even guidelines. Elected officials, as sovereign political actors, are
free to do as they please.
The fact that politicians operate this way is no accident; it’s what
the Founders had in mind. The job of democratic government isn’t to
take, consistently, one side or another. Rather, it’s to resolve disputes
among factions peaceably, without trampling minorities. James Madison made
this plain in the Federalist Papers. Voters can “fire” elected
officials at regular intervals if a majority so chooses, but they can’t
expect loyalty to any particular constituency between elections. It’s
this absence of built-in loyalty that opens the door to corporate influence,
a force the Founders didn’t — and couldn’t — foresee.
The decision-making of judges, it should be noted, isn’t as untethered
as that of legislators and executive officeholders. Their duty is to uphold
not just the skeletal bones of the Constitution but the full flesh and blood
of the law, with its thousands of pages and interpretations. They may, on
occasion, interpret anew, but unless they’re among a Supreme Court
majority, all such reinterpretations are subject to review.
Trustees are in the same boat as judges, rather than the wide-open waters
in which politicians swim. Their hands are constrained both by the law and
by their fiduciary duty to beneficiaries. This isn’t to say they have
no room to wiggle: equally loyal trustees may differ over what’s in
the best interest of beneficiaries. Still, they are subject to court review,
and they can’t betray their beneficiaries too brazenly.
The tricky thing here is that the beneficiaries to whom we want commons
trustees to be loyal — future generations, nonhumans, and ecosystems — are
voiceless and powerless. We must therefore take extra care when we set up
commons trusts. For example, we should install strict conflict-of-interest
rules for trustees and managers. We should require that all relevant information
about the trusts — including audited financial reports — are
freely available on the Internet. We should ensure that, if a commons trust
fails, its assets are transferred to a similar trust rather than privatized.
We should build in internal watchdogs and ombudsmen. And we should authorize
external advocates, such as nonprofit organizations, to represent nonliving
beneficiaries who, by their very nature, can’t take trustees to court.
Most states assign this function to their attorneys general, but this is
insufficient given the political pressures attorneys general are subject
With regard to the manner of selecting trustees, there’s no single
method. Trustees might be elected, appointed by outsiders, or be self-perpetuating
like the boards of many nonprofits. This is as it should be; we don’t
live in a one-size-fits-all world. The important thing is that, once selected,
trustees should have secure tenure, and — like judges — lengthy
terms. Indeed, trustees should be like judges in other ways: professional,
impeccably honest, well-compensated, and honored. Being a commons trustee
should be a distinguished and attractive calling.
It might be argued that, by shielding trustees from direct political influence,
we’d make them — and commons trusts generally — undemocratic.
The same could be said, however, for our courts. The fact is, there are certain
decisions, both economic and judicial, that should be shielded from politics
and markets. Moreover, neither government nor corporations represent the
needs of future generations, ecosystems, and nonhuman species. Commons trusts
can do this. In that sense, they’d expand rather than constrict the
boundaries of democracy. ... read
the whole chapter