Mining Act of 1872
Peter Barnes: Capitalism 3.0 — Chapter 3: The Limits of Government (pages 33-48)
Limits of Public OwnershipBecause 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 calculus.
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.