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
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
What’s wrong here? It’s not that businesses pursue profit; that’s
what they’re designed to do and what we want them to do. The problem
is that private capital rides in the front of the bus while everyone else
rides in the back. ...
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;
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
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.
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,
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
assets first and foremost on behalf of future generations. They may have
secondary beneficiaries, such as public education or residents of a particular
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
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
loss of open space around cities are seemingly unstoppable trends. Yet
in Marin County, just north of San Francisco, family-owned dairy, sheep,
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
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
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
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
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
Valves and Their Keepers
One job of common property trusts is to preserve habitat and landscapes,
but such trusts can also play another role — controlling the flow of pollution
into ecosystems. In this case, what they’d be managing isn’t the
ecosystems themselves, but human economic activity around the ecosystems. In
that sense, they’d be more like the Federal Reserve than the Nature
Let me back up here a bit. When I was in college, my economics professors
talked of fiscal and monetary “levers” that wise policymakers
could use to fine-tune the economy. This was in the early 1960s, still
of Keynesianism. I imagined an economic control room full of gauges and
valves, staffed by tweedy academics. Handsome, brainy men (it was still
in those days) would scan readouts, puff on their pipes, and twist a few
dials. Others would murmur praise. All would remain calm.
As I grew older, I learned the world is more chaotic than that. In reality,
there’s no economic control room. There’s only one big valve — the
money supply — and one person (with a few helpers) who turns it: the
chair of the Federal Reserve. That valve has some effect on economy activity — when
it’s loose, interest rates fall and economic activity perks up; when
it’s tight, interest rates rise and economic activity ebbs. But the Fed’s
valve doesn’t control everything our economic engine does. In particular,
it has little impact on the rate at which we pour pollutants into surrounding
ecosystems. To address this problem, we need more valves.
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.
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 the valve?
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
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 can do.
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.
A Second Set of Books
Mental models begin with assumptions. Most economists today assume there are
only two kinds of property, private (that is, corporate or individual) and
state. There are no shared assets, no inter- or intragenerational obligations,
and no nonhumans other than those we eat.
Yet as we’ve seen, many things are missing here. The most obvious omission
is the great economy of nature within which the human enterprise operates.
We’re borrowing prodigiously from that economy, but not recording the
loans. Equally absent are future generations, from whom we’re borrowing
just as wantonly and surreptitiously. In a proper bookkeeping system, every
loan shows up on two balance sheets, the borrower’s and the lender’s.
One entity’s liability is another entity’s asset. But this isn’t
true in contemporary economics. When the human economy grows, assets on corporate
and individual balance sheets go up, but nowhere is there a debit. In fact,
there aren’t any accounts that could be debited. There’s only
good growth on one side of the ledger, and on the other, a void in which
debt accumulate, uncounted and unnoticed.
In recent years, economists have added a few bits to this stripped-down
model. For example, they now recognize public goods and ecosystem services
of economic value. Public goods are services like national defense, education,
and flood control, which benefit everyone but can’t easily be sold at
a profit. Because markets don’t adequately supply them, governments step
in and do so. Economists sometimes debate whether the value of these public
goods exceeds the “burden” they impose on taxpayers, but they don’t
see the expenditures as adding value to any account, or to any asset owned
Similarly, many economists now recognize ecosystem services as valuable
inputs to the economy. However, the ecosystems that produce these services
owners or balance sheets. They’re just there, floating in space, with
no connection to humans. What I’m suggesting is that economists treat
them as if they were common property held in trust. This simple supposition
would not only put ecosystems on the books, enabling us to track them better;
it would also pave the way to real-world property rights that actually
protect those ecosystems.
Beyond Coase’s Supposes
“Let us suppose,” economist Ronald Coase wrote in 1960, “that
a farmer and a cattle-raiser are operating on neighboring properties.” He
went on to suppose further that the cattle-raiser’s animals wander onto
the farmer’s land and damage his crops. From this hypothetical starting
point Coase examined the problem of externalities and proposed a solution — the
creation of rights to pollute or not be polluted upon. Today, pollution rights
are used throughout the world. In effect, Coase conjured into existence a class
of property rights that didn’t exist before, and his leap of imagination
eventually reduced real pollution.
“Let us suppose” is a wonderful way for anyone, economists included,
to begin thinking. It lets us adjust old assumptions and see what might happen.
And it lets us imagine things that don’t exist but could, and sometimes,
because we imagined them, later do.
Coase supposed that a single polluter or his neighboring pollutee possessed
a right to pollute or not be polluted upon. He further supposed that the
transaction costs involved in negotiations between the two neighbors were
made these suppositions half a century ago, at a time when aggregate pollution
wasn’t planet-threatening, as it now is. Given today’s altered
reality, it might be worth updating Coase’s suppositions to make
them relevant to this aggregate problem. Here, in my mind, are the appropriate
* Instead of one polluter, there are many, and instead of one pollutee,
there are millions — including many not yet born.
* The pollutees (including future generations) are collectively represented
* The initial pollution rights are assigned by government to these trusts.
* In deciding how many pollution permits to sell, the trustees’ duty
isn’t to maximize revenue but to preserve an ecosystem for future
generations. The trusts therefore establish safe levels of pollution and
the number of permits they sell until those levels are reached.
* Revenue from the sale of pollution permits is divided 50 percent for per
capita dividends (like the Alaska Permanent Fund) and 50 percent for public
goods such as education and ecological restoration.
If we make these suppositions, what then happens? We have, first of all, an
economic model with a second set of books. Not all, but many externalities
show up on these new ledgers. More importantly, we begin to imagine a world
in which nature and future generations are represented in real-time transactions,
corporations internalize previously externalized costs, prices of illth-causing
goods rise, and everyone receives some property income.
Here’s what such a world could look like:
* Degradation of key ecosystems is gradually reduced to sustainable levels
because the trustees who set commons usage levels are accountable to future
generations, not living shareholders or voters. When they fail to protect their
beneficiaries, they are sued.
* Thanks to per capita dividends, income is recycled from overusers of key
ecosystems to underusers, creating both incentives to conserve and greater
* Clean energy and organic farming are competitive because prices of fossil
fuels and agricultural chemicals are appropriately high.
* Investment in new technologies soars and new domestic jobs are created because
higher fuel and waste disposal prices boost demand for clean energy and waste
* Public goods are enhanced by permit revenue.
What has happened here? We’ve gone from a realistic set of assumptions
about how the world is — multiple polluters and pollutees, zero cost
of pollution, dangerous cumulative levels of pollution — to a reasonable
set of expectations about how the world could be if certain kinds of property
rights are introduced. These property rights go beyond Coase’s, but
are entirely compatible with market principles. The results of this thought
show that the introduction of common property trusts can produce a significant
and long-lasting shift in economic outcomes without further government
It shouldn’t be thought that the commons is, or ought to be, a money-free
zone. In fact, an important subject for economists (and the rest of us)
to understand is commons rent.
By this I don’t mean the monthly check you send to a landlord. In economics,
rent has a more precise meaning: it’s money paid because of scarcity.
If you’re not an economist, that may sound puzzling, but consider this.
A city has available a million apartments. In absolute terms, that means apartments
aren’t scarce. But the city is confined geographically and demand for
apartments is intense. In this economic sense, apartments are scarce. Now think
back to that check you pay your landlord, or the mortgage you pay the bank.
Part of it represents the landlord’s operating costs or the bank’s
cost of money, but part of it is pure rent — that is, money paid for
scarcity. That’s why New Yorkers and San Franciscans write such large
checks to landlords and banks, while people in Nebraska don’t.
Rent rises when an increase in demand bumps into a limit in supply. Rent
due to such bumping isn’t good or bad; it just is.We can (and should) debate
the distribution of that rent, but the rent itself arises automatically. And
it’s important that it does so, because this helps the larger economy
allocate scarce resources efficiently. Other methods of allocation are
possible. We can distribute scarce things on a first come, first served
basis, or by
lottery, political power, seniority, or race. Experience has shown, though,
that selling scarce resources in open markets is usually the best approach,
and such selling inevitably creates rent.
Rent was of great interest to the early economists — Adam Smith, David
Ricardo, and John Stuart Mill, among others — because it constituted
most of the money earned by landowners, and land was then a major cost of production.
The supply of land, these economists noted, is limited, but demand for it steadily
increases. So, therefore, does its rent. Thus, landowners benefit from what
Mill called the unearned increment — the rise in land value attributable
not to any effort of the owner, but purely to a socially created increase
in demand bumping into a limited supply of good land.
The underappreciated American economist Henry George went further. Seeing
both the riches and the miseries of the Gilded Age, he asked a logical
question: Why does poverty persist despite economic growth? The answer, he
was the appropriation of rent by landowners. Even as the economy grew,
the property rights system and the scarcity of land diverted almost all the
to a landowning minority. Whereas competition limited the gains of working
people, nothing kept down the landowners’ gains. As Mill had noted,
the value of their land just kept rising. To fix the problem, George advocated
a steep tax on land and the abolition of other taxes. His bestselling book
Progress and Poverty catapulted him to fame in the 1880s, but mainstream
never took him seriously.
By the twentieth century, economists had largely lost interest in rent;
it seemed a trivial factor in wealth production compared to capital and labor.
But the twenty-first century ecological crisis brings rent back to center-stage.
Now it’s not just land that’s scarce, but clean water, undisturbed
habitat, biological diversity, waste absorption capacity, and entire ecosystems.
This brings us back to common property rights. The definition and allocation
of property rights are the primary factors in determining who pays whom
for what. If, in the case of pollution rights, pollution rights are given
to past polluters, the rent from the polluted ecosystem will also go to
them. That’s because prices for pollution-laden products will rise
as pollution is limited (remember, if demand is constant, a reduction in
supply causes prices
to go up), and those higher prices will flow to producers (which is to
By contrast, if pollution rights are assigned to trusts representing pollutees
and future generations, and if these trusts then sell these rights to polluters,
the trusts rather than the polluters will capture the commons rent. If the
trusts split this money between per capita dividends and expenditures on public
goods, everyone benefits.
At this moment, based on pollution rights allocated so far, polluting corporations
are getting most of the commons rent. But the case for trusts getting the
rent in the future is compelling. If this is done, consumers will pay commons
not to corporations or government, but to themselves as beneficiaries of
commons trusts. Each citizen’s dividend will be the same, but his payments will
depend on his purchases of pollution-laden products. The more he pollutes,
the more rent he’ll pay. High polluters will get back less than they
put in, while low polluters will get back more. The microeconomic incentives,
in other words, will be perfect. (See figure 6.1.)
What’s equally significant, though less obvious, is that the macroeconomic
incentives will be perfect too. That is, it will be in everyone’s interest
to reduce the total level of pollution. Remember how rent for scarce things
works: the lower the supply, the higher the rent. Now, imagine you’re
a trustee of an ecosystem, and leaving aside (for the sake of argument)
your responsibility to preserve the asset for future generations, you want
dividends. Do you raise the number of pollution permits you sell, or lower
it? The correct, if counterintuitive answer is: you lower the number of
This macroeconomic phenomenon — that less pollution yields more income
for citizens — is the ultimate knockout punch for commons trusts.
It aligns the interests of future generations with, rather than against,
of living citizens. By so doing, it lets us chart a transition to sustainability
in which the political pressure is for faster pollution reduction rather
There’s one further argument for recycling commons rent through trusts.
As rent is recycled from overusers of the commons to underusers, income is
shifted from rich to poor. That’s because rich households, on average,
use the commons more than poor households. They drive SUVs, fly in jets, and
have large homes to heat and cool — thus they dump more waste into the
biosphere. Studies by Congress and independent economists have shown that only
a rent recycling system like the one just described can protect the poor. Absent
such a system, the poor will pay commons rent and get nothing back. In other
words, they’ll get poorer.
As always, there are a few caveats.
* First, to the extent commons rent is used for public goods rather than
per capita dividends, the income recycling effects are diminished. This is
offset, however, by the fact that public goods benefit everyone.
* Second, the less-pollution-equals-more-dividends formula doesn’t work
indefinitely. At some point after less polluting technologies have been widely
deployed, the demand for pollution absorption will become elastic. Then, lowering
the number of pollution permits sold will decrease income to citizens. But
that time is far in the future, and when it comes, the world will be a healthier
place. And even then, trustees won’t be able to increase the number
of pollution permits without violating their responsibility to future generations.
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,
odds of escaping corporate capture are much better with trustees than with
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
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 to.
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