Guest Essay on Vital Economic Issues
Natural Capital: Key to Economic Justice
The super-rich get their income from a near-monopoly of capital, not from "a job." Therefore, if we are to have economic justice we must have justice in the distribution of capital, and in the income from it. In order to accomplish this, we must distinguish between (1) natural capital (the income from which should be fairly equally shared by all earthly residents) and (2) all capital generated by private parties over and beyond our common heritage of natural capital. This privately generated capital, and the income from it, should accrue to those who generated it.by Alfred F. Andersen
But this division has not taken place in Western civilization. The result is that this civilization has not yet achieved economic justice. What follows is an historical account of an opportunity lost three hundred years ago, and again two hundred years ago, and of how we might still achieve it.
John Locke, the influential 17th century British philosopher, acknowledged that what economists now call "natural capital" (all land and its resources) was rightly our common heritage. However, he argued, it is not practical to require approval for any proposed use of it from every co-owner-resident of the earth. There had to be a fair and practical way for someone who wanted to use some part of it to go ahead and do so without securing such an impossible universal agreement.
Locke argued, first, that anyone had a natural right to take of the earth's natural capital so long as there remained "enough and as good left in common for others." He also argued that a person who put personal effort and labor into what was thus taken thereby transformed it from its previous status of common property into the personal private property of the person who had, as we now say, "improved" it.
As Tom Paine was later to point out (Agrarian Justice, 1797), we can imagine that when land was plentiful and human population sparse such a practice would indeed have been considered both practical and fair. Since by putting labor into a part of natural capital the latter became joined with the improvements, the product would, it would seem, have had to have a single owner. Either that would have to be all persons in common, as before, or the person who had improved it. There being at the time an abundance of land, it is understandable that the latter option was accepted, especially since no one could presume to speak for all persons in common.
However, by Locke's time those initial conditions no longer prevailed. In fact, it had been centuries since assuming private ownership of a piece of natural capital still left "enough and as good" in common for others. By Locke's time, most of the common-heritage capital in the Western world had already been claimed as private property. Yet Locke still advocated the continuance of the original practice. He made a few weak comments about there still being unclaimed land in the world, but he never did address his own requirement that any further taking of it would have to leave "as good" in common for others. In short, Locke didn't solve the problem which he himself stated so clearly.
By the time Adam Smith came along a century later the enormous momentum which established practice had given to free-enterprise capitalism was accelerating rapidly. Within countries, wealth became so rapidly concentrated in the hands of an elite few that they were exploring outlets for their exploits outside national borders. The result was European colonialism. Being basically a moral philosopher, Adam Smith actually argued against colonialism and its corporate operators by urging greater distribution of entrepreneurial opportunities among the populous. But, since he gave no answer to Locke's ownership dilemma, he did nothing to reverse the trend of persons and corporate bodies claiming common- heritage as private property by simply adding a bit of "improvement" to a piece of it.
This problem was solved a century after Locke and about two decades after Adam Smith published his The Wealth of Nations in 1776. Again, it was solved by Thomas Paine, the American patriot, and the solution spelled out in his 1797 pamphlet, Agrarian Justice. He took on the challenge when he returned to Europe after the American Revolution and was reminded of the dire poverty there amid great affluence.
Paine recognized that there should be a continuing separation between (1) the natural capital itself (which should remain common property) and (2) any improvements made on any part of it (which should be the private property of persons making the improvements). His solution called for holding all of our common heritage of natural capital in some kind of trust. This would assure its being retained as common heritage down through the centuries. Then, in order to permit individual use of it, he suggested leasing it out for such use, while still retaining common-heritage ownership. Finally, he suggested distributing the income from such leasing among the residents of a country (and, presumably, eventually the earth), thereby assuring each of the joint owners of natural capital a fair share of income from it. That income could then be used by farmers to lease farmland, by artisans to buy tools and buildings or to finance operations, and by everyone to cover living expenses. These common-heritage dividends were to go to rich and poor alike, since they were not to be considered charity, but payment on a right which was due to everyone.
Unfortunately, Paine's solution was ignored. Those who had benefited from the centuries-old practice, and one which was legitimated a century earlier by the highly respected John Locke, had by that time become too powerful, having gained control of whatever political process would have been necessary to implement Paine's proposal.
What we at Tom Paine have mostly added to Paine's proposal is the following. We are suggesting that our common heritage of capital should include, in addition to land and its resources, technology ("intellectual property") inherited from previous generations Some of this inherited technology is already incorporated into land values, especially urban land values. Thus, income from that incorporated technology would accrue to our common heritage in the course of users paying to lease it. Additionally, we feel that the vast amount of inherited intellectual property on which foundation all modern technology is built should also be considered common heritage. Therefore, high-tech industries presently reaping huge profits in today's increasingly technological global marketplace should be paying to a common-heritage trust for use of whatever common-heritage technology they depend on for their operations. That trust would then distribute that income along with income from leasing common-heritage land.
Income from selling non-renewable resources should not be distributed, however, but used to provide to future generations technology which they can use to substitute for those non-renewable resources which will not be passed on because they will have been used up or rendered unusable.
As for future technological developments, at present, royalties are paid to those who first discovered it for a limited period of time (in the United States, for about 17 years), after which the it is available free to anyone who has the resources to exploit it, which is usually the already rich. We suggest that, after the initial period granted the inventor, royalties should be paid to a common-heritage trust. In our day the concept of natural capital must be expanded to include the entire biosphere, including not only land and its resources, but the waters of the earth, the atmosphere surrounding it, and beyond that into our solar system. For the foreseeable future it seems unnecessary to be concerned about galactic travel and its impact.
Including the entire biosphere within our common heritage, brings up pollution considerations. The biosphere can adapt to a certain amounts of pollution and other impacts. These amounts should be identified and permitted; but not beyond these. Thus, industries should be permitted to lease degrees of impact much as they would lease land and technology. Since there is a limit on the amount available for lease, the market would determine the value of it. And just as getting the optimum income from leasing land would result in some land always being available for lease by newcomers, thus optimum income from leasing impact on the biosphere would result in some allowable impact at all times remaining in an unleased state. If at any time all of either became leased out, then that would be an indication that the trust was charging something short of market value, and the charges should be raised. The trustees of the trust would have the responsibility for obtaining the maximum income for general distribution, except that many parts of our common heritage would remain available for the general public without charge: public parks, fresh air, water fountains, etc.
The impact of economic enterprises on individual and social life presents more complex problems. In some areas there would be allowable impact here also, such as regards pure economic interests. A certain amount of generalized discomfort might be considered the price to be paid for a system which generally benefited everyone. These are more complex issues, beyond the scope of this essay.
The various problems associated with this plan, such as how governments would be financed if income from land was no longer available to them, and how to get "from here to there," etc. require book-length treatment.
Alfred F. Andersen, Tom Paine Institute, Eugene, Oregon; 541-461-9381 firstname.lastname@example.org
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