There are many visions of what a new economy might look like: more local than global, more sharing than exploitative, more respectful of the earth than of profit. What’s missing in most of these visions, however, is the system architecture needed to guide the economy in those directions, and keep it headed there for the indefinite future.
A good new economy architecture must do two things our present architecture doesn’t do: protect vital ecosystems and spread the fruits of our economy broadly. The first is essential to preserving our planet, the second to assuring that all individuals and communities have the resources to become more secure and self-reliant.
Discussions of economic architecture tend to get stuck in the stale dichotomy of state vs. market. The truth, however, is that neither state nor market contains the key to a new economy. (If they did, we would have gotten there by now.) Instead, the key to a new economy lies in a third realm, the commons or common wealth.
What is common wealth? And how might we use it to build a more local, equitable and sustainable economy?
In pre-capitalist days, the commons was the source of human subsistence. It provided food, water, fuel, building materials and medicinal plants to everyone, as well as amenities such as stories and music. Then, a great transformation occurred, and much of the historic commons was enclosed. Replacing it were private property, markets and money. This transformation unleashed a frenzy of entrepreneurial activity that created enormous private wealth, but it didn’t completely eliminate common wealth. Rather, it changed the forms of common wealth and made it harder to see.
The most valuable forms of common wealth today are natural ecosystems such as our atmosphere and socially built systems such as our legal, financial, transportation and communications infrastructure, without which private enterprise couldn’t flourish. Consider what would happen, for instance, if the Internet shut down. Google, Amazon and all the other businesses that depend on the Internet would have little value on their own. The same is true for companies using other collectively built systems. In other words, it is shared wealth that creates most of the value of private wealth, yet we charge private wealth owners almost nothing to use it.
The failure to charge for common wealth — for example, letting polluters dump freely into our atmosphere — leads to what economists call “negative externalities.” The costs of pollution aren’t paid by polluters; they are shifted to pollutees, nature and future generations. And this market failure persists because no living individuals or companies would financially benefit from fixing it.
But imagine a system in which everyone benefits from fixing this tragic flaw. In this system, polluters would pay and all living citizens, as joint beneficiaries and trustees of nature’s gifts, would get dividends. The higher the price for using the commons, the larger the dividends and the lower the externalities. The health of nature’s gifts would be directly linked to greater income for everyone.
Similarly, imagine an economy in which banks and securities traders pay to use our co-created financial infrastructure, a source of considerable value to them, and everyone receives dividends from such payments. One result would be a shift of money from the speculative casino to the real economy. Another would be a more secure middle class.
Sound revolutionary? In fact, the idea of using monetized common wealth to benefit everyone isn’t new. Thomas Paine argued in 1797 that land, air and water are gifts to us “from the Creator of the universe,” and that their economic value is therefore the “legitimate birthright” of every man and woman. To turn this birthright into money we can use, Paine proposed a National Fund that would pay everyone at age 21 about $17,500 in today’s dollars, and $12,000 a year after age 55. Revenue would come from ground rent paid by landowners, the privatizers in Paine’s day of the greatest amount of common wealth. Paine even showed mathematically how this could work.
More recently, the state of Alaska in 1978 created a giant trust fund whose beneficiaries are all the people of Alaska, present and future. This so-called Permanent Fund is capitalized by earnings from Alaska’s commonly owned oil. Over three and a half decades, it has paid dividends to all state residents ranging from $800 to $3,200 a year, depending on oil prices and stock market fluctuations. In 2015 the dividend was $2,072.
So here’s my proposal. Extend the notion that common wealth should benefit commoners — which is to say, all of us together — one person, one share. Create state and national versions of the Alaska Permanent Fund using a variety of co-inherited and co-created assets. Make corporations pay for some of the value they gain from these assets and some of the harm they do to them. And share such payments among all legal residents equally. It’s simple, really. Virtually everything described above can be done electronically, with little or no expansion of government. (Governments would have to set up the funds, but once created they’d largely run themselves.) As I showed in my book, With Liberty and Dividends For All, such common wealth trust funds could generate dividends of up to $5,000 per person per year, or $20,000 a year for a family of four. And as Paine said, such dividends would be “not charity but a right.”
The effects of this economic architecture would be multiple. First, ecological destruction would be slowed economy-wide, as would various forms of private rent extraction. Second, families, entrepreneurs and local economies would be strengthened as people found more time and resources to devote to new ways to live and work. Money would circulate in virtuous cycles, and rising economic tides would lift all boats, not just the yachts.
In short, identifying, protecting and in some cases monetizing common assets would both accelerate the transition to a new economy and keep it on track for decades thereafter. Think about that when you listen to the next presidential debate.