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Land Trusts and a Strategy for Horizontal Integration

This essay was prepared for the Land Reform Conference from April 25-28, 1973 in San Francisco, CA.

Today in the large agribusiness complex, exemplified by Tenneco, we see the movement towards “vertical integration” (that is: control of production from the farm through the processor to the ownership of the wholesale or retail stores, and often including ownership of production of equipment and machinery) carried out to an extreme degree. While vertical integration spells a higher degree of monopoly control, maximum profit to the few owners of the corporations, high prices to consumers along with reduction in quality of food, and ecological danger to the land through monoculture practice, the forces behind the movement are not always recognized, nor is an alternative realistic strategy devised. Vertical integration may be seen as the enemy in that it exemplifies control over resources, production and people, which the giant corporations exert for the benefit of a few people, but an analysis of the sources of power which it depends upon is needed. Without denying the need for a political strategy, I submit that this is not an adequate strategy. I suggest that a movement towards horizontal integration, community control, and a high degree of regional self-sufficiency would be, at least, a part of a merger strategy in opposition to vertical integration. It is in the context of this strategy that the community, or regional land trust, belongs. Before defining what a land trust is or hew to develop it, let’s look at the forces which have helped shape vertical integration, because it is necessary to have a clear understanding of these forces before a comprehensive opposing strategy can be mapped out.

Basically, those forces, in my opinion, have consisted of three major factors, long in existence and deeply entrenched in the American or Western economic systems.

1.     Built into the very core of the U.S. Constitution, written as it was by landowners, is the proposition that property rights take precedence over human rights or ecological realities. The notion of ownership of land and national resources in private hands and for private profit was incorporated and reaffirmed by the Constitution, and thus perpetuated a myth promulgated by Roman law for the first time in Western history. Only the American Indians, the original inhabitants of this soil, dared then to question this supposedly divine truth which had come down from the Romans. Not that the Indians claimed ownership, as some of them do today, but rather they questioned the notion of ownership of land and resources itself, which, in fact, had no place in Indian culture. In accepting the white man’s trinkets (for which they had no use) the Indians were not “selling” the land, but rather acknowledging in a symbolic way the white man’s request to share the use of the land, which was, to the Indians’ way of thinking, the gift of the Great Spirit for all men to use without exception.

While the power of private ownership in land and resources remains strong and relatively entrenched, the ecology or environment crisis is bringing about a change in thinking about the notion of absolute rights in private property and, therefore, the public is prepared and open to the concept of trusteeship in land use rights rather than ownership rights. It is also becoming more sensitized to the legal robbery which takes place under the form of what is called euphemistically “speculation in land.”

2.     The second factor is special privileges which have been granted by law to private for-profit corporations, and which have provided them with advantages over individuals or “natural persons”. Such privileges as personal immunity from suit had only been accorded to public non-profit corporations such as schools, government institutions, etc., previous to the early 1800’s when the State of New York passed the first law, over considerable opposition and public indignation, granting the same privileges to for-profit corporations. The Civil War gave a great impetus to these for-profit corporations which, as they moved west, began to acquire huge holdings in land (grants to the railroads, for instance) and other resources. By the end of the Civil War, Abraham Lincoln remarked, “The corporations are in the saddle and control the country”. Up until quite recently, this privileged position has gone almost unchallenged.

Today a resurgence of opposition to the private profit corporation is sweeping the country. (Ralph Nader says “But finally the public is beginning to understand that corporate crime, corporate pollution and corporate distortion of our laws takes more lives, destroys more property and depletes more consumer incomes than all the street crimes put together). But not until the special privileges granted these monstrous corporations are revoked, can imbalance of power be rectified. Meanwhile, an opposite strategy of developing nonprofit corporations to replace profit corporations must grow.

3.     The third force, and perhaps the least understood or recognized behind the vertical integration, is the power of the centralized issuance of money. By the time Alexander Hamilton had overcome the opposition of the Jeffersonians and established the first bank of America modeled after the central bank of England, this force had already been established. The centralized monopoly control over issuance of money has grown ever stronger (not without periods of populist opposition) until today it remains almost unquestioned even by the foremost critics of the “system”. While the system has worked badly for the majority of the people, especially those in the rural and undeveloped parts of the U.S. and the world, the Keynesian band aide was applied in the 1930’s to patch up the system and it has been staggering along ever since, but even more inexorably at the expense of those outside of the main centers of commerce. In short, the rich have been getting richer and the poor, poorer without change as a result of the Keynesian reforms of the monetary system. In fact, the very centralization of the system and privileged control which is built into the profit banking system makes such a misdistribution of goods and services a virtual certainty. Any strategy to oppose vertical integration must take this factor into account.

The often-drawn conclusion from the above analysis by those in opposition to special privilege and injustice of the system is to conclude that what is needed is more government control, or taking over the ownership of resources, and production means by the government itself—usually implying the Federal government. We are, of course, somewhat more sophisticated today, and most of us recognize that bureaucracies established by the government usually end just that—bureaucracies—which do not improve the situation and often make it worse or, as Nader might put it, “the supposedly regulated end up controlling the regulators”. Nor has socialism as practiced in other countries given a great deal of insight or hope regarding our own problems in the U.S. This is because the limited success of socialism (at the very least, people are usually better fed and better housed than they were prior to the socialist regimes) has generally taken place in the so-called undeveloped countries. As their socialist systems developed, these countries have been isolated from the exploitative system which controlled them previously—usually called imperialism. Basically this has meant a “closed economy” whereby the depredations of the international monetary and corporate system could not invade the country and exploit the local population. Certainly, this has been effective in China and Cuba when accompanied by land reform programs and, perhaps, to a lesser degree in other socialist countries.

But, because the U.S. is an overdeveloped nation, it is not likely that identical solutions will be applicable here, certainly not on the national level, at any rate. As we see in the case of Russia, centralization of power under the name of socialism merely leads to bureaucratic control from the center and not very much difference in the inequality of distribution results. As has been observed by many people, Russia and the United States are growing closer together, as ever larger bureaucracies control both countries from centralized points.

On the other hand, if one takes the view that essentially the entire United States is divided between affluent centers of power (the large industrial and financial complexes of the East, Midwest and far West) and the rest of the country is essentially undeveloped country, an analogy can be drawn between the situation of the undeveloped countries and the undeveloped areas of the U.S. — generally the rural areas and the inner cities. Here is where the concept of horizontal integration enters in as the alternative strategy to a purely political strategy. Within the regions defined as “undeveloped” (Appalachia, South, Southwest, North Central, inner cities) subregions can begin to create a comprehensive strategy which includes land trusts, relatively closed economies and community development corporations. I will try to describe each component and its role in an overall economic strategy of horizontal integration.

The Community Land Trust

  1. Trusts can be established immediately. They do not require any legislation for implementation. Land trusteeship utilizes the legal principle of the leasehold, but in perpetuity (99 years and renewable). Such long-term leasehold systems, as a substitute for ownership are being utilized increasingly in urban areas (in New York City most skyscrapers are on leased ground) and even in new towns (Irving in California, for instance), but generally for maximizing profit (Leavitt retains the commercial areas of his towns and leases them out—thereby avoiding taxes and spreading profit over years). On the other hand, trusteeship and stewardship has a long tradition in many societies (Indians of North and South America — the ? of Mexico, the tribes of Africa, the “commons” in England and New England, the crofters? system in Scotland, the Eskimos of Alaska. And in recent history, the Gramdan movement in India, and the Jewish National Fund in Israel).
  2. A trust can be used as a holding mechanism for all sizes and tracts of land. Some of these tracts may be large enough to build entire new towns (large or small) or simply used as farms or as conservation tracts.
  3. As it develops and includes more and more parcels of land in a region, the remaining land speculators can be forced into selling at non-profiteering prices (or paying high taxes) through applying the Henry George principles of site-value taxation. This can be done, and has been done, at the local assessor level. Meanwhile, taxes on improved property (small home owners) can be reduced. Eventually this principle can be applied on a statewide level.
  4. Since traditional land reform (or land re-distribution) often involves forcible expropriation, the very use of the term often frightens landowners, including homeowners who fear (irrationally) loss of their homes, etc. At the same time, since land is still held in private ownership and since the other forces (control of capital, etc.) are not dealt with, historically the history of land reform is not encouraging. Typically, land reverts after about 20 years to its former landlord owners (or new ones).
  5. On the other hand, under the trusteeship concept, the land is taken out of ownership into trusteeship — in short, a new form is applied. Since trusteeship Implies and means concern for the land itself in a conservation or ecological sense, new allies are found in the ecological movement who want to ensure that the land is not violated (in Maine these people are called “land advocates” and their number is growing rapidly). This creates a basis for a broader coalition than “land reform”, per se.
  6. Because large segments of land are held as a unit, the trust can utilize the greatest flexibility in planning, taking into account the entire region which, from a planning viewpoint, is the most logical unit for resource planning (most regions have regional planning commissions already—usually frustrated planners who are unable to utilize their best knowledge of the region. In Southwest Georges we received enthusiastic support from the Regional Planning Commission). This flexibility in planning permits both short range and long-range strategies which can include small farms, large farms, or combinations of both. This planning makes possible the utilization of the modern technology of the large-scale farm, and at the same time encourages and promotes the new ecological fertilizers and farming systems to avoid the dangers of monocultures and pesticides. At least, large-scale use of machine technology is necessary to compete with the agribusiness farm system.   Land redistribution or resettlement creates more small farmers, but does nothing to insure survival of the small farmers.

Another aspect of this same issue which must be considered is the assumption that farm workers and agriculturalists want small farms — I doubt this is true in most cases if it means giving up labor-saving machine technology. Farm laborers want a share, a real participation in ownership of their production, but not at the expense of more “stoop labor”. In our planning sessions for New Communities Inc., in Southwest Georgia, we ran into this issue any number of times. Farmers did not want to divide the farm (about 6,000 acres) into small individual tracts because it would make the use of machinery more difficult. Cucumbers, which meant a great deal of stoop labor, were voted out as a cash crop even though they bring good prices.

To those who are concerned about chemical fertilizers and pesticides distributed with large-scale machinery, as well as those who believe in the small farm system, this attitude presents a problem and a challenge. I suggest that a land trust mechanism which helps to remove the burden of land payments from the back of the farm worker is a     which offers the best approach to solve this problem. In our planning at New Communities Inc., we have (at least in theory) developed a plan for combining large-scale farming with small plots mainly for home gardens and animals. However, larger plots could be provided for individual families, should they desire or need them. At the same time, this planning permits families to live reasonably close together in villages where other needs such as schooling, recreation, buying clubs, marketing co-ops and other stores can easily be provided.

In Israel, the advantages of flexibility in planning can be seen very clearly, since over 2/3 of the best land is held in the Jewish National Fund Trust. Here, everything from small farms, Kibbutzim, Moshavim and whole new towns are planned and established on trust land.

In short, the trusteeship concept is an activist approach to the problem of redistribution of resources, and while it is initially aimed at the land, as it grows and develops strength as a movement it can begin to reach out into other areas of resource management. Looking at it from another dimension, the very notion of trusteeship when applied in the broadest fashion to all resources begin to break down the very limits of the nation-state as we have known it in the last century or so. The concept is being applied now to the oceans, in the Seabed Committee of the United Nations General Assembly. A general conference is now being planned on the law of the seas to draw up a treaty establishing an “international ocean regime” for the peaceful uses of ocean space and resources for the benefit of mankind as a whole.

As Elisabeth Borgese writes in The Center Magazine:

“In trying to establish an organization for the management of ocean resources, we must tactile all the problems of world government. This includes questions of constitutional structure, distribution of voting power, relations between large and small and developed and developing nations, planning and resource management, conservation, regional cad global development, taxation, diversity and unity, sovereignty and property, rights and responsibilities, a new science policy, and the control of technology for the benefit of mankind”.

With the exception that its scale is regional instead of global, most of the above applies to the problem of organizing a regional land trust. What is learned in the process at the global level may be applied at the regional level and vice versa. In fact, it will be the interaction between these two forces of global and regional resource management which will become the nucleus of the “new politics” of the trans-national period we are entering — a period in which the new technologies of mar are rapidly breaking down the institution of the nation-state. As it becomes increasingly clear that either “we abolish war or war will abolish us”, war as an instrument of political policy becomes increasingly unfeasible. (Even a small and weak national like Vietnam can defeat—or at least prevent from winning— the most powerful nation in the world, because that nation doesn’t dare to use the power it possesses. So the Vietnam War marks a watershed in world history— the beginning of the rapid disintegration of nation-states as they have been historically known.)

War has been an intrinsic part of the nation-state. (Randolph Bourne said, “War is the health of the state”.) Without war as an instrument of rational political policy, the nation-state cannot endure. Even the very cost of maintaining an outmoded and obsolete “defense” establishment will help to break down the nation-state itself. Resentment and resistance to the taxes required to maintain this establishment will bring about decentralizing forces and new alternative institutions, already springing up around the country. New institutions of many kinds are needed, but central to all such institutions must be the institutions for land and resource management on a global and regional level. Trusteeship is simply the underlying concept which can give coherence and unity to all such planning whether “conservative” or “radical”.

The second element in the threefold strategy of horizontal integration is the concept of the nonprofit Community Development Corporation (CDC) The concept of the CDD provides the mechanism which can substitute for the present vertically integrated corporation on a local or regional level. As an umbrella on a nonprofit basis it can even spin off and control for-profit corporations which return profits to the CDC, which, in turn, uses those profits for the benefit of the community. As the land trust is the land use planning organization, the CDC is the development organization. It can develop businesses, industries (hopefully new ecologically sound industries), and it can provide for recreation, health, schools, etc., which the community may need and which are not provided for in the present institutions. Its job is over-all development planning, using the savings of local members as Initial capital to start the process.

But the third element in the strategy of horizontal Integration is the one least understood or considered. It is comparable to the process of a new country establishing its own money-of-account, or currency, and essentially creating a semi-closed economy which produces for local consumption primarily and exports the surplus for “foreign exchange”. This is not to imply that all underdeveloped countries do this. Unfortunately, they often fail to do so because they have accepted the colonial banking system which they have inherited from their former colonial masters. In these cases, and it is the majority of them, the former “mother” country continues to exert economic control through the power of the dollar, the pound, the franc, etc. While these countries are politically independent, they continue to be economically controlled from the outside. In the same way, a horizontal integration strategy will not be complete or successful until some form of isolation from the larger economy and independence from the dollar is achieved. One form of such isolation is accomplished in Israel in the case of the Kibbutz where no money is required within the internal mechanism of the Kibbutz, but only a bookkeeping system is used to determine each family’s allocation.” Exports from the Kibbutz and imports into it are paid in terms of the Israeli dollar; any surplus of export income over import cost being allotted on an equitable basis to each worker family. The amount of national cash or currency needed is thus reduced to a minimum. Coupons, or credit vouchers, are used as internal currency within the Kibbutz but, of course, are only good for purchases at the Kibbutz clothing store or at the Kibbutz “supermarket”. Such a system can be applied on a wider level and there are many examples of “script” as it has been called, in U.S. history, especially during the great depression of 1930. It is my opinion that such a system, but on a more sophisticated level, must be introduced in order to insure successful horizontal integration. We are now involved with an experiment in New Hampshire which is demonstrating that such a system can utilize the existing bank system. We intend, of course, to use it as a means for financing land trusts in New Hampshire and Maine, and for creating the currency needed to develop the CDC’s.

The international monetary crisis, as it is called, and the continuing devaluation of the dollar is helping to bring about a favorable climate for accomplishing this objective. We have established e script, or currency, which does not devalue with Inflation, but is linked to a noninflationary index (Bureau of Labor index at present, but eventually a world commodity index), A checking account system Is already la operation which moves through the bank clearing house. However, it is a separate corporation, a. non-profit corporation, which determines how its funds will be used within a developing horizontal or regional system. At present, U.S. dollars are being exchanged for Constants, as the new unit is called, but eventually it will rediscount loans and in the process issue new credit.

Most of us have been intimidated by either our lack of knowledge of the banking mechanisms, by our naive assumptions, or fears that only the government can issue currency. The result is that we have retained our dependency upon the centralized system and it’s ability to exploit us through the mystery of its operation. Without intending to oversimplify whir, is not necessarily en easy subject, I submit that the time is long past for de-mystifying this process which has kept us at the mercy of Wall Street and its manipulations.

Publication By

Robert Swann

Robert (Bob) Swann was the founder of the E. F. Schumacher Society, now the Schumacher Center for a New Economics. In 1974 E. F. Schumacher asked Robert Swann to start a sister organization to his own Intermediate Technology Development Group, but it was not until 1980, when prompted by Resurgence editor Satish Kumar, that Swann organized the E. F. … Continued

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