Architecture for a New Economics

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 Allsuch 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. 
 
 
"Common Wealth Dividends: The Key to a New Economy" by Peter Barnes
 

Peter Barnes is a member of the Board of Directors of the Schumacher Center for a New Economics.  He is an innovative thinker and entrepreneur whose work has focused on fixing the deep flaws of capitalism.  He has written numerous books and articles, co-founded several socially responsible businesses (including Working Assets/Credo), and started a retreat for progressive thinkers and writers (The Mesa Refuge).  He lives in Point Reyes Station, California.
Read Peter Barnes' E.F. Schumacher Lecture titled "Capitalism, the Commons, and Divine Right."  To engage Peter Barnes as a speaker, visit the Speakers Bureau page on our website for contact information.