Why is the global economy constrained by the energy cost of energy?
Environmental and human rights organizations understandably regard as disastrous the "globalization" or breaking down of barriers protecting a country's culture and resources that its people want protected. This paper proposes incorporating Basic Income into a stable system that can limit unwanted globalization by giving all citizens shares in the income from natural resources, notably land. These "land-shares" would be converted legally to the status of an individual's beneficial interest in a trust. The Trust would enforce environmental standards on behalf of its beneficiaries rather than relying on environmental or social laws of governments, against which international trade lawsuits can be filed. The paper will also look at stable systems and show how using the trade exchange could amplify the Basic Income and stabilize the local economy.
Giving everyone equally a basic income, a direct payment that is enough to live on -- henceforth called "Basic Income" -- could not have much chance of becoming the law of the land. Powerful people and institutions are not known for taking a great interest in regularly handing out a huge amount of money directly to the public. A Basic Income will have to be part of an indirect scheme -- indirect because it doesn't consist of making people want the Basic Income itself. Instead we need to attach the Basic Income to something more and more people do want, namely protection from foreign takeover of our cultures and our environment. What has been happening to native peoples -- ever since Europeans wowed American Indians with glass beads -- is now happening to us native peoples. It has to be stopped. The instrument for this purpose is the Land Trust. It has been keeping domestic investors from undesirable land use for decades. It could handle foreign investors.
The problem is, how to attach the Basic Income to the Land Trust so firmly that people who are upset about the destruction of our cultures and our environment will not only turn to the Land Trust, but see Basic Income as an unquestioned part of it. Maybe even an important part of it. Remember, we're native peoples facing a superior concentration of technology and capital eager for our land and our natural resources. What we really want to do is make sure that the proceeds from these bounties of Nature go to the inhabitants: us. At the same time, we have to set limits on resource-use so yields can be sustained. Therefore, a charge for having the use of these bounties, within set limits, would be justified. This land-use license fee for all land would provide the Basic Income for all people. Collecting revenue from land is a good idea anyway, according to several centuries of advocates, from the French physiocrats and Adam Smith through Henry George, Leo Tolstoy and Winston Churchill, to a large number of advocates in many countries today. Now there is added urgency in a need to protect this Basic land-use Income nugget by forming an ecological Land Trust around it.
The first part of this paper will look at the Land Trust and the Basic Income separately as strategies and how they can best be connected. The second part of this paper shifts from this all-important maneuver, protection for the short term, to the stable system, protection for the long term. The first section reviews some features of stability, the current blind spot concerning the subject, and possible reasons for it. Then to the Land Trust and Basic Income combination the second part adds an economic stabilizer, the familiar trade exchange. It's not the usual mutual credit club that has to rely on people being trustworthy. It's set up as a stable system that works automatically for everyone. According to the systems approach, success of an enterprise over time should never depend upon people's trustworthiness. Arguably that has been the mistake in launching a number of noble causes.
The Land Trust is an out and out legal maneuver. The dictionary defines a maneuver as making changes in position in order to secure an advantage in attack or defense. The Land Trust was always a defensive maneuver. Nearly thirty years ago it was used to defend property, especially farm land, from a change in use. Speculators and developers would offer a farmer a higher price than his land was worth as a farm, and if his children had left the farm, he was happy to sell. Mennonites, for whom farming is a way of life, found the solution. All landowners would put their lands into a Trust that held the titles. Then the Trust would lease their lands back to them with inheritable leases. Through covenants that went with the land, they could safeguard its use. Ecological Land Trusts, such as the Nature Conservancy has established, do the same, for example, carefully limiting any timber or grazing rights.
Today this defensive maneuver to protect lands from unwanted use is needed as never before because of organized pressure from other nations through the Organization of Economic Cooperation and Development (OECD) and the European Union (EU) in particular. To these organizations individual governments have given up their sovereign right and duty to protect the property and well-being of their own citizens. As a result, on behalf of foreign investors the EU has been able, for example, to negate Dutch efforts to reduce cadmium build-up and to legalize the use of a chemical Germany wanted to ban (1). Furthermore, governments are expected to sign the Multilateral Agreement on Investments (M-A-I) or worse (2), This agreement gives corporations the right to sue governments. The Offense? Maintaining laws to protect the health, jobs and environment of the citizenry when companies find these protections detrimental to investing. There is no reciprocal power of governments to sue corporations. Foreign investors would have all the rights of local investors and then some. Legal decisions would be made by a non-elected tribunal, all provisions binding for twenty years without appeal. Why is this loss of national sovereignty supported by national governments? It seems incomprehensible but is dramatic evidence that concern for the public is less compelling than financial pressures, and those are going to increase.
The threat to the well-being of the citizenry comes from another direction as well. Jobs are disappearing forever because fewer and fewer people are needed to produce anything. That fact is surely the long-term justification for the Basic Income. With the Basic Income, people would no longer be dependent on jobs in order to deserve income. Yet this logic may not move the powers that be, whose burgeoning technologies go right on intensifying the problem. True, some day corporate leaders might present Basic Income as the ultimate technical triumph of making people fully superfluous. The trouble is, it might look and taste like the bread that goes with the circuses for an idle population.
The real coup de grace on getting any Basic Income legislation passed now comes from the nature of Basic Income itself. It has all the drawbacks of the single-theme human betterment movements one sees in the United States, whose appeal to people varies inversely with their political power. True believers with a history of failure to persuade, intimidate or embarrass powerful people to act for human betterment just mount another charge on the same old battlefield. True believers never quite take to heart that people with power do not mind being or appearing selfish (3). Voting for money to go straight to the citizen to spend as he likes in fact requires a politician to be unselfish. He likes selectively handing out money and contracts. To him a standard cash distribution for everyone would amount to privatizing, not government services but government itself. Forget it. A large bureaucracy would agree. And that doesn't begin to account for the effect of the idea that people are unequal, not the system. If things are anything like this in Europe, Basic Income by itself is not a winning ticket.
Yet the very reason politicians don't like Basic Income, that they lose control of spending, is its real strength. We're used to economic controls. Outcomes that differ from expected ones warrant more controls. We pass new laws; increase taxes; tighten or loosen the money supply. The significance of Basic Income is that it is a deliberate move to give up control, to turn over spending decisions to people themselves as an early use for revenue, rather than spend the revenue on a variety of social services with the money going chiefly to those supplying them. Without external controls, spending in effect runs itself, providing an element of stability that applies to biological systems as well.
The land-use licensing fee that would provide public revenue, here the Basic Income, is already part of a plan advocated by economist Herman Daly. The plan would make sure that ecological, social and economic objectives don't get in the way of each other in being implemented. The secret is to tackle the objectives separately and sequentially, because each has different costs and benefits that must not affect the others. First determine the optimal scale for resource sustainability, for input and output -- throughput -- that is well below the carrying capacity of the land, and issue licenses for sale accordingly. Next, separately distribute the licenses or the money to the public. The marketplace is left to allocate the wealth efficiently. An example of a common conflict is between setting the scale and promoting social measures. Limiting scale limits growth, which conflicts with relying on growth for increasing income. That's why the optimum scale of resource-use must be set first to guarantee ecological objectives. The distribution must be made for its own sake, certainly a vindication of the logic of the Basic Income.
We have the Land Trust for observing the required scale and the Basic Income for the distribution. But Daly's licenses were for entire watersheds. Property rights and responsibilities of landowners don't coincide with watersheds. Depletion rights or pollution rights, CO2 emission, for instance, could extend over whole nations or even internationally. These grand licenses would need to be converted to, or supplemented by, single licenses for each property. The license would limit depletion or pollution of every natural resource in or on that land, the timber and water, for instance. Licenses for the use of land, a limited resource itself, make as much sense as licenses for other limited resources such as fish and game, and broadcasting frequencies. The fee could be as automatic as possible, using a standard formula based on the property's size, on its location (such as nearness to markets, people and amenities), and on its natural assets such as minerals, water, timber, and nature-made tourist attractions. Since these are the same factors determining leasing charges, land-use license fees and leasing charges are easily combined.
The Land Trust would collect the land-use fees according to separate contracts with each licensee to observe the limitations on land-use. The Trust would also have a fiduciary obligation to deliver the license fee money in equal shares, including a standard child-cost, to every adult resident of the farms, towns and villages in its territory. No Land Trust has done this before. A new kind of Land Trust would be formed, the Landshare Trust.
Enabling legislation could exempt the landowners, now lessees, from other taxes, and exempt the residents not only from taxes on their Basic Income, but also from receiving services the foregone taxes would have paid for (5). To have any chance of passage the change must be "revenue neutral", that is, not causing an increase or decrease in total revenue. For a legislature to make these tax shifts into law would not be committing legislators to a national tax shift but to the shift for a specific type of Trust property only. That is important. Legislators are aware that landowners have been notoriously resistant to land reform schemes in the past, and may see little to lose by making this tool for land-use protection available. They would be right in any case, because forming or joining a Landshare Trust would be voluntary. Conditions would differ in different countries. As a result, the number of landowners can't be predicted who would be willing to form or join a Trust once the tax shift law is passed. One country may increase the attraction for landowners by specifying that the Trust pay off any mortgages on the parcels of land as well as taking over these mortgages from the bank, which the Trust might do as the new owner. Lessees would still own the improvements, usually buildings, and would continue paying off the mortgages on these. In one country the lessees may collectively be the sole trustees of the Trust. In another country that might be considered a potential conflict of interest. Many Trusts may require a lessee who wants to move to offer his improvements to the trust first at replacement cost to prevent the value of the land from entering into the price. The participation of the Basic Income recipient in community and Trust affairs may also vary. Variation helps to show what works best. One constant, however, would be the trust's legal functions. Every Landshare Trust would have specific obligations to its beneficiaries and to the land, through charter, restrictive covenants, and contracts.
This paper is not only an argument for incorporating the Basic Income into a stable system as a practical maneuver. It is also an argument for gaining a long-term advantage from building stability within systems. Considered here are some general properties of stable and unstable systems, in particular our unstable money, and how and why reformers seem unconcerned about this. Finally an example of a stable system is presented and how it could help the long-term future of the Basic Income.
The Land Trust and the Landshares (Basic Income) are both strategies that shift from external controls to internal controls. Internal controls mean internal limits. If limits are ignored, automatic consequences halt the process. You run out of money. You lose your land-use license. Those barriers stabilize the system. In some cases reaching a limit even triggers, a reverse process called a negative feedback loop. An example is the thermostat, where a difference in expanding metals turns the furnace on or off. In one positive feedback loop to be described, landshare values spiral upward, but the action stops because money has to reflect trade, which has a real world limit. Without limits a positive feedback loop leads to a crash. An example is the population explosion ecologists call "species irruption" (6). A familiar example of a positive feedback loop that has no physical limit is compound interest. Debt accumulates faster and faster, that is, exponentially. The rate of increase is itself increasing. That describes our money creation. An internal limit could be something as simple as a debt ceiling that couldn't be raised. Instead, the production of money has completely outpaced the production of goods and services exchangeable for it. We experience this as a continuous rise in general price levels over time, "inflation". But the consequences are far more serious, because the unchecked growth of money finances the unchecked growth of nearly everything under corporate management.
It is no coincidence that corporations, banks, and governments are now running the global economy. The first to benefit from newly created money are these institutions. They lend or borrow the money to invest in huge undertakings that have devastated people's lives and the environment. Among widely known examples are the World Bank's dam projects in India displacing tens of thousands of tribal peoples, and its Polonoroeste colonizing project in Brazil's rainforests, an unprecedented environmental and social calamity. (7) Even vaster amounts of money, billions of dollars worth, change hands daily among traders betting on currency fluctuations. The bigger the fluctuation the bigger the chance for profit or loss -- and a precipitous drop in value for some country's currency. Currency traders are ignorant of the effects of their collective speculations, banks and corporations are quite aware of the distant damage they do, and governments are surrounded by the misery they help create. A government will cut back social services, for example, a standard practice, to get IMF refinancing. Knowing that the IMF and World Bank are creations of the developed countries adds to the nightmare. The loans continue. The tragic outcomes continue. Yet few people connect disappearing rainforests, polluted rivers, and hungry people with the absence of any internal, automatic limit on creating money. Why is this? Much of the answer lies in our history.
Money creation took off in a big way after World War II. The United States inflated so many dollars into circulation beyond the gold reserves backing the dollars that it wouldn't exchange dollars for gold. As redeeming the dollars wasn't required, that internal limitation was a farce. Soon no currencies required backing. There was no pretense of limits. The result has been the real instability, a generation of men and women who don't even think about setting internal limits for man-made systems. Especially for money. Ecologists think about it. David Givens reminds us that systems with diversity are stable, complex ones are fragile, that many factors: depletion of resources, extreme population increase, pollution are caused or made worse "by human destruction or lack of long-term planning. Thus humanity can contribute to stability maintenance by designing and implementing homeostatic control mechanisms [those negative feedback loops], and by maintaining a range of species [diversities] that buffer against catastrophe." (8).
None of this seems to be happening. Politicians and reformers alike, who publicly deplore the excess of currency transfers and pollution, show no readiness to "contribute to stability maintenance". Both politicians and reformers show a readiness instead to tax the currency transfers and the pollution. A fuel tax, for instance, to limit CO2 emissions. These are in the Netherlands Green Tax recommendations for 1998 and the May 1997 Declaration of European Economists as part of an alternative European Union policy. Unfortunately taxing excess builds an appetite for revenue, but does not stabilize a system; only a built-in halt to the excess does, as explained. Taxing excesses only generates revenue if the excesses continue. The tax is more ridiculous if the practice to be discouraged is insensitive to price changes. Add an "eco-tax" to fuel, for example, and the rich just pay more for gasoline (petrol) when the price goes up, the poor are out of luck (9) and everybody chokes on all the paid-for pollution emissions.
Economists are certainly not seeking to build in limits, not even one of the European economist signers of this Declaration who has shown growth to be a net liability. (10) Those enlightened few who do condemn growth exempt the most potent, damaging growth of all, the growth of money, because it has to pay for the many things a government should do for the people -- reduce unemployment, for instance, their top priority. They want the EU to create jobs. Supporting a universal Basic Income, which reduces the role for government, was not considered. Their mind-set appears in the summary of the Declaration of European Economists:
In tackling these [labor] problems successfully the EU could make a considerable contribution to the preservation, re-establishment and progressive reform of the European model of the welfare state which, in most countries of the EU, was erected after World War 2 and has been under continuous attack during the last 15 years (11).
Economists see Socialist controls vs. Capitalist controls ahead, but all they are seeing is the rear-view mirror. True, socialists will continue to turn up in droves at anti-globalization meetings. In those angry crowds, are there people who sense that the competition is not between two complex, fragile, control systems? Many astute social critics are working overtime to raise consciousness in people. It makes sense now to start looking more at systems, to increase their stability, as ecologists invite us to do. That may be the only way to get a Basic Income that lasts.
Forming the Landshare Trust would be the major accomplishment because of the enabling legislation required, and the most urgent. Foreign assaults on territorial sovereignty are taking place now. However, the monetary system is so unstable that for any real stability a separate money should be available also. That means using a trade exchange, the clearing kind. People's accounts would be backed by their landshares, the Basic Income land-use money. To prevent any inflating -sneaking in extra credits, accounts would be cleared periodically. Accounts owing exchange money would pay the national currency of the landshare to accounts owed exchange money, thus clearing all account balances to zero (12). This clearing feature would make the account money immediately acceptable to everyone, exactly because it has the built-in limitation of having to be redeemed periodically.
Uninflatable, the account money would not lose its exchange value (13). This further enhances the value for the community that all trade exchange money has, especially these days. Multinationals move mobile capital and jobs across borders in pursuit of less mobile resources. The trade exchange counters this exodus by anchoring labor and capital to the trade area of its money. This anchoring greatly multiplies the money's circulation hence usefulness beyond the amount of the original Basic Income landshare. Also, the money is less likely to be spent too quickly, a worry of Basic Income advocates. People could turn in account money for landshare money any time, but perhaps, to favor the local economy more, people may decide on some penalty for redeeming account money between settlements. Settlements would be at whatever regular intervals people want. In pre-banking Europe, clearing houses for clearing debt were set up on the spot whenever the town held its fairs.
There's a built-in bonus, that positive feedback loop mentioned earlier. The value of the landshare collateral that backs a trade account can easily spiral upward, because its value is based in part on the desirability (nearness to markets, people and amenities) of the area that the trade exchange serves. If the desirability increases, then to some extent the land-use fees would increase too that provide the landshare collateral. Increased collateral generally increases trade, which normally would increase the desirability of the area again, causing a rise in the land-use fees again, and so on. This gradual upward ratchet effect would taper off at a maximum level of activity because the money is limited to reflecting trade, the stabilizing physical restriction.
Only the main features of the proposal and its setting could be outlined here. Instead of risking more rejection by legislators as is, the Basic Income becomes more acceptable to legislators and more valuable to the citizenry as part of answering an urgent need for both protecting our country's resources and benefiting from them. Basic Income collection and distribution becomes the fiduciary obligation of the ecological Land Trust. Behind this barrier we natives stand ready to deal to our advantage with trading expeditions.
The Landshare Trust and its reliable money are designed, not for self-sufficiency, but for stability, for enduring. Because stability also lies in diversity rather than complexity, new autonomous Landshare Trusts should form, new diverse centers of ecological, social and monetary stability. People attracted to these centers would become Basic Income recipients at a rate a national economy could accommodate. Gradual growth is more feasible than wholesale change. If the outlook for growth gets too good, people will know what to do...set about installing internal, stabilizing limits.
1. The chapter "The Dutch Dilemma" in The Growth Illusion by Richard Douthwaite (Tulsa OK: Council Oak Books, 1993)
2. While there are problems (for instance, the EU doesn't like the US' exception for subsidies and procurement programs, and the US is critical of the Regional Economic Integration Organization (REIO)), there are bilateral side trade-offs under negotiation. With or without the MAI, investment rules will be enacted, maybe in a year's time as a part of the World Trade Organization or IMF provisions. That would extend the MAI to many third world countries, and by then the Agreements may well be harsher, United States Trade Representatives warn.
Public Citizen Global Trade Watch, 7/20/98, firstname.lastname@example.org.
3. What made me a firm believer in Basic Income was seeing alarmed bureaucrats immediately block my attempt to get some direct per capita payment of $100,000,000 of Federal funds to St. Louis, Missouri's "targeted" 50,000 poorest people. There was no thought of concealing greed. It is regarded as normal. Around then I read a book The Tyranny of Kindness by Theresa Funiciello (New York, NY: Atlantic Monthly Press, 1993) which gave the full welfare picture in the United States. I was shocked. Even respected charities were in on the take.
4. Beyond Growth by Herman Daly (Boston, MA: Beacon Press, 1996)
5. The Art of Community by Spenser H. MacCallum (Menlo Park, CA: Institute for Humane Studies, Inc., 1970) describes the tax-free public services of the proprietary communities: retirement estates, hotels, multipurpose malls, trailer parks, etc. that provide major community services under voluntary contract. This is an unsung accomplishment of a trend in the United States.
6. Species irruption damages the environment beyond the land's carrying capacity, i.e. ability to support the species. According to theory, the recovery from irruption will find the land with a lower carrying capacity for the species than before. But the sooner the recovery the less that drop in carrying capacity will be. "Patch Disturbance and the Human Niche" by John M. Logan (http://www.dieoff. org/page78.htm) accessed in July 1998.
7. Mortgaging the Earth by Bruce Rich (Boston, MA: Beacon Press, 1994)
8. Principles and Practice of Plant Conservation by David R. Givens (Portland OR: Timber Press, 1994, reprinted 1996), p 5.
9. In "Sustainable Development: The Role of Rent", in Land and Liberty (London, UK: Henry George Foundation of Great Britain Ltd: Winter 1998), James Robertson, a Basic Income advocate, adds an "eco-bonus" to counteract the hardship of an eco-tax on the poor. I took issue with this in the article immediately following his.
10. The Growth Illusion by Richard Douthwaite (Tulsa OK: Council Oak Books, 1993)
11. Declaration of European Economists, May 1997, http://staff-www.uni-marburg.de/-rillingr/wpl/texte/eurodecl.html, accessed July 1998.
12. If governments wish transaction records for tax purposes, banks can, after settlement, receive checks to a person's account, as they do with their customers' accounts, but in a batch. These checks would then be exactly offset to zero balance by checks from his account plus or minus any settlement check that transferred collateral.
13. Money of account, in whatever form, comes into existence when buyer receives goods or services, and disappears when buyer becomes seller. E. C. Riegel shows us that this is true of all account money, and that if free of the inflating of national managed currencies, this money is the natural, universal currency good anywhere. Nobody controls or needs to control the amount of inflation-free money in circulation. Flight From Inflation: The Monetary Alternative by E. C. Riegel (Heather Foundation, P.O. Box 180, Tonopah, NV 89049, 1978)