Shann Turnbull on transforming capitalism through trusteeship governance

Republished from November 2008:

Shann Turnbull is an advocate of new forms of network governance such as ‘stakeholder mutuals

Amongst his articles and essays are:

* ‘Agendas for Reforming Corporate Governance, Capitalism and Democracy’

* ‘The Seven Deadly Sins of Capitalism’

Here, we republish his vision of how to transform the current form of capitalism.

Shann Turnbull:

The future of civilisation is being jeopardised because we are corrupting our environment. The concentration of power, which causes this corruption, is also corrupting our values and ethics. To minimise corruption of all sorts, we need to decentralise power to the greatest extent possible so as to maximise checks and balances.

The most fundamental sources of power in society arise from the ownership and control of land, enterprises and money. The current ownership system was developed to serve the needs of past rulers who sought absolute powers. As a result, there is no limit as to the extent and value of property, which any person can possess. New rules are needed to decentralise the power of owning things. Ecological rules, which follow the self-limiting and self-regulating principles, found in all living things.

The concept of land ownership evolved from usage. In earlier society, any rights to land depended upon usage. As society developed and centralised political structures evolved, personal usage by the ruling class became impractical over the territory subjected to their power. As the ruling class made the rules, rights to land without usage were developed, maintained and furthered by force and conquest. By this means the concept of ownership was established.

Because Australian Aboriginals did not have a ruling class they did not develop the need to have a word for ownership in their many different languages. No do we have a word in modern languages to describe the Aboriginal relationship to land. In my 1978 Australian Parliamentary Papers (No. 135 & 438) on Economic Development of Aboriginal Communities in the Northern Territory, I had to invent a new word. This was “ownee” which has the same relationship to owner as appointee, licensee and franchisee has respectively, to appointor, licensor and franchisor. That is, the former is subject to the power of the latter.

The Indian leader, Mahatma Gandhi, who was educated in London as lawyer, saw the need for a “non violent” ownership paradigm different from the existing one. He developed the notion of “Trusteeship” in South Africa where traditional relationships to land are similar to those of Australian Aboriginals. He introduced the concept to India where it was seen as representing the philosophy of the Upanishads who also shared the traditional paradigm. The idea of Trusteeship is that any owner of property is only holding it as trustee for society. Gandhi saw the need for people to obtain a “legitimate” return from their property but that any surplus should belong to society.

To make the idea of Trusteeship operational and consistent with ecological principles, we need to introduce the concepts of ‘stakeholders’ and ‘dynamic tenure’. Stakeholders are those people, whose lives are affected by property, be it land, enterprises or money. Dynamic tenure transfers ownership from one class of individual to another depending upon the relationship of the individual to the property. With urban land, the Stakeholders would be the occupiers and neighbours, while with corporations they would be employees, customers, and suppliers including those providing community services like health, education and social security.

With dynamic tenure, corporate stakeholders would obtain co-ownership interests only after the shareholders had obtained monopoly rights to profits for a sufficient time period to provide the incentive for them to invest. In this way shareholders would obtain the “legitimate” return described by Gandhi. It would make corporate investment consistent with the time-limited rights provided to all investors in intellectual property like patents and copyright. However, rather than lose all rights at once as for intellectual property, the rights of shareholders would gradually diminish after, say 10 years, at 5% per year, to provide stakeholders 100% ownership 20 years later without cost. All assets of the company would then be sold to a successor corporation.

Mature corporations would finance the development of new technology and market growth through transferring parts of their operations to corporate “offspring” so as to attract new investors. In this way, corporations would give birth, die and have limited size like all living things. I have described such ecological entities in my writings as Ownership Transfer Corporations (OTC’s). OTC’s would allow those people whose life was affected by corporate operations to have some say in their control. This would create feedback information and control mechanism to greatly improve self-governance and social accountability of the corporate sector.

As most stakeholders would be local residents, the introduction of such ecologically designed corporations would create a highly decentralised locally owned and controlled society. Local residents know best the type of products, services and production techniques, which could best sustain their host bioregion. This would create the basis for establishing a sustainable economic system based on highly diversified self-financing, self-governing communities.

The replacement of the current static, monopoly, perpetual shareholder system of owning corporations with a dynamic, co-ownership, time limited, stakeholder tenure could also be applied to land and buildings. Ownership of apartments would transfer to tenants as co-owners at the rate investors wrote off their value for tax purposes. Ownership of non-residential buildings would revert, after they were written off for tax purposes, to a Community Land Bank (CLB). The CLB would become the local government authority and own all land in its precinct. It would issue shares to all voting residents pro-rata to the area of land occupied by their homes, whether of not they were rented or owned.

A duplex title system would by created for homeowners. One title would be redeemable shares equal to the value of the land occupied. The second title would be a lease to the home. The negotiable lease would provide exclusive ownership rights for as long as the owners were occupiers. All tenants would acquire co-ownership rights in CLB shares and their homes, without cost as stakeholders, through dynamic tenure in much the same way as residents acquire rights in squatter settlements.

Like an OTC’s, CLB’s minimise external ownership and so vests control with resident stakeholders. All windfall gains and wipeouts in land values are averaged out over the community. Net gains in value can be used to finance community improvements to create self-financing communities. The CLB, like the OTC creates a more efficient, equitable, socially accountable, self-governing and environmental sustainable basis for structuring society.

Dynamic tenure, which is a feature of both OTC’s and CLB’s, would introduce a new way of distributing national income through property rights, rather than through the traditional ways of work and welfare. In other words, dynamic tenure creates a technique for privatising the tax and welfare system to create a new type of economic system described in my 1975 book, Democratising the Wealth of Nations.

The structure of money also needs to be based on ecological principles as described in my contributions to Building Sustainable Communities edited by Ward Morehouse. In this book, I suggested the use of energy dollars to finance power generation from sustainable sources like solar, wind and waves, etc. Selling pre-payment vouchers to consumers would finance the generators. The vouchers denominated in units of energy would become an inflation proof kilowatt-hour reserve currency.

The reserve currency would provide the backing to create hand-to-hand bearer energy notes. As the reserve currency would have limited life and operating costs would need to be covered, the hand-to-hand currency would have a negative interest rate. The theory and practice of negative interest rate money has been described by Professor Irvin Fisher in his 1933 book Stamp Scrip and more recently by Professor Dieter Suhr who describes it as “Neutral Money” in his 1989 book The Capitalistic Cost-Benefit Structure of Money.

It is the invisible structure of money, ownership, control and corporate governance, which determine the form, and content of the visible structures built by society. Considerable thought goes into designing and building the visible structures but not the invisible ones, which control them. Instead, we simply replicate the existing structures, which have evolved through a centralised political process to maintain centralised power.

There is currently a unique historical window of opportunity for countries in transition from socialism to not simply clone the existing defective system of private property rights. It was to share the concept of dynamic stakeholder tenure that I made two visits to Czechoslovakia and a visit to the Peoples Republic of China during 1991.

The political systems of the world are evolving to more democratic forms but the structure of property rights has so far remained unchanged. The existing ownership rules are inconsistent with creating an effective democracy. Too much wealth is held by too few. This is because the present rules of owning land, enterprise and money provide profits in excess of the incentive to invest and so concentrates wealth with the already rich. Such surplus incentive, or surplus profits, is created by our static perpetual rules of ownership. Dynamic tenure provides a technique to distribute surplus profits to the stakeholders and so provide community returns as envisaged by Gandhi.

Surplus profits arise because investors obtain ownership rights for a longer period of time than they require obtaining the incentive to invest. Unlimited ownership is thus inconsistent with the moral justification for a market economy, which assumes that competition will limit profit. To legitimate a market economy, we need to adopt new ownership structures, which follow ecological principles. These would be more efficient, equitable and minimise the corruption of people, their values, ethics and the environment.”

More Information on the books by the author:

* Democratising The Wealth of Nations;

* co-author of the TOES book Building Sustainable Communities: Tools and concepts for self-reliant economic change;

* A New Way to Govern: Organisations and society after Enron

Source of the above article: Published in Perspective’s, World Business Academy, San Francisco, winter, 1992 and in World Citizen News, Washington, D.C., vol. 6, no. 4, p. 5-7,May, 1992