Today we present the first of 3 parts from Co-operative Commonwealth: De-commodifying Land and Money a paper prepared by Pat Conaty for the 13th International Karl Polanyi Conference at Concordia University, Montreal on 6-8 November 2014. Pat is research associate of Co-operatives UK, a Fellow of New Economics Foundation and author with Mike Lewis of The Resilience Imperative Cooperative Transition to a Steady State Economy. We will publish Part 2 on Wednesday Dec 31st and Part 3 on Friday Jan 2nd.
Access to land and the cost of that access are essential to the provision of affordable housing. Likewise, access to money, and the cost of that access, are issues fundamental to economic health. Karl Polanyi argued the necessity to de-commodify land and money by reversing their private enclosure.1
The market and institutional failures highlighted by 2008 and the major economic depressions over the past two centuries inspired creative work to develop land reform and interest-free money systems. The 1820s, 1830s, 1870s and 1930s triggered innovation in monetary reform and land reform. Most experiments ran out of steam. Others led to movement building that forced mainstream parties to make changes in public policy. Many countries influenced by these ideas and by Keynes secured a marked increase in democratic ownership and control over the banking sector and in relation to monetary policy for resourcing large-scale public investment.
This paper explores these historical achievements for their applicability today. The innovations are rooted in nineteenth century co-operative practice. The approach and the practical work today of land and monetary reformers lies outside the canon of orthodox economic thinking. However as this paper will show, during times of crisis, practical land reform and monetary reform has been periodically given strong and transformative support by public-social partnerships. These past breakthroughs and existing good practice provide insights for shaping a Co-operative Commonwealth strategy. To put this analysis into a current context, new policy, practice and legal thinking developing in relation to the Commons as a social economic operating system is important to note as background.
The Economics of the Commons – An emerging paradigm for the 21st century
In 1968 Garett Hardin argued that it is human nature for self-seeking individuals to degrade non-private property.2 Hardin concluded that private freedom and the commons were incompatible – though tragic the commons would not survive. For decades this Tragedy of the Commons thesis has been regarded as true.
In the 1970s, Elinor Ostrom began looking for evidence to test Hardin’s argument. Ostrom’s focus was Common Pool Resources (CPRs) and specifically small natural commons over which nobody has private ownership. She acknowledged ‘open access’ CPRs that appeared to validate Hardin. But her research unearthed a large diversity of co-operatively managed resources that disproved Hardin’s categorical argument.
In Governing the Commons, Ostrom comprehensively profiled case after case of resilient commons practices on every continent from fisheries management in the Philippines to rubber tappers in the Amazon, to Swiss villagers managing their meadows, rivers and Alpine forests since the 13th century and to water stewardship operating over centuries in Spain.3
Given this evidence, might the commons and a citizen led provisioning economy become the norm in our lifetime in every sector from waste treatment to welfare services and from education to local enterprise and fundamentally for redesigning money and banking? Former Ralph Nader researcher, David Bollier had such an epiphany in 2003 and co-founded On the Commons to study, promote and track commons innovation.
A decade later Bollier’s pioneering work has marshalled powerfully the evidence of an emerging new economy of the commons. He demonstrates that this expanding movement is operating today in every trade and diversifying from Open source software kicked off by Linux in 1991 and now ubiquitous to the seed sharing commons in Andhra Pradesh, to the Peruvian Potato Park protecting 500 species of spuds and to Couch Surfing with five million members providing free accommodation to travellers in 97,000 cities and towns globally.4
As Ostrom and Bollier demonstrate, the key difference between an ungoverned CPR and a resilient commons is the stewardship of a community co-managing the resource with ethical rules to weed out ‘free riders, shirkers and vandals.’ Sounds intriguing but what is the impediment? Two sectors appear ample company and three a crowd.
Unfortunately we are ruled by a duopoly that Bollier traces to the enclosures that hived off the economy to the market and governance to the nation state.5 While over 2 billion people globally rely on commons systems economically for their livelihoods, these vernacular practices are under threat by land grabs by global investors.
Redeveloping legislation to validate commons as the third operating system with equitable weight to the market is crucial. The commons law for the sea, rivers, forests and grazing lands has its origins in Roman legislation passed by the emperor Justinian in 535 AD.6 Commons rights to subsistence (for firewood, turf, and pasture) were granted under The Charter of the Forest in 1217 – two years after Magna Carta. Bollier describes a growing body of law to protect and expand open source software and other commons through a range of creative commons licenses and use rights.
Like the commons Ostrom discovered for managing natural systems, there are a legacy of co-operative commons still operating for money and land. These provide guidance for ethical rules and beneficial constraints for bringing real estate and banking into a Co-operative Commons.
Practical land reform: co-operative and municipal support past and present
As Polanyi highlights in the Great Transformation, land enclosure evolved over centuries and in England was accelerated by thousands of Parliamentary acts of land enclosure in the eighteenth and nineteenth century. He highlights that resistance to a self-regulating market economy required the liquidation of the beneficial constraints exercised by usury laws, the rights of commoners, the guilds and other kinship and civil society institutions.7 In England the struggle to preserve these constraints by the working class was fierce between the 1770s and 1850.
The resistance to land enclosure in Newcastle Upon Tyne led to the practical proposal of Thomas Spence for Parish Land Trusts. Proposed in 1775 these were to be set up to hold rural and urban land in trust on behalf of local people and to capture economic rent for the benefit of the citizens.8 The Spence Plan influenced wider thinking. Robert Owen’s plan for Villages of Unity and Co-operation from 1817 sparked the development of the co-operative movement.9 David Ricardo invested in Owen’s New Lanark scheme and argued for taxation of unearned economic rents in his Principles of Political Economy and Taxation in 1817.
Many Owenite socialist communities were founded but none survived.10 Owen’s ideas inspired Feargus O’Connor to set up the Chartist Co-operative Land Company in 1846 that secured significant capital from trades union members to developed a number of co-operative villages.11 A few villages were built before the company.was forced to close by government in 1851.
Land reform interest grew and broadened to public land solutions. John Stuart Mill strongly supported the co-operative movement’s efforts to bring land into commonwealth and argued for the municipalisation and nationalisation of land progressively. Mill proposed an affordability remedy: convert land into commonwealth with a long lease to (a) control rising costs and (b) capture socially both the ‘unearned increment’ and economic rent for the welfare of all.12
The popularity of Henry George’s, Progress and Poverty, and his argument for a land taxation builds on the solid intellectual arguments of Ricardo and Mill for ending unearned rental income windfalls and utilising land taxation as a strategic land transfer mechanism. Municipal land reformers like Joseph Chamberlain implemented slum clearances in Birmingham and other cities followed this lead from 1873 with efforts to pursue Mill’s policy arguments. Publicly owned infrastructure including municipally owned gas, water and sewerage arose from these reforms where the development of land as a public asset led the way.13
Other efforts before World War 1 showed how a comprehensive land reform system could work for an entire city. Linking up the vision of Spence and Owen and the municipal land reform progress to tackle slum conditions and develop public utilities, Ebenezer Howard, the founder of Letchworth Garden City in 1903, showed how to put Mill’s insights into practice through a novel ‘co-operative land society’. This Garden City mission was strategically ambitious as the agreed 1919 definition highlights:14
“A Garden City is a town designed for healthy living and industry of a size that makes possible a full measure of social life but not larger, surrounded by a rural belt; the whole of the land being in public ownership, or held in trust for the community.”
By holding all the land (5,500 acres) in co-operative ownership, Letchworth, the first Garden City, was able to capture lease income from the land, from commercial buildings and to reinvest that money continuously in community improvements. By 1945 Letchworth was generating and capturing economic value through mutually owned infrastructure, including: water, sewerage, gas, electricity, roads, transport services, places of employment, farmland, schools, hospitals and recreational amenities. These assets and economic rent had become co-operative commonwealth harnessed for the benefit of 33,000 citizens. No other urban land reform initiative has matched the self-financing economic success of Letchworth. Though it has lost land and the UK nationalisation of energy after 1945 and through leasehold reform legislation since 1967, Letchworth Garden City Heritage Foundation still holds £127 million in assets generating reinvestment income of over £7 million annually.
Typically, land values account for 25-75% of house prices. So if you can remove land from the market, you can both drastically reduce housing prices and keep homes permanently affordable. That is what community land trusts (CLTs) can do. The diagram below shows how Community Land Trusts can secure affordable housing by removing land from the market into democratic ownership and control through the trust.
In 1970 Bob Swann and Slater King (the cousin of Dr. Martin Luther King, Jr.) set up the one of the first US CLTs, New Communities Inc, on 5000 acres of land at Leesburg, Georgia, near Albany.15
The CLT in Burlington, Vermont led by former Mayor Bernie Sanders has been a pioneer and the Champlain Housing Trust Vermont in the city highlights well the benefits. It was founded as Burlington Community Land Trust in 1984 after cutbacks in federal programs to fund affordable housing. Instead of the conventional strategy of housing subsidy, which would try (and fail) to keep up with rising land values, the CLT would take land out of the market.16 Crucial was a social-public partnership between community groups and the city council. The city supplied a core revenue grant to set up the CLT and an additional $1 million line of credit from the city employees’ pension fund.
The CLT has expanded steadily and now manages over 2,000 affordable units of housing including part-equity homeownership and apartments to rent. The CLT also supports on its land an additional 81 limited-equity homes provided by five housing co-operatives.17 In addition to housing, the CLT has developed a day centre for the elderly, a nursery facility, managed office space for social enterprises and non-profits, a shop-front for the region’s community development credit union, and a multi-unit housing and workspace complex for local businesses.
Since 2000, municipally-supported partnerships are responsible for the most innovative CLT work in the United States and a City-CLT partnership model has emerged. A growing number of cities support existing CLTs, are starting new ones and actively fostering their development: including Chicago, Albuquerque, Irvine (California), Portland (Oregon), and Syracuse (New York). The Irvine master plan is building 5000 “permanently affordable” homes on a redundant military base (4700 acres).
A number of factors have prompted this new-found support. The leading one is the proven ability of CLTs to use discounted land and other government subsidies to maintain the affordability of housing despite rising real estate markets.18 For over 26 years neither land nor homes have been lost from the CLT portfolio in Burlington. Additionally, CLTs have a track record for avoiding problems with debt and mortgage foreclosures when markets contract. Thus CLTs provide both land and housing stewardship and especially when working hand in glove with city staff. City-CLT partnerships are winning wider recognition as a robust way to prevent the loss of affordable housing (and other community assets) secured by municipal investment. There are now over 250 CLTs in the USA and about 50 in the UK. The model is being developed in Canada and in Belgium and gaining interest in France and Portugal.
1 Karl Polanyi (1944) The Great Transformation, Beacon Press, pages 251-252.
2 Garret Hardin (1968) ‘The Tragedy of the Commons’, Science, Vol. 162 pages 1243-1248.
3 Elinor Ostrom (1990) Governing the Commons: The Evolution of Institutions for Collective Action, Cambridge University Press.
4 David Bollier (2014) Think Like a Commoner: A Short Introduction to the Life of the Commons, New Society Publishers.
5 Bollier (2014) page page 43.
6 Bollier (2014) pages 87-89.
7 Polanyi (1944) pages 68-73.
8 Noel Thompson (1998) The Real Rights of Man: Political Economies for the Working Class 1775-1850, Pluto Press, pages 4-11.
9 Robert Owen (1991) A New View of Society and Other Writings, Penguin Classics. See section ‘Report to the County of Lanark’ in 1820, pages 250-308.
10 Julia Parker (1998) Citizenship, Work and Welfare – Searching for the Good Society, MacMillan, pages 74-76.
11 Johnston Birchall (1994) The Co-op: The People’s Business, Manchester University Press.
12 John Stuart Mill (1848) Principles of Political Economy, Augustus M. Kelley Publishers, 1909 edition, pages 817-822 and Samuel Hollander (1985) The Economics of John Stuart Mill, Volume 2, Basil Blackwell, pages 833-839.,
13 Tristram Hunt (2004) The Building of Jerusalem – the Rise and Fall of the Victorian City, Wiedenfeld and Nicholson pages 232-265.
14 Pat Conaty and Martin Large (2013) editors, Commons Sense – Co-operative place making and the capturing of land value for 21st century Garden Cities, Co-operatives UK page 10.
15 In his last book, Where do we go from Here: Chaos or Community (1967) Martin Luther King proposed a set of co-operative solutions based around concepts of social economic trusteeship of land and other assets. Karl Polanyi was another proponent of strategies for taking land and money out of the market. He welcomed public ownership of land, toughly regulated banking and other Keynesian cheap money reforms.
16 Mike Lewis and Pat Conaty (2012) The Resilience Imperative – Co-operative Transitions to a Steady-State Economy, New Society Publishers, pages 87-95.
17 The CLT provides full technical assistance service to support the development of new housing co-ops.
18 Lewis and Conaty (2012).