Peter Barnes on Capitalism 3.0

In the fourfold vision of societal reform, which I have alluded to elsewhere, towards a more commons-based civilisation, it will be important to reform the market. One of the more evolved positions on this topic is that of the school of natural capitalism. Here’s the take of Peter Barnes largely reprinted from the On the Commons blog.

1. Peter Barnes on Natural Capitalism

“Since the 18th century, and especially since the collapse of communism, we’ve been living in a world increasingly driven by the `need’ to maximize return on capital. The rationale for this obsession is that, if risks taken by capital owners aren’t rewarded first and foremost, capital will sit idle and wealth won’t be created. As a businessman and investor, I’ve benefited personally from the supremacy of capital and am not keen to question it. But as a citizen, I have to note that too much kowtowing to capital is both dangerous and unnecessary. It’s unnecessary because, in this day and age, we have a capital surplus that’s mostly wasted on speculation. And it’s dangerous because it leads, willy nilly, to the destruction of nature, community and other time-honed sources of well-being. That’s the `tragedy of the market,’ and unless we fix it, we’ll see ever-greater human misery and ecological ruin, even while GDP increases. How do you fix a system as vast and complex as global capitalism? And how do you fix it gracefully, with minimum pain, disruption and coercion? The answer is: you do what Bill Gates does. You upgrade the operating system.

If you think of the economy as a huge spreadsheet, with each cell representing a producer, consumer or property owner, you can see that the behavior of the whole is driven by the algorithms, or mathematical instructions, in the cells.

Our current operating system is dominated by three algorithms and one starting condition. The algorithms are: (1) maximize return to capital; (2) the price of nature equals zero; and (3) property income is distributed on a per share basis.

The starting condition is: the top 5 percent of the people own more property shares than the remaining 95 percent.

These algorithms and the starting condition stimulate the production of goods and services, but they also have non-trivial side effects: they devour ecosystems, widen inequality and distract us from truer paths to happiness. This is no accident; any economic system whose calculus is to maximize return to a small minority, while paying nothing for nature, is bound to create these effects.

If our current operating system is the cause of our ills, we can hardly expect it to fix them. Tinkering at the edges — a new regulation here, a new law there — won’t make much difference. What will make a great difference is new algorithms in the cells. This isn’t as big a deal as it might seem. It doesn’t require abolishing the present algorithms, expropriating any property, raising taxes or expanding government. Nor does it mean replacing the existing operating system in one fell swoop.

Rather, it means gradually elevating some currently under-used algorithms to greater strength so they can counter-balance the currently dominant ones. If this is properly done, our economic machine on its own — without persistent government intervention — will, over time, respect nature, reduce inequality and increase our personal well-being.

What algorithms to elevate? I’d nominate four: (1) preserve common assets, such as gifts of nature, for future generations; (2) live off income from shared gifts, not principal; (3) distribute income from shared gifts on a one person, one share basis; and (4) the more the merrier.

Each of these algorithms already exists, and institutions that embody them are popular and work well. Land trusts like the Nature Conservancy preserve millions of acres. Thousands of foundations and endowments live off income without dipping intyo principal. The Alaska Permanent Fund — a giant mutual fund set up with revenue from North Slope oil — pays all Alaskans equal yearly dividends, simply on the basis of residence. The Internet is a classic non-depletable commons that grows more valuable as more people use it.

The challenge as I see it is first to imagine, and then to build, new institutions to manage currently unprotected pieces of our shared inheritance. Unlike the joint stock corporation, these new economic actors wouldn’t strive to maximize profit; instead, they’d follow one or more of the algorithms noted above. Nor would they be accountable to profit-seeking shareholders; they’d owe legal loyalty to future generations, living citizens equally, and, when appropriate, the larger biotic community. Over time, they’d constitute a `commons sector’ that would both contain and enhance the market sector.

One immediate consequence of this upgrade would be a hike in the price of nature; guardians of over-burdened ecosystems would no longer allow free and unlimited private use. Another consequence would be a flow of property income not just to private shareholders and fortunate Alaskans, but to all Americans as a matter of right. I call this upgraded operating system Capitalism 3.0 and view it as a third stage in the evolution of capitalism. To see why, you’ll have to read my forthcoming book, or perhaps a later blog.”

2. Peter Barnes on the Commons

This is an excerpt from a lecture at the Schumacher Society:
“First of all, the commons consists of stuff we share. That is to say, whether it is a street or a river or the air or the vast store of human knowledge–none of these belongs to you or me or private corporations. They are something we share in one way or another.

Second, the commons consists of stuff we inherit. It is not made up of anything that you or I or some corporation makes. One can present a very good case that if you make or invent something, it should be your private property, at least for a while. This is an entirely appropriate way of rewarding people and businesses for value they create and risks they take. But air and water and ecosystems and DNA and language and legal as well as political institutions are not made by any individual or corporation. They are gifts we inherit, either from nature or from the collective efforts of millions of humans.

Third, the commons consists of stuff we must pass on to future generations. Just as we receive the commons as a gift, so too we have a moral obligation to pass this gift on to our children in at least as good condition as we received it. If we can add to it, improve it, so much the better. At a minimum we must not degrade it, and we certainly have no right to destroy it.

Fourth, the kinds of things that tend to be commons are not small; they tend to be large, and they tend to be spaces or systems–natural systems or social systems. Within these spaces and systems there can be private pieces: for example, many pieces of the Internet or of a watershed may be privately owned. But the Internet and the watershed as whole systems are commons, and we share them. The systems, if not all the pieces, are parts of the commons.

And fifth, let me dispel two myths that have obstructed clear thinking about the commons for many years. One is the myth that all commons are inherently self-destructive. This myth is largely the result of a 1968 essay called “The Tragedy of the Commons” by the late biologist Garrett Hardin. Hardin assumed that there is basically only one kind of commons: the unfenced pasture or waste dump with no management system, areas to which individuals can add animals and wastes freely and at will with no limitation. As a result destruction can result. What Hardin overlooked is that there are many kinds of commons and many ways to manage them. For example, you can put a fence around a pasture or you can put a fence around a waste dump and charge a dumping fee; you can have fishing and hunting limits and sell licenses. There is no tragedy if a commons is treated properly.

The other myth is that a commons must always be free and open to anyone who wants to use it. In an uncrowded world, this would be the ideal way to run a commons, but in a crowded world, such as the one we now inhabit, we must not allow unlimited dumping into the air, the water, and the soil. We must put limits on the uses of many of our commons: on the noises we allow into the shared spaces around us, on hunting and fishing, cutting of trees, posting of billboards. We can charge tolls for parking on city streets, for using congested highways, and for driving into the center of cities such as London. All these are legitimate management tools to protect and preserve different kinds of commons.

There are numerous reasons why the commons is so important. We all know why the market is important: it produces and distributes the vast array of goods and services that characterize our high-consumption society. What the commons does for all of us is less obvious–in part, I should note, because the commons never advertises!

1. For most of human existence the commons supplied everyone’s food, water, fuel, and medicines. People hunted, fished, gathered wild fruits and herbs, collected firewood and building materials, grazed their animals in common pastures, and farmed on common lands. In other words, the commons was the source of basic sustenance. This is still true today in many parts of the world, and even in the city where I live, San Francisco, there are people who fish in the Bay, not for sport but for food.

2. The commons is the source of all natural resources and nature’s many replenishing services. Water, air, DNA, seeds, topsoil, fire, electricity, minerals, wild animals, domesticable animals, edible plants, healing plants, solar energy, wind energy, water power, forests, rivers, ultraviolet protection, climate regulation, biodiversity, and much more. These are all parts of the commons.

3. The commons is our ultimate waste sink. It recycles water, oxygen, carbon, and everything else we excrete, exhale, and throw away. It is the place where we store, or try to store, the toxic residues of our modern industrial system.

4. The commons holds and disseminates humanity’s vast accumulation of science, art, customs, and laws. It is the seedbed of all human creativity. As Isaac Newton said, “If I have seen further it is by standing on the shoulders of giants.” Without the open sharing of ideas, there would be no religion, science, mathematics, philosophy, children’s games, musical instruments, dances, jazz, hip-hop, fashion, sports, democracy, universities, libraries–the list goes on and on.

5. The commons is essential to human communication. We talk to one another with shared symbols and languages that are the living products of many generations. Most of the spaces we communicate through–the air that carries sound, the visual environment we use for traffic signs and billboards, the vast global web of wires and switches we call the Internet, the electromagnetic waves we use for radio, TV, and cell phones–are parts of the commons.

6. We use the commons whenever we travel from place to place, whether by land, water, or air. If we could not use the commons in this way, we would be prisoners in our private homes.

7. We rely on the commons for our sense of community. The commons is the village tree, the public square, Main Street, the neighborhood, and the playground. In addition to families, it’s the glue that holds us together.

3. More Information

Currently Peter Barnes is writing a book entitled Capitalism 3.0: Enriching Ourselves By Enhancing Our Commons, to be published in 2006 by Berrett-Koehler. He lives in Point Reyes Station, California, where he is a senior fellow at the Tomales Bay Institute.

Barnes has a proposal to make the ‘sky’Â a public property, in the format of a trust, so that polluters can be charged.

1 Comment Peter Barnes on Capitalism 3.0

  1. AvatarErnst von Weizsaecker

    Message to Peter Barnes:

    it is with great excitement and admiration that I read Capitalism 3.0.Thanks for all those timely insights. You don’t seem to have seen my own book (co-edited with Oran Young and Matthias Finger), entitled “Limits to Privatization. How to Avoid Too Much of a Good Thing”, Earthscan, London, 2005. If you want a copy give me a signal to my Santa Barbara mail: [email protected].

    Ernst von Weizsaecker
    Dean, Donald Bren School of Environmental Science and Management, UCSB, Santa Barbara 93106 CA

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