So too in a market economy. When two property rights
come to the same intersection, one has to trump the
other. Either capital can fire labor, or labor can fire
capital. Either my right to pollute trumps your right not
to be polluted, or vice versa. As they say in Hollywood,
someone must get top billing.
But who? Marjorie Kelly has written a brilliant book
called The Divine Right of Capital. By divine she
doesn’t mean God-given. She means that, under our
current operating system, the rights of capital trump
everything else. The rights of workers, communities,
nature, and future generations — all play second
fiddle to capital’s prerogative to maximize
short-term gain. This hierarchy isn’t the doing of
God or some inexorable law of nature. Rather, it’s
a result of political choice.
The question of who gets the top right in any society
is always an interesting one. Invariably, the top dogs in
any era assert that there’s no alternative. Kings
said it three hundred years ago; capital owners say it
today. They hire priests and economists to add moral or
pseudoscientific credence to their claims. The truth,
though, is that societies choose their top right holders,
and we can change our minds if we wish.
Kelly locates many places where capital’s
supremacy is written into our codes. Corporate directors,
for example, are bound by law to put shareholders’
financial gain first. If a raider offers a higher price
for a publicly traded company than its current market
value, directors have little choice but to sell,
regardless of the consequences for workers, communities,
or nature. Similarly, it’s the fiduciary duty of
mutual funds, pension funds, and other institutional
investors to seek the highest returns for their
shareholders or beneficiaries. This duty is embodied,
among other places, in the Employee Retirement Income
Security Act of 1974. Although the language of the act
sounds innocent enough — a pension fund manager,
like any trustee, “shall discharge his duties . . .
solely in the interest of the participants and
beneficiaries” — it results, ironically, in
the financing of many workers’ retirements by
investing in companies that shift other workers’
jobs overseas. Throw in the WTO and NAFTA, and the rights
of capital stand comfortably astride everyone
else’s. ...
Trusts are centuries-old institutions devised to hold
and manage property for beneficiaries. The essence of a
trust is a fiduciary relationship. Neither trusts nor
their trustees may ever act in their own self-interest;
they’re legally obligated to act solely on behalf
of beneficiaries.
Trusts are bound by numerous rules, including the
following:
* Managers must act with undivided loyalty to
beneficiaries.
* Unless authorized to act otherwise, managers must
preserve the corpus of the trust. It’s okay to
spend income, but not to diminish principal.
* Managers must ensure transparency by making timely
financial information available to beneficiaries.
These rules are enforceable. The basic enforcement
mechanism is that an aggrieved beneficiary or a state
attorney general can bring suit against a trustee. When
that happens, the trustee must prove she acted prudently;
if there’s any doubt, the trustee is fined or
fired. As Supreme Court Justice Benjamin Cardozo once put
it: “A trustee is held to something stricter than
the morals of the marketplace. Not honesty alone, but the
punctilio of an honor the most sensitive, is the standard
of behavior.”
A trustee isn’t the same thing as a steward.
Stewards care for an asset, but their obligations are
voluntary and vague. By contrast, trustees’
obligations are mandatory and quite specific. Trusteeship
is thus a more formal and rigorous responsibility than
stewardship.
Trusts can be in charge of financial as well as
physical assets. In this chapter, my concern is natural
assets — gifts we inherit from creation. One of my
premises is that each generation has a contract to pass
on such gifts, undiminished, to those not yet born. If we
are to keep this contract, someone must act as trustee of
nature’s gifts, or at least of the most endangered
of them. The question is, who?
The candidates are government, corporations, and
trusts. I argued earlier that neither corporations nor
government can fulfill this function; they’re both
too bound to short-term private interests. That leaves
trusts. ...
Think, for example, about carbon. At present, our
economic engine is emitting far too much carbon dioxide
into the atmosphere; this is destabilizing the climate.
We desperately need a valve that can crank the carbon
flow down. Let’s assume we can design and install
such a valve. (I explained how this can be done in my
previous book, Who Owns the Sky? It involves selling a
limited quantity of “upstream” permits to
companies that bring fossil fuels into the economy.) The
question then is, who should control the valve?
Unfettered markets can’t be given that
responsibility; as we’ve seen, they have no ability
to limit polluting. So we’re left with two options:
government or trusts. Government is a political creature;
its time horizon is short, and future generations have no
clout in it. Common property trusts, by contrast, are
fiduciary institutions. They have long time horizons and
a legal responsibility to future generations. Given the
choice, I’d designate a common property trust to be
keeper of the carbon valve, based on peer-reviewed advice
from scientists. Its trustees could make hard decisions
without committing political suicide. They might be
appointed by the president, like governors of the Fed,
but they wouldn’t be obedient to him the way
cabinet members are. Once appointed, they’d be
legally accountable to future generations.
Now imagine a goodly number of valves at the local,
regional, and national levels, not just for carbon (which
requires only one national valve) but for a variety of
pollutants. Imagine also that the valve keepers are
trusts accountable to future generations. They’d
have the power to reduce some of the negative
externalities — the illth — that corporations
shift to the commons. They’d also have the power to
auction limited pollution rights to the highest bidders,
and to divide the resulting income among commons owners.
That’s something neither the Fed nor the EPA can
do.
These trusts would fundamentally change our economic
operating system. What are now unpriced externalities
would become property rights under accountable
management. If a corporation wanted to pollute, it
couldn’t just do so; it would have to buy the
rights from a commons trust. The price of pollution would
go up; corporate illth creation would go down. Ecosystems
would be protected for future generations. More income
would flow to ordinary citizens. Nonhuman species would
flourish; human inequality would diminish. And government
wouldn’t be enlarged — our economic engine
would do these things on its own.
One final point about valves. It’s not too
critical where we set them initially. It’s far more
important to install them in the right places, and to put
the right people in charge. Then they can adjust the
settings. ...
Accountability and Democracy
The question I’m most often asked about commons
trusteeship is: How can we be sure trustees won’t
succumb to corporate influence, just as politicians have?
My answer is that, while there can be no guarantees, the
odds of escaping corporate capture are much better with
trustees than with elected officials.
The key reason is accountability. In the world of
corporations, accountability is quite clear: directors
must be loyal to shareholders. In the world of
government, accountability is less clear. Elected
officials must uphold the Constitution, but that’s
about it. If there are conflicts between workers and
employers, polluters and pollutees, voters and donors, or
future generations and current ones, whose side should
politicians be on? There are no requirements or even
guidelines. Elected officials, as sovereign political
actors, are free to do as they please.
The fact that politicians operate this way is no
accident; it’s what the Founders had in mind. The
job of democratic government isn’t to take,
consistently, one side or another. Rather, it’s to
resolve disputes among factions peaceably, without
trampling minorities. James Madison made this plain in
the Federalist Papers. Voters can “fire”
elected officials at regular intervals if a majority so
chooses, but they can’t expect loyalty to any
particular constituency between elections. It’s
this absence of built-in loyalty that opens the door to
corporate influence, a force the Founders didn’t
— and couldn’t — foresee.
The decision-making of judges, it should be noted,
isn’t as untethered as that of legislators and
executive officeholders. Their duty is to uphold not just
the skeletal bones of the Constitution but the full flesh
and blood of the law, with its thousands of pages and
interpretations. They may, on occasion, interpret anew,
but unless they’re among a Supreme Court majority,
all such reinterpretations are subject to review.
Trustees are in the same boat as judges, rather than
the wide-open waters in which politicians swim. Their
hands are constrained both by the law and by their
fiduciary duty to beneficiaries. This isn’t to say
they have no room to wiggle: equally loyal trustees may
differ over what’s in the best interest of
beneficiaries. Still, they are subject to court review,
and they can’t betray their beneficiaries too
brazenly.
The tricky thing here is that the beneficiaries to
whom we want commons trustees to be loyal — future
generations, nonhumans, and ecosystems — are
voiceless and powerless. We must therefore take extra
care when we set up commons trusts. For example, we
should install strict conflict-of-interest rules for
trustees and managers. We should require that all
relevant information about the trusts — including
audited financial reports — are freely available on
the Internet. We should ensure that, if a commons trust
fails, its assets are transferred to a similar trust
rather than privatized. We should build in internal
watchdogs and ombudsmen. And we should authorize external
advocates, such as nonprofit organizations, to represent
nonliving beneficiaries who, by their very nature,
can’t take trustees to court. Most states assign
this function to their attorneys general, but this is
insufficient given the political pressures attorneys
general are subject to.
With regard to the manner of selecting trustees,
there’s no single method. Trustees might be
elected, appointed by outsiders, or be self-perpetuating
like the boards of many nonprofits. This is as it should
be; we don’t live in a one-size-fits-all world. The
important thing is that, once selected, trustees should
have secure tenure, and — like judges —
lengthy terms. Indeed, trustees should be like judges in
other ways: professional, impeccably honest,
well-compensated, and honored. Being a commons trustee
should be a distinguished and attractive calling.
It might be argued that, by shielding trustees from
direct political influence, we’d make them —
and commons trusts generally — undemocratic. The
same could be said, however, for our courts. The fact is,
there are certain decisions, both economic and judicial,
that should be shielded from politics and markets.
Moreover, neither government nor corporations represent
the needs of future generations, ecosystems, and nonhuman
species. Commons trusts can do this. In that sense,
they’d expand rather than constrict the boundaries
of democracy. ...
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