Peter Montague review of Capitalism 3.0

Rachel’s Democracy & Health News, December 21, 2006

BOOKS FULL of new ideas are rare, but here’s one worth chewing on: Peter Barnes’ Capitalism 3.0. The book is original, readable and provocative.  It will definitely hold your attention.


Peter Montague

But let’s get one thing straight.  Despite the title of his book, Peter Barnes is no radical.  He is an entrepreneur and investor who co-founded Working Assets, the telephone company.  He says, “As a businessman and investor, I’ve benefited personally from the primacy of capital and am not keen to end it.”

On the other hand, he recognizes that, “Capitalism as we know it is devouring creation.  It’s living off nature’s capital and calling it growth.”  So “to save capitalism from itself,” the book offers a whole slew of new ideas, the goal of which is to give capitalism a “software upgrade” to fix what Barnes sees as its major flaws: its disregard for nature, future generations and the poor.

Barnes’s analysis of the problem is succinct.  The history of capitalism reveals two threads: the decline of the commons and the rise of the corporation.  These two threads are linked because corporations make money by taking valuable things from or dumping wastes into the commons without compensating its owners (all of us).

By “the commons” Barnes means “all the things we inherit or create together,” which none of us owns individually.  The commons is like a river with three forks:

• Nature, which includes air, water, DNA, photosynthesis, seeds, topsoil, airwaves, minerals, animals, plants, antibiotics, oceans, fisheries, aquifers, quiet, wetlands, forests, rivers, lakes, solar energy, wind energy…and so on;

• Community: streets, playgrounds, the calendar, holidays, universities, libraries, museums, social insurance [e.g., social security], law, money, accounting standards, capital markets, political institutions, farmers’ markets, flea markets, craigslist…etc.;

• Culture: language, philosophy, religion, physics, chemistry, musical instruments, classical music, jazz, ballet, hip-hop, astronomy, electronics, the Internet, broadcast spectrum, medicine, biology, mathematics, open-source software…and so forth.

All assets in the commons have two characteristics: they’re gifts and they’re shared.  Furthermore, they’re indispensable; they provide sustenance for everyone.  If we fail to protect them, we’re sunk.

Our current economic system (which Barnes calls Capitalism 2.0 or “surplus capitalism”), corporations are destroying the commons in two ways:

• Corporations are enclosing (privatizing) the commons — bottling water and selling it, using our airwaves without compensating us, taking common-heritage stories, copyrighting them and selling them back to us;

• Corporations are externalizing their costs into the commons — dumping toxic wastes into air and water, for example.

Because of this one-two punch, and because corporations grow without limit, capitalism creates three serious problems:

• Nature is being destroyed.

• Enormous inequalities have arisen — the rich keep getting richer, leaving everyone else behind.  Today the wealthiest 5% of us owns more than the other 95% of us.  This makes a mockery of democracy, and of the idea that we all start life with similar opportunities;

• Happiness is in short supply.  Despite the enormous wealth we produce, people say they are no happier now than they were 40 years ago.  Surplus capitalism has speeded up life and made many of us insecure about our future.  So what’s the point of all this economic activity if it isn’t improving people’s quality of life?  “We need rest, relaxation, and time for companionship and creativity. Surplus capitalism can’t give us enough of those things,” Barnes points out.

to the meat.  Barnes says these problems can’t be fixed by government regulation, taxation or public ownership.  Government is too easily corrupted by money and power.  Barnes sees no way around this harsh reality.

• Regulatory agencies are routinely captured by the companies they are supposed to regulate.

• Green taxes will never be set high enough to make a difference, and they disproportionately burden the poor.

• Public ownership is no guarantee that an asset will be managed for the benefit of future generations, non-human species, or ordinary people — just look at the way grazing rights and mineral rights on public lands have been mismanaged for more than 100 years.  The state does not promote the common good — it rewards the wealthy and the powerful.

“We face a disheartening quandary here.  Profit-maximizing corporations dominate our economy.  Their programming makes them enclose and diminish common wealth.  The only obvious counterweight is government, yet government is dominated by these same corporations.”

The old counterweight to corporate power — organized labor — has been “decimated” and the other counterweight — the mass media — have been turned into corporate mouthpieces.  Campaign finance reform will not work because, “Occasionally a breakthrough [has been] made in campaign financing — for example, corporations are now barred from giving so-called soft money to political parties — but corporate money soon finds other channels to flow through.  The return on such investments is to simply too high to stop them.”

Barnes goes on to explain why corporations can never be made “socially responsible,” can’t be made less destructive by “free market environmentalism,” and won’t be reformed by libertarian privatization.

This is a bleak picture, indeed, but one that longtime Rachel’s readers will probably greet with a nod of the head.

solution?  A  30-to-50-year strategy.

“Throughout American history, anti-corporate forces have come to power once or twice per century…It may take a calamity of some sort — another war, a depression, or an ecological disaster — to trigger the next anti-corporate ascendancy, but sooner or later it will come.  Our job is to be ready when it comes.”

What constitutes readiness?  Three things, Barnes says.

First, we must have a proper view of government’s role.  That role isn’t to run the economy, or even to manage the commons directly; it’s to assign common property rights to trustworthy guardians who will.

Second, we must have a plan to fix our economic operating system, not just to put patches on symptoms.

Third, we must recognize that the duration of any anti-corporate ascendancy will be brief, and that we must use that small window to build institutions that outlast it.

Barnes’s basic idea is “to fix capitalism’s operating system by adding a commons sector to balance the corporate sector.”  The corporate sector can’t be fixed or controlled by government, but perhaps it can be counter-balanced by creating a large and robust “commons sector” as part of the next phase of capitalism, which Barnes calls Capitalism 3.0.

Barnes points out that, when we try to put a monetary value on the commons, it far exceeds the value of private wealth.  The commons is an enormous asset that we presently allow corporations to use for free. Barnes believes that, if we created shared property rights in the commons, and then charged corporations for using them, we could protect the commons for future generations and create a new income stream for all living citizens.

We already have examples of property rights in common assets; the Alaska Permanent Fund is Barnes’ favorite.  As oil is extracted from the ground in Alaska, royalties go into the Fund and are invested in stocks and bonds.  Each year, every resident of Alaska, including children, receives a dividend from the Fund of about $1,000.  To someone who makes $50,000 per year, that may mean little; but to someone who earns $10,000 per year, it can make a real difference.

By establishing common property rights, Barnes would create a “commons sector” within our market economy.  He envisions it growing and providing a counter-force to the corporate sector.  This large commons sector is what would distinguish Capitalism 3.0 from our present economy.

This commons sector would be managed according a set of principles, which would vary somewhat depending on whether the asset was limited (nature) or inexhaustible (ideas and cultural creations).  Here is a short version of the management principles:

• Leave “enough and as good” in common — a phrase first used by John Locke, who argued that it’s OK to privatize some parts of the commons so long as “enough and as good” is retained in common ownership.  “Enough” of an ecosystem would mean enough to allow it to regenerate itself and remain healthy.

• Put future generations first.  Trustees of common property would be accountable to future generations (and could be sued by the present generation if they were obviously failing in this duty).

• Pay dividends.  Whenever possible, common property owners should receive some income from their share of ownership.  People would notice and care about the commons if they received income from it.  But common property rights could not be traded or sold or passed to offspring.  They are a birthright that stays with an individual for life and expires at death.

 to say that this is a book rich with interesting new ideas — or old ideas offered in a new context and a new light.  As Bill McKibben says, “It’s an indispensable book on a critical topic.  You may not agree with everything Peter Barnes proposes, but we all can benefit by engaging in the debate that this book so skillfully draws us into.”

In closing, I want to contribute to the debate this book will provoke.  Here are two questions the book raises for me:

• Given the influence of modern corporations over all our institutions — and given the single purpose that makes them so “efficient” and, at the same time, so destructive of nature and of democracy — how can we hope to insulate trustees of the commons from corporate influence?

• Given that the human footprint on the Earth is relentlessly expanding, in effect crowding out the other creatures whose existence is essential for the proper functioning of the biosphere, how can a system that requires perpetual corporate growth be sustainable?

Perhaps my most important point is that some of the ideas in this book might well be applied to a steady-state economic system.  In this sense, Peter Barnes’s ideas might well outlast Capitalism 2.0 and even 3.0, as the requirements of the biosphere begin to discipline our thinking.

In sum, this is a book to take with you on the long haul ahead.