Co-owned wealth is wealth we coinherit or cocreate, wealth of the whole system and/or its subsystems, wealth not created by individuals or businesses. Much of it is truly priceless and should remain that way. However, users of some of it should pay rent, with the income pooled to pay dividends to owners. The question I address here is: Is there enough co-owned wealth that we can plausibly organize this way to pay meaningful dividends to everyone?
To answer this question, we must first establish criteria for choosing assets to rent. The criteria I use are the following:
• The income generated from renting the asset (as opposed to selling it) should be great enough to justify doing so.
• Renting the asset should create benefits beyond dividends. Such ancillary benefits could arise from the internalization of currently externalized costs or from the redirection of extracted rent. I also make two assumptions:
• Renting is done asset by asset, as political opportunities arise.
• One hundred percent of the rent is distributed in equal dividends to all legal US residents who have a Social Security number.
I now address the question first at the economy-wide level and then by looking at specific assets.
Taken as a whole, rented co-owned wealth would constitute a new sector of our economy. How big would this sector need to be to sustain a large middle class, and is that a plausible size?
As of 2013, approximately three hundred million Americans had Social Security numbers.1 If each received a dividend of $5,000 yearly, the total revenue needed would be $1.5 trillion, or 9 percent of GDP. This is roughly equivalent to the federal social insurance sector—Social Security, Medicare, disability, and unemployment compensation.2 It should be noted that co-owned asset rent would not be a cost to our economy, as payments to foreign countries are, but rather would be a circular flow entirely within our economy.
Another comparison is with value added taxes (VATs) in Europe. Though initially paid by businesses, VATs are ultimately paid by consumers; in this way, they’re akin to user fees for co-owned assets. There are, however, two significant differences. One is that VATs apply to value added by businesses, whereas co-owned wealth user fees would apply to value added by co-owned as-sets.3 The other is that VAT revenue flows to government whereas rent from co-owned wealth would flow to all of us equally.
All countries in the European Union are required to collect VATs; rates range from 20 percent in Britain and France to 25 percent in Sweden. EU-wide, about 13 percent of economic activity consists of public services funded by VATs.4
These numbers tell us that in terms of scale, a co-owned wealth dividend sector would be about the size of our present social insurance sector and about 30 percent smaller than the public service sector supported by value added taxes in Europe. Its scale is therefore plausible.
It’s important to note that in considering the revenue potenttial of specific co-owned assets, numerical precision isn’t possible; we’re dealing with future projections and many unpredictable variables. What follow are therefore back of the envelope” calculations made with the best available data.
That said, it’s also important to note that, for purposes of this book, numerical precision isn’t necessary. My goal is to determine whether annual co-owned wealth dividends in the range of $5,000 per recipient are economically possible if the political will is there. This can be done with rough numbers.
Our atmosphere enriches us in many ways, for which we currently pay nothing. It delivers oxygen for breathing and burning fossil fuels, nitrogen for making fertilizers, fresh water for farming and drinking, waste absorption, ultraviolet protection, and more. Of these services, the most important to charge for—because it causes the most harm—is our use of the atmosphere for carbon absorption.
How much rent might we collect by charging for atmospheric carbon absorption? One way to answer this is to use the formulas in the Carbon Limits and Energy for America’s Renewal (CLEAR) Act (Cantwell-Collins, 2009).5 The bill would require permits for bringing burnable carbon into our economy, gradually reduce the number of yearly permits by 80 percent over 40 years, and require all permits to be purchased at auctions bounded by floor and ceiling prices that would rise over time.
Using the floor and ceiling price formulas contained in the bill, carbon permit revenue in 2033 (twenty years from 2013) would be between $87 billion and $309 billion in 2013 dollars, with a midpoint of $198 billion.
There’s no doubt that everyone benefits from our financial infrastructure, and also no doubt that financial firms and their shareholders benefit far more than anyone else. Yet these firms pay virtually nothing to use that infrastructure. In fact, many of them are subsidized to perform such public functions as creating money.
We might share the benefits of our financial infrastructure more evenly in at least two ways: charge small fees for trading in it, and create new money through dividends rather than bank loans.
Estimates have been made of the revenue that could be generated by a financial transaction tax, which is effectively the same as a financial infrastructure user fee. (The difference is that taxes would flow to government while user fees would flow to the people.) I use a 2012 estimate by Robert Pollin and James Heintz of the University of Massachusetts/Amherst that yields the following revenue (assuming a 50 percent drop from 2011 trading volume as a result of the fees):6
Figure A.1: POTENTIAL REVENUE FROM FINANCIAL TRANSACTION FEES
Figure 7.1 in chapter 7 uses this $352 billion total (adjusted to $357 billion in 2013 dollars) as the midpoint, with a variance of plus or minus 25 percent for the low and high estimates. I should note that financial transaction fees aren’t the only way to make banks and traders pay for using our financial infrastructure. The International Monetary Fund has argued that other measures might work better.7
With regard to new money creation: from 2001 to 2008 (before the financial crisis), the average yearly increase in what the Federal Reserve calls M2 was $244 billion.8 I use this figure (which is adjusted to 2013 dollars) to calculate the low end of the range in figure 7.1. For the high end I use the average annual change in M2 from 2001 to 2013, which includes several years of “quantitative easing.” That figure, translated into 2013 dollars, is $323 billion. The middle figure is halfway between.
Intellectual property (IP) rights owned by private corporations include patents, copyrights, and trademarks granted and enforced by the federal government. Such property rights are enormously valuable. A recent study by the Department of Commerce found that IP-intensive industries account for about a third of US GDP.9 This is the reason why our government goes to such great lengths to protect IP, not only within the United States but worldwide.
That said, it’s not simple to estimate how much revenue could be generated by charging for IP protection. According to the Department of Commerce study, the 15 most patent- and copyright-intensive industries (software, entertainment, pharmaceuticals, et al.) accounted for $1.6 trillion of value added in 2010. A 20 percent value added fee on those industries, comparable to Britain’s value added tax, would yield $320 billion.
The economic value of the electromagnetic spectrum—long used for radio and television and increasingly used for cell phones and data transmission—is enormous and rapidly growing. By law, the spectrum is publicly owned, but in practice, much of it has been given or sold to private broadcasting and telecommunications companies. Putting a value on using it is complicated by many factors, including the different properties of different frequencies.
For purposes of figure 7.1, I’ve adopted a simplified valuation methodology similar to that used for IP protection. According to the US Bureau of Economic Analysis, the value added by the broadcasting and telecommunications industries, averaged over 1998 to 2011, was 2.5 percent of GDP. Applying that to 2013 GDP yields a value added of $418 billion. A 20 percent value added fee on those spectrum-intensive industries would generate $84 billion for dividends.
The list of other co-owned assets that might be rented for dividend purposes includes minerals and timber on public lands (including offshore continental shelves); the Internet (commercial use only); and air, soil, and water as waste sinks for pollutants in addition to carbon. Complexities abound in estimating the revenue such rents might generate; I have therefore omitted them from figure 7.1. However, there is much opportunity for research and revenue in this area.
There is sufficient rentable co-owned wealth in America to pay meaningful dividends to everyone.