Rankin Column: The Crown's Ownership Interest
Keith Rankin's Thursday Column (Scoop apologises for the delay in publication.)
The Crown's Ownership Interest
12 August 1999
On Monday, Simon Upton, in a Herald opinion piece defending the post-reform public service culture, noted: "If there is a criticism that can be made it is that ministers" have "underemphasised . the Crown's ownership interests".
In a feature article in this month's Atlantic Monthly, "A Politics for Generation X", Ted Halstead, president of the New America Foundation, claims that America's young adults will soon come to realise and push for the recognition of public property rights:
"Sooner or later Xers will figure out that America could raise trillions of dollars in new public revenues by charging fair market value for the use of common assets -- the oil and coal in the ground, the trees in our national forests, the airwaves and the electromagnetic spectrum -- and the rights to pollute our air. We currently subsidize the use of these resources in a number of ways, creating a huge windfall for a small number of industries and a significant loss for all other Americans. The idea of reversing this trend by charging fair market value for the use of common assets and returning the proceeds directly to each American citizen plays to a number of Xer political views -- it is populist, equitable, libertarian, and pro-environment all at once."
I'm not too sure exactly what Mr Upton had in mind by the "Crown's ownership interest". He may have in mind former public assets that have been privatised, plus present public assets that have been prepared for privatisation or that could be privatised. Certainly, the electricity reforms caused an instant write-off of many millions of dollars of public equity; a major failing of this government's public sector management.
Such assets by no means represent the full extent of the "Crown's ownership interest". There is another set of assets - "common" assets - without which production could not take place. Furthermore, it is the growth of these common assets - many of which are intangible - that enabled historical economic growth to take place. Generally, common assets are ignored because, implicitly, they are regarded as unowned rather than publicly owned. It is these assets to which Halstead refers.
In our system of national accounts, we attribute income either to labour ("compensation of employees") or to capital ("operating surplus"). Labour and capital represent two forms of private property. The only property income we attribute to the Crown is the income due to commercial assets that are capable of being privatised (SOEs). No income is attributed to common or 'public domain' assets. Under such an accounting system, the income attributable to socially owned inputs is simply treated as a surplus to be divided between "labour" and "capital". Worldwide, from the 1980s, capital has grabbed this seemingly free surplus for itself, thereby creating the huge and seemingly inexplicable inequalities that resulted.
Our future as a species depends on us taking responsibility for all of the assets which generate the global economic product; ie including common assets. The value we give to productive assets derives from the incomes that we draw from them. We can only attribute economic value to common assets by claiming a common income from them; a social wage or a social profit. The social wage can be distributed as a mixture of social services, social investment, and cash benefits.
This idea of a social profit or social wage is what Ted Halstead is getting at. When we wake up - and he believes that "generation Xers" will eventually wake the rest of us up - we will start to see taxation in a new light; as rents or 'royalties' payable by firms for their profitable use of commonly held assets.
While this new interpretation of property rights doesn't necessarily require a rise in taxes, Halstead's comments do suggest such an increase. What is most important, however, is the implication that taxation does not represent a deadweight cost. Rather taxation is a payment to the people for the commercial use of public domain resources, much as wages, interest and rents represent payments to the owners of privately owned resources.
Americans such as Halstead don't talk of the "Crown" as we do. In New Zealand, however, the government is a servant of the Crown, and the Crown is simply a symbolic representation of the people of New Zealand. (The same Crown is of course - but separately - a symbol for the populations of some other countries, most particularly the United Kingdom.) When we think of common assets as being the property of the Crown, we take a nationalistic view of the public domain. While not perfect, that represents a useful first step in the acknowledgement of public property rights. At least it is attributing some responsible ownership to the assets that Halstead describes, and many more besides. (Halstead mentions neither the invisible glue that binds our communities together [our 'social capital'], nor our public inventory of knowledge and ideas [intellectual capital], nor our institutions of government [executive, legislature, judiciary], nor the Internet.)
Many of our common assets are transnational; eg the ozone layer, and the Internet. Such assets are owned not by the national Crown but, collectively, by all the world's Crowns. They form the justification for an international layer to our taxation systems, and hence for an international social wage. We already pay royalties in recognition of global intellectual property rights. Why should we not all receive royalties as global common property rights?
In addition to national and transnational common assets, many of our jointly owned assets are subnational. Robert Putnam argued that north-central Italy is much more prosperous than southern Italy for one main reason; the north is social capital rich, while the south of Italy is social capital poor. From this point of view, a social wage could legitimately be paid at the level of local or provincial government.
Nevertheless, it is the recognition of public property rights at the national level that should set the ball rolling, creating in each nation new social contracts that underpin a new form of capitalism (social capitalism?). As Ted Halstead says, such a capitalism would be "populist, equitable, libertarian, and pro-environment all at once".