Our current economic crisis is not only a crisis of the economy. It is also a crisis of economics. The free-market fundamentalism of the closing decades of the 20^th century today has been thoroughly discredited – or at least, should have been – by financial collapse, swelling inequality, global imbalances, mass unemployment, and environmental degradation.

The public is hungry for an economics that is tuned into the realities of the 21^st century. Yet the talking heads of the media conglomerates continue to preach old-time economic orthodoxy, blaming our economic woes on regulation, taxes, foreigners, or a few rogue bad apples in the Wall Street barrel. To the public, economists seem unhinged from reality and oblivious to the human consequences of economic malfunction.

When people see relatives, friends and neighbors losing their jobs or homes – or when it happens to them – they know something is deeply wrong about the economy. As they watch the richest “one percent” fiddle while the economy burns, and grow ever richer, their dismay turns to anger. As they see the government operate hand-in-glove with financial and corporate elites to crush the livelihoods and hopes of working people, the stale liberal-versus-conservative debate about the relative merits of the state and market seems beside the point.

The desire for an economics that makes sense of our economy is especially intense among young people. When they embark on introductory economics courses in high schools, community colleges, four-year colleges and universities, students have not yet been indoctrinated, or simply turned off, by orthodox economic doctrines. They are eager to understand the world in which they will live and work. But in the classroom they are regaled with fairytales about perfect competition, efficiency, rational expectations, free trade, and economic growth. Young people want and deserve something more.

A new initiative is seeking to increase the share of voice of reality-based, ethically grounded economics in public discourse and the classroom. It’s called Econ4: economics for people, the planet, and the future.

Econ4’s mission statement sets out four necessary conditions for a healthy economy:

• A level playing field: A child’s life chances should not depend on accidents of birth such as race, gender, or parental income. Access to food, health care, education, and a clean and safe environment are basic human rights. These are not privileges that ought to be allocated on the basis of political power, nor are they commodities that ought to be allocated on the basis of purchasing power.

• Resilience: A healthy economy can withstand unanticipated shocks. It can bounce without breaking. We can build resilience into our economy by embracing the principles of dispersion, decentralization, and diversity. Rather than relentlessly chasing the illusion of maximum “efficiency” at any single point in time, we should aim to minimize our economic vulnerability over time.

• True-cost pricing: The prices that guide economic decisions, whether in markets or in government policymaking, should incorporate a full accounting of costs and benefits. When pollution goes uncounted, the result is an implicit subsidy for activities that harm people and the planet. When family care for children goes uncounted, the result is an implicit tax on services that benefit us all. True-cost pricing does not mean that everything – including freedom, community, and human life – can or ought to be measured in dollars and cents. But it does mean that these and other non-market values should not be ignored and effectively priced at zero.

• Real democracy: An economy that works for people, the planet, and the future requires transparency, accountability, and participation. Economic institutions – whether in the private sector, non-profit sector, or public sector – will serve the public good only if they are insulated from the short-term greed of political and economic elites. This insulation can be secured only by the democratic distribution of power, founded democratic institutions, active citizenship, and a democratic distribution of wealth.

Econ4 aims to produce animated economics videos for viral dissemination and classroom use; launch a network for innovative economics teaching; end intellectual monoculture in the training of new economists; and upload ethics into the economics profession. Its basic premise is simple: to build an economy that works for people, the planet, and the future, we must rebuild economics itself.

This post is adapted from the mission statement of Econ4: Economics for People, the Planet, and the Future, of which Boyce is a founding member.

In most financial scams, the victims simply lose their money. In Africa, some lose their lives.

Sub-Saharan Africa experienced an exodus of more than $700 billion in capital flight since 1970, a sum that far surpasses the region’s external debt outstanding of roughly $175 billion. Some of the money wound up in private accounts at the same banks that were making loans to African governments.

Inflows of foreign borrowing and outflows of capital flight are closely intertwined. As we document in Africa’s Odious Debts, there is a strong correlation between the two. For every dollar of foreign borrowing, on average more than 50 cents leaves the borrower country in the same year. This tight relationship suggests that Africa’s public external debts and private external assets are connected by a financial revolving door.

How does it work? Common mechanisms include inflated procurement contracts for goods and services, kickbacks to government officials, and diversion of public funds into the bank accounts of politically influential individuals. Some of Africa’s flight capital comes from other sources, too, such as earnings from oil and mineral exports. But foreign loans make an exceptionally easy mark in that there is no need to bother with the messy business of extracting natural resources to convert them into cash.

Principals and agents

The history of finance is littered with examples of the hazards of lending other people’s money and borrowing in other people’s names. In theory, bankers are meant to serve the interests of their depositors and shareholders by making prudent loans that will be repaid with interest. In practice, however, they often are rewarded above all for “moving the money,” getting loans out the door. In the wake of the U.S. financial crisis, this issue belatedly began to attract attention at the U.S. Fed.

An analogous principal-agent problem operates on the borrower side, where government officials negotiate and disburse loans on behalf of their citizens. Some borrow in the name of the government, line their pockets and those of their cronies, and saddle the public with the debt.

When a fraction of foreign borrowing is siphoned abroad, Africa still receives an inflow of money, albeit less than the face value of the debt. The net drain comes in subsequent years when the creditors are repaid with interest.

Using World Bank data, we estimate that each additional dollar of external debt service means that 29 fewer cents are spent on public health, and that each $40,000 reduction in health expenditure translates into one additional infant death. Putting these together, we calculate that debt-service payments on loans that fueled capital flight translate into more than 75,000 extra infant deaths annually. It is not only money that is being stolen in Africa: it is human lives.

What is to be done?

The hemorrhage of scarce resources from Africa can be curbed. Efforts by some African governments to recover wealth stolen by past officials have won international backing in the Stolen Asset Recovery Initiative launched by the World Bank and United Nations Office on Drugs and Crime. More can and should be done to identify looters and their accomplices and to repatriate stolen funds.

Tougher anti-money laundering laws and enforcement are needed to staunch the illicit financial flows from Africa into safe havens abroad. In the United States, Treasury Department officials concede that banks routinely accept deposits of funds that enter the country in violation of existing laws. Moreover, the banks currently are not prohibited from handling proceeds from many activities, such as tax evasion, that would be considered crimes if committed within the U.S.

More transparent information about financial inflows to African governments would also help. Much as the Publish What You Pay campaign launched by international NGOs promotes disclosure of corporate payments for natural resource extraction, a Publish What You Lend campaign could strengthen transparency and accountability in financial markets.

Last but not least, African governments should be encouraged to selectively repudiate debts incurred by past regimes that cannot be shown to have been used for legitimate purposes. The doctrine of odious debt in international law provides a basis for repudiation of debts from which the public derived no benefit, when creditors knew or should have known this to be the case. Added legal grounds for selective repudiation are found in the principle of domestic agency in British and American law, which requires agents to act in good faith in the interest of their principals.

These steps would not only benefit Africa’s people today. They also would help to repair our dysfunctional international financial architecture, strengthening incentives for the exercise of due diligence by creditors and for responsible borrowing by governments. Without these changes, debt relief can offer only a temporary palliative. In the world of international finance, Africa needs justice, not just charity.

James K. Boyce and Léonce Ndikumana are the authors of Africa’s Odious Debts: How Foreign Loans and Capital Flight Bled a Continent, published by Zed Books in association with the Royal African Society, the International African Institute and the Social Science Research Council.

In 2007 the National Audubon Society, one of the leading environmental organizations in the United States, issued a report headlined “Common Birds in Decline.” Based on statistical analysis of 40 years of bird population data, it announced “the alarming decline of many of our most common and beloved birds.”

The story attracted wide press coverage. “Spreading suburbs and large-scale farming are contributing to a precipitous decline in once common meadow birds,” began a New York Times story. An accompanying editorial lamented, “We somehow trusted that all the innocent little birds were here to stay. What they actually need to survive, it turns out, is a landscape that is less intensely human.”  A letter to the editor predicted that the deadly pattern will continue “as long as we ask the earth to support too many people.”

Few commentators bothered to study the study itself. Had they done so, they might have noticed that among 309 bird species for which statistically meaningful trends could be established from data in two population surveys, birds showing a “large increase” exceeded those showing a “large decrease.” Forty-one species recorded a large increase in both surveys; only twelve saw a large decrease.

Looking at the data on individual species, reported in an appendix, readers would have found that one species registering a large increase was the bald eagle, until recently classified as endangered in the lower 48 states. The eagle’s numbers rebounded after the 1972 ban on use of the pesticide DDT. Another rapidly increasing species is the wild turkey, driven to extinction in many northeastern states more than a century ago by forest clearing for agriculture. It has returned as abandonment of farms led to forest regrowth. In both cases, the comebacks were actively abetted by private and governmental restoration initiatives.

Of the species that registered significant declines, many are birds of open habitats – meadows, pastures, and early successional forests – habitats that were created and sustained by farmers in the 18^th and 19^th centuries on lands that have now reverted to forest.

So the take-home messages from the Audubon study could have been:

• more bird species in the United States are increasing in population than decreasing;
• efforts to protect and restore threatened species have scored major successes; and
• many of the species whose numbers are declining depend on human-created habitats that are disappearing.

The relationship between non-industrial agriculture and biodiversity is not unique to birds in the northeastern U.S. For example, in a recent study in the northern highlands of Oaxaca, Mexico, published in Global Environmental Change, University of Manitoba researchers James Robson and Fikret Berkes found that widespread abandonment of traditional milpa agriculture is leading to “localised declines in biodiversity, despite (or because of) extensive forest resurgence.”

The American writer Wallace Stegner once noted that when facts enter “the maw of that great machine that at once creates and obeys public opinion,” they often come out as something else. “Ideas,” he wrote, “are like dye thrown into moving water.”

A powerful current in American environmentalism maintains that Humans are Bad for Nature. It is a belief that took hold with the closing of the frontier in the late 19^th century, but its roots can be traced to early European settlers’ misperception of North America as a pristine wilderness, and perhaps even further back to the Christian doctrine of “original sin.”

The mission of environmentalists, in this story, is to preach self-restraint in a valiant effort to curb our ecological footprint and limit our misdeeds so as to remain within Nature’s capacity for forgiveness.

Absent from this narrative are the ways that humans can and do have positive impacts on the environment. Call it our ecological handprint. It can be seen in the diverse habitats created and sustained by non-industrial agriculture. It can be seen in the co-evolutionary processes by which humans domesticated plants and animals, originating the species on which we depend today for most of our food. It can be seen in the ecological restoration that brought the return of the wild turkey and bald eagle.

Hellfire and brimstone may be effective for garnering media attention and procuring donations from the faithful and fearful. But original-sin environmentalism not only rests on a selective reading of our past. It also has led to a political dead end. When the choice is framed as Humans versus Nature, it turns out that most people will choose Humans. If environmentalism is to win the future, we must move beyond this false dichotomy.

One side effect of the American/British occupation of Iraq is that it sparked public debate on a dark secret of international finance: the debts taken on by odious regimes.

As Iraq’s new rulers debate what to do about the billions of dollars in foreign debts inherited from Saddam Hussein’s regime, voices ranging from the charity Oxfam-International to US defence guru Richard Perle are calling for debt repudiation on the grounds that the debts Iraq now bears were contracted to sustain a corrupt, oppressive regime.

Iraq is not the only country burdened by such debts. Across sub-Saharan Africa, many of the world’s poorest people struggle with the crippling legacy of profligate lending to corrupt, oppressive rulers.

During his 32-year dictatorship, Congo’s former president Joseph Mobutu accumulated a personal fortune estimated at $4 billion, while his government ran up a $12 billion foreign debt. More of the same in Angola, where last year an IMF investigation revealed that $4 billion disappeared from Angola’s treasury over the past five years. It so happens that the Angolan government borrowed a similar sum from private banks in this period, mortgaging future oil revenues as security.

Read the full article at Project Syndicate.

It is time for a new strategy for climate policy in America – a strategy founded on climate justice.

Climate justice has four pillars:

• Action: Climate change will affect us all, but its heaviest costs will fall upon low-income people who live closest to the margin of survival and are least able to afford air conditioners, sea walls, and other types of insurance. Climate inaction is climate injustice.
• Adaptation for all: We cannot prevent climate change altogether. Investments in adaptation are necessary, but how should these be allocated? The conventional economists’ prescription is that investments should be guided by “willingness to pay,” which of course depends on ability to pay. The implications of this logic were spelled out two decades ago in the Summers memorandum that purported to make the case for dumping toxic waste in low-wage countries. Climate justice requires that investment in adaptation should be guided by human needs, not by the distribution of purchasing power.

• Co-benefits: Burning fossil fuel releases not only carbon dioxide but also co-pollutants that endanger human health. Co-pollutant damages per ton of CO2 vary greatly, so it makes sense to reduce emissions where the “co-benefits” of co-pollutant reductions are biggest. Because co-pollutants disproportionately impact low-income and minority communities, integrating them into climate policy is a matter of climate justice as well as efficiency.
• Dividends: A cap on carbon emissions is essential, but instead of giving free permits to polluters – a central plank in “cap-and-trade” schemes – polluters should pay. Permits are valuable: their holders will receive the fossil fuel price increases triggered by the cap. They should be auctioned, not given away, eliminating any need for permit trading. The revenues should be returned to the people as the rightful owners of the atmosphere’s limited carbon-absorptive capacity (or any country’s share of it). The “cap-and-dividend” climate bill proposed by Senators Maria Cantwell (D-Wa) and Susan Collins (R-Me) in 2009 would do exactly this, returning 75% of the revenue directly to the public as individual dividends, and devoting the remainder to clean energy investments.

A climate justice policy would jettison the cap-and-trade strategy that repeatedly has gone down to defeat in Washington. Cap-and-trade was based on a political calculation: give free permits to polluters to win their backing, and this would clear the way for passage of a climate bill.

The calculation didn’t work. The Wall Street Journal denounced cap-and-trade as “the biggest tax in American history,” and Republican opponents took up the cry. House leader John Boehner declared: “By imposing a tax on every American who drives a car or flips on a light switch, this plan will drive up the prices for food, gasoline and electricity.”

President Obama countered that the cost to the average American would be “about the price of a postage stamp per day.” In making this claim, Obama and cap-and-trade proponents confused the cost to the economy of cutting emissions with the cost to households of higher fossil fuel prices. The economic cost will be small: the Congressional Budget Office estimated in 2009 that expenditures on energy efficiency and clean energy investments to reach emission targets would amount to only 18 cents per person per day. But the household cost from higher fossil fuel prices will be substantial. Obama and the CBO were referring to the cost of avoided emissions. Boehner was talking about the cost of emissions that are not avoided, and he was right: a cap would increase prices, just like a tax.

Neither side talked about the real issue: who will get the money that consumers pay in higher fossil fuel prices. Recycling this revenue to the people, as proposed by Cantwell and Collins, would leave most Americans with more money in their pockets, not less. In ducking this question, both sides in the cap-and-trade debate played the public for fools.

Instead of courting the fossil fuel lobby, a climate justice policy would turn to the American people for political support. It would appeal to their economic interests, but just as important, it would appeal to their moral values. When they enter the ballot box, Americans voters think about not only what is in their interest but also what is right.

When it comes to passing laws, Washington politicians typically rely more on support from lobbyists than from the people. But in the case of climate policy, business-as-usual politics has reached a dead end. The time has come for a bold departure. Climate justice is not only a moral imperative. It is a political necessity.

Tax havens have gotten a lot of press lately. In Britain, the UK Uncut movement has mounted demonstrations across the country against tax dodging by large corporations and wealthy individuals – making the connection between profits parked abroad and deficits and budget cuts at home.

Last month in the U.S., The New York Times revealed that GE, one of the nation’s largest companies, earned 46% of its revenue in the U.S. over the last three years but booked less than one-fifth of its profits there, shifting most of its booked profits to low-tax countries. In 2010, taking advantage of loopholes in U.S. tax laws (for which the firm had lobbied Washington lawmakers), GE paid negative taxes: despite $5.1 billion in declared pre-tax U.S. profits, the firm received a $3.2 billion tax credit. This and other blatant examples of corporate tax dodging are inspiring the birth of US Uncut, an American cousin of the British movement.

The term “tax haven” is a euphemism, however, for two reasons.

First, “haven” carries the connotation of a safe refuge from oppression. As Nicholas Shaxson writes in his new book, Treasure Islands: Tax Havens and the Men Who Stole the World, tax havens “offer escape routes from the duties that come with living in and obtaining benefits from society.” They provide refuge not from oppression but from responsibility – the responsibility to contribute to the physical and institutional infrastructure of the economies in which the dodgers themselves make money.

Second, “tax” havens are not just about dodging tax. Money flows to these places not only to hide from the taxman, but also to hide from the law. As secrecy jurisdictions, tax havens allow asset holders to hide their identities from authorities in their own countries, and often from authorities in the secrecy jurisdictions themselves. For a modest price, front men, dummy corporations, and multi-layered transactions provide anonymity.

Shielding the loot of corrupt politicians, crooked officials, and organized criminals from discovery and recovery, secrecy jurisdictions act as financial sinkholes – places where vast sums of money flow between the legitimate world economy and the illicit underworld economy.

Tropical islands are the best-known secrecy jurisdictions. In a 2008 debate, presidential candidate Barack Obama cited a single building in the Cayman Islands that “supposedly houses 12,000 corporations,” making it “either the biggest building or the biggest tax scam on record.” That same year, a U.S. Government Accountability Office report revealed that Citigroup had 90 subsidiaries in the Cayman Islands alone.

But as Shaxson’s book makes clear, the U.S. and Britain are themselves big players in the secrecy game. Both countries welcome foreign money of dubious origins, with few if any questions asked.

The costs of financial sinkholes are borne by ordinary citizens throughout the world, not only by taxpayers in the industrialized countries but also by many of the world’s poorest people. In our forthcoming book, Africa’s Odious Debts, my colleague Léonce Ndikumana and I document the flight of $735 billion (in constant 2008 dollars) from sub-Saharan Africa from 1970 to 2008. Most of this disappeared into financial sinkholes; recorded African deposits in Western banks amounted to less than 6% of this amount.

To put Africa’s capital hemorrhage into perspective, the total foreign debt of the same countries stood at $177 billion at the end of 2008. In this sense Africa is a net creditor to the rest of the world: its external assets far exceed its external liabilities. A crucial difference, however, is that the assets are private and hidden, whereas the liabilities are public, owed by the people of Africa through their governments.

Much of the credit for growing public awareness of these issues goes to advocacy groups like the Tax Justice Network, Global Financial Integrity, and Global Witness, who have exposed the shadowy underside of the international financial system. Governments are starting to take more notice, too. In 2009 a Norwegian government task force produced a comprehensive report on how tax havens undermine development in low-income countries. In the U.S., Senator Carl Levin (D-Mich.) is championing legislation to clamp down on offshore secrecy jurisdictions and to get the U.S. out of the money-hiding business.

When the countries of the world joined together to eradicate smallpox a generation ago, they achieved a historic victory for global public health. International cooperation to plug the world’s financial sinkholes could bring a comparable victory for global economic health. This is a cause that can unite ordinary Americans and Africans alike.

What does it mean to say that the environment is our “common heritage”? On one level this is a simple statement of fact: when we are born, we come into a world that is not of our own making. The air we breathe, the water we drink, the natural resources on which our livelihoods depend, and the accumulated knowledge and information that underpin our ability to use these resources wisely – all these come to us as gifts of creation passed on to us by preceding generations and enriched by their innovations and creativity.

Yet once we take seriously – as I do – the proposition that this common heritage belongs in common and equal measure to us all, we move beyond a positive statement of facts to a normative declaration of ethics. We move beyond an understanding of what is to an assertion of what ought to be.

To say that the environment belongs in common and equal measure to us all does not mean that we have inherited a free gift with no strings attached. For our common heritage carries with it a common responsibility: the responsibility to share the environment fairly amongst all who are alive today, and the responsibility to care for it wisely to ensure that our children, our grandchildren, and the generations who follow will share fairly in our common heritage, too.

Once we move onto the plane of morality, the proposition that the environment is our common heritage is no longer a simple matter. Indeed, the claim that the environment belongs in common and equal measure to us all may strike some as a utopian ideal – nice-sounding words but devoid of practical content.

Yet I believe that the fair sharing of our common environmental heritage is not only a real possibility, but that it is in the process of becoming a reality here in the United States and across the world.

In making this claim, I do not wish to minimize the great environmental challenges that lie before us. From local landscapes burdened by toxic pollution and reckless resource extraction to the global threat of climate change, we can see the fruits of greed and short-sightedness, the results of the failure of our society and others to live up to the moral imperative summed up in the phrase, “fair sharing of the common heritage.”

But I am also mindful of the words of the late Raymond Williams, who wrote: “To be truly radical is to make hope possible rather than despair convincing.” And I am conscious of the great steps forward that humankind has made, and that through our struggles we continue to make, on the road to establishing that the environment is our common heritage both as a matter of moral principle and as a matter of law.

A clean and safe environment as a human right

Already today, the principle that the environment belongs in equal and common measure to all can be found enshrined in the most fundamental of legal documents: the constitutions of national governments and states.

For example, the constitution of the Commonwealth of Massachusetts – the official name of my home state – says: “The people shall have the right to clean air and water.” That’s a direct quote.

The Constitution of the Republic of South Africa, adopted in 1994 following the demise of the apartheid regime, states: “Every person shall have the right to an environment which is not detrimental to his or her health or well-being.”

These constitutions – and many others at home and abroad – embrace the bedrock principle that access to a clean and safe environment is a human right.

It is not a privilege to be allocated on the basis of political power.  It is not a commodity to be allocated on the basis of purchasing power. It is a right held in common and equal measure by all.

Of course, translating this lofty constitutional principle into on-the-ground practice is neither automatic nor simple. But the fact that the right to a clean and safe environment is embedded in constitutions around the world testifies to the great power of the common heritage ideal. And it helps undergird and inspire efforts to translate this right into law and practice.

The environmental justice movement

The environmental justice (or EJ) movement is a prime example of such efforts. In combating disproportionate pollution burdens imposed upon low-income communities and people of color, the EJ movement today is claiming – or reclaiming – the right to a clean and safe environment.

An important tool for EJ activists, indeed for everyone who cares about the quality of the air they breathe and the water they drink, is right-to-know legislation such as the U.S. Emergency Planning and Community Right to Know Act (EPCRA), passed in 1986 in the wake of the chemical disaster in Bhopal, India. EPCRA requires industrial polluters to disclose their releases of hundreds of toxic chemicals, and makes this information available to the public through the annual Toxics Release Inventory. The simple fact that polluters know that the public has access to this information sometimes is enough to change their behavior – particularly when the right to know is coupled with communities actively voicing the demand for a clean and safe environment.

When communities stand up against polluters, they are sometimes accused of “nimby-ism,” the not-in-my-back-yard philosophy that simply deflects pollution burdens onto other communities. The environmental justice movement has a clear and compelling reply to this charge: “Not in anybody’s back yard.”

But it would be utopian to imagine that we will be able prevent all pollution anytime soon. We can and must continue our efforts to reduce pollution, but we cannot expect to eliminate it altogether, at least not in our lifetimes.

What does the common heritage principle have to say, then, about the pollution that will not be prevented in the foreseeable future?

I believe there is a two-part answer to this question. First, pollution burdens should be distributed fairly, as advocated by the EJ movement, rather than concentrated in particular communities.

Second, polluters should pay for their use of the limited waste-absorptive capacities of our air and water. When polluters pay, they have an incentive to cut pollution above and beyond what is required by regulations. In keeping with the principle that the environment belongs in common and equal measure to us all, the money the polluters pay should be distributed fairly to the public, as we are the ultimate owners of the air and water.

A common heritage climate policy

As an example of how this dimension of the common heritage principle could be translated into effective policy, consider the “cap-and-dividend” climate bill that was introduced a year ago in the U.S. Senate by Maria Cantwell (D-Wa) and Susan Collins (R-Me), a bill they plan to reintroduce in the new Congress with additional sponsors.

The Cantwell-Collins bill, officially called the Carbon Limits and Energy for America’s Renewal (CLEAR) Act, would put a ceiling (that is, a cap) on U.S. carbon emissions from burning fossil fuels. To bring fossil fuels into the nation’s economy, the oil and gas and coal companies will need to buy permits at monthly auctions. The total number of permits, fixed by the cap, will decline over time as we transition to a clean-energy economy. As the permits become more scarce, their price will go up.

Most of the money from the permit auctions – 75% – will be returned directly to the American people in the form of equal per person “dividends” paid out monthly via ATM withdrawals, electronic deposits into bank accounts, or checks in the mail. The other 25% will be devoted to clean energy investments.

Unlike the cap-and-trade proposals that have repeatedly failed to pass the United States Senate, the Cantwell-Collins bill has no free permit giveaways to polluters. The polluters pay. And the permits are not tradable – any more than other sorts of permits, like hunting permits or driving permits, are tradable – so that unlike cap-and-trade, the bill does not create a new sandbox for Wall Street to play in.

If enacted into law, this cap-and-dividend policy not only will curb carbon emissions. It also will translate into very concrete practice – and into people’s pocketbooks – the principle that our country’s share of limited capacity of the Earth’s atmosphere to absorb carbon emissions belongs to all Americans in common and equal measure.

Crop genetic diversity as the common heritage of humankind

As a final example of how we can apply the common heritage principle to real-world challenges, I want to talk about seeds – specifically about rice, wheat, maize and the other crops on which we depend for our survival. These crops originated through what Charles Darwin called “artificial selection,” whereby the earliest farmers saved and replanted seeds of those plants over successive generations that did best at providing palatable and nutritious food. In this way, ultimately they bred new species that would never have come into existence without the guiding hand of human intervention.

This is perhaps the greatest example in history of what economists sometimes call “investment in natural capital”: human actions that positively enhance the ability of the environment to sustain our well-being in the long term.

Over the millennia since their ancestors first domesticated plants, generations of farmers have bred hundreds of thousands of diverse crop varieties. This diversity is what enables plant breeders today to respond to outbreaks of new insect pests and crop diseases by finding resistant varieties.

Crop diversity is sustained in the field largely by small farmers, most of them in the global South – maize farmers in southern and central Mexico; rice farmers in India, Bangladesh and southeast Asia; potato farmers in the Andes; and so on. In so doing, these farmers provide an enormously valuable service to humankind, a service for which they currently receive no compensation.

In this case, the fair sharing of our common heritage does not only mean protecting crop diversity from a genetic version of the enclosure movement that privatized common agricultural lands in 18^th century Britain. It also means devising ways to reward small farmers, above all in the historic centers of crop genetic diversity in Latin America, Asia and Africa, for their vital contributions to long-term human food security.

There is much in common between small-farmer movements around the world, many of which have banded together under the umbrella of the international alliance known as Via Campesina, and the movement for environmental justice and efforts to forge a fair climate policy here in the United States.

In these and other diverse arenas, these new environmentalists are upholding the moral principle that the environment, as our common heritage, should be shared fairly within the present generation and cared for responsibly on behalf of future generations.

This is why I say that the common heritage principle not a utopian aspiration. It is a powerful, living force in the world today. But we cannot be complacent. Much has been achieved, but much remains to be done. As we join, each in our own way, in the common struggle to make this moral principle a practical reality, we can take heart both from the victories of those who came before us, and from the knowledge that we have allies across the globe.

We can take heart from the words penned by the 19^th century anti-slavery minister Theodore Parker, words repeated and made famous in more recent times by Dr. Martin Luther King, Jr.: “The arc of the moral universe is long, but it bends toward justice.”

We can take heart from the evidence all around us that history is on our side.

This post is excerpted from the author’s acceptance speech for the Fair Sharing of the Common Heritage Award, presented by Project Censored and the Media Freedom Foundation in Berkeley, California, February 5, 2011.

Some of the best things in life are free. Unfortunately, so are some of the worst.

When polluters dump poisons into our air and water, they do it for free. This means they have no incentive to curb emissions. It also means that our air and water effectively belong to them, not to those who breathe the air and drink the water.

Regulation

Environmental regulations limit what polluters can lawfully discharge into our air and water. The damage control they provide is of great value. The U.S. Environmental Protection Agency estimates that from 1970 to 1990 alone the Clean Air Act saved more than three million lives. Critics can argue about whether the regulations should be tighter or lighter, but no sensible person would advocate jettisoning them altogether.

But while regulation does much to protect public health and the environment, it doesn’t stop free pollution. Within the regulatory envelope, pollution that is legal is free. Firms are supposed to follow the rules, but they have no incentive to cut pollution beyond the mandated limits.

Cap-and-Giveaway-and-Trade

In 1990 the U.S. government tried something new: it required electric power companies to have permits for their emissions of sulfur dioxide, a health hazard and source of acid rain. Each permit allows the polluter to discharge one ton of SO₂ into the air, with the cap on the total number of permits being ratcheted down over time.

To win political buy-in from the companies, Congress gave them free permits based on their historic emissions. Companies can then sell permits and buy them from each other. Permit trading would be redundant if they were auctioned rather than handed out free, but the giveaways made trading a necessary part of the system.

This is called “cap and trade.” A more accurate name would be cap-and-giveaway-and-trade. The policy solves the incentive problem, because companies now can make money by reducing pollution and their need for permits, and profit by finding new and cheaper ways to do so. Economists have lauded the outcome as a great success because SO₂ emissions were cut in half in the span of a decade at a low cost.

But as a solution to the property rights problem, cap-and-giveaway-and-trade is perverse. Free permits to polluters ratify their appropriation of our air and water. The permits become another cost of doing business, passed along to consumers via higher electricity prices. The companies then pocket the money as windfall profits.

Cap-and-Dividend

Attempts to pass a cap-and-trade climate bill in the U.S. failed this year for the third time. Opponents charged that carbon cap-and-trade would amount to “the largest excise tax in history.” Proponents countered that the cost to the average American family would only be “about a postage stamp a day.”

This dispute hinged on confusion – inadvertent or deliberate – between the cost of preventing pollution and the value of permits for pollution that is not prevented. The postage stamp number, based on a 2009 Congressional Budget Office report, refers to the cost of cutting carbon emissions to stay within the cap. This cost is relatively modest because there are many low-cost ways to improve energy efficiency.

The value of permits – the quantity of permitted emissions multiplied by the permit price – is a much bigger number. Click here to see the difference between the cost of preventing pollution and the value of permits, as calculated in a 2010 EAAC report. This represents the lion’s share of price increases that consumers would see at the gas pump and in their electricity bills.

Whether this permit value is really a “tax” depends on what happens to the money. In cap-and-giveaway-and-trade, it’s not a tax because it goes to companies as windfall profits. If the permits are auctioned instead, and the government keeps the money as in the Regional Greenhouse Gas Initiative in the northeastern U.S. states, it is true that it’s like a tax.

There is an alternative to windfall profits and taxes. A cap-and-dividend policy would return the money directly to the public as equal dividends for every woman, man and child in the country. This is the approach taken by U.S. Senators Maria Cantwell (D-WA) and Susan Collins (R-ME) in the climate bill that they introduced a year ago and plan to reintroduce with additional co-sponsors in the next session of Congress.

Cap-and-dividend is founded on the principle that the air and water belong to all of us.  The policy has several attractions. It provides incentives to cut pollution and drives investment in clean technologies. It protects working families from the impact of price increases resulting from permits on their purchasing power. Most important, by delinking environmental policy from the contentious issue of taxes it just might be a politically viable way to stop the travesty of free pollution.