Wealth and Want
... because democracy alone is not enough to produce widely shared prosperity.
Home Essential Documents Themes All Documents Authors Glossary Links Contact Us



Subsidies At Their Worst: Privileges
by Jeffery Smith

Money is the mother's milk of politics. Yet the milk invested by lobbyists and those they represent is a drop in the bucket compared to the flow they get back from the public tit, thanks to the milkmaid state. Politicians grant well-connected big businesses:

a. direct cash outlays, such as cash to corporations for advertising overseas,

b. lucrative contracts, such as with weaponeers et al campaign contributors, and

c. tax breaks that burden would-be competitors, such as tariffs that protect GM and Ford but not autoworkers. Even if we were to abolish subsidies (a) and taxes, eliminating the advantage of tax breaks (c), and negotiate responsible contracts (b), that'd still leave in place

d. seven subtle privileges, mere pieces of paper that government grants its customers at nowhere near market value, positioning the privileged to claim all the surplus value of society.

1. The corporate charter's salient feature is to limit the liability of those choosing to profit by putting others at risk. As if such protection were not enough, legislatures even raise this limit as the "need" arises. In case of a nuclear meltdown (this one's for you, GE), oil transport spill (say "thanks", Exxon), or software design bug (it's on the house, Microsoft), the wealth of those responsible is kept safe. Under ancient common law, or if rights to a healthy planet were enshrined in modern constitutions, victims of premeditated risky decisions could collect full compensation from the responsible parties. Charters, and their companion pieces of legislation, are worth to those corporations putting nature, labor, and consumer at risk however much that year insurance companies would charge them, i.e., the losses due to unsafe products, workplaces, and pollution and depletion - hundreds of billions annually.

2. Pollution permits, performance waivers, land use exemptions -- whether granted by bureaucracies, legislatures, or courts - are worth much more than however much government charges and business pays. The polluter saves by not having to invest in clean-up equipment or in production methods that waste less. And once government permits any deviation from the rule, then the recipient is sheltered from any future charges of malfeasance and can save again on insurance. It's hard to figure how much such leniency is worth, since if a company were to capture its pollutants, often it could sell them at a profit as a secondary line of business.

3. Patents protect the basement inventor, right? Wrong. Most basement inventors who manage to win a patent never see a penny of profit. What patents do is tie up good ideas, skew techno-progress (e.g., automotive engine design eschews all fuels but one), and enrich those few well-enough endowed to carry innovation to market. Were government to charge each year full market value for protecting intellectual property, basement inventors would still pay only token amounts while GM, DuPont, and Microsoft would have to spend billions -- the annual market value of their patents.

4. Utility franchises create monopolies in exchange for some public service, such as providing electricity, phone communication, etc. Yet are monopolies necessary? The power grid could be a public monopoly, for example, while the power suppliers could be private competitors, a model at last government is turning to. Government regulators are supposed to keep utility profits "fair", but do they? Some of the most lucrative investments are in Enron and AT&T whose unearned monopoly profits in the billions represent the annual market value of franchises.

5. Communication licenses for TV, radio, cell phones, and the like are given away for free or for far less than market value, turning recipients into "instant billionaires" (the business press gleefully notes). Why does government let such assets go for peanuts? Partly out of habit, partly because the recipients contribute mightily to political campaigns, but also because government can get the revenue it wants elsewhere -- it can always tax income or sales or borrow. What are communication licenses worth to Disney, Warner, and hopefully some day to us? Tally up how much TV charges for Superbowl Sunday and how much all stations charge for commercials and carriers charge to monthly subscribers. However many hundreds of billions of dollars that is ea ch year, a goodly portion of it is rent.

6. Resource leases for public oil, minerals, forests, and grazing land, are often let at "fire-sale" prices. If any private landlord squandered his own assets that way, he'd go broke overnight. How much more could our public steward collect from ca ttle ranchers, Chevron, Weyerhauser, and others leasing the public domain? At least as much as private landlords get per acre. It's enough billions that the present beneficiaries spend fortunes on determining the outcome of elections, electing their water boys to Congress and state legislatures who keep the current largesse flowing.

7. Land titles do protect the average homeowners but because they cost virtually nothing (a paltry filing fee often about $2.00), they also protect enormously wealthy absentee landlords. Were government to charge full annual value fees for deeds (r emember, the words "own" and "owe" were once one), then it could afford to forgo taxation. Such a shift in the revenue base would save a vast majority thousands of dollars each year -- and cost an elite some millions. What's the value of today's nearly free deeds? Try a couple trillion or more dollars each year, the money we spend on the nature we use.

Land titles are the granddaddy of all privileges. Historically, titles preceded all others and created a class of elite owners with the power to win the six other indirect subsidies, along with the more direct ones – grants, contracts, and tax favors. To undo and reverse this history, it's necessary to collect and share the natural rents from all seven inconspicuous privileges.

For these pieces of paper, government should charge full market value. A bank or insurance company does not charge a flat fee; they charge a rate geared to the value of the loan or insured property -- and keep it as high as the market will bear. Good for the goose, good for the gander. Accepting the challenge of the conservatives, let's run government like a business -- and charge business as much as the market will bear. From these seven pieces of paper, we'll reap trillions and afford the aboliti on of taxes. Then, like a successful publicly-held company, we'll disburse the surplus in equitable shares among ourselves, we stakeholders, the citizenry.

Getting a Citizens Dividend would not only eliminate poverty, it'd also erase any rationale for subsidies - direct or indirect - to the poor or to the privileged. Repealing the free ride of privileges would be like repealing capitalism. Without those subt le detours imposed upon public revenue, owners would have to work to amass a fortune, and work is one of the worst ways known to strike it rich.

What you can do: Dry up the milkmaid state. Dispense with the notion that the state must meddle in enterprise. Dispense the notion from others, too. Focus government on its lone raison d'etre - defend rights. Demand your right to a fair share of natural revenue.


Jeffery J. Smith is president of the Geonomy Society.

To share this page with a friend: right click, choose "send," and add your comments.

Red links have not been visited; .
Green links are pages you've seen
Top of page
Essential Documents
to email this page to a friend: right click, choose "send"
Wealth and Want
... because democracy alone hasn't yet led to a society in which all can prosper