4.1.9-4.2.7: Transforming the Privilege Fund

Module 4, Section 1.9-2.7

Transforming the Privilege Fund

1.9 Collectors of the Privilege Fund invest in land and resources in 'underdeveloped' countries. To quell protests, investors call for military intervention.

1.10 The protection of massive privatized assets requires armaments and a clever system of propaganda to convince the general public that they must pay taxes from their wage income and/or incur public debt to pay for these “protective services.” At this stage a war economy is in full swing. The military-industrial-financial complex leads to super-state expansion and resultant covert and overt wars for geo-spatial control of natural resources and prime locations such as ports and other transport nodes.


Dr Martin Luther King said that only ‘the radical reconstruction of society itself' and ‘a radical redistribution of economic and political power' could ‘save us from social catastrophe.” He told us that "a nation that will exploit economically will have to have foreign investments and everything else, and will have to use its military might to protect them… the problem of racism, the problem of economic exploitation, and the problem of war are all tied together. They are the triple evils that are interrelated." MLK 1.11 What is the true cost of war?
Newly placed gravestones. Mangled bodies. Broken hearts and homes. Economic instability. Depression and all its attendant miseries. Back-breaking taxation for generations and generations. -Major General Smedley Butler



Transforming the Privilege Fund

2.1 Diagram Four
Transforming the Privilege Fund


2.2 This fourth diagram describes a new role for democratic governance. It shows the Privilege Fund converted to a Resource Rent Fund utilized for the benefit of everyone. A condition for land enclosure for private use would be payment of land rent to the entire community. This is the goal of “land value capture.” “Exclusive” private property rights to land, which includes the right to privately appropriate land rent, is thereby easily converted to “conditional” private use rights to land. Individuals, groups, or businesses can secure use rights to land provided that they pay the full rent of land to society to be utilized for the benefit of all.
the earth belongs to everyone

2.3 Land Value Capture places the economic foundation of society on the principle of equal economic human rights to the value of earth’s resources. We might call this new mandate for governance “earth rights democracy.”

2.4 Another way to grasp this concept is to consider that land belongs to all on an equal basis, each with an “equal share.” In the best forms of tribal land tenure systems there is an agreed upon process or leader making fair decisions about allocations of land use to clans and families. In complex cash economies, public systems of land value capture play this allocative role. Those who privatize or enclose the most and the best land would pay the most land rent to the common fund. Those with little or no land or poorly located land would pay little or nothing. Taxes on their wages or other productive activities would be eliminated.

2.5 Thus, instead of rent being captured by the few leading to wealth inequality, the new role of "earth rights" democratic governance is to capture land rent for the many leading to a much fairer distribution of wealth.

2.6 As the economy develops and becomes more complex and land rent grows, a percentage of the rent from the now public resource rent fund could be distributed as equal cash payments to everyone, a “citizens dividend” similar to the previously described Alaska Permanent Fund dividend system. Surface land rent is one of the best sources of funds for citizen dividend payments, better than oil rent which would best be utilized to finance renewable energy systems.

2.7 Optional Reading: The Law of Rent and the Economics of War and Peace This paper, first presented in New York at the Eastern Economics Association Conference (2007) on the panel organized by Economists for Peace and Security, further develops the themes of each of the four diagrams in this section.


Land Conflict Resolution

landscape A similar pattern exists for conflicts around the planet: power-seeking to get the prize of land and natural resource wealth. Land value capture can work to directly address issues of territorial conflict. The key to peace is to equitably distribute the land rent throughout the area in dispute.


Those pursuing non-violent solutions to surface land, oil and other natural resource conflicts would initiate information gathering to determine the approximate amount of land and resource rent that could be captured from the territory experiencing land and resource conflicts. They would publicly and transparently post this information in the form of land and resource value maps.

They then would consult with people living in the areas of conflict to solicit their ideas on how the land rent when captured for public use could be utilized. In this way those in the conflict zone would be encouraged to imagine a peaceful settlement to the conflict and a way forward to a future where all can attain their basic human needs.

The peacemakers would next put forth a proposal to establish a Land (and/or Resource)Rent Authority to administer annual land value (resource rent) assessments and the collection and distribution of land rent for the benefit of everyone. In places where there is no functioning land market from which to determine land values, the amount of land rent to be paid in order to secure title to specific disputed land parcels could be determined by land auctions, with those willing and able to pay the highest amount of land rent into the public fund receiving land title or the right to extract the natural resource.

For an example of an oil resource rent fund, recall the aforementioned Alaska Permanent Fund. Also, citizen activists in Bayelsa State, Nigeria, have proposed the establishment of a Bayelsa State Oil Fund Commission to equitably allocate oil rent to the people of the state. To learn about this well-designed resource rent fund proposal GO HERE

The Land Rent Authority once operative would also have the capacity to enforce the land value capture policy, at least until other functional structures of democratic governance are put in place. The Land Rent Authority thus would be a key to an overall peace plan for the area experiencing land conflicts.

Peacemakers would present this plan to establish a Land Rent Authority as a way to secure equitable land rights and fundamental economic justice for every person who wants to reside within the territory under dispute. The next step would be a time period dedicated to broadening the popular basis of support and endorsement for the plan, the goal being legitimization and approval of the proposal by as many people as possible.

After a substantial number of people have endorsed the proposal, the Land Rent Authority would be formally established and begin its work. Those who cooperate with the plan and willingly pay their fairly assessed land rent fee would be considered rightful title holders and the Land Rent Authority would protect and enforce their title rights.

Those refusing to pay their fairly assessed land rent fee, who in essence want to continue with their private land enclosure without fairly paying to the community their fair share for the rights to this privilege, would risk losing their land.(Note that this is no different than how property taxation is enforced in many countries at the present time.) In other words, there would be no basis for the Land Rent Authority to pay for and enforce title protection to lands unless the land rent has been paid into the common fund. In this way fairness in land rights would become a force of law.

It is important to understand that this approach to land conflict resolution is contained within a framework of “just law and order” as compared to simply “law and order.”

Defining the parameters of sovereignty is a key component of the world order dialogue as it struggles to reach consensus regarding the boundaries and prerogatives of power. Sovereignty is the status of a person or group of persons having supreme and independent political authority. In dealing with the concept of sovereignty, we are dealing with the reality of power. It is a power over territory, over land and water, oil and minerals, as well as those life forms which have miraculously emerged out of the mud of the earth.

The kings and queens of Europe, Asia, and Africa were sovereigns. They reigned supreme and were thought to be divine. They descended from those having the strongest might and force to prevail over territory. The larger and richer the territory they could hold under their power and authority, the higher their status. They were both feared and courted by other humans.

These were the dominators who ruled the land and made the rules. Their rules became law. Their territorial law was most often a form of "dominium" -- the legalization or formalization of control over lands originally obtained by conquest and plunder. All real estate was in essence the royal estate. Might made right, as the rules of power became the laws of the land.

Land value capture policy, however, stems from a moral and ethical framework of “just law” based on equal rights to land and natural resources as a birthright. As such it leaves “might makes right” in the dust of neanderthals and neocons.

The use of legitimate force under just laws and institutions constituted to secure the equal human right to land and natural resources is no different than law enforcement currently established to protect citizens against crimes. The payment of the land rent fee legitimizes and enforces the right to private, exclusive land title. Non-payment of the land rent fee forfeits the right to enforcement of title protection and therefore private and exclusive land use rights.

It is evident that democracy as presently constituted is insufficient to provide peace and economic human rights. It is also necessary to assure economic justice, and the foundation of economic justice is the compensation of land rent paid to all the members of the community for the private use of the land which rightfully belongs to everyone.

This form of land tenure - private use rights secured on condition of payment of full land rent to the community with no taxation on labor and productive activities - furthers both individual initiatives for wealth production AND a fair distribution of wealth. There is no trade-off of one or the other. There is instead a full social synergy.

International covenants on economic human rights to food, shelter, health care, and education have been widely endorsed. Unfortunately there has been a great lack of clarity regarding precise mechanisms for implementing economic human rights for all. By preventing land, a gift of nature, from being hoarded or used as a basis for land speculation and profiteering, land value capture sets the stage for securing all other economic human rights.

The exercise of both common and individual rights in land is essential to a society based on justice. But the rights of individuals in natural resources are limited by the just rights of the community. Denying the existence of common rights in land creates a condition of society wherein the exercise of individual rights becomes impossible for the great mass of the people.

Land value capture is a practical approach for securing common rights to land rent while retaining individual rights to the products of labor. Land value capture is thus an important key to the implementation of economic human rights within demo-cratic societies whether they currently lean towards capitalism or socialism. Its potential for land conflict resolution is considerable in either case.

This Land Rights and Land Value Capture course is primarily focused on public capture of rent from surface land. For information on resource rent capture institutions that can help resolve conflicts over oil and other natural resources go to Alaska Permanent Fund, Bayelsa State Oil Fund Commission Bill, How to Tax Mineral Rents and Experiences with Oil Funds: Institutional and Financial Aspects.