Monopolies and Privileges
Ole Lefmann
[Reprinted from Progress, January-February
2003]
PROGRESS AND POVERTY
During the past century in technically developing countries the
economic progress lifted the vast majority of people out of dire
poverty and kept them in reasonable circumstances. They are still low
paid and poverty a recognisable ghost that in several countries is
veiled by a web of social security benefits and other public support.
The economic uplifting of people and their staying on the "high
level" of economy happened only because of the technical
development's ongoing demand for skilled labourers and service
providers. They will probably continue to experience economic progress
as long as the technical development continues; but the gap of wealth
between the privilege holders and the non-privilege holders is
currently expanding.
125 years ago Henry George asked why progress did not abolish
poverty. He found the answer and started the fight for Free Trade -
against monopolies, privileges and public protection of trade and
industry. That fight went on in the technically developed countries
for over a century. It became victorious, but though Protection as an
idea was officially rejected, public protection of trade and industry
was ended, and most of the monopolies were brought under control,
publicly protected privileges grew in number, and it has been growing
ever since.
THE SCOURGE OF PRIVILEGES
Privileges
- introduce and keep increased prices or inferior qualities of
commodities and service,
- expand the gap of wealth between privileged people and
non-privileged people.
- oppress poor people's influence on their own life, and oppress
their self-confidence.
- concentrate abundance of richness into the hands of a minority
of citizens who are served by a well-paid middleclass, but leave
poverty to the majority; who in technically developed countries is
kept in happy ignorance of the injustice by publicly administered
support and obscure explanations. The worst effects appear in the
technically less developed countries with a tradition for
corruption.
THE REMEDY AGAINST MONOPOLIES AND PRIVILEGES
Henry George in the end of the 19th century proposed that the
government should collect the rent of land, abolish monopolies and
privileges and stop public protection of trade and industry. This,
together with the minimising of public administration as described
later, was what he meant by proposing FREE TRADE that should put an
end to the oppression of non-privileged citizens.
However, he agreed that some monopolies/privileges would have to
remain because it would be impossible to abolish them, or because
abolition would be inappropriate. He proposed that those
monopolies/privileges that would have to be tolerated (so-called "natural
monopolies") should be run by the public administration. This was
common sense as long as only few monopolies should remain.
Since then, however, the range of privileges that we have to accept
has expanded enormously, and that has put George's recommendation of
public administration of all the monopolies and privileges we
tolerate in conflict with his strong recommendation that the
public sector should be kept as small as possible.
Henry George did not describe a solution to this contradiction that
did not exist in his time. Today it is up to his followers to
decide what to do with those monopolies/privileges that we cannot
abolish.
Before we are able to make that important decision we have to
consider which privileges we would have to tolerate and which tasks
should be run by the public administration.
THE PRIVILEGES WE SHOULD OR MIGHT TOLERATE
In the beginning of the 21st century it is reasonable to assume that
some citizens should or might have exclusive rights to:
Use of NATURAL RESOURCES such as:
- Land (for any purpose: production, residence, leisure, etc.);
- The sea, surface and sub-surface (fishing, farming and hunting
places, and resource extraction areas);
- Still or flowing water (for power and irrigation, and for
transport of people and goods);
- Orbital space positions (for research, and for collection
and/or transmission of information);
- Electro magnetic spectra (for transmission of information);
- Scarce natural resources on or from soil and underground;
Use of UNIQUE CONSTRUCTIONS, the exclusive rights of which function
like exclusive rights to use of natural resources, such as:
- Cables, wires and tubes passing public land or sea, or
officially registered on private land or sea (for transport of
energy, information, fuel and water);
- Rails, roads, bridges, tunnels, cables, and canals over public
land, or officially registered on private land (for transport of
people and goods);
- Air lanes and sea lanes (for transport of people and goods);
- Watermills, locks, dams, and water storages;
- Major power plants, (hydro, nuclear, or otherwise fuelled);
- Airports, harbours, rail stations and terminals;
- Satellites in orbits, and research rockets in interplanetary
space.
Provide of UNIQUE SERVICES, such as:
- Emission of money, and putting money into circulation
- Lotteries, casinos, betting;
- Police and security forces;
- Emergency preparedness for catastrophes such as fire, storm,
earthquakes, flooding;
- Cremating and burying corpses;
Trade in DANGEROUS PRODUCTS such as:
- Nuclear products;
- Drugs, medicine, narcotics;
- Poison, pesticides and fertilizers;
- Explosives and weapons.
Trade in DANGEROUS SERVICE such as:
- Commercial transport of persons;
- Medical, chiropractic, dental, etc. treatment of human beings;
- Commercial serving of intoxicating drinks and/or drugs;
- Exhaustion, out letting, discharging, storing, destruction and
burying polluting materials;
- Disposal of refuse and waste.
Install DANGEROUS INSTALLATIONS, such as:
- Gas, electricity, water;
- Erection of and taking down huge scaffoldings;
(This list is by no means exhaustive)
The list of privileges is growing longer every year and the
quantities of privileges in each category of the list are growing as
well. That means that the privilege holders constantly increase the
volume of privilege-profit they take from their customers without
giving anything in return.
PRIVATE OR PUBLIC ADMINISTRATION?
The followers of Henry George agree in public collection of the rent
of nature and of the publicly created rent, but they may give
different answers to the question: Which tasks should be run by the
public administration?
Socialist-minded followers, who do not mind Henry George's
recommendation of the public administration kept as small as possible,
would probably suggest that the public administration should run all
monopolies and control all privileges run by the private sector of the
society.
That proposal would recapture for the community the rent captured by
privileges, but it implies the risk that also effectively run private
privileges would be taken over by the public administration, which
would reduce competition unnecessarily, and also implies that the
control of remaining private privileges would be either insufficient
or make its costs too burdensome for the otherwise effective business.
Libertarian-minded followers, who praise Henry George's
recommendation of the public administration kept as small as possible,
would probably suggest that the public administration should run only
such monopolies/privileges that could not be run as good or better, or
as cheap or cheaper by the private sector, and they would probably
accept
no further public interference into private activities.
That proposal would recapture for the community some of the rent
captured by the private holders of monopolies/privileges, but it
leaves a considerable part of the privilege-profit with few private
privilege holders who do not give anything in return to their victims.
I assume that the preferable proposal should combine:
- abolition of monopolies and privileges as far as possible;
- keeping the public sector as small as possible;
- public collection of the Rent of Nature and Society for the
betterment of all citizens.
The following proposal will combine the above-mentioned three items:
***
Proposed Conditions of Public Activities and of Private
Privileges
1. The Public Administration should ONLY run activities IF:
- the citizens in general WANT the activities in question
to be run, and
- the private sector of the society CANNOT RUN the
activity in question as good or better and as cheap or cheaper,
either
- as a private enterprise operating completely on the conditions
of the competitive market, or
- as a private privileged company meeting the conditions
mentioned below (2.), and
- the publicly run activity is currently SUPERVISED by
the Monopoly and Merger Commission (or an institution like it)
under the responsibility of the democratically elected Members of
Parliament. The Parliamentary Commissioner (or the Ombudsman)
shall currently impress this responsibility to the Members of the
Parliament.
2. A Privilege should ONLY be given to a private entrepreneur IF:
- the activity COULD NOT BE RUN effectively and in
adequate safety without the privilege in question;
- the privilege shall be SUPERVISED by the Monopoly and
Merger Commission or an institution like it;
- the privilege holder shall ANNUALLY PAY to the public
purse a charge of the privilege, the size of which shall be
determined frequently by regular, fair and accurate assessments of
the highest amount any skilled and capable user would like to pay
annually for holding the privilege. The charge of the privilege
shall be publicly registered, and be publicly accessible for any
citizen at any time;
- the privilege shall be ABOLISHED if problems occur in
determining the size of the annual rent of it, or in collecting
the annual rent. Instead of abolition of the private privilege it
might be TRANSFORMED into a monopoly operated by public
administration, which, however, shall only happen if it meets the
above-mentioned conditions (1.). NO COMPENSATION shall be
granted if the abolition, or transformation into a privilege or a
publicly operated monopoly, is caused by problems occurred in
determining the size of the annual rent, or in collecting it for
the public purse.
3. Private entrepreneurs shall NOT be allowed to buy a privilege from
the public for an amount once for all - they may ONLY rent it under
the conditions mentioned above (2).
4. The Exception: The ONLY exception from the rules of payment of
rent mentioned above (2.) should be the Intellectual Property Rights
of inventors, composers, etc. to the value of their inventions,
compositions, etc. The incomes of intellectual property rights are to
be looked upon as rewards to the inventors, composers, etc. for their
inventions, compositions, etc. and should therefore be free from other
charges than the registration fees. In some countries the government
finds that the intellectual property rights has to be limited to last
for a certain period of years.
5. The revenue of the publicly collected privilege-profits shall be
used to the betterment of all citizens.
***
HOW TO DETERMINE AND COLLECT THE VALUE OF PRIVILEGES?
Henry George proposed that landowners should pay an annual charge for
their exclusive right to use the land. He had to leave the details and
practical legislation to his followers. He trusted that when the wish
for the reform he proposed became strong enough the method would
easily be developed.
In several countries around the world systems of assessment of the
rent of land have been developed, and where they have been properly
used, in Australia, Canada, Denmark and New Zealand, they have worked
satisfactorily.
A similar method would be the obvious method to determine and collect
the value of all privileges.
- Use a combination of competent laymen and publicly employed
specialists.
- Determine the annually charge as the highest annual payment
that would be offered by competitors who want to keep or take over
the privilege in question.
- Register the size of the annual charge and make it publicly
accessible for everybody at any time.
- Inform the citizens publicly that this value is not created by
the privilege holders, but by the society and that it therefore
belongs to all citizens on an equal footing.
- Inform them also that it will damage the economics if the
revenue of privilege-profits go to few citizens only, but it will
be a blessing to society if it is used to the betterment of all
citizens.
- Use the revenue to the betterment of all citizens or distribute
it to them in equal shares.
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