The World Bank and the United Nations Department of Economic and Social Affairs recently published a report on the potential of the blue economy. Like other reports and initiatives on blue growth, the author of the report combined optimism with the growth potential of ocean and coastal business sectors, with caution about the potential for this growth to be unsustainable. The report describes a number of key sectors in the blue economy, such as fisheries, marine biotechnology, coastal tourism, shipping and offshore and coastal mining. Conforming to what is now a mainstream view, the report emphasised market-based mechanisms and private investors as key to help fund the transition to a sustainable blue economy in developing and small island states.
There are many critical issues about existing visions for expanding the blue economy. In our paper on the 'commons fund' idea, we consider one of the gaps in blue economy visions: how the economic benefits of this are distributed? Clearly part of the hope attached to blue growth is its developmental potential, which are based on two assumptions. First, it will provide more and better jobs in coastal developing countries and small island states. Second, blue growth can raise more money for governments, which in turn will enable them to spend more for their citizens. Thus the World Bank and others are encouraging client governments to borrow from private investors to help finance the transition.
The question of how this income will be used is generally overlooked in reports on the 'sustainable blue economy'. However, as the literature on the 'resource curse' suggests, government income from selling or renting natural resources has often caused major and lasting problems. Countries that rely to a great extent on resource wealth are often characterised by higher than average levels of inequality, corruption and civil conflict. Many of the depressing case studies illustrating the resource curse are from Africa and among small-island states. Could blue growth follow the same worrying trends?
The commons fund idea
The resource curse remains a contested idea. But it is undeniable that in many countries, authorities have a dire record when it comes to using natural resource wealth for enduring benefits, particularly for the most marginalised or in need. Generally, the worst examples come from countries that rely on income from mining and oil. But these problems may be true for other blue economy sectors. Previous research has failed to demonstrate how the millions of dollars received by some governments from expanding foreign fishing access to domestic waters and international fish trade has actually improved the lives of most citizens. How governments manage public income from 'healthy blue assets' therefore becomes critical to consider in any blue economy vision.
In our report we put forward the idea--based on a growing international movement--that an interesting way for governments to manage resource rents is to avoid spending them. Instead, this stream of income can be used as a pot of money for investment, with the dividends from this investment being equally distributed to every citizen via a permanent unconditional cash transfer, given either monthly or annually. The concept is known by several titles, and here we refer to it as a 'blue commons funds'. Arguments for these funds are not just based on economic considerations--the fund idea has a powerful message about the common, or shared, rights people should have over nature.
The origins of the common fund idea
The idea of establishing a permanent fund and distributing the income from this fund to all citizens may seem radical. Yet the basic proposal has been made by many people, including economists at the World Bank.
The first person to develop this concept was Thomas Paine, a British political activist living in the 18th century, who spent time in both the US and France. Paine was outspoken on many subjects, including colonialism and slavery, and he is credited as being one of the leading intellectuals that led to the American revolution, and the birth of international human rights. Towards the end of his life he focussed on property rights, as he was appalled at the steady loss of common land, and the enormous wealth that people with private land enjoyed over the peasant class. He proposed substantial levies on private ownership of land, including a hefty land inheritance tax. He recommended that the resulting income needed to be protected from political interference, so he envisaged a National Fund, which would distribute all the income raised through land levies equally among citizens, via a monthly pension payment for those over 55, and a one off payment too all people turning 21. By his calculations, the Fund would be able to make a substantial contribution to reducing inequality.
Paine saw this as a 'guaranteed minimum income', meaning the wealth of 'natural property', which was bestowed by God to everyone, should ensure that all citizens had enough money to live in decency. The payments from the Fund were not acts of charity; they represented people's rights. Today the more familiar title is 'basic income'.
Paine's ideas were revived nearly 80 years later, when the US state of Alaska agreed to establish a permanent fund based on revenue from oil. Since then 50% of the interest made by the fund is given to every Alaskan citizen as an annual cheque.
Principles of a blue commons fund
The idea for a blue commons fund is already partly up and running. Sovereign wealth funds already exist in many countries, and most have been established with windfall payments from natural resource sectors. Alongside Alaska's fund, Norway's oil fund is probably considered the most impressive. In the 1980s Norway's parliament agreed to set up an independent fund, managed by a governing board. The fund invest in both domestic and foreign assets. Only the income from this fund is then made available for government use. Setting up the fund was a difficult decision, as the government lost substantial income, partly offset by increasing levels of direct taxation. But over the years the fund's assets have grown to over a trillion USD. Because of this, Norwegians are among the most wealthy people on the planet. The Shetlands Islands have done something similar with great success.
Today, there are over 60 national or sub-national sovereign wealth funds, and the majority of these have been based on mining and oil. In Africa, countries including Mauritania, Botswana, Ghana, Nigeria, Equatorial Guinea, Sao Tome and Principe, and Angola have set up their variants. In some of these countries, these funds are already using income from the blue economy--mostly from offshore oil and gas. Yet the management of these funds is controversial, and some have been calamitous failures; lacking transparency and being highly vulnerable to political interference and corruption.
As we describe in our paper, a commons fund linked to the blue economy needs to be based on several core principles:
It has to be based on the ideal of common ownership of all natural resources. The trend in many places is to sell off and privatise as much of nature as possible, in order to generate short term profits. There is a risk this may characterise blue growth in developing and small-island states, if these increase their dependence on foreign investors and follow market-based 'solutions'.
It has to be based on the ideal of 'inter-generational equity'. Many people's support for a commons fund is based on the objection that one generation can benefit by depleting natural capital, thereby denying future generations the same opportunities. The sustainable blue economy concept has to elaborate on how this will be avoided. The commons fund is part of the solution, as it saves the income from resources in perpetuity, as is the case with Norway's oil fund. Many sovereign wealth funds have failed to follow this principle, and have therefore been depleted. Indeed, some have been used as collateral to increase their country's debt, such as in Angola.
It has to be independent. Many problems with sovereign wealth funds is that the pot of money has been too easy to access by governments. Although the Alaska fund is the leading example of a commons fund based on universal cash payments, it is also a case study on how these funds can be abused; recent governors have pushed through corporate friendly tax cuts, meaning the state's budget has become more and more reliant on the permanent fund. Without public debate, there have also been a relaxing of rules on how the fund's interests are distributed between the state government's budget and the universal cash payment. The share left for Alaskan citizens has diminished to less than a quarter of what it could have been.
The fund's investments and interests has to be transparent. Again, Norway is a shining example. High levels of transparency has ensured public debate on how the oil funds are invested. Because of this, the Norwegian parliament has agreed to direct the oil fund board to disinvest in coal projects, and also timber companies that do not meet ethical and ecological standards. Other sovereign fund managers exist in a state of confidentiality, which is an anathema to the commons fund concept.
The levies for a common fund?
The idea of a commons fund needs to be elaborated further. A key issue lies with what levies are paid into the fund. Royalty payments and profit sharing arrangements are the usual sources of income for sovereign funds based on the extractive industries--oil and mining. For many coastal and small island states these sources may be appropriate. There is a separate argument on whether governments should allow prospecting for these resources at all, but if we conceded that mining, oil and gas will continue to form part of the blue economy, then establishing the commons fund could be the best way forward.
Beyond these lucrative extractive industries, levies from the blue economy could come from all commercial exploitation of ocean and costal resources. This would include fisheries, for example. Under a commons fund idea, what is considered the access payment, which today is almost always paid to the government, would be redirected as income to the commons fund. A separate fee would be payable for government management costs.
A commons fund may also include levies on pollution, following the ideal of the 'polluter pays'. Specifically, a proposal for a commons fund is to include income from a 'carbon tax'. This may co-exist with the proposed payments for 'blue carbon storage' that many organisations like (such as the World Bank and the FAO), but a carbon tax is a more progressive levy as it directly targets companies producing higher carbon emissions. It is simpler to administer as well, given that estimating carbon stored in coastal and ocean habitats is extremely complex and expensive.
Of course, a commons fund could evolve beyond these levies; a percentage of the entrance fee to marine national parks could be another levy, as could a tourist tax. The key point, as Thomas Paine envisaged, is that we should recognise a common ownership of nature among all people, present and future, and therefore it is right that capital raised from the private exploitation or use of these shared resources ought to be shared equitably as well. Otherwise, our natural capital is most likely to be a source of growing and uneven private riches.