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The New Economics: The Special Proposal

Originally printed in the July 2012 Issue of Country Wisdom News.

The field we call New Economics abounds with ideas and projects intended to help build a just, prosperous and environmentally sane economy. In this column I’d like to tie together and complete several lines of reasoning taken up in my last three columns, all of which have touched on the related ideas of civil capital and civil endowment.

We have seen that economic capital is a key part of any modern economy and that the basic concept of capital could be reframed and expanded to include the idea of capital for the common good: civil capital. Furthermore, we’ve discussed the possibility that a system employing such capital could go a long way toward easing hardships and healing injustices within our human family. Finally, we have seen the possibility of a leap, one that combines rationality and intuitive insight, and draws together confidence in the basic goodness of humanity with the possibilities of the gift economy. To make this leap is to see that the establishment of civil endowments is both desirable and possible. The final step in this discussion is a pragmatic one: How can this idea be put into practice? Ah, the details.

I believe that a civil endowment system, involving any number of decentralized endowments, can and should be established on the basis of civil society and civil society organizations. That is a most basic point, and it says a lot. It says that we are not going to ask the government to do it, tempting as it may be for some. And, we are not going to assume that self-interested parties (businesses and the wealthy) would do such a thing either—at least not on their own initiative. The fact is that civil-society organizations (i.e. educational, NGO, and nonprofit organizations of all kinds) already manage vast sums of money. The top 25 US grant-making foundations had over $143 billion in endowment assets in 2009. (This is after the crash of 2008.) And Wikipedia lists over 70 US universities with endowments over a billion dollars. Princeton, for example, has $17 billion under endowment—an average of over two million dollars per student

No doubt social comment might be made on these facts, but I draw an additional conclusion: the legal and social structures currently exist for nonprofit organizations to manage large endowments. Let’s take the leap and create endowments for the whole human race.

It gets interesting when you start thinking about investing for the whole of the human race. Bringing in the notion of “the universal beneficiary,” which includes human beings yet to be born in the future, makes it even more interesting. Most conventional endowments, of course, invest to generate short-term cash returns for their organizational mission. They are not necessarily concerned with the impact on society or the environment that those investments make. Then there are private investors in the category of socially responsible investing (SRI).

More recently the related term “impact investing” has become popular. These folks are very concerned with how their investments affect the world, but they still own them. They get the productive returns, and the equity remains in their hands. Civil endowments, on the other hand, would provision both the productive return and the equity of their investments for the common good. And, by definition, their operational investment policy would need to work toward the highest standards of environmental and social impact, simply because the beneficial owner of such investments would be, quite literally, everybody.

How will wealth flow into civil endowments? I believe that human generosity is sufficient to start a trickle-in of money for such a purpose. As time goes on, certain “structural generosities” can be put in place that take tiny slices of various transactions on a macroscopic scale, gradually building a permanent endowment system. The productive return of civil capital itself can also be used to build the endowments.

The management of civil endowments is the area in which I find the most skepticism when I talk to people about this. Do we have the skill and the integrity to manage investments for the whole human race? I suggest that we have to try. To succeed, we simply must craft fiduciary institutions that have the proper goals, accountability, and oversight. In addition to the primary stewards of civil endowments, there should be a second level of organizational oversight, a certification process from an independent standards body to verify that endowments stay within agreed-upon practices. This certification would be required for an endowment to continue to receive civil capital funding.

Perhaps an article such as this raises more questions than it answers, but at least it plants a seed. You can find these ideas expressed in much greater detail in my blog (trickle-in.blogspot.com), and in my book, Civil Endowment Theory: The Special Economics of Compassion. The Special Proposal is, first and foremost, a call to action. It is the suggestion that, once we understand the potential of this idea, we go ahead and put it into action. I feel honored to present this proposal to you for your contemplation, and perhaps your eventual participation.