Happy Independence Day! And on this occasion celebrating freedom, maybe it is time to think about taking a page out of the Soviet Union’s handbook. Freedom and Soviet Union are not often mentioned in the same sentence but I figured that would make you put your beer down.
What does the collapse of the Soviet Union have to do with us here in the free market capitalist U. S. of A? Well a lot. The Soviets thought that no one should own private property or more precisely everyone should own everything collectively. Since everyone owned everything and the assets were more or less “free” no one really had all that much incentive to take care of them.
Sound familiar, well it should, we follow exactly the Soviet model with all of nature and many societal assets and the result is similar epic mismanagement.
So what is the lesson? When the Soviet Union faced collapse in the early 90's, a teetering economy, political apathy, and failed collectivist experiment, they did an extraordinary thing. They took all the public assets that were being mismanaged and offered them to the public. It was a voucher system that transferred oil companies, steel mills, pipelines, car-makers — essentially the entire Soviet economy — from state hands to the private sector. They allowed people to go to their local post office and pick up their share of these state assets.
Some people wadded the vouchers up and tossed them in the trash. Some sold them for a bottle of vodka and others collected them and became the Russian oligarchs. Russia’s economy went from per capital GDP in 1991 of $3,427 to $12,995 in 2011.
Now the transformation was not a perfect one, that is for sure, and what happened in Russia is not a template for action. But it does illustrate an important concept: Assets can be freed from mismanagement, moved from one system to another spurring huge economic growth.
In our system the collectively owned or “free” assets — fish stocks, air, wildlife, or for that matter human health — suffer the tragedy of the commons. Our economy cannot include these assets because they have no financial value, which is the current language of our economy and the result is they are being neglected and destroyed. But it need not be that way.
The successful transformation of excluded assets into financial wealth for the benefit of all has a rich history. Women in the U.S. were largely absent from the workforce until the 1970’s. By including them, we turned the intrinsic value of women into $3.5 Trillion dollars of additional annual GDP.
Once, African Americans were held in slavery. Not only was this a horrifically inhuman institution, it deprived the U.S. of an invaluable human resource. Freed to realize their human potential, African Americans now represent $1.2 Trillion of GDP.
All the way back to the founding of this country, we have had a knack for using finance creatively to include formerly excluded assets. If you were willing to come to America and work – even at the lowest level in indenture, you could have a job for 5 years and at the end of that five years have paid off your debt and own 100 acres of land. The human potential of the landless class in Europe was powered into financial wealth by the possession of land that could be farmed or sold for cash. Some economists point to the creation of a land owning, capitalized populace as one of the most important engines of our country’s fabulous growth and prosperity.
We can actually trace this concept of inclusion all the way back to ancient Greece where a few insightful individuals recognized that an economy that included only the ruling landed elite robbed Athens of the creative energies and entrepreneurialism of the majority of the populace. That realization was the birth of Western Civilization and Democracy, which was as much an economic as it was a political movement.
If we include all natural assets in our economy, we can usher in a new paradigm for our country that aligns our social and environmental values with the engine of our modern economy to power a more robust, fair and prosperous future. Now that's something to celebrate!