5 Chapter 5 The Bounty of the World
We didn’t choose the conditions of our birth. There are billions upon billions of worlds in this galaxy and billions upon billions of galaxies this size in the part of the universe we can see.
We were born here.
We were lucky.
This is an incredible planet.
The book ‘The Meaning of Life,’ a part of this series, talks about the conditions needed for the thing we call ‘life,’ as it works on earth, to come to exist, reproduce, and evolve. We would not expect these conditions to be common. Even if we consider the most basic condition alone, the requirement of water existing in a liquid form, only a small percentage of the worlds so far discovered appear to qualify at all.
We don’t just have water in liquid form.
We have oceans of it.
We have a mixture of gasses in our atmosphere that is basically perfect for circulation of this water, making it available in just the right quantities almost everywhere. Billions of tons of water are lifted from the oceans each day through evaporation. The evaporation purifies the water, removing all salts and contaminants that might accumulate to harm the living things below; the water floats upward forming massive clouds that circulate across the land, dropping the water in ways that create incredibly diverse ecosystems.
There is great synergy in this diversity. Plants need carbon dioxide to grow; animals provide it; animals need oxygen which plants produce. Plants are food for the animals and animals take this food, digest it, and return most of it to the earth to feed the plants.
The earth is extremely productive and incredibly bountiful.
It was productive and bountiful long before humans arrived, producing trillions of tons of plant material which fed trillions of animals. When the first humans arrived in each area, we could simply take this bounty for ourselves; we had abilities to organize, plan, make tools, and otherwise dominate the other animals and they couldn’t do anything about it. The bounty of the earth is available for the dominant animals to take at their pleasure. We are the dominant animals. If we want the bounty of the world, it is ours for the taking.
Who Benefits From the Bounty?
The human race is lucky we wound up evolving on such a bountiful planet. It has food in vast abundance and great variety. It produces fantastic amounts of lumber that we can use to make things and burn to keep us warm and cook our foods. Its has abundant iron, aluminum, silicon, and calcium, which we can process into steel, concrete, glass, electrical wiring, LED lights, photoelectric panels, water pipes, bridges, skyscrapers, and other things that can make life better for the members of the dominant species. If you were to compare the composition and productivity of the earth with other known planets (including the more than 5,000 verified ‘exo planets’ circling other stars), you would not find anything even remotely close to this wonderful world. It is clearly at the very top of the list of the desirable places for earth life. It is so much better than all other known worlds that, if we were trying to come up with names to refer to the different worlds, the only names that would seem to fit would be terms like ‘heaven’ or ‘paradise.’
But not everyone benefits from this incredible bounty.
For some people on earth today, live really is a paradise. They have everything they ever want and need. They have so much money that, if the want something to eat, they don’t even consider the price. If you make a million dollars a second (which many people do), what difference does it make if a steak costs $20 more than a hamburger? If they want a steak, they get a steak.
Others live very hard lives. More than ¾ of the people who live on Haiti live on less than $2 per day. When Columbus first wrote about Haiti in his logs, he described it as ‘terrestrial paradise.’ (Columbus actually came up with theory that the land of Haiti was geographically closer to heaven than Europe; this was how he accounted for the incredible abundance there.) Haiti had many things that Europe lacked and, as soon as European companies found out it existed, they moved there to rape the island of everything valuable it contained. The result was utter destruction. Now the island is consistently rated as one of the worst places on earth to live. The government sends out trucks to pick up the corpses of those who have died there. Sometimes they get behind and the smell is horrific.
Not everyone benefits equally from the enormous bounty the world produces. In different societies, the bounty goes different places. If we want to understand the way different societies work, we need some way to follow the different flows of value and wealth that come to exist on the world over time to their destinations.
In societies that use money to divide and distribute wealth, we can do this by following money. In Pastland, for example, we muse money to divide wealth. People who get money actually get wealth. (Remember: each dollar bill is actually a certificate that represents ownership in a pound of rice that already exists and is in storage in the central granary. If you get a dollar bill, you get a piece of paper that is ‘worth’ whatever value people mentally assign to a pound of rice.) Each year the land produces wealth. The more money people get, the more of this wealth they get. Some of the money they get might be thought of as representing the bounty of the world around them. If we can define this bounty in a practical way, so we can tell which dollar bills represent the bounty of the land, we can follow this bounty, and determine who gets it, by following these dollar bills to the people who get them.
Our group in Pastland has a natural law society. (This is due to the moratorium on countries and ownership of land. We haven’t banned countries and ownership forever, we just don’t want to deal with the conflict and violence that go along with them until we have had time to solve other problems.) Natural law societies are simple. No country or person owns any part of the world. Ownership (by countries or any human entities) leads to great complexities. Since natural law societies don’t have ownership, they don’t have these complexities. The are simpler societies than societies that have any kind of ownership. (Sovereign ownership, the kind of ownership practiced by countries, is only one of many possible kinds of ownership; it is complete, absolute, and unconditional ownership; there are many other systems where people own, but only own partial rights.)
We can look at what happens to the bounty of the world in natural law societies first. Then, once we understand how this works in simple societies, we can move all of the same people and same land and same kind of money to a more complicated society (for example, the territorial sovereignty society that people who were patriotic and loved their nations first tried to build in Pastland) to see where these same dollar bills would go on this other system. This allows us to see where the bounty of the land goes in each system and to understand the different incentives these flows create.
The Bounty of the Pastland Farm
In Pastland, we live on land that some people might call a ‘swamp.’ Others may call it a ‘productive freshwater marsh.’ Others still might call it a ‘rice farm.’ No matter what we call it, the land produces 3.15 million pounds of rice a year.
None of this production is due to anything humans have done.
The land produced the exact same amount before our group (the first humans) arrived in the area. We aren’t responsible for the production, nature is.
In any area, the dominant animals have first claim on the things the land produce. Before we arrived, other animals got their pick. The ducks and geese ate whatever they wanted. They could have stayed all year and, if they had some way to store the grain, it would have fed them all year. But there is a bounty available for ducks and geese in many places. They can fly pretty much anywhere they want and find food. Since they have a choice, they choose to live in the north during the summer, to avoid the heat of the tropics, and choose to live in the tropics during the winter, when it is cold in the north. Other animals also migrated in various ways, taking food where it was easiest to get and living where life was most pleasant.
When we arrived, we became the dominant animals in this area. We had first claim on the wealth it produced. We could take what we wanted. Other animals only got what we left behind.
What did we do with the wealth we took from the land?
First, we ‘sold’ it. This basically means ‘traded it for money.’ We made this trade by using dollar bills as rice certificates. Each dollar bill represented one pound of rice that was in the granary. We then divided this rice by dividing the dollar bills.
We put $3.15 million in cash on the table in the front of the meeting room. We then opened the meeting and had people come to the front and explain to us why they thought we should give them some of this money.
Kathy came up first, speaking on behalf of her workers. She said we should give her $700,000 to give to her workers and suppliers. She told us that she had promised them she would do her best to make sure they got paid and she wants to keep her promise. She told us that if we paid the workers and suppliers this year, they would know that we appreciate their efforts and feel confident we will reward them in the future. These people gave up things of value to them, including their time, to make sure the wealth nature produced was available to the group as a whole. If we pay them the right amount of money (market rates, as discussed earlier), they will feel whole: they have broken even and gotten enough money to compensate them for the things they gave up. They are willing to do these things if they at least break even. All she wants is for us to allow her to keep her promise to them and pay them enough to break even.
None of them are going to get rich. They are only going to get enough money to break even.
We voted and approved the expense. Kathy came to the front with a luggage cart and loaded huge stacks of dollar bills onto the cart. Later, she held another meeting with her workers and suppliers and paid them all.
Kathy didn’t get any of this money. She didn’t ask for anything for herself, she only wanted money for her workers and suppliers.
After she left, someone came to the front and said that we need to let Kathy know we appreciate the things she did. Kathy didn’t do any actual work. She was crippled in the events after the time warp and can’t even get out of bed without help. But we should pay her because, even though she didn’t do any actual physical work, her efforts and skills brought us great benefits. She knew what to do and organized a system that causes wealth to flow from the land into the grain silo. We want her to keep doing these things. It is true that she volunteered to do them and didn’t ask for anything. She might continue to volunteer for the rest of her life. But she might not. Even if she does volunteer for the rest of her life, if people don’t think organizing is important enough to get rewarded, they may not take the time to learn the skills needed to organize. When Kathy dies, no one may know how to do the things she did and we may all starve.
It makes sense to pay her. We all benefit by this. Even if she doesn’t care for the money and gives it all away, the fact that the money goes to her tells everyone in the community something important: You help the human race and the human race rewards you. People will step forward to do things that they wouldn’t do if this relationship wasn’t established in their minds.
After we pay Kathy, there is $2.4 million left on the table.
This money is there because nature was kind and generous to the residents of this part of the world. It is not due to anything any human has done. If nature had not been as generous, the rice that this money represents would never have come to exist, and the table would be empty after paying everyone who does anything in production. But nature is generous, so the money is there.
No one in Pastland can take credit for the generosity of nature. No one in our group created the dirt of the swamp. No one is responsible for the evaporation on distant oceans that eventually led to the rain that the rice needed to grow. No one here painstakingly put together the 16 million ‘base pairs’ that are in rice DNA and provide the coded instructions that tell rice plants how to grow. All this existed before humans.
You could think of the 2.4 million pounds of rice that this money represents as the ‘bounty’ of the land around us. It is a gift from nature. Whoever gets this rice gets gifts from nature. We will divide these gifts by dividing the $2.4 million in cash. Whoever gets some of this money will get certificates of ownership of the ‘gift rice.’
The Basic Productivity of the land
In each of the societies we examine in this book, we will divide the bounty of the land by dividing money. We need name to represent ‘the money that represents the bounty of the land’ so we can discuss this flow of wealth without having to use this long term each time we want to refer to this money.
This book uses the term ‘basic productivity’ to represent the ‘money value of the bounty’ of the land.
In the case of the Pastland Farm, the bounty is rice. Not everyone likes rice. Some people never want to see a bowl of rice in their lives. Just because people don’t see rice doesn’t mean they don’t benefit from the bounty of the land. They benefit by getting money which they can trade for anything they want.
They don’t get the bounty of the land by having a truckload of rice dumped on their lawn; they get the value of the bounty of the land in the form of money.
The Free Cash Flow And The Basic Productivity
In our 21st century world, many farms are bought and sold in countries all around the world every day. If you look on websites where people advertise these farms, you will see that sellers put a certain number in their ads that they clearly think must be important to buyers, because they put it in very bold type and use many tools to call attention to it.
This is the ‘free cash flow’ of the farm.
This is the number buyers care about.
If they buy this farm, they will be buying a package of rights.
These rights include the right to get a certain amount of money, for free (without doing anything) each year that passes. They naturally care a great deal about how much free cash ‘flows’ from the farm, and therefore how much free money they will get as owners.
The amount of free cash flow is an extremely important matter to potential farm buyers. If there are two farms for sale at the same price, but one has a higher free cash flow than the other, buyers will naturally want the one that gives them more free money each year. If a farm produces a higher free cash flow, people are willing to pay higher prices than they would for a farm with a lower free cash flow.
For example, a farm like the Pastland Farm, which produces $2.4 million a year in free cash flow, is going to sell for a lot more than a farm that barely produces enough to cover its costs and has only $24,000 a year in free cash flow.
Some potential buyers don’t care about anything else (other than the free cash flow).
Corporate buyers, for example, only look at numbers. They have shareholders who tell them exactly what they want. Almost always, they want the same thing: the most money they can get for each dollar they invest. The corporations hire buyers to find properties that can meet these guidelines and buy them.
A buyer who wanted to live on the farm might care about a lot of things that a corporate buyer wouldn’t bother with. Is the farm close to schools and stores? Is the farmhouse big and comfortable? Is there a pleasant view? Are there trees for shade? If you are going to live there, these things will matter.
If you are a corporate buyer, none of these things matter. You aren’t going to live on the property and may never actually lay eyes on it. Corporate buyers often buy and sell farms to other corporations for tax and other reasons unrelated to farming. They don’t send people out to look at the land. Why bother? It doesn’t matter to the shareholders. Shareholders only care about one thing: the free cash flow. When they buy, they basically ignore all benefits of ownership other than the right to get the free money. That is what they are buying.
It is true that some farms are purchased by people who intend to live on them and operate them. But most farms that generate free cash flows like the Pastland Farm sell for prices that are far above the means of people who are interested in actually farming land personally. A farm like this might sell for $50 million or more. If you want to own this farm and operate it, you will have to accept living in a remote place with few services. Your kids will have to take a long bus ride school. If you need to go to a hospital, you will may have to travel for hours. You will be living in a swamp and have bugs around. They won’t be any fancy restaurants or nightclubs. Generally, people with $50 million burning a hole in their pocket aren’t going to want to live like this.
In practice, corporations buy almost farms that generate these free cash flows. I was raised on a ranch in Montana. I remember the corporate buyers coming to the ranch to make offers when I was a kid. He refused to sell and swore a blue streak about them as soon as they left. He never did sell. But his kids didn’t want to live on a ranch in remote Montana. The land now belongs to a corporation. I knew all the farm owners around the area when I was a kid. They were all old people, having inherited the farm during the depression, when people couldn’t move to cities because there were no jobs. Now, corporations own all this land. Kids don’t want to live in remote areas and put up with bugs and isolation, when they can make the same amount in cities. Corporations buy the land.
The corporations care about one thing: the numbers. They don’t care about the great stoker furnace that my uncle was so proud of. (Put the coal in a bin and an auger feeds it constantly. No more getting up at 4am to stoke the furnace!) This wasn’t a selling point. The corporations only cared about the free cash flow the land generated. The corporations are patient: corporate charters in the United States never expire; the corporations last forever.
In the end, the farm is going to be a kind of ‘black box.’ A certain amount of money flows from this ‘black box’ each year, for free.
What happens inside the box? The corporations don’t care. All they care about is the amount of money that flows out of the box.
There is a standard term for the amount of money that flows from a farm, without anyone involved in production having to do anything: the free cash flow. In this specific example, (the Pastland Farm) the free cash flow will be exactly equal to the number I call the ‘basic productivity,’ which represents the money value of the bounty of the land.
I don’t want to use the term ‘free cash flow’ however, in discussions, because there are times when farms produce enormous free cash flows, but not only aren’t bountiful, they don’t produce anything at all. The problem is that the money that represents the free cash flow doesn’t have to come from the farm itself, it can come from government subsidies, options to drill oil or to allow the land to be converted to housing under certain conditions, payments to farmers who agree to not grow crops on their land, and many other sources. The corporations that are buying and selling property rights care about the amounts of cash flow from the land, not whether the land actually produces anything useful.
I need a term that represents real value that comes to exist due to the bountiful nature of our world, so we can see how bountiful the world is (measure the bounty in dollars) and determine who gets this bounty. In many cases, the ‘free cash flow’ advertised by sellers of cash-flow generating properties will be identical to the basic productivity, and for practical purposes we can normally use the free cash flow that is advertised by sellers as a proxy for the basic productivity, but I don’t want to simply use the common term, because the basic productivity will always represent something real of value that gets created over time and makes the world better for the human race.
If there is more basic productivity, the human race is always better off. More wealth has come to exist on the world and will continue to come to exist each year in the future. (The basic productivity is a flow of money, just as the ‘free cash flow’ is a flow.) You may not be better off personally, because you may not get any of this money. But someone or some group has higher incomes. If we want to understand who benefits because the world is bountiful, we need to be able to follow the money. We need to pick a spot where we can identify the money that represents the basic productivity. (Preferably as something we can clearly identify like a huge pile of dollar bills on a table.)
Then we have to follow the money.