2. Resource Rents

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“No-one can own the fish of the sea” — Mr Justice Cranston, in a High Court ruling on fish quotas, 10.7.13 (1)

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Amongst economists it is generally understood that the term ‘land’ includes all natural resources, all gifts of nature, natural forests, wildlife, minerals in the ground, fish in the sea etc.   This definition raises the question of ownership, exploitation rights and also the concept of  Resource Rents.  Justice Cranston’s ruling could apply equally to all natural resources.

It is debatable whether land is actually a natural resource. Food, air and water are not seen as resources but as the very essentials of life; land is just as essential. Perhaps resources may be considered as necessary for civilised life, but not life itself; human beings existed and flourished, however primitively, before the discovery of minerals, coal or oil. However for the purpose of this article land is considered as a natural resource, if not the most fundamental of all resources. The questions raised here are about the control or ownership of these resources, and who should receive the benefit?

The basic principle of land value taxation may be applied equally to all natural resources, ie. as all natural resources are a gift of nature they cannot be owned, not even by governments or nations(2). Public custodianship may be accepted by general consent as a practical administrative necessity, but a wise government would be careful to distinguish this from ownership.

If ownership of a natural resource is to be allowed, then the benefits derived may be equally claimed by all human being on the planet, who could be seen as the collective owners. This of course raises the issue of practicality – or the impracticality of determining such an equal shareholding. This problem has been resolved historically by the convention of accepting that each nation (or tribe) may claim ownership of those resources over which it has territorial control, so natural forests, minerals, water, oil or fish in the sea are allowed to be claimed by general unwritten consent amongst all nations (3). This dispensation has obtained throughout history (despite periods of warfare) but is now coming under some strain with the exponential growth of world population, the rise of international corporations and the phenomenon of globalisation. Claims for the ownership of natural resources are now put forward by private companies, on the strength of their new control, not of territory, but over the economy of the erstwhile owner; the private economies of corporations are now often greater than those of the host country, so they are able to dictate the terms of gaining access to resources. These developments have given rise to a new awareness of the value of the world’s natural resources and the issue of ownership.

The principle guiding resource rents is that no individual or organisation has the right to appropriate or exercise control over any gift of nature without recognising the debt to society, in the form of an appropriate payment. Such payment may be described as a Resource Rent. A land value tax is a similar payment, known by economists as the economic rent.

However, where LVT is concerned it is important to distinguish between rural land and urban land. Rural land may have value already due to natural circumstances, and this may be increased through directly applied work. Urban land however requires no such work; it simply has to be there. The three dimensional resources of coal, oil, fish etc. are tangible physical resources that require work to convert them into useable wealth. With urban land, what is being considered is a two dimensional area on the surface of the earth that only has value because of its location within a man-made agglomeration. All other natural resources require work directly applied to the resource to realise its value as tangible wealth. Where natural resources are concerned the increase of land value due to agglomeration does not apply; the natural resource may be remote from the location that benefits from its exploitation; the increased land values in Aberdeen are due to remote ‘work on land’ a hundred miles away in the North Sea.

For all these reasons it is more appropriate for the wealth derived from natural resources to be taxed through a licensing or leasing system, whereby a private entrepreneur is granted a lease to exploit the natural resource for an agreed return over an agreed period to the controlling government – a resource rental.

Another option is for the government to invite companies to bid for a contract to carry out the extraction. Who ever came in with the lowest bid and the best terms and conditions would get the contract for a fixed period.

(1) http://www.theguardian.com/environment/2013/jul/10/fishing-quotas-smaller-vessels-court

(2). Private ownership is only legitimate where it is related to productive effort (work). Refer to Related Essays: – ‘Work, Gift and Theft’.

(3). Fishing of the open seas beyond territorial limits has always been seen as open to all nations. Inside these limits disputes are commonplace.