“Is Intergenerational Equity possible?” – An Interview with Rahul Basu

Rahul Basu works on implementing intergenerational equity, beginning with minerals in Goa. With a background in the world of finance and economics, Rahul proposals have resulted in the creation of the Goa Iron Ore Permanent Fund. He spearheads the campaign to modify the treatment of mining in the IMF’s Government Finance Statistics Manual and the UN’s System of National Accounts. Rahul is Research Director, Goa Foundation, an environmental non-profit in India, and a member of The Future We Need, a global movement to make intergenerational equity foundational for civilization.

Let’s start with the idea of Intergenerational Equity (IE) – what is it, and why is it critical for the future?

What is intergenerational equity and how to achieve is a question that has arisen in multiple fields including public finance and international environmental law. The core understanding is that the present generation alive is a member of a continuing series that includes the past and the future, all of whom are morally equivalent. While we cannot change the past, a simple way to ensure intergenerational equity is to ensure that our children and future generations inherit at least as much as we did. This ensures that they are at least as well off as we are. Ideally we would leave a legacy on top.

We must first maintain capital for future generations, only after that are we are entitled to consume the fruit of our inheritance, the usufruct. The rights of children and future generations must come before ours, as they have zero political power.

Maintaining our capital is necessary to ensure we are sustainable. If each generation consumes part of the inheritance, then soon enough there’s nothing left for future generations. Violating intergenerational equity is at the heart of the moral problem with our multiple sustainability crises – carbon, biodiversity, etc. We are consuming our children’s inheritance, like vampires.

If we are to achieve a sustainable planet, we need to make the intergenerational equity principle foundational for civilization. Capital maintenance first, then consume the residual. Put differently, first be sustainable, then develop. 

At the moment, our global footprint is some 1.7 earths. We are not sustainable. And some people still need development. The obvious answer is that in aggregate we must reduce our footprint, i.e., consume less. Since some people still need improvement in their standard of living, others would have to reduce their footprint even more.

What is the Public Trust Doctrine?

In many legal jurisdictions, there is an idea that [some] natural resources are held by a representative government in trust for the people and future generations. At a planetary level, it has been proposed that all humans are joint owner/custodians of the planet for future generations. Under the UN system, nations have Permanent Sovereignty over Natural Resources. In common law countries like India, this idea of natural resource held in trust is the Public Trust Doctrine. In civil law countries, this is called the Public Domain. The Public Trust Doctrine may be explicitly in the Constitution (Pennsylvania), or laws relating to natural resources or indigenous peoples, or may be interpreted by courts (India). 

For resources outside national sovereignty, there are similar concepts. For example, under the UN Convention of the Law of the Sea (UNCLOS), deep sea minerals in international waters are considered the Common Heritage of Mankind, with the International Seabed Authority acting on behalf of humankind. A proposed global atmospheric trust is at the core of much climate change litigation.

The Public Trust Doctrine and variants can be seen as a way of increase the likelihood of implementing intergenerational equity with natural resources by elevating their status in terms of standards of care required vis-à-vis man-made resources like roads, education, etc. The central idea is that even if a nation or civilization collapses, as long as natural resources are intact, a new nation or civilization can arise in future.

Why did you focus on the mining industry and mineral wealth?  What are the IE issues here?

My work is a serendipitous by-product of trying to deal with the severe governance problems that iron ore mining was creating in Goa, India. In 2012, a public interest litigation was filed by Goa Foundation, an environmental non-profit (where I’m the Research Director), seeking the complete shutdown of iron ore mining due to rampant illegalities. During the hearings, the Supreme Court asked that while intergenerational equity had been ruled to be a part of the right to life, how could it be implemented?

Googling found Edith Brown Weiss’s seminal work on intergenerational equity in international environmental law and Hartwick’s Rule in economics. Two World Bank reports were especially useful – Changing Wealth of Nations (2011) and Rents to Riches (2011). The idea was simple. 

Minerals in the ground are worth what they can be sold for minus the full costs of extraction, including a normal profit for the extractor. This is called economic rent or resource rent. From the perspective of the mineral owner, mining is a transformation of wealth from mineral form to other forms. Rents to Riches! 

This is a wealth management problem. Minerals in the ground earn zero. If this value were invested in a global portfolio, itcould earn perhaps 3% real income a year. Can we sell for the correct value, invest everything in productive non-wasting assets(like land or future generations endowment funds), and protect these new assets in perpetuity? If we can do that, then the 3% real income is rightfully earned, and best distributed as a dividend, equally to all as a right of ownership.

With this perspective, it also became clear that the environment, the social capital of the local community and the opportunity to earn income from the work of extraction are inheritances that deplete with mining. These all fall under ESG and the Social License to Operate (SLO). We could integrate many contentious mining issues under the intergenerational equity lens.

We believe that minerals are an easy way to introduce intergenerational equity. While the value of a small patch of forest can be contested, minerals have a clear market value. However, as our work documents, in most places, most of this value is lost to extractors, and what little is received is consumed. Our proposal for zero loss when selling mineral wealth, saving the entire mineral sale proceeds in a future generations fund, and distributing the real income equally to all is obviously superior to current practice and visibly fair to all, including future generations who will inherit the minerals and fund and benefit from the dividend in their turn. 

And I’ve found that once people see that our mineral wealth is a shared inheritance to be managed keeping future generations in mind, they see that the forests on top of the minerals or the carbon level in the atmosphere are also shared inheritances. 

How is IE related to Climate Justice?

Climate is a particular instance of our broader sustainability crisis. Intergenerational equity thinking is needed to see climate injustice clearly. For example, one of the leading proposals to deal with carbon emissions is to impose a rising carbon tax and use the proceeds to pay out a dividend equally to all. The political thinking is clear – around 70-80% of the population will receive more by way of dividends than they would pay through carbon taxes. However, the problem is that since carbon stays in the atmosphere for hundreds of years, our children and future generations will not have access to these payments, while suffering from increasingly severe consequences. 

Seen properly, we are actually creating intergenerationalpollution. In order to compensate future generations, we need to create intergenerational assets for them to inherit. This would suggest that carbon pollution charges should be invested, potentially in the transition to a circular renewable economy, and only the income from these new investments be distributed as a dividend. Further, since the atmosphere is a global common, such charges, investments and dividends must be global in scope.

This implies that most people, especially in rich countries, would be net payers, i.e., their costs will rise, shrinking consumption. At the aggregate level, this is the desired outcome as we are already over-consuming. However, this could give rise to political dissent.

If we are equal inheritors of the planet, and we see that a global carbon cap is essential to stay within 2C, and that carbon emissions creates a long-term liability, then perhaps we need to start some sort of rationing system whereby the first priority is to use the remaining carbon budget towards the transition to a circular renewable economy. The next priority is to ensure everyone gets access to a minimum level of modern energy & universal basic services. Any leftover carbon budget could be reserved for future generations to use. This would still deny future generations any space to emit carbon, and can only be justified if the circular renewable economy fructifies in full.

The Future We Need is a co-founder of the Cap & Share Climate Alliance. We argue for (a) caps on carbon extraction, (b) no offsets, (c) money from sale of allocations to be invested in a global future generations fund invested in the transition, and (d) a global dividend paid from the real income of the fund.

How do you define “shared inheritance” – and what is the role of government?

Many had seen minerals as wealth and mining as the conversion of wealth. However, no one seemed to have developed our fairly obvious structure of (a) zero loss at extraction; (b) save all in a future generations fund; and (c) pay out a citizen’s dividend. We realized that there are actually two competing metaphors / paradigms being used to understand mineral management.

Consider our likelihood to consume $5,000 in four different scenarios:

1) As a lottery winning. Most of us would have a party, blow up most, perhaps use some towards savings

2) After working for a month. Most of the salary / wages would be spent on regular expenses, a small sum may be saved

3) These are savings after a year of hard work. We would try not to spend it except on assets or lumpsum expenses like Christmas

4) We have inherited this amount as grandma’s ring. We would try very hard to keep this heritage intact for our children’s generation

Traditionally governments account for mineral sale proceeds as “revenue”, not as capital receipts from asset stripping. Further, mineral sale proceeds are often called “windfalls” revenue, emphasizing a lottery aspect. In our analysis of Goa’s mining, we found over an eight year period, for every $100 of minerals (valued at resource rent), the state received less than $5. This was recorded as “revenue”. 

From a public perspective, if mining were doubled, we would receive $10, enabling taxes to be lowered, subsidies increased, or new investments in public infrastructure. Seems reasonable. However, the reality is that we had a hidden loss of more than 95% of our inheritance, and doubling mining would make matters much worse.

As a consequence, we are advocating for a shift to the “shared inheritance” paradigm from the dominant “windfall revenue” paradigm. What is a shared inheritance? The planet is a shared inheritance. The commons, which still are far greater than private wealth, are a shared inheritance. Shared among the commoners, and an inheritance.

If we see minerals belonging to the people, then it is logical to conclude that the mineral sale proceeds could simply be distributed to everyone equally. But that would be a disaster. Everything would be extracted, sold, and the money spent – see Nauru. The inheritance aspect of intergenerational equity and the public trust doctrine add an important aspect: future generations have the first right to the capital – the minerals or new non-wasting assets of equivalent value. We cannot spend our wealth. Our children come first!

What is the Goa Foundation, and what inspired you to start it? What is the “Future We Need”?

Goa Foundation was started in 1986 by a group of environmentalists and works on all aspects of the environment. When I joined them in 2011, they were well respected nationally as one of the most effective environmental non-profits. During our work on intergenerational equity and mining, we realized that our proposals needed to be supported by the population at large – the commoners over special interest groups. We started the Goenchi Mati Movement in Goa. We quickly realized that this idea can be applied to minerals anywhere, and intergenerational equity goes much broader and deeper. We set up The Future We Need as a people’s movement to make intergenerational equity foundational for civilization, beginning with minerals. 

What role does IE play in advancing the Common Good?

Why do we desire the common good. Because we see each other as having an equal right to the planet, and we see that greater equality in wealth and power results in a society that is nicer to live in. If we can incorporate intergenerational thinking, we would look to design societies which achieve the common good over generations, not just today. Consider that Elinor Ostrom selected long-life as the criterion to decide what is a successful common. If we think just of today, we will simply distribute everything equally. But that will lead to inequalities over time. Holding things in common, like minerals and the future generations fund, would lead to multi-generational common good.

What are you working on now?

What we are proposing is a change in paradigm. As Max Planckexplained, “a new scientific truth does not triumph by convincing its opponents and making them see the light, but rather because its opponents eventually die, and a new generation grows up that is familiar with it.

The most important aspect of making this change is to build out the new paradigm at a theoretical level. This is actually quite a large area of work since the implications begin at moral philosophy and traverses law, accounting, economics, governance and much else. We need a Center for Implementing Intergenerational Equity to handle this. For the moment, my focus is on building out the theoretical framework.

At the same time, there’s always some monitoring of Goa mining that is needed. A correction to international government accounting standards is taking place, which also needs monitoring. Then there’s advocacy when politics, laws, rules and regulations change, whether Goa, India or global levels. And there’s outreach. 

Making this change will require much more, but building movements and organizations isn’t my interest or skill.

Thanks so much.

INTERVIEW by Christian Sarkar