Endowment Zones: Building resilient safety nets, environmental trusts, and public services.

In any community, some people will fall on hard times for reasons beyond their control. While propping up failing businesses prevents new and better ideas from taking hold, no one wants their neighbors to fall through the cracks.

How do we build communities for growth and dynamism, but with resilient safety nets?

One tried-and-true method for helping those in need is through private charity. Civil society and humanity’s cooperative spirit is a powerful and ancient force for good. Another more modern tool is creating social businesses that build schools, orphanages, hospitals and shelters.

Both of these are important ways that we can help one another. But major problems like environmental degradation need bigger solutions.

Using Free Cities and endowment zones to solve social problems offer a way to radically augment charity and social entrepreneurship.

When an area is zoned with rules conducive to good growth and entrepreneurship the value of the land can increase exponentially.

Consider that fortunes have been made overnight by rezoning a New York City block from ‘commercial’ to ‘residential’ (or vice-versa), opening up the possibility for new entrepreneurial ventures. Those that occupy the land pay rents, whether these are businesses or residents.

Like an endowed foundation, an endowment zone can pay out a percentage of its land rents to basic income supports, environmental causes, education, or healthcare. As the zone attracts residents and commerce increases, this endowment grows. It’s a recurring dividend for social good.

For example, a one percent share in the tiny 110-acre free zone the Dubai International Financial Center (DIFC) would create 30 million dollars towards a safety net or public good. All this, from an area the size of a small American farm, supercharged for business.

While schools often fight for appropriations in national budgets, these millions could be given directly to citizens as vouchers for education. Hospitals, healthcare for the poor or disabled, or even general healthcare vouchers could be financed from endowment zone dividends.

Larger projects like urban-scale Free Cities could raise much larger endowments than the tiny DIFC. This means as entrepreneurs make breakthrough projects and grow their bottom-lines in a zone, endowments for the less fortunate grow at pace.

Endowment zones for environmental problems are a powerful and underused tool for improving the natural world. Environmental trusts – legal entities charged with the protection of a natural resource – have been endorsed by Nobel Laureate economist Elinor Ostrom as well as progressive entrepreneurial guru Peter Barnes.

An endowment zone could pay into environmental trusts and funds to protect the Amazon or Mississippi River. Areas already damaged by pollution could be restored with the funds of a zone. They could finance new habitats for endangered species, or simply natural parks for popular enjoyment.

Public services should be consistently high-quality, and predictable. Unfortunately, standard politicized models for public goods sometimes mean a new party, president, or bureau-chief can lead to wild restructuring of public services and safety nets for only partisan reasons.

Worse still, special interests can hold a citizenry hostage by threatening vital public services with cutbacks, strikes, or shutdowns. Massive debts owed by municipalities can mean sudden fiscal austerity. Tax-and-redistribute models for public goods and safety-nets are fragile, not resilient. They are easily threatened by small shifts in politics, and don’t cope well with change. But endowment zones are also resilient — safety nets without costly political battles or unpredictable austerity cutbacks.

We need to move beyond divisive ideology and politicized solutions towards resilient solutions like endowment zones. Tying safety nets, environmental projects, and public services to endowment zones means a steady supply of public goods. So long as the zone is allowed to thrive, all boats continue to rise.

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  1. Quora says:

    What’s the one thing that would do the most to improve the future of Detroit?…

    Establish “endowment zones” along lines similar to those advocated by Zachary Caceres at http://www.radicalsocialentreps.org/2012/04/endowment-zones-using-commerce-to-build-safety-nets-and-public-services/. It can begin by transfering huge swaths of …