Privatizing the Ocean—The Last Great Mahele?

Jeremy Brown is a commercial fisher from Bellingham. He is a board member of the Washington Trollers Association, the Western Fishboat Owners Association, the American Fishermens Research Foundation and the Nooksack Salmon Enhancement Association. He is a 2002 Food and Society Policy Fellow, a program of the Thomas Jefferson Agricultural Institute in partnership with the Institute for Agriculture and Trade Policy and funded by the W.K. Kellogg Foundation.

- —Harold Macmillan

describing Margaret Thatcher’s privatization program

The “Great Mahele” refers to the process whereby Hawaiian land, formally held by the King, was divided, (mahele roughly means division) accelerating the transition from subsistence to a cash and property based economy. Despite the stated intent that Hawaiian commoners should be the beneficiaries, in a very short time haole traders and missionaries had amassed most of the land, a situation that could be said to persist to the present1.

The loss of the Hawaiian people’s land through the Great Mahele is beyond dispute, whatever good intentions preceded it. Similar developments are unfolding today, as a rationale for creating property rights to the continental shelf becomes evident. The privatization of the ocean commons could well duplicate that pattern of loss in Hawaii, but on a far larger scale.

The amazing turnaround in the British economy under Margaret Thatcher, and the rebound from recession in the U.S. under Bill Clinton, are customarily attributed to the skill and correct economic policies of those leaders. A review of the sale of assets held in public trust at the time indicates another explanation and offers a glimpse of what the present U.S. administration might have in mind for the continental shelf.

It was in the 1980s, when North Sea oil started to pour into the British economy, and state owned monopolies in gas, electricity, railways and telecoms were sold off, that Thatcher was able to erase the red ink from Britain’s Exchequer. Former Prime Minister Macmillan described this process as “flogging the family silver to settle the tradesman’s bill.”

In the 1990s, the sale of an asset that had hitherto been considered of insignificant value poured enormous amounts of money into the U.S. Treasury.

Before the advent of pagers and cell phones, access to radio frequency was a mundane affair: TV had it’s assigned bands, AM and FM radio, Amateur radio, business communications, marine and so on all had their allotments. This was regulated by one of the least glamorous of federal agencies, the Federal Communications Commission (FCC).

The electromagnetic spectrum, or radio frequency, stretches from extremely low frequency through the bands more familiar to most people as AM, FM and UHF, and on up through microwave to x-rays and beyond, sometimes referred to as “DC to daylight.” The extremes of this range are of little interest to everyday communication, but modern life as we have come to know it simply would not function without regulated and orderly access to much of the spectrum.

The visionaries of mobile personal communications (pagers, cell phones, etc.) realized that the potential demand for bandwidth would swamp this comfortable arrangement, and pressed the FCC to become more responsive to their ideas and to make available much greater blocks of the spectrum. Starting in the mid-1970s with a flexible “Specialized Mobile Radio Service.” the FCC moved from assigning licenses for a nominal fee, to a progressively more market-based system: the public auctioning of frequency allocations. By the time congress revised the Telecommunications Act in 1994, the auction of cell phone frequencies alone were expected to raise $10 billion for the U.S. Treasury, an estimate that proved to be low by a factor of 10! Ironically, it was the policies adopted in the Reagan years that paid off so handsomely for Bill Clinton!

Those same visionaries who entered the process early and were able to acquire significant blocks of spectrum before the ‘market’ caught up, were handsomely rewarded as the value of their holdings skyrocketed. Some, who entered the market later and got caught up in the bidding frenzy for the remaining frequencies, paid too much and have suffered for it.2

In the early years of the twenty-first century, the U.S. government again finds itself in deficit. But bandwidth is a finite commodity and now largely in private hands; it cannot be minted as a profligate treasury might print banknotes. Since that cupboard of assets has been stripped bare, another item of family silver must be found to keep up with the tradesman’s demands. The usually identified assets held by the government in the public trust, such as land, are too protected by laws and the alert eye of public interest watchdogs. What would be ideal is something of great potential value that is tucked away in the proverbial cedar chest, and that none of the rest of the family knows about, or would miss.

Just such a treasure is the continental shelf. Indeed, the territorial waters of the U.S., commonly called the Exclusive Economic Zone3 appear perfect for such a sale. They are real estate, hold vast natural resources, are completely out of sight, and 99 percent of the public doesn’t even know the Exclusive Economic Zone exists. Potential economic benefits for private holders of the continental shelf include not only familiar oil and gas development, but also mining minerals such as deep sea manganese nodules and methane hydrates, geothermal potential and aquaculture.

Who could possibly object or miss it once it was sold off? Probably only fishers, sailors and cranky academics. Against this you have the vast force of speculative venture capital, eager to grab a piece of the action in a land rush on the planet’s last frontier.

But surely the powerful environmental lobby would never allow such a thing to happen? Indeed the silence of most of the large green groups is surprising, since they must know something is happening. This apparent acquiescence is best understood when one realizes what the green lobby might actually stand to gain from this process.

High on most environmental wish lists is the desire to establish Marine Protected Areas, a system of “off-limits” preserves throughout the oceans where most activities would be prohibited. If key environmental lobbyists can be assured that they will get to lock up certain “crown jewels,” the privatization of the rest of the ocean commons may be a price they are willing to pay.4

Following the example of previous privatization of public assets, the “insiders” who lock up their piece of the action early would stand to benefit handsomely once market forces take control, as noted above with wireless communications. This has also occurred in Russia where fortunes in the billions have been amassed in a very short time by those who ‘bought’ certain state assets early on. To guard against this, public-spirited regulators should be expected to widely publicize this process in order to acquire the highest possible value to the country for the sale of its property.

Not if those who stand to benefit the most can help it. So far, the insiders are well ahead. The U.S. Commission on Ocean Policy,5 established in 2000 by Congress and appointed by the President, has conducted its business quietly below the radar of media scrutiny. The 16-member commission and its executive director include nine with direct ties to the oil, mining, development, aquaculture and waste disposal industries; all industries with reasons to pay attention! Seven also have ties with interests that would benefit from the creation of Marine Protected Areas, but only two have any connection with stakeholders who will likely lose: shipping and fishing.6

Many of the submissions to this commission have dealt with the creation of secure tenure or property rights to the seabed and its resources.7

Agencies such as the U.S. Geological Survey, the Department of Energy, the U.S. Army Corps of Engineers, and the Environmental Protection Agency are quite reticent about the potential value of creating any such opportunities. However, the National Oceanographic and Atmospheric Administration and its subsidiary National Marine Fisheries Service may actually be serving, to a degree, the public interest by openly promoting the development of offshore aquaculture8 and the creation of clear property rights to the ocean floor.9 The mainly foreign-owned marine aquaculture industry in the U.S., which is principally engaged in raising Atlantic salmon at break-even or below, has expressed strong support for expansion offshore. Being first in line and able to convert their leases into real property would certainly explain why these foreign corporations continue to aggressively promote their presence here.

All of these developments assume a self-evident rationale for creating property rights to the continental shelf; that the government has a financial interest in creating and selling them, and the various industries desire to acquire them as cheaply as possible. The open public debate as to whether any of these things are actually in the public interest has yet to begin. That debate should begin before any commitments are made. The privatization of the ocean commons is a very serious matter—citizens should pay attention to this issue and communicate concerns to elected officials. The pattern of loss in the Hawaiian Islands could be repeated here in the near future, on a far larger, global scale. §