I'm a businessman. I believe society should reward successful initiative with profit. At the same time, I know that profit-seeking activities have unhealthy side effects. They cause pollution, waste, inequality, anxiety, and no small amount of confusion about the purpose of life.

I'm also a liberal, in the sense that I'm not averse to a role for government in society. Yet history has convinced me that representative government can't adequately protect the interests of ordinary citizens. Even less can it protect the interests of future generations, ecosystems, and nonhuman species. The reason is that most--though not all--of the time, government puts the interests of private corporations first. This is a systemic problem of a capitalist democracy, not just a matter of electing new leaders...

... For years the Right has been saying--nay, shouting--that government is flawed and that only privatization, deregulation, and tax cuts can save us. For just as long, the Left has been insisting that markets are flawed and that only government can save us. The trouble is that both sides are half-right and half-wrong. They're both right that markets and state are flawed, and both wrong that salvation lies in either sphere. But if that's the case, what are we to do? Is there, perhaps, a missing set of institutions that can help us?

...My initial ruminations focused on climate change caused by human emissions of heat-trapping gases. Some analysts saw this as a "tragedy of the commons"... I saw the problem instead as a pair of tragedies: first a tragedy of the market, which has no way of curbing its own excesses, and second a tragedy of government, which fails to protect the atmosphere because polluting corporations are powerful and future generations don't vote.

This way of viewing the situation led to a hypothesis: if the commons is a victim of market and government failures, rather than the cause of its own destruction, the remedy might lie in strengthening the commons. But how might that be done? According to prevailing wisdom, commons are inherently difficult to manage because no one effectively owns them. If Waste Management Inc. owned the atmosphere, it would charge dumpers a fee, just as it does for terrestrial landfills. But since no one has title to the atmosphere, dumping proceeds without limit or cost....

...I wondered what would happen if we, as a society, created a trust to manage the atmosphere on behalf of future generations, with present-day citizens as secondary beneficiaries. Such a trust would do exactly what Waste Management Inc. would do if it owned the sky: charge dumpers for filling its dwindling storage space. Pollution would cost more and there'd be steadily less of it. All this would happen, after the initial
deeding of rights to the trust, without government intervention. But if this trust--not Waste Management Inc. or some other corporation --owned the sky, there'd be a wonderful bonus: every American would get a yearly dividend check.

This thought experiment turned into a proposal known as the sky trust and has made some political headway. It also served as the epicenter of my thinking about the commons, which led to this book....

Although capitalism started as a brilliant solution, it has become the central problem of our day. It was right for its time, but times have changed. When capitalism started, nature was abundant and capital was scarce; it thus made sense to reward capital above all else. Today we're awash in capital and literally running out of nature. We're also losing many social arrangements that bind us together as communities and enrich our lives in nonmonetary ways. This doesn't mean capitalism is doomed or useless, but it does mean we have to modify it. We have to adapt it to the twenty-first century rather than the eighteenth. And that can be done.  How do you revise a system as vast and complex as capitalism?  And how do you do it gracefully, with a minimum of pain and disruption? The answer is, you do what Bill Gates does: you upgrade the operating system...

Part 1 [of the book] focuses on our current operating system, a version I call Capitalism 2.0. (Capitalism 1.0 died around 1950, as I'll explain in chapter 2.) I show how this system devours nature, widens inequality, and makes us unhappy in the process.

Part 2 of the book focuses on capitalism as it could be, a version I call Capitalism 3.0. The key difference between versions 2.0 and 3.0 is the inclusion in the latter of a set of institutions I call the commons sector. Instead of having only one engine--that is, the corporate-dominated private sector--our improved economic system would run on two: one geared to maximizing private profit, the other to preserving and enhancing common wealth.

These twin engines--call them the corporate and commons sectors--would feed and constrain each other. One would cater to our "me" side, the other to our "we" side. When properly balanced--and achieving that balance would be government's big  job--these twin engines would make us more prosperous, secure, and content than our present single engine does or can. And it would do this without destroying the planet.

Part 2 proposes a number of new property rights, birthrights, and institutions that would enlarge the commons sector in one way or another. I like to think that these proposals blend hope and realism.

Among them are:

• A series of ecosystem trusts that protect air, water, forests and habitat;
  
• A mutual fund that pays dividends to all Americans--one person, one share;
  
• A trust fund that provides start-up capital to every child;
  
• A risk-sharing pool for health care that covers everyone;
  
• A national fund based on copyright fees that supports local arts;
  
• A limit on the amount of advertising.

The final part of the book explains how we can get to Capitalism 3.0 from here, how the models can work, and what you and I can do to help.

The dramatis personae throughout the book are corporations, government, and the commons. The plot goes something like this.

As the curtain rises, corporations are gobbling up the commons. They're the big boys on the block, and the commons--an unorganized mélange of nature, community, and culture--is the constant loser. It has no property rights of its own, so must rely on government for protection. But government is a fickle guardian that tilts heavily toward corporations.

Fortunately, corporations only dominate government most of the time; every once in a while, they lose their grip. So it's possible to imagine that the next time corporate dominance ebbs, government--acting on behalf of commoners--swiftly fortifies the commons. It assigns new property rights to commons trusts, builds commons infrastructure, and spawns a new class of genuine co-owners. When corporations regain political dominance, as they inevitably will, they can't undo the new system. The  commons now has safeguards and stakeholders; it's entrenched for the long haul. And in time, corporations accept the commons as their business partner. They find they can still make profits, plan farther ahead, and even become more globally competitive.

None of the proposals advanced in this book will come to fruition tomorrow. My aim, though, is not that. My aim is to light a beacon, to show the kind of system we should be building, bit by bit, as opportunities arise. I see this system-building as a decades-long process punctuated by periods of rapid change. It will involve businesses and politicians, economists and lawyers, citizens and opinion leaders at all levels. If we're not to get lost, we'll need a guide, and that's what I hope this book will be.