by Pablo Yanes | Dec 19, 2017 | News
Zone 10 – Guatemala City.
With the support of the Swedish Embassy and Oxfam in Guatemala, the Central American Institute for Fiscal Studies (ICEFI) has presented a new book entitled Universal Basic Income: More Freedom, More Equality, More Jobs, More Well-being. A Proposal for Guatemala (2019-2030), was presented in simultaneous events held in Guatemala City and Quetzaltenango. The book explains how inequality is affecting people’s lives and undermining the possibilities of strengthening democracy and development in the world, and Guatemala in particular. In light of this reality, the book proposes a universal basic income (UBI) of Q175 per month (20 €/month) accompanied by increased social spending from 2019 to 2030, which could eliminate extreme poverty and reduce inequality, while generating 4.7 million jobs and potentially boosting economic growth as much as 50%. It also gives scenarios for its financing – including a progressive tax reform – and the main challenges to its effective public administration.
When studying social inequality in Guatemala, the book mentions income inequalities, worker insecurity, the scourge of child labor and lack of employment guarantees, the still unaffordable cost of the basic food basket, the acute chronic malnutrition ravaging Guatemalan children (especially indigenous and rural children), the visible discrepancies in women’s political representation in public and private power arenas, widespread poverty and extreme poverty – also more and more wearing the face of indigenous and rural women – and the complex, institutionalized racism permeating all realms of society. All this is reinforced by the overwhelming problems of corruption and lack of transparency, by paltry public spending on the production of universal, quality goods and services, and by a tax policy that lacks legitimacy among the citizenry due to the unfair way in which taxes are collected and certain economic sectors are granted privileges.
For ICEFI, this reality requires alternative proposals to help mitigate social inequality and its more harmful effects and build economic, social and fiscal scenarios for underpinning sustainable, inclusive economic development. Together with improved public goods and services, a UBI – understood as a sum of money allocated by the State to each citizen or resident – would have a positive impact on Guatemalan society. With a monthly per-person amount of Q175, the UBI could eliminate extreme poverty and reduce inequality. The study, which should be considered a seminal work subject to discussion and more in-depth examination, also reveals that a UBI such as the one proposed could generate 4.7 million jobs in the coming years (33% of the working-age population in 2030), spread out over the entire national territory in agriculture, industry, finance, and commerce – an effect that could boost economic growth by close to 50%. Moreover, the related bankarization would promote the formalizing of businesses aimed at providing goods and services to the public. Inequality would be reduced from 0.538 to 0.472, as measured on the Gini index – better than Costa Rica (0.504 in 2014) but still far from what has been recorded for Uruguay (0.379 in 2014).
As for taxes, the proposal includes financing mechanisms (with and without tax reform). The tax reform scenario is based on a modernization of the income tax, elimination of tax privileges, and gradual reduction of income and value-added tax evasion. The book also emphasizes that implementation of a public policy such as the one proposed implies a revaluation of the State’s role as the main guarantor of individual rights and booster of development and democracy. Fiscal policy can potentially close the current gap between the economy and citizen well-being. With a modern fiscal outlook and political agreement for a profound fiscal reform, the country could have the resources for financing a UBI and other public programs aimed at enhancing social well-being, smoothing the way for compliance with the 2030 Agenda for Sustainable Development while driving productive transformation, access to credit and economic formalization.
In this book, ICEFI recognizes that a UBI would not solve all the problems the country urgently needs to face as a result of its past and present. Together with improved public services, however, it could provide a minimum though effective floor of social protection for tackling inequality and all its related phenomena. At a time when most citizens are unhappy with the current economic and political model, the study can also serve as a basis for debate on alternatives for change. Discussion of a UBI in Guatemala is expected to bring together small, medium, and large enterprises, merchants, producers and cooperatives, as well as social organizations pushing agendas for development and democracy.
The study is available in Spanish.
by Citizens' Income Trust | Dec 18, 2017 | Opinion
This article is based on a research project conducted by a French student, Lucas Delattre, during the summer of 2016, and updated in October 2017
Introduction
A Citizen’s Basic Income is an unconditional, nonwithdrawable income paid to every individual as a right of citizenship.
In 2016, at a discussion on Nick Srnicek and Alex Williams’ book Inventing the Future: Postcapitalism and a world without work (Verso, 2015) at the New Economics Foundation, Ed Miliband was asked what needed to happen to move us towards the implementation of a Citizen’s Basic Income scheme. ‘A pilot project’ was the answer. Others have made the same suggestion.
Existing pilot projects
Many of the projects that have been claimed as Citizen’s Basic Income pilots do not satisfy the criteria of being universal, unconditional and based on the individual. Those that do pay unconditional incomes to individuals cannot be absolutely universal, since they necessarily exclude those outside the sample. This is also an ethical issue that cannot be avoided. And the short duration of most projects enables some short-term effects to be detected, but not long-run or life-time effects. (A project in Kenya is giving 23 US$ per month to 40 villages for 12 years, which is much longer than the two years for which most experiments run.)
Some projects call for volunteers, and so are unlikely to be representative. Mandatory involvement of a representative sample is to be preferred; and even better is a saturation sample, covering a defined geographical area, which can enable effects to be picked up at a local level. Projects that compare the experience of pilot groups that receive an unconditional income to the experience of control groups that do not are preferable to experiments that do not employ control groups.
In 2008 and 2009 a privately-financed pilot project was held in the small rural settlement of Otjivero-Omitara in Namibia. 100 Namibian dollars (£7) was paid each month to every member of the population for a period of two years, and significant results were achieved in relation to health, education, crime reduction, economic activity, and poverty reduction. There was no control group with which to compare these results.
Between 2011 and 2013, similar projects in India paid 300 rupees (£3) per month to every member of several pilot villages, and in India the impressive results obtained in the pilot project villages could be compared with those in the control villages.
The Alaskan Permanent Fund (APF) is a sovereign wealth fund based on Alaska’s oil revenues, and invested in the international stock market. It gives an annual dividend payment to every Alaskan citizen, who has been resident for at least a year in Alaska. The APF has usually been able to provide a dividend of between $1,000 and $2,000 each year. Obviously, it is annual and variable, and is not sufficient to take on the role of social security: but it has had beneficial effects on the population of Alaska.
A micro-level pilot project in Germany provides Citizen’s Basic Incomes to selected individuals for one year. In Finland, a random sample of 2,000 people aged 25-58, who were unemployed at the end of 2016, are receiving €560 per month Income for two years in place of existing benefits, and the sample subjects can keep their payments after they have found employment. However, while being based on the individual and unconditional, this does not fulfil the Citizen’s Basic Income criteria of being universal. A similar approach is being considered by some Dutch municipalities. The current experiment in Ontario, Canada, is a Guaranteed Minimum Income project where a means-tested household-based benefit targeted on subjects aged 18-64 is being tested.
The Negative Income Tax experiments in the USA and Canada during the 1970s were based on the household, and so did not fulfil the criteria as a Citizen’s Basic Income pilot projects.
None of this is to suggest that the projects that have been undertaken are not of value. They are. Valuable lessons have been learnt in Namibia, India, Alaska, and the various states in Canada and the USA where Negative Income Tax experiments have taken place; and additional useful lessons will be learnt in Berlin, in the Netherlands, and in Finland. But we still await a genuine Citizen’s Basic Income pilot project. It is arguable that the Indian and Namibian experiments were as near to genuine pilot projects as possible because they were of sufficient duration to enable trends in behavioural change to be evaluated and trajectories predicted.
The UK
Might it be possible to run a Citizen’s Basic Income pilot project in the UK? A genuine Citizen’s Basic Income pilot project? Multiple problems present themselves:
- the project would have to be for a sufficiently long period for a sufficient number of assessments of behavioural change to be made to enable trajectories to be plotted and reliable estimates made of the likely behavioural changes that would accompany a permanent Citizen’s Basic Income scheme;
- any Citizen’s Basic Income viable in the short to medium term in the UK (and in any developed country) would have to be funded wholly or in part by changing income tax and social insurance contribution levels and thresholds. So a genuine pilot project would require government departments to make those adjustments just for the individuals involved in the project, and to recycle the savings into pilot project participants’ Citizen’s Basic Incomes – a somewhat unlikely proposition;
- the project would need to involve a cross-section of the population if it were to stand some chance of modelling a genuine Citizen’s Basic Income; and
- because any revenue neutral or almost revenue neutral scheme would impose losses on some households (- preferably on households in the higher income deciles), some participants in the pilot project would lose disposable income at the point of implementation.
A feasible Citizen’s Basic Income experiment
What would be feasible would be to provide a genuine Citizen’s Basic Income to a small community on top of existing benefits provisions and without altering National Insurance contributions or Income Tax payments. This would avoid government departments having to change current tax and benefits provisions: but it would require additional funding and it would not mirror the tax and benefits changes that would be required to fund a genuine Citizen’s Basic Income. This is why I have called it an ‘experiment’ rather than a ‘pilot project’. Important lessons could be learnt: but nobody would be able to regard the experiment’s results as evidence for how a Citizen’s Basic Income would work in practice.
A further feasible option would be to give a Citizen’s Basic Income to all sixteen to eighteen year olds and not give them an Income Tax Personal Allowance. This approach would create minimal problems for the tax and benefits authorities and for employers, and it would result in almost no losses at the point of implementation. The important question would be whether to promise permanence – in which case it would be a genuine pilot project; or whether to limit the experiment to a stated number of years – in which case it would be an experiment. (Microsimulation research on such a pilot project/experiment can be found in a recent working paper. )
by Karl Widerquist | Dec 17, 2017 | Opinion, The Indepentarian
Of course, it is possible to fund UBI in America. Based on my calculations from a forthcoming article in Basic Income Studies, this one-minute video argues that a UBI large enough to eliminate poverty in the United States will cost 2.95% of the GDP per year–even if no other entitlement programs are replaced or reduced.
by Karl Widerquist | Dec 13, 2017 | Opinion, The Indepentarian
This essay was originally published in the USBIG NewsFlash in October 2005.
Dividend checks from the Alaska Permanent Fund (APF) go out this month paying $845.76 (US), to every Alaska resident. (The APF is the only existing Basic Income in the world. It pays yearly dividends based on earnings from an investment fund created out of the state’s oil tax revenues.) The amount is down slightly from last year. The reason for the decline is that each year’s returns are tied to stock market returns over the last five years, and recent market returns have been much lower than returns in the late 1990s. The recent increases in oil prices are increasing the total size of the fund, but it will be years before their effects are felt in the yearly dividends.
The idea of the fund is gathering more and more attention around the world. The Alberta government is preparing to send checks of $400 (Canadian) to every resident of the province. The checks are a one-time response to the province’s large budget surplus, which has been caused largely by the recent increase in oil tax revenue. Although this is a one-time grant, the program’s architects credit the APF as inspiration. New Mexico, which also has a growing budget surplus thanks to the recent increase in oil prices, maybe the soon follow suit. Governor Bill Richardson and prominent members of the state legislature have been discussing a one-time tax rebate in the neighborhood of $50 (US) per person.
The spread of the Permanent Fund idea does not stop with Alberta and New Mexico. Recent editorials have discussed the idea around the world. Kevin O’Flynn, writing for Newsweek International, mentioned the APF as one of the possible models for reform of Russia’s oil industry. Two recent editorials have argued for a permanent oil dividend in Iraq. Lenny Glynn, writing for The Weekly Standard, argues than enshrining an oil dividend into Iraq’s constitution would be a force for democracy, national unity, and economic development. It would almost certainly make the constitution more popular. Ronald Bailey, writing for Reason on line: Free Minds and Free Markets, includes the creation of an “Iraq Permanent Fund” in his list of things the Bush administration should have done for a successful post-war Iraq (https://www.reason.com/links/links081805.shtml).
Petroleum.com: Latin American Energy, Oil & Gas included a commentary by Michael Rowan, entitled “the Sinkhole,” praising Permanent Fund and comparing it to Venezuela’s nationalization of its oil industry. Governor Jay Hammond began setting up the permanent fund at about the same time that Carlos Andres Perez nationalized Venezuela’s oil industry in 1976. Rowan argues that nationalization of 100% of Venezuela’s oil revenues had no noticeable effect on poverty in Venezuela, but the Alaska fund, which distributes only a fraction of the taxes on Alaska oil revenues, has provided a real and verifiable benefit to low-income Alaskans—and has been especially important in reducing poverty among indigenous Alaskans. “If [Perez] had done what Hammond did in 1976, Venezuela’s Permanent Fund would have about $120 billion this year, paying a dividend of $1,500 to each of 8 million Venezuelan families.” The editorial is hostile to activist government policies, but it is not hostile to policies that effectively help the poor. Rowan’s endorsement shows that the Permanent Fund idea is a good way to promote anti-poverty policies with the political right, but that’s not all there is to it. People who normally favor redistribution should not ignore Rowan’s argument that getting money into the hands of the poor can be more effective toward economic equality than putting a government in direct control of resources. Rowan’s commentary is online at: https://www.petroleumworld.com/Ed081105.htm.
-Karl Widerquist, Oxford, UK, October 2005
by Karl Widerquist | Dec 7, 2017 | Opinion, The Indepentarian
This essay was originally published in the USBIG NewsFlash in August 2005.
Jay Hammond, the governor of Alaska from 1975 to 1982, who led the fight to create the Alaska Permanent Fund, was found dead at his Homestead about 185 miles southwest of Anchorage, on Tuesday, August 2, 2005. He led an amazing life. Hammond was a laborer, a fur trapper (by dogsled), a World War II fighter pilot, an Alaskan bush pilot, a husband, a father of three, a wildlife biologist, a backwoods guide, a hunter, a fisher with the U.S. Fish and Wildlife Service, and a homesteader. Hammond was one of the last people to take advantage of the Civil-War-ear U.S. law giving away land. Other than a requirement to build a house and farm the land for five years, it was given away free—no strings attached.
Hammond was also a hero to everyone who believes that no one should be barred from the resources they need to meet their basic needs—no strings attached.
Hammond got the idea for a resource dividend when he was mayor of a small town on Bristol Bay, Alaska in the 1960s. He realized that salmon were being taken out of the area without necessarily helping the town’s poor. He proposed a three percent tax on all fish caught in the area to be redistributed to all residents of the town. By an enormous stroke of luck, the man who had that idea (and saw it work in Bristol Bay) would be elected governor of Alaska just as the state was beginning construction of the Trans-Alaska oil pipeline. Oil companies stood to make billions of dollars, and of course, they argued that Alaskans would benefit through new job opportunities, but Hammond knew one way to make sure that every single Alaskan would benefit from the pipeline.
And so the Alaskan Permanent Fund was born. For the last 20 years, every Alaskan has received income from state oil revenues. A portion of the state’s taxes on Alaskan oil goes into an investment fund, which pays dividends from the interest on those investments—hence the permanent fund. Dividends vary, but they are usually more than $1,000 per year for every man, woman, and child living in the state.
The system is not perfect. Hammond told Tim Bradner, of the Anchorage Daily News, that his biggest regret was to let the legislature eliminate the state’s income tax. Without the citizens’ responsibility to pay taxes to support state services the fund will be vulnerable, and the legislature has been trying to raid the fund ever since. So far, the enormous popularity of the fund has protected it fairly well. Hammond also regretted that the fund was too small. Only one-eighth of the state’s oil tax revenues go into the fund. If half of oil tax revenues went into the fund, as Hammond envisioned, every Alaska family of four could expect to receive more than $16,000 this year. Hammond died campaigning to increase the size of the fund.
But the most important thing about the fund is that it exists. It’s simple, it works, and everyone in the state benefits from it every year. How many elected officials can say they did that? According to Sean Butler in Dissent Magazine, Nobel Prize-winning economist Vernon Smith, called the Permanent Fund, “a model governments all over the world would be wise to copy.” It is a pilot program for resource taxes and basic income plans all over the world. Economists have recommended the Alaska solution for resource-rich, poverty-ridden countries from Nigeria to Iraq. Just this summer the government of Azerbaijan sent a delegation to Alaska to study the Permanent Fund. You can’t keep a good idea down.
Jay Hammond spoke at the 2004 USBIG Congress in Washington, DC. Here is how Butler describes the event: “The father of the Brazilian basic income, Senator Eduardo Suplicy, also presented at the USBIG conference last year. During his speech, he noticed Jay Hammond sitting in the front row, and, to warm applause from the assembled crowd, descended from the stage to shake his hand. The two basic income pioneers had at last met. Hammond and Suplicy make an odd couple. The Republican Hammond, with his Hemingway-like white beard and grizzly build, wears his far north ethos of self-reliance with pride. Suplicy, a founding member of the left-wing Brazilian Workers Party and a U.S.-trained economist, has the dignified appearance of an intellectual and professional politician. Its tropical socialism meets arctic capitalism; yet somehow, when the two come together over basic income, they get along.”
I had the good fortune to attend that event and meet Governor Hammond. He was warm and engaging. He wasn’t there to bask in the glory of people who admired his past achievements but to fight to keep improving the APF. He was a genuine hero.
An article on Hammond and basic income by Sean Butler, entitled, “Life, Liberty, and a Little Bit of Cash,’ appeared in Dissent Magazine just a few weeks before he died.
There have been many good tributes to Hammond in the news and on the internet since his death. Here are just a few:
Frank Murkowski, current governor of Alaska, “Hammond’s Legacy Will Stand Out,” Alaska Daily News
Tim Bradner, “Hammond has passed; his ideas must live on,” Alaska Daily News
Douglas Martin, “Governor of Alaska Who Paid Dividends,” New York Times
