Karl Widerquist and Michael W. Howard (eds), Exporting the Alaska Model: Adapting the Permanent Fund Dividend for reform around the world, Palgrave Macmillan, 2012, 1 137 00659 2, hbk, xix+ 291 pp, £65
In 1797 Thomas Paine suggested that, because in principle the land belongs to everyone equally, those who occupy it should pay a ground rent to the whole community. We can generalise the profits that landowners reap from the occupation of land into the concept of ‘economic rent’: if someone uses natural resources that belongs to all of us in order to make money, then any income greater than the cost of production is ‘economic rent’. Paine would have made the point that the economic rent belongs to all of us.
Oil companies extract oil from Alaska, and the Alaskan State Government taxes the oil companies and pays a proportion of the tax revenue into a permanent fund. The fund pays an equal annual dividend to every citizen of Alaska. Thus the economic rent relating to oil extraction benefits the whole community. The Alaskan Permanent Fund Dividend is not a Citizen’s Income because it is an annual payment and it varies with the profits made by the Permanent Fund. Recently the dividend has been rather lower than previously – but, as the book points out, wherever economic rent arises from the exploitation of natural resources, a government can collect tax on private profits and use the tax revenue to pay a Citizen’s Income.
The editors are candid about the genesis of this book: it contains material by a variety of authors that would not fit into their earlier Alaska’s Permanent Fund Dividend: Examining its suitability as a model; but having said that, all of the material is directly relevant to the theme expressed by the title of this second book.
Part I employs the Alaska model – natural resource tax revenue, a permanent fund, and an equal dividend to every citizen – to ask where similar circumstances might make a similar dividend possible. Hamid Tabatabai tells how Iran has stumbled into paying a Citizen’s Income ( – though here natural resource tax revenue pays directly for a Citizen’s Income without building a permanent fund). Angela Cummine asks why other similar permanent funds do not pay dividends to citizens, and concludes that the root reason is probably government desire to retain control over the funds and their incomes; Alanna Hartzok suggests that the Alaska Permanent Fund should be invested in more environmentally and socially responsible ways before the idea is exported; and Groh asks what will happen when oil revenues dry up.
Part II asks how the Alaska model might be applied where natural resources are not being extracted. Flomenhaft shows that if other such public assets as water, public forests, broadcast spectrum, and land value were to be treated in the same way as Alaska treats its oil, then taxes on the exploitation of such common resources could easily fund a permanent fund that would pay a dividend at least as large as Alaska’s. Segal shows that employing such a policy in developing nations could cut world poverty by half. Hickel finds that South Sudan could fund both a substantial dividend and infrastructure improvements by employing the Alaska model. Hammond suggests that Iraq should employ the Alaska model to enable all of its people to benefit from oil revenues ( – Jay Hammond was the Governor of Alaska who achieved the Permanent Fund and the Dividend, and his chapter is published posthumously). Howard suggests that governments should cap carbon emissions and then sell the rights to emit carbon up to this cap in order to fund a permanent fund and therefore a dividend. Widerquist studies the feasibility of a US fund paid for by taxing the exploitation of a variety of common resources, and suggests that this approach should be employed in Alaska in order to maintain the fund and dividend as oil revenues decline.
Part III explores Widerquist’s proposal for capital accounts ascribed to each individual citizen at birth. The funds’ owners can spend the dividends whenever they wish, but cannot spend the capital, which is passed on to their future generations.
The editors’ final chapter suggests that the Alaska model should be viewed more as a list of questions inviting answers than as a fixed detailed policy to be applied in its entirety: Does the government wish to capture some of the economic rent generated by resource exploitation? Does the government wish to create a permanent fund? Does the government wish to pay a dividend to citizens? How large should it be? What proportion of tax revenue will relate to natural resource exploitation? Does the government wish to pay a variable annual dividend, as in Alaska, or does it wish to pay a more regular and less variable Citizen’s Income?
As the proportion of gross domestic product distributed as wages declines, and a greater proportion accrues to capital (an inevitable process in a globalising economy), and as taxing corporations becomes increasingly difficult (another consequence of globalisation), governments will need to find new ways to fund both government expenditure and individuals’ incomes. The obvious way to do this is to tax the value of common resources, and particularly the value of land and of natural resources extracted from it (because however global the economy, nobody can remove land or the resources contained under it, including water). Using the proceeds to fund a Citizen’s Income would benefit both society and the economy. If economic rent from declining natural resources is used to fund a Citizen’s Income then a permanent fund will ensure that revenue can be generated when the natural resource runs out. If economic rent from the exploitation of a natural resource that is in constant supply (such as land) is used to fund a Citizen’s Income then a permanent fund is not required.
This book is a most useful companion to Alaska’s Permanent Fund Dividend: Examining its suitability as a model, and is a book that any government concerned about falling tax revenues should read.