by Karl Widerquist | May 30, 2018 | Opinion, The Indepentarian
This essay was originally published on Basic Income News in December 2012.
This year Alaskans received a dividend of $878, not bad compared to all the other states, but this dividend is the smallest since 2005, and it is only the second time in more than 20 years that the dividend has been below $900 per person. Alaska’s Permanent Fund Dividend (PFD) needlessly fluctuates widely. This year’s dividend is 25 percent smaller than last year’s dividend of $1,174, and it is 57 percent smaller than the 2008 record-high dividend of $2,069 (not counting the one-time supplement of $1200 that was added to that year’s dividend).
The declining dividend does not mean that the PFD is in trouble. Actually the Alaska Permanent Fund (APF), which financed the PFD, is at near-record high levels. It closed the 2011-2012 fiscal year at 40.3 billion dollars. The dividend was low this year because the state uses a complex formula averaging the returns over a five-year period to determine yearly returns. The five-year average was chosen to smooth out fluctuations in market returns to create a more stable dividend, but—as Alaskans can easily see—a five-year average is not enough to do that job. Markets tend to have stable long-term trends, but they can have occasionally large yearly fluctuations (either up or down) that can dwarf a five-year average. The mid-2000s market boom, and the 2008-2009 market bust were just such fluctuations. Now, several years later with the boom returns falling out of the calculations but the decline still in, the 2008 market bust affects the dividend the more than it did at the time.
There’s a better, more stable way to calculate the dividend. It’s called percentage of market value (POMV). Most financial managers agree that an individual can afford to withdraw up to 4 percent of a well-invested diversified portfolio and still expect it to grow in real terms over time.
If Alaska used this rule to calculate the PFD, this year’s dividend would have been $2,380. It would have been a record-high dividend, because the APF closed the fiscal year at a record-high level. Suppose then there was a major sell-off in the markets and the fund declined by 25% to $30 billion. The dividend would decline by 25% as well, to $1,846. Suppose instead it rose by 25% to $50 billion. The dividend would rise by 25% as well, to $3,076. Because 25% is an unusually large fluctuation, we can expect this to be an unusually large change in the dividend. Most often it would change by less than 10% from year to year, and in most years it would increase.
Perhaps Alaskans should be more conservative. The goal of the fund is not just to payout as much as possible. It is also to save for the future. The more the APFC pays out in dividends now, the slower the APF and the PFD will grow over the long term. So, perhaps a POMV rule of 3% would be better—a little more cautious—than the 4% rule. If so, payouts this year would have been $1860. Payouts after a 25% decline to $30 billion would be $1,395. Payouts after a rise to $50 billion would be $2325, and Alaska could expect to larger reinvestments by the APFC to help the APF get to $50 billion much more quickly.
POMV just makes sense. Nobody likes the big fluctuations. No one wants their dividend to be less than half of what it was a few years ago. POMV stabilizes dividends, making it easier for Alaskans to plan, and it can be part of a conservative payout strategy that will keep the fund growing over time.
-Karl Widerquist, Doha, Qatar, November 2012
by Claire Bott | May 29, 2018 | News
The BBC has made a half-hour radio programme exploring the current universal basic income (UBI) experiment taking place in Kenya. The programme was originally broadcast on 31th of March 2018, as part of the BBC World Service.
The experiment, funded by American charity GiveDirectly, is due to run for 12 years and is now in its second year. It involves 20,000 people in more than 200 villages, and includes a number of groups including a large control group. The villages used in the main experiment have been sequestered from outside visitors, as there are concerns that these could be disruptive to the experimental conditions. However, a “test” village is open to visitors, and the programme-makers conducted interviews with a number of people living there.
These included Edwin, who had spent the extra money ($22 per month) to buy much-needed furniture for his family, and Evelyn, who had invested part of it in her business selling fried fish at the market, and had saved the rest. Irene, a teacher, says that children from the village which is being given money are much more likely to attend school regularly. Joseph, the head teacher, added, “Previously, we had a lot of absenteeism from the village children during market days.”
The programme also included a brief summary of the history of UBI, including brief references to both Thomas More and Thomas Paine. There are quotations in support of UBI from celebrities such as Richard Branson (“It will come about one day, out of necessity”) and Elon Musk (“Ultimately, I think we’re going to have to have some form of basic income”).
Michael Faye, Director and Co-Founder of GiveDirectly, said on the progamme, “When I’ve gone to some of the surrounding villages, things I will hear are ‘Well, of course we wish we had gotten the transfer, but we’re doing meaningfully better than before the transfer started.’ I’ll ask, ‘Why are you doing meaningfully better?’ And they’ll say, ‘A lot of people in the village [which is getting the transfer] decided to rebuild their house, or they go to the market more. Well, somebody needs to build the house for them, someone needs to sell things in the market. So our businesses are booming because of the capital that the village next door has received.’”
The programme-makers intend to return to the village at regular intervals, in order to see how the situation is developing as the experiment continues.
Edited by: Caroline Pearce
by Guest Contributor | May 28, 2018 | Opinion
A step to a future of solidarity and sharing
For hundreds of thousands of years, men and women lived in tribal groups, practicing mutual cooperation and solidarity. In the present we live in capitalism, competing among ourselves, driven by individual ambitions to ‘have’. This is not doing us any good. However, we can see it as a painful but necessary civilizational phase, a means of developing the capacity to produce all that’s necessary for the material life of all. The age of capitalism has only lasted 200 years. A better future could be drawn with the re-establishment of an economy of solidarity between people. We propose a process of systematic, automatic and unconditional transfers of money between people, from those who have more to those who have less. We call it Unconditional Basic Income of All for All, or ‘UBI-AA’.
The Past – from Ancestral Economy to Capitalism
Human societies in which all men and women have lived on Earth since people here exist, and until the formation of the first sophisticated civilizations, were tribal groups. They functioned through cooperation and solidarity between their members in tasks such as obtaining and distributing food, building shelters and family dwellings or taking care of community assets; tasks that today we would call ‘economic’. In fact, over hundreds of thousands of years of human presence on Earth the whole economy was cooperative and supportive. And it was sustainable then.
After the emergence of the first sophisticated civilizations and empires – about 6,000 years ago – things began to change, and the forms of economic organization put into practice came to vary from then. Today, however, all the economic diversity that has existed over those 6,000 years is virtually nullified, and a unique model has once again consolidated. It is called capitalism, and it has been going on for about 200 years.
While the ancestral economic mode was based on solidarity and cooperation between people, on a harmony between them and nature and on an orientation towards the mere satisfaction of their needs, capitalism is characterized by competition among peers, by the predation of the Earth and by an orientation of its agents towards unlimited material accumulation. Both models are hegemonic, each in its own time. But that’s all they have in common; as for everything else, it is difficult to find more opposing realities.
Can, like its ancestral homologous form, also this present ‘state of the art’ in economic organization – capitalism – last for hundreds of thousands of years? It doesn’t seem possible, given the condition in which it left us humans, and the planet, after only 200 years. And yet, despite its deeply dark sides, an important merit can be attributed to capitalism: with the demand for accumulation and profit it gave us machinery, techniques and knowledge that can now allow us to have the resources for the material comfort of all. This is only a possibility and not inevitable because although these machines, techniques and knowledge give us the capacity, they alone do not guarantee that we will use it. However, capitalism cannot possibly make any sense in history unless the immense price it charged and still charges us eventually results in the actual extinction of the material scarcity from the face of the Earth. Only then will it be seen as a process of rising human civilization to a higher level, albeit with great suffering.
Thus, the great question of the present is how to accomplish the potential that capitalism offers us, to free ourselves from the ‘fatality’ of material scarcity. The simple progress of the economy, as we have it, does not seem to be the way. Reality shows us very clearly that the mere growth, without any change or innovation in the logic and processes of the present economy, will never raise the condition of all, although it may greatly improve it for some people. Neither the strengthening of the so-called welfare state, in its traditional, bureaucratic, expensive and life-controlling form, can do more than mitigate poverty. Traditional welfare will never eliminate poverty and it charges from its beneficiaries a price in dignity and in humanity that the more unnecessary it becomes, the more intolerable it gets.
No, capitalism does not inherently have a mechanism to guarantee essentials for all. Let us resurrect from our ancestral economic way its essential element: solidarity among people.
A Future – the UBI-AA
Solidarity among people is the essential idea of the alternative distribution model of the resources generated in society we will talk about here: the Unconditional Basic Income of All for All, or ‘UBI-AA’.
To show what it is and how it works we will turn here to an explanation given elsewhere:
The UBI-AA is a revenue redistribution process designed to operate monthly, providing automatic and unconditional transfers among citizens, from those who have higher incomes to those with low or no income at all. Built, supported and leveraged by them, the process will invite the participants to take responsibility and engage in their communities, which will reinforce them.
It works in two stages:
1) As it is acquired, each member of the community discounts to a common fund – a ‘UBI Fund’ – a proportion of their income, at a single and universal rate;
2) At the end of each month, the Fund’s accumulated total is equally and unconditionally distributed by all members of the same community.
This simple process of treating everyone equally puts those who in each moment have above-average incomes to deliver to the UBI Fund more than they receive from it, and those who have below-average incomes would receive more. Thus, the process operates a joint distribution between the participants of part of their individual incomes. In addition, to reduce inequalities between them, this solidarity between peers creates an unconditional guarantee of income for all, that is, an Unconditional Basic Income.
It follows from the action of the UBI-AA process the loss of available income by some and its gain by others. For those who lose money, it is important to limit the loss, while maximizing the gain for the rest to ensure broad acceptance of the policy.
The demand for this double result should not, however, mean a devaluation of the possibilities of mutability of all individual positions. With the passage of time and with the exercise of the options that the process itself will open to the participants, the situations of income “winners” or “losers”, in which each of them will at each moment be, should always be seen as circumstantial.
To make possible its intended effects, the implementation of the UBI-AA should be accompanied by the release of its participants from the burden of personal income tax. Such tax relief will compensate them for the contributory effort required by the UBI-AA process, although, for those above a certain level of income, such compensation may turn out to be merely partial.
Abolished the personal income tax, the moderation of loss for citizens with higher incomes and, at the same time, the material significance of the gains to those in the opposite condition, will be possible if the rate of contributions to the UBI Fund is set at an optimal level, balancing the two outcomes. [1]
A more complete description of the UBI-AA process, as well as a simulation of the financial effects it would have produced, both in individual citizen spheres and in the State budget, hypothesizing it in force in Portugal in 2012, can be seen here.
UBI-AA differs from most of the traditional redistributive processes in operation because it is unconditional; and from most of the unconditional alternative processes for being a construction of common citizens instead of the policy of a government, a central bank or any other ‘power’.
What is proposed with the UBI-AA is not directly the creation of an unconditional guarantee of income for all. The proposal is the institution of an alternative form of organization of the economy in its distributive side. This will be accomplished with the income distribution process described above; a process that will favor the rehabilitation of values such as solidarity and voluntary cooperation between people, and of which the creation of an unconditional guarantee of income for all will be a corollary.
We hope that may contribute to the flourishing of a new culture, less marked by the centrality of material goods. Who knows if making everybody’s access to essential material resources as simple as the possibility of breathing, will not end up instilling in us the same attitude towards those resources – money and things it buys – as that we have towards the air we inspire: no matter how valuable it may be to us, we do not quarrel with each other for it; we use the quantities we need. Accumulating it would no longer be necessary.
Such cultural shift would certainly be a great step forward for us, human beings, and very good news for Earth.
[1] This stretch is an English translation from Projeto de um RBI – Local – Solidário – Voluntário, [Project of an UBI – Local – Supportive – Voluntary], by Miguel Horta, 2017, available (in Portuguese) from: https://pt.scribd.com/document/341205904/Projecto-RBI-Local-V-2017.
Written by Miguel Horta
by Guest Contributor | May 26, 2018 | News
Scott Santens published on Medium the transcription of a speech he wrote for a keynote session he presented in Sweden in 2017, with the title “It’s time for technology to serve all humankind with Unconditional Basic Income.”
The speech revolves around the impact of automation on society, acting as a disruptor in the labour market, making many jobs obsolete without creating more and better jobs for humans. This is a trend that goes on since the ‘90s: “Yes, it already happened. It’s not in the future. It’s in the past”.
Technological unemployment is a reality, he says, and it’s observable from the decline in occupation of the US population since 2000, the year in wich human labour peaked. Ephemeralization made a lot of middle-skilled jobs obsolete, creating an occupational vacuum filled by low-skilled jobs, as jobs are automated “from the middle out”. This translated in income stagnation for the middle class, growth in incomes monthly variance and rising income inequality. All factors which ultimately affect the wellbeing of individuals and society as a whole, producing a costant sense of insecurity in the population. But, according to Santens, we shouldn’t fear automation:
“We have the opportunity to forever free humanity from drudgery and toil, but as long as people require money to live, and jobs are the primary way of obtaining money, people will fear automation.”
Technologic unemployment ends up hindering productivity itself, because automation of the medium skilled jobs makes workers shift toward the low skilled ones, increasing the offer of low paid work and thus making automation less convenient and postponable.The answer resides in decoupling work from income, through the introduction of an Unconditional Basic Income, a solution which would make income circulate from top to bottom. It would eliminate the necessity to work in order to survive, thus driving very many undesirable jobs out of the labour market and making automation more impellent. With a better distribution of wealth, full automation could be reached, eliminating many unnecessarry and unsatisfactory jobs, and society would be ultimately able to floursih. Scott Santens puts this clearly:
“…how much are we holding civilization back by allowing impoverishment to continue? How much more could we accomplish as a species, if we made the choice, that’s right, THE CHOICE, to abolish poverty and extreme inequality forever, by simply investing in humanity — in each other?”
More information at:
Scott Santens, “It’s Time for Technology to Serve all Humankind with Unconditional Basic Income”, Medium, April 13th 2018
by Andre Coelho | May 24, 2018 | News
Next week – 1 through the 3rd of June – Universal Basic Income Europe (UBIE) activists will be at the EYE2018 event, in Strasbourg. This event is an annual gathering of young Europeans at the European Parliament premises. There, they “come up with ideas for the future of Europe”, “discuss with European decision makers”, and join/meet other interested young people around Europe.
In an attempt to fuel the debate around basic income, UBIE aims at having 20 participants from 10 nationalities, at the EYE2018. There will be activities centered around equality/inequality (named “rich and poor”) and basic income will be discussed, at least, at a roundtable named “Basic Income: Return of Robin Hood?”. This roundtable, happening on Friday, at 11h am, will be organized by the European Parliament and will feature Harro Boven (Economist, Young Democrats (The Netherlands)), Aurèlei Hampel (UBIE), Ilkka Kaukoranta and Daniel Zamora, moderated by Petra Prešeren (RTV Slovenija).
Other event themes are:
- Young and old: keeping up with the digital revolution
- Apart and together: working out for a stronger Europe
- Safe and Dangerous: Staying alive in turbulent times
- Local and Global: protecting our planet
The event’s full programme can be found here.
More information at:
UBIE website
European Parliament, European Youth Event website
