by Yannick Vanderborght | Jun 11, 2012 | Opinion
Some might know the tale “The Emperor’s New Clothes” by Hans Christian Andersen. The story is about how betrayers sell new clothes to a vain Emperor. As the betrayers insist, the specific qualities of the clothes are such that they could only be seen by the cleverest and bravest people.
Today, the times of Emperors and Kings are almost gone, rather the nation became the sovereign in democracies. Hence, some know the term “Leviathan” used by Thomas Hobbes referring to the biblical-mythological lake monster: A polity in the form of a state as a super organism whose almighty is invincible.
But the old clothes of Leviathan often seem like a tight suffocating corset of a relation web made by lobbies. That is why the relatively new Pirate Party in Europe demands politics be made more transparent. They claim to tie a new dress for Leviathan. Thus, a new web of relations and power emerges, but in contradiction to other parties, it should show sympathies and antipathies more transparently.
Before the Pirates also other parties appeared more or less successful with the same desire to make politics more different and better. The common purpose is to care for the welfare of Leviathan. In principle the whole political dispute turns out to be how and under which framework to reach this goal.
Obviously, the Pirates want to give the population a share to define this aim. Other parties, however, often leave this, figuratively spoken with Adam Smith, to the invisible hand of the market.
In my view, the popularity of the Pirates is based on the feeling expressed by a growing number of people that this invisible hand prevents them from participating in the common wealth. But this relates to the participation in the achievements generated by the whole society rather than to defining the welfare itself. Hence, it is for example comprehensible, why the Pirates demand for an Unconditional Basic Income: to enable an almost bureaucratic-free economic participation for all.
However, only a minority is interested in the wealth of Leviathan. The majority is rather engaged in dealing with their own well-being. As long as Leviathan does not prevent them from doing so, the wealth of this only abstractly imagined being is indifferent for them. Eventually they elected, in a representative democracy, deputies who should care about Leviathan.
The new clothes, designed by the Pirates, are not really an attempted fraud. Further they are an offer for the cleverest in the state to participate in finding solutions for existing problems. As long as the new relation web of the Pirates has no negative impact on the decision making process, it could help to cure Leviathan.
by Karl Widerquist | Jun 4, 2012 | Opinion, The Indepentarian
Alaska’s basic income is cursed with interesting times. The Permanent Fund Dividend (PFD) is a small, variable basic income given yearly to every Alaskan who meets the state’s residency requirement. The size of the dividend is determined by several different factors, all of which are facing increased uncertainty and possibly moving in different directions.
The PFD is financed not by current oil revenue, but by past oil revenues that have been saved and invested in the Alaska Permanent Fund (APF). The size of the dividend depends on the returns to the fund’s investments and on the size of the fund, and the size of the fund in turn depends on the international market price of oil, the amount of Alaskan oil sold on the international market, and the tax rate on oil companies selling Alaska’s oil. Those four factors (among others) affect the size of the dividend, and all of them seem to be moving in different directions and facing increasing uncertainty right now.
Oil prices and returns to the fund’s investments have been high recently, helping bring the APF’s principal to record high levels. According to Amanda Coyne of the Alaska Dispatch, the fund ended March with $41.5 billion-the highest month-end figure to date. The state is expected to deposit nearly $1 billion into the APF this year. But while oil prices are high, oil exports from Alaska are declining; the governor of Alaska is pushing for lower taxes on oil exports, making it easier and more lucrative for countries around the world to import and export oil to and from Alaska from overseas using shipping services similar to Plexus Freight (www.plexusfreight.com). However, the rate of return on the APF’s investments is facing increased uncertainty in the next few years.
To begin, consider the APF’s rate of return. According to Pat Forgey, of the Juneau Empire, executives of the Alaska Permanent Fund Corporation (APFC) expect lower earnings for the rest of this year, and perhaps for several years, thanks to the outlook for stocks, bonds, and real estate. Alaskans have come to expect a very healthy return of 8 percent or more, but Forgey quoted Greg Allen, of the advisory firm Callan Associates, “Getting a 5 percent (real) return is going to require people to take more risk than they’re used to.” The APFC has a strong responsibility to avoid unnecessary risks with the people’s APF, and so they are likely to stick with a more conservative investment strategy. Lower returns will translate into lower dividends over the coming years even if oil revenues remain constant.
And oil revenues are not likely to remain constant. Alaska’s oil exports (measured in barrels of oil) have been gradually declining for 20 years, but rising oil prices have kept the state’s oil revenues up. The increase in oil prices in the first months of 2012 have been an enormous help to the state’s fiscal position. Oil revenues have also been increased by higher tax rates on oil companies, enacted in 2008. But the gradual decrease in the number of barrels exported each year will sooner or later outstrip the effect of higher revenues per barrel of oil, and the effects of the decline might be felt sooner rather than later.
According to the Fairbanks Daily News-Miner state projections indicate that declining revenues could put the budget into deficit within the next three years. For most states a budget surplus with a possible deficit three years off would be a great fiscal position. But Alaska is used to budget surpluses, and because oil is by far its main source of revenue, any decline in oil output is worrying.
Alaska governor Sean Parnell has responded to the prospect of declining oil exports by asking the legislature to decrease oil taxes. The idea is that lower taxes will encourage greater oil exports. The difficulty with this strategy is that to increase oil revenue lower taxes would not only have to increase oil exports but increase them so much that the greater number of barrels exported makes up for the smaller revenue on each barrel. It’s a questionable strategy that has certain benefits only for oil companies. Other oil exporters with high oil taxes find oil companies willing to drill and sell it. There are other things the state could do to encourage greater oil exports, such as introducing use-it-or-lose-it leases. Current law allows oil companies to lease the right to drill for oil in a certain area and then choose not to do so. Many leases today are simply sitting unused.
In sum, at the moment we have: oil prices up; returns on investments up (for now); oil taxes probably going down; and oil exports down. All that could change, in the short and medium term. The only certainty is that oil exports will eventually decline over the long term, because there is only so much oil in Alaska. It seems that the downsides are looking larger than the upsides at the moment, but I make no prediction of whether the APF and PFD will be up or down in the next few years.
-Karl Widerquist Tel Aviv, May 2012
Recent articles on the APF & PFD include:
Forgey, Pat (Feb. 24, 2012) Juneau Empire, “Permanent fund warned of lower earnings”
https://juneauempire.com/state/2012-02-24/permanent-fund-warned-lower-earnings
Pat Forgey (February 23, 2012) Juneau Empire, “Permanent Fund to continue securities lending: Alaska protected from risks, advisers tell fund trustees”
https://juneauempire.com/state/2012-02-23/permanent-fund-continue-securities-lending
Pat Forgey (February 23, 2012) Juneau Empire, “CIO suggests new permanent fund options: Investment chief Jay Willoughby says state should capitalize on fund’s strengths”
https://juneauempire.com/state/2012-02-23/cio-suggests-new-permanent-fund-options
Maureen Farrell (February 29, 2012) CNN Money Markets, “Alaska’s oil windfall”
https://money.cnn.com/2012/02/29/markets/alaska_oil/
Amanda Coyne (Apr 20, 2012) “Alaska Permanent Fund makes a comeback as markets rebound,” Alaska Dispatch.
https://www.alaskadispatch.com/article/alaska-permanent-fund-makes-comeback-markets-rebound
Kevin Olsen (April 23, 2012) “Alaska Permanent Fund nets 1.9% return over 9 months”
Pensions & Investments (PI online):
https://www.pionline.com/article/20120423/DAILYREG/120429976/alaska-permanent-fund-nets-19-return-over-9-months
Lisa Demer (February 27, 2012) “Alaska Legislature: Senate panel tackles multiple amendments to oil tax bill”
Anchorage Daily News: https://www.thenewstribune.com/2012/02/24/2040560/senate-panel-tackles-oil-tax-bill.html
Fairbanks Daily News-Miner Editorial Board (March 4, 2012) “Deficits loom: Alaska’s cash will erode quickly in coming years,” Fairbanks Daily News-Miner
https://newsminer.com/view/full_story/17726357/article-Deficits-loom–Alaska%E2%80%99s-cash-will-erode-quickly-in-coming-years?instance=home_opinion_editorial
by Citizens' Income Trust | Jun 4, 2012 | Opinion
Graham Room, Complexity, Institutions and Public Policy: Agile decision-making in a turbulent world, Edward Elgar, 2011, vii + 383pp, hbk, 0 85793 263 1, £95
This is one of those rare books which studies the deeper foundations of theory and practice: not just a particular social policy field, and not even the way in which social policy is either made or studied, but rather the nature of the world in which social policy is made – its institutional, social, and personal realities, and the dynamic relationships between them – and the ways in which social policy-making should therefore be carried out. As Room puts the questions which he asks himself:
How can we best conceptualise [the] dynamic processes of socio-economic change? … how can we model these dynamics empirically, as processes that are endogenous rather than merely the response to exogenous shocks? … what analytical tools … can be made available to policy-makers for the purpose of monitoring and steering these processes of transformation? (pp.4-5).
In answer to these questions the book discusses the policy process as a non-linear one which
involves feedback loops which bring into play a variety of actors who set about reshaping the policy intervention in light of their own strategic objectives … This is policy-making played out on a bouncy castle … Any policy is an intervention in a tangled web of institutions that have developed incrementally over extended periods of time and that give each policy context its own specificity. … Policy terrains and policy effects are path dependent. (p.7)
So policy processes can be both non-linear (containing feed-back loops) and path-dependent ( – their history determines to some extent where they go next), and it is in this complex context, which is also a highly turbulent one, that evidence-based policy decisions have to be made.
The first part of the book is theoretical, and Room draws on numerous disciplines to build a conceptual structure. He employs biological and mathematical sciences to understand the economy as a complex adaptive system which is nowhere near to equilibrium; and sociology and political science to understand institutions as diverse and dynamic moral communities subject to change by institutional entrepreneurs when public dissatisfaction opens up new political possibilities. A final theoretical chapter employs biological science to understand the agile agents who operate in far from equilibrium complex systems.
The second part of the book relates the first part’s conceptual structures to the empirical social scientific methods familiar to students of social policy. Room applies the mathematics of complexity, chaos, and emergent order, to combinations of complex social systems and networks, and then to social mobility and inequality. He finds that
egalitarian efforts by the state do not reverse inequalities so much as mute their harshness … As structural change alters the landscape of positional competition, it is … in general those who are already advantaged who are best placed to take advantage of the new opportunities and to avoid the new insecurities (pp.209-210).
Part 3 employs the understanding of the policy context outlined in part 1, and the methods discussed in part 2, to understand the policy-maker as a ‘tuner’, an energiser, and a steward, and to discuss particular policy areas. Of particular interest to readers of this Newsletter might be the chapter on poverty and social exclusion, which employs mathematical modelling to understand social polarisation, understands households as agile institutional entrepreneurs negotiating their way around the social policy landscape (of education, benefits, employment, etc.), and recognises that in the employment market ‘agile creativity accrues disproportionately to the advantaged’ (p.265).
After chapters on the knowledge economy and the current financial crisis, the final chapter offers a policy tool-kit for agile policy-makers, and examples of how the tools might be used.
This is a most fascinating book. Just as Aristotle wrote his Metaphysics (‘after-physics’) after his Physics, so Room has written a ‘metasocialpolicy’ which will act as a groundwork for future study of social policy and for policy-making. But perhaps we also need another layer of analysis. The book is about the evolution of complex adaptive systems, but the first chapter mentions a different kind of change: the earthquake – a sudden shifting of the tectonic plates. Scientific progress is mainly evolutionary in character, but occasionally there is a paradigm shift: the emergence of a new way of seeing, a shift in the conceptual tectonic plates. Our welfare state, in most of its aspects, is still fashioned for modernity: for a stable industrial nuclear-family society; but our world is less and less like that. Social reality is now ‘liquid’ (Zygmunt Bauman), but we are still waiting for the social policy earthquake which will deliver the necessary social infrastructure. It is the science of paradigm change that we require, and a new vision of social policy which will both serve and generate further liquid social reality. Strange though it might seem, the dynamic complexity of today’s social reality requires the opposite kind of social policy, because any complexity in practical policy will create social, fiscal and other boundaries which will prevent social and individual change. Just one obvious example is children’s transfers from primary to secondary school, and another the transfer from Job Seeker’s Allowance to (so-called) ‘tax credits’ on an often small change in the number of hours of employment. Liquid post-modernity requires simplicity in social policy so that no boundaries get in the way of social or individual change. Child Benefit and the NHS are obvious examples.
In complexity science as in politics, prediction is perilous; agile humanity is forever able to devise new challenges to the prevailing order; nothing is incontestable; human beings can in some degree choose their futures. (p.305)
by Citizens' Income Trust | Jun 3, 2012 | Opinion
Paul Spicker, How Social Security Works: An introduction to benefits in Britain, Policy Press, 2011, xii + 284 pp, hbk 1847428110, £65, pbk, 1847428103, £23.99
This well-organised book is what it says it is: an ‘introduction’ to the ‘design, management, operation and delivery of benefits’ (p.ix). Its careful structure enables Spicker to bring a sense of order to a system which he recognises to be ‘baffling’ (p.x), though he himself admits that ‘there is a limit to how clear it is possible to make things clear – the structure of benefits does not make sense’ (p.x). A further problem identified is the constant and rapid change from which the system suffers, and this reviewer can empathise with Spicker’s statement that his ‘head is cluttered with old rules and regulations dating back through the last thirty-five years’ (p.xi).
The first part of the book asks ‘What is social security?’ and suggests that ‘there is much more to social security than the relief of poverty’ (p.10). The second part details the development of the system from the Poor Law to the present day, and asks whether the new Universal Credit will in practice be a unified benefit. The third part discusses different categories of benefits (National Insurance, means-tested, non-contributory, discretionary, and universal), how claims are processed, and take-up levels. Part IV debates life’s contingencies (retirement, illness, disability, children, parenthood, lone parenthood, unemployment, and poverty); and the fifth covers such issues as cost, targeting, fraud, the meaning and measurement of poverty, and redistribution. A final chapter compares Britain’s system with those of other countries. A particularly interesting chapter is that on complexity in which Spicker concludes that complexity matters when it leads to the system ‘failing to respond to the changing conditions of people in complex circumstances … We cannot ask claimants to live simpler, more orderly lives’. Part of the answer is to address the issues of ‘conditionality, administrative rules and administrative procedures’ (p.145).
Chapter 12 on ‘Universal benefits’ starts with an argument as simple as the benefits themselves:
The general arguments for universality … include basic rights, simplicity and effectiveness. The central criticism of universal benefits is that they spread resources too widely: if benefits are going to everyone, then either they will be very costly, or they will have to be set at very low levels. This dilemma can be avoided. One option is that universal benefits can be reclaimed through the tax system – a process referred to as ‘clawback’. This has an effect similar to means testing, with two important differences: first, that everyone receives the benefit, and second, that the examination of means is also done for everyone. (p.117)
Then follow a history and discussion of Child Benefit, a description of New Zealand’s universal pension, and a discussion of the Coalition Government’s current consideration of a citizen’s pension for the UK. The chapter concludes with an intelligent and nuanced debate of a Citizen’s Income and with another encomium to Child Benefit:
What Child Benefit offers is a modest but secure element of a family’s general income, something that is fairly predictable and secure. It is the only element of income that seems to continue to function reliably in situations where people are moving in and out of work or where their income is unstable and unpredictable. That seems to me something which is valuable and important, and the principle could be more generally extended. (p.124).
In his concluding ‘Postscript: Social Security: a programme for reform’, Spicker’s first recommendation is: ‘extending the scope and value of less conditional benefits, like Child Benefit, which also helps to stabilise the income during transitions’ (p.274); and the first suggestion in a list of ideas for ‘reducing complexity, error and administrative confusion’ is ‘replacing some claims with automatic payments’ (p.274).
Spicker doesn’t put it like this, but it would be perfectly fair to describe his book as a sustained argument for a partial Citizen’s Income.
by Citizens' Income Trust | Jun 2, 2012 | Opinion
Beverley A. Searle, Well-being: In search of a good life, Policy Press, 2008, ix + 198 pp, hbk 1 86134 887 6, £65
In this thorough and very readable book Beverley Searle employs extensive panel survey data to study people’s subjective well-being and the economic and material contexts of their lives. A complex picture emerges. As we would expect, someone’s health influences their subjective well-being; interestingly, people over 55 tend to report higher subjective well-being than those under 55; and having and changing social relationships can affect subjective well-being in a variety of ways.
An important finding is that objective wealth and income measurements do not correlate simply with subjective well-being. An improvement in one’s financial situation might result in a brief increase in subjective well-being, but the effect will soon wear off. (If our incomes rise then we habituate ourselves to new life circumstances and these might or might not improve our subjective well-being.) What does seem to be significant is subjective wealth, i.e., how we see our wealth in relation to the wealth of those around us. The high subjective well-being experienced by men in social class III (manual) is a surprising and interesting finding. A possible reason is that men in this social class are more accepting of their social and economic circumstances than are men in so-called higher social classes, and that there is something inherently satisfying about the social and economic circumstances of skilled manual workers who work within a set of rules without exercising significant authority within the organisations for which they work.
The situation is of course complicated by the facts that employment status and type of employment influence subjective well-being and that they have a complex relationship with income and wealth.
The author quite rightly calls for more research on inequality and its effects, particularly because ‘feelings of exclusion and subjective deprivation operate at all levels of affluence’ (p.112). This means that ‘a social thesis of well-being’ (p.113) might be the way forward: a theory in which ‘the “subjective” element of well-being is determined as much by social and political systems and how they interact as by individual effort and striving’ (p.113).
In the light of this suggestion, Searle addresses housing, education, and employment. In relation to employment she identifies secure employment as fostering subjective well-being, and the UK’s long hours culture as being detrimental to it; and she recommends a Citizen’s Income as a means of rebalancing employment with the rest of life and as a way of recognising the value of voluntary activity (p.124).
This is a most useful book. It contains thorough treatments of methodology, innovative and clear representations of results, and intelligent discussion. (It’s a pity that the index is somewhat skimpy.)
The final paragraph sums up the message:
The hierarchical structure embedded in an economic idea of well-being is unable to embrace the rediscovery of the social welfare approach that is being adopted in some sectors of society … Subjective well-being is not an individual but a collective experience – as such, while everyone should have the right to experience high levels of well-being there should also be a shared, collective responsibility for the well-being of others. … The quest, then, may not be to raise happiness levels but to seek a more sustainable emotion – that of contentment, (p.129)
by Citizens' Income Trust | Jun 1, 2012 | Opinion
Social Policy and Administration, vol.45, no.4, August 2011
As Bent Greve writes in his introduction to this highly topical edition of Social Policy and Administration, the financial crisis which began in 2008 has given rise to ‘a new era of welfare states … where targeting and emphasis on work are more substantial than earlier’ (p.333). Cuts in welfare budgets mean lower and more restricted benefits and higher retirement ages. The aim is now to save money rather than to improve services.
Two articles show that the financial crisis has generated policy changes consistent with long-term policy tendencies; another that initial Keynesian responses are giving way to retrenchment; and another that governments have in fact not taken advantage of the crisis to bring about otherwise unachievable policy changes. Two articles show that it is political rather than economic factors which have generated welfare state reforms.
The overall impression is one of intensification of existing welfare state styles but with additional tendencies towards retrenchment and ‘targeting’ – the latter unfortunately understood as means-testing rather than as increasing the coverage and levels of universal benefits in the context of progressive tax systems.
