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 Karl Widerquist | May 23, 2018 | Opinion, The Indepentarian
This essay was originally published on Basic Income News in August 2012.
Last February two conservative commentators, Bill O’Reilly and Lou Dobbs, from the Fox News Network, praised the Alaska Dividend as “a perfect Model” of what America should be doing with its resources. It is amazing that prominent conservatives can praise a policy that redistributes income from the wealthiest Americans to all Americans unconditionally—without means test or work requirement.
O’Reilly began by saying, “It is my contention that we, the people, own the gas and oil discovered in America. It’s our land, and the government administers it in our name.”
Later, Dobbs added (as O’Reilly nodded and voiced agreement), “All of the vast energy reserves in this country belong to us, as you said. In Alaska, there’s a perfect model for what we should do as a nation. We should have—what it’s called there is a Permanent Trust. Let’s call it the American Trust. And the oil companies, that pay about $10 billion per year in fees and royalties—have that money go into this trust fund, not to be touched by the Treasury Department or any other federal agency, but simply for the investment on behalf of the American people (citizens). A couple things happen. One is, it reminds people whose oil this is, whose coal this is, and what the rights of an American citizen are. And it even puts a little money, a little dollar sign, next to what it’s worth to be a citizen. Have dividends disbursed and distributed every year. … [The other thing is] Peg [the royalties] to the price of gasoline … and that money go into that trust fund for the American people. I think you’d see a lot of people start to pay a little different attention to what people think and respect citizens a little more.”
It was a very good statement of what the Alaska model is for and how it ought to work.
But I doubt the two commentators realize how subversive their words were. If the government realized that the land belongs to all the people and truly began to administer it for everyone’s benefit, many changes would happen. If all the oil, coal, and natural gas of America belong to all Americans equally and unconditionally, so do all the gold, silver, bauxite, fish, timber, land, and groundwater. So do the atmosphere, the broadcast spectrum, and many other things worth an awful lot of money. If everybody who asserted private ownership of any of these things had to pay into the kind of public trust fund O’Reilly and Dobbs endorse, that fund would finance the most massive redistribution of wealth from rich to poor in the history of the United States (if not the world), and it could probably support a basic income large enough to permanently end poverty in America.
-Karl Widerquist, South Bend, Indiana, August 2012
Video of Bill O’Reilly and Lou Dobbs discussing the Alaska fund and dividend is online at: https://www.foxnews.com/on-air/oreilly/index.html#/v/1472237953001/government-
For more on the Alaska model, including cost estimates of the potential value of the natural resources the government gives away for free see the following two books:
Alaska’s Permanent Fund Dividend: Examining its Suitability as a Model, co-edited by Karl Widerquist and Michael W. Howard (Palgrave-MacMillan, 2012):
https://us.macmillan.com/book.aspx?isbn=9780230112070
Exporting the Alaska Model: Adapting the Permanent Fund Dividend for Reform around the World, co-edited by Karl Widerquist and Michael W. Howard (Palgrave-MacMillan, 2012)
https://us.macmillan.com/book.aspx?isbn=9781137006592
Or contact me: Karl Widerquist <Karl@widerquist.com>
by Michael Lewis | May 18, 2018 | Opinion
Facebook and Economic Security Project (ESP) co-founder, Chris Hughes has a new book out. Called Fair Shot: Rethinking Inequality and How We Earn, the book is part memoir, part policy proposal. The memoir chronicles Hughes’ childhood growing up in a North Carolina working class family, his school days, including four years at Harvard, his co-founding of Facebook, his failure as owner of the New Republic, and his efforts trying to figure out how best to give away his new-found fortune. The things Hughes learned during this thirty-year journey led to the policy proposal part of the book.
Hughes advocates what he calls a guaranteed income (GI) and is clear about how his proposal differs from a universal basic income (UBI). A UBI would periodically provide everyone with a certain amount of money without any means-test or work requirement. Hughes’ guaranteed income proposal has two provisions which distinguish it from a UBI: it is means-tested and it does have a work requirement. His idea is that we should provide every adult living in a household with an income of less than $50,000 a year a guaranteed income of $500 per month. So if Tara and Willow were a couple with a household income of $45,000 per year, each would each receive $500 per month. Thus, each would end up with $6,000 per year or $12,000 per year for the two of them. If Buffy and Angel had a household income of $60,000 per year, they would be ineligible for the program.
One reason Hughes is so interested in distinguishing his proposal from UBI is that he believes UBI has become too associated with automation. That is, the most frequently heard argument for UBI is that as robots and automation destroy jobs, we will need to reorganize society so people will be able to get their needs meet without having to sell their labor. Hughes rightly points out that there is a fair degree of debate about the extent to which jobs will be destroyed and, therefore, the extent to which concern about automation is a compelling enough reason to advocate UBI. Hughes also rightly reminds us that whether or not automation will destroy all, most, or whatever number of jobs; the job market is already unstable enough for there to be a need now for a policy that promotes economic security. And he believes his GI proposal is that policy.
As an “old timer” in the basic income “movement” I feel obligated to point out that UBI was discussed long before folks in Silicon Valley were paying attention. And many of those discussions had little to do with robots or automation. Thus a name change, from UBI to GI, is not necessary to suggest there may be reasons to support UBI other than worries about robots taking our jobs. But here we get to the crux of the matter: Hughes’ proposal does not appear to be just a name change but a different policy altogether. As I said above, GI would not be universal and would not be granted to those who are not working. The means–tested nature of GI is clear: those in households with incomes under $50,000 per year would get it, while those in households with higher incomes would not. I’m not a fan of this aspect of Hughes’ proposal, but, for the purposes of this essay, I’m going to set this aside. The work conditioned nature of Hughes’ proposal is less clear. This is what I want to focus on in the rest of the essay.
Even though Hughes’ GI would require people to work in order to receive it, however it does not have to be wage-work. That is, Hughes is willing to expand the definition of “work” to include care work, such as uncompensated child and elder care, as well as studying for a formal degree or training programs. So someone caring for their child or studying for a B.A. would be considered a worker and, therefore, eligible for the benefit, as long as their income was under $50,000 per year.
Hughes places such emphasis on work because he believes it is good for us; he tells us that it makes us, “happier, healthier, and more fulfilled” (p. 103).
As I was reading this discussion of the problems faced by the unemployed, I found myself wondering how much stem from an inability to find something fulfilling to do and how much from stigma. I do not think it is unfair to say that our society denigrates people whom we think can work but choose not to.
But let’s say Hughes is right and people do feel more fulfilled if they engage in wage work. Let’s say that engaging in wage work makes us less prone to depression, irritability, and insomnia. Going to college or caring for one’s kids is not wage work. So what do studies showing we are less prone to psychological and physical problems when we engage in wage work have to do with the kinds of non-wage work Hughes wants to compensate with his GI? I suspect it’s fulfilling, at least some of the time, to take care of one’s kids or to attend college. Is this why care takers and students, along with wage workers, should be compensated with a GI? But if something being fulfilling is sufficient to warrant compensation, why stop at wage work, care work, or going to school? People do all kinds of things, besides these three, they find fulfilling. Why not give them a GI too?
On page 92 of his book, Hughes says that, “everyone who contributes to their community” should receive a GI. It seems that engaging in something fulfilling is not what warrants receipt of a GI — making some social contribution does. This raises the question of whether being a wage worker, care taker, or student are the only ways to contribute to one’s community. Hughes’ answer seems to be “no.” On page 112, he argues for a more expansive definition of “work” which would include not just wage work, care work, and studying but also community service, religious service, and artistic work.
Here I found myself wondering how far Hughes is willing to go. That is, how expansive a definition of “work” does he want? The more expansive his definition becomes, the more fuzzy the distinction between GI and UBI (the unconditional part) becomes. To see what I’m getting at consider the following example.
In downtown Manhattan, there’s a famous, at least among many basketball lovers, outdoor basketball court on 4th Street and 6th Avenue. Basketball, in a sense, is a very communal game. A person may shoot jump shots all by themselves. But to play a full-court pick-up game requires ten people. So if someone decides to play, even for the “selfish” reason that they get fulfillment from it, they benefit the other nine players as well, simply by making the game possible. Now the folks who play at this Manhattan court are quite good. Many of us who’ve seen games at this court think it’s some of the best pick-up basketball we have ever witnessed. In fact, the quality of games at this court is so high, that large crowds of people usually gather just to watch the action. Presumably, these spectators get a great deal of enjoyment from watching these folks try to get the “ball in the hole.” Now here’s the question: are the players at this court, simply by playing, making a social contribution? They are not doing wage work, care work, art work, or religious service. Are they doing community work? If Hughes’ GI were enacted and all these players were from households with incomes of less than $50,000 per year, should they receive it?
Another way to get at the question above is this: under an expanded definition of work what would not qualify as work? If it turned out that anything done during one’s waking hours was work, then the difference between GI and the unconditional part of UBI would simply be semantic. Hughes could respond that semantic distinctions are not “merely semantic.”
In a society where work is a fundamental value it may be necessary to call something work, as well as convince others that it is, in order to give the person engaged in that activity a guaranteed income. This is a response I would agree with. But I would add that the importance of semantics cuts both ways.
Requiring an activity to be considered work before the person engaged in it can receive income support is also sending the semantic, or symbolic, message that only working people deserve economic security. I can understand why we might want to do this in a hunter-gatherer society where all are living on the brink of starvation. But do we really need to in the richest society the world has even known? Consider something that may at first appear unrelated.
The U.S. currently imprisons about 1.5 million people. Anyone familiar with the U.S criminal justice system is aware that our prison population is, arguably, one of the most despised groups of people in the nation. Yet we grant all these prisoners a right to food. Prison life is no doubt hard. And we certainly do not feed incarcerated people the best food possible. But we do feed them, and I suspect anyone who proposed that we stop doing so would not get very far. Now here’s a question: is refusing to make a social contribution worse than the most serious violent crimes we have imprisoned some people for committing? If not, why propose a policy which sends the semantic message that non-working people do not deserve income support, income that could help them obtain food, as well as meet other basic needs? Why send a semantic message which implicitly amounts to the claim that non-working people are worse than some of our most violent prisoners?
To anticipate a possible misunderstanding, I am not claiming that non-working people are better than some of our most violent prisoners. My point is simply that if all prisoners have a right to subsistence, why not grant non-working people that same right? Prisoners, non-working people, and all the rest of us are human beings in need of food and other means of subsistence. A UBI, at the semantic level at which I am speaking, acknowledges this. Hughes’ GI proposal does not.
Thanks to Chris Hughes for his very helpful comments on this piece. Any mistakes or errors are, of course, my responsibility alone.
About the author:
Michael A. Lewis is a social worker and sociologist by training whose areas of interest are public policy and quantitative methods. He’s also a co-founder of USBIG and has written a number of articles, book chapters, and other pieces on the basic income, including the co-edited work The Ethics and Economics of the Basic Income Guarantee. Lewis is on the faculties of the Silberman School of Social Work at Hunter College and the Graduate and University Center of the City University of New York.
by Karl Widerquist | May 17, 2018 | Opinion, The Indepentarian
This summer and fall I’ll give at least ten talks in seven cities in six countries including the United States, Canada, France, Scotland, Finland, and Lithuania. Here’s the information I have on each talk so far:
Friday, May 18, to Sunday, May 20, 2018, keynote speaker at “New Directions in Basic Income Workshop,” the University of Michigan, Ann Arbor, MI, presenting “The Devil’s in the Caveats: A Critical Discussion of Basic Income Experiments,” Sunday, 1:00 – 2:30pm.
Thursday, May 24, to Sunday, May 27, 2018, participant at “North American Basic Income Guarantee Congress,” McMaster University, Hamilton, Ontario, presenting “The Devil’s in the Caveats: A Critical Discussion of Basic Income Experiments,” Saturday 10:30 – 12:00pm, Room 1305/07.
Wednesday, June 13, Paris, France. Guest speaker at Science Po, presenting “Freedom as the Power to Say No.” Details TBA
Thursday, June 14, to Saturday, June 16, 2018, participant at “The Economic Ethics Network Conference.” Invitation only. University of Paris, presenting “Justice as the Pursuit of Accord.”
Sunday, June 17, Talk to Basic Income Activists on “Basic Income’s Third Wave,” Paris, France, details TBA
Monday, June 18, 3 to 5pm, guest speaker presenting “Prehistoric Myths in Modern Political Philosophy,” Ecole des Hautes Etudes en Sciences Sociales (EHESS), Paris, France
Friday, July 20, 2018, presenting “A Critical Discussion of Basic Income Experiments: The Devil’s in the Caveats,” Glasgow, Scotland
Friday, August 24 to Sunday, August 26, 2018, participant at Basic Income Earth Network Congress, University of Tampere, Tampere, Finland, presenting “Microsimulation Analysis of the Cost of Basic Income in the United Kingdom” (joint presentation with Georg Arndt).
Thursday, August 30, to Saturday, September 1, 2018, participant European Network for Social Policy Analysis Conference, Institute of Sociology and Social Work, Vilnius University, Vilnius, Lithuania, presenting “Basic Income’s Third Wave.”
Thursday, October 18, to Saturday, October 20, 2018, participant at Association for Political Theory, Haverford and Bryn Mawr Colleges, Pennsylvania, presenting, “The Prehistory of Private Property, Part 1: The Myth of Appropriation.”
by Karl Widerquist | May 16, 2018 | Opinion, The Indepentarian
This essay was originally published on Basic Income News in February 2012.
The resource curse, as I see it, comes in three different forms. Alaska has avoided the first two, but whether it avoids the third remains to be seen. The first-stage resource curse occurs when resource exports drive up the nation’s exchange rate and drive other industries out of business. The phrase “Dutch Disease” was coined to refer to this kind of resource curse. The second-stage resource curse occurs when the influx of cash from resource exports fosters corruption, graft, and sometimes dictatorship, so that all or most of the oil revenue is used against the people rather than for their benefit.
The third stage of the resource curse occurs when the resource windfall creates temporary prosperity for all or most of the people, only to lead to depression and economic deprivation as soon as the resource revenue disappears. A large number of factors can contribute to the third-stage resource curse. It can happen if the resource-exporting community invests in an infrastructure suited only to resource exports and is either too large or the wrong kind of infrastructure for the economy that will need to be in place when the resources are gone. Probably the most important reason for a third-stage resource curse is too much spending on immediate needs and not enough savings.
The first two forms of the resource curse will be apparent during the boom, and clearly Alaska has escaped them. But we cannot know for sure whether it has escaped the third stage until the resource is gone. How well is it doing to avoid the third-stage resource curse?
Three strategies to avoid this third kind of resource curse are savings, investment, and the hope that resource revenue will never end. Although Alaska oil production has been slowly and steadily declining for twenty years, the hope remains that natural gas, newly discovered oil reserves, or some other resource discovery will replace what is being lost. This hope will never die, but it can substitute for cautious preparation.
Alaska has made some good investment spending on schools and infrastructure, and it has managed to save some money. According to Commonwealth North, Alaska has saved $66 billion dollars: about $40 billion in the Alaska Permanent Fund (APF), $10 billion in the Constitutional Budget Reserve (CBR) and the rest in other funds and saving mechanisms. Compared to most other U.S. states, struggling with budget deficits, these saving figures are impressive, but they’re not as impressive compared to other resource exporters. After exporting similar amounts of oil, Norway has amassed a fund of $560 billion dollars.
Instead of saving the bulk of its oil revenue, Alaska has devoted almost all of it to current spending. This decision has put Alaskans at risk of the third kind of resource curse. If the state government had to draw on the interest of its savings to make up for a shortfall in oil revenues, all the funds together could not be counted on to cover even one-fourth of the state’s annual budget, and most of the interest on Alaska’s savings (after inflation-proofing and reinvestment) is already rightly dedicated to paying dividends. If and when oil exports come to an end, Alaskans will need and deserve the returns to their savings more than ever.
The Alaska Permanent Fund (APF) and Dividend are working just as intended. They are Alaska’s best savings plan. They constitute a model that other places should be following. When savings are most needed, the state shouldn’t abandon that model; it should build on it. If the fund was large enough, the interest on it could support both a substantial dividend and some or all of the state’s regular spending. The solution for Alaska is to save more money now, while oil prices are high and production is healthy and to treat more of its resources the way it treats oil. The state can’t save more for the future without making some sacrifices in the present, but I want to show you that a much larger fund is feasible.
First, let’s consider what might have been. When oil revenue started flowing into Alaska, one proposal was to save all of it and spend only the interest. Of course, we can’t change history now, but it is valuable to look back with the benefit of numbers that weren’t available looking forward. According to Gregg Erickson and Cliff Groh’s chapter in Alaska’s Permanent Fund Dividend: Examining Its Suitability as a Model, the state received a total of $103.5 billion in oil revenue by 2010 (adjusted for inflation). It invested $19.1 billion (18.2 percent of its oil revenue) in the APF. Most of the remaining $84.4 billion (81.8 percent) went to the general state budget. Even though the APF has paid 30 years of dividends, the principal has increased by a total of 217 percent to about $40 billion.
Suppose, for the sake of argument, that Alaska had saved all of its oil revenue into the APF, using half of it for regular revenue and half of it for the PFD. If this larger fund did just as well as the actual fund has over the last 35 years, the APF would now be worth about $225 billion. It would have $9 billion available this year. Suppose it used half dividends and half for spending. If all 700,000 Alaskans applied for the PFD, $4.5 billion would finance a dividend of more than $6,000 per person, or more than $24,000 for a family of four. The remaining $4.5 billion dollars would cover about 43 percent of the current state budget of $10.5 billion.
But this is not all that might have been. According to Erickson and Groh, oil produced in Alaska has generated more than $300 billion in total revenue, two-thirds of which has gone to oil companies. Although fees, royalties, and taxes on Alaska oil have recently been increased, they have historically been very low by world standards. Some nations capture as much as 80 percent of oil revenue. Even though the oil was discovered by state geologists on state land, and the oil companies were brought in only as hired help, the state has let the oil companies walk away with most of the profits. Had the state captured two-thirds of oil revenue instead of only one-third, and saved all of that, Alaska could now have an APF of $434.8 billion. It would have $17.4 billion available this year, $8.7 billion for the general budget and $8.7 billion for dividends. The share going to the state budget would cover 83 percent of state expenditure. The state would only need to raise only $1.8 billion in taxes to cover all other current spending. Assuming the population of Alaska remains unchanged at 700,000 (which is admittedly a very big assumption at such a large dividend level), every Alaskan would receive a dividend of more than $12,000 per year. Poverty would no longer exist in Alaska, and everyone, rich or poor, would have a large springboard for opportunity.
The figures could be even higher if the state had treated more resources the way it treats oil, but I think you get my point. Even if the state needed to spend some of that money as it came in on badly need projects, it has much greater capacity to save than it has taken advantage of. It could have waited to get rid of the income tax until was replaced by permanent returns to the state’s savings (rather than temporary oil revenue). It could have driven a harder bargain with the oil companies. And it could have treated more resources the way it treats oil and mining. It would now little to fear from the coming decline in the oil revenue.
We can’t change the past; where can we go from here? Alaska has increased taxes and fees on oil companies in recent years, and it needs to resist oil company pressure to reduce them. Several proposals on the table right now would increase the APF. Senator Johnny Ellis proposes moving $2 billion from the CBR to the APF, and Representative Mike Doogan proposes $10 billion. These proposals are a start, but it is not enough simply to protect some of the savings Alaska has accumulated. Alaska needs to save more — a lot more.
The state government takes in about $9 billion in oil revenue per year. Suppose the state saved $8 billion of that each year for the next 10 years and its investments do as well over those years as the APF has on average in the past. If so, by 2022, that savings alone would accumulate to more than $90 billion. The APF would grow to $50 billion, or $62 billion dollars with Rep. Doogan’s additional $10 billion were moved from the CBR. Combining that savings would make the APF balance $152 billion. It would produce $6 billion dollars of returns ready for use. If all of that revenue were devoted to the PFD, each Alaskan would receive a dividend of more than $8,000. If half of it were devoted to the PFD, it would have $3 billion dollars per year of permanent income to relieve pressure on the state budget, and it would still be able to pay dividends of more than $4,000 per person per year.
Such an ambitious short-term savings plan is probably not politically possible, but it is possible to move in that direction. Continuing to live off temporary revenue will leave the state vulnerable to the third-stage resource curse. Even $1 billion a year in additional savings would be a good start in protecting Alaska’s future.
by Karl Widerquist | May 9, 2018 | Opinion, The Indepentarian
This essay was originally published on Basic Income News in December 2011.
I can’t believe the news. We are in the midst of the worst global depression in 70 years, and the governments of almost every major industrialized country are talking about austerity. They’re cutting government services; laying off public sector workers; cutting pay, pensions, and benefits for public employees—all in the name of austerity and balanced budgets.
This astounds me because we’ve been through it before. We’ve seen what works, and we know that austerity is not the way out of a major depression. Austerity makes depressions worse. To get out of a depression, the government needs to spend money—and lots of it. The lessons of history are clear, and the reading of history I’m going to discuss to make my point is not terribly controversial among economists. Let me explain.
In a depression (or a deep recession or whatever you want to call it), we get stuck at the bottom. People can’t spend as much because they’re not making as much, but they aren’t making as much because people aren’t spending as much. Debt is a related problem, and so, I believe, is the real estate market, but there’s no room in this editorial for a full explanation. If you understand the idea of getting stuck at the bottom because of the feedback between spending and income, you get the essence of it. This kind of unemployment is pure waste. Human resources (not to mention idle shops and factories) are simply going to waste unused. We can wait for all that to work itself out on its own—as Japan has been waiting since 1989—or the government can take action.
Austerity is a reasonable response to—say—finding half of our industrial capacity destroyed by aerial bombardment. If our physical capacity to produce goods has fallen, then we’ll all have to make do with a little less for a while. But austerity is the worst possible response to an economy in a depression, because a depression economy is no less able to produce goods than before; it’s simply letting productive capacity go to waste. And that waste exists because people aren’t spending as much. If the governments of the world respond by spending less as well, they simply exacerbate the problem.
We learned how to take action in a big way at the outset of World War II. I wrote a few years ago about “the economic lesson of 1938” (August 2009). Today’s editorial could as well be called “the economic lesson of 1941.” The accompanying graph (at the bottom) shows U.S. per capita GDP for the years 1929 to 1947—from the stock market crash at the beginning of the Great Depression to the bottom of the post-war recession. Per capita GDP is the income of the average American. The figures are in “inflation-adjusted” 2008 dollars, meaning they’re multiplied by an index to show the purchasing power that the incomes of the time would have at today’s prices. No inflation adjustment is perfect, but they give you a rough idea. In general the graph shows we were much poorer back then, but it shows much more about the times.
The austerity years were 1929 to 1933. In addition to many other mistakes, the government responded to reduced tax revenue caused by declining economic activity by reducing its own activity to match. Average income went down from over $11,000 to less than $8,000—a loss of more than 25 percent. You can think of everybody getting a 25 percent pay cut at the same time or of 75 percent of people keeping their entire income while 25 percent of people lose their entire incomes. What actually happened was somewhere in between, a little bit of both. Unemployment went up to 20 percent, and in that sense the Great Depression was roughly twice as bad as what we’re going through now.
In 1933, Franklin Roosevelt was elected and we started spending money to stimulate the economy. He called it “priming the pump.” Years later Keynesian economists would call it “simulating aggregate demand.” Whatever you call it, Roosevelt took what, at the time, looked like big action, spending money trying to help people, to get the economy moving again. And he had several years of success until he returned to austerity measures in 1937 and 1938, suddenly trying to balance the budget. I wrote about that problem in my earlier editorial. Except for that year progress was slow but steady. Yet, by 1941 unemployment was still at 9.67%. After 12 years of waiting for an end to the depression, more Americans were unemployed in 1941 than they are now in the forth year of our depression.
But in 1941 the Japanese bombed Pearl Harbor. The United States entered World War II. And the depression ended virtually over night. We went from a 10-percent labor surplus to a labor shortage in a matter of months. The demand for labor was so great that women entered the labor force in unprecedented numbers. They found good high-paying jobs waiting for them. Average income shot up to $20,000 per year—two and a half times what it was after four years of austerity in 1933.
The depression disappeared because the government spent money and massive amounts of it. The government hired the idle labor (and more) as soldiers and support workers. The government hired the idle shipyards to build boats, the idle automobile plants to build jeeps and tanks, and so on. It was good for people, and it was good for business. The entire New Deal—it turned out—was far too small.
There are dangers to stimulating the economy in the wrong way, at the wrong time, or in the wrong amounts. You can end up with unacceptable debt, inflation, or a delayed depression. This is why I have never thought of myself as a Keynesian, and I do not think that massive stimulus is the best response to a garden-variety recession like most of the ones experienced between World War II and today. I’ve argued in this series (May 2009) that the most important thing government can do during a downturn is the same as during a boom: make sure everyone’s basic needs are met. If that is done, we can often let recessions work themselves out. I guess I’m a last-resort Keynesian. I think most non-Keynesian economists are, although they probably disagree a lot in how bad things have to get before they’ll take up their last resort.
I don’t think we should wait any longer because the possible dangers of a government stimulus can be overblown. None of them manifested themselves during or after the Second World War. Except for the obvious losses to war, the spending was good for people. After the war people got married; they used the money they saved to make down payments on houses, to start families, and to build better lives than they had in the 1930s.
The depression never came back. This is why I end the graph in the recession year of 1947. That year was as bad as the economy got after the war, but yet, per capita income was still nearly $15,000, not quite twice what it was after four years of austerity in 1933 and still 25 percent higher than it was in the boom year of 1929. After 1947 we got good healthy growth punctuated by short, forgettable, recessions. It was one of the best periods of economic growth in American history. The Second Word War spending worked, and there was no post-stimulus hangover, not in the short, not in the long run. The most massive government stimulus we’ve ever had—perhaps the largest in world history—did not cause any significant problems with debt, inflation, or delayed depression.
You can look at the income and unemployment figures for almost every industrialized, capitalist nation at the time, and you will see the same pattern: as soon as they began massive war spending, the depression ended in their country. But we don’t need a war to stimulate the economy. We just need to break the political obsession with austerity and start spending money.
Without the need to spend a stimulus on war, we can spend on schools, bridges, public transits, infrastructure, or on services to help the needy through a basic income guarantee or through something else. What we spend on is less important for stimulating the economy than the need to spend. The basic income guarantee movement now needs to be part of broader movement around the world against the austerity craze. This is one reason I support the Occupy Movement in the United States and the anti-austerity movement in Europe. We must focus the world’s attention on the need for government to spend money to help people. Once we open that door, the possibilities are great. But until then, we practice austerity against the lessons of our history.
-Karl Widerquist (karl@widerquist.com), the Second Cup Café, Doha, Qatar, December 2011
