by Citizens' Income Trust | Aug 2, 2013 | Opinion
Alberto Brugnoli and Alessandro Colombo (eds), Government, Governance and Welfare Reform: Structural Changes and Subsidiarity in Italy and Britain, Edward Elgar, 2012, 1 84844 477 5, hbk, xii + 183 pp, £65
Fundamental to the argument of this book are two different varieties of subsidiarity: what the authors call ‘vertical subsidiarity’: the idea that authority should be exercised at the lowest possible level in a hierarchy of authorities; and ‘horizontal subsidiarity’: the requirement that higher authorities should resource lower-level authorities to pursue the activity over which they have authority, including the resourcing of individuals and households to pursue their own chosen goals. ‘Network accountability and resourcing’, whilst being more of a mouthful, might be a more accurate expression of what the authors intend by ‘horizontal subsidiarity’: a multi-directional distribution of competences and resources across individuals, households, local communities, private sector companies, voluntary organisations, and public authorities.
The book’s first section is more theoretical in nature, and studies concepts relating to governance and subsidiarity; the second section charts the increasing relevance of regions within countries as opposed to nation states; and the third section studies recent changes in welfare state governance – and here UK readers will be particularly interested in Helen Haugh’s study of social enterprise involvement in health service delivery, and Martin Powell’s comparison of sometimes quite radical vertical and horizontal subsidiarity in Lombardy and the increasing involvement of private sector and voluntary sector organisations in welfare provision in the UK.
The fourth section of the book studies ways in which national governments have resourced households and individuals to take responsibility for their own welfare. Of particular interest will be Julian Le Grand’s chapter, in which he discusses the design of quasi-markets in welfare delivery, how to ensure equity of provision in a quasi-market context, and why such asset-based welfare instruments as child trust funds should be universal.
Tax and benefits were not on the agenda of the group of scholars convened by the Institute for Research, Statistics and Training in Lombardy to research and write this volume. If a further volume tackles this subject then a chapter might usefully be given to an impending experiment in the UK. Since the nineteenth century, social security benefits have been a nation state competence ( – as in most countries, although sometimes aspects of schemes will be devolved to the next layer down, as in the US). Policy and regulations are set at national level even when administration is managed locally, as with Housing Benefit. The UK government has now decided to localise Council Tax Benefit policy and regulations at the same time as it combines national in-work and out-of-work means-tested benefits in order to enhance employment incentives. It will be interesting, and perhaps painful, to watch the consequences of the interaction of a nationally regulated Universal Credit and a locally regulated Council Tax Benefit.
If the Institute does publish a volume on tax and benefits, then the editors might conclude that there are some aspects of welfare provision ripe for greater subsidiarity, and some that require policy and regulations to be determined at the highest possible level of authority. We have seen trade rules becoming more continental and global, and we are seeing calls for greater European involvement in such fields as food safety; and it might be that at the same time as the governance of such functions as social care and social housing become more local, taxation and benefits policy and regulation should become increasingly global. The editors might also decide that greater subsidiarity and increasing globalisation might in some circumstances benefit each other, and that in particular the best way to promote the ability of households and individuals to fulfil their own chosen goals might be a European or global universal Citizen’s Income.
by Citizens' Income Trust | Jul 26, 2013 | Opinion
Åsa Lundqvist, Family Policy Paradoxes: Gender equality and labour market regulation in Sweden, 1930-2010, Policy Press, 2011, viii + 155 pp, hbk, 1 847 42455 6, £65
The Nordic countries provide generous gender-neutral parental leave and benefits and also publicly-funded childcare, and the result is an unusual combination of high fertility and high female labour market participation. This book is a detailed study of family policy in Sweden, particularly in relation to two paradoxes: that policy promotes both mothers as carers in the home and as workers in the labour market, and that men and women are regarded as both different and equal.
The book is a study of how Swedish social policy relating to the family has arrived at its present state and of more recent developments which have been driven in different directions by a greater individualisation in society (and thus defamiliarisation) and an understanding of women as disadvantaged within the family. Most recently, a reintroduction of a benefit for carers at home, and the introduction of labour market incentives for women, have exacerbated the paradoxicality of the situation.
As the concluding section of the book suggests, the fundamental paradox is between equality and freedom of choice. We might put it like this: How to preserve radical gender freedom in the face of government policies aimed at equality in the labour market? And how to preserve gender equality in the face of government legislation designed to give to carers freedom over how they organise their households and their labour market participation? These are vital questions for any government, and are thus an essential field of debate for anyone promoting debate on social policy reform.
This is a well-researched and thought-provoking book.
by Karl Widerquist | Jul 22, 2013 | Opinion, The Indepentarian
The Alaska Permanent Fund (APF) has reached an all-time in a year in which Alaska’s Permanent Fund Dividend (PFD) will probably reach its lowest level since 1987. The PDF is Alaska’s small, variable, yearly basic income. It’s financed by the returns of the APF. You’d think, then, that the fund and the dividend financed by it would move up and down together. And they do-on average, over the long-run, with a time-lag. But they don’t necessarily move together in any particular year, and this year the difference is extreme. The fund has risen to an all-time high of $45.5 billion, while the dividend is likely to reach a 25-year low of barely more than $700.
One reason the fund and dividend don’t always move together is that new oil revenues deposited into the fund increase its size every year without directly affecting the dividend. Another is that the size of the dividend depends on how many Alaskans apply for it that year. But the main reason the fund and dividend often move in opposite directions has to do with the formula translating the returns of the fund into dividends.
The legislators who created the dividend choose a rather simplistic way to try to protect the fund from inflation and to smooth out returns to make the dividend less volatile than the fund’s returns. The fund is invested in stocks, bonds, real estate and other assets around the world. A fund like that can rise by 20% one year and decline by 20% the next- but this is part of the risk when it comes to stocks and bonds. Everyone knows that when you get into stock trading uk, you’re likely to see the market fluctuate and funds like this are no different. It did nearly that in 2007-2009. Nobody wants to have a negative dividend, and so the state decided to smooth out the dividend by basing it on a 5-year average of returns to the fund. This strategy does make the dividend more stable than it would be if it was calculated solely on the returns in any one particular year, but it also makes the dividend a lagging indicator of the fund’s performance over the previous 5 years.
This year’s dividend calculation is the first one in five years that doesn’t include the big returns of 2008 and last one that will include the negative returns of 2009-experienced as the world stock market bottomed out following the 2008 financial melt-down. As long as this year’s returns are better than they were in 2009, next year’s dividend will be substantially higher than this year’s. Some (very) preliminary estimates indicate that the dividend could nearly double to about $1400 next year.
The state could make the dividend much less volatile by dropping the current formula based on 5-year-average returns and adopting a new formula based on percentage of market value (POMV). Under a POMV strategy, if the fund increases by 10 percent (say from $45 billion to $49.5 billion), the dividend increases by 10% (say from $1500 to $1650, and when the fund decreases by 10% (say from $45 billion to $40.5 billion), the dividend decreases by 10% (say from $1500 to $1350). Most investment managers agree that a well-managed fund can pay out at least 4% of market value each year and still expect the fund to grow on average in real terms over time. Such a formula would be much simpler and more stable than the current system in which the dividend can double while the fund increases by only 10%.
-Karl Widerquist, Lowfield, Morehead City, North Carolina, May 23, 2013
For more on the recent ups and downs of the fund and dividend, see the following three articles:
Jerzy Shedlock, “Alaskans’ Permanent Fund dividend may shrink to less than $800 this year,” The Alaska Dispatch, March 30, 2013
Jerzy Shedlock, “Booming stock market helps Permanent Fund hit $45.5 billion,” Alaska Dispatch, March 31, 2013
Anchorage Daily News, “Alaska Permanent Fund his all-time high,” Anchorage Daily News, February 20, 2013
by Citizens' Income Trust | Jul 19, 2013 | Opinion
Sophia Parker (ed.), The Squeezed Middle: The pressure on ordinary workers in America and Britain, Policy Press, 2013, 1 4473 0894 2, hbk, xii + 169 pp, £65, 1 4473 0893 5, pbk, xii + 169 pp, £21.99
This collection of essays tackles a major issue: the declining living standards of households on low to middle incomes (defined as households in income deciles 2 to 5). Both causes and partial solutions are explored. One major cause of declining living standards is the failure to maintain the value of national minimum wages, but another is the gravitation of the proceeds of economic growth towards households in the upper earning deciles, leaving lower earners struggling to afford mortgages, social care, and, in the US, health care. Partial solutions might be focused training, in-work benefits, more affordable housing, higher national minimum wages, employers paying a ‘living wage’, and jobs of better quality ( – the UK has a better record than the US here, particularly in relation to employment rights for agency and part-time workers). The authors suggest that attending to the politics of the situation is essential, and that an important direction of travel might be asset-based welfare provision such as child trust funds, although some of the current attempts at incentivising asset accumulation tend to privilege the already wealthy.
The volume’s concluding chapter finds the US experience to be worse than the UK’s, and warns the UK to avoid policies that have led the US towards ever greater inequality. A particular lesson to take to heart is that the welfare state, and particularly free health care, has protected lower and middle earners in the UK from some of the worst effects of the economic downturn suffered in the United States: so if the UK wishes to avoid the plummeting living standards of the US then maintaining a strong welfare state is essential.
However, as Lane Kenworthy explains, some elements of the welfare state might be more of a problem than a solution. Tax Credits (and Universal Credit) weaken employment incentives, particularly for second earners, ‘and may in fact make things worse for many families’ (p.40). Daniel Gitterman contributes a detailed study of the United States’ Earned Income Tax Credit, in the course of which he makes a few comparisons with the UK’s Tax Credits. He might have added that the US Tax Credits are close to being genuine (annual) tax credits, whereas the UK’s ‘Tax Credits’ are in fact means-tested benefits, with all the problems usually consequent upon means-testing. In their introduction, the editors write that households with net incomes in the second, third, fourth and fifth income deciles are ‘not heavily reliant on means-tested benefits’ (p.xi). This might be true in the US, but it is not true in the UK, where a high proportion of earners in the second and third income deciles will be heavily reliant on means-tested ‘Tax Credits’.
The book covers a lot of ground, in terms of both diagnosis and prescription. However, diagnosis of the employment disincentives imposed by means-tested Tax Credits is not followed up with any prescription for reform. A benefits system based more on universal benefits would not impose anything like the same level of employment disincentives as the UK’s current system. Child Benefit gets a mention (on p.95: a reference unfortunately not indexed), but only as part of an argument that higher out-of-work benefits reduce employment incentives: a highly misleading suggestion, because Child Benefit is paid at the same rate to households both in and out of employment, and so in no way contributes to employment disincentives. It is the deduction rates related to means-tested benefits that cause such disincentives, not unconditional benefits such as Child Benefit.
The declining living standards faced by households with below median incomes are not likely to see much improvement in the near future, and the volume under review will be a valuable tool as policy-makers consider the reforms that might improve living standards for households in income deciles two to five. Policy makers might also wish to consider the possibility that this section of the population would benefit substantially from the implementation of a Citizen’s Income.
by Citizens' Income Trust | Jul 12, 2013 | Opinion
Bernard Lietaer, Christian Arnsperger, Sally Goerner, and Stafan Brunnhuber, Money and Sustainability: The missing link, Triarchy Press for the Club of Rome, EU Chapter, 1 908009 7 53, pbk, 211 pp, £24
This report, written for a European group affiliated to the think tank The Club of Rome, stands in a long line of publications that identify the creation of money via bank debt as an economic, social, and ecological problem. Money created in this way, and the ways in which we have turned money into a variously packaged commodity, amplify boom and bust cycles, result in short term thinking, require economic growth to sustain the system, concentrate wealth, and damage the trust on which social capital is built. Repeated banking crises are a clear signal of a system in trouble.
The authors identify the fundamental problem as currency monopoly, and propose that the monopoly should be broken by an extension of existing experiments in complementary currencies.
The reason for this review in the Citizen’s Income Newsletter is not because this book is about a Citizen’s Income, or about the structure of tax and benefits systems. It isn’t. But it is an exercise parallel in many respects to the research that the Citizen’s Income Trust and others have done on feasible extensions of universal benefits. The book recognises that the current monetary system has to continue much as it is; it identifies problems with the current system, and argues convincingly that plural currencies at a variety of levels (local, national, and European) would be a partial solution to many of the current difficulties and would reduce the risk of future crises; it studies and evaluates existing experiments in alternative currencies; and it makes feasible proposals on the basis of those evaluations. Similarly, we have shown that a Citizen’s Income would be an adaptation of the existing tax and benefits system, that it would respond to a variety of current economic and social problems, that it would build on existing experience of universal benefits, and that it would be feasible.
This is not the place for a detailed critique of the authors’ nine specific proposals, but to this reviewer they appeared both feasible and desirable: as would be a Citizen’s Income.
This is a good book on how limited economic reforms could make a real difference to both our global society and its environment.
by Citizens' Income Trust | Jul 5, 2013 | Opinion
Nicola Jones and Andy Sumner, Child Poverty, Evidence and Policy, Policy Press, 2011, xii + 250 pp, pbk, 1 847 42445 7, £23.99, hbk, 1 847 42446 4, £65
The authors’ purpose isn’t entirely described by the title or subtitle. They claim in their introduction that the book ‘is about children’s visibility, voice and vision’ (p.1): that is, about children as agents. Even that isn’t accurate, because we don’t in fact hear children’s own voices and visions in the book. What we hear is adults formulating ways in which we might experience children’s visibility, voice and vision. The questions that the authors ask are these: ‘How can we understand child poverty and well-being? What types of knowledge are being generated about the nature, extent and trends in child poverty and well-being in developing-country contexts? How can this evidence catalyse change to support children’s visibility, voice and vision? Finally, how do these questions play out in different contexts?’ (p.1).
The first part of the book studies concepts of child poverty and well-being, how knowledge about these is generated, how policy is formulated, and how knowledge informs policy. Well-being is understood in relation to a child’s relationships and subjectivity as well as in material terms; there is a detailed discussion of the diversity of evidence available; and policy-formation is understood as a complex process from which children’s voices are frequently excluded.
The second part of the book contains chapters on Africa, on Asia, and on Latin America and the Caribbean. For each continent there are sections on material, relational and subjective well-being; a section on knowledge generation (mainly in relation to information-gathering institutions); a study of the interaction between knowledge gathered and policy formation; and a case study. A concluding chapter emphases the importance of a child-centred approach if child poverty is to be abolished. Throughout the book there are tabulated literature reviews which will be immensely useful to future researchers.
It would have been interesting to have heard the voices of children, particularly in relation to the case studies. It would also have been educational to include a chapter on child poverty in so-called developed countries, and on how visible and audible children are in those countries’ policy processes. Perhaps these areas could be tackled in future publications. It would also be educational to see research findings on how effective particular policy initiatives have been in tackling child poverty as defined in part I of the book, and on how children experience those initiatives – in their own words.
In particular: Does the gradual shift away from service provision and towards conditional cash payments (such as Brazil’s bolsa familia) improve children’s material, relational and subjective well-being? And would a Citizen’s Income improve children’s well-being further? (See our report on a Namibian Citizen’s Income pilot project in the Citizen’s Income Newsletter, issue 2 for 2009). In evaluating the outcomes, children’s voices will be crucial, as this book rightly suggests.
