by Karl Widerquist | Sep 20, 2011 | News
The BIG debate in Namibia continues as the Permanent Secretary of Environment and Tourism, Kalumbi Shangula, criticized the BIG coalition’s recent arguments for BIG. Shangla, surprisingly argued that the size of the BIG coalition’s proposed Basic Income Grant of 100 Namibian dollars is too small. He said that a grant of that size could only “alleviate” rather than “reduce” poverty. He also questioned some of the BIG coalition’s findings from their reject pilot project in Otjivero-Omitara. Members of the coalition replied with counter-arguments and editorials. Henry Platt, executive director of the Church Alliance for Orphans and Vulnerable Children, argued that BIG could make an important difference to the lives of orphans and vulnerable children in Namibia.
Stories about the debate are online at the following links:
Irene !Hoaës, “BIG debates rages on,” New Era, August 16, 2011
https://www.newera.com.na/article.php?articleid=40150&title=BIG%20debates%20rages%20on
Claudia and Dirk Haarmann, Hilma Mote, and Herbert Jauch, “The BIG Debate in Context: Facts and Fiction about Otjivero,” New Eria July 15, 2011
https://www.bignam.org/Media%20Reports/2011_07_15%20-%20New%20Era_11_07_15%20-%20The%20BIG%20Debate%20in%20Context%20-%20Facts%20and%20Fiction%20about%20Otjivero.pdf
Johanna Absalom, “BIG can benefit orphans and vulnerable children,” July 8, 2011
https://www.economist.com.na/index.php?option=com_content&view=article&id=23685:big-can-benefit-orphans-and-vulnerable-children&catid=587:community-and-culture
by Karl Widerquist | Sep 18, 2011 | News
ReCivitas, the Brazilian organization that distributes a privately-funded basic income in a small village in Brazil, now has a pro-bono partnership with the biggest tax law office in Latin America, Mattos Filho, Veiga Filho, Marrey Jr. and Quiroga. This partnership will give ReCivitas legal support for contracts for people who invest in the BIG Bank that supports the initiative. The BIG Bank, started by ReCivitas only a few weeks ago, already has 500,000 Brazilian Reals (About US$310,000)—thanks to donations and investments from as far a way as Japan. A small part of the interest to this fund will support the Basic Income, but the amount of investments in the fund is already enough to ensure that the project is sustainable at its current level. The organizers of ReCivitas say that the fund is very conservative and ethical and that the fund manager is one of the biggest in Brazil, Credit Suisse Heding-Griffo. The organizers hope soon to use some of the money to support the basic income pilot project in Namibia, and they plan soon to expand to Germany.
For more information about ReCivitas, go to their website at:
https://www.recivitas.org.br/
Or, email the organizers at:
recivitas@recivitas.org.br
by Yannick Vanderborght | Sep 4, 2011 | Opinion
Anniversaries are poignant human moments, points on a journey, never an end in themselves. Twenty-five years ago, on September 4-6, 1986, a small group of us held a workshop on basic income, and on September 6 decided to set up a network, BIEN. The memory is blurred; the documentation is scattered. However, this 25th anniversary is a testament to several aspects of BIEN, and it is perhaps acceptable to reflect on the journey so far.
It is intriguing that a core of the group that set up BIEN has remained active in its cause. Many of the original group, including this writer, had written papers advocating and justifying a basic income before we established BIEN. At the time, and for long afterwards, we were regarded by many of our colleagues and friends outside BIEN as quirky, idealistic, stupidly utopian or naïve. I recall the Director of the ILO’s Social Security Department using the expression ‘bad, mad and dangerous to know’. We have always had members who had a talent for giving some credence to that simplistic denigration. But neither they nor the insults have dimmed the light.
I doubt if any of us would have imagined that BIEN would last more than a couple of years, if that. The longevity is a tribute to many in that group, some of whom moved out after playing important roles, some played leading roles before retiring to the ranks, some moved out and then returned, refreshed. Some of the early figures have died; they are not forgotten. Some of the fresh-faced, long-haired youths who were at the inaugural meeting have shamelessly gone on to become grand-fathers and grand-mothers. It happens.
In BIEN, it has always been true that the whole is greater than the sum of the parts. It has always had distinguished social thinkers, some of whom have gone on to become distinguished names in their field. Yet we have always recognised that it is the collective network, not individuals, which makes BIEN special. In a sense, at a personal level, a network such as ours is an exercise in associational freedom, in that the voluntary unpaid nature of what we have been trying to do together has strengthened each of us, to a greater or lesser degree. Would we have held the line if we had worked individually? I doubt it.
What has also been invigorating is that BIEN has always been ecumenical. Many who have added to its vitality have been profoundly religious and spiritual, many others have been atheists or agnostics. Politically too, we have avoided sectarianism. Some have been on the political right, others have been solidly on the left. It is testament to our charter and the many individuals who have steered the network that BIEN has always been a ‘broad church’. Nobody has been turned away or been subject to insults or disdain because of their personal views. If they have wanted to join the conversation, they have been welcome.
From the outset, there has been at least two lines of thinking that have dominated our conversation, one that is broadly philosophical and libertarian, stressing the appeal of a basic income as a right and as a stand-alone matter, the other that basic income should be seen as one component of a redistributive political and economic strategy. A third line has always been there as well, but has become increasingly important, the potential of a basic income as a means of enhancing a more gendered and ecologically viable future. Perhaps it is this third line that will prove decisive in the next few years.
In sum, a fundamental defining feature of BIEN members is that they have been and will remain inherently non-conformists, in the great tradition of thinking that defines humanity. We all believe there is an alternative.
That leads to what has been the primary means by which BIEN has flourished, our national networks and our Congresses. Those networks have tended to fluctuate, sometimes depending on the energies of one or two people, to the extent of making them fragile as their leading lights move through busy lives. But it has been particularly invigorating to see how new networks have emerged in recent years.
This has partly been associated with the great change we made to our name, going from BIEN to BIEN in Barcelona in 2004, when after some background wrangling, we opted to formalise reality by changing the “E” from Europe to Earth, recognising that an increasing proportion of our members were from outside Europe. Looking back, it seems obvious that the name change should be made.
For some in our ranks that was not obvious at the time. Some worried that we would lose our focus; some worried that if, as was felt appropriate, we alternated our Congresses between a European city and one outside Europe that members would only be able to afford to go to one Congress every four years. The former fear has proved unfounded; the latter fear has meant we have a greater responsibility to raise funds to enable as many people as wish to come to be able to do so.
As for the networks, it has been impressive that the second generation have been daring and invigorating. It is invidious to single out particular networks, but besides our wonderful members in Brazil and Argentina, it has been exciting to see the emergence of BIN-Italia, BIKN in Korea, BIJN in Japan and USBIG in North America. My dream at the moment is to see one in India. In this huge and wonderful country, the debate about income security has suddenly become very topical.
As for our Congresses, I am sure many of us proverbially pinch ourselves from time to time in wondering how we have done them. Every single one has started with a sense of trepidation among the nominated organisers. Who is going to do the work? Where are we going to obtain the money? What should the themes be? Who will be our plenary speakers? Will there be enough quality papers?
Practically every Congress has had its moments of crisis during the organisational phase. And yet all have taken place, and an assessment of their evolution and contents would make a fascinating topic, perhaps for a Ph.D. Let me just recall the places where we have held our Congresses since our inauguration in Louvain-la-Neuve in September 1986. In chronological order they have been held in Antwerp, Florence, London, Paris, Amsterdam, Vienna, Berlin, Geneva, Barcelona, Cape Town, Dublin and Sao Paolo. The names trip off the tongue as great cities. In each case, those who did the incredible amount of preparatory work deserve tremendous credit.
In every Congress, there were wonderful contributions, often from newcomers, sometimes from distinguished politicians or personalities. Who could forget the moving speech made by Archbishop Desmond Tutu at the Cape Town Congress? Of course, no BIEN members had anything to do with the content of his speech. It was the delivery and the commitment shown by him that moved us. It is almost unfair to single him out, since over the years there have been numerous fascinating contributions.
At the Sao Paolo Congress, I recall a private chat with a fellow founder member in which we both remarked how extraordinary it was to find that we learned new ideas and interpretations at every Congress. Only a small fraction of the papers presented over the years have ever been published; I have a volume from the Geneva Congress in front of me now. However, probably over 600 papers have been presented at the thirteen Congresses.
What then of the cause? Twenty-five years is a long time to have been refining our thinking without success. Well, progress has been substantial. In an early paper in the 1980s, I predicted that social policy would drift to workfare before an unconditional universal basic income became part of mainstream thinking, essential for responding to the growing inequalities and insecurities. Regrettably, workfare has been ushered into reality, in the United States, in the UK and in various ways elsewhere. It runs counter to any legitimate idea of freedom, and is divisive. It may grow uglier before there is a revolt against it. Then, I believe, our time will come.
In that regard, we might reflect on three quotations that have stayed with me during the twenty-five years. The first is a nice aphorism from Barbara Wootton:
“It is from the champions of the impossible
rather than the slaves of the possible
that evolution draws its creative force.”
We all know the feeling of being told a basic income is an impossibility. Usually, it is said by people who either presume it is impossible because it has never been done or do not wish it to be possible, because it might mean less for themselves or for their kind.
The second comes from William Morris, one of the early advocates of a basic income in his News from Nowhere. It was not from that book that the saying comes, but seems hugely relevant today.
“I….pondered how men fight and lose the battle, and the thing they fought for comes about in spite of their defeat, and when it comes turns out not to be what they meant, and other men have to fight for what they meant under another name.”
Those words were written in 1886. What is in a name? Probably, most of us in BIEN have toyed with terms that might work better than the familiar basic income – ‘social dividend’, ‘citizen’s income’, ‘basic income grant’ (BIG), and so on. In the UK at the moment, the government’s new universal credit is not a basic income, but could be seen as a major step in creating a basis for moving towards what we might regard as a basic income.
The third statement is from a stranger fellow traveller. In 1947, a small group of 36 mavericks, led by Friedrich Hayek, convened a meeting in Montreux and set up the Mont Pelerin Society. Their ideology would not appeal to most BIEN members. However, for the best part of thirty years they met and wrote and lobbied, mostly ignored or regarded with disdain by conventional circles. In his preface to his 1982 edition of his famous Capitalism and Freedom, Milton Friedman, who had been a young economist at that 1947 meeting, wrote:
“Our basic function is to develop alternatives to existing policies, to keep them alive and available until the political impossible becomes the politically inevitable.”
Perhaps he was being a little cute, since his thinking had become part of the Washington Consensus by then. None of us think we are analogous to the overtly political Mont Pelerin Society, but after decades of neglect, no less than eight of its 36 founders went on to receive Nobel Prizes in economics. My nominations go in on Monday!
More generally, the view that ideas go from being disregarded to being mainstream only after 30 years has, not surprisingly, appealed to me during the past 25 years. One could say that basic income is one of those ideas that Albert Hirschmann had in mind in saying that whenever a new progressive idea comes up it is subject to three reactions – the claim of futility (that it would be ineffectual), the claim of jeopardy (that it would endanger other goals), and the claim of perversity (that it would have unintended consequences). We have certainly faced those claims, and still do. But fewer people are being convinced by them.
As for the 30 years before an idea comes into its own, I feel quietly optimistic that we are ahead of the curve.
Why is that? First, in the so-called rich countries social policy is in disarray, while insecurity and inequality have become pervasive and threatening to the social stability of society. In this, the precariat has become pivotal, growing angrier and more alienated by the day and filling the squares of cities in numerous countries.
Second, we have seen a remarkable development in developing countries in the past decade. Here we have to admit that back in the 1980s we did not anticipate the extraordinary progress the debate on basic income would make in the near future. Yet in the past decade in particular, in Africa, Asia and Latin America, forms of non-contributory cash transfer have become hugely popular. We have seen the spread of so-called conditional cash transfers in Latin America and elsewhere.
These are not basic income schemes, being selective, targeted and conditional. However, they have legitimised the payment of cash in monthly payments as a vehicle to overcome poverty and insecurity. The task now is simpler – to show conclusively that targeting, selectivity and conditionality are profoundly wrong. Each day one can find more evidence and each day one can find that prominent policymakers have lost their confidence in one or other of the three. Conditionality is the worst of the challenges before us. It is pervasive and part of the new orthodoxy among politicians and some international financial agencies, notably the World Bank.
While the struggle goes on to show that conditionality is paternalistic, divisive and contrary to ideas of freedom and equality, a quiet revolution is taking place – basic income has been accepted as a legitimate option in development discourses. And we are seeing several countries where something like it is ‘on the cards’ or being tried. All BIEN members know of the law of 2004 in Brazil committing its government to a basic income. All BIEN members have been thrilled by the Namibian experiment. Now, we are in the middle of a pilot scheme in villages in India and in part of Delhi. Others in Brazil and elsewhere have lifted our spirits.
At national level, what amount to short-term basic income schemes have become integral to relief programmes following ecological and social shocks. And we are seeing national moves towards our goal in some unexpected places, including Mongolia and Iran. We should not be carried away by these. However, they may turn out to be harbingers of a breakthrough. The evidence piles up that if the financial constraints are lifted, people everywhere act rationally in the interest of their families and their communities. The essential optimism that lies in the heart of all BIEN members is being supported in wonderful ways.
All of this is for more considered analysis on later occasions. A point on a journey is one for lightness, for reflecting on what drives us. At core, it is a sentiment that goes back thousands of years – a sense of social justice. In that regard, I am reminded of Aristotle’s wondrous words about philia. As I look back at our modest efforts, I can only think right now that BIEN has been, is and will remain a tribute to the virtues of friendship. For what has kept it together is a spirit of philia cemented by a common bond of wanting to make the world of inequality and exploitation a little better for all those who are economically insecure.
La lotta continua!
BIEN’s very modest birth. Louvain-la-Neuve (Belgium), September 6th, 1986:
by Karl Widerquist | Jun 14, 2011 | Opinion, The Indepentarian
Alaska’s Permanent Fund Dividend is closer to a Basic Income than almost any other policy in the world today. The lessons of how it was created and how it became so popular and successful are extremely important to the Basic Income movement. Two autobiographies available now tell different parts of the story of the Alaska Dividend. One is by Jay Hammond, the governor who, more than anyone else, is responsible for creating the fund and dividend. The other is by Dave Rose, the first executive director of the Alaska Permanent Fund Corporation.
Each book tells the story of its author’s life. These stories are interesting in their own right, reflecting the experience of many latter-day pioneers who came to Alaska from the lower forty-eight states before or in the early years of statehood. Hammond moved to Alaska after being a World War II pilot, and he lived the Alaskan experience as a ‘bush’ pilot, a wilderness guide, a homesteader, a legislator, a small-town Borough President, and governor. Followers of current U.S. politics will be interested to know that Sarah Palin took the name of her television show from ‘Jay Hammond’s Alaska,’ which ran for seven years in the late 1980s and early 1990s.
But followers of the Basic Income movement will be most interested in the inside accounts of how the Alaska Dividend was created and became the sound and solidly supported programme that exists today. Although the Alaska Permanent Fund (APF) is the source of revenue for the Permanent Fund Dividend (PFD), many non-Alaskans are unaware that the two are different programmemes created at different times by different kinds of legislation.
The events leading up to the creation of the fund began in 1955 when Alaska called a constitutional convention in advance of statehood. The constitution that was finally adopted proclaims that all of the natural resources of Alaska belong to the state for the benefit of the people.
One of the most important events which led to the development of the fund and dividend happened quietly in an office in Juneau in 1963. At that time, negotiations with the federal government over which lands would be transferred to full state ownership and which would remain federally owned had dragged on for several years. A geologist named Tom Marshall (according to Hammond) and/or the commissioner of natural resources, Phil Holdsworth (according to Rose), persuaded then-governor Bill Egan that there might be oil in far-northern Alaska. Egan then finished the land negotiations with the federal government by agreeing to take a ‘large, barren and unpopulated wasteland on Alaska’s Arctic Slope, near remote Prudhoe Bay.’ In 1967, oil was discovered under that barren, unpopulated wasteland.
Jay Hammond was elected governor in 1974, when, he says, ‘the scent of anticipated oil revenues wafted like musk in the halls of the state legislature’. Hammond was possessed with the idea of putting as much of that money as possible into a permanent fund that would pay dividends to Alaskans. The concept had been with him for a long time. Years earlier, as mayor of the small municipality of Bristol Bay Borough, he had tried unsuccessfully to create a similar programme at the local level using fisheries revenue.
Hammond had many reasons for favouring the fund and dividend. He thought that the temporary windfall should be saved rather than spent as it came in. He was afraid that the government would waste the windfall on poorly designed programmes or projects that would benefit only special interests or favored constituents. He wanted to make sure that every Alaskan would benefit from their jointly owned oil resources. And he hoped the dividend would help the poor.
After reading his book and speaking to him at the 2005 USBIG Congress, I still cannot say for sure how this idea came to Hammond and how he came to be so obsessed by it. He appears to have been influenced by the guaranteed income movement of the 1960s, but this does not fully explain where he got the idea for a state-owned fund paying dividends to all citizens.
Although Hammond was not the only person responsible for the creation of the fund and dividend, it is clear that it would not have happened without his single-minded pursuit of it for his entire eight years as governor. He made it his top priority. It was the object seemingly of every budget compromise he made from 1974 to 1982. The Alaska Dividend therefore owes its existence to the right person being in the right office at the right time.
The time was right not only because money was beginning to flow, but also because of public perception. Five years before he took office, in 1969, the state government had received an initial windfall of $900 million (six times the size of the state budget at that time) from the sale of leases for the right to drill. Some people at the time, including then-governor Keith Miller, argued that the state should invest the money and spend only the interest. But by 1974 all of that money was gone, and there was a widespread (if exaggerated) belief that most of it had been wasted. There was thus strong support for saving at least part of the expected oil windfall when Hammond began discussing the idea of a fund and a dividend with the legislature.
In 1976, after a series of compromises, Alaskans passed an amendment to the state constitution dedicating at least 25 percent of each year’s oil royalties to the new APF. It was a fraction of what Hammond wanted. Although he discussed many different figures, he at one time had hopes of dedicating 50 percent of all oil revenue to the fund. Royalties make up only about half of the state’s oil revenues. Therefore, the APF is only one-fourth as large has Hammond had wanted.
The biggest missing piece, from Hammond’s perspective, was the dividend. There is no mention of it in the amendment, which simply states that at least a minimum amount of certain kinds of mineral revenue would go into a fund of ‘income producing investments.’ It did not specify what these investments should be or how the returns would be used. Although these omissions were a disappointment to Hammond, according to Rose, the vagueness of the APF amendment was instrumental to its passage. It drew support from diverse groups, not all of whom would have supported a more clearly defined plan dedicating the returns to a dividend or anything else.
By both Rose’s and Hammond’s accounts, the dividend proposal was not popular with the public or with members of the legislature when Hammond started pushing for it in the late 1970s. The dividend got through thanks both to the strength of the governor’s office and to a long series of compromises made by a few dedicated legislators.
After a court challenge about how dividends were to be distributed, the final version of the dividend bill was passed and went into effect in 1982. It dedicated roughly half of the APF’s returns to the PFD. Unlike the fund itself, the dividend is not protected by a constitutional amendment. It is created by a simple majority vote of the state legislature. It is protected today, mostly, by its enormous popularity. According to Rose, a legislator proposed to do away with the PFD only six months after the first dividends went out. Rose writes, ‘His proposal had ample support in the Legislature, but when the public heard about it, everyone ran for cover.’ After just one dividend cheque, the PFD had a strong political constituency. After three or four cheques, it became politically inviolable.
But the fund was still not fully secure from diversion. The principal only had to be held in ‘income producing investments.’ There are many risky, politically motivated projects that can count as income producing investments. Many politicians wanted to use it for subsidized loans or infrastructure projects. Some wanted to restrict the APF to invest only in Alaskan assets. The legislature still has the power to intervene on any of these issues, but for the most part they have not. These issues have been resolved largely by the Alaska Permanent Fund Corporation (APFC), a body that was created in 1980 to manage the fund and dividend.
David Rose became the first executive director of the APFC in 1982. He made it his goal to follow the ‘prudent investor rule,’ a legal doctrine in which those who invest on behalf of others must seek the highest returns consistent with the safety of the investment. Investments with almost any other political goal are ruled out by the prudent investor rule, because they tend not to be the safest and most profitable. This rule was nominally established in APF legislation in 1980, but the law has few teeth. It takes the self-discipline of the managers and the oversight of public opinion to keep it in place. The state set up other programmes for subsidized loans and development projects. By the time Rose left office in 1992, the prudent investor rule was well established in precedent. The Alaskan public, wary that some bureaucrat might be blowing the source of their future dividends, paid close attention to the fund’s performance.
Even Rose felt the temptation to use the fund for political objectives. He tells one story from the late 1980s when the manager of Kuwait’s sovereign wealth fund came to him privately and suggested that the Kuwait fund, the APF, and two pension funds from the lower forty-eight states, should pool their assets and buy a controlling interest in British Petroleum (BP). Rose turned it down, of course, but not without some hesitation and daydreaming. It would have been a political move – not the move of a prudent investor.
These two books together lay out the long series of events between 1955 to 1992 that led to the APF being established in the Alaskan state constitution; the PFD being established by law; the prudent investor rule being established by law and precedent; and all being protected by public opinion. At the time of writing (January 2011), the APF is at more than $38.4 billion. The most recent annual PFD (October 2010) was $1,281 for every man, woman, and child in Alaska.
The dividend is safe for now because it continues to be one of the most popular programmes in Alaska, but that might not be true forever. The legislature has recently made several attempts to redirect the principal of the fund toward political projects, such as infrastructure investments, which show reduced commitment to the prudent investor rule. Alaskans were surprisingly resigned to the $12 billion the fund lost in the financial crisis of 2008-2009.
Furthermore, Alaska faces difficult budgetary times ahead thanks to decisions made when the oil started flowing. Back then, when Hammond was trying to create the dividend, he reluctantly and regretfully signed a bill to eliminate the state income tax. Looking at short-term effects only, the elimination of the income tax seemed like a great idea. The state simply didn’t need the tax, and it was making far more money in oil revenue than it needed to run the state budget. Hammond thought it would be much better to dedicate more oil revenues to the permanent fund and continue to finance most government spending through regular taxes. Eliminating the income tax would benefit Alaskans unevenly and temporarily. Dedicating an equal amount of additional money to the APF (and an accompanying dividend) would benefit all Alaskans permanently. Instead the state decided to live off temporary oil revenue.
Today nearly 85% of the Alaskan state budget is funded by oil. When those revenues run out there will be enormous pressure to redirect the PFD, and perhaps even APF principal, toward supporting the state budget. Furthermore, the state will be in the position of needing to find new tax sources just when the industry that dominates the state economy will be contracting. Perhaps natural gas will create a new resource boom just as the oil money begins to run out. Perhaps some other part of the Alaskan economy will take over. But it is clear that Alaska is in a more precarious position than it would have been if the state had saved more of its oil revenues.
It’s tempting to think what might have been if Alaska had saved all of its oil revenue in a best-case scenario. Suppose the state had kept the income tax, put all its oil revenues into the APF, and spent only the interest. The APF would now be something in the neighborhood of eight-to-ten times its actual current size of $38.4 billion. For a best-case scenario, say $400 billion. Most financial analysts agree that one can withdraw up to 4% or 5% per year from an investment fund and still expect it to grow over time in real terms. Suppose the state was able to withdraw 5% each year, using half of it for dividends and half for the state’s operating budget. That would produce a dividend of $15,000 per person per year and $10 billion for the state budget. Current total state spending is only $10.5 billion per year. Thus, the state would only need to raise $0.5 billion from other sources this year, and it would be able to envisage the day when returns to the fund financed the entire state budget.
Enticing, but it is a best-case scenario, relying on the most optimistic assumptions on every issue. It ignores all of the financial risks and political, economic, and demographic barriers to maintaining such a system. It also ignores the fact that the state needed to spend some of the oil money as soon as it came in. It was a poor state with weak infrastructure and poor schools: it no longer is – thanks to the oil boom. Although some of the oil money was wasted, some of it was well spent. As Rose argues, ‘Until basic needs are met, such as education and public safety, the government has no business saving for the future.’ Alaska had to spend a lot to meet its needs at the time, but it could have saved much more than it has. If Hammond had got his way, the fund and dividend would be four times the size they are now.
The APF and PFD give us a model on which we can improve. The memoirs of Hammond and Rose help us to understand how we can do it.
Literature:
Dave Rose and Charles Wohlforth, Saving For the Future: My Life and the Alaska Permanent Fund, Epicenter Press, Kenmore, WA, 2008, 256pp, hbk, 978 0 9790470 4 6, $24.95, pbk, 978 0 9790470 5 3, $17.95.
Jay S. Hammond, Tales of Alaska’s Bush Rat Governor, Epicenter Press, Kenmore, WA, 1994, pbk, 340 pp, 978 0 945397 43 4, $17.95
by Ian Orton | Jun 9, 2011 | News
To support its campaign on the global extension of social security, in 2008 the International Labour Organisation (ILO) undertook a study of 126 research reports on tax-financed social transfer programmes (STs) operating worldwide. 62 programmes from 30 developing countries were analysed. These STs reach between 300 and 350 million beneficiaries – children, working adults, and elderly people – and represent a considerable proportion of the world’s poor. The results are available through the ILO’s online Matrix on the effects of social transfers (2009). 3 STs have emerged as a core component of poverty reduction strategies supported by international organisations such as the World Bank and a number of UN institutions. Thus their impact merits considerable interest.
This article outlines the current knowledge on the effects of STs in a way relevant to those interested in Citizen’s Income (CI). STs are not unlike CIs. They are non-contributory and tax-financed, and a considerable number of STs are unconditional and universal (across certain groups). The ILO study shows positive impacts of STs on a range of areas of human existence. The study therefore enables us to predict the kinds of effects that a CI could deliver in low and middle income countries.
The findings of the ILO matrix on social transfers
The ILO’s matrix was developed to support decision-making within ministries of planning and finance, mainly in developing countries. By ordering the unintended and intended effects of tax-financed STs in developing countries in relation to human development goals and the anti-poverty agenda, the matrix helps to inform national policy makers about the outcomes that could be realistically expected from STs and to guide investment in social security systems. Likewise, all those interested in CI might utilise the findings of the matrix to guide their arguments on the CI proposal.
Results
The table below gives an overview of the impacts of the STs. In the columns, the impact of STs in the specific sub-dimensions are documented. Programmes had a generally positive effect, 4 evidenced by the significantly higher scores in the ‘clear positive effect’ column for all but five of the sub-dimensions. Those sub-dimensions where the overall positive impact cannot be discerned are in grey text.
The conclusion of this article is that a majority of the social transfers studied clearly generate a range of positive effects in terms of enhancing human development, supporting the full utilisation of productive capacity, enhancing and stabilising consumption, and facilitating social cohesion and inclusion.
TABLE: Summary of the ILO matrix: Effect of social transfers
| Impact dimension and sub-dimensions |
Number of programmes |
Total |
| with a clear positive effect |
with a clear negative effect |
with no evidence of effect |
where effect is unclear |
| 1. Enhancing human development |
|
|
|
|
|
Adult preventative health
Child labour
Child preventative health
Drop out rates
Educational attainment
Maternal preventative health
Reduction in the worst forms of child labour
School attendance
School enrolment |
1
6
7
4
9
3
1
12
13 |
–
–
–
–
–
–
–
–
– |
–
2
–
–
–
–
–
–
– |
1
2
–
1
1
–
–
–
– |
2
10
7
5
10
3
1
12
13 |
| 2. Supporting the full utilisation of productive capacity |
|
|
|
|
|
Employability
Employment creation
Reduction of informality
Participation in the labour market
Productive activities |
1
4
–
5
15 |
–
–
1
2
– |
1
1
–
–
– |
2
2
–
2
– |
4
7
1
9
15 |
| 3. Enhancing and stabilising consumption |
|
|
|
|
|
Food expenditure
Income inequality
Income level and stimulation of consumption
Income stability and consumption smoothing
Long-term effects on income and consumption
Nutritional level
Satiation |
4
4
20
5
5
10
3 |
–
–
–
–
–
–
– |
–
2
1
–
1
2
– |
–
–
3
–
–
–
– |
4
6
24
5
6
12
3 |
| 4. Facilitating social cohesion and inclusion |
|
|
|
|
|
Empowerment
Intra-household relations
Social capital and solidarity |
14
4
4 |
–
–
3 |
1
–
– |
2
1
– |
17
5
7 |
This study shows that STs exhibit positive impacts on poverty, health and nutrition, the social status of recipients (notably women), economic activity and entrepreneurial small scale investments (notably in agriculture), and have avoided significant adverse effects on labour market participation of the poor populations which they serve. The studies also show that many families used part of the cash transfer to invest in small-scale agricultural activities, including the purchase of livestock. However, in the areas of adult preventative health, reduction in the worst forms of child labour, employability, reduction of labour market informality, and social capital and solidarity, the effect of STs is less obvious, either because there is no actual effect or because of limited research on the subject.
In light of these results, we can deduce that a CI could deliver similar effects in some instances. Consequently, the results can be used to support some aspects of the CI proposal. However, before the repercussions for a CI are discussed in detail, we need to explore a number of important caveats and knowledge gaps.
Methodological caveats and knowledge gaps
- The programme evaluations covered by this study do not represent an exhaustive list. Rather, the study covers those programmes that were easily accessible online and were Anglophone and to a lesser extent in Portuguese.
- There are problems in finding original sources online. In light of this, the study cannot be considered to be comprehensive, though the studies used are probably representative and give a good overview.
- The findings in the table are the result of a subjective chain of interpretation open to human error.
- The matrix suffers from knowledge gaps. For example, little is known about the effects of STs on non-beneficiaries, and little is known about the macroeconomic impact of STs on economic growth and about how this affects general redistributive mechanisms (formal and informal).
- The evaluations privilege quantitative measures over qualitative ones. This is a concern because the qualitative effects of STs (i.e. social bonds, capabilities, and human empowerment) may have a lot more to say about people’s well-being than quantitative measures.
The analysis presented here can therefore only be considered as indicative of the effects of STs.
To what extent does the ILO study support the Citizen’s Income proposal?
Thus far this article has cautiously suggested that the findings in the ILO matrix study augur well for CI, by indicating that it too can be expected to deliver a number of similarly positive effects. However, the message perhaps ought to be a little more mixed and nuanced, because the table better supports unconditional and universal transfers for children and the elderly (a CI for the young and the old) than for working age adults. A significant number of the STs that focus on active population groups are conditional and targeted (based on behaviour and income/wealth) and therefore one might suppose that their effects will be related to their conditional and targeted mechanisms.
Conclusion 1: Effects of social transfers for children and elderly support the case for a Citizen’s Income:
The findings on the effects of STs on children and pensions suggest that a CI could have similarly positive effects. It is possible to make this conclusion because a significant number of the STs for these two vulnerable groups were unconditional or universal across these groups and are therefore similar to a CI. The social pensions evaluated were not based on previous activity or earnings and are therefore essentially a Citizen’s Pension. Similarly, the South African Child Support Grant, which is unconditional, has encouraged human capital formation of the young and their future earnings (Agüero et al, 2007, p. 19). We could expect a CI to do the same for children. The results of social pensions and a number of other unconditional transfers support the expectation that a CI could generate similarly positive social and micro-economic effects.
Conclusion 2: Effects of social transfers for the active population deliver a mixed message for a Citizen’s Income
Apart from the pilot CI in Namibia, there are no studies on the impact of a CI on active population groups, simply because, with the exception of the Alaskan Permanent Fund, there is no fully-fledged CI that actually covers active population groups. 5 Secondly, the STs analysed in the ILO study differ from a CI because they are conditional. 6 It is therefore difficult to maintain with any certainty that the effect of a CI would be the same as for conditional and targeted STs.
Having said that, the findings of the Namibian pilot scheme do permit us an insight into how the active population group might react. For instance, according to the evaluation of this pilot, productive capacity of the active population group rose and economic activity rose, especially among women. In addition, own account work saw the largest increase, and particularly the tending of vegetable plots and the building of latrines, both of which increased the community’s health. The pilot scheme also seemed to stimulate more micro-economic activity, with new shops opening. These findings are important as they provide evidence that a CI does not act as a disincentive in the labour market (see Basic Income Grant Coalition, 2009; Torry, 2009). This is of great significance, as the argument that a CI would act as a disincentive to productive activity tends to be one of the biggest concerns of policy makers and governments with regard to STs for the active population. Having said this, one must also be cautious about using the Namibian pilot scheme as absolutely conclusive evidence on the potential effect of a CI on the active population because of obvious limitations in terms of replicating an actual fully-fledged society-wide CI.
The key impediment to using the table to support CI revolves around whether it is the conditional nature of many of the STs that is pivotal in producing the positive results they have delivered. Does conditionality make the difference? If conditionality is not the overriding factor, then perhaps we can conclude that the unconditional and universal nature of a CI could deliver results similar to those documented in the ILO matrix. There is not space here to discuss this debate in full, but suffice to say that the precise role played by conditionality in delivering positive outcomes is not clear. As the author of this article and the ILO have argued elsewhere, it is problematic to argue that conditionality is pivotal in producing the outcomes generated by STs (see ILO, 2010a).
A similarly ambivalent conclusion on the role of conditionality is made by Gabel and Kamerman, who state that researchers have not been able to attribute with absolute certainty the causality between effect and the conditional mechanism, because of the difficulty in disentangling the effects of the policy from other elements (e.g., the state of the labour market) (2008, p.18). One suspects that the motivation for conditionality is to satisfy the ‘paternalist twitch’ of governments and policy makers (Standing, 2002: 208) and public thirst for satisfying the social ethic of reciprocity. There is therefore plenty of scope for arguing that a CI could deliver similar outcomes in the absence of conditionalities.
Closing remarks
It is not clear that conditionality is crucial in achieving certain human development goals or for producing the positive effects that have been identified in the ILO matrix, so the study can be used to support a CI, provided caveats and limitations accompany any such argument.
What the findings of the matrix definitely support are those conditional programmes which many see as precursors to a society-wide CI. For example: in Brazil, Senator Eduardo Suplicy, a key proponent of CI, has argued that the Bolsa Familia ST is a first step towards a CI (2006). This is because the behavioural demands synonymous with the receipt of cash from conditional STs are easier to sell to the public and political class than is a CI. The greater political acceptability synonymous with conditional 7 STs could help to cultivate a political and public culture more receptive to STs and, therefore, to a CI at a later stage.
Just as significant as the results of the matrix study are those of the pilot CI in Namibia which has demonstrated positive results similar to those documented in the ILO matrix table across an entire community, including the active population. Particularly significant are the positive effects on labour market participation and productive capacity. The linking of the matrix and the findings of the Namibian case study can bridge the ‘unknown’ empirical dimension in the ILO study; given that hitherto no society-wide CI has really existed. Combining the results of the table and the Namibian case study justifies the expectation that a CI could produce similar effects to STs for the active population.
However, the current preference amongst governments and major international institutions (e.g. the World Bank) seems to be shifting toward conditionality, and this poses some concerns for those proposing universal and unconditional cash transfers. The political prospects of a CI would be better if the trend were against conditionality.
In conclusion: The ILO matrix confirms what many have suspected, that STs have a number of positive micro-economic and social effects. The matrix also offers proponents of CI reasons to feel optimistic that it too could produce similarly positive results.
Disclaimer: The author conducted the original research for this project as a consultant for the International Labour Organization. However, the responsibility for opinions expressed in this paper rests solely with the author and dissemination does not constitute an endorsement by the International Labour Organization of the opinions expressed in it.
Notes
1. This paper was originally submitted at the 13th International Congress of the Basic Income Earth Network in Sao Paulo, Brazil, June 2010. I would like to thank Armando Barrientos, Florence Bonnet, Philippe Marcadent, Nadine Ndeberi and Luis Soares for their assistance, and the ILO’s Social Security Department for financing the original research that features in this paper.
2. The author currently works as the Financial Crisis Monitor for the International Social Security Association.
3. The author of this paper was a member of a team that carried out the research that constituted the content of the ILO matrix. The ILO matrix project was supervised by Philippe Marcadent. The data contained in the matrix is discussed more analytically in the new ILO book: Extending social security for all: a guide through challenges and options (2010a) and in an ILO working paper entitled: Effects of non-contributory social transfers in developing countries: A compendium (2010b).
4. For a more detailed description of the methodology employed to calculate the scoring system that features in the table please see: Orton, I. 2010. Reason to be cheerful: How ILO analysis of social transfers worldwide augurs well for a basic income. www.bien2010brasil.com
5. And this differs from the standard proposed version of a CI in that it is an annual dividend, therefore one wonders how far it can replicate the income smoothing nature of those STs that are paid monthly.
6. A similar discussion for the way many STs are targeted could also be made, but there is not space here.
7. The reason for this acceptability is that conditionality conforms to the social norm of ‘reciprocity’ whereby in social contract type relationship the recipient adjusts his or her behaviour in a way acceptable to the rest of society.
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