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 $45.5 billion,” Alaska Dispatch, March 31, 2013
Anchorage Daily News, “Alaska Permanent Fund his all-time high,” Anchorage Daily News, February 20, 2013
by Yannick Vanderborght | Jun 10, 2013 | Opinion
Marina P. Nóbrega – for the Municipal Council for the Citizen’s Basic Income, Santo Antonio do Pinhal, SP, Brazil
Humanity has to rescue the human solidarity that used to pervade tribal societies where wealthy was evenly shared. In our days money has to be used to that effect as great social thinkers have been preaching. In Brazil, President Lula´s law 10,835 from 2004 says that “A monthly benefit enough for the basic needs of a person will be paid equally to all. This basic income is to be instated by steps, taking care first of the most in need.” This law is still unregulated but the government, immediately after, created the successful Bolsa Familia (BF) program. Law 10,835 is unique in the world and needs to be regulated as to the steps to be taken to gradually universalize the benefit.
The Municipal Council for the Citizen’s Basic Income in the city of Santo Antonio do Pinhal has such a proposal.
Our initial proposal was to have a municipal pilot project fueled by a percentage of gross earnings from private businesses and private donations plus 6% per year from the city’s revenue. The idea was to create a fund to operate as the Alaska scheme. The Council analyzed carefully this proposal in the light of basic income principles and the practical attempts made to collect funds. We came to the conclusion that the Alaska way is impossible to succeed in our conditions besides we also do not accept that the annual and variable dividends represent the idea we have about a basic income.
Instead, we suggest that the path to Basic Income should go through 3 stages. We do not think this to be the best way for other countries but, considering Brazil’s situation, with almost 50 million under the support of the conditional BF (average of US$ 17.50 per person), we have a stepping stone to approach the final goal of including all in basic income. The steps suggested are:
Step 1 – Start the unconditional and universal basic income with all newborns in Brazil in the near future. The Council suggested that the caring parent receives US$ 35.00 per month and the same amount is deposited monthly in a savings account in name of the child, to be withdraw when he/she reaches legal age. This will be particularly valuable in two ways: it is financially viable, progressive and amenable to planning, will carry a strong symbolic value benefitting the children of the nation and pointing to a better future. This move will have a crucial educational value by giving people of all social classes time to understand the revolutionary value of a minimum income independent of work.
Step 2 – Next we suggest remove all conditionalities linked to the Bolsa Familia program. This will require that the funds for the almost 50 million involved (about 25% of our population) be doubled. We can predict that the result will be impressive economically and socially. The humiliation of means test, the complexity of the paperwork that opens the opportunity for political manipulation will vanish. The economy will benefit, and the results will be boosted by the possibility of taking regular jobs or opening a small business, both banned under the present conditionalities. These people will be freed from the known “poverty trap” created by the requirements for admission.
Step 3 – The Bolsa Familia bureaucracy can now be directed to monitor people that are still economically vulnerable but outside the government lists or people that fall into the “precariat”. They and their dependents should immediately receive the unconditional basic income.
PS: The Council can be reached by sending mail to maripnobrega@gmail.com
Phones: 55 12 9777 9115 or 55 12 3911 3839
by BINews | May 25, 2013 | Research
Wolfgang Müller – BI News
As many other countries, South Africa struggles to provide effective social assistance policies in tackling poverty and inequality. Any proposed reform has been determined by ideology according to Leon Schreiber in an article on Politicsweb, February 26, 2013. They still ignore social reality, that many people are not able to find employment. This dominance of ideology also affected the public discourse about a proposal for a Basic Income Grant (BIG) by the Taylor Committee on Comprehensive Social Security for South Africa. Despite of positive examples such as Alaska or the Basic Income Grant Coalition in Namibia, the BIG has faded. In order to overcome this ideological driven discourse in South Africa and alleviate poverty and inequality, Schreiber urges to simply relay on the Constitution, which grants everyone the right to social security and social assistance.
Schreiber, Leon “Time to think BIG again?” Politicsweb, February 26, 2013
https://www.politicsweb.co.za/politicsweb/view/politicsweb/en/page71619?oid=360521&sn=Detail&pid=71619
by Karl Widerquist | May 22, 2013 | News
Guy Standing on RT the BIG Picture
Thom Hartman, of the U.S.-based news website, RT The Big Picture, recently interviewed Guy Standing on basic income, the Alaska Dividend, the Indian basic income pilot project, and related issues. The interview is now on YouTube.
Hartmann, Thom. “The right to basic income: Interview with Guy Standing,” RT The Big Picture, YouTube, Apr 1, 2013
https://www.youtube.com/watch?v=RAnzQ7PKM9M
by Karl Widerquist | May 17, 2013 | Research
![Democratic Wealth Democratic Wealth](https://i0.wp.com/www.opendemocracy.net/files/DWlogolarge_0.png?resize=300%2C300&ssl=1)
Democratic Wealth
OurKingdom: Power & Liberty in Britain, “Democratic Wealth,” 15 May 2013
This piece discusses BIG from a republican prespective—that is from the two-millennia old political movement with roots in the writings of Cicero, Livy, Machiavelli, and Rousseau and with little or nothing to do with the so-called “Republican” party in the United States. According to the authors, “Republicanism offers a persuasive guide to the political shaping of markets. A basic income could be the foundation of a democratic republican economy that frees all citizens from the commodification of labour.”
The piece is a part of a series called “Democratic Wealth” (https://www.opendemocracy.net/ourkingdom/collections/democratic-wealth-building-citizens-economy), which is edited by Stuart White and which has included other pieces on basic income, including “The Alaska Model: a citizen’s income in practice” (https://www.opendemocracy.net/ourkingdom/karl-widerquist/alaska-model-citizens-income-in-practice).
Julie Wark is the author of Manifiesto de derechos humanos (The Human Rights Manifesto, 2011). Daniel Raventos is the author of Basic Income: The Material Conditions of Freedom. Both are involved with the international political review Sin Permiso.
Raventos, Daniel and Julie Wark, “A republican call for a basic income”
OurKingdom: Power & Liberty in Britain, “Democratic Wealth,” 15 May 2013
https://www.opendemocracy.net/ourkingdom/daniel-raventos-julie-wark/republican-call-for-basic-income