by Philippe van Parijs | Oct 23, 2010 | Opinion
The Basic Income Earth Network (BIEN) held its thirteenth biennial congress in Sao Paulo, Brazil, June 30 through July 2, 2010. USBIG has been a national affiliate of BIEN since 2006. Philippe Van Parijs, director of the Hoover Chair of economic and social ethics at the Catholic University of Louvain and Chair of BIEN’s International Advisory Board, wrote the following account of the Congress for the BIEN NewsFlash (reprinted in its entirety):
There are at least three reasons why holding a BIEN congress in Brazil made a lot of sense. Firstly, Brazil’s cash transfer system is one of the most comprehensive in the so-called developing world and is sometimes presented as one of the closest real-life approximations to a genuine basic income. Secondly, Brazil adopted, in January 2004, a law that explicitly asserts as an objective the introduction of an unconditional and individual basic income for all its permanent residents. This is something no other country ever did. And thirdly, it is on the suggestion and insistence of Senator Eduardo Matarazzo Suplicy that BIEN was turned, in September 2004, from the Basic Income European Network into the Basic Income Earth Network. Eduardo Suplicy was the first senator for Lula’s PT and has been representing the state of São Paulo in the Brazilian Senate for nearly 20 years.
So, the choice of São Paulo for this 13th Congress was more than justified, and it proved excellent. Thanks to the hard and intelligent work of an energetic organizing team led by Lena Lavinas, Fabio Waltenberg and Celia Kerstenetsky, the congress was yet another fantastic occasion for sharing information, exchanging arguments, taking new initiatives and rekindling fraternal contacts. The organization was even so good that the congress was able to smoothly accommodate the plenary viewing of the Brazil-Holland World Cup football match and happily get back to full swing straight away despite Brazil’s painful defeat.
The congress took place in the Faculty of Economics of the University of São Paulo on 1 and 2 July 2010 and was preceded by a Brazilian pre-congress day on 30 June. Over the three days, the meeting attracted over 500 participants from over 30 countries and hosted close to 200 presentations that can still be downloaded from the congress site (www.bien2010brasil.com). This meant many parallel sessions that allowed for some in-depth discussion, combined with a number of plenary sessions. The closing one, chaired by Senator Suplicy, provided an opportunity to look back and think ahead with four of those who founded BIEN in Louvain-la-Neuve in 1986 (Clause Offe, Guy Standing, Robert van der Veen, Philippe Van Parijs). On afternoon preceding the congress, BIEN’s Executive Committee was received at length by President Lula, who explained how BIEN’s objectives were already partly met by the programmes that exist in Brazil.
Indeed, several sessions of the congress, including a plenary addressed by the director of the programme, Lucia Modesto, were devoted to the achievements of the Bolsa Familia and to how the challenges it faces may pave the way to a basic citizen’s income. Means-tested programmes such as the Bolsa Familia unavoidably generate a major problem of fair implementation in the context of a largely informal economy. As the programme matures, there will be more and more people who will rightly say: “this is unfair, my neighbour is earning more than me and is receiving a Bolsa Famila whereas I am not”.
Brazilian scholars who study the operation of the scheme do observe that there are comparatively very few households removed from the programme because their assessed income exceeds the (low) threshold, and they acknowledge that many more would need to be removed if the means test were rigorously implemented. But it would be very harsh, expensive, conflict-ridden and unpopular to monitor closely families that are still very poor and punish them with the withdrawal of the Bolsa Familia as soon as their monthly earnings are suspected of exceeding the threshold of 140 reals per person (less than 80 dollars). So far, the risk of clientelism and straight corruption intrinsic in such a system has not eroded its popularity. The public discussion about the Bolsa Familia has been focusing mostly on a different issue, namely whether one should strengthen or weaken the condition of school attendance currently imposed on households with children in the appropriate range: 85% of the classes for children between 6 and 15, 75% for adolescents. But in case the legitimacy of the whole scheme were to be threatened by the unsustainability of the means test, Senator Suplicy and other Brazilian basic income supporters are ready with a structural solution: just do what the 2004 law promises to do, i.e. get rid of hundreds of thousands cases of unfairness in one go by simply extending the benefit to all.
The congress was, as usual, an opportunity to hear about what is happening in very different places in the world. For example, it provided a nice opportunity to compare the local basic income experiments currently conducted in Namibia and in Brazil or soon to be started in India. After the end of the conference, two groups of participants even went to visit the two Brazilian experiments currently underway (in São Antonio do Piñal and Quatinga Velho). It is important to keep the order of magnitude of these experiments firmly in mind. In São Antonio do Piñal, for example, an attractive municipality located in a hilly part of São Paulo state and supporting itself largely from tourism, we visited the room in which the municipal council made an unprecedented decision. It decided to allocate 6% of all municipal revenues collected from local taxes (as opposed to state or federal grants) to the funding of a basic income for all inhabitants. However the total of these local taxes amount to 1.240.000 reals per year. 6% of this amount divided by the 7000 inhabitants gives each of them less than one real per month (about half a dollar). This is a neat symbolic gesture, that its initiators try to supplement in various ingenious ways, but so far it does not weigh much next to the colossal bolsa familia programme, which provides an average per-family monthly benefit of about 50 dollars (95 reals) to over 12.5 million Brazilian families.
This is to be compared with what many of us saw as the most surprising news of the whole congress. It came from Iran. In January 2010, the Iranian parliament approved by a narrow majority the so-called “targeted subsidy law”, which combines two measures. Firstly, it scraps a large implicit subsidy to oil consumption by both Iranian households and firms. It does so by bringing the comparatively very low domestic price of oil in line with the international price. Secondly, it compensates the impact of the general price increase on the standard of living of the population by introducing a monthly uniform cash subsidy for over 70 million Iranian citizens to be paid to the heads of households. The amount is expected to reach initially about 20 dollars per person per month and to gradually rise to 60 dollars. The rich, who consume directly and indirectly more oil than average will not be fully compensated for the price increase, but the poor will automatically be more than compensated. The law, which is due to come into effect on September 21, is therefore expected both to foster a more efficient use of scarce natural resources and to reduce the level of social inequality. For more information, see the section “national debates” below (or Hamid Tabatabai, hamtab@gmail.com, “The ‘Basic Income’ Road to Reforming Iran’s Subsidy System”, slides downloadable from the website of the congress, updated paper forthcoming in Basic Income Studies). If this scheme is actually introduced and expanded as planned in Iran, it promises to be a very interesting initiative to study, and it may inspire other countries. Wherever one is seeking a “sustainable new deal” that combines ecological and social concerns, making resource consumption far more expensive and distributing the large revenues from the price increase equally to all is an obvious option to consider.
In many places, this is a far more realistic option than an Alaska-type permanent fund programme (discussed at the congress by two of its best specialists, Scott Goldsmith and Karl Widerquist). This programme distributes dividends to all Alaskan residents — in 2009, somewhat above 100 dollars per person and per month. As income per capita is about 13 times higher in Alaska than it is in Iran, this dividend obviously makes far less of a difference to the local income distribution than the Iranian scheme will, despite the latter being lower (per capita) in dollar equivalents. But the main difference is that the Alaska scheme is funded out of the interest collected from investments made worldwide with revenues generated by the production of oil at some point in the past, whereas the Iranian scheme should be understood to be funded out of a tax on the current consumption of oil. The Alaska-type scheme is therefore restricted to resource-rich (sub-) countries that manage at some point to exercise sufficient political self-restraint to create and develop a substantial fund. The Iranian-type scheme, by contrast, is available to any country that wants to price the consumption of oil in an ecologically responsible way and to buffer the effect on people’s standard of living in a socially responsible way. For this road to basic income to be a real option there is no need to first accumulate a large fund, nor indeed to be an oil-producing or resource-rich country. Yet, there are also disadvantages. In the long run, one can expect the return on the Alaskan fund to keep fluctuating quite wildly but not to converge to zero. Our consumption of oil, by contrast, will not continue forever.
This surprising Iranian story is only one of the many that were discovered and discussed at the São Paulo congress. It neatly illustrates the role a network such as BIEN can play to spread useful information, to make it intelligible, to broaden our imagination, to boost our confidence and to empower our struggle for greater justice all over the world.
-Philippe Van Parijs, Chair of BIEN’s International Advisory Board
by Guest Contributor | Aug 12, 2010 | News
By Hamid Tabatabai
Iran is on the verge of becoming the first country to introduce a basic income. This dramatic development is happening with little international attention and for reasons that have little to do with the international discussion of basic income.
Iran is trying to get rid of a horribly inefficient system of implicit fuel subsidies. As one of the world’s largest oil producers, the Iranian government makes about $70 billion per year from the oil exports, but it loses an estimated $100 billion dollars per year (30% of its GDP) by directing its state-owned enterprises to sell various products, mostly gasoline, far below their international price. Thus, Iran’s system of subsidizing the consumption of fuel at home actually costs more than Iran makes exporting fuel abroad.
This system of subsidies is one of the main benefits Iranians receive from their government, and many Iranians have grown dependent on cheap fuel and other commodities. The government cannot get rid of the subsidies without providing something else for the people to cushion the blow. After several years of debate, basic income has emerged as the only realistic form of compensation for the withdrawal of subsidies.
Thus, basic income has arrived in Iran through the backdoor, sidestepping most of the issues usually discussed in the international debate. The money will come from eliminating obviously inefficient subsidies. The money should go to everyone, because everyone will suffer from the loss of the subsidies, and everyone has equal claim to own the state enterprises. The money can’t be targeted because the government doesn’t have the ability to collect the necessary information to ensure that targeting is accurate.
According to the new law, the government will use half of the increased revenue for other government services, and it will distribute the other half of the money directly to the people as a grant to all who apply. When fully phased in, that amount has the potential to provide a basic income of $60 per person per month ($720 per year) or more. This figure is still well below the poverty line, but it is a very significant amount. Iran has a per capita income of only $3,500 per year, less than one-tenth of Alaska’s per capita GDP of $42,000. Nearly 70 million people will be eligible for the Iranian basic Income, more than 100 times the number who receive the Alaska dividend. Considering also the enormous difference in the cost of living in the two places, it is clear than a $720 basic income in Iran will be more significant than the existing $1000 to $2000 dividend in Alaska.
There are drawbacks to the current plan. Although every citizen of Iran is entitled to the grant, the money will be paid to “heads of households,” who are overwhelmingly male. Thus, some men may have the power to keep their wives, children, and other dependents from benefiting from the grant. Also, foreigners living in Iran (mostly Iraqi and Afghan refugees) will not receive the grant even though they will suffer as much as other residents from the loss of the subsidy.
The phase-in is scheduled to begin sometime between September 2010 and March 2011. There is no clear word on how long the phase-in will take. The law has been passed; more than 90% of Iranians have already applied for their grants, but the Iranian political system is chaotic, and there could yet be substantial changes. We can’t be sure exactly what will happen until it happens. We can only wait and see.
The source for this article is “The ‘Basic Income’ Road to Reforming Iran’s Subsidy System,” by Hamid Tabatabai, paper presented at the 13th International Congress of the Basic Income Earth Network (BIEN), June 30 – July 2, 2010. There is much more to this issue than I have had room to discuss here. For more information, or for a copy of that paper, please contact Hamid Tabatabai at hamtab@gmail.com.
by Karl Widerquist | May 30, 2010 | Opinion, The Indepentarian
[This article was originally published as part of ‘the Basic Income Guarantee Blog on USBIG.net. I reprint it here exactly as it was published then.]
In a period of about eight months, I managed to save and invest enough money to get myself a small personal basic income. It was easy-if you get the kind of lucky breaks I got. Of course, you could use the best trading app there is with the hope of making some great returns as I did! I’m telling you this story only because it illustrates how much our economic fortunes are determined by luck, how favorably our laws treat people who own stuff (people who have obtained control of natural resources) and how much unearned income is available for redistribution.
According to my job title, I’m a philosopher. My field is not known as a big money-maker. But at least since Aristotle, philosophers have occasionally made good money by teaching the children of the rich. Aristotle went to Macedon to teach the son of the king. I went to the Middle East the children of the oil-rich. The history that made parts of the Middle East rich began more than 90 years, as the Ottoman Empire was breaking up. Britain and France decided to arbitrarily draw lines on the map of the Middle East to create dependencies that eventually became states. Nobody knew at the time how much oil was there or where most of it was. So, they had no idea those lines would make eventually some of those countries very rich and others very poor.
Thanks to those decisions, the small Persian Gulf state of Qatar is now the wealthiest country in the world. A few years ago the Emir of Qatar (who basically owns the country) offered huge amounts of money to get big-name Western universities, including Georgetown, to open campuses there. Last year Georgetown hired me at a salary about three or four times what I made on my previous job.
What did I do to “earn” this salary? My teaching load is lighter and my skills are no higher than they were last year. The work I do now is no more important than the work I did last year. The children of the oil-rich can afford to pay more for their education, but it’s hard to argue that it’s more important to educate them than anyone else.
Partly I’m being paid for my flexibility. Most people can’t pick up and move to the Middle East. Partly I’m being paid because everybody knows the Emir of Qatar has a lot of money, and nobody with any other options is going to work there unless they get a piece of it. Just a lucky break for whoever happens to be in position to take advantage of it.
So, suddenly, I had money to invest.
Meanwhile, in South Bend, Indiana, the most depressed real estate market in the United States, my brother was a public school teacher. He had bought a couple houses, fixed them up, and was making good money renting them out. He had time and skills to invest but not money. I had money but no time. We trust each other. The arrangement was obvious-a lucky coincidence.
Because real estate prices are so low in South Bend, we already have three houses, a lien on another, and we’ll soon be shopping for another. We have long-term leases signed on the first three houses, so that, beginning August 1, my share of the rental income from those houses will be about $700 per month, or $8,400 this year, next year, and every year.
The laws of the state entitle me to keep that stream of income from now until the end of time. I could leave it to my children or set up a trust fund that to direct that flow of income toward whatever purpose satisfies the whim I have in my head when I write my will. That is a lot of money that can be put aside for something useful. Whether it will be used for my children’s tuition fees or for medical costs, that money can go a long way.
As we’re thinking about shopping for another real estate property, maybe we should consider out of state real estate investing instead? This could offer us more choice in the type of property that we invest in, as well as having the possibility to use it as a vacation home. I would just like something that could help to contribute to our income.
Above all, investing in real estate is a fantastic way to diversify your investment portfolio. However that being said, it is no secret that managing several properties at once can be confusing, particularly if you intend on leasing out your properties to tenants. For this reason, if you are considering investing in real estate, it might be a good idea to research some of the amazing property management companies out there that can take care of the day to day responsibilities that come with being a property owner. I know that a friend of mine managed to find a jacksonville property management company to safeguard his investments by doing some research online so it might be worth researching some different property management companies in your area.
Anyway, what I am trying to say is that thanks to my property investments I have a basic income, not just for life, but forever.
I pay about $15 a month in property tax on each home. But because we can deduct funds spent on improvements to the homes and claim “depreciation,” I can expect to pay no income taxes out of my share of the returns. If it looks like our profit will be so strong that it will force us to pay taxes we can put a new roof on a house, deduct the cost from our earnings, see the value of our home increase (thought property taxes will not), and earn more rent. People who actually have to work for their money can expect a quarter or a third of it to go to income taxes. This is not some brilliant shelter that our accountant devised. This is how people who own stuff are treated by the tax rules from Key West, Florida to North Slope, Alaska.
Assuming no compound interest and no new investments on my part, the rent on the property I have accumulated in eight months of saving and investing will add up to $84,000 over 10 years, $840,000 over the next 100 years. If you would like to invest in some new real estate, you may want to check out The Florence Residences Pricing which is a great money investment. Assuming compound interests and new investments that amount would go up exponentially-possibly increasing by 10 times in a dozen years.
Of course, $8,400 is a very small basic income. It doesn’t tempt me to quit my job and spend the rest of my life surfing off Malibu. Yet, it is nearly as large as what a very optimistic basic income supporter would hope to start out with. It is far larger than anything Congress is likely to approve for people who need it. People are likely to say we “can’t afford it” even though there are many people, who own much more than I do, taking in money just as easily.
Compare my personal basic income to the only regional basic income in the world today. Last year, the Alaska Permanent Fund Dividend paid $1305 to each resident of Alaska. That means that after eight months of saving, I am able to pay myself a dividend more than six times the amount that the oil-rich state of Alaska can pay its citizens after more than thirty years of saving and investing. But Alaska taxes almost nothing else but oil, and they use only a small portion of their oil revenue to support the Permanent Fund. Mostly they used their oil wealth to give people who own other things in Alaska a big tax cut. If they had used all of their oil royalties to support the fund, the dividend would be at least four times what it is now.
What can I possibly have done in eight months of investing to have earned a perpetual stream of income from now until the end of time?
Not much really. Lucked into a situation. As much as people believe that we must keep taxes low to reward people who do stuff and produce stuff, our property laws and tax laws most favor people who own stuff. In part, laws are set up this way because people who own stuff are very powerful. They have an enormously disproportionate control over government policy, and very often choose policies in their own self interest. Owners have successfully pushed most of the tax burden off onto people who make salaries.
But another important reason why the laws so greatly favor people who own stuff is that most people do not understand the difference between rewarding people who produce stuff and rewarding people who own stuff. A lot of what we spend goes to reward production, but it’s a mistake to think all income is earned. What can any investor do in a finite amount of time to “earn” a stream of income that lasts forever?
Supposedly investors are paid for their forbearance and parsimony. Because investors have the discipline to put money away instead of spending it on consumption now, they earn a return on that savings. But I didn’t save money because I was frugal. I saved money because I had money. I have spent money more extravagantly in the past year than at any other time in my life. Because I made so much more than I was used to, I was able to buy pretty much whatever I felt like, and still have a lot left over to invest. This seems to be true of a lot of investors.
Supposedly investors are paid for taking risks, but many of the vest investments are not very risky. There is no chance that this business will go bankrupt, because we don’t owe any money. There is some chance that rental prices in South Bend will fall slightly, but probably not much. If the South Bend real estate market stays depressed I can expect my rental income to rise with inflation. If the market gets better I can expect it to rise more quickly than inflation.
Supposedly investors are paid for providing a valuable service. To some small extent this is true of me. If I hadn’t invested this money, the South Bend real estate market would be just a little more depressed. Rental properties would be just a little less available; purchase prices would be just a little lower; rental prices would be just a little higher, and other landlords would make just a little higher rate of return. That’s something. But it hardly justifies a stream of income from now until the end of time.
Supposedly the stream of income is justified by the continued maintenance and improvements that owners put into their properties. But those all come out of the stream of income. The need for maintenance or improvement might decrease the size of my returns, but there is no necessity for any new investment or even action on my part to maintain them. I can just sit back and collect. Over time, the renters pay for the maintenance themselves.
Investors might have to do something or produce something to obtain ownership of a resource, but once they own it, anyone who wants to do anything with that resource has to pay the owner for the privilege. The owners of the past get a cut of all current production whether they personally contribute anything or not. The existence of so much unearned income reorients our economy away from productive activity so that you can’t be sure that the initial investment was necessarily something productive. Much of what people do, especially in the financial, insurance, and real estate sectors revolves not around the provision of services but around using financial resources as leverage to obtain more financial resources.
Renters pay me because I own stuff that other people don’t. I’m in that position, because I just happened to have a brother who needed an investor just when I happened to have money to invest. I was in that position because I just happened to get a job in Qatar. The Emir of Qatar just happened to be able to give me that job because arbitrary decisions made long ago by the British Empire just happened to have worked out so that he owns stuff that other people don’t.
Lucky break upon lucky break upon lucky break determines who owns resources and who does not. Those who do not own will pay those who do, year after year, from now until the end of time or until we decide to change the rules. We don’t need to eliminate property to change the rules in an important way. How about a little rebate from those who own stuff to those who do not? It would compensate them for all that they have to pay just because others control the resources we all need to use.
-Karl Widerquist, begun in New Orleans, completed in Buenos Aires, May 2010
