by Karl Widerquist | Sep 10, 2011 | News
Bedingungsloses Grundeinkommen, a Facebook page in German, obtained its 50,000th follower in the summer of 2011. The page was created by Daniel Häni and Benjamin Hohlmann in Basel, Switzerland. The popularity of this site is just a small sign of the extent to which the BIG movement is taking off in German-speaking countries from the grass roots to the highest levels. Five of the six major parties in Germany have Basic Income factions. Dozens of members of the German Parliament have endorsed Basic Income. The national German BIG network is a large and growing organization, which has regular events often in cooperation with Swiss and Austrian groups. The German BIG Network will host the 2012 BIEN Congress in Munich. German-speaking countries have something that few other countries have: local Basic Income groups with regular activities in many German cities. Daniel Häni and Enno Schmidt founded a Swiss group in 2006 in Basel. They produced the documentary “Basic Income. A Cultural Impulse” (released in 2008), which is the most popular movie about BI in Germany and Switzerland.
The Bedingungsloses Grundeinkommen Facebook is online at:
https://www.facebook.com/bedingungsloses.grundeinkommen.
For information (in German) about the German BIG network, go to their website:
https://www.grundeinkommen.de/
An English (dubbed) version of “Basic Income. A Cultural Impulse” is online at:
https://dotsub.com/view/26520150-1acc-4fd0-9acd-169d95c9abe1
CORRECTION: The original version of this article misidentified the page as being created by the German BIG Network
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 Yannick Vanderborght | Aug 1, 2011 | Opinion
India might seem an infertile ground for basic income. For decades, social policy has been about the bureaucratic raj, through which subsidised items have been supposedly supplied directly to ‘the poor’, mainly through ration shops, and where subsidies in general have become deeply ingrained in the society, accounting for over 5% of GDP. However, within the past two years an extraordinary change has occurred. Suddenly, the whole of the political establishment is talking about the desirability or otherwise of “cash transfers” instead of subsidies.
The timing of this new political prominence is fortuitous, since we had been planning a pilot cash transfer scheme since 2008, effectively a basic income pilot, albeit called a ‘universal, unconditional, individual cash transfer’. It had its origins in a seminar in Ahmedabad at the headquarters of the Self-Employed Women’s Association (SEWA) of India, where I laid out the principles of a basic income and reviewed the arguments for universalism against selectivity and targeting, and unconditionality against conditionality. Initially, there was some resistance to the idea that each man and each woman should receive the cash transfer independently. SEWA leaders were inclined to push for it to be paid to women only. To their credit, they eventually agreed that it should be paid to men and women independently, with the children’s cash being given to the mother or principal child-carer. Initially too, some argued for conditionality, but in a subsequent meeting representatives from local SEWA branches came out vehemently against conditionality. This was wonderful.
It took a year to raise funds, during which time a team of researchers and SEWA leaders was formed to plan the work. It was decided to operationalise the pilot in villages in Madhya Pradesh. But as we were planning, another opportunity came up to operate a second smaller pilot in a district of Delhi. This was instigated and supported by the Delhi Government, and the design reflected that. The Delhi pilot involved giving households a ‘choice’ between continuing with the existing PDS ration scheme, based on what are called the BPL (Below Poverty Line) cards that the poor are supposed to possess, and taking a monthly cash transfer instead. Many opted for the cash.
Shortly after this small pilot was launched, local opposition was mobilised, with a street campaign based on a claim that we wished to take away food and other essentials from the poor, currently provided to some people through the BPL cards. This misrepresentation led to riots directed at our team and pressure being put on those residents who had opted to take the basic income cash to revert to the rations. The ration shop owners were involved in this, although the action was led by a so-called Right to Food group.
As of July 2011, the Delhi pilot has been maintained, thanks in part to behind-the-scenes support of the local government and to the courage of local SEWA members. There is even evidence that more residents are wishing to shift to the basic income. We are in the midst of the second round of a monitoring-and-evaluation survey of the impact of the basic transfers. And there has been a request from the Delhi Chief Minister to conduct a second pilot in another area.
Meanwhile, the pace of political debate has been rapid. There has been a press furore, with prominent critics, such as Jean Dreze, claiming those pushing for cash transfers are wishing to dismantle the social state. I have responded to that in several newspaper articles and interviews, and in mid-July addressed the National Advisory Committee responsible for advising the Congress Party leadership, and thus the Government, on social protection policy. I have also given several presentations to UN organisations, including a long seminar that was teleconferenced in seven cities of India.
Meanwhile, the bigger pilot in Madhya Pradesh has moved ahead. We have been doing everything possible to maintain a low profile, which is one reason for my reluctance to present a description to BIEN members. Some of those who oppose cash transfers refuse to accept the legitimacy of pilot tests, and want to disrupt them.
Anyhow, although we certainly do not want any publicity about where the pilot is being conducted, the essence of the methodology and objectives are worth noting, partly because they might be relevant for pilots in other countries.
First, we decided to conduct a variant of a randomised control trial (RCT), in which all residents in 8 villages were to be provided with the basic cash transfer while all residents in 12 similar villages were not. Note that the full randomista model would provide the “treatment” (i.e., cash transfer) to a sample of households selected at random from within each village, to be compared with similar households not provided with the “treatment”. In the case of cash transfers that would be fraught with practical and moral drawbacks. So, we opted to provide the cash transfer to every individual in 8 villages and to none in the 12 ‘control’ villages.
Partly for pragmatic reasons, or funding constraints, and partly because the amount represented about 40% of bare subsistence, the pilot opted to provide each adult with 200 Rupees a month and each child under the age of 14 100 Rupees a month. Again because of funding constraints, it was decided to run the pilot for 12 months, although we had initially planned to do so for 24 months.
In accordance with a long-advocated theoretical position, we designed the experiment with one innovative feature. My perspective – shared by many within BIEN – is that a basic income would work better if combined with existence of ‘basic Voice’, i.e, a collective body able to represent the interests of the vulnerable. After all, particularly in low-income areas, a person with cash is vulnerable to losing it to more powerful individuals or groups unless there is a body able to represent and defend their entitlements.
With this in mind, it was decided to design the RCT experiment so as to compare the outcomes in places where there was no Voice body with those where there was such a body. Fortunately, we had a good way of doing this. For SEWA is operational and embedded in some of the villages and not others. So, from a sampling frame of all ‘SEWA villages’ and a sampling frame of all ‘non-SEWA’ villages in the district selected, we drew a sample of four SEWA and four non-SEWA villages in which the basic cash transfer would be paid.
Once the design principles had been worked out, the first practical phase was the drawing up of a full listing of all households in the 20 villages, not an easy or speedy process. That done, we conducted a comprehensive baseline survey of all households, and launched the cash transfer in the following month. But while that was going on, one further obstacle had to be overcome. It was desirable to control for ‘financial inclusion’, by universalising the way by which individuals received the cash transfer and by ensuring everybody had a bank account. This is a major issue in India today. The majority of the population are ‘unbanked’.
Rolling out bank accounts has been ongoing, with a record of when they were opened being kept for all individuals. For the first two months, the cash transfers were made by direct transfer, with teams from the project going to each village on a designated day. The process has been time-consuming but fortunately without incident. We hope to switch to paying through bank accounts shortly.
While a baseline household and individual survey was conducted, a Community Survey was also conducted to obtain macro-level data. Both the baseline and community surveys will be repeated, with modifications to suit the new period, six months after the start of the pilot, defined as the time of the first cash transfer. These will be called the midline surveys. Then, six months after that the endline surveys will be conducted.
Before the pilot was launched, we drew up a list of hypotheses associated with basic income or cash transfers, all of which are familiar to members of BIEN. We will be testing each of those, and hope to produce a public report and a series of technical papers over the next 18 months.
During that time, we expect the public and political debates in India to evolve dramatically. It is unlikely that the project team will stay out of those debates, even if it wished to do so. The Government has set up an official committee to review basic subsidies and two Food Security Bills are currently the focus of political attention. Numerous economists and other social scientists have taken up positions for or against cash transfers, and no day goes by without at least one newspaper article adding to the debate.
All that can be wished at this stage is that reason will triumph over emotion, and that dispassionate analysis can lead to better social policy. The importance cannot be over-stated. After all, there are more people in India – over 300 million – who are in absolute poverty than in any other country of the world. If a basic income could be part of the way to cut that number drastically, that would be a wonderful contribution. But we must keep our feet on the ground as we grind out the difficult fieldwork and analysis before us.
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 Yannick Vanderborght | Jun 13, 2011 | Opinion
Every time I read about the lives lost in the wars of Vietnam and Iraq, in the repression against movements pro-democratization in many Arabian countries, in the recurring conflicts at the borders of Israel and Palestine, in lamentable episodes that killed Chico Mendes, Sister Dorothy Stang, and the couple José Cláudio Ribeiro da Silva and Maria do Espírito Santo – defenders of the forests – and in the violence that occur in the outskirts of our metropolis, the beautiful lyrics of Bob Dylan, who turned 70 on Tuesday, May 24th, come to my mind, especially “Blowin’ in the Wind”, written in 1962.
Then, the Vietnam War was spreading absurdly. It seemed that mankind, including Chiefs of State of powerful nations, was hardly listening to the people who called the attention to the absurd of the wars and to how it would be better to solve great divergences among people and nations through the non-violence. There were great examples of this attitude as Leon Tolstoi, Mahatma Ghandi and Martin Luther King Jr., the latter always remembered for his beautiful words in “I Have a Dream”, of August 28th, 1963, when he claimed for the approval of laws assuring equality in civil rights among all the peoples as well as the Universal Suffrage:
This is no time to engage in the luxury of cooling off or to take the tranquilizing drug of gradualism…This sweltering summer of the Negro’s legitimate discontent will not pass until there is an invigorating autumn of freedom and equality… Let us not seek to satisfy our thirst for freedom by drinking from the cup of bitterness and hatred. We must forever conduct our struggle on the high plane of dignity and discipline. We must not allow our creative protest to degenerate into physical violence. Again and again we must rise to the majestic heights of meeting physical force with soul force.
Martin Luther King Jr. was one of those who built the conscience of the peoples of the world in a way to put an end to the long and suffered Vietnam War. In big cities, on the streets, in public squares, crowds decided to sing, many times led by Bob Dylan, Joan Baez, the group Peter, Paul and Marie and other great interpreters.
“How many roads must a man walk down
Before you call him a man?
How many seas must a white dove sail
Before she sleeps in the sand?
How many times must the cannon balls fly
Before they´re forever banned?
How many years can a mountain exist
Before it´s washed to the sea?
How many years can some people exist (as the Brazilian people, I think)
Before they´re allowed to be free?
How many times can a man turn his head
Pretending he just doesn´t see?
How many times must a man look up
Before he can see the sky?
How many ears must one man have
Before he can hear people cry?
How many deaths will it take till he knows
That too many people have died?
The answer, my friend, is blowin´ in the wind
The answer is blowin´ in the wind.”
This is a matter of common sense, totally within our reach to accomplish, even with much effort and determination. It is obvious that, in order to reach the conditions for living with less violence in our society, in order to end the need for wars to solve the fundamental mankind problems, we must put into practice the tools of economic and social policies that mean the use of principles of justice, as the ones elaborated by philosopher John Rawls, in The Principles of Justice (1971).
Thus, we could realize a shared feeling of fraternity, which effectively would be recognized by the society, resulting in a much higher level of civility.
So, to create a civilized and fair society, we must take into consideration values that are not only the search of self interest, to take advantages in everything. It´s clear that all of us want to develop and we also want the progress of our beloved ones. I teach my sons and pupils to consider the value of ethics, of the search for truth, of fraternity, of solidarity, of freedom and of democracy. And what are the tools consistent with these values? One example would be extension of good opportunities in education to every child, every youth and every adult who did not have good opportunities of education. A good public health service for all. The accomplishment of an agrarian reform, in a country still unequal in its land property conditions. The incentive to the cooperative forms of production and to the participation of the workers in companies’ profits. The expansion of micro credit opportunities. And the implementation of social inclusion programs that may bring a higher level of freedom and dignity to all the human beings.
According to the conclusion reached by a growing number of economists and philosophers of the five continents at the 13th International Congress of Basic Income Earth Network, Bien, held at USP in 2010, the tool that would contribute for this objective in a high level is a Citizen´s Basic Income, regardless the person’s origin, race, age, gender, civil, social or economic condition.
Fortunately the National Congress approved and President Lula sanctioned, in 2004, the Law 10.835/2004, to institute the Citizen´s Basic Income step by step, under the criterion of the Executive Power, starting with those who need most, like the Bolsa Familia does, until the day when everybody, including foreigners living in Brazil for five years or more, has the right to receive an income, as enough as possible, to meet the vital needs of everyone.
It will be great if President Dilma Rousseff announce this upcoming November the implementation of the Citizen´s Basic Income, during her term until 2014, as approved by consensus by the IV Nation Congress of the Workers’ Party, in February, 2010. We will sing with much joy and significance: “The answer is blowin´ in the wind”.
