by Citizens' Income Trust | Aug 9, 2013 | Opinion
Anne B. Ryan, Enough is Plenty: Public and Private Policies for the 21st Century, O Books, 2010, x + 215 pp, pbk, 1 84694 239 6, £11.99
‘The concept of enough is developed throughout this book … enough is relevant to public policies and personal resources … enough is not uniform throughout the world; it can take different forms and expressions for individuals and for cultures.’ (pp.1,2)
The author explores the ecological, aesthetic, moral and spiritual aspects of ‘enough’; discusses the limitations of monetarization of the economy and of GDP measurement; and describes industrialised agriculture as ‘suicidal’ (p.50). Solutions are suggested: individualised carbon trading, a Citizen’s Income, locally-traded food: and the principles underlying these proposals are explored.
There is much here that echoes E. F. Schumacher’s Small is Beautiful (HarperCollins, latest printing 2001) and John V. Taylor’s Enough is Enough (SCM Press, 1975: sadly now out of print), and there is a rather rigorous treatment of many of the areas of interest in Tony Fitzpatrick and Michael Cahill, eds., Environment and Welfare (Palgrave Macmillan, 2002). Discussions of these three books would have enhanced the book under review. There is no bibliography and no index, which is a pity.
Of particular interest to readers of this Newsletter will be chapter 5 on a Citizen’s Income. A Citizen’s Income’s effects on employment patterns are discussed, as are possible objections to the policy and options for paying for a Citizen’s Income. The author concludes: ‘The principles informing a Citizen’s Income help us to ask radically new questions about the nature of work and security.’ (p.115)
This wideranging book addresses us with the questions: ‘Do all of these problems and proposed solutions hang together?’ ‘Could they hang together?’ The answer to the first is ‘Not necessarily’, and the answer to the second ‘Possibly’. There might be little in this book that is really original, but for the positive answers which it gives to these questions the book is worth reading.
by Karl Widerquist | Jul 1, 2013 | Opinion, The Indepentarian
Basic income is a regular unconditional cash grant paid to all citizens without any means test or work requirement. It’s often dismissed as a utopian idea.
However, a basic income, or something very close to it, exists today in Alaska. It’s called the Permanent Fund Dividend (PFD) or sometimes “the Alaska Dividend.”
The PFD has been paying annual dividends to Alaskans since 1982 with no conditions except citizenship, residency, and the willingness to fill out a form. After following the Alaska Dividend since 1999, and I want to share six lessons that supporters of progressive economic policy should learn from what I call “the Alaska model,” but first some basic background.
In 1956, Alaska ratified a constitution recognizing joint ownership of unoccupied land and natural resources. In 1967, North America’s largest oil reserve was discovered in state owned areas on Alaska’s North Slope. In 1976, a state referendum created the Alaska Permanent Fund (APF), a portfolio of diversified assets, into which the government would invest a small part of the state’s oil revenue each year as a way to turn the temporary stream of oil money into permanent wealth. Back then, the state had no plan for what to do with the APF. In 1982, the state government finally decided to distribute part of the returns from that fund as a yearly dividend, and the Alaska model was born. The APF continues to rise with yearly deposits from oil revenue, and it goes up and down with the financial markets.
The PFD is derived from the returns of the APF’s investments. With some effort to smooth out the ups and downs, the dividend fluctuates with the markets. In 2008, the dividend (plus a onetime supplement of $1,200) reached a high of $3,269, which comes to $16,345 for a family of five. After the financial meltdown of 2008, the dividend has declined, reaching $878 per year in 2012. That’s still $4,390 for a family of five. Now that world markets have come back, the APF recently reach a new high of $46 billion. Higher dividends are likely to follow in a few years.
The APF and PFD are not perfectly designed, but they are an important and innovative example of democratic wealth existing in the world today. The APF is community-owned wealth invested in the private economy. The PFD converts some of the returns to that wealth into democratically distributed income. Together, the Alaska model is something, from which we can learn, and on which we can improve. An unconditional cash dividend of $4,000 to $16,000 per year for a family of five is significant for everyone except for the wealthiest people, and it is extremely significant for people living at the margins. It has helped Alaska maintain one of the lowest poverty rates in the United States. It has helped Alaska become one of the most economically equal of all 50 states. And during the 1990s and 2000s it helped Alaska become the only US state in which equality rose rather than fell. Alaska is doing something right, and the dividend is a part of it. Here are the six lessons from the Alaska model.
1. Resource dividends work and they’re popular
At a time when conditional social policies are under attack across the industrialized world, the Alaska Dividend continues to be extremely popular. It is sometimes called “the third rail of Alaska politics,” implying any politician who touches it dies. In 1999, a ballot initiative proposed diverting funds from the APF was rejected by more than 80 percent of Alaska voters. Think about that. It’s hard to get 80 percent of people to vote the same way on anything. But here we have 80 percent of Alaskans voting for a policy that fights poverty and promotes equality.
2. You don’t have to be resource rich to have a resource dividend.
It’s easy dismiss anything connected with Alaskan oil is an aberration, something possible only because of Alaska’s enormous windfall. But there are three reasons why nearly any political community can do what Alaska has done:
First, Alaska isn’t unusually rich. Oil transformed it from one of the poorer to one of the wealthier U.S. states, but Alaska is only the tenth richest of the states with a per capita GDP of about $42,000—only $2,500 higher than the national average. Alaska has no greater financial means than many other states and nations.
Second, the entire dividend is financed by only a small fraction of Alaska’s resource wealth. The APF is supported almost exclusively by taxes on a single resource, oil. Alaska’s taxes on oil are very low by international standards. And the state devotes only a small portion of that revenue to the APF. If Alaska devoted, say half of its potential resource revenue to the APF, the PFD could easily be five to ten times what it is now.
Third, every country, state, and region has resources—extremely valuable resources—but we don’t think of them the way we do of gas and oil because we’re so used to governments giving them away to corporations who sell them back at a profit and pay very little in taxes. Recent estimates by Gary Flomenhoft show that a resource-poor state, Vermont, could support a dividend two- to five-times larger than the PFD, if it made judicious use of resource taxes. The most resource-poor countries in the world are probably Hong Kong and Singapore, where millions of people are crowded together on a little island, and they have to import almost all their consumption goods. But these countries have fabulously valuable real estate. I wouldn’t be surprised if a tax on Singapore’s land could support something much larger than the Alaska Dividend. For the most part, the difference between being “resource rich” and “resource poor” is the difference between having the kind of resources states usually tax and the kind they usually give away for free.
3. Look for opportunities
Alaskans don’t have the dividend because they are resource-rich. They have it because some smart Alaskans took advantage of the opportunity. Common resources are being privatized all the time all over the planet. We could tax privatized resources, but the easiest place to start is at the moment of privatization. Every new well that’s drilled is an opportunity to assert community control of resources. So is every new mine that’s dug, every new reserve that’s discovered, every new smokestack that seeks to use the atmosphere as a garbage dump.
Less obvious opportunities are just as real. The US government recently gave away a huge portion of the broadcast spectrum to private companies for digital television broadcasting. If they had auctioned off leases to the highest bidder, they would have created a stream of income worth billions of dollars every year as long as broadcast exists. That was an enormous lost opportunity. Today, increased awareness about the need to do something about global warming is another opportunity. Two strategies currently being discussed, “tax and dividend” and “cap and dividend,” would make polluters pay for the damage they do to the environment and return the proceeds to everyone as a dividend. Opportunities are all around, if we look for them.
4. Think like an owner. Think like a monopolist. Think like Johnny Carson
There is a danger in the Alaska model. If everybody gets paid when we privatize resources, they might want to privatize more resources and allow more damage to the environment. The solution to this problem is that once the community demands fees for the use of its resources, it asserts ownership of those resources. Once members of the community begin to think of themselves as the owners of their environment, new opportunities open up. The community is the owner; government is the broker; business is the hired help. The owner sets the terms of rental. They can allow private exploitation of their property only with strong environmental protections attached. The right to compensation is only one of the rights of ownership—along with it comes the right to manage, regulate, and restrict access. Receiving payment for resources helps the members of the community think of themselves as joint owners of the environment with the power to insist that tenants be good stewards of the environment.
Once members of the community start to think of themselves as owners of the community’s resources, they need to realize that, as a group, they have a monopoly over those resources. Monopolists don’t sell all they can at bargain prices. They restrict supply, selling less to get higher prices. Once we think about maximizing profit from resources, big corporations can forget about bargain deals.
But we should not think like just any monopolist. We should think like Johnny Carson. Who? In the 1970s, Johnny Carson hosted the most popular talk show on American television. Because he could have gone to any network and brought his audience with him, he demanded and got a salary that made him the highest paid entertainer in the world, but he didn’t stop there. He gradually demanded more vacation time, eventually getting something like four months per year. Then, he decided to reduce his weekly workload by one day. So he worked four days a week, eight months a year, and he was still the highest paid entertainer in the world. Johnny Carson realized that his time was valuable not only when sold, but also when unsold. As monopoly owners of the commons who think of our environment the way Johnny Carson thought of his time, we could have more money coming in while we also secure larger parks, more nature reserves, less pollution, and better resource management.
5. Build a constituency
The feeling of shared ownership is one of the reasons resource dividends tend to be so popular once they’re in place. They build a large constituency who will defend the policy when attacked. Talking to Alaskans reveals a greater sense of ownership of Alaska’s oil reserves than of other state property and a greater sense of ownership of the APF than of the state’s oil reserves.
Another way way to build a constituency is through universal rather than targeted policies. It is easy for politicians to single out the recipients of targeted programs, because they are a relatively small and marginalized group, but a dividend, large enough to make a difference for the majority of the population, is much safer from attack.
A third way to build a constituency is to make policy significant. Insignificant gimmicky programs might be easier to pass, but they are also easier to cut when a less favorable administration comes into power. If a politician proposed cutting the Alaska Dividend, all Alaskans would face losing $1,000–$2,000 a year for the rest of their lives. Whether that politician was promising a tax cut or some other spending program, they would put a universal constituency of Alaskans in the position where they would sacrifice something very significant for the uncertainty that the replacement will be delivered. Alaskans care about the PFD because it makes a difference in their lives.
6. Avoid creating an opposition
Just as some policies create larger constituencies than others, some create greater opposition than others. Policies, such as the minimum wage and rent control, put most of their burden on one, specific, easily identifiable group who will probably fight the program as long as it exists. Even if financed by broad-based income tax, targeted redistribution can create an opposition if a significant number of taxpayers see it as something they’re unlikely to need.
The APF and PFD have virtually no opposition. No one has reason to feel burdened by their creation and continued existence. It’s just a pile of money that the state happens to own. No one feels infringed by it. Of course, the APF is created and continually enlarged by taxes on the oil industry, and they do try to lower their tax burden as much as they can. But they have much harder time making complaint to the public. Opposing oil royalties is like complaining that they have to pay a price for steel, trucks, or ships. It doesn’t make sense to complain about what is obviously an unavoidable cost of doing business. That’s just the way of the world. In Alaska, Norway, and some other places, the state owns the oil fields. Anyone who wants to drill must pay. And now that’s the way of the world. A good solid policy can change the way the world works.
-Karl Widerquist, Doha, Qatar, April 26, 2013
by Citizens' Income Trust | Feb 4, 2013 | Opinion
Since the 1990s, on average the Indian economy has been growing at over 6% a year. Yet hundreds of millions remain mired in poverty, and inequality has grown steadily. For decades, although there are 1,200 centrally-funded social policies on the statute books and hundreds more at state level, successive governments have relied largely on the Public Distribution System (PDS) to redress poverty.
The PDS subsidises consumers via subsidised grain, rice, sugar and kerosene if they have a Below Poverty Line (BPL) card or something similar. Producers of many goods receive huge subsidies as well. Altogether, subsidies eat up 7% of GDP.
They do not work. The system is wasteful, inefficient, market-distorting, regressive and deeply corrupt. Rajiv Gandhi famously said that 85% of subsidised food did not reach the poor. The Deputy Chair of the Planning Commission said in 2009 that only 16% of it reached them. Others have estimated that for every Rupee spent 72% is lost in transit.
While continuing with the PDS, in 2005 the Congress Party, long regarded as the bastion of Indian democracy, launched a grandiose National Rural Employment Guarantee Scheme (NREGS), supposedly guaranteeing every rural household 100 days of labour a year at the minimum wage. Huge numbers have supposedly benefited, vast sums spent, many eulogies uttered.
In reality, ghosts have been resurrected, recorded as having done labour. Most rural people have had few if any days of labour under the scheme (renamed to give it the status of having Gandhi’s name preface it). Much of the money has gone into local bureaucrats’ pockets. One study estimated that only 8% of recipients had been employed for 100 days in one year. Another suggested that only a minority of projects had been completed, another that it has not reduced rural poverty at all. Corruption is endemic. The scheme only awaits a journalist to write a book entitled The Greatest Social Policy Scam in History.
Meanwhile, something remarkable has been brewing. A radical alternative has been gaining ground. In 2009, led by SEWA (the Self-Employed Women’s Association), we launched the first of three pilot cash transfer schemes. The principle is simple: Give people cash, a basic income, instead of subsidies or make-work labour. And do not attach conditions, directing people how to spend the money; they can work that out for themselves. We do not claim credit for what has happened since, for other factors have contributed. But the pilots have proved timely.
The first, financed by UNDP, took place in a low-income area of Delhi, where hundreds of households were offered the alternative of continuing with the subsidised items or receive a monthly cash transfer of equivalent value. Many initially chose the cash. Later, when we did the evaluation, many more wished to do so. Although a political campaign was organised, involving physical violence towards our women fieldworkers, the results have been very positive, with improvements to living standards.
Meanwhile, with financial help from UNICEF, we launched a bigger pilot in the state of Madhya Pradesh. In eight villages, for eighteen months, every man, woman and child has received an unconditional monthly cash transfer. Over 5,500 villagers have been recipients. We have been evaluating the effects by comparison with people living in comparable villages, in a so-called randomised control trial.
Such pilots take a long time. Politics does not wait. Suffice it to note that the results of this and the third pilot in tribal villages are heart-warming. Even though the amount paid is very modest, about 30% of bare subsistence, we have observed improvements in nutrition, school attendance and performance, women’s status, economic activity and sanitation. Many villagers have told us they want a substitution of cash for subsidies. More have come round to that as experience has been gained.
What seems to happen is that the cash provides liquidity and a sense of security that infuses confidence and gives people a greater sense of control over life. So the positive effects exceed the value of the transfer.
It is what has happened back in Delhi that is so intriguing. In the past few months, we have been asked to brief senior officials, and they have been emboldened to push cash transfers into the centre of national debate.
In November, the Prime Minister went on television to announce the government is to launch a cash transfer scheme, rolling it out to 51 districts in 2013 by raising the price of kerosene and compensating people by cash paid into bank accounts. Not to be outdone, on December 15, Delhi’s Chief Minister launched an unconditional cash transfer scheme in her state for those omitted from the cap put on BPL card holders. A torrent of media comment has followed.
The Congress Party has been converted. Earlier this month, its leader Sonia Gandhi, the Prime Minister and several Cabinet colleagues descended by helicopter on a village and announced its cash transfer policy to a crowd of 30,000.
Indian social policy is at a crossroads. Opposing cash transfers, a group of diehard supporters of the PDS have been promoting a Right to Food bill that would universalise the PDS and subsidised food. They have also organised hostile protests. They claim cash benefits would lead to abandonment of public social services.
They are being Canutish. The PDS is literally rotten, as Delhi’s Chief Minister has admitted. Often grain comes in sacks that contain numerous small stones to make up the weight; often the grain and rice are stale; often villagers travel long distances only to find the rations are not there. All this is ignored. Let them be supplicants, say the paternalists in effect.
The risk now is that, in the rush to operationalize cash transfers across the country, design faults and excessive politicisation will put back the cause for years. Here we have a lesson for government. In the villages receiving the basic income, the payments have been an extra, not a substitute for something. We asked everybody to open a bank account within three months of receiving their first payment. There were predictable teething problems. But soon, everybody had accounts, with help from our colleagues. In that time, suspicions were allayed and support for cash transfers strengthened.
The government is doing it the wrong way. It is raising the price of a subsidised item, kerosene, telling people they will be compensated through a bank and by means of an identity card, the Aardaar. But, as the government’s pilot has shown, many will lose in the short-term since they do not have accounts and cannot obtain the cash. This risks a backlash.
The solution must be based on realising that while villagers are always on the edge financially a government can take a medium-term perspective. If they rolled out their scheme to those 51 districts by offering extra money in the first year while stating that everybody must open a bank account in that time, the fiscal cost will be small. In the second year, they could phase out selected subsidies, sharing the gains by disbursing a third of the subsidy in additional payments while saving the fiscal coffers the other two-thirds. Remember that most money spent on subsidies does not reach the intended beneficiaries.
Will wisdom prevail? One cannot be optimistic. It is a pre-election year and Congress is set on making cash transfers what a leading politician has called “a game-changer”, an election-winning measure. This will galvanise opposition. Everybody would gain if only the politicians had the wisdom to de-politicise the reform. The Government should set up an independent Cash Transfers Commission to oversee the process and to ensure the level of benefits is set by economic criteria and not raised just before elections.
How much better it would be if unconditional, universal, individual cash benefits were rolled out slowly and quietly. We know they have made a great difference to the lives of those thousands of villagers in our pilots. We have heard their stories, seen their children and analysed the data gathered by our fieldworkers. There is a great chance of transforming Indian social policy. Let us hope the politicians take it.
