From Basic Income to Social Dividends: Sharing the Value of Common Resources

It’s time to broaden the debate on how to fund a universal basic income by including options for sharing resource rents, which is a model that can be applied internationally to reform unjust economic systems, reduce extreme poverty and protect the global commons.

Image credit: Christopher Andrews — Flickr Creative Commons

(By Rajesh Makwana, originally published on www.sharing.org)

Few debates highlight the many complex issues around how governments should share a nation’s wealth and resources as much as the current discourse on basic income. Also referred to as a citizen’s income, the policy generally refers to the unconditional and universal payment of a regular sum of money to a country’s residents, usually as a replacement for a range of existing state benefits such as pensions, child allowances, tax credits and unemployment payments. Unlike many other policies that challenge the status quo, the scheme commands substantial support across the political spectrum — from progressives who hope it can reduce inequality and improve social justice, to neoliberals seeking to further diminish the role of the state in delivering a full range of welfare services. The idea also has a long historical precedent, with Thomas Paine, John Stuart Mills, Martin Luther King and Milton Friedman featuring among the numerous prominent figures who have supported the idea, in one form or another, since the late 1800s.[1]

More recently, financial and economic circumstances such as mounting unemployment rates, social and economic insecurity and unprecedented levels of inequality, have pushed the proposal back up the political agenda. A Swiss campaign for a citizen’s income gained enough support in 2013 to trigger a forthcoming referendum on instituting the policy, which could result in every citizen receiving the equivalent of $34,000 dollars every year. By January 2014, over 285,000 people had signed the European Citizens Initiative for an Unconditional Basic Income, which sparked a much needed public debate on the pros and cons of the policy. With the UK’s Green Party also supporting the measure (despite concerns around how it could be funded) it’s clear that the conversation about how to implement and finance such a scheme is set to expand considerably in the years ahead.

At face value, the idea of receiving an unconditional lump sum of money from the state each week, month or year presents a fair and inclusive solution to the financial constraints many people face in a consumerist society — especially at a time when unemployment and inequality are on the rise. In addition, a basic income could give people the freedom to work fewer hours if they choose, while streamlining inefficient and complicated tax and benefits systems. In response to an escalating environmental crises that extends far beyond the popular discourse on global warming, the measure has also been proposed alongside other policies to pave the way towards a ‘steady state economy’ that is not predicated on endless growth.[2]

“A basic income could give people the freedom to work fewer hours if they choose, while streamlining inefficient and complicated tax and benefits systems.”

However, it is not at all clear whether a state administered citizen’s income would ultimately help or hinder the creation of truly sharing societies, in which ‘freedom from want’ can be achieved within a redistributive economic framework that reinforces the social ties that bind people and communities together. As discussed below, the policy could ultimately play into the hands of those whose idea of individual freedom includes minimizing government programs and further deregulating markets, which would ultimately work against the ethic and practice of sharing. There are also important questions around how to fund a basic income that should be explored more fully, especially if the scheme is to be beneficial to citizens in developing countries or even implemented on an international scale to help end world poverty or protect the global commons.

Questioning the political context

A convincing case for an unconditional basic income has long been put forward on the basis of personal liberties and freedoms. As outlined in various international agreements, access to food, shelter, healthcare and a decent standard of living is a basic human right, together with economic security during retirement or when unable to work.[3] Since the state is the primary guarantor of these rights, it is reasonable to propose that an unconditional income is a viable route to securing these fundamental entitlements and achieving a degree of social security. In line with this perspective, Professor Guy Standing argues that basic security for all as an unconditional right is fundamental to securing personal freedom, especially at a time when a new ‘precariat’ class of disaffiliated migrants and temporary workers suffer from systemic insecurity across the globe — largely as a consequence of economic globalization.[4]

“Access to food, shelter, healthcare and a decent standard of living is a basic human right.”

This idea that a basic income can increase freedom by enabling people to work less and devote themselves to more creative pursuits or unpaid work in the ‘core economy’ has a common sense appeal, particularly when job insecurity is on the rise and people are increasingly questioning how to balance their work-life commitments. In his book Sacred Economics, Charles Eisenstein sets out a convincing case for creating the conditions in which people can pursue work that doesn’t necessarily generate a return, as this will give us the freedom to act on the desire to give freely without financial incentives.[5] Philippe Van Parijs takes a similar perspective on basic income as a route to freedom, arguing that in order to be truly free, people need to have access to the means needed for “doing what they might want to do”.[6] These are convincing philosophical arguments that add further credence to the premise that a citizen’s income would promote equality and social integration, as everyone would receive an equal level of state benefits regardless of their personal circumstances.

However, there are several reasons why the issues of rights, freedom and equality need to be considered from a broader perspective, especially by those who are troubled by the encroachment of neoliberal ideology in policy-making. For example, the New Economics Foundation emphasize a key ideological difference between benefit systems based on social insurance and the provision of a guaranteed basic income for all. As they explain, a basic income is “an individualized measure, not a collective one, focusing resources on providing everyone with an income at all times rather than on pooled risk-sharing mechanisms which provide help for everyone when they need it. This may reduce people’s capacity to act together, by encouraging them to provide for themselves with their income rather than promoting social solidarity, collectively funded services, and shared solutions.”[7]

Given the huge costs associated with providing citizens with an unconditional state income, we should also be concerned that the scheme could compete for funding with other government funded services, such as healthcare, education, childcare support and social housing. Together, comprehensive welfare services such as these ensure that certain basic needs can be universally met without having to rely on commercial alternatives. Rather than implementing new basic income schemes, the aim should perhaps be to scale up social protection along the lines of a proposal by Barbara Bergmann, who recommends that a universal basic income is only considered after a well-funded ‘Swedish-style’ welfare state has first been established. This would include, for example, far more generous allowances for children, pensioners, the unemployed, and those with a disability, or even more generous work leave policies and free university education.[8]

Under the current trajectory of public policy in which welfare services are being subjected to increasing waves of neoliberal reforms, there is clearly a risk that existing mechanisms of redistribution and social solidarity could be severely undermined if replaced by a basic income. Introducing the scheme during a period when welfare services are being dismantled by economic austerity could mean that individuals would be left to pay for essential services at market rates instead, which could of course fluctuate substantially over time and weaken the monetary value of the basic income. Although this approach might appeal to those who favor freedom and personal choice, the individualistic nature of a citizen’s income is also the reason why many free marketeers favor the measure as an alternative to state funded social services. For these reasons, it is prudent to be wary of any attempt to implement the scheme within a political context characterized by laissez-faire capitalism.

The coming era of leisure

In 1930, John Maynard Keynes famously posited that standards of living would be between four and eight times higher in a hundred years’ time, and that people would need to work a mere 15 hours a weeks.[9] Although Keynes’ era of leisure is still a pipe dream for most people despite the tremendous improvements in living standards he rightly predicted, there is evidence to suggest that formal working hours will have to be dramatically reduced in the years ahead. The reductions in wages that would follow such a dramatic shift in employment patterns provides a pragmatic case for the state to provide a supplementary unearned income to all citizens. There can be little doubt that patterns of work are already going through a dramatic transformation: robotic automation, digitalization, the internet and other technological developments are responsible for significantly reducing the availability of jobs. Much of what is produced is now shared for free — including software, journalism, film, information and music. Although corporate profits are at an all-time high, demand for labor is falling and wages as a share of GDP have been in decline for the past three decades in the UK and the US. People are also living longer and retiring later, while part-time or temporary work, insecure casual contracts, and self-employment are increasingly the norm for those who find themselves precariously underemployed.

“Demand for labor is falling and wages as a share of GDP have been in decline for the past three decades in the UK and the US.”

As people in developed countries adjust to an economic reality in which there is much less available work, reducing the length of the formal working week might be unavoidable. Since it is unlikely that wages would increase proportionately as we work less, an additional form of income could be necessary in order to prevent millions more people falling below the poverty line. A citizen’s income would also acknowledge and help sustain the indispensable unpaid work that currently takes place in the core economy, including raising children and caring for the elderly, maintaining community relationships and support networks, as well as the various voluntary services provided by individuals and civil society organizations. Paying a basic income to facilitate a shift towards fewer formal working hours or to support the core economy would strengthen interpersonal sharing and reciprocity within communities, and it could mean that people would no longer be forced to do menial or difficult jobs that they would otherwise undertake reluctantly for fear of survival.

Of all the arguments for a universal income scheme, this one is perhaps the most convincing — especially since there is evidence to suggest that working less and sharing available work more equitably across society would have a range of additional benefits, such as reducing levels of consumption and markedly improving quality of life.[10] However, the overall impact that the policy could have on the labor market is far from clear cut. For example, there is the claim that a citizen’s income could be a disincentive for workers, which might be especially problematic in relation to necessary but menial tasks that workers would avoid if they had an alternative source of income.

“A citizen’s income would also acknowledge and help sustain the indispensable unpaid work that currently takes place in the core economy.”

Putting aside these disputed concerns, the main impact of a citizen’s income on jobs would be to deregulate employment laws. In other words, employers would have little obligation to pay a living wage if governments are already supplementing incomes, and workers would be more prepared to leave their jobs as unemployment would no longer be such a concern for them. Francine Mestrum convincingly argues that the policy would effectively shift labor costs that are currently borne by companies to society as a whole. A basic income could therefore become a subsidy to employers who would no longer feel obliged to pay decent wages or provide adequate benefits to their employees.[11] As such, it is possible that a citizen’s income could be particularly problematic in developing countries that are working towards enhancing working conditions and employment rights.

Streamlining the benefits system

The most practical reason for introducing a citizen’s income is to overhaul and simplify complex means tested benefit systems that are failing their targeted claimants. According to a number of basic income proposals, a new agency could not only provide a standardized benefit but also coordinate a simplified income tax system in order to help recoup costs associated with the scheme. In the UK, for example, a single weekly payment could replace child allowances and the state pension, while eliminating the need for various tax allowances, credits and reliefs. The aim would be to integrate the tax and benefits system and treat everybody in the same way rather than have different rules for claimants and tax payers.[12]

Apart from the obvious financial savings that streamlining the benefit systems would generate, a single universal payment to all citizens would address a range of issues that currently plague welfare services across the world. These include abolishing complex administrative procedures associated with testing the eligibility of claimants, as well as preventing the ‘benefit trap’. Means testing is also widely regarded as a demeaning and socially divisive process that can leave claimants feeling stigmatized or branded as scroungers or even cheats. Many people aren’t even aware of their entitlement to benefits, or they can be confused by the eligibility rules and put off by the possibility of receiving increasingly harsh ‘benefit sanctions’. With almost a third of people not claiming the state payments they are entitled to in the UK alone (amounting to around £10 billion of unclaimed aid a year), it is fair to conclude that means testing is simply not providing the economic security it was designed to deliver.[13]

“A single universal payment to all citizens would address a range of issues that currently plague welfare services across the world.”

Despite these unequivocal arguments for redesigning and simplifying state benefits, the big hurdle for implementing a citizen’s income is the problem of cost as the scheme appears unaffordable when translated into concrete figures. The income would need to be high enough to ensure that those who are no longer able to claim most other state benefits could survive above the national poverty line, and this same amount of money would need to be provided to every citizen regardless of their financial circumstances. Even though this would be a huge financial commitment for cash-strapped governments, the UK’s Citizen’s Income Trust have detailed how a basic income scheme can be designed to be ‘revenue and cost neutral’, even though they recently conceded that an unacceptable proportion of poor households would lose out under their proposal.[14] Research suggests that even a revised scheme that reduces any negative impacts would not be sufficient by itself to keep households above the relative income poverty line.[15] Although such a scheme might be more politically palatable, it would also defeat the objective of simplifying the benefits system as a number of means tested allowances would still be necessary.

Photo by Russell Shaw Higgs — Flickr Creative Commons

The great tax shift

Unless alternative means are found to fund a basic income, a truly comprehensive scheme for sharing a nation’s financial resources is likely to remain unaffordable, while a less costly version may not provide a worthwhile alternative to existing benefits. But if funding is the primary issue, why not link the policy to wider reforms for how governments raise public revenue? Campaigners in countries across the world have long advocated for numerous ways in which states could raise huge quantities of additional income for urgent social and environmental purposes, such as implementing higher taxes on extreme wealth and very high incomes, closing tax havens, ending corporate tax avoidance or implementing a financial transaction tax. Alternatively, governments could divert a percentage of their colossal military budgets, or withdraw a proportion of the vast subsidies currently paid to agribusiness and the fossil fuel industry.[16] Similarly, new levies on environmental ‘bads’, such as pollution or waste disposal, could help raise revenues while providing a disincentive to ecologically destructive activities.

While countless civil society campaigns continue to focus on these and other redistributive proposals, a number of even more radical approaches to reforming the way governments raise public revenue are also being more widely discussed by progressives. For example, may proponents of systemic tax reform argue that levies on earnings, employment and profits disproportionately impact those already on low incomes, while encouraging environmentally damaging activities, and penalizing the contributions that people and companies make to society. Land value taxation is widely regarded as a logical and fairer alternative to existing methods of raising revenue and, like basic income, it has considerable support among both progressives and conservatives. In accordance with the need to dramatically reform both fiscal and benefit systems, James Robertson has proposed a new social compact in which land value taxation would play a central role in funding a citizen’s income.[17] Robertson’s proposal illustrates the possibility of funding a more comprehensive basic income scheme that would also enable governments to take decisive steps towards creating a more just and sustainable economy. Nonetheless, the political will to pursue these widely supported measures remains conspicuously absent, which points to the need for a more visible public debate about the various means governments can employ to pool and share a nation’s financial resources.

“Land value taxation is widely regarded as a logical and fairer alternative to existing methods of raising revenue and, like basic income, it has considerable support among both progressives and conservatives.”

Social dividends from shared resources

In light of the inherent difficulties connected to reforming established tax and benefit systems, it is also worth considering alternative options for establishing a citizen’s income that could have much wider implications for creating a sharing society. Although this approach is rarely part of the popular discourse on implementing a basic income scheme, there are a growing number of proposals for instituting a ‘social dividend’ that is based firmly on the principle of sharing as it recognizes that all citizens have a right to income from ‘natural property’, such as land and other resources that are either inherited or co-created by society. The idea can be traced back to the work of the American revolutionary Thomas Paine, who stated that “the earth, in its natural, cultivated state was, and ever would have continued to be, the common property of the human race”.[18] The notion that the earth is our common inheritance was also central to the ideas of the social theorist Henry George in the 19th century, and still maintains strong support among Georgists as well as commons theorists.[19]

As explained by Peter Barnes in his book ‘With Liberty and Dividends for All’, the majority of the wealth that is inherited or created together by society is captured and extracted by the rich rather than distributed fairly among citizens. Meanwhile, the damaging social and environmental costs of this process are largely borne by the public or the biosphere. The simple idea at the heart of most proposals for a social dividend is therefore to charge user fees on shared resources, which can then be distributed to all citizens as a basic right. Although an agency would initially be set up by governments to administer the program, it would operate independently of the private and public sector as a ‘commons trust’ that could conceivably manage a range of shared resources — from land, fossil fuels and atmospheric carbon storage, to the electromagnetic spectrum and intellectual property. According to a calculation by Barnes based only on a specific selection of shared assets, the program could provide every American citizen with as much as $5,000 a year.[20]

“All citizens have a right to income from ‘natural property’, such as land and other resources that are either inherited or co-created by society.”

Given the various problems associated with existing basic income schemes, not least of which is funding, issuing social dividends from user fees on shared resources could be a sensible alternative to the tax-funded benefit programs considered above. The social dividend approach would address a number of the concerns that drive proponents of a citizen’s income, such as providing a non-labor supplement to falling wages and incomes, or reducing social and economic exclusion. Moreover, sharing the value of co-owned resources in this way would not necessarily interfere with existing systems of welfare and social protection, which could still be reformed independently to address some of the failings highlighted previously.

Barnes also reminds us that while the idea of reforming tax systems remains problematic and contentious, distributing income from user fees appeals to both liberals and conservatives. The program could be set up as a self-financing commons trust that operates outside of the public and private sector, and managing the fund would neither inflate nor deflate the size of government. Like taxes, user fees on ecologically damaging activities would also provide a disincentive to both producers and consumers, effectively internalizing environmental costs into the price of products. Additionally, a social dividend would be an effective way to integrate the principle of sharing into the way nations govern the use of co-owned assets, as it gives form to the notion that natural resources should be managed in the interests of all people and future generations — which is clearly a prerequisite to creating a more equal and sustainable world in the 21st century.

From national to global dividends

Sharing the value of co-owned resources is not just a theoretical premise; the practice has long existed in Alaska where 25 percent of all mineral lease rentals, royalties, bonuses and other payments received by the state are placed into a permanent fund that is currently worth over $53 billion.[21] The fund was initially set up by the government of Alaska in 1976 and is now managed on behalf of its citizens who receive an annual dividend from the income it generates, which amounted to $1,884 in 2014. Unsurprisingly, the fund is popular with residents and acts as a crucial economic stimulus, while being transparent and cost effective to manage. Moreover, in stark contrast to when the fund was first established, Alaska now has one of the lowest rates of inequality and relatively low levels of poverty compared to other US states. For these reasons, the Alaska Permanent Fund provides a unique example of the benefits of sharing resource dividends directly with citizens, and is regularly referred to by campaigners working on a wide range of progressive causes.

The Alaskan model also has important applications for low income countries, particularly those that struggle to reduce extreme poverty or are afflicted by the ‘resource curse’ — the paradox of countries being rich in mineral wealth but unable to achieve sustained economic development. For example, the economist Paul Segal argues that governments in developing countries should distribute rents due on their natural resources directly to all citizens as an unconditional cash transfer.[22] Such a program would provide incentives for people to register with the fiscal system, strengthen state capacity, help ameliorate the institutional causes of the resource curse, and reduce corruption. Sharing the value of resources in this way would be entirely in accordance with universally adopted human rights covenants which state that “All peoples may, for their own ends, freely dispose of their natural wealth and resources”.[23] Most importantly, Segal highlights the considerable impact that a social dividend derived from resource rents could have on extreme levels of human deprivation. According to his calculations, this measure alone could halve global poverty if implemented internationally by all developing countries, and he concludes that the scheme “would be easier to implement than most existing social policies”.[24]

“Sharing the value of co-owned resources is not just a theoretical premise; the practice has long existed in Alaska.”

This same model could also be applied to fund basic income schemes in developed countries that have sizable reserves of oil, gas and other industrial minerals, such as the US. As Segal notes, prior to the systematic privatizations that characterized the 1980s, just such a proposal for ‘A People’s Stake in North Sea Oil’ was floated in the UK by Samuel Brittan and Barry Riley. More recently, economists have proposed similar models for a basic income funded by resource revenues for Nigeria, Iraq and Bolivia. According to a study by World Bank economists, a universal basic income in the form of a ‘direct dividend payment’ derived from just 10 percent of national oil revenues would be sufficient to close the poverty gap in Angola, Equatorial Guinea and Gabon, and could half the poverty gap in larger countries such as Mozambique and Nigeria. The report’s authors explain how it would also be possible for a proportion of these revenues to be used by governments to fund public goods, which could further help reduce poverty and enhance social welfare.[25]

The discourse on how to fairly distribute the value of a nation’s co-owned resources is critical, especially in relation to creating effective sharing societies without poverty or extreme inequality. But the process of deriving social dividends from shared resources need not be confined to the nation state, and could even be used to fulfill the entitlement of every human being to a fair share of the global commons. For example, Alanna Hartzok outlines how a Global Resource Agency could feasibly collect resource rents from the exploitation of shared resources such as ocean fisheries, the sea bed, the electromagnetic spectrum, and even outer space.[26] The resulting fund could be further bolstered through levies on activities that damage the commons, including carbon emissions and other forms of pollution to the oceans and atmosphere. In a globalized economy characterized by a vast array of economic processes that fall outside the jurisdiction of national territories, such a mechanism could clearly be an indispensable source of finance for underfunded global governance bodies such as the United Nations and its affiliated agencies. The finances raised could also support the provision of global public goods or help meet other international priorities such as providing disaster relief, ending hunger or mitigating climate change. Furthermore, this international model of economic sharing could also distribute a proportion of the revenues generated as a global citizen’s income based on an equal share of the value of global resources. Since rich countries are responsible for the vast majority of resource consumption and pollution, an international citizen’s income raised through user fees on the global commons could also amount to a sizable redistribution of wealth in favor of citizens in the Global South.[27]

“The process of deriving social dividends from shared resources need not be confined to the nation state, and could even be used to fulfill the entitlement of every human being to a fair share of the global commons.”

Another international route to raising the finance needed to eradicate extreme poverty is suggested by Professor Thomas Pogge, who proposes that all human beings should be recognized as having an inalienable stake in the world’s natural resources and that they should therefore be entitled to a share of the value of any natural resource (such as crude oil) regardless of where it is extracted.[28] He calls this share a Global Resource Dividend (GRD) and proposes that it is fixed at 1% of gross world product, which currently comes to $780 billion per annum.[29] Pogge suggests that it would make sense to differentiate between natural resources by collecting larger shares for those that are most damaging to the environment (like coal). In this way, he argues that the GRD could help avert ecological harm while enabling the world’s poor to share in global economic growth and reduce their financial disadvantage. Pogge’s original proposal does not constitute a universal citizen’s income, as it selectively targets the dividend to provide those living in extreme poverty with up to $250 a year. According to his calculations, however, if the GRD was used to create a truly universal basic income “the poorer half would still get an income boost of over 20% on average … The income of the poorest quarter would go from currently 0.9% of gross world product to 1.15%, a tidy 28% raise.”[30] There can be little doubt that a global citizen’s income financed through resource dividends would have a transformative impact on those who live below the global poverty line, and could even be considered as an adjunct or alternative to conventional development assistance.

Expanding the public debate on basic income

If the ultimate intention of a citizen’s income is to secure the basic right of all people to live in dignity and fully develop their capabilities, it is clearly in relation to the very poorest in society (and across the world as a whole) that any form of basic income would be most beneficial. In this respect, the evidence suggests that a citizen’s income based on resource dividends presents an important systemic solution to poverty that has the potential to counterbalance the injustice of a global economic model in which wealth predominantly flows to the richest 1% of the world’s population. The policy also has significant ecological implications in relation to the emerging ‘degrowth’ debate on the impossibility of pursuing endless economic growth without irreversibly harming the environment.[31] In line with this perspective on the limits to growth, resource dividends for all could facilitate the necessary shift away from unsustainable patterns of production and consumerism, and stimulate a much needed public debate on the nature and purpose of work.

“A citizen’s income based on resource dividends presents an important systemic solution to poverty.”

There are clearly many convincing arguments for how a citizen’s income based on resource rents could play a pivotal role in establishing a truly sharing society in which the fulfillment of people’s basic rights are not limited to their capacity to earn wages. However, it should also be apparent that any form of basic income or social dividend is not a panacea and should only be implemented as part of a comprehensive program of progressive reforms. As Share The World’s Resources emphasizes, the objective of public policy should be to establish systemic forms of sharing that decentralize and devolve political power and embody the fundamental right of all people to a fair share of the wealth and resources that are created by nature or society as a whole.[32] Thus unless any basic income scheme is implemented as part of a broader policy agenda to address the structural causes of inequality and environmental crises, its longer term benefits would remain questionable.

Although there is growing support for social dividends funded by user fees, any call for reforming the way collective resources are managed is unlikely to gain political traction at a time when the institutions of central government increasingly embody market principles, and proposals for radically restructuring economic systems are still generally outside of mainstream political debates. Furthermore, it is difficult to overstate the power and influence that fossil fuel corporations could wield over policymakers who are considering setting aside a proportion of co-owned wealth for the benefit of citizens, especially in resource rich countries where user fees would have a negative impact on corporate profits.[33] Clearly, if resource dividend schemes are to be implemented more extensively, it would be necessary to challenge the neoliberal consensus that currently dominates public policy at the governmental level as well as in global institutions such as the World Bank and International Monetary Fund.

But despite the expected resistance from those with a vested interest in maintaining the status quo, it is reasonable to assume that policies seeking to share the value of common pool resources would be extremely popular with voters, especially if they were more closely linked to existing calls for a citizen’s income. If the proposition also had more support from within civil society and among progressive parties, there is every chance that such policies could rapidly move up the political agenda. As the media continues to highlight basic income schemes with increasing frequency, there has never been a better time to broaden the public debate to include alternative ways to fund the proposal — particularly if this draws attention to systemic methods of supplementing personal incomes through policies based on redistributive justice and the principle of sharing.