The introduction of a universal basic income protects nature, reduces pollution, helps to reverse global warming and leads to more balance and justice in society.
From the fifteenth century—at the end of the Middle Ages, when time stood still to a large extent—Europe began an acceleration of economic, social and technological development which led to the industrial revolution and eventually culminated in the world we live in today. That rapid progress didn’t come out of nowhere. Europeans used paper and the technique of printing with moveable type. They knew how levers worked. And they benefited from the rules to organize society that their ancestors had already designed.
Paper was invented in China two thousand years ago. A thousand years later, the Chinese also discovered the method of using loose porcelain letters to combine into words to print texts. Archimedes invented the operation of levers before the beginning of our era and Roman law is still at the basis of most modern civil law. Without these achievements—and there are, of course, many more—the great growth in prosperity in Europe would not have been possible. All that knowledge and technology was available for free.
Since time immemorial, philosophers have considered the question: what belongs to whom? Confucius already taught that the Great Way of Life triumphed when all-natural resources were used entirely for the benefit of all and were not appropriated by individuals for their selfish needs. The Roman statesman Pliny the Elder argued that the monopoly of land ownership led to the fall of the Roman Republic. Voltaire has Candide say that “the fruits of the earth are a common heritage for all”. And Abraham Lincoln said that “the land God has given can never be the property of one man”.
Despite this age-old wisdom, today we live in a world in which a lot of property is not used for the benefit of everyone at all. Karl Marx recognized the problem that an unequal distribution of property—capital—leads to inequality in society. His solution, communism, doesn’t work. However, his analysis is correct, and the problem of inequality still requires a solution. The issue goes, beyond the regulation of (intellectual) property rights and the ownership of capital goods, back to the question of what belongs to whom.
Around 500, Roman law was codified for the first time after centuries of lawsuits and political speeches in Rome. There is a lot of ‘work’ from our ancestors in something that is now available to everyone for free. It would be much more difficult today to draw up an agreement between two parties if the Romans would not have thought about it a long time ago. We all benefit from that, but some benefit more than others. An example: Amazon is one of the three companies with the highest market capitalization in the world. Amazon founder Jeff Bezos is the richest man in the world. It is undeniable that Bezos was the first to use the Internet on a large scale for a store that is always open and sells everything. But how successful could Bezos have been if there had been no roads? Or no electricity? Bezos didn’t invent the world wide web either. And his company uses ‘Roman’ contracts on a daily basis.
Herbert Simon (1916-2001) was an American economist and Nobel Prize winner. Among other things, he studied the concept of ‘patrimony’ or inherited property. Our common heritage, according to Simon, is that we are all members of “an enormously productive social system, which has accumulated a vast store of physical capital, and an even larger store of intellectual capital – including knowledge, skills, and organizational know-how”. These are all the things Jeff Bezos used ‘for free’ to make an immense fortune. In one of his last lectures, Simon stated that “if we are very generous with ourselves, I suppose we might claim that we ‘earned’ as much as one fifth of [our current prosperity].” The rest comes to us as a gift from nature and because our ancestors worked hard and paid taxes. Apples grow on trees. The Internet was developed with taxpayers’ money. The construction of roads has been financed with public funds. Who paid for the education at the schools and universities that Amazon’s employees enjoyed? Without all those investments, today, Jeff Bezos—in the vision of Simon—would be 80 percent less rich.
Would it not be reasonable and fair for all of us, as ‘members’ of the social system that has produced that common heritage over the past two thousand years, to share in the successes generated by creative entrepreneurs on the basis of that collective value? In other words: Amazon would pay us for the use of the Internet, the roads, and more—they would pay for the use of our common heritage. Jeff Bezos would be a little less rich. And all of us a little richer.
A payment for the use of the common heritage is perhaps the best justification for a universal basic income. The idea of a basic income has been around for centuries, but it has recently attracted more political attention than ever before. The idea is mainly propagated by tech entrepreneurs who foresee how fast advancing automation, driven by artificial intelligence, can lead to high unemployment. Others promote a universal basic Income as a method of reducing poverty and social inequality. From such perspectives, the introduction of a basic Income is above all a defensive measure. It is much more inspiring and more just to present the universal basic income as a right for every world citizen that goes back to the common heritage.
Thomas Paine is primarily known for his essay Common Sense, which inspired America to declare independence from England in 1776. Less well known is that Paine, almost twenty years later in 1795, wrote the essay Agrarian Justice. “It is a position not to be controverted that the earth, in its natural uncultivated state was, and ever would have continued to be, the common property of the human race,” he wrote. Once there’s cultivation, “it is the value of the improvement only, and not the earth itself, that is individual property”. Paine went on to conclude that ‘every proprietor […] of cultivated land, owes to the community a groundrent (for I know of no better term to express the idea) for the land which he holds”. He proposed that the income from that ‘groundrent’ would be used to finance a basic income for all citizens. With that proposal, Paine stands as the father of the universal basic Income.
In his essay, Paine is very precise: A “National Fund” is to be created to pay “every person, when arrived at the age of twentyone years, the sum of fifteen pounds sterling, as a compensation in part, for the loss of his or her natural inheritance, by the introduction of the system of landed property. And also, the sum of ten pounds per annum, during life, to every person now living, of the age of fifty years, and to all others as they shall arrive at that age.” That 15 pounds a year, today would be about $17,500—that’s roughly the current minimum wage in the United States.
Paine’s visionary contribution is that he recognized that land could be monetized—not just for the benefit of a few, but for the good of all. He never saw his vision put into practice, but more than two centuries later the introduction of a universal basic income is closer than ever. Paine also wrote that the intended annual benefit was a “legitimate birthright” of every man and woman. He specifically added: “not charity, but a right”. There is an example of such a financial right linked to ownership. Dividends are periodic payments that companies make to their owner, their shareholders. The distribution depends on the profit and may vary from year to year, but the amount per share is always the same. You can only receive a dividend if you are entitled to it. In the modern economy, dividends are an important source of non-work-related income.
Why shouldn’t every citizen of the world receive an annual dividend based on their share of the common heritage? The word ‘basic income’ has a connotation of benefits. There’s a social, non-business touch to it. Dividend, on the other hand, is a word that is linked to ownership, to value –it underlines the businesslike nature of the payment. You’re entitled to dividends because of your share in the wealth we’ve created together—it’s not a favor.
What does that value include? Paine wrote about “natural property” such as “earth, air, water” as a free basis from which people can create value. And for that opportunity, you pay an annual contribution to everyone. Today we can easily extend the list of ‘free’ elements that make it possible to generate value. The concept extends much further: science, education, technology, infrastructure, legal and financial systems. The common heritage is also constantly growing with new achievements. Take artificial intelligence. Robots are taking away jobs. At the same time, the robot is the result of decades of research and development. A lot of that work has been financed with taxpayers’ money. It is only logical that companies pay a price to the community for the use of that advanced technology. With the introduction of robots in their production processes, the payroll expenses of companies will decrease. Instead, they will contribute (more) to the community fund from which annual dividends are paid to all citizens. It sounds different: the robot is not the ‘evil’ innovation that leads to people losing their jobs; the robot is an achievement as result of common efforts, and we all share in the financial gains of that investment.
‘Dividend’ is also the word that Jay Hammond used for the first large-scale program that put Thomas Paine’s idea into practice. Hammond was the Republican governor of Alaska from 1974 to 1982. During his tenure, he launched the Alaska Permanent Fund. Since then, that fund has paid an annual dividend based on the abundant income from the sale of natural gas and oil by the state to each Alaskan resident. In 1980, the capital of the fund was $900 million. By 2018, that value had risen to $65 billion. Residents usually receive more than $1,000 ($4,000 for a family of four) each year. The top year so far was 2015 with a dividend per person of $2,072.
Norway has a sovereign state fund into which a percentage of the country’s oil and gas revenues flow. That fund is the richest fund in the world with a capital of more than $1 trillion. The idea behind the fund is the same as the idea behind the Alaska Permanent Fund: the inhabitants of Norway should benefit from the income from the natural resources the country owns. However, the execution is very different. The Norwegian fund invests in the interests of the Norwegian population and pays dividends to the government, which uses them to finance the state budget, for example for free health care and education. In other words, Norwegian citizens benefit from the fund, but they do not receive any direct benefits and they play no role in the policymaking.
Oil and gas reserves—and other natural resources taken from the soil—provide a tangible basis for a dividend payment to the residents of a state or country. But the same principle can be applied to start other domains of nature. The American entrepreneur and author of With liberty and dividends for all, Peter Barnes, proposes a ‘Sky Trust’. This management fund could own—in the interest of everyone—all rights to the clean air and issue a limited number of CO2 permits that companies can buy. From the income a fund is created that provides dividends to all interested world citizens. The trustees of the fund have a legal obligation to protect the interests of future generations. From that perspective they determine how much CO2 nature can absorb.
A Sky Trust can make an important contribution to the reduction of global CO2 emissions and the reduction of climate change. The same fund could manage the very valuable radio wave frequencies used by telecommunications companies. Similar funds can be set up for (drinking) water and for ecosystems. The financial infrastructure can also be a source of dividend payments. Companies could pay a small fee for every financial transaction they make. The same applies to the use of automation, artificial intelligence and robots. The protection of intellectual property arguably provides a source of dividends in the public interest too. Governments and international organizations protect the intellectual property rights of processes and products with which companies in the pharmaceutical industry, for example, make a lot of money. All these inventions are also largely based on and derived from previous research funded with public funds. It is perfectly fair and reasonable to argue that all citizens should benefit from these fruits produced with their taxes.
There are many other possibilities for ‘assets’ that can be contributed to collectively managed asset funds. The effect of such funds would be twofold. Pollution and excessive use of natural resources would be reduced. At the same time, a basis is created for an annual dividend payment to all citizens. Ultimately, it is a political decision to determine how many funds will be set up for which elements of the public domain and how high such a benefit can or should be.
Peter Barnes calculates that the proceeds of a combination of CO2 licenses and very limited rates for intellectual property protection, use of frequencies and financial infrastructure will raise enough funds for an annual payout of $5,000 to each American—$20,000 for a family of four. That amount is more than the minimum wage in the US. The dividend would therefore have a major impact on a large part of society.
The question arises as to why it would make sense to set up a whole new structure of public wealth funds in order to achieve a goal that can also be achieved through taxation. The answer is that taxation is a political instrument. This means that the levying and spending of taxpayers’ money is constantly changing under the influence of elections, lobbies and all kinds of interests. The intended dividend for all citizens does not come from a tax but from a fee for the use of common assets. And these fees are not collected by the tax authorities, but by a new entity—a fund that is jointly owned by everyone. The money does not flow through government channels and bureaucracy; the dividend is paid directly to the owners: the citizens. This also makes the system very efficient. The operating costs of the Alaska Permanent Fund are only 0.3 percent of the assets. There is no need to calculate or determine whether someone qualifies: everyone gets the same.
Another important difference with taxation is that taxation redistributes money—people with more money pay more tax—while a public dividend results from a fair and equitable primary distribution of resources arising from common heritage. Also: tax is an obligation. Companies only have to pay the user fee if they want to make use of certain elements in the public domain. They will only do so if that element adds value for them so that they can make more money with it and the compensation ensures that everyone participates in that success. After all, it is very common for us to pay another person for the use of his property. That’s how capitalism works. You don’t just walk through someone else’s garden.
Critics will claim that the user fee will increase the burden on business. That’s right. The consequence of the intended dividend payment is that Amazon will have to pay more money for the use of elements in the public domain. This means that less profit will go to the company’s shareholders. And that means founder Jeff Bezos will be less wealthy. Part of Amazon’s profit stream is transferred from the shareholders to all citizens as owner—shareholders—of the public domain that the Internet giant needs to be successful. That’s an outcome of capitalism! We don’t let Amazon walk ‘our garden’ for free anymore.
The same critics may argue that public wealth funds that ‘own’ air and water are fictitious constructions. This criticism can easily be refuted by referring to the fact that the corporation—the source of much pollution and injustice in the world—is also a fictitious construction. A corporation is a ‘legal person’ that in many cases has the same rights as natural persons. This fictitious vehicle has created enormous progress in the world. However, this fiction has also caused a lot of damage to ‘natural persons’ or citizens. With the introduction of a new construction—the creation of public wealth funds—we can curb that influence and at the same time increase justice and equality in society. In many countries, citizens register to get access to social security and health care, and other government services. Imagine that every citizen also receives a dividend account at the same time. On that account, the public equity funds make periodic distributions in the same way as investment funds do.
The dividend payment will not encourage inflation because there is no creation of new money: existing money will be diverted. The dividend will support the economic development because the money will mainly go to many people who will use it for daily products and services. More money to Jeff Bezos doesn’t lead to more supermarket sales. More money to John Doe does.
Opponents of the introduction of a universal basic income argue that ‘free’ income is not ethical—‘something for nothing’—and leads to undesirable consequences such as drug and alcohol abuse. That perspective is wrong: this is not a benefit in return for nothing. The dividend is a payment based on the use of the common heritage created by investments made by all and by generations before us! We and our ancestors have already earned this income. The point is that each company launched today doesn’t start with nothing. Each new business has direct access to the common heritage. For that access—service—the owners of that heritage receive compensation. That is exactly why ‘dividend’ is the right word and not ‘basic income’. Incidentally, alcohol abuse in the American capital Washington and in several American states is higher than in Alaska where the population receives ‘free’ income. And Alaska isn’t the state where drug consumption is highest either. Much research supports the perspective that most families who live from month to month use extra money for the household budget, for education and for other things that provide a better future for their children.
The public dividend is not the end of capitalism. It puts an end to ‘the winner takes all’ capitalism. The introduction of a public dividend protects nature, reduces pollution, helps to reverse global warming and leads to more balance and justice in society. [JK]
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