And Green Economics
How a Recession could be Fun
This paper is a résumé of a book Citizens’ Income and Green Economics published by The Green Economics Institute firstname.lastname@example.org
Imagine an island which will support 10,000 sheep. As long as there are 9,999 sheep or fewer it is in everyone’s interest to increase numbers, but at 10,000 or more the interests of each individual shepherd and the community as a whole are suddenly, diametrically opposed. But no one notices, so all shepherds continue to increase their flocks. The island is over-grazed, and the society collapses into warfare, and worse. Garrett Hardin must have been unaware of the history of Rapanui (Easter Island), or he would have quoted it in ‘The Tragedy of the Commons’. 1 I have paraphrased his classic essay, but what actually happened was that around AD 900 a Polynesian family arrived on a lush sub-tropical island smaller than the Isle of Wight (or Martha’s vineyard). By 1500 there were at least 7,000, and possibly many more, but the trees used for fishing canoes, statue transport and which supported soil fertility were fast disappearing. Weapons first appeared then, followed shortly after by human bones instead of fish in rubbish heaps. On Easter Sunday 1722 a Dutch ship discovered 3,000 malnourished inhabitants on a barren island.2
Professor Jared Diamond offers evidence that similar self-destructive behaviour seems to have been typical of many, perhaps all human groups as they colonized new territories3. Garrett Hardin supplies a part of the explanation, but I believe a crucial part of the answer lies in their cultural patterns. According to a recent television documentary presented by Dr. Alice Roberts, the entire human population outside Africa is descended from a single family group similar in size to the one which colonized Rapanui. That group (source of the Adam and Eve story?) crossed the southern tip of the Red Sea 70,000 years ago. Ever since then human groups have been expanding. The generally overlooked significance of that is that each and every human group outside Africa developed a culture suited to expansion.
Expansion must sooner or later meet limits. But instead of the foresight with which humans are credited leading to rational preparation for this foreseeable eventuality, a culture which has evolved to take maximum advantage of the potential to expand reacts very differently. It will normally be individualistic, and highly competitive. As competition for ever scarcer resources becomes intense, the reaction is not co-operation or restraint, but aggression, and then warfare. The first to reduce their demands on the environment do nothing to save it, they merely put them selves at a disadvantage vis a vis all the rest. A globalised world is now on a similar course for exactly the same reasons, and this may be the first time that resource limits, or the effects of our waste products, especially CO2 are playing a part globally. Unlike climate change, on Rapanui there could be no scepticism on either the cause or consequence of felling all the trees. Yet with only 11 clans, they could not reach agreement to change their behaviour before a catastrophe.
Many see Capitalism (or Neoliberalism, the underlying philosophy) as the main problem. As a founder member of the Green Party, I am concerned that despite the benefits capitalism has produced (not evenly shared), as from now it poses a serious threat to the biosphere – the global environment on which we all depend. But I think that attacking it is misguided, for two reasons: capitalism is robust, and will successfully resist efforts to destroy it until it is too late, and it is a symptom rather than a cause. Similarly bankers, at any rate the high flyers, are greedy, with little regard for anything beyond their own short term enrichment. But again, bankers are symptoms. Rapanui destroyed itself although it had neither Capitalism nor bankers.
However, even if the ‘Tragedy’ is the norm, most societies recovered. Even on Rapanui, by the time Captain Cook was able to converse with the islanders in 1774, the descendants of the survivors were beginning to evolve a sustainable way of life within the meagre resources remaining4. In contrast to Rapanui, the Siane, a tribe in New Guinea, had a culture which distinguished between necessities, which were shared unconditionally, and luxuries which could be traded in a kind of ‘free market’, so that everyone had an identity of interest when dealing with ecological limits.5 Despite their minimal technology and resources, the Siane perceived themselves to have a comfortable margin to spare above necessities. The reason so-called ‘primitive’ tribes did not develop advanced technology was not necessarily because they were less intelligent than Europeans, but because they did not need to.
But if Professor Diamond is right, the ancestors of the Siane must have gone through at least one ‘Tragedy’, and possibly more. But the difference is that they had arrived at their present home, with strict physical limits, several millennia ago, whereas it was Rapanui’s first experience of dealing with resource constraints. Some use the successful management of existing commons6 to dispute the ‘Tragedy’ thesis, but this misses the point just made about encountering limits for the first time. But if the inertia of a growth-based culture was irresistible on Easter Island, how much more so is it globally? Agreements to limit activity require unanimity or effective control. Even the more obvious Green policies, recycling, public transport, renewable energy, reducing air travel, more efficient engines etc. etc. amount to cooling a fire by putting logs on it if used to prolong the mind set which doomed the Easter Islanders. As with them, our competitive culture is more likely to degenerate into aggression, warfare, and at worst genocide7.
If humankind is truly intelligent, then it should be possible for the world community to adopt a strategy for managing the global commons without first going through the ‘Tragedy’. We do not have to return to the Siane way of life, but we could adopt their strategy for sharing wealth. The key requirement is ‘an identity of interest when dealing with ecological limits’5. Most who have addressed this problem hitherto have asserted that this must mean socialism. I believe something closer to the strategy which enabled the Siane to live sustainably, – share necessities, have whatever rules you like for anything else - will have a better chance of being adopted. A Citizens’, or Basic Income (CI) would be a natural form for the ’Siane’ strategy to take in a developed monetised western state. However it would first have to be purely a thought experiment, so that people world wide can get used to the idea.
Every man, woman and child will receive a weekly sum sufficient to cover food, fuel, clothing and accommodation. The CI will be tax free, paid to individuals and unconditional. Everyone will keep it, working or not, or whether they need it or not. It will replace all existing social security benefits and tax allowances for the able bodied. It will be revenue neutral because it will be paid for out of taxation, though resource dividends, notably a Land Value Tax could also play a part13. Most of those on higher incomes will pay more in tax than the CI is worth to them. (In passing, this includes me).
Crucially the Citizens’ Income abolishes means testing. So far as low paid recipients are concerned, means testing amounts to a massive tax on their earnings. Actually everyone who does not receive means tested benefits pays this disguised tax on the first part of their income, but that is irrelevant for all but the lowest paid. This unorthodox view of the poverty trap is corroborated by a surprising source – Dynamic Benefits8, a policy report in a series edited by Ian Duncan Smith, later Minister for Work and Pensions in the UK coalition government, whilst he was still in opposition. The graph on page 88 shows benefit withdrawal rates as if they were taxes. This is reproduced at the top of this page, showing high tax-equivalent withdrawal rates on those losing means tested benefits. Dynamic Benefits explicitly admits that withdrawal of benefits is exactly the same as a tax so far as the person losing a benefit is concerned. Marginal tax rates vary between 100% and 70% on incomes from zer0 to £11,000 per annum, falling to 30% above that rate, eventually rising to 50% on very high incomes. Those who avoid entering the labour market are not ‘scroungers’ but are acting rationally.
The Citizens’ Income merely shifts this real but hidden tax burden on to the shoulders of the better off who should bear it. If critics object that the CI means workers paying for shirkers, this has been so ever since means testing was introduced in England in 1603, but the workers who pay are those who narrowly fail to qualify for benefits, as the last paragraph explains. On the contrary, although the CI does allow people not to work, it re-instates a work incentive. The point to keep clearly in mind is that the CI is simply an application of the ‘Siane’ strategy to a Western democracy.
A communal approach to wealth sharing is indispensable to the primary purpose of an ecological identity of interest. This entails a considerable reduction in inequality, but I advocate the Citizens’ Income in preference to Socialism because it allows the better off, including entrepreneurs large and small, to keep at least some of their differentials. This crucial widening of potential support is more than a compromise between old enemies. It has both ideological and practical aspects.
A Citizens’ Income can become a fusion of core ideas from the now outdated ‘left’ and ‘right’. In itself the CI is radically redistributive from the well off to those in the poverty trap, but it allows some ideas to make sense which are rightly condemned as oppressive in its absence. A minimum wage (MW) becomes unnecessary. Studies showing that a MW does not destroy jobs may be valid in in an expanding economy, but this cannot be true in a steady state economy. The ecological footprints of the world in general, and Britain in particular are already too large, but there are implications which are unpalatable to those who welcome the redistributive effect of a Citizens’ Income.
Similarly, notions of personal responsibility for one’s actions can seem unfair in a patently unjust society, but where security is guaranteed they will become important. For example, the Citizens’ Income must not encourage large families, as a growing population would not be consistent with sustainability. I would envisage a generous CI for a first child,9 an adequate CI for a second child, but tapering amounts for subsequent children. Responsibility for childrens’ welfare will rest with the parents. In the modern context this scheme might look ‘right wing’, yet prior to 1911 it would have seemed radically socialist in the extreme.
For understandable reasons old tribal attitudes still hamper rapprochement. The pragmatic reason for rapprochement is that until those from both sides who have already shifted from a ‘growth’ to a sustainability paradigm realize that they now have more in common with their old enemies than their old unreconstructed friends, the Tragedy will proceed apace. Public support for measures necessary to achieve sustainability has never been higher than 28%, and it has slipped during the economic downturn. Their unavoidable unpopularity has led to suggestions that democracy may have to be sacrificed if the planet is to be saved for human habitation10. The CI – as a thought experiment – is vital to head off this risk.
Green philosophy starts from the proposition that the biosphere – the space within which life is possible – is a thin shell around a little ball. But for some it is irrelevant whether we are approaching its limits to cope, because they believe a technical solution will always be found to any problems. Their confidence seems justified because we have repeatedly won this gamble in the past, though not always without a heavy cost to some sections of humanity. But how will we recognize when the gamble does become foolhardy, and how will our competitive culture respond? Innovations may well make further expansion possible, but clinging to this hope is dangerous. As mentioned, even ‘Green’ measures are dangerous if used to avoid challenging the assumption of perpetual growth. We must get away from a dependence on growth. The normal expectation should be a steady state economy.
Perhaps I ought to make my own position clear. Although I helped to found the UK Green Party in 1973 and I remain a member, it has not fulfilled the role I envisaged, of publicising a steady state society. The whole idea was basically a thought experiment, but on a more comprehensive scale than I now regard as necessary. I believed that there was a need for a group purporting to be a political party, which accepted that the world is finite, and presented the policies needed to meet this recognition without any concessions to existing attitudes. A steady state economy, which will look like a recession in terms of conventional economics, may be the norm at least from time to time, but with the Citizens’ Income continually recycling enough wealth for basic needs from the rich back to the rest, (the way the Siane lived comfortably within their means) this could be contemplated without the fear and insecurity which recessions must always cause in a growth economy.
Clearly such a Manifesto would be generally unpopular, but by 1974 I had established in election campaigns that 10% of the public, even then, would take this uncompromising approach seriously. If a significant portion of that group could be persuaded to vote for such a party it would receive enough publicity for the wider public to consider the issues. The Party would become a ‘real’ party as more people were recruited as a result. I am not criticising the Green Party for choosing a more realistic strategy – building up from local grassroots groups – merely commenting that a need which I perceived was not met. The 10% who listened in 1974 grew to 28%, but has slipped back to around 20% due mainly to preoccupation with the recession. Most people think the economy is more important than the environment. I believe the economy depends on the environment. There is enough support for some lip service to climate change, but it leaves 80% who would reject a party – even a Green Party – which spelled out what avoiding action might mean in practice.
So there is still a need for a thought experiment, but I now believe it can be restricted to the Citizens’ Income. Attitudes on any other issues – even eco-issues – do not matter. My reason for this change of mind is Alaska. There are two places in the world where some form of Citizens’ Income is already in operation. One, a true uncompromising Basic Income is being tried in a small Namibian village by a coalition of German aid organizations11. The other strictly speaking is not a CI – the Alaska Permanent Dividend Fund12, but it has features in common which allow us to draw some important and surprising conclusions.
In preparation for the oil coming on stream, the Alaska Permanent Fund – no mention of a dividend at first – was set up in 1976. It was a recognition that oil was a temporary bonanza, and the revenues ought to be invested in something more permanent. The use to which the fund should be put could be decided later. The first dividends were paid in 1982. The rationale seems close to Social Credit as advocated by C. H. Douglas nearly a century ago. All citizens of a state should be treated as though they were shareholders in that state as a business enterprise. The Permanent Fund is a relatively small portion of Alaska’s oil revenues, around 10% of the total. It must be invested in income producing assets, and only earnings, not the principal, can be spent. The Alaska PDF resembles a Citizens’ Income in that every citizen (including children) who is and intends to remain a resident receives the same amount regardless of circumstances. The annual dividend paid in October 2011 was $1,174. The fact that the entire population has an interest in protecting the capital ensures that the PDF as a policy is secure.
The ‘Green’ purpose of the Citizens’ Income is to combine equity and sustainability. The Alaska Permanent Dividend Fund has neither as its raison d’être. But among the more salient effects of the PDF is that the distribution of income in Alaska is one of the most equitable in the entire United States!11. This is despite overwhelming support for the Republican Party, with scant sympathy for egalitarian or social justice arguments. On the other hand, a ‘right wing’ effect of which I approve may also have occurred. The average real wage in Alaska has fallen slightly12, raising the possibility that higher incomes from the dividend are being partially offset by lower real wage rates. This would facilitate the creation of eco-friendly jobs.
Possibly relevant to the above mentioned odd state of affairs is the curious phenomenon of the Alaska Green Party. Given the general tenor of politics in Alaska, some might not expect it to be natural territory for a Green Party. By and large green parties are ‘left of centre’. Yet their electoral record includes some surprising results, of which the highlight was in the 2000 Presidential election, when they polled 10% – a much higher percentage than Greens anywhere else in the USA. That the Alaskan establishment is seriously rattled by the Green Party is shown by the fact that the state government passed a statute re-defining the meaning of ‘political party’. In 2007 this was upheld by the state courts as excluding the Green Party from the electoral process.
I am not surprised by the Alaska Green Party’s success. Green activists tend generally to be passionate about social justice, but Green voters are more likely to be the well-off who already have the sense of security a Citizens’ Income will give everyone. Success in Alaska could simply be the same phenomenon which occurred in Britain up to and including the 1989 European elections – idealistic egalitarian activists, but the Green votes were highest wherever the Conservative votes were highest. In 2000 the Permanent Fund was big enough (just short of $2,000) to extend that all important feeling of security to all citizens. It could give everyone that sense of ‘identity of interest when faced with ecological problems’, even though that was not its purpose. Has it already begun to do that in Alaska??
The Alaska Permanent Fund may have even more far-reaching effects. A conference at the University of Alaska-Anchorage in April 2011 discussed ways in which the ‘Alaska Model’ could be applied elsewhere13. Resource-poor Vermont was used as an example. By applying the Alaska model to resources as diverse as forestry, groundwater, surface water, the broadcast spectrum, and so on, one contributor to the conference, estimated that Vermont could pay a dividend of at least $1,972. Another contributor combined this principle with the cap-and-dividend and tax-and-dividend strategies which have been proposed to address global warming. He estimates that a USA wide programme could produce a dividend of $678 per person. According to Karl Widerquist12, Iraq (with oil) and Mongolia (without) are seriously discussing this idea, and Iran was already phasing in a resource dividend which could turn out to be larger per capita than the PDF.
The conference identified six lessons which could be drawn from the Alaska model:
- Resource dividends work and they are popular.
- You don’t have to be resource-rich to have a resource dividend.
- Look for opportunities and take advantage of them.
- Think like a monopolist. That is, the community must realize that it owns its resources, which constitute the commons. The community has the responsibility to be a good steward of the commons, and it should not let them go cheap.
- Make it significant: the Alaska Dividend survives because it is a programme worth defending.
- Avoid creating enemies. A pot of money that pays cash to every citizen has many supporters and few enemies. This observation is true of few other progressive policies.
Although the conference was focussed primarily on social justice issues, none of these observation militate against the use of resource dividends as a source of revenue for the Citizens Income, with the objective of sustainability.
The Tragedy of the Commons dictates that any measures to bring about sustainability will be ineffective as long as anyone can act independently. Sustainability in one country will not work, hence the need for a ‘thought experiment’ at first. So how do we bring the USA, China and all the others who are industrializing into a steady state consensus? There is an admittedly conjectural possibility bound up with the ‘Siane’ strategy. The trick is to reduce consumption internally whilst maintaining the ability to supply the unabated demands of others. China’s advantage relies on the fact that her workforce still has lower expectations than ours. If the Citizens’ Income has the hoped for effect of reducing consumerism internally, however slightly, Britain would temporarily find itself in a stronger trading position! The minimum wage would hamper this possibility. This advantage is not the final object of the exercise, but it would prompt others to adopt the CI with the same internal effect. That would allow the first rays of hope for effective international agreement. Rather than smashing capitalism, a better way to stop Earth-threatening expansion is for consumers – world wide – to stop feeding the beast. Just stop buying the extra products.
To share necessities unconditionally, but to have whatever rules you like, subject only to their sustainability for anything else, is a strategy which needs to be adopted as between nations internationally, as well as between individuals within each nation. ‘Contraction and Convergence’ is one proposal which begins this process:
A policy in which all nations seek to reduce their levels of green house gas emissions, and converge levels towards a point where all citizens of the world are entitled to emit equal amounts of pollutants.14
Viewed from the perspective of finite resources, conventional ‘wisdom’ that prosperity depends on everyone buying as much as possible, and certainly more than ever before seems fatuous. But there are legitimate concerns to be addressed. For example, if goods are to be made to last, manufacturing must contract. The process will be unwelcome, but the Citizens’ Income will not just cushion the worst effects, it will ensure that a certain level of economic activity will always take place. .As long as the resources are there, any activity which is sustainable can happen.
I have recently retreated to the ‘thought experiment’ approach as the sheer enormity of explaining practical ramifications of a CI to a still consumerist public became clear. In 2011 for example, the Swedish Greens withdrew a proposal from their parliament due to the tax rate which would have to accompany the Citizens Income in a steady state or a recession. Even ignoring the need for sustainability, there is only one reason why rich bankers are on a more favourable tax regime than those defined as almost in need and that is because it is easier for the bankers to take their wealth elsewhere. But according to Martin Wolf of the Financial times, correcting this is politically impossible because the tax rate would probably have to be at least 60%15. Note that this is tantamount to an admission that those losing means tested benefits are already paying more. According to the Alaskan sources this should be alleviated by resource dividends, but in Britain perhaps these have already been given away too cheaply. Mr. Wolf is of course correct on conventional assumptions, including a resumption of growth, but not if civil unrest happens first.
Some may ask, isn’t all this irrelevant, as the world monetary system is coming apart at the seams? The serious mistakes which led to the current Eurozone debt crisis were all part and parcel of the growth economy. Such failures are not new. Germany had a total currency collapse in 1923, but as on Easter Island, a fresh start was made. If the Citizens’ Income principle had been in people’s minds before the current economic downturn, the transition to a steady state economy could have seemed a natural outcome, in place of the fear and insecurity which has hitherto been associated with recessions. It will ensure that a basic minimum level of economic activity will always take place. The experts appear to be close to admitting that there are no answers within the ‘growth’ paradigm, yet they cannot think outside it.
The Citizens’ Income, purely as an idea, can allow, but not automatically bring about attitudes consistent with a sustainable environment, just as the underlying principle has done in less sophisticated cultures. Green policies cannot be implemented until a majority accept them, however reluctantly, but this can only happen if the Citizens’, or Basic Income, or something which achieves its intended purpose, is given wide publicity.
Clive Lord email@example.com May 2011
References and notes
1 Hardin, Garrett (1968) ‘The Tragedy of the Commons’ Science 162 (1968) pp1243-48
2 Diamond, Jared (2005) Collapse: how Societies choose to fail or survive Penguin/Allen Lane
3 Diamond, Jared (1991) The Rise and Fall of the Third Chimpanzee Vintage UK Random House
4 According to a Horizon documentary on BBC1 on 9th January 2003, strategies to live within their depleted environment had begun to emerge on Easter Island in 1774.
5 Wilkinson, Richard G. (1973) Poverty and Progress Methuen, London p48
6 Ostrom Elinor Governing the Commons (1990): The Evolution of Institutions for Collective Action Cambridge University Press Shiva, Vananda (1989) Staying Alive: Women Ecology and Development Zed Books London. These sources do not directly refer to the ‘Tragedy’, but have been used as evidence against it
7 In The Rise and Fall of the Third Chimpanzee Professor Diamond identifies 37 instances of genocide between 1492 and 1990. There have been three since.
8 Dynamic Benefits: Towards Welfare that Works (2009) Economic Dependency Working Group, of the Centre for Social Justice 9 Westminster Palace Gardens, Artillery Row London SW1P 1RL www.centreforsocialjustice.org.uk
9 There will have to be a definition of ‘family’ which I do not address here
10 Ophuls, W, Ecology and the Politics of Scarcity 1977 San Francisco: Freeman; Hardin, G The Limits to Altruism 1977 Indianapolis: Indiana University Press; Heilbroner R, An Inquiry into the Human Prospect 1980 (2nd Ed) New York: Norton. The idea was discussed on BBC Radio 4 in 2010.
11 Der Spiegel 24th August 2009 www.spiegel.de/international/world/0,1518,642310,00html
12 For a detailed account of the Alaska Permanent Dividend Fund, see The Alaska Permanent Fund Dividend: An Experiment in Wealth Distribution A paper presented to the 9th International BIEN Congress Geneva, September 12th-14th 2002 by Scott Goldsmith, Professor of Economics, Institute of Social and Economic Research, University of Alaska Anchorage, 3211 Providence Drive, Anchorage, Alaska 99508 USA, Phone: 907-786-7720,Fax: 907-786-7739. http://www.basicincome.org/bien/pdf/2002Goldsmith.pdf
13 Alaska Permanent Fund Weblog posted by Karl Widerquiston June 6, 2011 http://usbig.net/alaskablog/author/karl/widerquist
14 Early Day Motion 538, placed before Parliament on 18.01.05
15 Email exchanges, whilst asking for permission to quote Martin Wolf in my book.