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January 9, 2015

How to Save the Middle Class When Jobs Don’t Pay

Sharing common wealth would revive the American Dream for all

(By Laity Lodge Family Camp under a CC license.)

Peter Barnes, co-founder of On the Commons, is an

innovative thinker and entrepreneur

whose work has focused on fixing the deep flaws of

capitalism. He has written numerous books and articles

and co-founded several socially responsible businesses

(including Working Assets/Credo). He lives in northern

California with his wife, dog and vegetable garden.

This article includes material adapted and excerpted by

the author from his new book With Liberty and Dividends For All, and

other writing by the author. This excerpt first appeared in

Yes! magazine.


There’s long been a notion that, because money is a prerequisite for survival and security, everyone should be assured some income just for being alive. The notion has been advanced by liberals such as James Tobin, John Kenneth Galbraith, and George McGovern, and by conservatives like Friedrich Hayek, Milton Friedman, and Richard Nixon. It’s embedded in the board game Monopoly, in which all players get equal payments when they pass Go.


And yet, with one exception, Americans have been unable to agree on any plan

that guarantees some income to everyone. The reasons lie mostly in

the stories that surround such income. Is it welfare? Is it redistribution?

Does it require higher taxes and bigger government? Americans

think dimly of all these things.


But then, there’s the exception. Jay Hammond, the Republican

governor of Alaska from 1974 to 1982, was an independent thinker

who conceived of, and then persuaded Alaska’s legislators to adopt,

the world’s first system for paying equal dividends to everyone. In

Hammond’s model, the money comes not from taxes but from a

common resource: North Slope oil. Using proceeds from that gift of

nature, the Alaska Permanent Fund has paid equal yearly dividends

to every resident, including children, ranging from about $1,000 to

over $3,000. (Bear in mind that a family of four collects four same-sized

dividends.) While this isn’t enough to live on, it nicely supplements

Alaskans’ other earnings. And paying such dividends regularly

for more than thirty years has bolstered the state’s economy, reduced

poverty, and made Alaska one of the least unequal states in America.


The question Americans in the lower 48 should now ask is: Did

Alaska find the right formula? If it can convert part of its common wealth

into equal dividends for everyone, can the rest of America do the same?


There are many good reasons to ask this question. One

is that America’s middle class is in steady decline. In

the heyday of our middle class, jobs at IBM and General

Motors were often jobs for life. Employers offered decent

wages, health insurance, paid vacations and defined pensions.

Nowadays, such jobs are rare.


It’s also unlikely that the jobs of the future will pay more

(adjusted for inflation) than today’s. In unionized industries

like autos and airlines, two-tier contracts are now the norm,

with younger workers paid substantially less than older

ones for doing the same work. Nor is the picture brighter

in other industries. In the Labor Department’s latest list of

occupations with the greatest projected job growth, only

one out of six pays more than $60,000 a year. The implication

is clear: without some form of supplementary non-labor

income, we can kiss our middle class goodbye.


The second reason to ponder Alaska’s dividends is climate

change. It might seem odd that dividends based on

oil could presage a remedy for climate change, but such

is the case. Imagine if we charged companies for using

another common resource—our air—and distributed the

revenue equally to all. If we did this, two things would follow.

First, higher air pollution costs would lead to less fossil

fuel burning and more investment in renewables. And

second, households that used less dirty energy would gain

(their dividends would exceed their higher costs) while

households that used a lot of dirty energy would pay. This

would spur both companies and households to do the right



A third reason for considering Alaska’s model is our

long-lasting economic stagnation. Not counting asset bubbles,

our economy hasn’t sparkled for decades, and neither

fiscal nor monetary policies have helped much. Tax cuts

for the rich have benefited no one but the rich, and as Mark

Blyth and Eric Lonergan recently wrote in Foreign Affairs,

pumping trillions of dollars into banks hasn’t stimulated

our economy either. What’s needed is a system that continually

refreshes consumer demand from the middle

out—something like periodic dividends to everyone that

can be spent immediately.


One further reason for looking north to Alaska is the current

stalemate in American politics. Solutions to all major problems

are trapped in a tug-of-war between advocates of

smaller and larger government. But dividends from common

wealth bypass that bitter war. They require no new taxes or

government programs; once set up, they’re purely market

based. And because they send legitimate property income

to everyone, they can’t be derided as welfare.


In this regard, it’s worth noting that Alaska’s dividends

are immensely popular. Politicians in both parties sing

their praises, as do the state’s voters. One attempt in 1999

to transfer money from the Permanent Fund to the state

treasury was trounced in a referendum by 83 percent.

Nationally, Alaska’s model has been lauded by Fox News

commentators Bill O’Reilly and Lou Dobbs as well as liberals

like Robert Reich.


The reasons for this popularity are pretty clear. Alaskans

don’t see their dividends as welfare or redistribution.

According to several surveys, most Alaskans consider their

dividends to be their rightful share of their state’s natural

wealth. There’s no stigma attached to them, and

any attempt by politicians to reduce them is seen as an

encroachment on legitimate property income.


Moreover, because the dividends are universal rather

than means-tested, they unite, rather than divide, Alaskans.

If only “losers” got them, “winners” would be resentful.

Universality puts everyone in the same boat. No one

is demonized and a broad constituency protects the dividends

from political attack.


How Would It Work Nationally?

How might a common wealth dividend system work at

the national level? The easy part is distributing the dividends.

As in Alaska, enrollment could be done online and

payments could wired electronically at a cost of pennies

per transaction. The Social Security Administration could

set that up in a jiffy.


The harder part is collecting the revenue. In my latest

book, With Liberty and Dividends For All, I show how, over

time, we could generate enough revenue to pay dividends

of up to $5,000 per person per year. Initially, a sizable

chunk would come from selling a declining number of

permits to dump carbon into our air. Later, more revenue

could flow from our monetary infrastructure, our patent

and copyright systems, and our electromagnetic airwaves.


Consider what $5,000 per person per year would mean.

If a child’s dividends were saved and invested starting

from birth, they’d yield enough to pay for a debt-free

college education at a public university. In midlife, $5,000

per person would add 25 percent to the income of a family

of four earning $80,000 a year. In late life, it would

boost the average retiree’s Social Security benefit by about

30 percent. Thus, dividends from common wealth would

provide a badly-needed boost for poor and middle class

families during what promises to be a lasting shortage of

good-paying jobs.


Surprisingly, the core idea behind Alaska’s dividends

is over two centuries old. In his 1796 essay “Agrarian

Justice,” American patriot Thomas Paine distinguished

between two kinds of property: “natural property, or that

which comes to us from the Creator of the universe—such

as the earth, air, water … [and] artificial or acquired property,

the invention of men.” The second kind of property,

Paine argued, must necessarily be distributed unequally,

but the first kind belongs to everyone equally. It is the

“legitimate birthright” of every man and woman, “not

charity but a right.”


And Paine went further. He proposed a practical way

to implement that right: create a “National Fund” to pay

every man and woman a lump sum (roughly $17,000 in

today’s money) at age twenty-one, and a stipend of about

$1,000 a month after age fifty-five. Revenue would come

from what Paine called “ground rent” paid by landowners.

He even showed mathematically how this could work.

Presciently, Paine recognized that land, air, and water

could be monetized not just for the benefit of a few but for

the good of all. Further, he saw that this could be done at a

national level. This was a remarkable feat of analysis and

imagination, and it’s time to apply it broadly.


Today, Paine’s core idea—that everyone has a right to

equal income from common wealth—can be applied not

just to natural resources but also to the creations of society.

Consider, for example, the immense value created by

our legal, intellectual, and financial infrastructures, the

Internet, and our economy as a whole. This value isn’t

created by single individuals or corporations; it’s created

collectively and hence belongs equally to all. In a fairer

economy some of it would actually be distributed to all.

The ideal mechanism for doing this would be common

wealth dividends—simple, transparent, direct (not trickle

down), built on co-ownership rather than redistribution,

and politically appealing.


And here’s the best part. If Paine’s idea and Alaska’s

model were applied at sufficient scale, the implications

would be vast. The current tendencies of capitalism to

widen inequality and devour nature would be self-corrected.

Instead of plutocracy and climate change, our market economy

would generate widely-shared, earth-friendly

prosperity. And it would achieve these goals automatically,

without much need for government intervention.


Is this wild-eyed dreaming? Possibly, but no more so than

universal suffrage or Social Security once were. Common

wealth dividends could be the next step in America’s long

march toward equal rights—and the game-changer that

leads to a new version of capitalism. But first, we have to see

the opportunity and demand it.