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
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.