3. (2013 January) Numbers: Alaska-style dividend under discussion

Alaska-style dividend under discussion in at least five states and nations
By Karl Widerquist

Although Alaska’s basic income, the Permanent Fund Dividend (PFD), has had great success for the past 30 years, it is yet to be imitated. Many resource-exporting nations around the world have sovereign wealth funds (a pool of state-owned investments in private assets accumulated from past trade surpluses). But so far, the Alaska Permanent Fund (APF) is the only sovereign wealth fund paying a regular dividend. Discussion of an Alaska-style dividend has occurred intermittently in various spots around the world over the years without any states so far making significant moves toward actually doing it. But that could be changing.

Discussion of an Alaska-style dividend now seems to be on the rise around the world. Just within the last three months discussions have gone on in Iraq, Libya, North Dakota, Western Australia, and Alberta, all of which are currently experiencing — or expecting to experience soon — major resource windfalls.

The most serious discussion at the moment seems to be happening in Iraq. Now that violence has settled down, the country is on the way to regaining its position as one of the world’s largest oil exporters. But, because many Iraqis live in poverty, the issue of providing a resource-financed dividend, along the lines of Alaska’s Permanent Fund Dividend, has returned to high-level political debate in Iraq, according to Aminah al-Thahabi, writing for Niqash: briefings from inside and across Iraq. The issue is so well-known that most major factions up to and including parties in parliament have a position on it. Supporters of the dividend argue that it would help fight the resource curse and ensure that all Iraqis benefit from the country’s oil industry. Opponents argue that a dividend could feed inflation and that the money could be better spent helping people indirectly by improving Iraq’s infrastructure, much of which is still in disrepair after years of sanctions and war.

Johnny West, of OpenOil consultancy, calculates that Iraq can afford “a dividend, starting at $220 per capita in October 2012 and rising with expanded production.” West argues Iraq’s resource-dividend potential is so strong that “poverty could be abolished inside two years, and that, just as important, it would unleash such interest and attention from the public that governance in the oil industry would never be the same again.”

Like Iraq, Libya is a potentially oil-rich nation in which large numbers of citizens live in poverty, thanks, in part, to conflict and dictatorship. In a recent Business Week editorial, Brian Bremmer argues that an Alaska-style fund and dividend could help Libya escape the resource curse, which plagues many resource exporting nations, including Libya during the Qaddafi regime. Bremmer argues that Libya’s Sovereign Wealth Fund became a plaything for Qaddafi’s family. Devoting fund returns to dividends would keep the Sovereign Wealth Funds in the public eye and might make Libya’s investments less vulnerable to corruption.

In Western Australia, Larry Graham, a former member of the state parliament, recently wrote an opinion piece arguing that the burning political question facing Western Australia right now is how to share the benefits of the coming resource boom. He argues that the state could do no better than to imitate Alaska by creating a sovereign wealth fund that pays a yearly dividend.

North Dakota is also on the cusp of an oil boom with new oil drilling quickly getting underway. In a recent opinion piece in the Bismarck Tribune, Vernon Peterson argues that North Dakota should take “a prudent look at Alaska’s Permanent Fund and Dividend.” Citing the enduring popularity of the Alaska Dividend, Peterson argues that a North Dakota Permanent Fund and Dividend would aid cash-strapped families and individuals. He indicates that the people of North Dakota, not just the Legislature, should have the opportunity to decide how to spend a small portion of the oil windfall.

In Alberta, the second-largest party in the provincial assembly supports an Alaska-style dividend. This party, the Wildrose Party, which holds 17 of 87 seats in the Alberta legislative assembly, is a recently formed conservative party that exists only in Alberta. In their platform for the elections held on April 23, 2012, the Wildrose party endorsed a policy in which the Alberta Heritage Fund (the state’s sovereign wealth fund) would pay a yearly dividend of about $300 to every Albertan. The Heritage Fund paid a one-time dividend several years ago, but that move has been widely dismissed as an election-year gimmick. Despite earning significant returns over the years Alberta’s Heritage Fund has failed to build up nearly the principal of the Alaska funding (closing at only $15.4 billion at December 31, 2011), largely because the legislature has dipped into the fund for ad hoc spending. The difference in success between Alaska’s and Alberta’s sovereign wealth funds might indicate the value of a regular dividend.

At least one resource-exporting nation has recently introduced a basic income. Iran pays a monthly ‘cash subsidy’ of about US$40 to every citizen, which comes out to $480 per year for a single individual and $2,300 to a family of five. This amount is extremely significant for low-income families in Iran. But unlike the five proposals discussed above, Iran’s basic income is financed by current revenues rather by a sovereign wealth fund, and so it is hard to say that Iran’s policy is an Alaska-style dividend.

The possibility of other states and nations imitating aspects of Alaska’s Fund and Dividend system is the subject of two books published this year by Palgrave Macmillan, Alaska’s Permanent Fund Dividend: Examining its suitability as a model (released in March 2012) and Exporting the Alaska Model: Adapting the Permanent Fund Dividend for Reform around the World (due to be released in August 2012). These two books examine the strengths and weaknesses of the fund and dividend in Alaska and discuss the possibility of imitating that combination of programs in a range of states and nations including Vermont, the United States (as a whole), the South Sudan, Iraq, and several others.

Angela Cummine, of Oxford University, has studied existing sovereign wealth funds around the world and found considerable reluctance on the part of managers of existing funds to use the returns to fund an Alaska-style dividend. However, the recent increase in discussion among newly-resource-rich nations and nations that have had recent regime changes might indicate that the prospects for introduction of the world’s second Alaska-style dividend are increasing.

~Jerusalem, Israel-Palestine, May 2012

(Books by Karl Widerquist are available at the RSF online bookstore here.)

3 thoughts on “3. (2013 January) Numbers: Alaska-style dividend under discussion

  1. The Alaska Permanent Fund is a great IDEA and example of Georgism, BUT if nearby dry land values go largely untaxed, do not the APF financial benefits ultimately accrue to those who already own and/or receive rents from land, to the detriment of those paying rent and/or trying to buy land?

  2. Yes, good thinking. This is part of what is sometimes called “The Dutch Disease”, after what happened in The Netherlands following oil revenues from the Dutch sector of The North Sea.

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