Matthew Yglesias is at it again with a new Georgist inclined article in Slate magazine.
“Classical economics had three factors of production—labor, capital, and land. Contemporary economists normally treat land as simply a form of capital. This is mostly the pattern Thomas Piketty follows in his important new book Capital in the 21st Century. But as Karl Smith writes, many of Piketty’s findings about “capital” seem like they may mostly be findings about land.”
Matthew Yglesias, from Slate.com writes that land, pollution, and congestion pricing provide a large enough tax base to fund a welfare state.
“Add it all up and you get $14.488 trillion in land value…This number is high enough that it tends to confirm that view that taxation of land and other natural resources, supplemented by pollution fees and things like congestion charges could replace all taxes on labor and investment and still fund an ample welfare state and public sector.”
It’s interesting to note that Mason Gaffney has done a more thorough analysis, revealing that official reports of total land value are far below their actual value. You can find Gaffney’s treatment in his new book, The Mason Gaffney Reader, in a chapter entitled “Revenue Potential of Land.”
Fellow Georgist and true-blue Aussie Karl Fitzgerald has released a report entitled Speculative Vacancies in Melbourne. You can view the report by clicking on the link below.
“64,465 properties were potentially unused over the study period, having consumed less than 50 litres of water a day, and 12,691 properties did not use any water, and were demonstrably unoccupied.”
Karl also sat down with David Collyer, policy director at Prosper Australia, during the latest installment of the Renegade Economist podcast. They discuss slashing Australian interest rates and ratcheting up land prices, among other topics.
Think New York Is Costly? In New Delhi, Seedy Goes for 8 Figures
By Jim Yardley (New York Times)
Editor’s Note: You might think of India as a “poor country” but take a look at real estate prices there: higher than in developed countries.
We’ve got to break out of the old ways of thinking about the economy.
By Gar Alperovitz and Steve Dubb
Leverage City Assets
By maintaining direct ownership of areas surrounding transit station exits, public agencies in Washington, DC, Atlanta and elsewhere earn millions, capturing the increased land values their transit investments create… CalPERS, California’s public pension authority, helps finance local community development needs; in Alaska, state oil revenues provide each citizen with dividends as a matter of right; in Alabama, public pension investing has long focused on state economic development.
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.)
Alaska: This year’s dividend is the smallest since 2005
By Karl Widerquist
Alaska distributed its yearly Permanent Fund Dividend (PFD) on October 4, 2012. The amount was disappointing, only $878—down from last year’s dividend of $1,174 and the smallest dividend since 2005. The 2012 dividend was only the second dividend in the last 20 years to be below $900, and it is well below the all-time highest dividend of $2,069 in 2008 ($3269 including a one-time supplement the state added to the 2008 dividend).
The PFD is a sort of a yearly, variable basic income, given to all U.S. citizens (men, women, and children) who fill out a form showing that they meet the state’s residency requirement for eligibility. This year nearly 650,000 Alaskans received the dividend. It is financed by the Alaska Permanent Fund (APF), which is a sovereign wealth fund owned by the state and financed in turn by the accumulated savings from the state’s oil exports. The dividend varies considerably from year-to-year because the amount is calculated from a complex formula averaging the last five years of returns to the fund. The dividend is down this year because of the poor performance of international stock and bond markets over the last five years.
Even this year’s small dividend will come to $4,390 for a family of five, and the dividend makes a big difference in the lives on many Alaskans. The dividend is one reason Alaska is the most economically equal of all 50 states. According to Russ Slaten, “the oldest applicant was 107 years-old, and the youngest was born minutes before the qualification deadline on December 31 of last year.”
According to Jeff Richardson of the Fairbanks Daily News-Miner, Alaskan retailers have seen a smaller-than-usual bump in sales around dividend time this year because of both the smaller changes and in the higher cost of fuel oil. The smaller effect on retail sales might also be partly attributable to the increase in people donating all or part of their PFDs to charities through the state’s Pick-Click-Give program that allows people to direct some or all of their PFD to the charity of their choice in a few steps on the internet. This year, 23,000 Alaskans gave more than $2.2 million through the program, four times as much as they gave in the first year of the program (2009).
The PFD has largely escaped the demonization given to many programs that promote equality, probably because it provides tangible benefits all Alaskans, rich and poor alike. According to Jeanne Devon, “Even those who gripe about it in theory don’t want to actually give up their own Alaskan ‘entitlement.’ It is our oil, after all.”
The yearly fluctuations in the fund do not signal a long-term threat to the PFD. The fund has had a healthy grown trend since its inception, and it continues today. The bigger worry for the future of the Alaska Dividend is gradual decline in the state’s oil revenues. The amount of oil flowing through the Trans-Alaska Pipeline System is getting dangerously close to the minimum level needed to keep the pipeline system open. Most of the state’s operating budget comes from oil exports, and the state budget is not well prepared for the loss of oil revenue. Gradual decline (or a sudden drop) in oil exports would put enormous pressure on the state budget and might inspire the legislature to divert returns currently used to financed the PFD toward regular government spending.
Editor’s note: Check The Georgist News next month for two of Karl Widerquist’s recently published books on this topic: Exporting the Alaska Model and Alaska’s Permanent Fund Dividend.
Inequality: It’s Even Worse Than We Thought
By Michael Kinsley
In 2011 Investors’ Bids on US Land Up 128% Land in America has fewer owners but that might change as a new game catches on and subsidies shrink. 2013 Budget Could Cut Fossil Fuel Subsidies by $4B http://www.progress.org/2012/co-opoly.htm