9 9 Only a crisis—actual or perceived—produces real change.
When that crisis occurs, the actions that are taken depend on
the ideas that are lying around.
Building a dividend system as proposed here is well within America’s financial and technical capabilities. The ingredients to do it lie at hand. The organizing principles are over two centuries old and have been road tested in Alaska. Our challenge now is to scale the concept to a meaningful size.
That said, the current political environment makes such scaling all but impossible. It therefore behooves us to take a longer view.
As Charles Darwin and Alfred Russel Wallace noted in the nineteenth century, living systems evolve through a process of variation and selection. Many nonliving systems, including economies, evolve in a similar way. Capitalism in particular has been characterized as a system of “creative destruction.”1
One aspect of evolution that remained unclear for decades after Darwin and Wallace was whether the vary-and-select process proceeds gradually or in sudden bursts. In theory, it could work either way, but in 1972, paleontologists Niles Eldredge and Stephen Jay Gould published a landmark paper that argued, based on fossil records, that “the history of evolution is not one of stately unfolding, but a story of homeostatic equilibria, disturbed only rarely by rapid and episodic events of spe-ciation.”2 They called this pattern punctuated equilibrium, and it seems to apply not only to biological systems but to others as well.
The reason for this punctuated pattern seems to be that complex systems live near equilibrium but never quite at it. They hover in a zone between equilibrium and chaos, and every once in a while a crisis pushes them toward (or over) the chaotic edge. At such times, they either collapse or shift into what biologist Stuart Kauffman calls the “adjacent possible.”3
The adjacent possible isn’t simply whatever happens next. Rather, it’s a set of potential futures in which modified versions of the existing system lurk. Which of these versions eventually emerges is inherently unpredictable. But when the system includes humans, it’s possible for humans to affect the outcome. We can do this by imagining a preferred future and building support for it prior to the crisis.
It’s important to distinguish between the adjacent possible and what might be called the incremental possible. By the latter I mean adjustments to the existing system that don’t require a serious crisis (aka a punctuation). Political debate in Washington rarely goes beyond this sort of possibility. The adjacent possible, by contrast, lies further in the future and requires a punctuation.
It’s often said that pragmatists deal with the incremental possible while idealists fantasize about the adjacent possible. I don’t see it that way. I see preparing for the adjacent possible as a different form of pragmatism, a kind that looks further ahead. At certain times in history, it’s not fantasy to think about adjacent possibilities—it’s pragmatic, strategic, and necessary. Now is such a time.
In my mind, a market economy with liberty and dividends for all is a plausible adjacent possibility. I also believe that a crisis—more severe than that of 2008—isn’t far away and that we need to prepare for it. In the rest of this chapter, I show how we might do so.
THE MOST IMPORTANT WAY TO PREPARE for the next crisis is to think and act like co-owners of shared wealth. Jay Hammond did this, and so should we. I guarantee that if we do, mental and political breakthroughs will follow.
Among the mental breakthroughs that will follow are these:
Old idea: Jobs for all.
Breakthrough: Nonlabor income for all.
The idea that able humans ought to work for a living is age-old, and long may it endure. Less venerable but equally compelling is the idea that there ought to be jobs for everyone. Without rejecting either notion, however, we can—and must—move beyond them.
Work serves economic and, just as important, psychological needs. It’s a source not only of income but also of dignity and sometimes happiness. This doesn’t mean, however, that work is the only source of income, dignity, or happiness. Income can also flow from nonlabor sources, as can dignity and happiness. The point is, our right to pursue dignity and happiness shouldn’t be limited by the wages paid in our economy. There’s a need for decent-paying jobs for everyone—a need that’s increasingly difficult to fill—and a need for nonlabor income for all, a need that’s considerably easier to fill.
Supplemental nonlabor income is needed today not only because jobs pay less, but also because their form has changed. In the last half of the last century, the typical middle-class job was with a long-term employer that provided health insurance and defined-benefit pensions. Such jobs are now scarce. A rising number of jobs are now part-time and temporary, and workers must often stitch two or three together to make ends meet. At the same time, defined-benefit pensions have been replaced by 401(k) plans that put retirement savings at the mercy of the stock market.
In effect, large numbers of workers have become solo navigators of volatile labor and financial markets. They must constantly reinvent themselves and become savvy (or lucky) investors as well. In such an unsteady environment, a reliable base of nonlabor income is a necessity rather than a luxury.
Old idea: One person, one vote.
Breakthrough: One person, one share.
In Baker v. Carr, decided in 1962, the Supreme Court ruled that historical and geographic factors couldn’t be used to deprive citizens of equal weight in voting. Citing the Fourteenth Amendment’s guarantee of equal protection, the court held that all electoral districts must contain roughly the same number of voters.4 The only exception is the US Senate, where—because of our Constitution—each state gets two senators regardless of the state’s population.
A similar formula can apply to income from co-owned wealth. We could divide such income based on unequal criteria, as Alaska at first tried to do; but in Zobel v. Williams, decided in 1982, the Supreme Court found such classifications suspect, also because of our Constitution’s equal-protection clause. This means that the default formula for distributing income from co-owned wealth is one person, one share.5
The Zobel decision was a leap for equality from the political realm to the economic. It’s important to note, however, that the court didn’t require states to pay equal dividends from co-owned wealth. It said only that if a state distributes income from co-owned wealth, it must do so in a nondiscriminatory way. This was a big step forward, but not as far as we need to go.
The next breakthrough is to affirm a right to receive income from co-owned wealth, a right that government would seek to enforce. Such a right would descend from our equality of birth and our inalienable right to pursue happiness.
Old idea: Social insurance.
Breakthrough: Shared wealth dividends.
Contributory social insurance was one of the great achievements of the twentieth century. It mitigated many of the risks of modern life by including everyone in universal insurance pools. Without it, the suffering caused by unemployment, old-age poverty, sickness, and disability would be far greater than it is today.
But social insurance goes only so far. Essentially, it’s a safety net that provides some backup when you’re retired, unemployed, or ill, but it does nothing to sustain middle-class families when wages sink. For that we need a reliable nonlabor income flow that supplements labor income.
The best way to provide that flow is with dividends from co-owned wealth. Every American would get the dividends wired to his or her bank account or debit card. The amount of the dividends would vary from year to year depending on the income earned during the year. Total dividends would never exceed that income.
In an age of declining real wages, shared wealth dividends would be an essential prop for our middle class. But they’d be more than that. Like social insurance, co-owned wealth dividends would connect Americans to each other and across generations. They’d be an affirmation that Americans belong to a society in which joint inheritances and productivity gains benefit everyone. As Lou Dobbs put it, American citizenship would be worth real money.
Old idea: Redistribution.
Breakthrough: Pre-distribution.
Under the present design of capitalism, differences are magnified and wealth flows inexorably upward. The remedy we usually hear about is redistribution—Robin Hoodish transfers from those with the most money to those with the least. Traditional welfare programs are based on this kind of transfer.
The problem with redistribution is that it begins with a taking of income previously received. This naturally breeds resentment among those whose money is taken. Pre-distribution, by contrast, involves no takings. Rather, it seeks a better-balanced initial distribution of income by the market. As Yale political scientist Jacob Hacker has put it, “Market reforms that encourage a more equal distribution of rewards before government collects taxes or pays benefits … are both more popular and more effective than after-the-fact mopping up.”6
Achieving that better initial distribution, though, requires a new set of pipes and property rights. In addition to our existing set, which inexorably skews income upward, we need a second set that distributes some nonla-bor income evenly. The everyone-gets-a-share pipes would offset the wealth-concentrating effect of winner-take-all pipes. The relative sizes of the two sets of pipes would determine the market’s overall distribution of income.
Alaska is an example of how pre-distribution can work, but not the only one. Consider also professional sports, a $25 billion industry in the United States.7 Most income for the industry comes from two sources: ticket sales and television. But the untempered playing field is uneven: teams in large media markets have a huge advantage over teams in small ones. Without a mechanism for sharing some income evenly, large market teams would overwhelm all the others, and the entire industry would suffer.
To avoid this, major professional sports leagues have added mechanisms to even things out. One of these is the player draft preference given to losing teams; another is revenue sharing. Thus, in the National Football League, all television revenue—regardless of where it comes from—is divided equally among all teams.8 This enables little Green Bay, Wisconsin, to stand shoulder-to-shoulder with big New York City, and it makes the industry as a whole more profitable than it otherwise would be.
The same kind of dual revenue flow would benefit our national economy. One stream of nonlabor income would flow, as now, disproportionately to a few, while another would be shared equally. Such parallel piping would not only help our middle class; it would also keep our economy chugging, with considerably less inequality and debt than we have now.
SO FAR, I’VE TALKED ABOUT CONCEPTUAL breakthroughs. They’re a prerequisite for system change, but not sufficient. Eventually, we have to translate transformative ideas into new economic realities—which in this case means new pipes and property rights.
To assist in this post-conceptual work, I suggest we create two to-do lists, one labeled “Things to Do After the Next Crisis” and the other “Things to Do Before the Next Crisis.” On the first list I’d place the most important institutions to create after a punctuation: a national dividend-paying fund similar to Alaska’s, and legally accountable agents that protect and charge for use of natural and social systems.
On the “Before the Next Crisis” list I’d place all the work we need to do to pave the way for such post-crisis institutions. This includes devising more ways to collect rent from co-owned wealth, legal and economic research supporting those methods, draft legislation, state and regional initiatives, and more educational materials, including that Monopoly-like game I started but didn’t finish.
Some of these efforts are already happening. In Vermont, legislators are considering a bill to create a state Common Assets Trust that would earn income from pollution permits, groundwater extraction, and other fees. A research team at the University of Vermont estimated that the trust could pay dividends to every state resident of about $2,000 a year.9 This is despite the fact that, unlike Alaska, Vermont has no oil or natural gas.
In North Carolina, a band of Cherokees elected to pay half the profits of a tribally owned casino to its members in equal dividends, which last year totaled close to $8,000 per person.10 An epidemiologist studying children in the area found that within five years, the number of Cherokee living below the poverty line declined by half, and the frequency of behavioral problems among children who moved out of poverty declined by 40 percent.11
Further west, in Sherman County, Oregon, residents are reaping a windfall from the wind itself. Using taxes and fees on several large wind farms, the county pays a yearly dividend of $590 to every household. “It’s modeled after Alaska,” says the county judge, adding that the county can afford to pay more but keeps the checks under $600 to spare its clerks from filing hundreds of federal tax forms.12
Other imaginative ideas are abroad. Tech visionary Jaron Lanier writes that Google, Facebook, and other “Siren Servers” have turned a magnificent piece of public infrastructure—the Internet—into a private rent-collecting machine, without paying to use the machine or compensating those whose data and attention they profit from. “Ordinary people ‘share,’ while elite network presences generate unprecedented fortunes,” he observes. Lanier thinks the Siren Servers should pay for our personal information and mind time, though he doesn’t say how.13 One possibility is to charge tiny fees for every ad click and put that money into the dividend pot.
Other countries are experimenting, too. Dozens have created what are generically called sovereign wealth funds, which together own more than $6 trillion in assets. The largest of these, in Norway, has assets in excess of $1 million per Norwegian.14 If it paid dividends of 4 percent, everyone in Norway would receive about $40,000 a year. That, no doubt, seems excessive to Norwegians, so the fund pays 4 percent to their government instead. Norwegians are happy to fund their government this way because it provides, among other things, free medical treatment.
Elsewhere in Europe, there’s growing interest in a universal guaranteed income. In 2013, organizers from fifteen countries launched an initiative to get the European Commission to “explore the feasibility” of an EU-wide basic income “high enough to ensure an existence in dignity.” Such income would be in addition to, not in lieu of, existing social programs. The organizers fell short of the one million signatures needed but plan a second drive shortly.15
Meanwhile, in Switzerland (which isn’t part of the EU), organizers obtained enough signatures to put on the ballot an initiative that, if passed, would pay every citizen a monthly stipend of $2,800, financed by an increase in Switzerland’s value added tax. The referendum must be held before 2018.16
European interest in universal income is driven by attitudes that are stronger there than here: a sense of social solidarity and a belief in individual dignity as a human right. On top of that, there are EU-specific reasons for dividends. Europeans need to “perceive very tangibly that the European Union does something for all of them, not only for the elites,” writes Belgian political scientist Philippe van Parijs. “Bismarck helped secure the legitimacy of his unified Germany by creating the world’s first public pension system. If the European Union is to be more in people’s eyes than a heartless bureaucracy, it will need a universal Euro-Dividend.”17
Other candidates for dividends are countries with exceptionally large oil deposits. After the United States invaded Iraq in 2003 and deposed its leader, Saddam Hussein, two US senators, Mary Landrieu of Louisiana and Lisa Murkowski of Alaska, pressed the Bush administration to consider an Iraqi Permanent Fund similar to Alaska’s.18 The idea was to unite all Iraqis, regardless of ethnic group, and minimize the risk of a future oil-funded dictatorship. Secretary of State Colin Powell is said to have liked the idea, but for unknown reasons it wasn’t pursued.
More recently, experts have suggested the Alaska model for countries that are potential (or actual) victims of the resource curse,” the oft-noted tendency of nations rich in natural resources to be more repressive, corrupt, and slow to develop than others not so well endowed. The best cure for the curse, argue two writers in Foreign Affairs, is to “transfer the proceeds from oil directly to the people.”19
Also notable is a trend among major developing countries—including Mexico, Brazil, and South Africa—to establish direct cash payment programs as alternatives to traditional aid. A book called Just Give Money to the Poor concludes that “instead of maintaining a huge aid industry to ‘help the poor,’ it is better to give money to poor people directly.” Contrary to common assumptions, the authors find, most cash recipients use the money wisely—to send their children to school, start businesses, and feed their families.20
THE OTHER ITEM ON THE AMERICAN pre-crisis to-do list is to start, build, and join movements. Ideas are essential but not enough. Movements put power behind ideas. And on the movement-building front, there’s lots of work to do.
The labor movement has been around in various forms for 150 years; it can justly be credited with enlarging our middle class enormously. In recent years, however, as the middle class has waned, so has the power of labor unions. They’re still the middle class’s strongest agent, but they’re no longer strong enough to reshape our economy. They—and the middle class—need allies.
It should be noted that labor unions, by their very nature, focus on labor income. During the cap-and-trade battle, they supported handouts to polluters rather than dividends for all because they believed that polluters would preserve, if not create, jobs in previously organized industries (coal mining, steel, manufacturing). By contrast, the American Association of Retired Persons (AARP) supported dividends because their thirty-five million members understand and rely on nonlabor income.
To be sure, labor unions and AARP agree more often than they disagree, but their divergence over dividends reflects a deeper problem. The middle class as a whole lacks a sense of identity. It’s split into subgroups—workers in various industries, seniors, students, farmers, minorities, and so on—each of which identifies more with its own agenda than with a unifying goal. This makes the middle class extremely difficult to organize.
On top of this, our middle class hasn’t figured out what its problem is. It knows it’s declining and worries about its children’s future. But as to the cause of its descent, not to mention the remedy, it remains confused. Yes, more good-paying jobs would be nice, and maybe more public spending or tax cuts would help create them. But the thought that good-paying jobs might never come back in numbers hasn’t yet penetrated. Nor have many, outside of Alaska, considered the possibility of dividends. It’s easier to blame politicians (or China, or immigrants) than to think these questions through.
It’s hard to imagine how a powerful middle-class movement can be built in these circumstances. Still, a look back to the 1930s offers some hope. In 1933, several years after our economy crashed, an unknown doctor named Francis Townsend wrote a letter to the Long Beach Press-Telegram proposing to pay pensions of $200 a month to every retired person over sixty. The pensions would be financed by a 2 percent national sales tax and would have to be spent within thirty days. This simple plan, the doctor said, would not only provide security to the elderly but speed up the spending of money, revive the depressed economy, and help everyone.
Much to the doctor’s surprise, letters of support poured in. Townsend urged his supporters to set up clubs and send letters to Congress, which they did. Soon the clubs had two million members and were raising money faster than the Democratic Party. Eventually over ten million Americans signed Townsend Plan petitions.21
On its surface, the Townsend Plan was about money, but behind it lay a vision of how work and leisure could be balanced in a highly productive economy. The Depression made it clear that there weren’t enough jobs for everyone. Townsend’s solution was to pay people to retire early, thereby opening jobs to younger entrants. Human life would then be divided into three stages: preparation for labor (youth); labor (midlife); and finally, early and dignified retirement. This vision of a smaller workforce sustained by quickly spent pensions appealed to all age groups.
The Townsend Plan had flaws. For one thing, a 2 percent sales tax wouldn’t have raised enough money to pay the proposed pensions. For another, since average wages at the time were around $100 a month, a $200-per-month pension would have been unseemly as well as unaffordable. But there’s no doubt that the Townsend movement, along with others led by Upton Sinclair and Huey Long, pushed Congress to pass Social Security in 1935 and expand it in 1939. If such mass movements could be built prior to the Internet, might not comparable ones arise today?
With regard to nature, there are similar possibilities. Today’s environmental movement exploded in 1970 when the first Earth Day demonstrations mobilized twenty million people across the country. Soon Richard Nixon was signing laws to protect air, water, and endangered species.
But like the labor movement, the environmental movement has seen its influence wane. In part, this is due to the changing character of environmental problems: global warming is much less visible than oily beaches and flaming rivers. But it’s also due to changes in the movement itself. “Even as the environmental movement has become an established presence in Washington, it has become less able to win legislative victories,” Nicholas Lemann wrote in the New Yorker. “It has concentrated on the inside game, at the expense of broad-based organizing.”22
As Bill McKibben has said, the environmental movement needs to become a movement again. McKibben’s new organization, 350.org, is trying to make it that, using the Internet to connect self-organizing chapters. So far, its focus has been on stopping things, like the Keystone pipeline, which would bring Canadian tar sand oil to Gulf Coast refineries. But its larger goal—getting the atmosphere’s carbon dioxide concentration below 350 parts per million—is indelibly engraved in its name, and its preferred mechanism—charging polluters and paying dividends to all—has the potential to rally broad support.
IN THE PAST, EACH GENERATION of Americans believed it would live better than the one that came before it. That’s what we meant by “progress.” But though we continue to advance in technological ways, we’re no longer progressing in intergenerational betterment. That part of the American dream has died.
Perhaps it can’t be saved, and we should just accept that fact. That’s what economist Tyler Cowen argues in his 2013 book, Average Is Over. Twenty-first-century America will be “much more unfair and much less equal,” he says. About ten percent of Americans will be wealthy while the rest grow increasingly poor. Aid from government will be inadequate, and millions will live in shantytowns like those in Mexico and Brazil. On the upside, everyone will enjoy free Wi-Fi and limitless entertainment.23
Other plausible futures are even grimmer: climate mayhem, financial collapse, a surveillance state. A strong case can be made that any of these futures is likelier than a middle-class renaissance. Yet it’s too soon to throw in the towel. In the darkest days of the Great Depression, with Hitler rising in Germany, John Maynard Keynes wrote an essay called Economic Possibilities for Our Grandchildren. Reading it now, in the lifetime of those grandchildren, I’m surprised not only by how hopeful Keynes was but also by how prescient.
Keynes predicted that, barring all-out war, “the standard of life in progressive countries … will be between four and eight times as high as it is today,” and he was right, even with an all-out war. He foresaw that “there will be ever larger … groups of people from whom problems of economic necessity have been practically removed,” and he was right about that as well.
Keynes was wrong about one thing: the euthanasia of the rentier. Far from being euthanized, rentiers grew more extractive than ever. But perhaps after the next crisis, we’ll move in a different direction: instead of euthanizing rentiers, we’ll share rent universally. Not extractive rent, but recycled rent that comes from co-owned wealth managed properly.
If Keynes could be optimistic in 1930 and turn out to be largely right, there’s room for hope today. As then, there could be terrible horrors before calm and prosperity return, or we could be lucky and suffer only minor horrors. This we can’t predict. But there’s at least a chance that from a crisis of some proportion, there could emerge an economic system that combines the best of pre-crisis capitalism with the postcrisis adaptations envisioned here.
Is this wild-eyed dreaming? Possibly, but no more so than universal suffrage or social insurance once were. Americans are an adaptive people. If we’re willing to shed old ideas and experiment with new ones, there’s no telling what we can do.
These are, indeed, times that try our souls, as Thomas Paine wrote about the winter of 1776. But he also wrote, “I know our situation well, and can see the way out of it.” And he was right. Perhaps now, as then, we’ll find our way out of our current predicaments and into a brighter future.