The long road to a social dividend

Earth4all is an international initiative to accelerate the systemic change necessary for an equitable future on a planet with limited resources. As its founders note, “Combining cutting-edge science with new economic thinking, Earth4All was designed to identify the transformations needed for shared prosperity.” This article, written by a participant of the Earth4All initiative, presents the original concept of the “social dividend” as one possible option for the development of economic relations in the world. This article was previously published as part of a series on the transformation of economic systems. Published in Russian for the first time.

Current tax policies raise the awkward question of why we tax people's efforts at adding value when they produce goods and services -and again at the point of consumption. Rather, why are we not taxing at source the people and organisations that benefit from global resource extraction, capital gain and land value? Owners of property -whether conventional or intellectual -or platforms and networks -can collect unearned income, which economists call economic rents, for controlling access to their scarce property. But they do not add value. In some cases, this imposes costs on society that an additional tax could recoup. Instead, most contemporary taxes apply to labour, production and consumption.
In fact, many governments subsidise resource extraction via tax breaks for the machines that substitute for labour, or by enabling access to and the use of fossil fuel energy and minerals deposits, or for agricultural production at scale. Other subsidies and tax breaks encourage the ravaging of common goods such as forests and fish stocks.
Yet still we persist in the belief that somehow this is an industrial economy rather than one characterised by converting goods into financial instruments that favour the beneficiaries of rents, called rentier bias. Taxation in its contemporary formats became part of a social compact in now-rich countries that enjoyed the so-called "employment age" after the Second World War.
" All peoples may, for their own ends, freely dispose of their natural wealth and resources." International Covenant on Economic, Social and Cultural Rights, Article 1 Significant change has occurred since the post-war period. Earth4All should embrace new structures for employment and tax, leaving behind outdated modes of thought. Equally, the mythology of progress and how it is measured needs exposing, since it is another relic of the mid-20th century. Indeed, the seminal work on growth The Stages of Economic Growth by W.
W. Rostow was subtitled A non-communist manifesto, reflecting the geopolitics of the time and anxieties over which economic system could produce more.
Economist Herman Daly pointed out long ago that greater supply through resource extraction or improved productivity, employment or manufacturing at scale allows a society to postpone answering the questions of distribution and demand management. Even if supply-focused growth caused inequality, people could still point to rising incomes. Individuals could all feel like they were winning the race, as it were.
However, the planet and the global community were not. Eventually growth was not even doing what it promised as it became anchored in the growth of debt not production (see Box). It became a cruel but effective means of growing the wealth of the better-off parasitically through a combination of debt overheads, labour precarity and stagnant wages. Because gross national product (GNP) continued to grow, and policymakers continued to value this blunt metric, it still smelt like progress.
The evidence is overwhelming that Western economies have a financialised rentier economy that revolves around ownership of existing properties rather than an industrial or productive economy (Christophers, 2020). It was the task of classical economists in the late 18th century and much of the 19th century to understand this dynamic as it applied to landowners, trusts, oligopolies and the financial system and to suggest alternatives. Adam Smith, Karl Marx and Henry George all addressed the problem of how to deal with the rentier. Hence the long history of proposals to clamp down on rent-seeking actors, break up monopolies and use the money raised to increase economic security and wellbeing or to offset the effects of poverty (Chu, 2021).

GNP growth constructed on debt instead of productivity
Economist and Wall Street financial analyst Michael Hudson writes: "'Wealth creation' by debt leveraging -that is, asset-price inflation -was celebrated as a post-industrial economy, as if this were a positive and natural evolution. But in reality it is a lapse back into a rentier economy, and even into a kind of neofeudalism. The post-2008 bailouts have vested a new rentier elite to lord it over the 21st century, thanks to the fact that most gains since 1980 have gone to the 1% -mainly the financial sector, not to the 99%." Lawyer and author James Robertson handily summarised today's change: "The social compact of the employment age is now breaking down. The time is passing when the great majority of citizens, excluded from access to land and other means of production and from their share of common resources and values, could nevertheless depend on employers to provide them with adequate incomes in exchange for work, and on the state for special benefit payments to see them through exceptional periods of unemployment. A new social compact will encourage all citizens to take greater responsibility for themselves and their contribution to society. In exchange, it will recognise their right to share in the value of the 'commons', enabling them to become less dependent than they are today on big business and big finance, on employers, and on officials of the state." The long road to a social dividend / earth4all.life / 4

A dividend on the commons
The "enclosure of the commons", a historic term from English landownership, sets the stage for economic rent-seeking and we argued in the Earth for All book that compensation is due.
Employees obviously deserve a share, outside of wages, perhaps in the form of dividends and capital gains. The general population also deserves a share: we are all co-owners of global commons. As a society, We could charge fees for the rights to access global goods and then channel them into a commons fund or citizens' wealth fund, managed at a distance from government. Economists call this a fee/dividend approach to accounting for the cost of using global or common goods. Such an approach encourages a more sustainable use of the commons. It also works to satisfy basic needs.
This then is the essence of fee/dividend proposals: to close the loop on property rights and to distribute the surplus to co-owners. In this paper the focus is mainly a carbon fee/dividend, not because it is somehow a special case or a complete solution, but because it shows potential, if we can think through and reimagine fee/dividends for our own times and circumstances. If we are in search of a new "social compact" as James Robertson argues, then here is the basis of it.
The potential for taxing resource extraction or waste has been thoroughly explored. In October 2021, the Center for Climate and Energy Solutions listed 35 carbon tax programmes around the world. Sweden has had one since 1991, while South Africa implemented Africa's first carbon tax in 2019. In some cases, sub-national entities operate them: British Columbia began one in 2008.
These programmes assume that the economy would adjust after eco-taxation through marketbased mechanisms and that governments could use the taxes to add to social welfare in some form. In reality, outcomes vary as much as the policies diverge from each other. Eco-taxation has struggled in large part due to its disproportionate impact on, minorities (Bubna-Litic, 2012) and the poor who spend a greater fraction of their incomes on energy. Special interest lobbying against these initiatives has also distorted them.
Although there have been 30 years of such eco-taxation approaches, writer and author of The Case for Carbon Dividends James K. Boyce plumps for a fee and dividend as being the most acceptable, transparent, predictable and effective (see also Barnes, 2021).
One of the attractions of the fee/dividend approach is that dividends cycle straight back to citizens. It is economic justice and environmental justice rolled into one. It is also easy to understand. It is this same concern with inequality that a fee/dividend approach addresses, making it clear who pays and who is supported. Incidentally, fees and dividends have a broad potential to tackle other forms of inequality and environmental challenges. For instance, the same approach could ensure that those suffering the worst effects of pollution receive adequate compensation from polluters, as in the case of an oil spill. Or it could encourage sustainable harvests of fisheries.
Charging fees on returns to property and redistributing them suits today's economy because it is a turn of the dial focused on demand management and distribution rather than production and income. Nobel Prize-winning economist Joseph Stiglitz argues for applying the idea to land ownership: "A tax on the return to land, and even more so, on the capital gains from land, would reduce inequality and, by encouraging more investment into real capital, actually enhance growth." Stiglitz credits the idea to Henry George, an influential journalist- Since the governance of such funds is as important as the target source and the beneficiaries, Standing argues that three clear rules should guide the activity. The first is the Precautionary Principle -investments by the fund are not problematical in social or environmental terms and should be regenerative and restorative. Next is the Public Trust Principle whereby resources are preserved for public use, and the government must protect and maintain these. If it is a permanent fund, then obligations to maintain its integrity are central. Last is Hartwick's rule, that investment of resource rents from non-renewables should provide intergenerational equity so that future generations are not worse off.
Guy Standing's research revealed that a degree of financial autonomy was a powerful driver for broader emancipation. Similarly, research in Madhya Pradesh by Sarath Davala showed that women and girls' health, nutrition, economic activity and school attendance and performance improved more than in men and boys when a modest basic income was given to 6,000 people over 18 months (Davala et al., 2015;UNESCO, 2021).

What's my share?
This is usually the second question, after "What is a fee/dividend approach?". The answer is that it depends. It also depends on the goal of the fee/dividend intervention. For some a basic dividend is about supplementing income without resorting to means testing. For others a basic dividend is a way to replace welfare or allow lower wages. The latter options are just shuffling the deck, and usually for ideological reasons: to reduce government expenditure and influence in the welfare system or to subsidise employers or perhaps discipline labour to accept whatever jobs are available.
For some, by contrast, the very strength of a reasonable basic dividend is around more autonomy, such as being able to say no to the worst-paying jobs or working conditions or to negotiate for improvement. This is especially true for women and disadvantaged groups.
There is also the scope of the fee dividend. Limiting fees/ dividends to carbon is a lot less than one on, say, financial internationally by all developing countries, and he concludes that the scheme "would be easier to implement than most existing social policies".
That's a bold claim but something is beginning to coalesce around structured fee/dividends and a commons or citizens' wealth fund. As economist Alanna Hartzok puts it in Financing Planet Management (1994), "The fundamental human right which now needs to be affirmed is this -the Earth is the birthright of all people." At heart it is about doing the right thing.
Guy Standing agrees that ethical considerations are key to achieving social progress within environmental boundaries.

A real-world dividend?
The proposed 2021 US Energy Innovation and Carbon Dividend Act (EICDA) has three pillars: Rather than try to answer the question "What is it worth in money terms?", we should view a fee/dividend approach mediated by a citizens' fund as a way to leverage real impact on a range of key issues. Such a system can be expanded over time or adjusted according to experience. It does good work by being a structural approach to money stocks and flows, made much easier by recent digital development, and one that is transparent and fair.
To conclude, the fee/dividend system proposed in this paper could have a positive impact in all of the following ways:

Equity: it goes to every individual
The environment: it accounts for non-renewable resources and incentivises greener practices Empowerment: especially for women.