Interview with Steven Rosenfeld about “Dividends For All”

AlterNet, August 8, 2014

Steven Rosenfeld: Your book,With Liberty And Dividends For All, starts with a very sober assessment of the American middle class.  It’s disappear­ing in our lifetime.  And the reason is that work-related income isn’t enough.  Tell me about that.

Peter Barnes:  I can throw out lots of numbers, but rather than do that, just think back.  Some of us, like myself, are old enough to remember when there were lots of steady, good-paying jobs, both in the private and public sectors.  They provided health insurance and pensions.  That was what built the middle class when I was growing up.

Now, because of globalization, automation and the decline of labor unions, that is no longer the case. Most young people who are entering the labor market today don’t get jobs like that.

It’s kind of a “you’re on your own economy” now.  Everybody temps.  They have more than one job. They’re always marketing themselves to get the next job.  They don’t get health coverage.  They have to pay for their own retirement.  On top of which, education costs are way up.  Students have debts they have to repay.  All these things are different.  And they’re going down, not up, as far as the middle class is concerned.

Rosenfeld: So your crucial observation is that work-related income is not enough.

Barnes:  Exactly.  We can’t rely on good-paying jobs to sustain a large middle class in the future.  It’s not going to happen.

Rosenfeld: Your solution comes from assets that all citizens share.  You call it “co-owned wealth.”  So break this down.  What should be shared?  What is co-owned wealth?

Barnes: Even though good-paying jobs are in decline, there’s a lot of wealth in our economy.  So if we want to have a middle class, we can do it.  We can spread around wealth we actually have, in ways that aren’t tied to the time-clock.

What is the wealth out there that belongs to us but doesn’t come from labor?  A lot of it is wealth we inherit — like all the gifts of nature.  And a lot of it comes from stuff society created — our science, knowledge, tech­nologies and so on.  Plus there’s a lot of social infrastructure — such as our financial system, our copyrights and patent laws.  All of these create enormous amounts of wealth.  This is wealth that’s not created by indivi­duals or corporations, but by society.  So what I’m saying is that some of that wealth should be shared equally among everybody, as a birth­right.  And that would be the basis for supplementing labor income.

Think about the board game Monopoly.  It’s supposed to be a metaphor for capitalism, but there are a couple of aspects of it that aren’t present in our current system.  For example, everybody starts off with the same amount of capital.  Now that’s nice — it would make for an interesting and fair economic system.  Then, everyone gets money every time they go around the board.  That keeps the game going. Without that, people wouldn’t have enough money to play the game.  Those features ought to be part of our real-world economy.  Everybody needs a base to build on and cash to play with — especially, as I said, when labor income isn’t enough.

Rosenfeld: You write that one of the founders of the American Revolu­tion, Thomas Paine, wrote about sharing this kind of wealth.  You note that conservatives in Germany in the late 1800s created a system of social insurance that became the model for Social Security.  And you point to Alaska Governor Jay Hammond, a Republican, who created what today is called the Permanent Fund, from which every Alaskan gets $1,000 or more a year as a dividend from oil and gas revenues.  So it’s not unpre­ce­dented. What is unprecedented is the idea of creating a national fund based on the common wealth of Americans, and paying divi­dends to everyone from that.  How would that work?

Barnes: You mention the Alaska Permanent Fund.  That’s been a very successful and popular model for over 25 years.  Republicans support it, Democrats support it, everybody supports it up there.  What I’m talking about is applying that model nationwide, and funding it with other com­mon wealth besides oil.

One important bit of common wealth that could start this off nicely is the air.  If anybody owns the air, it’s all of us together.  But what’s causing climate change is the fact that nobody is seen as owning the air, so polluters dump their crap into it for free.  If we created an entity that charged pollu­ters for dump­ing their crap into our common property, and then used that revenue to pay equal dividends to all, we would generate a substantial dividend flow.

That’s source number one.  There was federal legislation introduced in 2009 to set up that sort of a system, and it was just reintroduced a few weeks ago by Rep. Chris Van Hollen of Maryland.  So that legislation is out there.  It’s very simple, just 28 pages long.  It would limit the input of carbon, sell permits, and divvy up the money equally.  It’s a no-brainer.  It would solve two huge problems at once, one being climate change and the other being widening inequality.  So I would start off by passing a bill like that.

That might get us to between $500 and $1,000 a year per person in divi­dends.  I think we should get the dividends up to $5,000 per person per year, in order to be significant to the middle class.  In my book, I identi­fy other bits of monetizable common wealth to do that.  They’d each require different bits of legislation, which wouldn’t happen all at once, but over time — just like Social Security started in 1935 and got larger over time — the same thing would happen with the mutual fund.  It would start modestly and grow larger.

The biggest bit of common wealth that could be a source of dividends is our financial infrastructure. This is something that has been created by our society over the years.  It’s an extremely valuable asset but it doesn’t benefit everybody equally.  It benefits mostly the private banks that have sucked an enormous amount of money out of our financial system.

Just to give one example of that, look at how new money is created in our economy.  Every year, we have to increase our money supply to keep up with growth.  The way it works now is that commercial banks create most of our new money by lending it into existence.  They can do that.  They are required by law to keep about ten percent of their deposits in cash.  But then they can loan out—out of thin air—about ten times that amount.  That’s how new money is created.  It’s created as debt that has to be repaid to private banks.

But that isn’t the only way we can create money.  There’s been lots of thought given to this over the years, in fact by conservative economists, who think that creating new money this way leads to excessive debt, financial bubbles and instability, and that a better way to create new money would be to have the govern-ment simply print it and spend it.  This is not a new idea.  What is new is the twist I put on it.  I say that instead of govern­ment spending new money itself, it could distribute it equally to everyone and let us spend it into the economy.  That would have the same effect as having the government spend it, but we would decide how to spend it rather than the government.

Rosenfeld: You’re not talking about tax increases.  You’re talking about pay-as-you-go financing.  You’re talking about giving consumers more disposable income.

Barnes: Exactly.  There’s nothing in this that would run counter to con­servative principles.  There are no tax increases.  There’s no increase in the size of government.  And there’s no re­distribution. Government isn’t taking money from anybody, it’s just arranging that some income from common wealth is distri-buted equally.

Rosenfeld:  Let’s talk about the obstacles.  Too many people are greedy. Many wealthy people griped about paying higher taxes to pay for Obama­care.  So how do you turn ideas like this into action?

Barnes: The answer is there needs to be a movement.  If you look back at the history of Social Security in the U.S., there were massive popular move­ments prior to 1935 that put pressure on Franklin Roosevelt.  People don’t remember this now, but there was the Townsend Plan move­ment in the 1930s which proposed that every person over sixty receive a check from the government of $200 a month, which they would have to spend within 30 days, the idea being that this would stimulate the economy. And it would help seniors, who didn’t have any source of income in those days.

This movement got millions and millions of supporters.  It was at the same time that Huey Long was advocating “share the wealth” and there were “share the wealth” clubs all over America.  Roosevelt responded in a posi­tive way, but it was movements that made this happen.

Recently we’ve had outbursts like Occupy.  So people are now aware that wealth is concentrating in the top one percent.  But so far, I don’t know exactly why, a large movement for a fairer distribution of income hasn’t emerged.  But it will.

Rosenfeld: You say in your book that people are overwhelmed by prob­lems and aren’t able to see solutions.  I think the elegance of this solution is that it’s simple.

Barnes: That’s right.  It’s my hope that having a simple solution will inspire a movement.  I think people are ready for a solution to inequality.  Everybody knows what the problem is.  But for some reason there’s a void in the realm of solutions.  Everybody in the leadership class now recog­nizes that inequality is a serious problem, but when they get around to talking about solutions, they say maybe we should invest more in education or innovation, or raise the minimum wage.  These are good things to do but they don’t solve the problem.  So I don’t know what’s wrong with our leaders, but they’re not coming up with solutions.