Yanis Varoufakis (Ιωάννης Βαρουφάκης) proposes to fund a universal basic income (UBI) using dividends from a commons capital depository, essentially channeling a percentage of shares issued at an initial public offering (IPO) into a depository. He argues that taxing robots is difficult in practice, that funding UBI through income tax is untenable, and taxing capital/wealth is difficult in practice. Rather, he proposes (see full article for context; emphasis mine):

So how should society be compensated? Taxation is the wrong answer. Corporations pay taxes in exchange for services the state provides them, not for capital injections that must yield dividends. There is thus a strong case that the commons have a right to a share of the capital stock, and associated dividends, reflecting society’s investment in corporations’ capital. And, because it is impossible to calculate the size of state and social capital crystalized in any firm, we can decide how much of its capital stock the public should own only by means of a political mechanism.

A simple policy would be to enact legislation requiring that a percentage of capital stock (shares) from every initial public offering (IPO) be channeled into a Commons Capital Depository, with the associated dividends funding a universal basic dividend (UBD). This UBD should, and can be, entirely independent of welfare payments, unemployment insurance, and so forth, thus ameliorating the concern that it would replace the welfare state, which embodies the concept of reciprocity between waged workers and the unemployed.

Has anything like his proposed commons capital depository ever been tried in practice? Although he proposes it in the context of UBI, as a form of/alternative for taxation it could be introduced independently.

Is there any historical precedent for such a model? Are there any economic studies into what the effects would be to shift government revenue from one based on income or capital gains tax, to one such as proposed by Varoufakis?

  • $\begingroup$ I'm curious. Why to add his Greek name? $\endgroup$ – luchonacho Sep 11 '17 at 9:20
  • $\begingroup$ @luchonacho Because he's Greek. $\endgroup$ – gerrit Sep 25 '17 at 14:51

Has anything like his proposed commons capital depository ever been tried in practice?

Sweden had such experiment, but in a much lower scale than it was originally planned and of what Varoufakis is calling for. This was ultimately due to the opposition of employers/capitalists, and the election of a right-wing government.

The idea came from the trade unions in Sweden, and a proposal was presented in 1975 by the economist Rudolf Meidner. According to this article, its goals were:

  • to counteract the concentration of ownership which, from a general equality perspective, must be regarded as unacceptable;

  • to increase wage earners’ influence in economic life through ownership of capital;

  • to facilitate the continuation of the solidaristic wage policy by a mechanism to deal with excess profits (which could also be seen as an element in lessening the concentration of capital)

The fund was to be accumulated by holding a proportion of companies’ profits (originally, 20 per cent before tax), which were to be issued as new shares. This was basically an expansion of equity, to be owned commonly by all workers in the economy. After a few decades, this method would leave most of the (equity-based) companies in the hands of workers. So in effect, this was ultimately a socialisation of the ownership of firms. Quite a bold program.

In the end, a reduced version was introduced in 1984, which lasted only for seven years. The fund was privatised by a right-wing government in 1992.

You can read more about this here and here.

More generally, there are plenty of countries with a so called Sovereign Wealth Fund (SWF). Many of these are financed with natural resources like oil (Norway) and minerals (Chile, copper), either coming from special taxation or royalties, or because firms are owned by the state. These funds tend to be invested in a multitude of assets, not only equity. As such, they are not directly attempting to own capital (as in the case of Sweden). I am not aware of any SWF that yields a citizen's dividend though. Many are used as a buffer in case of an economic crisis, or reinvested in other activities like advanced human capital (e.g. Chile).

  • $\begingroup$ Alaska's SWF (funded by oil revenues) pays a citizen's dividend pfd.alaska.gov $\endgroup$ – Steve222 May 8 '20 at 15:22

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.