Social dividend

The social dividend is the return on the capital assets and natural resources owned by society in a socialist economy. It refers to the distribution of the property income generated by publicly owned enterprises in the form of a dividend payment to each citizen, most notably appearing as a component in proposed models of market socialism.^[1] A social dividend constitutes the individual's share of the capital and resources owned by society. The basic income guarantee is a related and sometimes overlapping concept, but is distinguished from a social dividend in that a basic income can be financed through a broader range of sources and does not necessarily imply social ownership.^[2]

Social dividends are a key feature of many market socialist models characterized by publicly owned enterprises operating to maximize profit within a market economy. In such a system, the social dividend would grant every citizen a share of the property income generated by publicly owned assets and natural resources, which would be received alongside any labor income (wages and salaries) earned through employment.^[3] A social dividend would eliminate the need for the social welfare and income redistribution programs, as well as eliminating their administrative costs, that exist in capitalist economies. Models of market socialism featuring social dividend schemes differ from cooperative variants of market socialism. In cooperative variants, the profits of each firm would be distributed among the members/employees of each individual firm as opposed to the public at large.^[4]

The social dividend concept has not yet been applied on any large scale in any national economy. In both the former Soviet-type economies and Western mixed economies, the net earnings of state enterprises are considered a source of public revenue and are spent directly by the government to finance various public goods and services.^[5]

Origins of the concept

As a precursor to the social dividend concept, Léon Walras, one of the founders of neoclassical economics who helped formulate the general equilibrium theory, argued that free competition could only be realized under conditions of state ownership of natural resources and land. Walras argued that nationalized land and natural resources would provide a source of income to the state that would eliminate the need for income taxes.^[6]

For Karl Marx, property income is a component of surplus value, which refers to the net value above the total wage bill. The surplus value is distributed among a small minority of passive owners, or capitalists. The capitalists appropriate the product of social labor by holding ownership titles to the means of production. In Marx's view, socialism implied an end to this class dynamic - the surplus value would be appropriated by the working class as a whole. However, even though Marx was opposed to the distribution of property income under capitalism, this was not the instrumentality of capitalist collapse nor was it the primary reason for the desirability of the abrogation of capitalism. In Marx's view, capitalism was not to be opposed due to any supposedly moral defect in its distribution, but because its underlying dynamic of capital accumulation and surplus value appropriation was unstable and ultimately unsustainable.^[7]

The neoclassical socialist economist Oskar Lange is credited with the first use of the phrase "social dividend". In Lange's model of socialism, the social dividend referred to the accumulation of profit and rent by publicly owned enterprises minus investment.^[8]

Contemporary proposals

Notable economists and political scientists that have included social dividend system in their models of socialism include Oskar Lange, Abba Lerner, James Meade, James Yunker, John Roemer, Pranab Bardhan and David Schweickart.^[2]

The American economist James Yunker outlined a model of socialism, dubbed Pragmatic market socialism, that featured a social dividend payment. Yunker's model of socialism is almost identical to present-day capitalism, with enterprises organized as corporations with similar management structures, the major difference being a public entity would own their shares. The difference between capitalism and this form of market socialism involves the distribution of property income: the property return generated by these corporations goes to the population as a whole instead of an owning minority.^[9]

In John Roemer's and Pranab Bardhan's model of market socialism, public ownership takes the form of public ownership of shares in publicly listed firms. The dividend payments, instead of accruing to a small class of private owners, are divided equally among all adult citizens. The social dividend supplements wages and income derived from personal savings.^[10]

The Nobel Laureate economist James Meade advocated reversing the nationalization process within the United Kingdom as a means to finance a social dividend. After the Second World War, British industries that were nationalized conferred control rights to the state but not income rights, so the state was not granted free use of its profits. Meade advocated what he referred to as "topsy-turvy nationalization" where the state acted as a shareholder, receiving residual income from its enterprises without being granted control rights. The proceeds from the state-owned enterprises would finance a social dividend, providing flexibility to labor markets while preventing the government from micromanaging the enterprises it owned.^[11]

In Beyond the Profits System: Possibilities for the Post-Capitalist Era, economist Harry Shutt advocates a basic income system to replace all existing state social security and welfare functions with the exception of childcare. This measure would be financed by the public and cooperative ownership of enterprises, and goes alongside the end of capital accumulation as the driving force in the economy. Taken together, these measures would constitute a post-capitalist economy.^[12]

There are many institutional forms a social dividend can take. Generally, they are regarded as being universally distributed without constraint, even to unemployed individuals. However, the exact institutional arrangement varies among different proposals, for example, there might be certain constraints on the receipt of the dividend payment imposed on the unemployed.^[13]

In practice

Systems similar to a social dividend have been implemented to some degree on the basis of public ownership of natural resources, most notably in Alaska (Alaska Permanent Fund) and in Norway (The Government Pension Fund of Norway).

Criticism

Ludwig von Mises claimed that private dividends are necessary for calculating the opportunity costs of capital goods. According to Mises, financial markets redirect resources from less efficient areas of industry to more efficient areas.^[14]

"It is above all necessary that capital be withdrawn from particular undertakings and applied in other lines of production ... [This] is essentially a matter of the capitalists who buy and sell stocks and shares, who make loans and recover them, who speculate in all kinds of commodities”.^[15]

Attempts to replace private dividends with social dividends lead to either dis-coordinated bureaucratic planning or bureaucratic rigidity.^[16] Mises rejected Lange's proposal because financial markets provide signals that Langian market socialism lacks:

"Those suggesting a quasi market for the socialist system have never wanted to preserve the stock and commodity exchanges, the trading in futures, and the bankers and moneylenders as quasi-institutions. One cannot play speculation and investment. The speculators and investors expose their own wealth, their own destiny..." ^[17]

MacKenzie asserts that John Roemer's proposed "socialist stock market" fails to provide a sufficient basis for efficient capital investment, and that equalization of stock ownership precludes an efficient division of labor between those who do and do not have a comparative advantage in planning capital projects.^[18]

Related concepts

Social dividends have an alternate definition which may be described as the citizen's egalitarian share of surplus tax revenue. This form of social dividend exists within the framework of capitalism since productive assets would be privately owned, operated for private profits and would not directly finance the social dividend.

References

^ The Social Dividend Under Market Socialism, by Yunker, James. 1977. Annals of Public and Cooperative Economics, Vol. 48, No. 1, pp. 93-133: "The term ‘social dividend’ was introduced in 1936 by Oskar Lange in his milestone essay ‘On the Economic Theory of Socialism’. It refers to the direct distribution equally among the citizen body of property income accruing to the state-owned enterprises under socialism."
^ ^a ^b Social Dividend versus Basic Income Guarantee in Market Socialism, by Marangos, John. 2004. International Journal of Political Economy, vol. 34, no. 3, Fall 2004.
^ Philosophy and the Problems of Work: A Reader, 2001, by Kory Schaff. ISBN 978-0742507951. (P.344): "A citizen in this society will receive income from three sources: wage income, which will vary depending on her skill and the amount of time she works, income forthcoming by savings, which will also vary across households, and the social dividend, that will be, in principle, approximately equal across households."
^ Social Dividend versus Basic Income Guarantee in Market Socialism, by Marangos, John. 2004. International Journal of Political Economy, vol. 34, no. 3, Fall 2004: "It is argued that market socialism is the only rational form of socialism, and that market socialism with labor-managed firms is by far the best form of market socialism (Jossa and Cuomo 1997: xiv). This is something quite different from the theoretical models of market socialism debated and quite different from command economies (Schweickart 1993: 90). The market socialist model proposed in this paper differs from the preceding models in that it does away with the J. E. Roemer–P. K. Bardhan–J. A. Yunker social dividend-coupon economy and substitutes it with a basic income guarantee."
^ The Social Dividend Under Market Socialism, by Yunker, James. 1977. Annals of Public and Cooperative Economics, Vol. 48, No. 1, pp. 93-133: "The social dividend concept has not yet been applied in any important real-world context. Both in Communist and non-Communist countries, the net earnings of state firms are considered a source of public revenue and are spent directly by the government on various public goods and services."
^ Bockman, Johanna (2011). Markets in the name of Socialism: The Left-Wing origins of Neoliberalism. Stanford University Press. p. 21. ISBN 978-0-8047-7566-3. For Walras, socialism would provide the necessary institutions for free competition and social justice. Socialism, in Walras's view, entailed state ownership of land and natural resources and the abolition of income taxes. As owner of land and natural resources, the state could then lease these resources to many individuals and groups, which would eliminate monopolies and thus enable free competition. The leasing of land and natural resources would also provide enough state revenue to make income taxes unnecessary, allowing a worker to invest his savings and become 'an owner or capitalist at the same time that he remains a worker. {{cite book}}: Cite has empty unknown parameter: |month= (help)
^ The Social Dividend Under Market Socialism, by Yunker, James. 1977. Annals of Public and Cooperative Economics, Vol. 48, No. 1, pp. 93-133: "It is abundantly clear from the writings of the founder of scientific socialism, Karl Marx, that he viewed the distribution of property income under capitalism as morally reprehensible. To Marx, property return must be identified with ‘surplus labor value’, namely the excess of total labor value over the total wage bill under conditions of a subsistence individual wage. This surplus value is distributed over a small minority of owning capitalists. Although the value is created by labor and is therefore the legitimate property of labor, the capitalists are able to extort it from the proletariat by virtue of their ownership of the capital instruments of production...Nevertheless, while Marx employed the surplus labor value theory to undermine the moral foundations of capitalism, it was, in his view, neither to be the instrumentality of capitalist collapse, nor was it the primary reason for the desirability of the abrogation of capitalism...…Surplus value was seen as providing the fuel for the cyclical engine and therefore as the fundamental cause of the impeding dissolution of capitalism."
^ On the Economic Theory of Socialism, by Lange, Oskar. 1936. The Review of Economic Studies, Vol. 4, No. 1: "It seems, therefore, convenient to regard the income of consumers as being composed of two parts: one part being the receipts for the labour services performed and the other part being a social dividend constituting the individual's share in the income derived from the capital and the natural resources owned by society."
^ The Social Dividend Under Market Socialism, by Yunker, James. 1977. Annals of Public and Cooperative Economics, Vol. 48, No. 1, pp. 93-133: "This in turn suggests a ‘market socialist’ blueprint – the socialist system should utilize the same market allocation devices as are used presently under capitalism. The only difference is that property return (profits, rent and interest) generated by these allocation devices goes to the population as a whole rather than to an owning minority as under capitalism."
^ Philosophy and the Problems of Work: A Reader, 2001, by Kory Schaff. ISBN 978-0742507951. (P.344): "The second socialist aspect of this economy is that the profits of firms will not go to a small fraction of the citizenry but will be divided, after taxes, more or less equally among all adult citizens, taking a form that Oskar Lange called a social dividend."
^ Whither China?: Intellectual Politics in Contemporary China, 2002, by Xudong Zhang. Duke University Press. ISBN 978-0822326595. (P.105-106): "...the UK nationalized its steel, electricity, railway and coal industries after World War II but it was only a residual controlled without residual claims, for the state received no free use of its profits...James Meade, a Nobel Laureate in economics, proposes to reverse the U.K. nationalization process. What he calls 'topsy-turvy nationalization' is essentially giving residual claims directly to the state as shareholder without granting control rights. Major benefits of topsy-turvy nationalization, according to Meade, are two: government use of the proceeds of its shareholding to finance a 'social dividend,' which will provide flexibility to the labor markets by granting minimum income to everyone; and government separation from micromanaging business decisions for the companies that it owns in part."
^ Shutt, Harry (March 15, 2010). Beyond the Profits System: Possibilities for the Post-Capitalist Era. Zed Books. p. 124. ISBN 978-1848134171. a flat rate payment as of right to all resident citizens over the school leaving age, irrespective of means of employment status...it would in principle replace all existing social-security entitlements with the exception of child benefits.
^ Makwana, Rajesh. "From Basic Income to Social Dividends: Sharing the Value of Common Resources". Medium. Retrieved 8 May 2015.
^ Ludwig von Mises "Socialism, an Economic and Sociological Analysis" 1922, reprinted by Liberty Press, 1981"
^ Mises 1922 p121"
^ Ludwig von Mises "Bureaucracy" 1944"
^ Mises 1949 p705
^ D.W. MacKenzie "Social Dividends, Entrepreneurial Rules, and Bureaucratic Rules, Eastern Economic Journal, March 2016"

External links

Progress.org
Intelligent-systems.com.ar
Liberty Fund
Who framed 'social dividend'?, Walter Vantrier, 2002

[1] The Social Dividend Under Market Socialism, by Yunker, James. 1977. Annals of Public and Cooperative Economics, Vol. 48, No. 1, pp. 93-133: "The term ‘social dividend’ was introduced in 1936 by Oskar Lange in his milestone essay ‘On the Economic Theory of Socialism’. It refers to the direct distribution equally among the citizen body of property income accruing to the state-owned enterprises under socialism."

[Social_Dividend_versus_Basic_Income_Guarantee_in_Market_Socialism,_2004-2] Social Dividend versus Basic Income Guarantee in Market Socialism, by Marangos, John. 2004. International Journal of Political Economy, vol. 34, no. 3, Fall 2004.

[3] Philosophy and the Problems of Work: A Reader, 2001, by Kory Schaff. ISBN 978-0742507951. (P.344): "A citizen in this society will receive income from three sources: wage income, which will vary depending on her skill and the amount of time she works, income forthcoming by savings, which will also vary across households, and the social dividend, that will be, in principle, approximately equal across households."

[4] Social Dividend versus Basic Income Guarantee in Market Socialism, by Marangos, John. 2004. International Journal of Political Economy, vol. 34, no. 3, Fall 2004: "It is argued that market socialism is the only rational form of socialism, and that market socialism with labor-managed firms is by far the best form of market socialism (Jossa and Cuomo 1997: xiv). This is something quite different from the theoretical models of market socialism debated and quite different from command economies (Schweickart 1993: 90). The market socialist model proposed in this paper differs from the preceding models in that it does away with the J. E. Roemer–P. K. Bardhan–J. A. Yunker social dividend-coupon economy and substitutes it with a basic income guarantee."

[5] The Social Dividend Under Market Socialism, by Yunker, James. 1977. Annals of Public and Cooperative Economics, Vol. 48, No. 1, pp. 93-133: "The social dividend concept has not yet been applied in any important real-world context. Both in Communist and non-Communist countries, the net earnings of state firms are considered a source of public revenue and are spent directly by the government on various public goods and services."

[6] Bockman, Johanna (2011). Markets in the name of Socialism: The Left-Wing origins of Neoliberalism. Stanford University Press. p. 21. ISBN 978-0-8047-7566-3. For Walras, socialism would provide the necessary institutions for free competition and social justice. Socialism, in Walras's view, entailed state ownership of land and natural resources and the abolition of income taxes. As owner of land and natural resources, the state could then lease these resources to many individuals and groups, which would eliminate monopolies and thus enable free competition. The leasing of land and natural resources would also provide enough state revenue to make income taxes unnecessary, allowing a worker to invest his savings and become 'an owner or capitalist at the same time that he remains a worker. {{cite book}}: Cite has empty unknown parameter: |month= (help)

[7] The Social Dividend Under Market Socialism, by Yunker, James. 1977. Annals of Public and Cooperative Economics, Vol. 48, No. 1, pp. 93-133: "It is abundantly clear from the writings of the founder of scientific socialism, Karl Marx, that he viewed the distribution of property income under capitalism as morally reprehensible. To Marx, property return must be identified with ‘surplus labor value’, namely the excess of total labor value over the total wage bill under conditions of a subsistence individual wage. This surplus value is distributed over a small minority of owning capitalists. Although the value is created by labor and is therefore the legitimate property of labor, the capitalists are able to extort it from the proletariat by virtue of their ownership of the capital instruments of production...Nevertheless, while Marx employed the surplus labor value theory to undermine the moral foundations of capitalism, it was, in his view, neither to be the instrumentality of capitalist collapse, nor was it the primary reason for the desirability of the abrogation of capitalism...…Surplus value was seen as providing the fuel for the cyclical engine and therefore as the fundamental cause of the impeding dissolution of capitalism."

[On_the_Economic_Theory_of_Socialism,_1936-8] On the Economic Theory of Socialism, by Lange, Oskar. 1936. The Review of Economic Studies, Vol. 4, No. 1: "It seems, therefore, convenient to regard the income of consumers as being composed of two parts: one part being the receipts for the labour services performed and the other part being a social dividend constituting the individual's share in the income derived from the capital and the natural resources owned by society."

[9] The Social Dividend Under Market Socialism, by Yunker, James. 1977. Annals of Public and Cooperative Economics, Vol. 48, No. 1, pp. 93-133: "This in turn suggests a ‘market socialist’ blueprint – the socialist system should utilize the same market allocation devices as are used presently under capitalism. The only difference is that property return (profits, rent and interest) generated by these allocation devices goes to the population as a whole rather than to an owning minority as under capitalism."

[10] Philosophy and the Problems of Work: A Reader, 2001, by Kory Schaff. ISBN 978-0742507951. (P.344): "The second socialist aspect of this economy is that the profits of firms will not go to a small fraction of the citizenry but will be divided, after taxes, more or less equally among all adult citizens, taking a form that Oskar Lange called a social dividend."

[11] Whither China?: Intellectual Politics in Contemporary China, 2002, by Xudong Zhang. Duke University Press. ISBN 978-0822326595. (P.105-106): "...the UK nationalized its steel, electricity, railway and coal industries after World War II but it was only a residual controlled without residual claims, for the state received no free use of its profits...James Meade, a Nobel Laureate in economics, proposes to reverse the U.K. nationalization process. What he calls 'topsy-turvy nationalization' is essentially giving residual claims directly to the state as shareholder without granting control rights. Major benefits of topsy-turvy nationalization, according to Meade, are two: government use of the proceeds of its shareholding to finance a 'social dividend,' which will provide flexibility to the labor markets by granting minimum income to everyone; and government separation from micromanaging business decisions for the companies that it owns in part."

[12] Shutt, Harry (March 15, 2010). Beyond the Profits System: Possibilities for the Post-Capitalist Era. Zed Books. p. 124. ISBN 978-1848134171. a flat rate payment as of right to all resident citizens over the school leaving age, irrespective of means of employment status...it would in principle replace all existing social-security entitlements with the exception of child benefits.

[medium-13] Makwana, Rajesh. "From Basic Income to Social Dividends: Sharing the Value of Common Resources". Medium. Retrieved 8 May 2015.

[14] Ludwig von Mises "Socialism, an Economic and Sociological Analysis" 1922, reprinted by Liberty Press, 1981"

[15] Mises 1922 p121"

[16] Ludwig von Mises "Bureaucracy" 1944"

[17] Mises 1949 p705

[18] D.W. MacKenzie "Social Dividends, Entrepreneurial Rules, and Bureaucratic Rules, Eastern Economic Journal, March 2016"

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