Matt Bruenig of the People’s Policy Project recently wrote an article in The New York Times, Suggested an idea of a social wealth fund—a government-owned portfolio of stocks, bonds and real estate whose dividends would be paid out directly to the citizenry.
This is similar to what economist Miles Kimball and others have been calling a sovereign wealth fund, which is the typical name for funds that some natural-resource exporters use to invest the proceeds from their state-owned oil and gas companies.
- The state-operated funds of countries such as Saudi Arabia are used in a discretionary manner, which often means their benefits end up flowing to the country’s richest. A social wealth fund, while having the same acronym, would guarantee that the income from capital assets gets distributed widely—perhaps as a universal basic income. A US social wealth fund would rely on tax revenue to purchase assets, rather than natural resource revenue, but the principle is the same.
- Bruenig frames a social wealth fund as a way to combat inequality and provide macroeconomic stability—and it certainly would do both of those things. But it’s also a way to insure the American middle and working class against technological change.
Importance of a social wealth fund:
- As technologies such as machine learning become more advanced, there’s a real possibility that automation could start making human labour superfluous on a large scale. So it’s important to have some way to protect a broad swathe of the populace against this scenario.
- A social wealth fund provides just such a way. If automation replaces human labour, it means the labour share of income will continue to fall.
- That would mean the share of income going to capital owners—corporate profit, land rent and interest income—would go up. A social wealth fund would automatically redirect that increased capital income back to the same people whose labour income fell, cancelling out much or all the harmful impact. In other words, a social wealth fund is a way to redistribute benefits of the robots.
- The beauty of this policy is that it doesn’t require the government to take a stand on whether automation will hurt workers. If automation proves to be a boon for workers instead of a threat, as in the past, then wages will stay high and the social wealth fund’s payouts will be more modest. Either way, workers or the middle class are protected against change that’s almost impossible to predict.
- A social wealth fund would protect against other big economic changes. Labour’s share of income is already going down—probably due to globalization, industrial concentration, falling worker bargaining power, land price appreciation and other forces.
- Every one of those trends sends more money into the hands of shareholders, landlords and bond-holders. So a social wealth fund would provide insurance against the future intensification of any or all of these developments.
- So the social wealth fund seems like a great idea. But there are also difficulties and dangers involving its implementation. The main challenge is the issue of corporate control.
A social wealth fund—or an army of social wealth funds—is still a fundamentally good and under-appreciated idea. It could be just what the country needs to reverse the negative trends that have afflicted the middle and working classes during the past several decades.