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 Similarities
Stakeholder grants share many similarities with Basic Income schemes. They are both universal - paid to everyone regardless of income, employment or family status. Moreover, in theory, either could be adapted into the other. For example, a Basic Income could be rolled up into a simple Stakeholder Grant simply through taking out a loan and then using the Basic Income payments to pay back the loan slowly. Similarly, a Stakeholder Grant could be annuitised - turned into regular payment - through investment in something which gave a regular incomes.
Indeed these similarities have troubled some of the proponents of Basic Income. Philippe Van Parijs, would forbid capitalisation of basic income. However, Ackerman and Alstott, would permit any recipient of their $80,000 Stakeholder Grant scheme to switch to a basic income simply by buying an annuity policy from an insurance company.
Stakeholder Grants
Indeed, proponents of Stakeholder Grants, like Ackerman and Alstott, argue that if the aim of policy-makers is to maximise people's real freedom, then Stakeholder Grants should be preferred to Basic Income.
They argue that "Basic income, in short is a fancy name for a restraint on alienation" (Bruce Ackerman and Anne Alstott, "Why Stakeholding", Havens Center 2002). By this they mean that the recipients of Basic Income - through not receiving their payment as a lump sum - are restricted in their actions. These restrictions are particularly felt by young people who would be required to save to fund any big purchases or investments.
Second, Ackerman and Alstott also argue that a Stakeholder Grant is preferable on administrative grounds. It will prove very difficult to prevent people from turning their Basic incomes into one-off lump sums - it would necessitate both regulation of the legal financial services industry and policing of illegal loan sharks.
Third, their are some inter-related political and resource allocation issues which Basic Income raises which Stakeholder Grants avoid. It seems natural to bring in Stakeholder Grants or Baby Bonds for one generation - no 50 year old would demand a baby bond. However may they demand a Basic Income - raising the immediate cost of introducing the scheme.
Basic Income
But what if the recipient of the Stakeholder Grant blows his or her money - on a flash car, or at the casino? Does society then have no obligation to support him or her?
Some have argued that beyond the prevention of starvation and destitution that then the state's obligation ends.
Others have claimed that a society which wished to promote real freedom could not then ignore the casino loser - and have used this to argue in favour of a Basic Income. Others, such as Stuart White, have argued that there also other responses. First, people could be provided with financial education - as is done in several Individual Development Account schemes in the US. Second, paternalistic restrictions could be introduced which state that the grant can only be spent upon certain activities (see below).
Ackerman and Alstott do provide some ideas on how to minimise the casino scenario. They would ensure that the recipients of the Stakeholder Grant had the capacity to make sensible decisions through restricting receipt to those who have graduated from high school. They would make no pay outs to those with criminal records. And finally, they would make the payments in four annual payments of $20,000 - presumably to encourage learning and reflection if the first instalment is frittered away. But ultimately, they argue, if some waste their grant, that is their decision - and the actions of a minority should not restrict the opportunity to enhance the freedom of the majority.
In the British debate paternalism has entered in a different way - no-one has argued that the Baby Bond should be restricted to school graduates and those with clean criminal records. Instead it has been proposed that there should be restrictions on how the money can be used: solely for higher and further education, a down payment for a house, and for the start up costs of a new business. Mostly on the grounds of administrative simplicity the British Government is proposing no restrictions.
Political aims of the proposals
Ultimately, it has been argued by Carole Pateman, the two proposals differ because of their differing conceptions of citizenship. Both argue for "real freedom" - but the break between work and citizenship is the most radical in Basic Income proposals. The prospect of squandering the Stakeholder Grant or a start-up business going bust - point to Basic Income's key difference - that it would, permanently, give citizens the freedom not to be employed.
Further Reading
Bruce Ackerman and Anne Alstott, "Why Stakeholding", Working Paper for the Havens Center Rethinking Redistribution Conference, 2002 US
Barbara Bergmann, "A Swedish-Style Welfare State or Basic Income?", Working Paper for the Havens Center Rethinking Redistribution Conference, 2002 Sweden
Samuel Brittan, "In Praise of Free Lunches", Time Literary Supplement, 2001 UK
Samuel Brittan and Barry Riley, "A People's Stake in North Sea Oil", Manchester Statistical Society, 1978 UK
Tim Callan, Cathal O'Donoghue, Holly Sutherland and Moira Wilson, "Comparative Analysis of Basic Income Proposals: UK and Ireland", The Microsimulation Unit Discussion Paper MU/RM/31, 1999 Ireland and UK
Tim Callan, Brian Nolan, John Walsh, James McBride and Richard Nestor, "Basic Income in Ireland: A Study for the Working Group on Basic Income", ESRI / Department of the Taoiseach Working Group on Basic Income Report, Ireland
Stephen Cohen, "Inequality and the Case for Redistribution", Working Paper for the Havens Center Rethinking Redistribution Conference, 2002
Dynamic Effects of Basic Income - Phase 2 of a Study for the Working Group on Basic Income, Department of the Taoiseach Working Group on Basic Income Report Ireland
Overview of Study on Basic Income Department of the Taoiseach Working Group on Basic Income Report Ireland
Report for the Working Group on Basic Income - Charles Clark , Department of the Taoiseach Working Group on Basic Income Report Ireland
Carl Emmerson and Matthew Wakefield, "The Savings Gateway and the Child Trust Fund: Is Asset-Based Welfare 'Well-Fair'?", Institute for Fiscal Studies Commentary 85, 2001 UK
Irv Garfinkel, Chien-Chung Huang, and Wendy Naidich, "The Effects of a Basic Income Guarantee on Poverty and Income Distribution", Working Paper for the Havens Center Rethinking Redistribution Conference, 2002
Alanna Hartzok, "The Alaska Permanent Fund: A Model of Resource Rents for Public Investment and Citizen Dividends", Earth Rights US
Patrick Honohan, "A Radical Reform of Social Welfare and Income Tax Evaluated", Administration Vol. 35 No. 1, 1987 Ireland
Julian Le Grand, "Implementing Stakeholder Grants: the British Case", Working Paper for the Havens Center Rethinking Redistribution Conference, 2002 UK
Michael Lewis, "Perhaps There Can be Too Much Freedom", Working Paper for the Havens Center Rethinking Redistribution Conference, 2002
J. Patrick O'Brien and Dennis Olson, "The Alaska Permanent Fund and Dividend Distribution Program", Public Finance Quarterly Vol. 18, no 2 April 1990 US
Carole Pateman, "Democratizing Citizenship: Some Advantages To Basic Income", Working Paper for the Havens Center Rethinking Redistribution Conference, 2002
David Nissan and Julian Le Grand, "A Capital Idea: Start Up Grants for Young People", Fabian Society, 2000 UK
Sheila Shaver and Peter Saunders, "Two Papers on Citizenship And Basic Income", SPRC Discussion Paper 55, 1995 Australia
Guy Standing, "CI, COAG and COG: A comment on a Debate", Working Paper for the Havens Center Rethinking Redistribution Conference, 2002
Phillipe Van Parijs, "Basic Income", Working Paper for the Havens Center Rethinking Redistribution Conference, 2002
Pascale Vielle and Jean-Michel Bonvin, "Activation Policies: A Capabilities Perspective", Working Paper for the Havens Center Rethinking Redistribution Conference, 2002
Allan Warrack and Russell R. Keddie, "Alberta Heritage Fund vs. Alaska Permanent Fund: A Comparative Analysis", APFC US
Amy Wax, "Something for Nothing: Liberal Justice and Welfare Work Requirements", Working Paper for the Havens Center Rethinking Redistribution Conference, 2002
Stuart White, "The Citizen's Stake and the Alienation Objection", Working Paper for the Havens Center Rethinking Redistribution Conference, 2002 UK
Karl Widerquist, "The Stakeholder Account System: A proposal for a hybrid of Basic Income and Stakeholder Grants for Britain and the United States", Working Paper for the Havens Center Rethinking Redistribution Conference, 2002 UK and US
Edward Wolff, "Stakeholding and Inheritances", Working Paper for the Havens Center Rethinking Redistribution Conference, 2002 US
Erik Olin Wright, "Basic Income, Stakeholder Grants, and Class Analysis", Working Paper for the Havens Center Rethinking Redistribution Conference, 2002
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