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Thursday, August 12, 2010

An Iranian Basic Income?

This article by Karl Widerquist, editor of the US Basic Income Guarantee (USBIG) e-newsletter - http://www.usbig.net.

Iran: On the verge of introducing the world’s first national basic income

Iran is on the verge of becoming the first country to introduce a basic income. This dramatic development is happening with little international attention and for reasons that have little to do with the international discussion of basic income.

Iran is trying to get rid of a horribly inefficient system of implicit fuel subsidies. As one of the world’s largest oil producers, the Iranian government makes about $70 billion per year from the oil exports, but it loses an estimated $100 billion dollars per year (30% of its GDP) by directing its state-owned enterprises to sell various products, mostly gasoline, far below their international price. Thus, Iran’s system of subsidizing the consumption of fuel at home actually costs more than Iran makes exporting fuel abroad.

This system of subsidies is one of the main benefits Iranians receive from their government, and many Iranians have grown dependent on cheap fuel and other commodities. The government cannot get rid of the subsidies without providing something else for the people to cushion the blow. After several years of debate, basic income has emerged as the only realistic form of compensation for the withdrawal of subsidies.

Thus, basic income has arrived in Iran through the backdoor, sidestepping most of the issues usually discussed in the international debate. The money will come from eliminating obviously inefficient subsidies. The money should go to everyone, because everyone will suffer from the loss of the subsidies, and everyone has equal claim to own the state enterprises. The money can’t be targeted because the government doesn’t have the ability to collect the necessary information to ensure that targeting is accurate.

According to the new law, the government will use half of the increased revenue for other government services, and it will distribute the other half of the money directly to the people as a grant to all who apply. When fully phased in, that amount has the potential to provide a basic income of $60 per person per month ($720 per year) or more. This figure is still well below the poverty line, but it is a very significant amount. Iran has a per capita income of only $3,500 per year, less than one-tenth of Alaska’s per capita GDP of $42,000. Nearly 70 million people will be eligible for the Iranian basic Income, more than 100 times the number who receive the Alaska dividend. Considering also the enormous difference in the cost of living in the two places, it is clear than a $720 basic income in Iran will be more significant than the existing $1000 to $2000 dividend in Alaska.

There are drawbacks to the current plan. Although every citizen of Iran is entitled to the grant, the money will be paid to “heads of households,” who are overwhelmingly male. Thus, some men may have the power to keep their wives, children, and other dependents from benefiting from the grant. Also, foreigners living in Iran (mostly Iraqi and Afghan refugees) will not receive the grant even though they will suffer as much as other residents from the loss of the subsidy.

The phase-in is scheduled to begin sometime between September 2010 and March 2011. There is no clear word on how long the phase-in will take. The law has been passed; more than 90% of Iranians have already applied for their grants, but the Iranian political system is chaotic, and there could yet be substantial changes. We can’t be sure exactly what will happen until it happens. We can only wait and see.

The source for this article is “The ‘Basic Income’ Road to Reforming Iran’s Subsidy System,” by Hamid Tabatabai, paper presented at the 13th International Congress of the Basic Income Earth Network (BIEN), June 30 – July 2, 2010. There is much more to this issue than I have had room to discuss here. For more information, or for a copy of that paper, please contact Hamid Tabatabai at hamtab@gmail.com.

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