Alaska PFD program serves as model for developing countries

Alaskans all over the state are eagerly awaiting the sweet sound of cash filling their pockets and bank accounts. The Permanent Fund Dividend (PFD), totaling $1,281 for this year, will be direct-deposited and mailed out on Oct. 7.

The PFD has been an annual Alaskan custom for over 30 years, and has inevitably caught the eyes of other countries. In order to fulfill their questions about the program, Dr. Scott Goldsmith, UAA economics professor, traveled to the 13th Basic Income Earth Network Congress at the University of Sao Paulo in Brazil to give a presentation on the PFD.

“There is growing interest around the world, particularly in developing countries like Brazil, in establishing what is called a ‘basic income,’” Goldsmith said. “This is a cash payment to every citizen with no strings attached.”

“No string attached” means that there is no income test so that it only goes to the poor, no requirement that people seek employment, etc, according to Goldsmith.
This is why so many other countries are optimistic about implementing this program. It could mean a big turn-around for the economy in impoverished countries.

“It provides everyone with enough cash to escape many of the problems associated with extreme poverty, like poor diet, lack of education, inability to acquire assets, etc,” Goldsmith said. “The Alaska PFD is the only working example in the entire world of such a program, so people are very interested in learning about it.”

His presentation is specifically targeted toward the history of the PFD, its effects on our society and what impact it could have on our future, therefore helping people to consider how it might possibly effect another country’s culture.
The people who attended the Sao Paulo presentation were very responsive.

“They were particularly interested in the fact that the dividend helps to level the income distribution in the state, providing a ‘floor’. They were also interested in how the dividend is important to the income of rural Alaskans,” Goldsmith said.

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He explains why it could be a good program to adopt and why it could have negative effects. To this, some might wonder what negative results could be derived from the PFD.

Goldsmith describes one problem as a “population magnet,” meaning that people come to Alaska just to receive free money. In order to discourage that, a rule was put into place that in order to be eligible, a person must live in Alaska for a full January to December year. So if a person comes to Alaska in February 2009 and is still there after February 2010, they will be ineligible for the 2010 dividend. However if they stay until February 2011, they will be eligible for the 2011 dividend.

Another dilemma speculated to be caused by the PFD is an increased birth rate. While this may seem fairly unlikely for Alaska, according to Goldsmith, this could potentially cause a major problem in other countries that already have high birth rates.
Besides population problems, implementing the PFD could also have negative economical effects, as well.

Goldsmith observes in his presentation the extreme inflation in the local communities cause by the PFD.

“When the annual dividend payment is distributed, retailers compete to lure recipients to consume as much of their checks as possible,” he said.

So instead of putting the money into savings, or paying off important bills, many people opt to spend their checks on material items.
While the last thought can be negative, it also has a positive side because it can provide a sense of economical stability, especially for a diminished economic culture.

All ideas must be taken into consideration in order to decide on a program that will have such a big impact on a society.

Goldsmith plans to further his study and put his findings into a book.

“Several conference participants are working on a book on the Alaska Permanent Fund Dividend, and I will be writing a chapter, largely based on the San Paulo paper,” Goldsmith said. “The purpose of the book is to explain the Permanent Fund and the dividend and discuss its applicability in other parts of the world.”

If people had a better understanding of the money they are receiving, there might be a better understanding on how it is continuously impacting our society.
While the program has flourished for many years, many wonder how long it will last. Goldsmith fears that we may face a problem continuing this program in the future.

“Here in Alaska we face our own economic predicament with the PFD. The state faces a dilemma in the future as oil revenues fall with declining production,” Goldsmith said. “The PFD was established to provide a stream of revenues to replace oil, but now we use that stream of revenues to pay the dividend. So how will we pay for public services in future years?”
It is a grim truth that many need to take the time and think about.

How would many Alaskans, especially in rural areas where it is the main source of income, cope? How would our state’s economy be affected if this program ceased to exist? Only time will tell.

Goldsmith’s closing words in his presentation were, “[The PFD] remains a controversial program because it challenges traditional economic and social relationships. If asked, many Alaskans would choose to eliminate the program; but just a many would probably vote to enshrine it in the state constitution.”
To view Dr. Scott Goldsmith’s presentation in full, the entire PDF version is available online at http://www.iser.uaa.alaska.edu/Publications/bien_xiii_ak_pfd_lessons.pdf.