Basic Capital: A Policy Whose Time Has Come . . . and Gone?

Introduction

It is not often that radical ideas entertained by egalitarian political theorists and philosophers have an immediate impact on public policy. This paper looks at how one such proposal, the idea of a universal capital grant or "basic capital," did apparently impact public policy in the UK in the form of the Child Trust Fund (CTF) enacted under the previous, Labour government. Some supporters of the CTF (such as the author) viewed it as potentially an important first-step towards the creation of something like a "property-owning democracy."¹

The victory, however, was mixed and looks to have been short-lived. The new Coalition government abolished the CTF in 2010 as part of its austerity program. In light of this, the paper considers the future prospects for basic capital. Can philosophy once again connect with real politics? If so, how?

What is Basic Capital? Why is it Important?

Let's begin by clarifying what basic capital is and why it seems to be an important contribution to the institutional framework of a just society.

Many readers will be familiar with the idea of unconditional basic income. Every citizen receives a periodic, cash income grant from the state which is unconditional with respect to means (income and wealth from other sources) and employment history or willingness to take employment. Basic capital (BC hereafter) is similar except that the grant takes the form of a one-off lump-sum payment to the citizen rather than a periodic income grant. Typically, the proposal is to endow citizens with BC early in their adult years. Sometimes proponents of BC argue that the grant should not be available simply as cash but that it should be limited to a range of uses. The menu of options might include: paying for higher education or vocational training, putting down a deposit on a house, or setting up a new business. While a few see the policy as an alternative to more familiar welfare state arrangements, others view the idea more as a complement to income transfers and public services.

The proposal is usually traced back at least as far as Tom Paine's Agrarian Justice of 1797, in which Paine proposed:

". . . A PLAN FOR MELIORATING THE CONDITION OF MAN, BY CREATING IN EVERY NATION A NATIONAL FUND, To pay to every Person, when arrived at the Age of TWENTY-ONE YEARS, the Sum of FIFTEEN POUNDS Sterling, to enable HIM or HER to begin the World!"²

Some two hundred years later, Paine's idea was taken up by Bruce Ackerman and Anne Alstott in their 1999 book, The Stakeholder Society.³ Ackerman and Alstott proposed that every US citizen should receive a grant of $80,000 on maturity. Receiving the full grant would be conditional on completing High School and not having a criminal record. Young adults would only get full control of the capital in their early twenties, but would be able to access it before then to help finance higher education. Ackerman and Alstott proposed that the BC be funded initially from a wealth tax. In the longer term, the policy would be financed out of a tax on the estates of those who had originally received the stakeholder grant. Thus, as with Paine, Ackerman and Alstott envisage a system of citizen's inheritance in which a portion of intergenerational wealth transfers is channelled through the state to establish a reasonable endowment of wealth for all in early adulthood.

Ackerman and Alstott based their case for BC on two main ethical considerations: equality of opportunity and freedom.

Let's start with the argument from equality of opportunity. The initial normative premise, of course, is that justice requires (amongst other things) some form of equality of opportunity. By this is meant not simply formal equality to compete for jobs and offices, but a more substantive equality that weakens the connection between chances for occupational attainment and parental social class.⁴ The degree to which society satisfies this conception of equal opportunity is affected—or so it is claimed—by a range of factors which...