Take a look at this idea of Matt Bruenig of the People's Policy Project. Matt Bruenig wrote an article in the New York Times, about a concept that looks a very interesting prospect and shows a lot of promise. It's called a social wealth fund.
So what is a social wealth fund? It's nothing but a Government-owned portfolio of stocks, bonds and real estate. The dividends from the social wealth fund can be paid directly to the citizens of India. This concept is very similar to a Sovereign Wealth Fund.
Find Sovereign Wealth Funds difficult to understand....I'll explain...Take a look at oil rich countries like Norway, Saudi Arabia and Kuwait which have a lot of wealth from oil and gas (energy) exports.
Most of their wealth comes from Crude Oil, whose prices can be volatile. To protect their wealth from volatility in prices, these countries have Sovereign Wealth Funds which invest in stocks, bonds, real estate, precious metals and so on across the Globe, where they can expect the best returns.
But Sovereign Wealth Funds have a weakness. They are for the rich. A Sovereign Wealth Fund makes the rich citizens even richer and is of no use to the poor. This is where a social wealth fund has an important role to play.
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A social wealth fund is Government owned where investments are made in stocks, bonds, real estate to get good returns. The dividends will be distributed to the citizens of India just like universal basic income.
Universal basic income is money given to you and all citizens of India by the Government, to take care of basic necessities. It would be brilliant if all Government subsidies could be replaced by universal basic income, where the money comes from a social wealth fund.
A social wealth fund can reduce inequality in society.
1. Why Social Wealth Fund?
You must have heard of automation and how it is widely believed that automation is stealing jobs. Automation is slowly replacing human labor and many citizens could lose jobs. How would all these laborers/workers who need jobs for daily sustenance survive?
Automation helps businesses increase profits. Automation increases money flows into corporate businesses, benefiting owners and employees in firms, while land rent goes up helping land owners (real estate).
A social wealth fund invest in stocks, bonds, land and real estate and makes money from the increasing land rent, rising interest income and corporate profits. This money is then transferred back to the very people who have lost jobs because of automation.
If workers lose jobs because of automation and industry makes profits because of automation, the social wealth fund invests in businesses/real estate, transferring the profits to the workers who have lost jobs.
SEE ALSO: Is universal basic income a good idea?
2. Social Wealth Fund Protects Workers and Middle Class
Today, automation and robots are called villains. You and many citizens have accused robots of stealing jobs. As robots become more advanced, many traditional jobs disappear. It is not true that robots are stealing jobs. It's just that you and other citizens are getting into newer kinds of jobs.
But there's cause for concern. With growing automation, there are chances that many laborers and workers in industry could lose jobs. This is a danger to the middle class and something must be done to protect them. At the other extreme, automation puts a lot of wealth into the hands of industry owners, land owners and businessmen. If the middle class loses their livelihood they would protest, forcing the Government to do something.
The answer to this problem could be a social wealth fund where the Government invests in stocks (profits from business), real estate (profits from land) and bonds (interest income) and transfers these profits to the middle class. So the Government doesn't have to interfere, as the middle class gets money from the social wealth fund.
A social wealth fund is an insurance against job loss through automation. You must remember that if automation doesn't cause many job losses, the returns from the social wealth fund would be slightly low. But still there are returns, keeping the middle class happy.
Universal Basic Income can be a solution to the Governments subsidy problem. The money for universal basic income can come from the social wealth fund. If automation causes job losses affecting the middle class, social wealth fund makes up for it, keeping workers and the middle class happy. Be Wise, Get Rich.
Mr. C S Sudheer is the founder and CEO of IndianMoney.com – India’s largest Financial Education Company. He started his career with ICICI Prudential Life Insurance and later on worked with Howden India. After his brief stint in Howden India, he moved on and incorporated Suvision Holdings Pvt Ltd which is the sole promoter of IndianMoney.com. He aims to build a nation that is financially literate with investment savvy citizens.
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