How universal basic capital can help China achieve its ‘common prosperity’ goals
- Given China’s economic success, it can use its huge surpluses to create a fund that provides dividends from capital gains on its investments to every family
- Families could draw on their accumulated wealth for their own needs, from housing to medical care and education, or even to start a business
China’s economy is an enormously productive and dynamic wealth-generating colossus with world-class enterprises. Instead of the benefits of that success flowing only to the shareholders of Alibaba or Tencent, for example, why not spread the equity around to everyone through a common prosperity fund that would provide dividends from capital gains on its investments to every family?
The growth in value of those family accounts over time would accrue to each family, not the state. After a certain vesting period, the family could draw on their accumulated wealth for their own needs, from housing to medical care and education, or even to start a business.
Though its sources of funding are different, Singapore’s Central Provident Fund operates essentially in this way.
In California, where we are based, the idea of universal basic capital is being actively discussed as one approach to stemming inequality there. Governor Gavin Newsom this year proposed using unexpected state surpluses to fund a US$500 college savings account for every low-income student in public schools.
Once seeded, this fund will be collectively invested by professional managers with the value appreciation over the years accruing to the individual to pay for their higher education when they reach college age.
They point out that a US$1,000 investment in 2011 in Tesla would now be worth $85,101; in Facebook, US$14,147; in Apple, US$12,957. If invested in this way, all Californians would benefit from holding a stake in the publicly traded companies residing in the state that are worth US$13 trillion.
It would reduce the burden that would be put on taxation, and on redistribution, while augmenting people’s assets. As Dalio puts it, “by allowing everyone to be a capitalist, it would generate more buy-in within a system that today is being torn apart by inequality”. He also notes that “it’s an odd duck that is neither capitalist nor socialist”.
From the Chinese perspective that sees unity in opposites, the reconciliation of this duality is precisely what the socialist market idea is all about. In many ways, China’s socialist market economy has far more policy leeway to test out this new path than the capitalist nations of the West. This could be one innovative path to “common prosperity” that the policy of the “third distribution” is meant to achieve.
Nicolas Berggruen and Nathan Gardels are co-founders of the Berggruen Institute