-Foreign Affairs
SUMMARY: Without using any familiar terms for Basic Income Guarantee, this article argues for a temporary BIG as a response to the Great Recession (or recessions generally). The U.S. Federal Reserve usually tries to stimulate the economy during recessions through monetary policies (such as reducing interest rates or increasing the money supply). These policies favor large financial institutions and according to authors, Mark Blyth and Eric Lonergan, “stimulating the economy in this way is expensive and inefficient, and can create dangerous bubbles — in real estate, for example — and encourage companies and households to take on dangerous levels of debt.” Instead, the authors argue that the government should simply give cash unconditionally to citizens. They argue, “In the short term, such cash transfers could jump-start the economy. Over the long term, they could reduce dependence on the banking system for growth and reverse the trend of rising inequality. The transfers wouldn’t cause damaging inflation, and few doubt that they would work. The only real question is why no government has tried them.”
Blyth and Lonergan suggest building up a sovereign wealth fund (SWF) capable of paying dividends, much like the Alaska Dividend, funded by its SWF. They claim, “The Bank of England, the European Central Bank, and the Federal Reserve already own assets in excess of 20 percent of their countries’ GDPs, so there is no reason why they could not invest those assets in global equities on behalf of their citizens.” They even suggest that government could take advantage of current near zero interest rates to spend another 20 percent of GDP buying equities, which would be likely to return 100 percent in 15 years. It is uncertain then whether the fund would pay dividends regularly or distribute them only during recessions. In either case, this plan would be a significant step toward a BIG.
Mark Blyth and Eric Lonergan, “Print Less but Transfer More: Why Central Banks Should Give Money Directly to the People.” Foreign Affairs, September/October 2014 Issue.
