Book review of Irrweg Grundeinkommen: Die große Umverteilung von unten nach oben muss beendet werden [The Basic Income Aberration: The Great Redistribution from Bottom to Top Must be Ended] by Heiner Flassbeck, Friederike Spiecker, Volker Meinhardt and Dieter Vesper (2012), Frankfurt, Westend
Heiner Flassbeck, Friederike Spiecker, Volker Meinhardt and Dieter Vesper wrote a book with two goals. Firstly, they are against the change of income distribution in the last decades (“the great redistribution from bottom to top”). The authors’ criticism of the increasing inequality is shared by many advocates of an unconditional basic income and opens them for the basic income debate. Nevertheless – and this is the second objective of the book – the authors reject the basic income.
This economic book focuses on the question of income distribution. Quite rightly, the question of distribution is thematicized as a central economic question that cannot be separated from the economic system as a whole. “The way of distributing income is crucial for the functioning of the economy. Distribution questions are deeply political-economic questions and cannot be answered satisfactorily without being set in the context of a promising political-economic idea” (p.9).
On one side, the authors separate themselves from a widespread attitude among mainstream economists. Many economists refuse value judgments on distribution policy since these are outside the economic discipline. However their political advice (with the argument of efficiency) often includes recommendations leading to expansion of inequality that are in no way neutral for distribution policy.
On the other side, basic income advocates are admonished to support their proposals with economic presuppositions and effects on consumer possibilities of broad sectors of the population, on demand and not only on value judgments regarding distribution policy. Personal income distribution (distribution among persons) decides over the amount of consumer spending, not functional income distribution (between labor and capital). A more equal personal income distribution safeguards economic stability, as the authors emphasize, and does not only strengthen social cohesion and social peace.
The book’s proposals on improving work income and containing the low wage sector would help to a more equal distribution. However more equality in personal income distribution can also be gained by improving transfer income. Steps toward an unconditional basic income could play an important part.
- Abolishing the sanction threat against Hartz IV recipients (social benefit for long-term-unemployed connected with a lot of bureaucratic controls and workfare-requirements) strengthens the negotiating power of workers in the low wage sector. The dominant pressure of job centers on the unemployed today forces them to accept low wages. A legal minimum wage can also be neutralized through evasion-strategies (like pseudo-independence or honorary contracts) if the negotiating position of workers is not strengthened. Therefore the pressure applied by the job centers must be reduced.
- Developing the child benefit to a children’s basic income would strengthen the purchasing power of families and improve the education chances of children of financially disadvantaged parents.
- Preventing old age poverty requires tax-financed benefits for seniors that cannot depend on gainful work or legal pensions. The less old age basic security benefits are tied to conditions and bureaucratic examinations, the more they will reach the target group and help in removing hidden poverty.
Every step at preventing poverty is also a step at invigorating consumer demand. Steps toward basic income can achieve that change of distribution demanded in the book. The authors who vehemently reject the basic income do not deliver any real counter-argument.
The main argument in the book against the basic income is the reference to the decline of gainful work incentives with an unconditional income. The real core of this objection is in the possible negative repercussion of a basic income on production that is limiting the amount of a possible basic income. At the same time there are possible positive effects like better protection against economic risks, strengthening and stabilizing demand and extensive improvement of framing conditions for value creation beyond the markets (in family work, honorary posts, unpaid activities in art, culture, politics, science, software development and so forth) which also have positive influence on the gainful working life.
On account of the incalculability of the economic effects, approaching basic income gradually is recommended. Individual steps like those named above can be evaluated to draw further conclusions. Steps toward a basic income can also be understood as a learning process. In its course, the economic possibilities and consequences of a gradually increasing uncoupling of income and benefits become clear. Steps toward a basic income like those cited above are especially recommended because they would contribute concretely to improving the life of those having the hardest time and to stabilizing the economic situation. That is certainly not a wrong way.
This book review was originally published in German in a longer form on November 15, 2012 by the BIEN’s German affiliate, Netzwerk Grundeikcommen at:
https://www.grundeinkommen.de/content/uploads/2012/11/kumpmann_rezension-zu-flassbeck-et-al_15nov2012.pdf. Ingmar Kumpmann is an economist in the Saarland Chamber of Labour and a member of the academic advisory for the Netzwerk Grundeinkommen
Basic Income Earth Network
Hans Christian Mueller, “Economists Argue over Distribution Question, “ November 4, 2012
Karl Widerquist, “Opinion: Independence, Propertylessness, and Basic Income,” November 18, 2012