by Furui Cheng | Jun 15, 2017 | News, Research
In an article published in the Journal of Political Ecology, Professor Alf Hornborg of the human ecology division of Lund University proposes that each country establish a complementary currency for local use only, which would be distributed to all its residents as a basic income. In this way, humanity as a whole would regain justice and sustainability.
In pre-modern societies, monetized exchange was largely limited to long-distance trade in preciosities, while most basic needs were met through socially embedded relations of reciprocity and distribution. Radical institutional changes in the nineteenth century then made money a medium for obtaining all kinds of goods and services – what we might call “general-purpose money”.
Efficiency is the inherent logic in general-purpose money. Adam Smith identified the benefits of general-purpose money at the local level. Yet when such efficiency is pursued at the level of a globalized economy (possible because fossil fuels have minimized transport costs), the potential for power differences, polarization, exploitation and collateral damage is vastly greater. In this way, the claimed “efficiency” is perhaps even inverted. As long as we subscribe to the assumption of general-purpose money as the medium of exchange organizing human societies, exploitation and underpayment are inevitable implications of production processes.
Economists often deplore such negative aspects of globalization: environmental damage, increasing inequalities, growing regulations, and resource depletion. Yet few tend to consider general-purpose money as a cultural peculiarity to which there are alternatives. Not even Adam Smith drew this conclusion, nor did Karl Marx.
Hornborg suggests that current concerns with climate change and financial crises offer a historical moment for reflection on how the operation of the global economy might be reorganized in the interests of global sustainability, justice, and financial resilience. The societal objective must be to strike a balance between such distinct interests and concerns as market principles and capitalism, everyday local life versus global finance, and long-term sustainability and survival versus short-term gain. In Hornborg’s opinion, the solution is to establish ways of insulating these competing values from one another, rather than allowing one to be absorbed by the other.
To increase sustainability, reduce vulnerability, and diminish inequalities, he advocates a complementary currency issued as basic income. To the long list of questions one may have regarding this policy proposal, Hornborg provides some preliminary answers in his article.
In fact, addressing the negative aspects of general-purpose money itself is not a new idea. Silvio Gesell (1862-1930), a German-born entrepreneur living in Buenos Aires, was an early pioneer of this endeavor. John Maynard Keynes mentioned Gesell in his General Theory of Employment, Interest and Money:
“It is convenient to mention at this point the strange, unduly neglected prophet Silvio Gesell, whose work contains flashes of deep insight and who only just failed to reach down to the essence of the matter. …their significance only became apparent after I had reached my own conclusions in my own way. …I believe that the future will learn more from the spirit of Gesell than from that of Marx. The preface to The Nature Economic Order will indicate to the reader, if he will refer to it, the moral quality of Gesell. The answer to Marxism is, I think, to be found along the lines of this preface.”
“Gesell’s specific contribution to the theory of money and interest is as follows. In the first place, he distinguishes clearly between the rate of interest and the marginal efficiency of capital, and he argues that it is the rate of interest which sets a limit to the rate of growth of real capital. Next, he points out that the rate of interest is a purely monetary phenomenon…This led him to the famous prescription of ‘stamped’ money, with which his name is chiefly associated and which has received the blessing of Professor Irving Fisher. According to this proposal currency notes would only retain their value by being stamped each month, …with stamps purchased at a post office… The idea behind stamped money is sound… But there are many difficulties which Gesell did not face.”
From the above, the reader can identify the similarities between Hornborg’s and Gesell’s proposals, from different perspectives, for redesigning and constraining the power of ‘man-made’ general-purpose money.
Alf Hornborg, 2017, “How to turn an ocean liner: a proposal for voluntary degrowth by redesigning money for sustainability, justice, and resilience,” Journal of Political Ecology.
John Maynard Keynes, 1936, Chapter 23 of “The General Theory of Employment, Interest and Money,” Palgrave Macmillan.
Article Reviewed by Genevieve Shanahan.
by Furui Cheng | Apr 21, 2017 | News
Enno Schmidt. Credit to Professor Cui Zhiyuan.
On April 27th, 2017, Enno Schmidt gave a speech on basic income in Beijing. Schmidt was one of the two initiators of the national referendum on basic income in Switzerland last June. He was invited by Professor Cui Zhiyuan from the School of Public Policy and Management in Tsinghua University. The attendance was modest, composed mainly of researchers and students, including some from Poland and the Philippines.
To start, Schmidt presented some of the awareness-raising events they undertook to introduce the concept of basic income to the Swiss people, such as the ‘Everyone is a King or a Queen’ activity, the world’s biggest poster, bearing the question ‘What would you do if your income were taken care of?’ and the eight million coins dumped in front of the Swiss parliament building.
He then explained the special national referendum system in Switzerland. From collecting signatures to voting, this campaign was not about winners and losers, Schmidt underlined. Rather, democracy is a process of participating, training, learning, debating, and choosing. No matter how people ultimately voted on basic income, he highlighted, they had asked themselves the same question: ‘why’. So even though most voters rejected the basic income proposal, Schmidt argues it is still valuable to have raised the issue and ascertained public opinion.
Finally, Schmidt explained the relationship between basic income and personal life, society, economy, politics, and culture. He also gave an overview of basic income pilots worldwide. In the Q&A session, the audience had an active discussion with the speaker. For example, one question concerned the optimal scale for a basic income. Schmidt claimed that, the smaller the scale, the easier the implementation but the more limited the personal freedom. In fact, he also added, it is difficult to implement a universal basic income in large countries with varied regional development levels, like China.
Article reviewed by André Coelho and Genevieve Shanahan.
by Furui Cheng | Apr 18, 2017 | Opinion
Furui Cheng
In the discourse of global basic income debates, China provides the most recent example of a social dividend-style basic income, similar to the Alaskan model. In discussions surrounding Nixon’s welfare reform in the 1970s, which was a quasi-basic income proposal, four different anti-poverty paradigms competed for influence. None of them can well explain today’s social dividend examples. We need a new paradigm in the current round of worldwide basic income debates.
China’s new facts
In November of last year I introduced the Huaidi case from China, in which villagers cooperated in urbanization and received high levels of welfare from their collectively owned land. This is not the only such case in China, however. The Chinese Famous Villages Influence Ranking was published in 2016, and 300 villages were selected from thousands in a joint effort by the Working Committee of Chinese Village Development Association, the Modern Village and Town Development Research Center of Tongji University, the Chinese Council of APCRD (the Chinese Association for Rural Community Development) and the Chinese Reputation Center (CPPC). The evaluation of the influence of Chinese villages in 2016 was mainly based on the comprehensive evaluation of the following factors: the village development index, people’s livelihood index, management index, charm index, green index and reputation index. In this way, the evaluation depends not only on per capita GDP or income, but also on living conditions, security conditions and interpersonal relationships, as well as the temperament of the villagers, including their mental state, sense of ownership and so on. This evaluation incorporates the well-being of the people and promotes the comprehensive development of further villages. The Zhejiang province has 37 villages in the ranking list, the most of all the provinces. Huaidi is one of the Hebei province’s 15 ranking villages, which ranks 77th of the total 300.
In addition to the regional welfare from land, China’s fiscal contribution by national state-owned enterprises (SOEs) has increased in recent years. In the past, Chinese SOEs only paid tax to the budget, but kept all their after tax profits. Since 2007, SOEs have increasingly paid part of their net profits to the national budget. This proportion will rise to 30% of total profits in 2020. There are four different categories of SOEs. The first type includes tobacco, petroleum and petrochemical, electricity production, telecommunications, coal and other resource monopoly industries and enterprises, which pay 20% of their net profits to the state. The second type includes steel, transportation, electronics, trade, construction and others in the competitive industries, paying a proportion of 15%. The third category includes the military and scientific research institutes, contributing 10%. The fourth category encompasses policy companies, including the Chinese Grain Reserves Corporation and the Chinese Cotton Reserves Corporation, which are exempt from turning over their net profits. Of interest, the proportion of the China National Tobacco Corporation’s net profits to be paid to the state has increased to 25%, singling the corporation out as a fifth category of its own. Part of the revenue from SOEs’ profits has been injected into the national social security system to benefit the majority.
Regardless of the origin of the social dividend – whether public land or SOEs – it is similar to Alaska’s Permanent Fund Dividend (PFD) model.
A new paradigm?
What are the key elements in the current global discussions about basic income? Is it simply an anti-poverty strategy, just like any other kind of social assistance program in operation? Or is it a comprehensive overhaul of the welfare system, like the New Deal transformation was in the 1930s, which came to form the very basis of the current social security system? The most controversial elements of debates surrounding present public welfare systems and basic income proposals include work ethic, fiscal affordability, a culture of desert and civil rights, among other aspects. The latter has been reviewed in detail in recent history, especially since Nixon’s Family Assistance Plan (FAP) legislation. The main characteristic of FAP is that people can receive the benefit without work requirement, and independently of their family structure. This is very similar to today’s unconditional basic income definition, although FAP is not universal.
At the outset of the Nixon administration, proponents of four fundamentally different anti-poverty paradigms, each of which contained a different causal story, competed for influence. Three of these paradigms supported Guaranteed Annual Income (GAI) plans. Proponents of an economic citizenship paradigm identified the economic system, especially structural unemployment and the wage structure, as the source of poverty. For proponents of this view, the objective of GAI policy was to alleviate poverty and provide citizens with basic income security.
The family stability paradigm identified the social system, especially changing family structures within poor, typically black communities, as the source of poverty. Proponents of this view hoped that GAI policies would decrease poverty by providing additional support for maintaining two-parent families, since rates of marital breakup appeared to be correlated with poverty rates.
The laissez-faire paradigm, which GAI supporters with a libertarian orientation invoked, identified the welfare system and its alleged perverse incentives against work as the root of the problem. Laissez-faire proponents felt that GAI plans would rationalize the welfare system by creating stronger incentives for labor market participation while also granting the poor greater freedom.
The main opposition to GAI proposals within the administration came from officials who saw the behavior of the poor themselves as the primary cause of poverty and believed that welfare reform should rehabilitate the poor by exposing them to the discipline of the labor market. This rehabilitation paradigm argued that limiting eligibility for social provisions and requiring recipients of government benefits to work would be the best path to eliminating poverty.
Is Alaska’s PFD or China’s current social policy context embedded in any of the above paradigms? I don’t think so. At least, that is to say, the four paradigms that undergirded this decade-long debate half a century ago are not sufficient to underpin a new round of worldwide debates on basic income. For example, many countries are considering levying a tax on various kinds of resources, including land, minerals, oil and gas, internet infrastructure, etc. (1). But if we want to justify these different kinds of taxes for financing basic income, the world need a new paradigm. As Philippe Van Parijs says: “It needs to recognize fully that the bulk of our real incomes is not the fruit of the efforts of today’s workers (let alone of the abstinence of today’s capitalists), but a gift from nature increasingly combined with capital accumulation, technological innovation and institutional improvements inherited from the past.”
Notes:
(1) Karl Widerquist and Michael W. Howard (edited), “Exporting the Alaska Model: Adapting the Permanent Fund Dividend for Reform around the World”, Palgrave Macmillan, 2012
More information at:
Furui Cheng, “Cooperative Society and Basic Income: A Case from China”, Basic Income News, November 10th 2016
Brian Steensland, “The Failed Welfare Revolution: America’s Struggle over Guaranteed Income Policy”, Princeton University Press, September 2007
Philippe Van Parijs, “Basic Income and Social Democracy”, Social Europe, April 11th 2016
[in Chinese]
The editor, “The Chinese Famous Villages Influence Ranking”, The Orientation News, December 16th 2016
HEB101, “Famous Villages in Hebei Province”, Hebei News, December 14th 2016
About the author: Cheng Furui is undertaking a post-doctoral program in the Institute of American Studies of the Chinese Academy of Social Sciences. She got her PhD from Tsinghua University and her research interest is public policy. “Social Assistance and Poverty Alleviation Divergence: A Capability Approach” is her first published book based on her doctoral dissertation, which explores the Chinese social safety net in detail. She is now a voluntary news editor of BIEN, and also one of the organizers of China Social Dividend/Basic Income Network: bienchina.com.
Article reviewed by André Coelho and
by Furui Cheng | Nov 10, 2016 | News
Written by Cheng Furui
In the process of Chinese industrialization and urbanization, more and more rural villagers have been transformed into urban citizens. Decades of industrialization have left China with a typical dual economic structure: people who make wages live in the cities, and peasants make a living on the land in villages around them. With the rapid expansion of city suburbs, there are always some villagers in the transition zones. As they change from crop growers to wage earners, villagers will lose their land and be accustomed to a totally new way of life. An important question is how to make these large-scale unnatural transitions as smooth and successful as possible.
China provides many examples. One of the most common and successful strategies has been the establishment of cooperatives. Huaidi, one of the many successful cooperatives in China, demonstrates the effectiveness of this approach to the challenges of urbanization.
Huaidi [1] is one of the urban villages in Shijiazhuang, the capital of Hebei province in China. It has a population of around 6000. Unlike most villages around the city, Huaidi villagers initiated a deep “one-villager-one-share” cooperative from the beginning of the urbanization process. In China’s countryside, land is collective owned and privately used by villagers, in an equal fashion, as long as their households are registered in that village. In the process of urbanization, local government compensates villagers for the land which has been taken from them, paying them a single value and a specific transition fee for several years. The value partly depends on the market, and partly on the bargaining power of villagers. Under the leadership of Chen Yuxin [2], Huaidi villagers received very good compensations for their lost land in 1996, 1998 and 1999.
The success of the cooperative has come from these big compensations. In a weak organization, as is common in surrounding villages, villagers will get their money individually and make their living in the city on their own, abandoning the collective at that point. But Chen Yuxin persuaded the villagers to give up the first cash compensation, and bought back the land development rights in the future. In 1996, the Huaidi villagers collected a total of 10 million yuan [US $1,475,797] [3] compensation to build a new shopping mall. In 1998 and 1999, according to the urban plan, Huaidi land was taken by the government to build a road and a big park, respectively. In 1998, they got future development rights on both sides of the road. In 1999, they gave up a land compensation of 200,000 yuan [US $29,516] per mu (equivalent to US $44.3/m2, which is much lower than current land price) and bargained for a 33,350 m2 land patch, for their own future development. Most local governments are happy to accept this kind of exchange because of fiscal implications.
In this way, Huaidi villagers pursue their own urbanization pattern: self-demolition, self-transformation, and self-development. Under this process, villagers get more autonomy and create their own future city life, not becoming the sorrowful victims of social policy. Their core ideal is serving the city, influencing its development, and assuring a smooth transition between city and countryside. With these development rights, Huaidi villagers have amassed billions in assets, including famous and prosperous shopping centers, a decorative empire, food street, private schools, a cultural center, and other attractions. The current annual profit is about 100 million yuan [US $14.76 million]. As shareholders, Huaidi citizens now benefit from a very good welfare system.
First, every family gets identical, well decorated houses. In rural China, besides the arable land each person tends, every family has a house on a separate patch of land. In remote areas, there is also forest land per person. After the land is taken away, families get the transition fee [4] for several years, which is mainly used to rent the house they just lost, before moving into the new one. But many people have no ability to buy their own houses in the city in their lifetime. So after the transition period, every Huaidi family is placed into three or four houses, with a total area of 330 m2. They are given two choices. Under the first choice, they have three houses of 140 m2, 110 m2, and 80 m2 respectively. Under the second, they have four houses of 82.5 m2 each. All the 6000 citizens are very happy to own new houses in the city. These houses are more than enough for the whole family to live, and most can rent one apartment for several thousand yuan [more than US $400] per month. [5]
Second, every child is free to enjoy education. Huaidi villagers have built a famous private school [6], which has facilities from kindergarten to high school. The high quality of this school attracts students from outside of Huaidi, who are accepted in exchange for high fees. Every year, the school organizes various kinds of activities and interaction with other famous schools throughout the world. Teachers are proud of working there. Across the country, China has nine years of compulsory education, from primary to middle school, but Huaidi offers 15 years of free, high-quality education. This private school is one part of the villagers’ collective assets, and all their own children are exempt from tuition fees.
Third, every person benefits from healthcare. Huaidi has had a universal healthcare system since 1996. China, on the other hand, has employee healthcare only since 1998, and universal healthcare just since 2008. Nowadays, Huaidi citizens have double protection. All people are expected to participate in the national healthcare system, and the community pays the medical insurance premium for all collectively. Additionally, everybody can benefit from community healthcare if they choose. It only costs 10 yuan [US $1.48] per year, and supports the beneficiary with another 60% compensation for the money paid by oneself above 1000 yuan [US $148], up to 60,000 yuan [US $8,855], after national medical insurance reimbursement.
Huaidi citizens discussing their new apartments
Fourth, every person of age has a pension. Since 1996, every woman in Huaidi older than 50, and every man older than 60 years, have benefitted from pensions of at least 2000 yuan [US $296] per month—with larger pensions for older people. Currently, the Chinese pension system requires a minimum 15 years of contribution, whether a person is employed or not. Huaidi integrated its own pension system with the national one in 2010. People who are employed participate in the pension system via their employers. For those who are not employed, the community pays three quarters of the total annual contribution, and citizens only pay one quarter. The minimum contribution is 20% of the local per capita income in the previous year.
Fifth, every person gets a whole set of benefits in kind. Everything from rice, flour, edible oil, beans, salt, eggs, beef, pork, vinegar, soy sauce, chicken powder, milk, mineral water, to all kinds of vegetables, tooth paste, toothbrush, tea, sugar, washing powder, soap, toilet paper, cleanser, towel, etc. are distributed regularly in specific quantities, enough for everybody’s consumption, all with good quality.
Finally, all Huaidi citizens have had a basic income of 1500 yuan [US $221] per year since 1995, which is directly transferred to their bank accounts in shares of 125 yuan [US $18.5] per month. For children under 18, this money is kept in parents’ accounts. This amount money was significant in 1995 (Chinese cities’ nominal per capita annual income was about 5000 yuan [US $738] in 1995), but not as much now, due to the rapid rise of GDP in the last 20 years (in 2015, the nominal per capita annual income in Chinese cities was about 50,000 yuan [US $7,379]).
One might wonder why the people of Huaidi get some cash regularly, and unconditionally, after receiving so many benefits in kind. The answer is that the basic income gives people more freedom, especially for those who are unemployed, even though they get enough distributed food and very good social security system. Additionally, this basic income acts as prevention of social ills, reducing crimes, fights and other hurtful behaviors.
Huaidi’s welfare system is much higher than Chinese average social security level, so nobody in the community applies for social assistance. Moreover, there are a lot of other benefits, such as free newspaper, free cable, public utility subsidy, university subsidy, and so on. These welfare benefits come from their original rural collective assets, especially land. Land reform is the biggest achievement from the Mao era. This kind of basic income–often called a social dividend–comes from assets, not tax. It is more likely to be universal for a highly populous country like China.
Notes:
[1] Baidu map, “Location of Huaidi“, 2016
[2] Chen Yuxin, “Leader of Hebei Huaite Group“, 2016
[3] At October 2016 exchange rates.
[4] The transition fee and the compensation for the land, are both paid by the government to the villagers, but the real land taker (future developer) should pay to the government first. Huaidi only keeps one part of this land development rights, and the other part is sold to the developer, who is the real payer of the compensation and transition fee. It is very difficult for single individuals to make good bargains during the land taking process.
[5] It is not very common for urban families to own multiple houses. So Huaidi citizens are richer than most of their neighbours.
[6] The Private School, “Shijiazhuang Foreign Language Education Group“, 2016
More information at:
(in Chinese)
Ge Jizhong, “People’s trust“, YanZhao Evening News, February 6th, 2015
Jiang Hongjie, “An interview with Chen Yuxin“, Hall of Fame Home Online, August 14th, 2012
Other information in this article comes from the author’s field research.
Article reviewed by André Coelho and Kate McFarland
by Furui Cheng | Aug 31, 2016 | News
In order to share the fruits of economic development with the general public, the government of the Macao Special Administrative Region (SAR) in China has given an annual state bonus to its all citizens since 2008. This so-called “Wealth Partaking Scheme (WPS)” is mainly funded by the revenue of local lottery industry. Permanent residents received 5,000 patacas [US $627(1)] in 2008. This amount has risen continually up to 9,000 patacas [US $1,128] in recent years. Non-permanent residents receive 60% of the amount received by permanent residents.
In addition to the WPS state bonus, the Macao SAR government has injected more capital into all qualified Provident Fund Individual Accounts since 2010. Provident fund individual accounts are provided to Macao SAR residents of the age of 18, and they used to receive the “incentive basic fund” and “special allocation from budget surplus”.
The incentive basic fund is a one-time monetary payment of 10,000 patacas [US $1,253]. All owners of provident fund individual accounts are entitled to this payment during the first calendar year after they have reached the age of 22, provided that they have been permanent residents of the Macao SAR during the preceding calendar year (and stayed in the region for at least 183 days out of the year).
The special allocation from budget surplus is an extra fund injected into the qualified accounts annually after the incentive basic fund. This extra fund was 6,000 patacas [US $752] in 2010, and now it is 7,000 patacas [US $877].
In 2016, Macao citizens’ average monthly income is 15,000 patacas (US $1,880) and the minimum wage is about 6,000 patacas per month. More than half of Macanese think the above two polices are the most important contributions of SAR’s administrative program.
Notes:
(1) – At August 2016 exchange rates.
More information at:
Governo da Região Administrativa Especial de Macau [Special Administrative Macao Regional Government], “Plano de Comparticipação Pecuniária no Desenvolvimento Económico do Ano 2016 [Wealth Partaking Scheme]”, 2016
Governo da Região Administrativa Especial de Macau [Special Administrative Macao Regional Government], “Fundo de Segurança Social [Social Security Fund]”, 2016
Karl Widerquist, “Macau: Government Distributes Temporary Basic Income”, Basic Income News, August 23rd, 2014
Karl Widerquist, “China: Macau residents to receive annual basic income”, Basic Income News, June 30th, 2015
Article reviewed by André Coelho and Kate McFarland.
