by Citizens' Income Trust | Dec 6, 2013 | Opinion
Kevin Farnsworth, Social Versus Corporate Welfare: Competing Needs and Interests within the Welfare State, Palgrave Macmillan, 2012, xii + 222 pp, hbk, 0 230 27453 2, £55
In this book, ‘corporate welfare’ means ‘governments serving the needs of business’ (through subsidies, contracts, tax allowances, etc.) and ‘social welfare’ means ‘governments serving the needs of citizens’ (through cash benefits, free education and healthcare, tax allowances, etc.). As Farnsworth points out, both are necessary. They are also connected to each other’ Corporate welfare, such as government contracts and subsidies, benefit citizens, and social welfare, such as free education and healthcare, benefit corporations – though there are also ways in which they compete, for instance through government tariffs designed to protect local industries preventing cheaper products from abroad being available to consumers. Sometimes, these are met with government contract bid protests, but this is rarer than many would believe.
The second chapter develops a continuum between social and corporate welfare in the context of a discussion of ideology and of citizens’ and corporate needs. (A note to clearly define the difference between ‘corporate welfare’ – provision for the needs of businesses – and ‘corporatist welfare’ – company, trade union and other non-state provision for citizen’s needs – would have helped the reader unfamiliar with the terms.) Farnsworth concludes that
what governments need to do is ensure that there is a close and complimentary fit between social and corporate welfare and that the burden of supporting the welfare state more generally is shared between all those that benefit from it. (p.74)
The third chapter shows how a more integrated global economy and the reduction of trade barriers has led to an increase in such corporate welfare measurers as investment inducements, and also how a global more liberal ideology has reduced the strength of social welfare, thus tipping the social-corporate balance more towards corporate welfare.
Chapters 4 and 5 employ statistical data to compare social and corporate welfare in a variety of OECD countries, and on p.142 Farnsworth presents a useful graph showing the proportions of state welfare expenditure spent on social welfare and corporate welfare. Somewhat surprisingly, Germany comes out as the most social welfare state, Sweden as a social-corporate welfare state, and the UK between the two. Unsurprisingly, the USA is the most corporate of the corporate welfare states.
Chapter 6 describes the financial crisis as a series of crises, and shows how in countries with a high proportion of companies in the financial sector the pendulum has swung rapidly towards corporate welfare and away from social welfare, which will have a negative effect on economic growth and thus on the corporate sector.
The concluding chapter emphasises the importance of both social and corporate welfare, and calls on the corporate sector to contribute more in order to justify the vast public expenditure that comes its way.
This fascinating study raises a question that the author does not directly tackle: When reform to either corporate or social welfare is being considered, should its impact on the other sector be considered? The answer is clearly ‘yes’. This implies yet another new agenda item for the Citizen’s Income debate.
Esping-Andersen’s name is misspelt throughout, and in general the copy-editing is abysmal, which is a pity. And another quibble: The title suggests that social and corporate welfare are necessarily opposed to each other, whilst the book in fact argues that the opposite is often the case: that is, that social welfare expenditure is good for business and that corporate welfare expenditure is often good for society. A Citizen’s Income would provide an important example of a reform that would serve both business and citizens’ interests.
by Citizens' Income Trust | Nov 29, 2013 | Opinion
Clive Lord, Miriam Kennet and Judith Felton (eds), Citizen’s Income and Green Economics, The Green Economics Institute, 2012, 339 pp, pbk, 1 907543 07 4, £20
This somewhat passionate book sets off from a classic example of the tragedy of the commons: the story of Easter Island, where for six hundred years the felling of trees for canoe manufacture and statue transportation led to environmental degradation, conflict, and human catastrophe. Expansion always has its limits, and the ways in which we are using the planet’s resources and polluting its environment are eerily reminiscent of the issue at the heart of the Easter Island disaster. The absence of an adequate mechanism to enable the community’s long term interest in conserving natural resources and protecting its environment is leading to a failure to control individuals’ or groups’ short-term interest in resource exploitation.
But this is also a hopeful book. It takes as the model for its proposed solution to the problem the way of life developed by the Siane tribe in New Guinea: shared necessities and a free market in luxury goods. From this example Lord et al argue that a Citizen’s Income would enable a just sharing of necessities at the same time as freeing the market in everything else. (The flaw in the logic is that amongst the Siane necessities were not automatically exchangeable for luxury goods whereas a Citizen’s Income would be an integral part of a money economy in which all goods and services can be exchanged with each other. The parallel to the Siane experience would be universal food stamps, not a Citizen’s Income.) As the authors correctly identify, reduced consumption and therefore reduced production can save the commons from degradation, but that will mean disconnecting consumption from jobs, a process which would be facilitated by a Citizen’s Income.
The major problem with the book is not so much the content but rather the structure. The book is a somewhat disconnected set of chapters, mostly by Clive Lord, but with others by other authors presumably related to the Green Economics Institute. Whilst each chapter is of interest, it is not easy to discover a consistent line of argument through the book. One reason for this is that the two main themes, 1. a Citizen’s Income, and 2. environmental protection and a sustainable economy, are not necessarily as directly related as the authors might think. They are dual enthusiasms, and because they are enthusiasms the potential connections and conflicts between them are inadequately explored. The reader is therefore left puzzled by the combination of themes. A more objective editor might have pointed this out to the authors.
But having said that, the two main themes are important and the book’s chapters are often thought-provoking. If you don’t have time to read the whole book then read chapter 4, which helpfully summarises the book as a whole, and which is equally helpfully published as a separate eight page pamphlet.
Easter Island’s story did not end in complete tragedy. When a Dutch ship arrived in 1722 there were still 3,000 people alive. They had found ways to co-operate in scraping a living from a barren landscape. Lord’s, Kennet’s and Felton’s book is a robust call for us all to act now before there is a tragedy from which we shall need to recover, and is an important contribution to a debate on how Green economics and a Citizen’s Income might relate to each other.
by Citizens' Income Trust | Nov 22, 2013 | Opinion
Tracy Shildrick, Robrt MacDonald, Colin Webster and Kayleigh Garthwaite, Poverty and Insecurity: Life in low-pay, no-pay Britain, Policy Press, 2012, v + 256 pp, pbk, 1 847 42910 0, £26.99, hbk, 1 847 42911 7, £70
There is no better way to learn about the effects of the UK’s employment market and its tax and benefits system than to hear people tell their stories; and the stories that we hear are stories of the ‘precariat’ (Guy Standing, The Precariat, Bloomsbury, 2011): people whose lives are characterised by precarious employment – if any – and by the resulting precarious income. The back cover of the book says that ‘this book is the first of its kind to examine the relationship between social exclusion, poverty and the labour market’. Not true. Trapped in Poverty: Labour-market decisions in low-income households, by Bill Jordan et al (Routledge, 1992), followed similar qualitative methods and told a similar story: similar, but not the same, because comparing the two books shows that today many individuals and households are in a far more precarious situation than the households that Jordan and his colleagues interviewed on an Exeter local authority estate twenty years ago. (Trapped in Poverty is not in Poverty and Insecurity’s bibliography.)
Poverty and Insecurity’s first substantive chapter, chapter 2, describes the book’s ‘dynamic’ approach to poverty: that is, an approach that studies how people move in and out of poverty. (Here Ruth Lister’s Poverty, published in 2004, ought to have been referenced.) The authors discuss recurrent poverty, low paid work, the low-pay, no-pay cycle, precarious work, and poor work, all of which appear throughout the book. They discuss the precariat and find that its growth is largely due to workers being ‘bumped down’ from higher-skilled to lower-skilled jobs; and that one of its most significant features is the high transaction costs experienced when people lose a job: a period of no income while benefit claims are processed, leading to debt, and then to unrepayable debt. A brief history of our means-tested and demeaning benefits system leads to the conclusion that the benefits system contributes to the poor quality of low paid jobs.
Chapter 3 describes Middlesbrough, where the research was carried out, and also describes the qualitative method; and chapter 4 describes employers’ and ‘welfare to work’ agencies’ perspectives on the low-pay, no-pay cycle, and finds that such agencies have little contact with people who are regularly in and out of work because their schemes are designed to cater for the long-term unemployed.
Chapter 5 finds that low paid and insecure jobs lead to more of the same and are not stepping stones to better jobs; and interestingly that this difficult experience does not dim people’s work ethic. Chapter 6 discovers that qualifications might or might not be a road to good jobs, and that most insecure jobs are obtained through friendship networks (an efficient method for both employers and employees when the job might not last very long). Chapter 7 finds that the main drivers of the low-pay, no-pay cycle are the supply of insecure employment and workers’ willingness to accept it; chapter 8 discusses the circular relationship between illness and poor jobs, and the similar relationship between caring responsibilities and poor jobs; and chapter 9 concludes that ‘neither work nor welfare protected the interviewees from poverty’ (p.189).
Chapter 10 concludes that work is not necessarily a route out of poverty, largely because there is a plentiful supply of low-skilled, short term employment, and workers are willing to apply for such jobs. The result is a lot of people in a low-pay, no-pay cycle, and therefore socially excluded core members of the precariat.
Most of the book is well-evidenced diagnosis. The final few pages are prescription: better jobs, by paying a living wage and improving conditions; and poverty reduction by increasing the level of benefits. The authors find the benefits system to be moving in a punitive direction. Two myths that the authors tackle are that benefits are too high and that the poor do not wish to work. Neither is true.
The authors ask for a ‘welfare system that promised social security not greater insecurity’ (p.223) – a good description of a Citizen’s Income.
by Citizens' Income Trust | Nov 15, 2013 | Opinion
Allan Sheahen, Basic Income Guarantee: Your right to economic security, Palgrave Macmillan, 2012, xv + 204 pp, 1 137 00570 0, pbk, £17.50, 1 137 34788 6, hbk, £62.50
Each adult who files an income tax return receives an annual ‘BIG’ [Basic Income Guarantee] or ‘refundable tax credit’ of $10,000 – just under the official 2010 poverty level of $11,139 for one person. The ‘refundable tax credit’ is available to everyone … All income other than this credit is taxed. If a person has no income at all, he or she keeps the full credit and pays no taxes. … If a person’s income is high, the amount to be paid in taxes will be larger than the credit received and … the person will pay out the difference in positive taxes. … the system is universal – everyone files a tax return, everyone gets a tax credit, and everyone with any income pays taxes. There is no means test, no work requirement, and no explicit eligibility criteria. No one receives a net transfer from the government unless the taxes on the person’s income from all sources are lower than the tax credit. (p.86)
Sheahen suggests on page 3 that different people use the term ‘Basic Income Guarantee’ in different ways, and indeed he offers different definitions on pages 3 and 86. I am assuming that the definition above from page 86 is the one that Sheahen wishes us to employ: and, if that is so, then in this revision of a book that he published in 1983 Sheahen has given us an accessible (in fact, quite chatty) book on Tax Credits: the genuine kind, and not the separately administered means-tested household benefits labelled ‘Tax Credits’ by the UK Government.
Sheahen sets the scene by offering a brief history of the recent US debate on poverty and the benefits system. He goes on to show that employment can no longer provide everyone with a subsistence income (because manufacturing and other processes are increasingly automated), and that inequality is becoming a serious problem; and he rightly suggests that a Basic Income Guarantee would contribute to the solution of these problems. Objections are tackled (such as ‘Is it moral for people to be given income that they haven’t earned …?’ (p.63) and whether people would continue to work: they would). Sheahen studies alternative approaches – such as the Government as the employer of last resort: an idea dismissed as impractical.
A Negative Income Tax (NIT) would be almost identical to Sheahen’s Basic Income Guarantee/ Tax Credit, so he studies NIT experiments undertaken in the USA between 1968 and 1979, and suggests that the fact that a NIT was associated with an increase in the divorce rate should not be regarded as a reason not to establish one. Sheahen studies the Alaska Permanent Fund Dividend, and he also studies discussions on benefits reform in a variety of countries and asks how the benefits reform debate might evolve in the US. Appendices explore affordability, describe the US’s current benefits provisions, and offer additional historical material.
Sheahen’s scheme is similar to that proposed by the Conservative Government in the UK during the early 1970s. The difference is that the UK proposal assumed that employers would administer the Tax Credits alongside Income Tax, whereas Sheahen’s scheme would be administered by the US Government, which for everyone with a tax liability lower than the Tax Credit would pay the difference into their bank account. These two administrative options suffer from different difficulties. If an employer is to administer the Tax Credit then the employer needs to know details of the employee’s income and tax liability relating to sources other than the employer’s payroll; and they need to know how such other incomes and tax liabilities change from month to month. If the Government is to pay the monthly difference between the Tax Credit and the total tax liability accurately each month, then it needs to know how all of that citizen’s incomes from different sources are changing from month to month. Whichever option is chosen, the administrative demands are considerable, as they would be for the similar Negative Income Tax.
Terminological clarity might have been helpful. The BIG scheme proposed is a Tax Credit scheme, and it might have been helpful to call it that (in the same way as Negative Income Tax is correctly described). The BIG described is not a Basic Income (or a Citizen’s Income), which will be confusing for people coming to this book thinking that ‘Basic Income Guarantee’ means ‘Basic Income’: it doesn’t. A Basic Income is an unconditional, nonwithdrawable income paid to every individual as a right of citizenship. Sheahen’s BIG is withdrawn as income rises, it is completely withdrawn at the break even point where tax liability equals the BIG, and it is not paid above that point. It is not a Basic Income, but it would have effects similar to one.
As long as readers approach this book with an understanding of these terminological issues, they will find it a useful contribution to the debate on the reform of tax and benefits systems.
by Citizens' Income Trust | Nov 8, 2013 | Opinion
Karl Widerquist, Independence, Propertylessness, and Basic Income: A theory of freedom as the power to say no, Palgrave Macmillan, 2013, 1 137 27472 4, hbk, xiv + 241 pp, £62.50
The message of this book is simple: We are not free; we ought to be; and a Citizen’s Income (called here a ‘Basic Income Guarantee’) is an important means to that end.
The ‘propertylessness’ in the title represents the diagnosis: that is, that someone who is without sufficient property to meet his or her basic needs is reliant on property owners for the meeting of those needs (through an employment contract, state benefits, or some other mechanism) and is therefore not free. Starting from a definition of freedom as non-interference, Widerquist develops a theory of ‘status freedom’: ‘the effort to identify the difference between a free person and an unfree person’, and also a refined definition of freedom as ‘effective control self-ownership … freedom as the power to say no’ (p.15). Co-operation with others should always be voluntary, which means that it should be from a position of genuine independence: and it is this ‘independentarianism’ that requires an individuals’ right to property and therefore to a Citizen’s Income.
In this book Widerquist draws out the implications of freedom as effective control self-ownership, and particularly its relationship to the individual’s co-operation with other individuals, to the labour market, to our ability willingly to sign away our freedoms, and to such theoretical positions as Philippe Van Parijs’s ‘real freedom’ (a positive freedom to do as one wishes consistent with others’ freedoms) and Stuart White’s ‘justice as fair reciprocity’.
Alongside this somewhat abstract discussion of concepts, Widerquist studies today’s social and economic context, and concludes that
in a modern, industrial economy [effective control self-ownership] is best secured by an unconditional basic income guarantee large enough to secure housing, food, clothing, and basic transportation, plus enough more that individuals do not display signs of economic distress (p.70)
and also that a Citizen’s Income is compensation for our inability to provide everyone with sufficient status independence (p.71).
There is no attempt to escape the logic of capitalism. Trade is a perfectly just mechanism if undertaken by independent individuals and by mutual agreement; and Widerquist shows how a moral obligation to participate can be satisfied better by voluntary participation than by mandatory participation:
Even if people have an obligation to contribute to a just system of social cooperation, giving individuals the power to say no to working conditions they find unacceptable might be a better method to create a just system of social cooperation than giving a democratic majority the powers both to determine the conditions of fair cooperation and to enforce participation. (p.117)
For Widerquist, the individual’s freely-chosen consent to participate is paramount: a freely chosen consent that can only be guaranteed by the existence of an exit option: that is, by the ability not to participate.
This book is many things: an exercise in political economy; a textbook on philosophy and social ethics (particularly in chapter 9 on ‘duty’); and a sustained argument for a Citizen’s Income: and it is an excellent example of all of them.
However, there remains a problem with terminology. For a UK audience, the language of ‘guarantee’ is confusing. A ‘guarantee’ of an income is a promise that someone’s income will reach a particular level, and this can be achieved by a means-tested benefit as well as by a universal one. The previous Labour Government’s Minimum Income Guarantee was means-tested, and was as far from a universal benefit as it is possible to get. It is unconditionality, individuality and universality that matter, and Widerquist might have stressed these important characteristics of a Citizen’s Income more than he has.
But having said that, this is an important contribution to the literature on universal benefits, and therefore to the debate that might one day lead to their extension to working age adults.
