by Citizens' Income Trust | Oct 8, 2012 | Opinion
The ‘sensible’ view of Citizen’s Income (CI) is that it would pool income tax allowances and welfare benefits, as far as possible, into a single uniform payment, varying only with age paid to every citizen, without conditions, funded in the main by income tax. This model has been studied extensively, and can be discussed with policy makers and advisors who understand the mechanisms and procedures involved. But politically this is a complete non-starter: In his latest book Future Money[1], James Robertson comments “The conventional assumption has been that there is no way of funding a Citizen’s Income except by taxing people’s other incomes highly, and it might have to be at a rate as high as 70%. For many years that has been seen as ruling out a Citizen’s Income. Like many objections to otherwise desirable proposals, the assumption is due to inability or unwillingness to think outside a narrow box.” (p135)
But over the years I have encountered another radically different view about the funding of Basic/Citizen’s Income. There is, it is claimed, a huge pool of money which has been hi-jacked by the banks: they have used their power to create nearly all the money in circulation and have thereby greatly enriched themselves. Most people are under the delusion that it is governments not banks that create new money, but in fact only 3% of all the money (M4) in circulation is official Bank of England notes or coins. The remaining 97% has been created within the banking system and it is they who reap the benefit. These ‘mavericks’ at our meetings of BIRG (Basic Income Research Group) and then later Citizen’s Income have always argued that this ‘seigniorage[2]’ – the benefit from creating new money – rightfully belongs to the people, and could/should be used to provide a Basic Income. In addition, Robertson reminds us that there is also a vast amount of ‘economic rent’ which flows from the ownership of natural assets like land and airspace. This should be charged for, and together with the proceeds of seigniorage would provide more than enough to pay for an adequate Citizen’s Income.
This ‘free lunch’ basis for CI might in the past be dismissed as either Mad or Bad. It did not help that advocates of money reform who spoke at meetings of BIRG did not always put forward their ideas with much tact either! I say that the idea that BI/CI could be funded by seigniorage might be seen as madness, because no mainstream, conventional economist could be found who would subscribe to it.
But an even more telling criticism is that the holders of this alternative view are Bad people. In a vitriolic attack, Derek Wall, who was once the co-leader of the UK Green Party, lays into ‘Social Credit’[3]. It was Major Douglas who inspired the Social Credit movement in the 1930s, which could be described as an earlier manifestation of Basic Income funded by seigniorage. In the hands of others, Wall claims, this degenerated into an evil anti-Jewish banking sentiment. Even today’s advocates, he claims, are similarly tainted. It is noticeable that the Green Party does not support money-reform, and the NEF are somewhat ambivalent about it as well, perhaps as a reaction to this whiff of ‘dangerous madness’.
Is it any wonder then that Basic Income funded by the common-wealth of seigniorage and resource-charges is seen as too hot to handle, too dangerous to be involved with, the deranged delusions from a lunatic fringe or worse? It comes as a shock therefore to find that James Robertson, the utterly reasonable, and tireless campaigner for fresh thinking about society and the environment, is entirely in favour of seigniorage reform and land- and resource-based taxation. Using the proceeds of these two revenue streams would, he tells us would be more than sufficient to fund Citizen’s Income and more besides.
In this, Robertson’s latest book, he follows up on earlier inspiring works such as The Sane Alternative (1983), Future Work (1985), Future Wealth (1990). Robertson ran Turning Point conferences (which was where, in the early 1980’s I first encountered Basic Income). He was a founder of TOES, the ‘anti’-G8 economic summit forum, and of course he is a leading light at NEF (New Economics Foundation). Later his output has explored the transformation of tax away from penalising earned incomes towards resource-based taxes, especially land-value taxes. Sharing Our Common Heritage: Resource Taxes and Green Dividends (1998) explains how it could be done.
Then, hesitantly at first (as I read it) but later as in this book currently under review, Robertson has experienced an epiphany. It was indeed true that the money-system had been hi-jacked by the banks, and that huge wealth was being diverted to the top 1% thereby; that the control over the issue of new money should be returned to a public authority and used for the public good. Together with Joesph Huber, Robertson became converted to the idea that our money system should be prised away from the clutches of the bankers in Creating New Money: A Monetary Reform for the Information Age. This appeared in 2000, long before the 2008 financial crash. Since then Robertson has continued with the monetary reform theme, something which became much more pressing following the banking crash when vast sums were needed to rescue the financial system. So Future Money is a synthesis which knits together his earlier ideas, with the all-important reclamation of the money system. The aim, as always with Robertson’s books is to show how a credible “sane” alternative could give everyone a better life, while at the same time creating an ecologically sustainable world.
Robertson has a wealth of experience in the ways of government and governing, including spells at the UK Treasury and commercial banks, but his background is in Arts, not economics “In retrospect, I am glad not to have had a formal education in economics and money and to have learned about them in practice later within a wider context of ideas.” (p13)
Since Robertson has long been a supporter of the idea of CI, it comes as no surprise when he says that these revenues should be used in to fund a “Citizen’s Income payable to all citizens as a right. [..] It will recognise that responsible Citizen’s in a democratic society have a right to share a significant part of the public revenue from the value of common resources. It will enable people to become less dependent for welfare and work on big government, big business, big finance and foreign trade. Because all of those incur environmentally wasteful overhead costs, it will also have a conserving effect.” (p130)
There are a small number of ‘heterodox’ economists who would agree with Robertson about the existence of seigniorage, that it has been captured by the private banking system but that it could be re-directed for the benefit of the citizenry. Perhaps the most high-profile (although not referred to by Robertson) is Steve Keen. His book Debunking Economics (2011 2ed, Zed Books) is about the whole range of failures of the dominant neo-classical economics, especially their inability to recognise and incorporate money into their models. Few establishment figures will engage with Keen, and even open-minded economists like Paul Krugman still do not agree that money is ‘endogenous’[4]. However compelling evidence that the banking system benefits from a huge public subsidy can be found in a recent Bank of England paper[5] where the ‘free lunch’ of the banking system is estimated to be of the order of £120 bn. p.a., enough to fund a £40 per week Citizen’s Income for every man, woman and child in the U.K.
I would encourage readers of CI News to closely study this book. There is much more detail about the environmental and humanitarian reasons for reforming the way currency is produced and how resources should be taxed. You will have to decide for yourself if you think reclaiming seigniorage is a realistic method of funding CI, or is crazy dangerous nonsense. The safe alternative is to continue studying the present job-system and see how an added-on CI funded by punitive rates of income tax might work, however futile and politically infeasible that might be.
[1] Future Money: Breakdown or Breakthrough Green Books, Totnes, Devon 2012
[2] Robertson avoids the use of the obscure term ‘seigniorage’; I use it because it precisely defines the feature of in the money system which could be the main source of funding for BI.
[3] Derek Wall (2003) Social Credit: The Ecosocialism of Fools in Capitalism Nature Socialism, September 2003
[4] see Paul Krugman’s blog article deriding ‘endogenous money’: 2 Apr 2012 https://krugman.blogs.nytimes.com/2012/04/02/oh-my-steve-keen-edition/
[5] Noss, Joseph & Sowerbutts, Rhianon (May 2012) The Implicit Subsidy of Banks: Financial Stability Paper No 15 Bank of England.
by Citizens' Income Trust | Jun 4, 2012 | Opinion
Graham Room, Complexity, Institutions and Public Policy: Agile decision-making in a turbulent world, Edward Elgar, 2011, vii + 383pp, hbk, 0 85793 263 1, £95
This is one of those rare books which studies the deeper foundations of theory and practice: not just a particular social policy field, and not even the way in which social policy is either made or studied, but rather the nature of the world in which social policy is made – its institutional, social, and personal realities, and the dynamic relationships between them – and the ways in which social policy-making should therefore be carried out. As Room puts the questions which he asks himself:
How can we best conceptualise [the] dynamic processes of socio-economic change? … how can we model these dynamics empirically, as processes that are endogenous rather than merely the response to exogenous shocks? … what analytical tools … can be made available to policy-makers for the purpose of monitoring and steering these processes of transformation? (pp.4-5).
In answer to these questions the book discusses the policy process as a non-linear one which
involves feedback loops which bring into play a variety of actors who set about reshaping the policy intervention in light of their own strategic objectives … This is policy-making played out on a bouncy castle … Any policy is an intervention in a tangled web of institutions that have developed incrementally over extended periods of time and that give each policy context its own specificity. … Policy terrains and policy effects are path dependent. (p.7)
So policy processes can be both non-linear (containing feed-back loops) and path-dependent ( – their history determines to some extent where they go next), and it is in this complex context, which is also a highly turbulent one, that evidence-based policy decisions have to be made.
The first part of the book is theoretical, and Room draws on numerous disciplines to build a conceptual structure. He employs biological and mathematical sciences to understand the economy as a complex adaptive system which is nowhere near to equilibrium; and sociology and political science to understand institutions as diverse and dynamic moral communities subject to change by institutional entrepreneurs when public dissatisfaction opens up new political possibilities. A final theoretical chapter employs biological science to understand the agile agents who operate in far from equilibrium complex systems.
The second part of the book relates the first part’s conceptual structures to the empirical social scientific methods familiar to students of social policy. Room applies the mathematics of complexity, chaos, and emergent order, to combinations of complex social systems and networks, and then to social mobility and inequality. He finds that
egalitarian efforts by the state do not reverse inequalities so much as mute their harshness … As structural change alters the landscape of positional competition, it is … in general those who are already advantaged who are best placed to take advantage of the new opportunities and to avoid the new insecurities (pp.209-210).
Part 3 employs the understanding of the policy context outlined in part 1, and the methods discussed in part 2, to understand the policy-maker as a ‘tuner’, an energiser, and a steward, and to discuss particular policy areas. Of particular interest to readers of this Newsletter might be the chapter on poverty and social exclusion, which employs mathematical modelling to understand social polarisation, understands households as agile institutional entrepreneurs negotiating their way around the social policy landscape (of education, benefits, employment, etc.), and recognises that in the employment market ‘agile creativity accrues disproportionately to the advantaged’ (p.265).
After chapters on the knowledge economy and the current financial crisis, the final chapter offers a policy tool-kit for agile policy-makers, and examples of how the tools might be used.
This is a most fascinating book. Just as Aristotle wrote his Metaphysics (‘after-physics’) after his Physics, so Room has written a ‘metasocialpolicy’ which will act as a groundwork for future study of social policy and for policy-making. But perhaps we also need another layer of analysis. The book is about the evolution of complex adaptive systems, but the first chapter mentions a different kind of change: the earthquake – a sudden shifting of the tectonic plates. Scientific progress is mainly evolutionary in character, but occasionally there is a paradigm shift: the emergence of a new way of seeing, a shift in the conceptual tectonic plates. Our welfare state, in most of its aspects, is still fashioned for modernity: for a stable industrial nuclear-family society; but our world is less and less like that. Social reality is now ‘liquid’ (Zygmunt Bauman), but we are still waiting for the social policy earthquake which will deliver the necessary social infrastructure. It is the science of paradigm change that we require, and a new vision of social policy which will both serve and generate further liquid social reality. Strange though it might seem, the dynamic complexity of today’s social reality requires the opposite kind of social policy, because any complexity in practical policy will create social, fiscal and other boundaries which will prevent social and individual change. Just one obvious example is children’s transfers from primary to secondary school, and another the transfer from Job Seeker’s Allowance to (so-called) ‘tax credits’ on an often small change in the number of hours of employment. Liquid post-modernity requires simplicity in social policy so that no boundaries get in the way of social or individual change. Child Benefit and the NHS are obvious examples.
In complexity science as in politics, prediction is perilous; agile humanity is forever able to devise new challenges to the prevailing order; nothing is incontestable; human beings can in some degree choose their futures. (p.305)
by Citizens' Income Trust | Jun 3, 2012 | Opinion
Paul Spicker, How Social Security Works: An introduction to benefits in Britain, Policy Press, 2011, xii + 284 pp, hbk 1847428110, £65, pbk, 1847428103, £23.99
This well-organised book is what it says it is: an ‘introduction’ to the ‘design, management, operation and delivery of benefits’ (p.ix). Its careful structure enables Spicker to bring a sense of order to a system which he recognises to be ‘baffling’ (p.x), though he himself admits that ‘there is a limit to how clear it is possible to make things clear – the structure of benefits does not make sense’ (p.x). A further problem identified is the constant and rapid change from which the system suffers, and this reviewer can empathise with Spicker’s statement that his ‘head is cluttered with old rules and regulations dating back through the last thirty-five years’ (p.xi).
The first part of the book asks ‘What is social security?’ and suggests that ‘there is much more to social security than the relief of poverty’ (p.10). The second part details the development of the system from the Poor Law to the present day, and asks whether the new Universal Credit will in practice be a unified benefit. The third part discusses different categories of benefits (National Insurance, means-tested, non-contributory, discretionary, and universal), how claims are processed, and take-up levels. Part IV debates life’s contingencies (retirement, illness, disability, children, parenthood, lone parenthood, unemployment, and poverty); and the fifth covers such issues as cost, targeting, fraud, the meaning and measurement of poverty, and redistribution. A final chapter compares Britain’s system with those of other countries. A particularly interesting chapter is that on complexity in which Spicker concludes that complexity matters when it leads to the system ‘failing to respond to the changing conditions of people in complex circumstances … We cannot ask claimants to live simpler, more orderly lives’. Part of the answer is to address the issues of ‘conditionality, administrative rules and administrative procedures’ (p.145).
Chapter 12 on ‘Universal benefits’ starts with an argument as simple as the benefits themselves:
The general arguments for universality … include basic rights, simplicity and effectiveness. The central criticism of universal benefits is that they spread resources too widely: if benefits are going to everyone, then either they will be very costly, or they will have to be set at very low levels. This dilemma can be avoided. One option is that universal benefits can be reclaimed through the tax system – a process referred to as ‘clawback’. This has an effect similar to means testing, with two important differences: first, that everyone receives the benefit, and second, that the examination of means is also done for everyone. (p.117)
Then follow a history and discussion of Child Benefit, a description of New Zealand’s universal pension, and a discussion of the Coalition Government’s current consideration of a citizen’s pension for the UK. The chapter concludes with an intelligent and nuanced debate of a Citizen’s Income and with another encomium to Child Benefit:
What Child Benefit offers is a modest but secure element of a family’s general income, something that is fairly predictable and secure. It is the only element of income that seems to continue to function reliably in situations where people are moving in and out of work or where their income is unstable and unpredictable. That seems to me something which is valuable and important, and the principle could be more generally extended. (p.124).
In his concluding ‘Postscript: Social Security: a programme for reform’, Spicker’s first recommendation is: ‘extending the scope and value of less conditional benefits, like Child Benefit, which also helps to stabilise the income during transitions’ (p.274); and the first suggestion in a list of ideas for ‘reducing complexity, error and administrative confusion’ is ‘replacing some claims with automatic payments’ (p.274).
Spicker doesn’t put it like this, but it would be perfectly fair to describe his book as a sustained argument for a partial Citizen’s Income.
by Citizens' Income Trust | Jun 2, 2012 | Opinion
Beverley A. Searle, Well-being: In search of a good life, Policy Press, 2008, ix + 198 pp, hbk 1 86134 887 6, £65
In this thorough and very readable book Beverley Searle employs extensive panel survey data to study people’s subjective well-being and the economic and material contexts of their lives. A complex picture emerges. As we would expect, someone’s health influences their subjective well-being; interestingly, people over 55 tend to report higher subjective well-being than those under 55; and having and changing social relationships can affect subjective well-being in a variety of ways.
An important finding is that objective wealth and income measurements do not correlate simply with subjective well-being. An improvement in one’s financial situation might result in a brief increase in subjective well-being, but the effect will soon wear off. (If our incomes rise then we habituate ourselves to new life circumstances and these might or might not improve our subjective well-being.) What does seem to be significant is subjective wealth, i.e., how we see our wealth in relation to the wealth of those around us. The high subjective well-being experienced by men in social class III (manual) is a surprising and interesting finding. A possible reason is that men in this social class are more accepting of their social and economic circumstances than are men in so-called higher social classes, and that there is something inherently satisfying about the social and economic circumstances of skilled manual workers who work within a set of rules without exercising significant authority within the organisations for which they work.
The situation is of course complicated by the facts that employment status and type of employment influence subjective well-being and that they have a complex relationship with income and wealth.
The author quite rightly calls for more research on inequality and its effects, particularly because ‘feelings of exclusion and subjective deprivation operate at all levels of affluence’ (p.112). This means that ‘a social thesis of well-being’ (p.113) might be the way forward: a theory in which ‘the “subjective” element of well-being is determined as much by social and political systems and how they interact as by individual effort and striving’ (p.113).
In the light of this suggestion, Searle addresses housing, education, and employment. In relation to employment she identifies secure employment as fostering subjective well-being, and the UK’s long hours culture as being detrimental to it; and she recommends a Citizen’s Income as a means of rebalancing employment with the rest of life and as a way of recognising the value of voluntary activity (p.124).
This is a most useful book. It contains thorough treatments of methodology, innovative and clear representations of results, and intelligent discussion. (It’s a pity that the index is somewhat skimpy.)
The final paragraph sums up the message:
The hierarchical structure embedded in an economic idea of well-being is unable to embrace the rediscovery of the social welfare approach that is being adopted in some sectors of society … Subjective well-being is not an individual but a collective experience – as such, while everyone should have the right to experience high levels of well-being there should also be a shared, collective responsibility for the well-being of others. … The quest, then, may not be to raise happiness levels but to seek a more sustainable emotion – that of contentment, (p.129)
by Citizens' Income Trust | Jun 1, 2012 | Opinion
Social Policy and Administration, vol.45, no.4, August 2011
As Bent Greve writes in his introduction to this highly topical edition of Social Policy and Administration, the financial crisis which began in 2008 has given rise to ‘a new era of welfare states … where targeting and emphasis on work are more substantial than earlier’ (p.333). Cuts in welfare budgets mean lower and more restricted benefits and higher retirement ages. The aim is now to save money rather than to improve services.
Two articles show that the financial crisis has generated policy changes consistent with long-term policy tendencies; another that initial Keynesian responses are giving way to retrenchment; and another that governments have in fact not taken advantage of the crisis to bring about otherwise unachievable policy changes. Two articles show that it is political rather than economic factors which have generated welfare state reforms.
The overall impression is one of intensification of existing welfare state styles but with additional tendencies towards retrenchment and ‘targeting’ – the latter unfortunately understood as means-testing rather than as increasing the coverage and levels of universal benefits in the context of progressive tax systems.
