Refugee support clothing depot (Hamburg)
by Rainer Ammermann
Much can be said about the possible links between the current refugee influx to Germany and the idea of unconditional basic income. Now, I want to highlight just one obvious intersection: thousands spend countless hours to build and maintain a support infrastructure for refugees independent from public services. They are not paid and they do in part work others might judge as stupid or heavy. They are driven only by the obvious need and the feeling to be part of a group or a movement of common interest. Although involvement in civil society activities in Germany is traditionally high, the challenge to support thousands of refugees and migrants at short notice shows once more the desire to work and to participate as a deeply rooted intrinsic and social value. With this in mind we do not need to worry about a lack of willingness to work once an unconditional basic income is implemented. But some have to worry that the jobs they offer may not provide the values necessary for real useful work.
One impressive project of refugee support is the clothing depot in a Hamburg trade fair hall. Within days and weeks it has become a well equipped logistics centre completely run by hundreds of volunteers. Of course, people in the core team bring in some professional experience, but no extra money drives them. Most volunteers in the store sort clothes, pack boxes and stack pallets. Some organize free drinks and food for the volunteers, others run and further develop the software used to process packages and orders, and so on. The centre is open 7 days a week from 9 to 9. New in this project is not the fact that volunteers work in a clothing depot, but the large scale of the project and that it is managed independently of established aid organizations with a fluid and self-organizing crowd of supporters. One can start working there without formal registration and without becoming a permanent member of a team or social group. Many people there work in anonymity apart from the first name on their chest.
I work there several hours about twice a week. I am impressed by the atmosphere of a relaxed but effective bustle based on freedom and mutual respect. Although I feel some kind of duty to contribute to this kind of community work (a socialist value), at the same time I enjoy the total freedom of choice each day to start and stop working whenever I like outside public service structures (a libertarian value). No formal accountability undermines my motivation while I can trust in the self-organizing crowd of people that the service is going on well in the time I focus on other things. I call this “my libertarian-socialist working feeling” (while this doesn’t fully reflect my personal political stance) and I feel it bears a huge potential for a more humane and effective world of work. May it stimulate somehow the inevitable way towards unconditional basic income.
Have some insights here and here.
Rainer Ammermann is an activist in the Basic Income Network Hamburg.
by George Spilkov
Outline of a framework for Basic Income at the core of an economic model based on free market economy
Adam Smith predicated his vision for a free market economy on the understanding that some constraints must be set in place to ensure all members of the society are self-sufficient and also, that they exchange only the surplus produce of their labour. He even went as far as to insist on division of labour being “designed” depending on the size of the market.
“When the market is very small, no person can have any encouragement to dedicate himself entirely to one employment, for want of the power to exchange all the surplus part of the produce of his own labour, which is over and above his own consumption, for such parts of the produce of other men’s labour as he has occasion for” – Adam Smith, “The Wealth of Nations”, Ch.3
But then Karl Marx (“The Capital”) convincingly explained that the condition for self-sufficiency cannot be satisfied, because workers have lost the means of production and are no longer self-sufficient. They depend for their survival on specialized division of labour that is imposed on them.
Is that the end of Adam Smith’s free-market or could such ideas be saved by the introduction of Basic Income? I believe the answer is “Yes, Basic Income can be the solution” and for the rest of this text I’ll try to explain why and how.
What is a human being to a business? For many businesses a human being is perceived as ‘a consumer’ at the output end of the businesses and as ‘a worker’ at the input end of the businesses. Therefore, it is in the best interest of the businesses to charge the humans as much as possible when they are consumers while paying them as little as possible when they are workers. The end result of such duality is, the humans suffer, businesses make profit; wealth concentrates, the people lose completely their self-sufficiency. Even now, we are making great strides in Intelligent Automation that, thankfully, is still managing to make good use of human talent, but for how long can this go on?
The matter can get much worse for the humans. Let’s just imagine a near future world (say about 50 generations from now) where automation has advanced to levels that resemble human-like Artificial General Intelligence (AGI). In such world, workers will no longer exist in any meaningful sense, because nearly all work will be done by a super intelligent automation. The businesses will perceive most human beings only as consumers. In such future, most humans will be jobless and, majority of us will have no means of production that can make us self-sufficient.
In our current society, humans without jobs (or income) become consumers without money. Consumers without money are useless to the businesses thus can be “discarded” (it means, literally wiped out of existence). How are we going to survive then? Perhaps, some of us could survive by reverting to violent redistribution of wealth (like war for example). Such approach creates too much suffering. The correct answer is we survive together, as one species, by introducing Basic Income. It must be sufficient to ensure the existence of a wide base of consumers who, in turn, will ensure the prosperity of the businesses and the society.
Do we need to wait for a future that has a human-like AGI before we consider Basic Income? Can we introduce it today and achieve great prosperity now? I believe the answers is, “Yes, we can have Basic income today” and we can have it in a way that is independent of political or technological circumstances i.e. a way applicable to any historical period. Let’s see how it can be done.
Who decides what a ‘dignified’ living is? Perhaps, a bunch of people, called a government, makes the decision while driven by their own ideas about what is ‘basic’ and ‘dignified’? Governments change, therefore, if the amount of Basic Income is determined by some political process (e.g. government’s budget justified by some ideology) then it is likely that Basic Income will turn into another tool to exert control over the people by applying control over the amount of BI.
Much more powerful approach is to implement Basic Income by using the free market as a base for estimating BI. Let’s call it Market Driven Basic Income (MDBI). The meaning of ‘Market Driven’ is that Basic Income will be an opposing market force to the leverage businesses (and other man-made constructs) obtain over the people due to their natural tendency to treat human beings with double standards (e.g. as ‘workers’ and as ‘consumers’).
MDBI can be defined as, the ‘most common’ outgoing spending amongst human individuals when seen as consumers and taxpayers. MDBI has to be derived from metrics that ‘capture’ only transactions from a person to a business, from a person to a government and from a person to any other ‘man-made societal construct’ (i.e. those metrics should reflect only the personal outgoing spending of the human beings, not metrics like gross output or GDI, or CPI, etc.). MDBI is a figure indicated, in part, by the free consumer markets showing what most individuals purchased the most and ,in part, by any other outgoing spending the individuals have (including taxes, fees, etc.).
With MDBI in place they (the businesses, the government, etc.) may even ask payments from us for the air that we breathe, it will make no difference to any of us as long as most of us have to make such payments, because such payments will become ‘common’ therefore “highlighted” to influence the MDBI.
Think about it, the more they (various political and economic man-made constructs in the human society) charge us (the human beings), for the goods and services they try to sell us or impose on us, the more they’ll have to pay us as Basic Income. The less they charge us the less they’ll have to pay us.
Finally, to transform MDBI into Basic Income (BI) some adjustment may need to be made using the formula,
where, DI is a certain amount of Disposable Income. It drives the direction of the economy and determines its minimum speed.
The free market ideas of Libertarianism (laissez faire capitalism) imply that three components must be in place in a free market; a free transaction, a free producer and a free consumer. We must ensure the existence of free consumers before we can talk about true laissez faire free market for human consumers. BI, defined by using MDBI, ensures the existence of free-consumers. On the free market, the freedom of the consumer can truly be measured only by the amount of Disposable Income (DI) a consumer has. The consumer freedom is the disposable income a human being can afford to waste on (or invest in) whatever they like without affecting their normal life (think of DI as gambling money of sort that drive the economy).
Also, the DI adjustment to BI is necessary because the businesses will begin to create a gap between prices of products affecting the MDBI and the next-up version of the same products. Therefore, the amount of DI adjustment should be set to breach about 80% of that gap. If the gap is allowed to exist the economy will stagnate without the DI adjustment.
What is the meaning of the ‘most common’ in the definition of MDBI? I am sure statisticians may have a very good answer to that question. My guess would be, first, apply some good clustering algorithm to determine the categories of people’s outgoing spending and then find out which of these categories are common for, let say, 80% of the people.
Why would people want to work if BI is defined as previously described?
Well, the incentive to work will come from linking the Minimum Wage (MW) to the Basic Income using the following formula,
MW= K * MDBI,
Where, MW = is the minimum wage;
K = is a multiplier to represent the incentive for people to get a job. (For optimal results I recommend K=2)
That makes the total minimum income for a working person equal to =BI+MW =BI+2*MDBI or expressed otherwise = (1+K)*MDBI+DI.
The presented model will outperform in simulations any other model. It will create a vibrant and agile economy generating optimal wealth while allowing dignified existence (defined by the free market) of all members of the society and will encourage people to seek employment. It will provide sufficient income(capital) to the lower end of the wealth ladder that will stimulate attempts for new small enterprises and business ideas.
The proposed model protects the human beings from any economic or political man-made constructs (systems of rules) regardless of the historical period or the technological development.
Market driven Basic Income could be implemented within 1-2 years, because much of the data necessary to determine the MDBI is already available in some form. It is just a matter of interpreting the data for the purposes of BI and also making small adjustments to the existing laws.
In a long term, perhaps, people can declare their outgoing spending by using a ‘spending card’ of sort which logs all outgoing payments (something like ‘electronic receipts and costs logger’).
For the remaining of this text, let’s try to predict some of the expected effects of introducing MDBI and the model’s sensitivity to influences.
What will be the reaction of the government and businesses to the market driven approach to BI?
MDBI avoids government involvement in determining its amount thus making BI independent of political or moral ideologies. It will make the government feel less oppressive to the people.
It is in the government’s best interest to keep the MDBI as low as possible. That means the government will seek to apply high taxes to a small groups of people and entities (i.e the rich) instead of smaller taxes to a wider groups of people (i.e. the poor).
MDBI may incentivize the government to extend the free social services (like free educations, medical care, etc.) in the hope that it will reduce the outgoing spending of the people thus reducing MDBI while allowing the government to be in control and work for the people.
The government will have to adjust its budget policies not to some ideological dogma about what people should or should not do. Its budget policies will have to be directed towards ensuring the funds for Basic Income Guarantee defined by the market preferences of the people and the economic and technological realities of the current, or any other, historical period.
Introducing Minimum wage (MW) linked to the BI will cause the businesses to respond by providing cheap goods that will cover the common needs (so they will pay lower wages), and then there will be a version of the same goods but at a higher price. Such response does not matter to the people, because if the people choose to use their DI for the more expensive goods then those goods will eventually become ‘common’ and therefore will affect the MDBI.
Some businesses will have to restructure their capital into new types of businesses. Those businesses that cannot remain competitive will have to close. Jobs will be lost. However with the newly found spending power many people may decide to start their own businesses. Other businesses will flourish because people will be able to purchase more of their products. That will create jobs.
Many companies, for example, like McDonald’s , will flourish under the new MW and BI. They will have higher labour costs which they will transform into cost per burger. However, the new relative cost per burger will be less compared to the new purchasing power of their customers. People will purchase more burgers and the profit for McDonald’s as absolute value will not change much. Also, their client base may increase if the product they sell is desirable and competitive.
After the introduction of BI the Supply and Demand principle will continue to work but without the leverage the businesses currently have over the human beings.
Finally, let’s look at a hypothetical worst case scenario involving MDBI where businesses actively act, hypothetically, against the idea of linking BI to MW. Let say most businesses decide to close in order to protect their wealth, resources and the means of production that they own and control. That will create massive unemployment and shortage of resources. Most unemployed people may rely only on BI for their survival. If most businesses close it will cause artificially created demand resulting in empty shops and insane prices. Consumers will stop purchasing thus driving BI down. However, people need at least, food, water and shelter. They will be willing to spend their entire BI to cover those needs. If no business is willing to provide those in sufficient quintiles then the government must temporary revoke the sanctity of ownership for the very wealthy. That means, moving wealth down the wealth-ladder to those who are willing to provide products on the market to cover at least the basic human needs for sustenance and shelter. That will restart the economy.
Such hypothetical scenario is the only time when the government must interfere with the private wealth generated by the free market.
In all other cases the government does not have to do a thing (apart from figuring out ways of collecting relevant amount of taxes to cover the BI as indicated by the free market).
Since the model does not discriminate against human age and circumstances it will allow for healthy young adults to accumulate somewhat more capital (disposable income) over the early years of their lives which they may chose to invest in projects/businesses or specialized education when they become more mature and experienced.
For people with addictive habits the government will continue to provide advice, help and control (if necessary) related to the use of their BI.
Given enough time the proposed market based model for BI and MW will reduce the wealth gap and will redistribute wealth to resemble a Gaussian curve of distribution (i.e. most wealth in the hands of most people a.k.a. it will create a strong middle class). Also, it will create agile economy that fully utilizes the human potential. It will make it more difficult for businesses and governments to exert economic, political and behavioural control over the human beings thus making the society more democratic. It will create diversity thus strength in the face of adversity.
In a world where “Space is the final frontier” we should try to create economic and political constructs that rise above simplistic views about our human nature, constructs that see our species as one sentient organism capable of reaching the stars and making the Universe our playground.
by Karen Christine Patrick.
DECIDER from the Urban Dictionary:
“A person who decides what is best.”
Twenty plus years dealing with “the system” in being the caregiver for my disabled daughter, then injury and being disabled myself, I have run the gauntlet of the “deciders” too many times to count. People who tell me that the Basic Income Guarantee is “socialist” have no idea what they are talking about if they are worried about “big government” or “the nanny state” because it’s here already in the United States, alive, but not well. Instead of taking the cue from Martin Luther King Jr. and others, way back in the day, we went the way of the deciders. I learned this term recently, “deciders” from the Urban Dictionary online. Sometimes “slang” words pin it just right. Instead of self-empowered individuals making their own decisions as to provisioning their daily life, we have an army, many battalions of deciders who decide FOR grown adults what they should eat, what they should wear, where they should live… if they “deserve” anything they things they are asking for. In a recession, where one cannot just simply go and fill out a resume or application, and show up to the job, to get the money to buy what is needed, this is enforced “learned helplessness.” The deciders have decided that we need them, and it’s enforced.
I can attest to “angels in the system” so for people in the social work class who are not only doing their job well, but still care deeply for people… this is not about you. This is about your co-workers who’s body shows up to shuffle the paperwork, but their mind and heart are absent, who stick by the rules even if the “rules” are just guidelines, are badly trained or misinformed. These are the deciders who make of the system a labyrinth of despair. There are also the devils of the system, the ones for whom my mother said, “would break the wings off of butterflies.” Our bureaucratic system acts as a dank, dark cellar system that warehouses human “resources” made from our most vulnerable citizens, the “precariat” with no other door to walk through. The potential for predation is truly there. Our “nanny state’ is just the kind of hunting grounds for that darker type, a natural habitat for psychopaths and sociopathic behavior that uses the rules as a ruler to whack you on the knuckles with if you get it “wrong” with a larger authority and less advocacy. The ability to decide the fates of people everyday, when one is frustrated and angry, to have a ready whipping post of authority of some kind, is too much of a temptation for some to resist, unfortunately.
Our system of “benefits” is at the mercy of the deciders. Deciders decide at every step of any process. Deciders methodologies are a product of a system that provisions “departments with budgets’ instead of “dividends for citizens”, thus paying the deciders and the “clients” out of the same pool of funds. This creates a natural competition for resources, a contrived animosity, a power play-between “deserving” clients and the ones who decide who is deserving. There are always plenty of deserving clients, especially in a scarcity economy. This is problematic for deciders, because they are outnumbered. However, they are in the system and of it, and know what the clients do not know, know how to make sure that they are provisioned first, and the clients after. They are playing the insider game, knowing they must pay out something to be seen as productive and deserving of budgets, but also knowing the strategies to maintain the superior position and creating a system-within-the-system hierarchy that gives them maximum decider leverage.
It’s human nature, so they say, to take care of number one. No matter how many times the “non-discrimination” policies are printed on forms, documents and other paperwork, humans discriminate. Training for FBI agents include the idea of the power of “mirroring,” a technique relying on the fact that we are most favorably drawn to, supportive of, those almost exactly like we are, with whom we identify. It would be the first tenet of decidership, if they are to decide, the are doing so on the basis of alike-ness subconsciously. Second, decidership is motivated by the tyranny of the urgent. Which is decided first, the client’s paperwork on the desk, or the demand of a superior in the system? The third tenet of decidership is the fear paradigm. The overt and covert threats of loss of status, loss of the comfort zone, loss of job security, the more motivating it is to make decisions based on how the decisions affect them personally, rather than with any concern about any part of any particular case. I’ve observed personally that you are in peril if your case is being heard just after a budget meeting threatening cuts or benefits loss for the employees of the department. Or just before or just after lunch. It’s a key point to ask the question, if you are in the system, are you a person, or a case?
I didn’t know the term for the procedure, but I invented one, “Case Stacking” what I saw watching what was going on in state government while living in a state capital city. I knew some of the state employees and heard them talk among themselves or complain about the way state business was handled. There was so much competition between departments, all requesting money from the state legislature that I saw this game that goes like this… human services departments are designed to process in as many cases as they can so they can show to the legislature during appropriations, “See, we have ALL these CASES. It’s soooo overwhelming” and then when they get their budget amount assigned which of course will NEVER provision the entire case load, especially here now in the age of American Austerity. The game continues to the next level. What happens is then, the first provisioning out of the budget is to pay the employees of the department. In recent years, budget cuts were ordered on the backs of the state employees resulting in job cuts, furloughs, reduction of benefits, and workers having to help codify their jobs technically so that automation, phone bots, and websites can replace functions, or eliminate their jobs. Now you have pissed-off and insecure, defensive deciders even before any funds are then assigned to the clients.
The constant drumbeat of how we need to save money and eliminate fraud, which is always pinned on the client population, never the decider population, is ringing in the ears as provider deciders meet with clients on the front line of the austerity war. The word “handicapped” was created from the idea of a disabled person having their cap in their hand, begging. We do have beggars on the street of our cities, but most of the cap-in-hand begging goes on in whitewash wall offices where it’s hidden away. The deciders are in cramped state offices, with piled up in-boxes, on phones, on computers, having to make so many decisions on so many things that deciding isn’t even personal so much anymore, it’s a machine growing larger every day with a reduction in human components. The client is faced with navigating a system that is just like the classical labyrinth, running blind, basic human needs in peril, waiting for decider action for food, shelter, money for bills, healthcare. And there is a monster in that labyrinth, the “minotaur of minutiae”, cowed by “the code” the decider’s rulebook which shifts and changes often, like sliding panels in this labyrinth. It is fiddled with all the time by deciders at the upper echelons, elected deciders who have promised to “do something” about poverty, homelessness, starvation. They do almost anything but give money, the lifeblood, the first choice of trade, directly to people as a Basic Guaranteed Income, but would rather maintain the decider class.
The decider class transcends all levels of society. The upper echelon decider class also presides over the activities of the middle class, deciders who decide things in your governments of all level, the cost of utilities to homes, deciders in financial institutions and banking, deciders in healthcare, education, professional licensing, taxes, getting permits, etc etc. These deciders are gremlins of another sort altogether who need appeasing with the paperwork having to be “right” and all fees paid, leaving the middle tiers also competing for that rubber-stamp, “Approved.” The palpable fear of becoming poor, of falling into the ranks of the ‘precariat” drives the compliance of the working classes.
It is from the middle class where the recruits to the ranks of the decider class come from. I would wager most deciders don’t like their jobs, especially any deciders with true human value and feelings left, the empathetic and kind, and knowing the deprivations of the system as they do, if they were not under threat themselves. Especially this would be true these days, in the scarcity economy of the “good job” that actually still, “pays the bills.” Watching the grotesque show from behind the curtains has to be frightening and heartbreaking. Those “angels in the system” are trying to save who they can, like rescuers on a sinking ship, as a triage team made by political necessity.
What drives it all now, this scarcity-driven human-provisioning machine, is no longer basic “making a living” issues but a clear and present fear. Nobody wants to end up in the precariat class where the next level down is completely down and out, irretrievably lost. It’s around us all the time, it is ourselves, friends, or family members falling into the pit, or just experiencing a failure to thrive, or not being able to be independent or able to formulate/maintain households. Our consensus reality show, political polemic, suggests it’s some defect in the people themselves, but in reality it is the failure of human leadership pointing the finger at those who cannot fight back.
We have an exciting idea to change the whole paradigm, to implement that we want people to be re-empowered to decide for themselves. We have a way to disband the decider class, reversing the learned helplessness that permeates the economic outlook in this state of global austerity. Those those about to lose their decider jobs, we say, “It’s nothing personal, we just don’t want to need you anymore.” The current system, having been given a large amount of resources is just not doing the job to rid of poverty, is not distributing resources fairly, nor is it fitting our notion that an economy is based on people making personal decisions. Not only do we need a Basic Income Guarantee, but, as Martin Luther King, Jr. said, it should not be too low or it relegates a large group of people to being locked into poverty. This Basic Income Guarantee “floor” for people to stand on, we will completely change this decider/client paradigm.
It becomes obvious that a lot of current members of the decider class, who have been dependent on a poverty class as a reason to exist, will lose their jobs. That’s a good thing, isn’t it? Those who work at processing poverty, who currently benefit by poverty because it has become an industry will be without a job when we eradicate poverty for real. But they will be provisioned by a Basic Income Guarantee until they transition to doing whatever comes next. Many social workers got into the field “to help people.” They would be free to really help people in a hands-on way instead of a paper-pushing way. This might be a very satisfying thing in the long-run, especially for those who really, deeply want to make a difference in the lives of people.
The day after a Basic Income Guarantee goes into effect, that does not mean people are not going to need each other, or that we won’t need some deciders for people who truly are disabled or incapacitated, it’s just that the process of helping or being helped won’t have a huge complexity to it that creates false hope and false work. For the precariat, from peril-to-provision will be a welcome change. I think the Basic Income Guarantee is a good, humane decision, even for the people currently in the decider class ultimately.
For more from Karen Christine Patrick, visit her blog
Dear Basic Income supporters around the globe,
Whether you are staging your first event as a new supporter of Basic Income, your country is hosting 40 different events this week as a result of a long Basic Income tradition, whether you are talking about it with your community or carrying on your national Basic Income campaigns regardless – 8th International Week is happening – thanks to you!
International Basic Income Week
Because of your efforts and cooperation we have a stunning 29 participating countries this year – across ALL continents, 20 of which are staging life events. Thank you so much for all your planning, organising and creativitiy from us at the mobilisation team: Christof, Manja, Robin (webmaster) and Barb (press officer).
Scott Santens said “UBI isn’t left or right, it is forward“ and right now it feels like we are a global movement that is taking current and future realities into account, while moving forward for human dignity and emancipation. It is a truly inspiring experience to be part of this.
Please keep your photos, sound or video files, press statements or other information about basic income in your country rolling in at this link: www.basicincomeweek.org/contact-form and https://www.facebook.com/events/421208298066517/
Interview series: https://basicincomeweek.org/category/interviews/
Official press release: https://basicincome-europe.org/ubie/2015/09/over-25-countries-call-for-a-safety-net-for-life-during-international-basic-income-week-14-20-september/
(since then 2 more countries have joined International Week, so we are up to 29 now)
Be welcome to use it, amend it, translate it for your purposes nationally and locally – if you couldn’t participate this year, this might be a way to still inform your fellows of what is happening around the world.
A little video to keep International Week rolling… https://www.youtube.com/watch?v=_V8BZxjktaY
This was inspired by Sidy’s Synchro-Performance with musicians, dancers, artists which is going ahead in Vienna today. https://www.labournetaustria.at/16-9-2015-sidyweltweites-bedingungsloses-gleiches-grundeinkommen-synchroperformance/
Music, dance and art are a universal language that unites, where words can divide – Sidy and me would like to try a global Synchro-Performance next year for 9th International Week. You are invited! Share your ideas with us: firstname.lastname@example.org email@example.com
Have a truly inspiring week,
Christof, Robin, Barb and Manja – International Basic Income Week mobilisation team from UBIE
14th – 20th Sep: 29 countries from ALL continents participating!
The Eurozone clearly needs a structural yet flexible central bank policy instrument that can be used to kick-start the economy as and when it is needed. A miniature version of the increasingly popular basic income policy would provide exactly this type of instrument.
By Willem Sas and Kevin Spiritus, originally published in Flemish Newspaper De Tijd, translation by Will Wachtmeister.
Can anyone remember what times were like before the crisis? When “cut-backs” was a word ascribed to the 1990s. When growth rates were healthy and inflation stable. When the benefits of a unified single European currency were still plain for all to see. Memories of those times have been fading rapidly. Especially so with persistent wage stagnation, mounting inequality and interest rates that have been reduced to basically their lowest possible level. Is there really no way out?
A policy response that is often put forward is looser monetary policy, the proverbial printing press. And since 9 March, the printing press has been in full swing in Europe too. Under the established label quantitative easing (QE), the European Central Bank has, after four years of hesitating, begun spending billions on buying up assets. This involves buying up private loans just as much as government bonds. The hope is essentially that this will stimulate both private and public investment.
Unfortunately, QE will not necessarily lead to more economic investment within the European Union. Insofar as public authorities aren’t able – or allowed – to invest, insofar as the financing doesn’t reach businesses and businesses don’t want to take on loans, QE will prove a fruitless endeavour. At the same time, QE could well lead to even more debt: by stimulating the economy through credit creation, it potentially blows more air into the bubbles caused by the most recent crisis. A massive buy-up of bonds and shares will in the end also cause asset-price rises, with the benefits going mainly to larger, wealthier investors.
This all means that success is far from guaranteed: the approach is fraught with risks and has damaging implications for equality. QE thus does not appear to be the best way forward for Europe. This is why there are economists who propagate a more efficient alternative, the so-called “helicopter money” approach. For as long as the economy fails to recover, newly printed money is simply distributed directly to the general population, as if it were dropped from a helicopter. Research shows that the money would be spent pretty much straight after it’s received, which would restore confidence to invest among businesses. It would also restore business confidence to take on new employees, who in turn respond by consuming more. And so the result becomes a virtuous circle.
But there are drawbacks. Sharing out helicopter money is a temporary measure that can only be adopted in exceptional circumstances. If at some point it transpires that the ECB has gone too far and created a threat of runaway inflation, it is very difficult to remove the newly created money from the economy. This is why there is a clear need for a structural and flexible policy measure which the central bank is able to use to kick-start the economy as and when it is necessary.
A variation on the helicopter theme, a monetary basic income, provides a way forward. Under this scenario, the ECB would distribute an amount of money to each citizen on a monthly basis, calculated as a percentage of average income (the amount therefore varies between countries). Let’s assume for the sake of simplicity that the amount is 400 euros a month throughout the Eurozone. It’s important that the individual Eurozone countries remain responsible for raising the 400 euros – for example by reducing benefit payments or tax allowance levels – whereupon they pay it back to the ECB.
So far, this is a neutral measure that shuffles money around without creating a stimulus. This remains the case except in times of crisis when the central bank increases the monthly payment to, say, 600 euros, until the economy recovers. Meanwhile, each national authority keeps its repayment levels fixed at 400 euros. The ECB thereby ends up printing an additional 200 euros per person per month, and this money is relatively quickly spent. As the economy recovers and growth and inflation figures rise, the basic income can be returned to the neutral level of 400 euros. In cases where the ECB had been too generous, the basic income level could even be lowered temporarily to 300 euros until inflation stabilizes. This would essentially remove money from the economy.
Viewed as a monetary policy instrument for tackling crises, this type of basic income can hardly be considered an indulgence. But there is more to it than that. The approach also does what it says on the tin: it is a miniature version of exactly the sort of basic income which increasingly features in public debate. Supporters claim that a structural basic income would provide a way of dealing with automation, growing inequality as well as the stress and agitation of everyday life. It would also enable people to be more creative and entrepreneurial.
This last point is far from a certainty and in effect represents the biggest drawback of a basic income policy. How many people would actually invest in new skills? And what will happen to the labour supply? There do exist several economic models that simulate the effects of minor reforms but when it comes to the effects of a comprehensive reform such as basic income, we’re very much in the dark.
As long as we can’t anticipate the consequences of introducing a basic income, making a case for it will remain difficult. And because the advantages will only really be felt when basic income is set at higher amounts, introducing it step by step is just as problematic.
Here our proposal for a limited monetary basic income offers yet another opportunity. To be sure, we don’t expect an amount that guarantees a dignified life to be introduced from the outset. But our proposal does allow economists to research the effects of a large income shock. When the central bank increases the monthly payment in times of crisis, this will generate a great deal of valuable evidence. As soon as the positive effects are ascertained, the neutral-level basic income can be increased step by step, eventually reaching the point of a fully-fledged basic income.
So we have stronger guarantees of success, less risk, and more equal opportunities to boot. That’s a better idea than quantitative easing for a start.
Willem Sas and Kevin Spiritus are completing their doctorates in public economics at the Center of Economic Studies at Belgian university KU Leuven.
Credit Picture CC Bobby Hidy