by Stanislas Jourdan | Mar 25, 2017 | Opinion
Spurred by Milton Friedman, the concept of “helicopter money” – under which central banks would distribute money to citizens – is making headway in economic debate, but is often confused with the idea of basic income. This article intends to clarify the distinctions and overlaps between these two concepts.
“Let us suppose now that one day a helicopter flies over this community and drops an additional $1,000 in bills from the sky, which is, of course, hastily collected by members of the community. Let us suppose further that everyone is convinced that this is a unique event which will never be repeated.”
When Milton Friedman wrote those lines in 1969, he probably never thought that “helicopter money” would become a buzzword in the 2000s post-crisis era. Friedman’s thinking was indeed quite radically unorthodox. How did the prominent neoliberal advocate come to suggest people should receive free money and that we would all be better off as a result? Far from philanthropic thinking, Friedman was in fact simply trying to illustrate his theory of the neutrality of money. If you need to make more money, you should consider renting out your spare room.
What would happen if we were to drop freshly printed notes over a population from a helicopter, just like rain? Nothing other than inflation, suggested Friedman, one of his main beliefs being that any increase in the money supply automatically leads to a proportional increase in consumer prices. Through this thought experiment, Friedman drew the conclusion that central banks can always avoid deflation by producing money and causing it to circulate in the economy.
In fact, however, the idea that we could create money and distribute it to the people goes back much farther than Friedman. In 1924, British engineer Clifford Hugh Douglas elaborated his theory of the “social credit”, its main component being the distribution of a monthly “national dividend” generated from money creation, the level of which would vary according to national production.
Although Douglas did gain some notable following at the time, especially in Canada, the idea was ultimately consigned to the oubliettes of history, leaving Friedman with the alleged paternity of the idea, centre-staging the helicopter analogy with it.
The concept wasn’t much thought of for 30 years following Friedman’s discussion, however, and it might have been forgotten again if it hadn’t been brought back to public attention in 2002 by one of the most influential voices of monetary policy. In a famous speech, the Federal Reserve chair Ben Bernanke alluded to this concept, making the case that, under important deflationary trends like that seen in Japan, the central bank could resort to helicopter money-style instruments to achieve its 2% inflation target.
Yet, far from initiating serious consideration, these remarks only caused Bernanke to endure mockery and “helicopter Ben” as a persistent nickname.
This is probably because the concept runs counter to the whole ideological turn of the 20th century in terms of monetary policy. Starting from the 50s, money creation has been gradually shifted from the sphere of public sovereignty into the quasi-monopolistic realm of the private banking sector. This process ultimately resulted in the outright prohibition, in most jurisdictions, of monetary financing of government budgets. Helicopter money sounds very much like a reversal of this trend, and a dangerous one to the ears of many mainstream economists.
An alternative form of money creation
There is recurring confusion around the exact meaning of helicopter money, which is probably caused by the simple fact that the alleged proponent of the idea, Milton Friedman, never seriously intended to implement it.
Thus, the concept finds itself often described in very diverse terms, ranging from the old-fashioned monetization of public debt to its purest form (and probably the one Friedman actually had in mind): the distribution of money directly to all citizens by central banks. The latter will be the one we assess in this article.
Helicopter money can thus be defined as the creation of money, without corresponding assets, and its distribution into citizens’ bank accounts.
It is therefore an alternative form of money creation, which is strictly different from the most common way in which money is created today: through the banking sector’s credit issuance functions. It is worth clarifying this point here: as the Bank of England has clearly demonstrated, today’s monetary supply is almost entirely controlled by private banks issuing credit into the economy. This is sometimes referred to (somewhat misleadingly) as the “fractional reserve banking system”. Although the benefits and pitfalls of such an arrangement are subject to never-ending controversy between academics, the way in which this system functions is nowadays largely undisputed.
Money tree sculpture in front of the Central Bank of Ireland.
The key advantage of helicopter money resides precisely in the fact that it would bypass banks as money creators, and is therefore one way for the central bank to maintain the money supply regardless of whether banks play their role as suppliers of money into the economy. In its purest form, helicopter money also bypasses governments’ treasuries, and is therefore not legally prohibited under the monetary financing rule (Art. 123 of the EU Lisbon Treaty).
A second clarification is also required at this point: helicopter money is also different from the so called “quantitative easing” (QE) policies that have been implemented by several central banks, although they pursue a similar objective: boosting the money supply to avoid deflationary pressures.
Under QE, central banks create money (the so called central bank’s reserves) and mobilize those reserves to purchase financial assets on a large scale and over a certain period of time. Usually, central banks purchase sovereign bonds with the intention of pushing down interest rates on those bonds, to encourage the financial sector to move away from investing in sovereign bonds and to instead lend money to riskier projects under the so-called “portfolio rebalancing effect”. This type of money creation is therefore targeted to the financial sector, with assets as collateral on the central bank’s balance sheet and, more importantly, is a temporary operation: the central bank destroys the money once the bonds it holds come to maturation.
Helicopter money is therefore very different from QE. In fact, it is precisely because of the many shortcomings of QE that helicopter money is being presented by a growing number of people as a superior alternative.
Helicopter money as an alternative to quantitative easing
The assessments of QE programmes in the US, Japan, and the UK have been subject to a wealth of contradictory conclusions. In Europe, the ECB’s QE programme was first applauded as progress, after years of speculation and resistance to implementation of QE when it was desperately needed – when the Greek crisis hit. However, it is becoming clear that QE recipes, in Europe and elsewhere, never really do the trick.
Generally speaking, QE does cause lending conditions to improve, but it does not automatically lead to an increase in bank lending. In other words, the “transmission channel” of monetary policy does not work so well under QE. To be fair, this is not the banks’ fault: there is little banks can do when conditions are so bad that virtually no companies or households want to take on debt because the economy is already over-indebted.
Economists talk of a “liquidity trap” whereby injections of cash into the private banking system by a central bank fail to stimulate the real economy. QE doesn’t overcome this trap.
Even worse, QE is often accused of creating asset bubbles and increasing wealth inequality, because the massive injection of money is narrowly targeted towards financial asset disproportionately owned by the rich. The Bank of England itself estimates that its own QE programme has increased by 40% the wealth of the richest 5% of Brits.
Against this background, helicopter money is experiencing a comeback, perhaps with even more strength than Friedman could ever have imagined. Since the start of the crisis, prominent economists and commentators, including Martin Wolf, Steve Keen, Anatole Kaletsky, Willem Buiter, Adair Turner, John Muellbauer, Bradford Delong and Martin Sandbu, have advocated for central banks to implement some form of helicopter money. Anatole Kaletsky and Steve Keen almost simultaneously proposed re-branding the concept “QE for People”, which later became the name of a European campaign (for which the author currently works).
Conference about “Quantitative Easing for People” at the European Parliament
The case for QE for People is quite straightforward: since the banking sector is not currently able to “transmit” the central bank’s monetary policy accommodation by increasing their loan’s issuance, why shouldn’t the central bank do it by itself? If the main task of central banks is to maintain inflation at around 2%, certainly the most effective way would indeed be to distribute money to people so they can spend it.
The debate on helicopter money took another turn when it was mentioned by the ECB’s chief Mario Draghi, under the spotlights of a press conference on March 9th 2016 and later by other senior ECB officials. “Helicopter money is a very interesting concept” Draghi said, while adding that the idea was not yet being considered by the ECB. Whether one think this was sincere curiosity or a clumsy statement on Draghi’s part, the fact is this single sentence provoked a historic tide of comments and debate on the idea, including within policymaker spheres.
How about basic income?
Similarities between helicopter money and basic income have led some commentators to offer very confused explanations, claiming, for example, that Finland was already undertaking a “helicopter money” programme (the basic income experiment).
Undeniably, there are resemblances between the two concepts, as both involve making unconditional payments to all citizens and usually without means-testing. Basic income’s principles of universality and unconditionality can also be found in helicopter money.
Key differences quickly emerge under careful analysis, however. Under a helicopter money regime, there is no clear commitment from the central bank to make payments periodic. Quite the contrary in fact, as most proponents of helicopter money (read the prolific Eric Lonergan for example) are keen to be clear on the fact that this should be an exceptional measure, to be used on a one-off basis, with the possibility (but not the commitment) to renew if necessary.
There is nevertheless some theoretical overlap with basic income. In addition to Douglas, several key advocates of basic income have put forward the case that money creation could be used to finance the benefit, either as a “boot” phase or as a way to supplement the fiscal means to finance basic income schemes. The French economist Yoland Bresson made the case that perpetual low interest sovereign bonds could be used to kick off the basic income in a first stage, thus leaving time for the government to implement all the necessary reforms of the tax-benefit system to make UBI fully functional.
These theories relate to the understanding of basic income as a mechanism of pre-distribution (as opposed to redistribution), whereby basic income is a recognition of the intrinsic value of all participants in society, or even as common inheritance. If all citizens create value “because they exist”, then it makes sense to “pre-validate” this economic value using money creation. If we are all richer today because of our predecessors’ work and heritage, then one can argue that more money should be introduced into circulation to recognise this added wealth.
These are, however, only marginal justifications today, put forward to support neither helicopter money nor basic income. Beyond some theoretical common ground, the differences between the two policies are most clear when one understands that they pursue different objectives.
Put simply, helicopter money can be framed as a punctual measure (extreme, one may say) with a rather narrow purpose: to stimulate economic activity by boosting people’s incomes under some strict circumstances, that is, when the economy is under threat of deflation.
Basic income, on the other hand, pursues a very wide range of objectives from poverty alleviation to work emancipation, gender balance incentivization, social protection modernization, more aggressive redistribution and so on. In contrast, stimulating people’s purchasing power is certainly not the main argument for doing basic income.
From those different objectives also stem different institutional frameworks. If the objective of helicopter money’s proponents is merely to stimulate demand, then transfers to citizens is only one practical means by which to achieve this single clear goal. From this viewpoint, it also makes sense to give independent central banks the legal capacity to distribute a citizens’ dividend as a new instrument in the monetary policy toolbox.
If basic income pursues more numerous and complex objectives, by contrast, it then makes sense that it should be the responsibility of elected governments to design and implement it, just like any other fiscal policy.
In conclusion, helicopter money could be seen as one of many “partial basic income” proposals: schemes that share some of the characteristics of basic income but not all of them. Yet given the very clear institutional distinctions just covered, it does not make sense then to associate too closely the two concepts. In this light, it might be more meaningful to refer to helicopter money payouts as “social dividends” or “monetary dividends” as opposed to “basic income”.
Can helicopter money lead to basic income?
Despite all the institutional and practical distinctions drawn above, it is quite enlightening to recognize the political porosity between the two proposals. Helicopter money proponents tend to also favor basic income (though not all do) and vice versa.
This is probably because the two ideas, to some extent, share some common strategic interests and help one another in the struggle for cultural acceptance of each proposal, especially in regards to unconditionality and the disconnection of money from labor.
From a basic income viewpoint, the rise of the helicopter money discussion is a useful addition to basic income’s financing question. If central banks can create money, then surely it would be easier to finance a basic income.
On the other side, it is also convenient for helicopter money proponents that the basic income discussion is making headway in the argument for universal payments to citizens: it levies an important moral blocage.
Even more strategically, perhaps, there is a case for seeing helicopter money as a necessary step to the implementation of a full-fledged basic income policy.
This is a particularly relevant argument when it comes to the European Monetary Union, which is currently deprived of any significant common fiscal policy. Because of this, it will probably take years before we might see something like a eurodividend (an EU basic income scheme financed by an EU budget) as articulated by Philippe van Parijs.
Speech by Philippe van Parijs on the Eurodividend at the European Social and Economic Committee in Brussels.
To circumvent this cumbersome and very long-term political route, Slovenian economist Jože Mencinger has repeatedly suggested the use of helicopter money as an “ideal experimental possibility” to kick-start a form of basic income in the EU.
Instead of QE, the ECB could start a helicopter money scheme by giving 200 euros per adult citizens for one year – no strings attached, no taxes involved, simply courtesy of the ECB’s (digital) printing presses. This would involve about three times less money printing than under QE and yet would be more likely to fulfill the ECB’s objective.
If this works and garners favorable public opinion, there would be even greater political momentum for implementing something like a permanent eurodividend scheme. The ECB’s temporary scheme would allow some time for EU policymakers to create the institutional and fiscal infrastructure for such a eurodividend to be functional.
In the long run, nothing forbids us from thinking that the ECB could permanently fund such a eurodividend scheme at a certain level, as Kevin Spiritus and Willem Sas have sketched. Yet such funding cannot be seen as an obligation for the ECB under the current legal framework. More intellectual debate will be required before policymakers come to the conclusion that some form of permanent helicopter money is necessary and desirable.
There is still much work to be done before either basic income or helicopter money can be put in place. However, 10 years after the financial crisis, it is clear that central banks’ models have not delivered as they were expected to. There is clear mismatch between the massive size of their balance sheet interventions and the bleak outlook of the economy.
There is a growing case that the whole central banking theoretical framework must be revised. Helicopter money is certainly one idea that is usefully challenging the monetary policy status quo. It will surely take another leap of determination and audacity for central bankers to take this step forward, but we should not rule out that it might also be the most pragmatic thing central banks can do at some point in the future. When things get to this point, the basic income movement must stand ready to play its part in facilitating the move towards helicopter money, while making sure to build upon this gigantic central bank experiment towards a permanent and sustainable basic income.
Thanks to Genevieve Shanahan for proofreading this article.
Credit pictures: Courtesy Financial Times; Positive Money, picturesbyJOE, UBI-Europe
by Tyler Prochazka | Mar 24, 2017 | Opinion
This past presidential cycle, libertarian presidential candidate Gary Johnson suggested to BI News that he was “open” to the universal basic income. Johnson’s 2012 running mate Judge Jim Gray recently laid out a proposal for broad reform and simplification of the tax code, as well as providing a guaranteed annual stipend of $15,000. The stipend would be gradually taxed away by 50 cents for each dollar. Those making $30,000 and above would not receive the stipend.
Gray said that his policy would effectively address poverty and is consistent with “liberty” and “compassion.” At the same time, it would remove the poverty traps that people in poverty face.
“Unlike today’s welfare and social security systems, this system always has incentives to work and earn the extra dollar,” Gray said.
The full interview can be found below.
What inspired this idea for the monthly stipend?
I don’t recall specifically. But I have always believed that institutions should regularly be revisited with an eye toward increasing their social incentives. Our tax system is terribly complex and in many ways harmful. If it could be reformed and simplified, that would be a wonderful occasion to address all welfare issues and, along the way, address our homeless problems as well.
Where would the funding come from to pay for the $15,000 stipend?
Abolish all other welfare programs, and all the bureaucracies that go along with them. That should leave plenty of money to support this stipend.
Would there be any targeted programs that would remain, or would they be entirely replaced with the stipend system? For example, medical programs, or programs for the disabled.
The stipend would have to be weighted to address people with truly special needs. In addition, I would also employ a voucher system to facilitate people purchasing health insurance of the private market, based upon a sliding scale for need.
Can you explain the relationship between your proposal and expanding liberty?
Welfare systems are extremely intrusive, and in many ways inequitable. This system would be implemented voluntarily, which is consistent with Liberty, and would be far less judgmental and intrusive – all of which is fully consistent with Liberty.
You said we should have this safety net because “that is who we are.” What did you mean by that?
I believe we Americans are compassionate people. If given a choice to provide for those in need, Americans would choose to assist – as long as they believed this was a workable system, and everyone understood this is not an “entitlement,” but simply compassionate.
How will the private sector respond to this stipend program? What new opportunities or businesses may arise that are not possible now?
Really good questions! I believe the private sector will fully support it, for reasons provided above. And this system would also provide opportunities for people to become involved in the arts, public volunteerism and experimentation with other business opportunities, because it would provide them a back-up safety net to hedge against failure.
Do you think the $15k would encourage laziness? How would people respond to not being forced to work?
We will always have incentives to laziness. But, unlike today’s welfare and social security systems, this system always has incentives to work and earn the extra dollar. Our present systems punish working because recipients lose more money by working than they gain. And it also encourages attempts to “game the system.”
Update 3/27: Clarified the stipend will be taxed away up to $30,000.
by Sarath Davala | Mar 21, 2017 | Opinion
India Network for Basic Income jointly with SEWA Bharat is organising a National Conference on “Basic Income in India” in New Delhi on March 29 and 30, 2017.
This National Conference comes against the backdrop of dramatic new developments in India with respect to Universal Basic Income. As you are all aware, on the 31st of January 2017, a day before the Federal Budget was announced, India’s Finance Minister, Arun Jaitley, presented the Economic Survey in the Parliament. This document is a perspective document presented every year by the Ministry of Finance, as it sees how the economy has fared the previous year, and also what the prospects are the coming year. This year, this document had a full chapter on Universal Basic Income, authored by Arvind Subramanian, the Chief Economic Advisor to the Government of India.
It is a 40-page document which painstakingly goes into a very balanced analysis of how the concept of UBI is relevant to the Indian context. It also lays out the challenges and dilemmas one faces when one applies it to a country as massive as India. The chapter hardly sounds like a government document. The author writes with a certain conviction that Universal Basic Income is a good idea, and that it should be seriously considered.
It is our common experience that when a proposal comes from the government it kicks off a much wider debate than when a citizen’s group like us raises it. And so much better when it is articulated so eloquently, unlike normal government documents. The media was abuzz with all sorts of voices.
Without going much into the contents of the innumerable articles that were written on this proposal, I would like to highlight one important aspect of this debate. Most of the commentators – economists, politicians, citizens’ groups – agree that, in principle, this is a good idea. Their disagreement them come after this point.
Here are some voices of those who oppose:
“It is in principle, a good idea, but…”
“India is not ready for it.”
“India cannot afford it.”
“UBI is a Trojan Horse to dismantle the existing welfare system.”
“This government is going to wash its hands off all its welfare responsibilities.”
“At a time, when a lot of effort is going into reforming the welfare delivery, and there is evidence of improvements across the country, introducing UBI would be ‘disruptive’.”
The arguments of the opponents are not very different from those that are being putforth elsewhere in the world. . Interestingly, these voices have not been very strong in India. Interestingly, all over the world UBI has support from both the Left and the Right. In the same breath, it also has opponents from both the camps. India is no exception.
In any case, the point is, within a short period, the idea has been gaining a great deal of traction in the country. As INBI Coordinator, increasingly I feel that there is now an urgent need for UBI literacy in the country. To tell people what it is about. What it implies for the citizen and for the government.
Given the mind-boggling numbers and fiscal implications, one thread of the UBI argument in India is: In order to make UBI meaningful, should we start with specific demographic groups rather than all citizens? And incrementally move towards “Universal”? If yes, then what should those vulnerable groups be? The tribal population (104 million and about 9% of the population)? Or all women(about 500 million about 48%of the population)? Or the elderly (about 100 million)? Or the Scheduled Caste population(about 200 million)? UBI purists might consider this a dilution of the concept of UBI and a sell out. Be that as it may, that is where the debate is now.
On International Women’s Day (2017) two associations, who otherwise make strange bedfellows, endorsed and appealed for ‘UBI for Women’. Self Employed Women’s association in Madhya Pradesh, and the oldest Industry body in Indi
a, The Associated Chamber of Commerce and Industry of India (ASSOCHAM).
Soon after the UBI proposal was presented in the Parliament, the Finance Minster of the northern-most state Jammu and Kashmir, Mr Haseeb Drabu, announced that the state is ready to implement a UBI. However, this readiness, he clarified, is contingent upon the federal government giving him a ‘go ahead’ because the federal grants form the substantial part of the state’s welfare budget.
It is a matter of time before more state chief ministers begin to see the economic, political and the moral dividends of the policy of Universal Basic Income. In India, the electoral heat and dust never settles. Between any two general elections, we have innumerable state elections or by-elections. People’s verdict is something that continually happens in India. UBI has not yet entered the electoral discourse. The first of its kind came during the recent Uttar Pradesh elections. Varun Gandhi,a two-time BJP Member of Parliament and the first cousin of Rahul Gandhi, wrote an elaborate article offering UBI as a solution to extreme poverty in the state.
Again, it is a matter of time before other politicians catch up.
Well, it is against this backdrop that our National Conference on Basic Income comes at the end of this month. We have tried to get as many voices as possible that endorse and affirm the idea. Along with the major political personalities who have come out in favour of UBI, we are also going to have economists who are engaged in serious calculations and trying to grapple with fiscal and political implications of UBI.
The challenge before INBI thus far has been to talk about the idea of UBI and foreground the evidence from the pilot study that UBI has positive and transformative effect on people’s lives. The challenge now is to work with all the groups and also with different state governments and the federal government to find ways of operationalising the idea. This is not an easy task. But then, that is the task before us now.
by Kate McFarland | Mar 20, 2017 | Opinion
I appreciate André Coelho’s recent response to Francine Mestrum’s article “The Alternative Facts Of The Basic Income Movement“, especially his clarification of the role of Basic Income News. However, I believe that Coelho’s reply fails to give due attention to what struck me as Mestrum’s main contention: that organizations like BIEN should not use the term ‘basic income’ to refer generally to guaranteed minimum income programs (which are typically means-tested rather than universal).
We must make no mistake here: the terminology is confusing. Although BIEN has adopted one specific definition of ‘basic income’, this definition is not universal. Indeed, even some of BIEN’s affiliates adopt definitions of the term that are not coextensive with BIEN’s. Many of the discrepancies between here reflect a different dimension of the semantic dispute: whether, by definition, a policy called a ‘basic income’ must provide a livable income. BIEN itself has rejected this constraint, but not without controversy (for more on this dispute, see Basic Income News articles by Toru Yamamori and Malcolm Torry). Mestrum is correct, though, to identify what we might call the question of “universality” or “uniformity” as another source of discrepancies between different uses of term.
Since I began writing for Basic Income News, I have managed to internalize a certain dialect (“BIENglish” if you will). I must admit, however, that the relationships between terms in BIENglish sometimes make little antecedent sense. For one, in BIENglish, ‘basic income’, ‘universal basic income’, and ‘unconditional basic income’ are mutually synonymous (defined as “a periodic cash payment unconditionally delivered to all on an individual basis, without means test or work requirement”). If I ignore my familiarity with a certain quasi-technical dialect, thinking merely as a competent user of the English language, this semantic equivalence might seem surprising. It might make more sense, it seems, to suppose that ‘basic income’ refers to something more general, of which ‘universal basic income’ and ‘unconditional basic income’ name specific variants. More confusing still, however, is the use of ‘basic income guarantee’ — which, in BIENglish, is not synonymous with ‘basic income’. Instead, in the dialect I have now internalized, ‘basic income guarantee’ seems to be roughly synonymous with ‘guaranteed minimum income’ — and is likely to extend even to some means-tested programs that Mestrum would support (but refuse to call ‘basic income’).
It is worth expanding on the latter point. BIEN’s US affiliate, the US Basic Income Guarantee Network (USBIG), defines ‘basic income guarantee’ (‘BIG’) as a “government ensured guarantee that no one’s income will fall below the level necessary to meet their most basic needs for any reason”. According to USBIG, a basic income is a specific type of BIG, one that “gives every citizen a check for the full basic income every month”. However, on USBIG’s definition, BIGs also include policies like the negative income tax (NIT), which “pays the full benefit only to those with no private income and phases out the benefit as people earn more private income” (thereby, perhaps, avoiding Mestrum’s main complaints against a truly “universal” basic income). We should stop here to note that, in the dialect of USBIG, the following sentence would seem to be true: “Francine Mestrum supports a basic income guarantee and opposes a basic income.” And we should expect ordinary English speakers to be at least a bit confused by something like that, assuming that they’re not already immersed in USBIG or BIEN lingo. This is the sort of potential linguistic weirdness to which we should be sensitive whenever we speak in “BIENglish” to a general audience.
To further confound the situation, however, we must mention the Canadian dialect. BIEN’s Canadian affiliate, Basic Income Canada Network (BICN), defines ‘basic income guarantee’ similarly to USBIG: “A Basic Income Guarantee ensures everyone an income sufficient to meet basic needs and live with dignity, regardless of work status.” Once again, this definition does not imply the absence of means test, and both a basic income and NIT (to use USBIG’s terminology above) would fall under its extension. In the Canadian context, however, I have not seen sharp definitional boundaries drawn between the terms ‘basic income’ and ‘basic income guarantee’. Notably, BIEN’s affiliate does call itself ‘Basic Income Canada Network’ — not ‘Basic Income Guarantee Canada Network’ — and seems to use the terms interchangeably on its “About Basic Income“ page (where the term ‘demogrant’ might be used roughly synonymously with the term ‘basic income’-as-used-by-USBIG). The latter is consistent with the Government of Ontario’s use of ‘basic income’ in naming and describing its upcoming (so called) Basic Income Pilot (which, in fact, is most likely to test an NIT rather than a “demogrant”).
Finally, we should stop to note that, given their names and affiliation with BIEN, one might reasonably assume that USBIG and BICN are concerned only with a universal and uniform basic income (i.e. a demogrant), paid out to all citizens regardless of means. This, however, would be incorrect. The stated primarily focus of each organization is a “basic income guarantee” — which, by definition, needn’t involve the payment of money to those who don’t need it (as Mestrum finds so problematic in traditional basic income proposals).
Now, I wish to make no claim as what the focus of these respective organizations ought to be. (After all, I am on the executive boards of both BIEN and USBIG.) I want only to use these examples to illustrate one claim: our terminology is confusing, unintuitive, and, at times, even conflicting.
We must not, however, pin too much of the blame on ourselves (though we are not fully innocent). The term ‘basic income’ is often used sloppily and, worse, equivocally in popular media. I sometimes witness speakers and authors who initially define ‘basic income’ as an unconditional cash grant paid equally and uniformly to all individuals — to go on later to claim that a “basic income” was tested in Manitoba’s Mincome experiment, championed by Martin Luther King Jr or Milton Friedman, or nearly introduced by President Nixon. That is, they use ‘basic income’ in a narrow sense (e.g. BIEN’s use) when defining it, but switch to broadest sense (e.g. the Canadian use) while illustrating it. This practice is misleading and deceptive.
This practice is in no way excused by the fact that, in some cases, an NIT could have the same ultimate distributional effects as a universal basic income. First, a basic income could be financed by means other than an income tax, in which case the final distributional effects would most likely differ. Second, even if we consider cases in which the distributional effect are the same, there remain other non-trivial differences between the two types of policies. They might differ, for example, in administrative cost or efficiency — and psychological and behavioral effects on recipients might vary depending on whether basic income checks are issued and later taxed back, or whether the initial payouts never occur. Beyond all this, however, the two types of policies are simply conceptually distinct — and there is no excuse to elide the difference between them without, minimally, alerting the audience and defending the decision to treat them as equivalent in context.
It is extremely doubtful that BIEN and Basic Income News lie at the source of this problem. (To claim otherwise would surely be to overstate the extent of our influence!) At the same, however, I believe that we merit some blame for doing too little to address or even acknowledge this terminological quagmire. I myself am not exempt from this charge. I have always, in my own writings, aimed to be precise in describing how the term ‘basic income’ is used by the speakers or groups on which I report, especially when their implicit or explicit definitions diverge from that of BIEN. Still, for me, a desire for “politeness” — a resistance to policing or condemning usage — has often led to my not being as forceful and overt in noting linguistic discrepancies as I otherwise might. It has always seemed pretentious and condescending to resort to scare quotes whenever another entity (e.g. the Government of Ontario) uses ‘basic income’ differently from BIEN — let alone to accuse said entity of misuse of a term — even if, at the same time, it reeks of equivocation not to.
If I were to offer a somewhat radical suggestion, I might encourage groups like BIEN and its affiliates to abandon the attempt to provide necessary and sufficient conditions for ‘basic income’. Now that uses of the term have proliferated in the mainstream, its definition is out of our control. In the hands of diverse and disperse natural language users, words have a way of acquiring different shades of meaning across regions and groups. (Think, for example, of how speakers from different geographical regions might argue about qualifies as ‘barbecue’.) There is no reason to assume that ‘basic income’ would be immune from such fracturing and fragmentation of meaning. While BIEN must aspire toward precision and accuracy in its own publications, it cannot place itself in the role of policing the linguistic practices of ordinary speakers. This is, by now, a losing game.
In the present context, in fact, we might hope to do little better than to offer a prototype. The prototypical basic income, we might say, is unconditional, universal, individual, stable, lifelong, and sufficient to meet basic needs (for example). At the same time, however, we would need to acknowledge — loudly and clearly — that the term ‘basic income’ is frequently used to denote programs and policies that, while possessing most attributes of this prototype, might lack one or two (e.g. that it might be sometimes be used to refer to programs that means-tested, or paid to households, or insufficient to meet basic needs). Writers would, of course, still bear responsibility for clearly and precisely articulating what their subjects mean by ‘basic income’ — but this is already necessary practice, given that we can seldom take for granted that speakers use ‘basic income’ to mean precisely the same thing as BIEN. However, if BIEN abandons the claim to provide necessary and sufficient conditions, we might mitigate the confusion that might arise when readers assume that occurrences of ‘basic income’ in our publications, which are not otherwise explicitly defined, correspond to BIEN’s definition.
Possibly, it will eventually become necessary that we consider the adoption of new terminology — should ‘basic income’ simply become too imprecise or ambiguous to contribute adequately to the understanding of what it is, exactly, that we study and promote.
Image: “Ambiguity” CC BY-SA 2.0 Lori Greig
by Guest Contributor | Mar 17, 2017 | Opinion
Article 25 and Basic Income: The perfect match
Most of us are aware of the problems we are collectively facing: environmental issues, job losses or job insecurity, homelessness, increased violence, terrorism, an immigration and refugee crisis, overpopulation, poverty and famine.
What hardly anyone is talking about is that we are all connected, and as much as we may have separated ourselves by nationality, religion, cast, political parties etc., the fact remains that we are one humanity or, as some describe, “one human family”. The planet provides for all of us without making a distinction – food, water, air, oceans and land – our commons. Yet we have managed to privatize these essential resources for only one purpose: to make money and profit, thus determining who should have access and who should go without.
Humanity has become so complacent over the last few decades that 18 million people are dying every year in a world of abundance. They have become the forgotten people as we have normalized their plight in our minds, often with the words “poverty has always existed, it’s nothing new”. Yet that poverty is steadily growing in many countries, with more impoverished famines in the developing world and increased homelessness and foodbanks across the West. We don’t hear much of those either, unless we ourselves are affected. Yet these deprivations are directly connected to increased violence, immigration, a degrading environment, homelessness and overpopulation.
So, what is the answer? Demanding Article 25 of the Universal Declaration of Human Rights and a Global Basic Income could be the solution we are looking for, as they go hand in hand.
On December 10. 1948 the General Assembly of the United Nations adopted and proclaimed the Universal Declaration of Human Rights, including Article 25 on the right to an adequate standard of living:
Everyone has the right to a standard of living adequate for the health and well-being of himself and of his family, including food, clothing, housing and medical care and necessary social services, and the right to security in the event of unemployment, sickness, disability, widowhood, old age or other lack of livelihood in circumstances beyond his control.
Motherhood and childhood are entitled to special care and assistance. All children, whether born in or out of wedlock, shall enjoy the same social protection.
Sadly, Article 25 has never been implemented globally through appropriate government interventions and redistributive measures, but if it were, it would finally end poverty and create hope for millions of people for the first time. An Unconditional Basic Income, a periodic cash payment delivered to all on an individual basis to cover basic needs, would also be essential, because it will help make it all possible. It will finally guarantee the universal realization of Article 25.
Basic income is already widely debated around the world within some countries, such as Finland, Spain, Canada, Holland and Scotland having trial projects. Peter Bevan Baker of the Green Party on Prince Edward Island, Canada, stated positive effects of an Unconditional Basic Income that include: “Local economic growth, supporting entrepreneurship, reducing administrative, complexity and costs, improving working conditions, reducing crime, improving health, and helping to build vibrant rural communities” (source).
However, some free market thinkers argue for a fixed (basic income) amount per person in favor of scrapping all other social services, like unemployment benefits and housing benefits. Their argument is that it will save the government a lot of time and money in determining who qualifies for welfare and who does not. This might be an incentive for politicians, but at the same time it might worsen the situation of relatively disadvantaged, vulnerable, or lower-income people. Basic Income Earth Network (BIEN), at last years General Assembly in Seoul, stated that it should not replace the compensatory welfare state, but rather complete and transform it into an emancipatory welfare system. Unconditional Basic Income Europe (UBIE) agrees with that statement, and both organizations advocate that there should be no means testing, but a guaranteed monthly or annual payment given to all.
In this way, a basic income is an emancipatory policy and will help us to strengthen democracy. The word ‘democracy’ originally comes from Ancient Greece and means ‘power of the people’. Unfortunately, this type of democracy does not exist anywhere in the world, but to get closer to this ideal, everyone on the planet should have a minimum degree of economic freedom to be able to choose how they want to live their own lives. It is the hope for every human being, given the social transformations it will unleash by enabling all people to plan for a secure future.
Of course, for an Unconditional Basic Income to work for everyone, the different living conditions of people around the world need to be considered. Some people live in dire poverty, with no roof over their head and no idea where their next meal is coming from. A small monthly income might make life a bit easier, but it will not be enough to lift them out of poverty once and for all. There is a growing sense of a new consciousness or awareness that we cannot separate ourselves from the cries of our brothers and sisters, no matter where they are in the world. Unconditional Basic Income was originally discussed only on national levels, but has since expanded in view to a global level, to include the most marginalized people.
What should also be taken into account is that most countries outside Europe do not have a comprehensive welfare system in place. This is another reason why many economic migrants are seeking a livelihood in Western Europe, where they would have the right to free medical treatments, housing and other benefits. If they had these basic social services guaranteed at home, they may never leave. Also, many developing countries do not have an adequate tax system in place to offer a functioning welfare system. Even with overseas aid going to many of these countries, the money flowing out to the more affluent parts of the world is usually much greater than the original donations given.
If it is not large corporations that harm these countries through illicit activity and profit repatriation, then it is often corruption at the highest level. Nigeria for example has a tremendous wealth of oil and minerals. Here the government officials live like kings, yet their people are one of the poorest in the world, with millions now facing the prospect of famine. Let us also not forget the numerous tax havens that many big companies use, which is equivalent to any other form of corruption. In all cases, money and resources is effectively stolen from the people that are in most dire need of it.
The list of corruption and exploitation goes on, endlessly. For all of these reasons, we urgently need to demand the human rights of Article 25 for everyone in the world, which is the key that will open the door to a truly Global Basic Income. Firstly, we must ensure that everyone has their basic needs covered, which means adequate housing, food, medicines etc., and an Unconditional Basic Income will safeguard the rest.
Over time, the guaranteeing of Article 25 and a basic income will mean that the world population will eventually stabilize, and people will no longer need to immigrate on a mass scale. Even the environment may be less exploited when illicit practices like poaching and sales of rare timber become much less common, or stop completely, as this has often been the only means for some poor people or villages to make a livelihood.
If enough people demand the full realization of Article 25, there will also be a huge knock-on effect on the wars that are everywhere being waged, as government spending must first cover the needs of its people before it can further invest in armaments.
Furthermore, food speculation must stop, as instead all countries work together to finally distribute the food to where it is most needed. For too long has food been used as a commodity in the financial sector, where it is often left to rot in the store houses of the West to increase its market value.
Pharmaceuticals will also have to change their profit-orientated ways of doing business, if we want to guarantee free or cheap healthcare for all citizens of this world.
The founder of Share The World’s Resources, Mohammed Mesbahi, has described in a new book how these drastic changes in government priorities can be brought about. In ‘Heralding Article 25: A people’s strategy for world transformation’, he writes that if we are waiting for our governments to do the job for us, we will be waiting for eternity, while most social and environmental trends are getting worse. Our only hope is to join together with millions of ordinary people in huge, continuous protests on a world-wide scale to demand from our governments the immediate implementation of Article 25, with the United Nations as the governing body to oversee and the organizational logistics.
For many people, such a plan of action may sound far too simple and even naïve, considering the complexity of political issues today. Yet there is nothing complicated about the fact that there is more food in the world than is needed, and yet people are dying of hunger. Governments all over the world are not serving their people, but instead they facilitate the profit interests of multinational corporations, which in turn exploit us. The only way to reverse this systemic injustice is through the people of the world uniting under the banner of Article 25. Not against capitalism or ‘the system’, which has also led us nowhere in the past, but through a simple demand for everyone’s right to a dignified life.
Of itself, an Unconditional Basic Income will not be sufficient to achieve an end to poverty. The hollow promise of economic growth and more jobs will also never work. The one ingredient that will make it possible is countless numbers of people rising up in peaceful protest with an engaged heart, and not just the intellect, for anything else will be short lived.
There are many groups that are doing tremendous good work for people and planet, and that should and must continue. But if we could unite even once a week and raise our voices for governments to implement Article 25 and a Global Basic Income, then we might start seeing some real changes.
By Sonja Scherndl and Anja Askeland
by Andre Coelho | Mar 15, 2017 | Opinion
A debate has arisen about the definition of basic income and the facts that support the movement. To contribute my input to the debate, I feel the need to respond, line by line, to Francine Mestrum’s latest article published on Social Europe.
It starts right at the top, with Mestrum equating basic income, professed in the Basic Income Earth Network (BIEN) Newsletter articles, with guaranteed minimum income. To justify this approach, she mentions the fact that no basic income has ever been implemented, and that the pilots concerned transferred cash only to poor people. Although her view is understandable, she fails to see that these pilots intended to test the outcome of a basic income implementation (which effectively transfers income from the relatively richer to the relatively poorer). It’s not that in a future basic income implementation rich people will not get it (as opposed to the Negative Income Tax approach); universality implies they also get it, but then all of the basic income and more is taken away, through taxation. That’s redistribution functioning.
We already see that in our current welfare states, but in twisted, unfair and inefficient ways. The conditionalities associated with present-day social security are creating poverty traps all around, so the unconditionality associated with basic income is intended to eliminate them. However, and as a matter of fact, her reference to the Canadian basic income experiment at Dauphin is misplaced, since Dauphin was actually an experimental saturation site, which means that everyone in the town was eligible for the cash. The income monitoring and distribution simulated the taxation effect (only positive transfers for the relatively poor).
Then, Mestrum goes on to say that current basic income experimental plans in the Netherlands, Finland and Scotland “can threaten social protection mechanisms”. Well, we in the basic income movement have already heard enough about the possibility of basic income being highjacked by right-wing neo-liberals threatening to dismantle social protection mechanisms (and much more) with the introduction of a basic income. I can hear them say, between the lines: “Here’s free money to everyone! Now get out of our faces and let us dismantle everything in existence publicly owned or managed.” Of course there’s a risk. I’m not denying it. However, any person who is aware will not be fooled by such intentions. I, among many other basic income defenders (most of them, actually), support a basic income which is complementary to the welfare state, not a substitution for it. Louise Haagh makes a very good case for this defense, as expressed here.
Then the questions. According to Francine, the only serious questions worth answering on basic income are whether income distribution schemes, like in Alaska, should be limited to resource-rich regions, and whether there shouldn’t be a global fund (linked to resources from all regions) to cover global needs. These are important questions, no doubt. But hardly the only serious ones. How about, “Should not all people enjoy a minimum amount of freedom in their lives, instead of being pressured and exploited all the time?”, or “Should not countries and their governments make efforts to reduce structural inequalities, which are seen as the source for countless social problems?”, or even “Should not countries introduce a way to guarantee basic financial security for all, as a way to effectively deal with the changing nature of work, precariousness and automation?”. My view is that Francine Mestrum nurtures a very narrow view on what is and what is not meant to be a basic income.
As for semantics, notably the “basic income” vs “minimum income” discussion in France, I do have not much to say. However, if we limit ourselves to a pure language discussion, note that “basic income” can mean anything from the most abject dictatorial sanctions-based system (as in present-day United Kingdom) of social assistance, to the most progressive, avant-garde unconditional system of cash transfers. Once each one of us explains what he/she understands these terms to be, there should be no confusion left.
Next, Mestrum identifies BIEN as a source of the problem, to be held responsible for these disputes in language (which she inelegantly calls “communicating on alternative facts”). This is unfair. More precisely, it is unfair because it stems from a misunderstanding of the mission of BI News. BIEN’s Newsletter is a collection of articles from Basic Income News for a given month. These articles convey information about what is happening around the world concerning basic income, and an article about the alleged confusion between “basic income” and “minimum income” would actually be a good candidate for Basic Income News. Articles can report news from someone defending basic income, or somebody else critiquing it (as Francine Mestrum does). Events and other publications on the Internet are also frequently highlighted byBasic Income News. What is posted on Basic Income News does not necessarily convey BIEN’s views on basic income. Instead, for that end, a short, general definition is available on BIEN’s website. There can be absolutely no mistake here.
Another thing has to be perfectly clear. As a BIEN member, and Basic Income News editor-in-chief, my role is not to speak for the minds of other people, even when they are confusing “basic income” with “minimum income”. Basic Income News is expected to be an impartial news service, aiming nonetheless to disseminate information about basic income. Interested readers will take their time to digest all this information, to think and to draw their own conclusions. Here I resort to a line I normally use in these situations: no one convinces no one, only the individual becomes self-convinced. Now, for that, of course, one must be in possession of enough information. And that’s where we, at Basic Income News, step in.
Understandably, Francine Mestrum has a deep rooted fear that basic income implementation will lead to the collapse of the welfare state and, with it, all the hard won social conquests, such as public education and public health and, of course, democracy. We are all too weary of the effects of the rentier capitalist economy thriving these days, chief among them the erosion of democracy. But Francine’s fears are not against basic income. These are against, as she herself puts it, “those who do not believe in society”. And that’s why all true defenders of a social basic income, the one that promotes solidarity, complements the welfare state and recognises the commons, must do exactly that: promote solidarity, defend the welfare state (while improving it) and help expand the commons.
Otherwise, I must agree with Francine: our society will inevitably decay into a dystopia of unbelievable proportions, destruction of the environment and exploitation of the people.
More information at:
Francine Mestrum, “The alternative facts of the basic income movement”, Social Europe, 16th February 2017
