Anthony Painter and Chris Thoung, Creative Citizen, Creative State – The principled and pragmatic case for a Universal Basic Income. Report published by the Royal Society of Arts (RSA), December 2015.
This report from the RSA is a most welcome addition to the recent flurry of publications and media interest in Citizen’s Income. It outlines a context – technological change – resulting in
underemployment, unemployment or the need to transition careers with some frequency for many. A Basic Income could provide a foundation to smooth working-life transition; (p. 5)
and an ageing population, requiring more people to spend time on caring for others.
The report notes the growing Citizen’s Income movement; studies a variety of other reform proposals (and particularly a Participation Income and an enhanced contributory system); and argues that polling data that shows that the British public regards ‘making work pay’ as far more important than tackling poverty and inequality provides a powerful argument for Citizen’s Income:
It is Basic Income and Basic Income alone that sends out absolutely clear yet non-coercive signals about the incentive to work. … Basic Income is a foundation for contribution. It incentivizes work but supports other forms of contribution too. In this regard, it is the system of income support that best rewards contribution – albeit contribution defined beyond narrow cash terms. (p. 14-15)
The report describes the UK’s current benefits system, notes that the sanctions regime will increasingly attack the self-employed and the employed once Universal Credit is rolled out, shows how Citizen’s Income would offer the ‘power to create’, and then sets four tests for the idea to pass:
- Does the system accord with a widespread set of moral precepts?
- Is it broadly fiscally achievable within the parameters of existing taxation and expenditure?
- Is it distributionally just when compared to the current system?
- Will greater individual (and civic) freedom and creativity be realized? (p. 18)
The particular scheme that the RSA evaluates in relation to the second and third criteria is based on the scheme published by the Citizen’s Income Trust (CIT) in 2012 but with a few minor variations – you can download the CIT proposal here.
A non-binding contract to encourage contributions to society will run alongside receipt of Citizen’s Income. The fact that it is non-binding, and the recipient’s failure to adhere to an agreed contract would not compromise their receipt of a Citizen’s Income, retains the scheme’s reciprocity – important for its ability to pass the first test – and retains it as one characterized by an initial act of generosity on the part of the state, rather than as one that expects a claimant to prove a contribution before the state reciprocates. There is, though, a danger with such a contract. It would be easy for a future government to make receipt of a Citizen’s Income dependent on adherence to a contract’s conditions, thus turning the Citizen’s Income into a Participation Income, so that it would no longer be a Citizen’s Income and would be loaded with administrative complexity and bureaucratic intrusion in people’s lives – precisely what is not required.
In relation to the levels of Citizen’s Income, the RSA scheme attempts to reduce the losses that poorer families with children might suffer at the point of implementation (which has been recognized as a problem in relation to the Citizen’s Income Trust 2012/13 scheme) by allocating a higher level of Citizen’s Income to the first child in a family, and possibly lower levels to the third and subsequent children. This compromises the definition of a Citizen’s Income, because that requires that every individual of the same age should receive a Citizen’s Income of the same amount: but this is a compromise in theory, and not a new compromise in practice, and so should not overly concern us. This is because in any Citizen’s Income scheme the children’s Citizen’s Income are paid to the main carer: so although in theory every working age adult (or adult over 25 years old, as in the RSA and CIT 2012/13 schemes) receives the same amount, in practice the main carer of children receives their own adult Citizen’s Income and the Citizen’s Incomes of their children. Because allocating different amounts to different children in a family will adjust a total amount paid to an adult that is already variable in relation to the number of the children in the family, no new compromise has in practice been generated. We might hope that if such a Citizen’s Income scheme were to be implemented, then eventually it might prove possible to reduce the compromise by bringing the Citizen’s Income levels allocated to different children nearer to or identical with equality: but as a transitional measure with some useful effects, the RSA’s approach has much to commend it.
A compromise that has nothing to commend it, though, relates to lone parents:
One group that could lose out in the transition to Basic Income in the RSA model are low income, lone parents with children over the age of five. … there may be scope for a transitionary measure whereby lone parents could continue to claim a Child Benefit top-up … introducing an element of household calculation. (p.31)
A lone parent addition would not satisfy the ‘unconditional’ requirement of a Citizen’s Income, and would result in precisely the kind of bureaucratic intrusion into people’s personal relationships that a Citizen’s Income is trying to get away from. If it is felt that lone parents need an additional payment, then an additional and separately administered payment should be made, so that the Citizen’s Income itself is not compromised. We are used to social policies that we can tinker with without destroying them. A Citizen’s Income is different. If we tinker with it, then we destroy it. This lesson has thankfully been learnt in relation to Child Benefit. In 2010 we were told that it would be means-tested. It has not been. Instead, an additional tax charge is imposed on high earning individuals living in households receiving Child Benefit. This is not sensible, because it has resulted in domestic disharmony and in the withdrawal of Child Benefit claims: but at least it does not destroy Child Benefit as a universal benefit. A similar approach could be employed in relation to lone parents in the context of a Citizen’s Income. The Citizen’s Income must never change; but an additional benefit could be established with its own conditionalities and administration.
When the report discusses some alternative Citizen’s Income schemes – such as scheme B in the recent Institute of Social and Economic Research paper, its use of the word ‘modified’ might be somewhat confusing. Scheme B is not a ‘modified’ Citizen’s Income, or a ‘modified’ Citizen’s Income scheme. The Citizen’s Income is a genuine Citizen’s Income. It is simply that scheme B retains more means-tested benefits than some other schemes – it still takes a lot of households off means-tested benefits, or reduces their claims to such low levels that they are likely to come off them. We ought to avoid the use of the word ‘modified’. Either a proposal is for a Citizen’s Income, or it is not; and if it is, then the whole scheme, including changes to means-tested benefits, tax allowances, etc., is a Citizen’s Income scheme. Some schemes, such as scheme B, would be easier to implement than others, such as the RSA scheme. In many ways, the RSA scheme would be preferable to scheme B. So perhaps we ought to regard scheme B as a useful first step, and the RSA scheme as a useful second step.
The RSA report is a long, detailed, well researched, and most useful document, and no short review can do it justice. The minor caveats that I have listed above are precisely that: minor caveats, and areas for continuing research and debate. The RSA is to be highly congratulated on the research project that has led to the report, and on the report itself. There could be no better place to start the next phase of the Citizen’s Income debate than this report.
Malcolm Torry, 101 Reasons for a Citizen’s Income, Policy Press, 2015, xvi + 120pp.
Finding 101 reasons in favour of a Citizen’s Income and then condensing them into a lucid, concise book is probably a lot harder than Malcolm Torry has made it look in this readable and compact collection. 101 Reasons for a Citizen’s Income is a book packed with easy-to-grasp arguments written with clarity from an elegantly simple, practical point of view.
In a way, this is the type of book you would hope for from the director of the UK’s Citizen’s Income Trust, a London-based organisation that promotes debate on the desirability and feasibility of a basic Income, and a BIEN affiliate. Torry keeps it mercifully short – just 120 small pages in total – which is clearly a good way of attracting new, curious readers. Showcasing a complete command of the finer points of the UK’s benefits system, the book’s approach also takes care to appeal to people of diverse political convictions. As a result, this is an excellent introduction for the great number of people who have never even heard of Citizen’s Income, and especially for those newcomers who are already interested in UK social policy.
Torry clearly has the sort of wide repertoire of arguments and skilful presentation that you would expect from someone who is both the current director of the UK Citizen’s Income Trust and an academic at the London School of Economics. Perhaps more tantalizingly for more seasoned Citizen’s Income fans, the author has also experienced the byzantine and counterproductive deadweight of UK social policy from what might have been the best (or worst) seat in the house, the Benefits Office in Brixton in the late seventies.
About this (and other matters) Torry shows a mature restraint, and the book is a far cry from the ranting and raving that this type of professional experience would have induced in other human beings (myself included). It is actually when Torry looks back on his personal experience that he serves up some of the book’s choicest nuggets. At one point he states, as a matter of blunt fact, that whilst working at the Brixton Supplementary Benefit Office “the claimants didn’t understand the regulations, and neither did we.” Deadpan aperçus and reminiscences add a little human interest and colour, and try not being moved – or get mad – by an officer who mutters over his casework “a man leaving, another coming, and then another – and with which of the two is she cohabiting, and who is the lodger?”
Citizen’s Income Trust director Malcolm Torry showcases a complete command of UK social policy (picture: Citizen’s Income Trust)
Otherwise, this is mainly a patient demolition of every defence that could conceivably be mounted of the current UK benefit system. Torry confidently shows that even if the UK system is given the benefit of the doubt at every step, there ultimately can be no justification for a bureaucratic machine that unnecessarily traps – and then horribly stigmatizes – people in poverty and unemployment. He also demonstrates clearly why a Citizen’s Income could solve the overwhelming majority of problems with the current system – especially the perverse work disincentives of means-tested benefits which, contrary to their trumpeted aim, penalise people in many different ways for finding and taking paid work. Presenting Citizen’s Income as the obvious alternative to the UK’s hopelessly unfair and ineffective benefits system is the book’s main point, and Torry makes it with brilliant lucidity and concision.
Elsewhere, Torry also pulls off the feat of invoking Kant’s categorical imperative and Rawls’ veil of ignorance without it seeming forced, weird or pretentious. Personally, I am grateful that the book manages to explain, where others including UK ministers have failed, the UK government’s Universal Credit reform in just a few sentences (spoiler alert: the Universal Credit is “neither universal, nor a credit”). Throughout, British party-political traditions and the sausage factory of Westminster policymaking are very well summarized – despite the book by its nature having little space available for context – as are the ways Citizen’s Income would fit into the wider political picture.
An added bonus is that Torry – bravely but necessarily – at certain points ventures into the uncomfortable tribulations around the resurgence of aggressive European nationalisms and immigration problems. He does so by arguing for the necessity of the social cohesion and the new sense of citizenship that a Citizen’s Income would generate. This is an argument urgently worth debating more extensively, given how much is now at stake in contemporary Europe.
The basic income movement is already a broad church, and a very diverse set of people need to continue to come on board if the policy is to become reality. One of the book’s great strengths is that it is designed to appeal to a wide range of people. From this point of view, it is interesting – and, in my view, somewhat problematic – that the book takes a scattered approach to the topic of innovation; surely, innovation is almost per definition something that everyone finds at least in principle desirable.
Rather than selecting as one of the 101 Reasons something along the lines of “A Citizen’s Income would set free innovation for the common good”, the book mentions innovation in several important but different ways. It offers crucial but somewhat isolated statements like “New software companies have the flexibility to innovate in ways in which the well-established companies cannot”, which is included in the section called “A Citizen’s Income would encourage new enterprise”. It also puts forward an in my view absolutely crucial – but again too isolated – observation that corporations disproportionately reap the rewards of innovation without reinvesting the proceeds: “The gap between wages and the proceeds of productivity is increasing. Less of the proceeds from production is now recycled back into industry via wages and consumption”. Elsewhere, Torry describes the world as having “economies in which innovation and automation are the norms” and being in need of Citizen’s Income to manage the upheaval.
Yet it is in the realm of lack of innovation, in the section called “Basic Income would break a logjam”, that we find what I think is the book’s most memorable passage. Torry describes how the world has today reached one of its periodic crises and is crying out for breakthrough innovation: “technology lying idle, human creativity frustrated, wealth flowing from poor to rich, and finite resources uncontrollably exploited … we are still waiting for the next new key concept. A Citizen’s Income might be just what is required.” In the same section, he describes the “key concept”: the breakthrough that in one fell swoop greatly boosts the well-being of every current and future human being. This is so because a key concept “enable(s) new ideas and new technology to create new kinds of wealth” and history shows how they have “freed the economy from stagnation and have stimulated new creative development, which has then itself stagnated until the next new key concept arrives.”
These are powerful sentences describing something that brings to mind a creative-destruction cycle of innovation in which the cycle is about to be put back into the ascendancy with the key concept of Citizen’s Income. But what is most interesting is that Torry neatly captures the constellations of historical periods in which these new key concepts are launched: “New developments that have set life’s evolution, scientific progress, or the economy free, have usually been prefigured by developments bearing some but not all of their characteristics; they have been symptoms of change as well as its cause; they have created revolutions with immense social implications; and in science and the economy they have had passionate advocates and equally passionate detractors – and, once in place, people have wondered why it all took so long.” In fact, this book already leaves the reader wondering why it’s all taking so long.
Before beginning this essay, let me describe the people about whom I am speaking when I use the term “liberal”. In the American 21st century context, I am essentially describing the people you would likely find in the leadership of the Democratic party. Despite the conservative view of mainstream liberals as radical socialists, they are, at most, cautious reformers. Even that probably goes too far. The way they depict themselves, and probably actually see themselves, is as people who believe in the system, but want it to be fairer, more compassionate, and more efficient. When viewed systematically, the most important of those is efficiency. A look at policy reveals that the primary aim of liberals is using the government to make capitalism work better and more efficiently. This also applies to seemingly non-market concerns like welfare benefits, civil rights, and education.
Let us look at equal pay and anti-discrimination labor laws for women. Some economic theorists on the right argue that such laws are unnecessary. According to them, the market would automatically correct any form of discrimination. If sexist employers refused to hire women or paid them significantly less than their equally skilled male counterparts, other employers would exploit the opportunity to hire the women at higher wages. The productivity gains of the fairer employers would lead to emulation and competition for women workers until parity with men is achieved.
Liberals usually respond by appealing to empirical reality. If this argument were true today, it would have also been true in 1910. We know there was sex discrimination then, as there continues to be today. If markets corrected inefficiencies by themselves, there would never have been any gender discrimination. But liberal arguments do not contradict the claim that sex discrimination is inefficient. Laws preventing gender discrimination may be just and compassionate, but they also make markets work more efficiently. Eventually, laws against gender discrimination turned out to benefit employers as much as they benefited women. In the documentary Inequality For All, Robert Reich showed that employers took advantage of the growing numbers of women in the workforce competing with men for the same jobs, and this was one of the factors that eventually lead to the leveling off of real wage growth that began in the United States in the late 1970s and early 1980s .
This analysis applies across the range of policies pushed by liberals. Consumer protection laws and tort laws may protect and compensate consumers, but they also encourage trade by making it easier to trust strangers in the market. Public health care and education saves and enriches people’s lives, but they also produce a skilled and healthy workforce for employers. Laws that support strong unions help the workers themselves, but they also increase workers’ wages so that they can spend more as consumers. Infrastructure projects provide public goods that are used by all, but they notoriously prioritize the needs of businesses over the needs of the disadvantaged communities where they are inevitably built.
What about same-sex marriage? It is crucial for social justice, but does it help market efficiency to allow people to marry whom they wish? No, it does not, and that is why same-sex marriage provides a useful counter-example. The fact is that same-sex marriage was never really a mainstream liberal goal. Nor was it really a goal of the large mainstream gay rights organizations. Both the politicians and the organizations focused on getting anti-discrimination laws passed, which do serve market efficiency as previously noted. Same-sex marriage as a goal arose from the gay and lesbian grass roots and was pursued more through the courts than through legislation. As late as 2008, all three top contenders for the Democratic nomination for President declared their opposition to same-sex marriage. The speed and enthusiasm with which virtually all of the top Democrats reversed their positions the moment same-sex marriage polled over 50% could certainly cause a person to doubt the sincerity of their previous opposition. But to blame that insincere opposition on political cowardice would be to miss the point. Professional politicians fight uphill battles against initial public opposition a lot. But they also have to pick their battles. And however much powerful liberals may have secretly sympathized with the plight of their gay and lesbian friends who wished to marry, they were simply not going to prioritize a political battle for social justice that would not increase market efficiency, grow the economy, and enrich their campaign donors.
So where does this leave us with basic income? To answer this, we need to examine how liberals approach welfare in general. It is certainly true that they support much more generous benefits than conservatives, they also tend to be even more concerned with separating the deserving poor from the undeserving poor than conservatives, whose main concern is turning whatever welfare spending that does exist into a way to funnel that money into corporate coffers. Liberals usually support robust Earned Income Credits, a kind of negative income tax limited to low wage earners, dropping off quickly above the poverty line. They support benefits for children and the elderly as well as the disabled, although they can be extremely strict about whom they consider disabled. They will give welfare benefits to unemployed single parents sparingly, on a temporary basis, and require education or employment search conditions designed to get the parents back to work as soon as possible. Drug and alcohol abuse are seen as reasons to cut off benefits. For unemployed working age adults, liberals sponsor “Care Not Cash” initiatives, which replace cash benefits with direct services, in the few localities that offer any benefits at all.
The pattern is clear: liberals believe that humans have value primarily as engines of production and consumption. Within this view, welfare is a legitimate tool to push people into the labor market. This ensures that goods and services can be produced. Those who do work and those incapable of working are to be given a sufficient income to take them slightly above the poverty line. This appears compassionate, but the systemic reason is to ensure that they have just enough money that they spend all of it. This way there is sufficient demand for goods and services to be produced, but people can not save enough money to become capitalists or be able to leave the workforce. Indeed, virtually all public assistance programs cut off recipients with any significant savings. While conservatives fight for the direct interests of the capitalist class, liberals fight for the interests of the capitalist system.
I understand that few liberals consciously believe and support the goals and beliefs which I ascribe to them here. They believe they are compassionate people who want to make the system work better for the unfortunate. That is probably true. But it does not matter. Like with institutional racism, the conscious intent of the participants does not matter; it is their actions and the results that matter. And the fact is, if you assume that the primary concern of liberals is market efficiency, you will predict their actions better than if you assume that their primary concern is uplifting the downtrodden or achieving economic and social justice.
Let us look at one more example before we turn to basic income: the minimum wage. One obvious way that the minimum wage fits the pattern I have described is that you have to be employed to benefit from it. A less obvious way is that it looks free, but it is actually a tax that is passed on to consumers, so it is the middle class that pays for it, not the capitalist class.
But the most striking way that the minimum wage fits this pattern is when you look at its amount. Democrats pick a new number every seven to twelve years. They refuse to index it to inflation so they can have at least one winning issue against Republicans every decade. Opponents of raising the minimum wage always mock the arbitrary nature of the new number picked and ask something like, “Why not $100 per hour?” Liberals typically dismiss this mockery with empirical evidence, pointing out that raising the minimum wage has almost never resulted in a loss of jobs, and sometimes results in increased employment due to increased demand.
But as with anti-discrimination laws, just because right-wing critics are empirically wrong does not mean that they do not have a point. What criteria do liberals use to determine how much the minimum wage should be? $100 per hour likely would wreck the economy. But if $10.10 per hour, the current consensus goal of the Democratic Party, would have no ill effects, why not fight for $15, or $20, or $25? Why not commission a study to determine the maximum sustainable minimum wage? Applying the principle that liberals are working to support the capitalist system, we can see where they get their numbers. Liberals pick a minimum wage that puts workers near the edge of the poverty line, where they can be good consumers but never save enough to exit the workforce.
So what can we expect from liberals in the fight for a basic income?
We can start with two broadly optimistic points. First, since liberals are concerned with efficiency, evidence can sway them, and the scientific and empirical evidence is strong that a basic income is cheaper to administer, raises health and education outcomes, and does not cause people to quit working and live an idle life. Masses of healthy and educated people working and spending money churns the economy, and this is good for the capitalist system.
Second, liberals will join the basic income cause with little hesitation when the technological unemployment crisis starts receiving mainstream media attention. While liberals will tolerate significant unemployment because it keeps down labor costs, they will see too large a number of unemployed as wasted potential consumers. This will be especially true if more workers are not actually needed to produce the goods and services that the unemployed could otherwise buy.
Now the caveats.
Let me start off with a particularly American concern. Despite the significant libertarian origins of and current support for a basic income, many people hear the idea of the government giving everyone free money and they think, “socialism”. And in America, this is a problem. Despite the good arguments that could be made that the United States in the 1950s and 1960s had the most socialist economy that has ever existed in human history, America during the Cold War defined itself in opposition to “socialism”. For many, fear of the label has stuck. Conservatives still use “socialism” as an epithet for economic policies they oppose, and many liberals will do or say whatever is necessary to avoid being associated with socialism. If you ask prominent liberals, they will point to surveys showing the unpopularity of socialism in America. This could be a chicken and egg problem: why should most Americans not be afraid of socialism if even liberal leaders oppose it? Fortunately, this also appears to be a generational problem that is going away. Recent surveys of Americans under 30 show support for socialism to be equal to support for capitalism, and the Presidential campaign of Bernie Sanders may be showing that fear of the label “socialism” is overblown.
The next problem with liberals will be to educate them. The facts being on our side will not help if establishment liberals do not know them. The specific problem here is that the misrepresentations of the work participation and family stability effects of the Negative Income Tax experiments that were spread in the mid 1970s are still believed by many establishment liberals. We will have to work hard to correct those misbeliefs.
Another problem will be that if technological unemployment does not reach a crisis point, liberals will simply not prioritize basic income on their own. They will have to be dragged into taking action by political pressure. This will be similar to the example of same-sex marriage, except that instead of claiming opposition up until the public changes its mind, look for liberals to vocalize general support for the concept of a basic income, but not do anything about it. An example of this strategy was how, in the years following the U.S. invasion of Iraq, a lot of politicians of all stripes, including President Bush, voiced support for setting up an Alaska style trust fund to pay oil dividends to all Iraqis, but it never happened. This will be because, even if liberals come to agree that a basic income would be a better policy than the current welfare system, the efficiency benefits to the capitalist system are not great enough to put it on their priority list. Just as the suffering of gays and lesbians who wanted to marry was not sufficient cause to make same-sex marriage a priority, neither is the suffering of the poor. It never has been in the past. Again, this will change when technological unemployment becomes a crisis, and there will not be enough consumers to buy goods and services without a basic income.
The final, and biggest challenge with liberals as allies will be their attempts to dilute the idea of a basic income. While they may become far more generous with the cash amounts, it will be difficult for them not to attach strings and conditions. The reason is that it will be difficult to change their belief that they know how to run the lives of the poor better than the poor themselves. But a bigger danger is that they will try to insist on means-testing. They will try to make the middle-class believe that means-testing will make it cheaper for them. The reality is that means-testing will make the financial burden of a minimum income fall on the middle-classes. This, again, is because the goal for liberals is not economic justice, but making the current capitalist system run better.
In order to relieve the immediate suffering of the poor and establish the principle that poverty is not tolerated in our society, it may be necessary to agree to means-testing to pass an initial guaranteed minimum income. Liberals will trumpet that the job is done. Those of us who count justice as one of our goals need to be prepared to continue the fight.
What does the future look like? No one knows and it is folly to argue one does. But we can think, we can even try to make predictions, depending on how much risk we are willing to take. To say, as Jeremy Rifkin suggests, that the future will look like a collaborative commons, based upon zero marginal cost, internet-linked nodal, laterally scalable shared green energized economy is all very well, and I definitely resonate with it, but is it inevitable? How zero cost is it? The price of generating an extra energy unit from a photovoltaic panel may be close to zero, but what about the panel itself? Who pays for it?
Proponents will say that photovoltaic panels are cheaper than they have ever been, huge economies of scale were possible in the last few years and any person these days can purchase photovoltaic panels. But is this true? Panels are cheaper than they were some years ago, no doubt, but a person first needs to eat, have a shelter, access some basic form of transportation and energy for cooking, lighting and such. Only after all that is guaranteed, can someone consider the photovoltaic panels, the electric car, or the 3D printer. The “future”, it seems, will not come until poverty is eliminated. Because poor people – 24.4 % of all European population was at risk of poverty in 2014, or 122 million people – cannot participate in this futuristic vision of the world unless their basic needs are met.
You doubt it? Then think about it. In most places, if you run out of money to pay for electricity, it is unlikely that your neighbors will help out by supplying you with some electricity, and even less likely that you will be given a photovoltaic system to produce your own energy. Where I live, at least, if I stop paying the electricity bill, they will cut me off, without a doubt. No matter how generous, how educated, how creative, how tolerant I might have been in life, the power company is completely indifferent: you do not pay, you will have to go without power. Period.
Things might be different in the future – and they certainly will. But at this moment the amount of money one has is less related to levels of education, generosity, creativity or tolerance, and more to status, power, social networks, dominance and violence. Attributing monetary value to people is a trap. The instant you say “this person is worth 1000 euros”, you automatically create an underclass of unworthy people. Those people might even be subject to discrimination and violence you object to, from deprivation and poverty to constant surveillance. So definitions or layers of worthiness cannot solve a core problem in present-day human species: our difficulty to share. To trust.
This is why I defend basic income. It represents a bold and clear statement: human dignity is not and must not be subject to discussions about worthiness or value. These attempts to quantify human beings are bound to fail, since our “value”, if we must speak of it, is incalculable. You cannot calculate it, so there is no use in trying. Basic income is also a crucial tool for participation. You cannot truly participate and contribute to a better society – let’s say by investing in a photovoltaic system – if you do not have the money to meet your basic needs.
This is why major societal challenges like climate change cannot be solved without addressing poverty. Because while there is poverty, people will simply not “do the right thing” when they cannot afford it. If the costs of living in a more sustainable way are higher than what they can afford, there is little choice but to eat whatever they can, buy the cheapest power appliances and drive the most affordable vehicles. And all these are still among the major polluters we are trying to eliminate.
Basic income activist Enno Schmidt give us his views on the recent recommendation by the Council of States, the upper house of the Swiss parliament, calling for people to vote against an unconditional basic income (UBI) in the national referendum next year.
The National Council, the lower house, issued a similar recommendation in September. The referendum is expected to be held next year – there are indications that it might take place as early as June. Swiss people will vote “yes” or “no” to a constitutional amendment that would introduce, if successful, the UBI as a right enshrined in the Swiss Federal Constitution.
Enno Schmidt is one of the promoters of the Popular Initiative that collected enough signatures to gain the right for a national referendum on the UBI. He is a painter, author and film-maker, and has been actively promoting basic income since 2006. He was born in Germany and lives and works in Basel, Switzerland.
In this interview, he tells Basic Income News what he thinks about the recent recommendations by the Swiss parliament, and the prospects for the referendum.
Toru Yamamori: Did you foresee the Council of States’ recommendation?
Enno Schmidt: We did not expect a majority in favour of the basic income initiative in either the upper or lower house of parliament. Still, it was good to see that there were positive contributions emerging from the two debates. There are MPs in both houses who understand some of the ideas behind the initiative. However, there was nobody voting in favour in the Council of States.
TY: How do the parliamentary recommendations affect the national referendum?
ES: The parliamentary motions are only recommendations. They are not binding decisions. Parliament fulfilled its obligations and debated the issue. The decision is entirely up to the Swiss citizens. The citizens are the highest decision-making body in a democracy. The parties, the Parliament and the government are organs of the sovereign. The ultimate sovereign is the voting population.
UBI activists dropped 8 million five cent coins outside Swiss National Council, Bern, October 2013.
TY: What is your next step?
ES: There are 8 Millions inhabitants and 5 million voters in Switzerland. We will do our best to promote debate on the idea of a basic income and talk to everyone about it.
TY: As you and others already did with the collection of the signatures for the referendum, with your films about basic income, and in public debates, tv shows, newspapers and collective actions.
What is your take on the final result of the referendum?
ES: It is not our victory if a majority says yes, nor our defeat if a majority says no. It is our business to give a chance to everybody to think about the possibility of an unconditional income, the difference between income and work, their future and the future of our society, and to encounter a positive vision for the 21st century.
We are not focused on the opponents. We want to make the idea attractive. The UBI vision is not against something, but asks for more. We want to show that a more exciting life is possible. We want to convince the majority. But even if only a quarter of the votes will be in favour of a UBI, then that would already be a great success. The referendum result is not the end. The discussion continues, and there can be another vote. Perhaps the Japanese are faster than the Swiss?
For more information, check out the English-speaking website of BIEN-Switzerland here, and our past news and commentary on the Swiss referendum:
Toru Yamamori, “SWITZERLAND: Council of States rejects basic income initiative,” Basic Income News, December 21, 2015.
Matthias Lindemer, “Swiss politicians reject basic income because they are scared of humans,” Basic Income News, December 7, 2015.
Stanislas Jourdan, “SWITZERLAND: Parliament rejects basic income initiative, but poll shows popular support,” Basic Income News, October 3, 2015.
Toru Yamamori, “Interview with Enno Schmidt, co-initiator of the Swiss Citizens’ Initiative,” Basic Income News, September 19, 2015.
Jenna van Draanen, “SWITZERLAND: Swiss parliamentary committee on social affairs opposes a federal initiative for basic income,” Basic Income News, July 14, 2015.
Karl Widerquist, “SWITZERLAND: National referendum will be held on basic income,” Basic Income News, October 5, 2013.
By Tom Streithorst
The Basic Income Guarantee (BIG) is back in the news. The Finns are considering implementing it, as are the Swiss, replacing all means tested benefits with a simple grant to every citizen, giving everyone enough money to survive. Unlike most current benefits programs, it is not contingent on being worthy or deserving or even poor. Everybody gets it, you, me, Rupert Murdoch, the homeless man sleeping under a bridge. Last seriously proposed by Richard Nixon in 1969, more and more economists and bloggers are suggesting that the Basic Income Guarantee may ultimately be the salvation of capitalism. The BIG will eliminate poverty, lessen inequality, and vastly improve the lives of the most vulnerable among us. But that is not why we need it. It may seem impractical, even utopian, but I am convinced the BIG will be instituted within the next few decades because it solves modern capitalism’s most fundamental problem: lack of demand.
Technology and capitalism have largely solved the problem of supply. We are able to make more stuff, with fewer inputs of labor and capital, than ever before. We have the know-how, we have the resources, we have the trained labor, we have the money. The only thing businesses lack is customers. Making stuff has become easy. It is selling it that keeps entrepreneurs (and central bankers) awake at night. Stagnant wages tell us that the supply of labor exceeds demand. Microscopic interest rates tell us that we have more capital than we need. Since the Great Depression most economists have recognized that demand is the Achilles heel of the modern economy.
Over the past 80 years, we have solved the problem of demand in three very different ways. The first is war. In 1938, US unemployment was almost 20%. In 1944 it was barely 1%. Everybody knows World War II ended the Great Depression. But it is worth remembering that it wasn’t the slaughter of civilians or the destructions of cities that reinvigorated the global economy, but rather the massive fiscal stimulus of government borrowing. Had we borrowed and spent as much on building schools, homes and roads as we did on defeating the Axis powers, the economic effect would have been even greater. The advantage of military Keynesianism is political: conservatives who loathe government spending are able to overcome their distaste when it comes to war.
The second, during the post war Golden Age, was rising salaries. Between 1950 and 1970, the average American worker saw his real wages double: since then, they have barely gone up at all. Back then, productivity improvements translated almost immediately into wage gains. As workers’ wages went up, so did consumer spending. Productivity increases meant each worker was able to make more stuff. Wage increases meant he was able to afford to buy it. Advertising transformed luxuries into necessities. Productivity gains combined with wage hikes gave the Golden Age the greatest GDP growth the world has ever seen.
In our most recent era, from 1982 until the financial crisis, the engine of economic expansion was ever increasing levels of private debt. After Reagan and Thatcher, median wages stopped going up, even as productivity maintained its inexorable rise. With wages stagnant, only by taking on more debt were consumers able to keep spending enough to buy all they produced. As long as banks were happy to lend, the economy managed to grow (albeit much more slowly than during the Golden Age) and the party could go on. But after the financial crisis, both household willingness to incur more debt and bank willingness to lend contracted, leaving us with the stagnant economy we are trapped in today.
These three old methods of stimulating demand have passed their sell by dates. Global war would reinvigorate the economy, but at an unbearable cost. Rising wages, unfortunately, are unlikely, with more and more of us replaceable by robots, software or much cheaper foreign workers. And higher levels of debt not only increase inequality, they also engender financial instability. What is to be done?
Every year, technological progress allows us to make more goods and services with fewer inputs of labor and capital. As consumers, this is wonderful. We can buy better and cheaper goods than ever before. As workers, however, productivity increases threaten our jobs. As we need fewer workers to make the same amount of stuff, more of us become redundant. And it is likely to get worse. The rise of the robots may eliminate 47% of existing jobs within the next two decades. Unfortunately, even though a robot can make an iPhone, it cannot buy one. If we are hurtling towards a post scarcity future, only a Basic Income Guarantee can ensure sufficient demand to keep the global economy ticking over.
It is not just the poor that profit. The rich get exactly the same payment, in the form of a tax cut. Corporations also win. With more money in consumers’ pockets, sales increase, raising profits. And since firms no longer need provide a living wage, labor costs could go down, which would give employers reason to hire. Meanwhile, workers, with a guaranteed income, no matter what, will have the freedom to tell an unreasonable boss to “take this job and shove it.” These benefits suggest that a Basic Income Guarantee could command considerable support from diverse sectors. But these are all merely side benefits.
If technological progress continues to eliminate jobs, the BIG may well be the only way we will be able to maintain demand in a post-work future. By giving every citizen a monthly check, a BIG will be as fiscally stimulative as World War II without requiring the murder of millions. The BIG is economically sensible and politically practical. What then stands in its way?
The first problem is that it sounds too good to be true. We have been told to be suspicious of anyone promising a free lunch, and giving people money for doing nothing certainly seems like a costless gift. Fear of scarcity is built into our DNA. For the BIG to seem viable for most people, they need to learn that demand, not supply, is the bottleneck of growth. We need to recognize that money is something humans create, not something with fixed and limited supply. With Quantitative Easing, central banks created money and gave it to the financial sector, hoping it would stimulate lending. Today, even mainstream figures like Lord Adair Turner, Martin Wolf and even Ben Bernanke recognize that “helicopter drops” of money into individuals’ bank accounts could have been more effective. Technocrats are beginning to recognize the practicality of Basic Income. We in the economic blogosphere need to bring this message into the public eye. The rise of the robots, ever declining prices for goods and services, and disappearing jobs may ultimately teach this lesson more effectively than any number of well-meaning essays.
The second problem is sociological. Most of us are still in employment. We feel, in some fundamental way, that our work makes us more worthy than lazy layabouts on benefits. This simultaneously makes us disinclined to raise benefits for others (or increase the number of people on benefit) and equally disinclined to think of ourselves as the kind of people that receive money from the state. Adam Smith, in The Theory of Moral Sentiments (the book he considered his masterpiece), said that we humans are motivated primarily by the regard of others. We want people to think well of us, and we want to think well of ourselves. The psychological pleasure of considering ourselves better than welfare recipients can trump genuine economic benefit. To overcome this objection, we need to recognize that defining ourselves by our jobs is very 20th century. If technological progress continues to kill traditional jobs, this objection too will eventually dissipate. As full-time jobs become harder to find, more of us will recognize the need for a BIG.
The third problem is perhaps the most central. By stimulating the economy and pushing it towards its production possibilities frontier, the Basic Income Guarantee will be growth enhancing, but it is undeniable that it will also be redistributive. The pie will be larger, but it will be sliced differently. For the past 30 years, we have stimulated the economy by shoveling money towards rich people. A BIG shovels money towards poor people. And for many in the top 1%, that is anathema.
Conservatives generally favor tax cuts as a way of stimulating the economy. Although they do not like to admit it, this is textbook Keynesianism. As long as the government does not cut spending, more money in consumers’ pockets will inevitably increase demand. Unfortunately, tax cuts generally favor the richest among us, and they, unlike the poor, are liable to save rather than spend their windfall. Stimulating savings is a waste of a tax cut. Today, we have an over-abundance of saving and a shortfall of investment and consumption. A BIG can be thought of as a tax cut targeted to those most likely to spend it, which is what the economy needs.
The Basic Income Guarantee solves the problem of demand, stimulates the economy, increases corporate profits, gives workers more freedom, and provides a safety net to the most vulnerable. It is economically sound and politically savvy. But the very rich do not fear unemployment, they fear redistribution and they will be the most significant force against the implementation of the BIG.
Frances Coppola, “The changing nature of work,” Coppola Comment, August 5, 2012.
Francesc Coppola, “The wastefulness of automation,” Pieria, July 8, 2013.
Tom Streithorst, “The central paradox of the 21st Century,” Pieria, June 25, 2014.
Anna Hedge, “Basic income and a room of one’s own,” Pieria, February 26, 2014.
Anthony Painter, “In support of a Universal Basic Income: introducing the RSA basic income model,” RSA, December 16, 2015.
Tom Streithorst has been a union member, an entrepreneur, a war cameraman, a promo producer, a journalist. These days, he mostly does voiceovers and thinks about economic history. An American in London, he has been writing for magazines on both sides of the pond since 2008. He is currently working on a book on post scarcity economics, and how the incredible productive power of capitalism and technology has the potential to bring us all prosperity and happiness but so far, we keep screwing it up.
This piece was originally published in Coppola Comment.