by Citizens' Income Trust | Oct 18, 2012 | Opinion
Matthew C. Murray and Carole Pateman (eds), Basic Income Worldwide: Horizons of Reform, Palgrave Macmillan, 2012, xv + 271 pp, hbk, 0 230 28542 2, £57.50
This book is a most useful survey of international experience of Basic or Citizen’s Income, of benefits sufficiently similar to enable them to be regarded as on the way to a Citizen’s Income, and of significant legislative attempts at Citizen’s Incomes. The book complements Basic Income Guarantee and Politics, edited by Richard Caputo and recently published by the same publisher, with which it overlaps to some extent, but not too much. Both books are essential reading for anyone interested in how experience of Citizen’s Income, and debate about it, are developing worldwide.
Some of the material in the first part of the book will be familiar to readers of this Newsletter, but some will not be. The Alaska Permanent Fund Dividend will be well known, but less well known will be some highly positive results from United States and Canadian Negative Income Tax experiments. This Newsletter has already reported stunning results from the Namibian Citizen’s Income pilot project, but less well known are the complexities of Brazil’s and Canada’s political economies and their effects on benefit reform.
The second part of the book describes Basic Income proposals for East Timor, Catalonia, South Africa, Ireland, Germany, New Zealand, and Australia. The overall impression is of a widespread global debate, different in different countries, but with lots of connections between the different national debates.
Murray’s concluding chapter is understandably effusive about the results of the Namibian pilot project, and about the brake on inequality provided by the Alaskan Permanent Fund Dividend. Conditional schemes, on the other hand, are found to lead to new inequalities (p.253), and tax credit and negative income tax schemes to have similar problems (p.255). Murray recognises the different effects of different political contexts, and this reviewer was particularly struck by ways in which more federal political arrangements, such as those in the USA and Brazil, can make the debate more possible locally but quite complex nationally.
One issue over which the editors seem to be somewhat confused is that of terminolog. In this book, ‘Basic Income’ usually means an unconditional and nonwithdrawable income for every citizen, but sometimes it means a class of benefit types of which an unconditional benefit is one member (e.g., p.251), which leaves the unconditional and universal benefit without a name. A similar problem arises in the introductory chapter, which lists some important questions: What form should the payment take? How much should it be? Should it be unconditional? Should it be universal? Can it be afforded? How should it be funded? Some of these questions are ‘controversial questions’ surrounding ‘Basic Income’ (p.2) if ‘Basic Income’ is understood as an unconditional, nonwithdrawable and universal income: but some are not. The question ‘Should the payment be universal?’ is a question about whether we should have a Basic Income. It is not a question about a Basic Income. Similarly, ‘Should the income be paid unconditionally?’ is a question about whether or not we should have a Basic Income. By the end of the introduction we are entirely unsure about what the term ‘Basic Income’ means.
I know that this has been said in these pages before, but it clearly needs saying again: clarity of definition is essential to rational debate.
Our position is this: A ‘Citizen’s Income’ or a ‘Basic Income’ is an unconditional, nonwithdrawable income for every individual as a right of citizenship. The terms should not be used for anything else. Other terms, such as ‘social dividend’ and ‘universal grant’ are equivalent, but only if they mean the same thing. (We do not use ‘Basic Income Guarantee’ because a guaranteed income can mean an income achieved by means-tested benefits.) Widespread agreement on the meaning of terminology would considerably help the clarity of debate, both individual national debates and the global debate, and it would have helped the editors and authors of the book under review to express themselves more clearly.
But having said all that: Murray and Pateman have provided us with a most useful collection of essays on some highly significant Citizen’s Income experiences and debates, and anyone interested in that debate should read this book.
by Citizens' Income Trust | Oct 16, 2012 | Opinion
Neil Fraser, Rodolfo Gutiérrez and Ramón Peña-Casas, Working Poverty in Europe: A Comparative Approach, Palgrave Macmillan, 2011, xx + 342 pp, hbk, 0 230 29010 5, £60
This data-packed book is one of a series of publications to emerge from the EU-funded Programme on Reconciling Work and Welfare in Europe (RECWOWE). The programme’s context is the tensions between work and welfare –
the tension between employer demands for more labour market flexibility and citizens’ need for economic security; the tensions between the increased participation in paid work and the importance of family life, the greater fluidity in family relationships, and the greater flexibility in the labour markets; the friction between quantity and quality of the jobs to be created, between job creation and maintaining or improving the quality of employment and finally the conflicts raised by the need to adapt (industrial) social protection systems to new labour market structures (p.xviii)
and the programme’s task is to understand the relationship between work and welfare in the many different national contexts across Europe. This book’s task is to understand in-work poverty, and in particular the institutional and policy factors which affect it. The editors identify as particular worries the growing segmentation and casualisation of employment and the downward pressures on the wages of low-skilled workers (p.3).
The first part of the book offers comparative statistical analysis of the situation across Europe. Amongst the conclusions are that in the UK in-work poverty is caused both by partners’ low labour market participation and by low wages (p.32) and that in an era of high unemployment active labour market policies cannot on their own prevent poverty.
The second part contains chapters on various countries. The chapter on the UK concludes that working poverty is rising, that it is due mainly to low work intensity (p.91), and that means-tested in-work benefits have kept in-work poverty down to average European levels, which our earnings inequalities would otherwise have taken us above.
The third part of the book tackles cross-cutting themes and finds high mobility (in-work poverty is often transitory and recurrent) (p.199). Studied as individuals, women more often suffer in-work poverty than men (a fact not often noticed because so many women are in households with men) (p.229), that standard of living inequalities correlate closely to individual wage inequalities (p.246), and that in-work poverty is higher amongst non-EU migrant workers than amongst migrant workers from within the EU (p.271). A chapter on the effect of tax and benefits policies on in-work poverty finds, unsurprisingly, that means-tested benefits mean that higher earnings often don’t translate into higher disposable incomes (p.281). It also suggests that there is a trade-off between redistribution and employment incentives, and finds that in-work benefits can cause a particularly acute disincentive problem for a household’s second earner, resulting in adverse effects on the incentive structure for couple households (p.302). The authors find that incentives are not an important determinant of employment rates amongst the low-skilled. In countries where work pays the least, in-work poverty is lower because general anti-poverty policies reduce in-work poverty as well as out-of-work poverty, and that in-work benefits most effectively increase employment and reduce inequality where wage inequalities are high. The authors ‘question the political pertinence of an instrument whose effectiveness is greatly reduced when approaching its apparent objective’. It is stating the obvious to suggest that in an economic downturn the priority should be generous universal unemployment benefits (p.302).
In their overall conclusions, the editors find labour market activation policies to be expensive and relatively ineffective, and the UK’s in-work means-tested benefits expensive and a source of disincentives, particularly for a household’s second earner: ‘Research … does not indicate a strong effect overall on employment levels in spite of claims to ‘make work pay’. This is likely to be affected by other aspects of the institutional context, notably benefits for those not working and the conditions attached to them.’ (p.314)
This comprehensive and thoroughly-researched book quite rightly offers no simple political programme for the reduction of in-work poverty. What it does offer is a sense of the complexity of this policy field, and a source of information and properly tentative conclusions which anyone attempting to develop policy in the field really ought to read.
by Citizens' Income Trust | Oct 15, 2012 | Opinion
The debt crisis persists. Bankruptcy is more common now than ever before, with bankruptcy attorneys in Harrisburg PA, and attorneys all over the world, dealing with increasing numbers of clients searching for advice on their debts and money worries. In the US, the Eurozone, and the UK, politicians are implementing dire austerity packages in order to reduce government deficits. Greece and Italy may be in the worst position, but the phenomenon deeply affects the majority of developed economies.
The new circumstances have led to the increase in the need for a debt collection agency for most banks. On the other hand, debt can quickly become overwhelming for companies who rely on business finance to stay afloat. If you’d like to learn more about ensuring your cashflow management system is as robust as possible in order to keep your business at its best, take a look at these debtor management tips.
Faulty thinking
How has this come about? The popular answer trotted out as the daily news mantra that governments have been reckless, bankers have been greedy, and consumers have been overspending, is too simplistic. The problem has deeper roots and causes, and will continue unabated unless these are better understood and addressed by policy.
Current talk is entirely monetarist. Economics is reduced to some sort of meta-accountancy. Keynes is derided by people who have never read him. Leading economics media commentators often have no formal economics training or degrees. Economics degrees themselves have often been restyled as ‘economics, finance and business’ degrees. The British Chancellor of the Exchequer tells the nation that it ‘cannot afford’ economic activity, which has to be cut because we simply ‘don’t have the money’. But the real economy is about real resources of people, skills, infrastructure, technology, land. All of these are available.
Standing back for a moment, isn’t it curious that human societies allow the money that they themselves create as an artefact to serve the real economy, then allow it to dictate their real economic behaviour? The tail really is wagging the dog. In the present structure, governments must raise money from the bond markets, who insist on repayment at interest rates which these markets determine according to their own level of confidence. Thus society and its governments are entirely subject to the prescriptions of bond dealers and credit rating agency speculators, who have no remit or capability in social leadership and management. Curious again, that UK political comment which is so troubled about ‘handing sovereignty to Brussels’, and to non-elected technocrats, is entirely supine in handing far greater sovereignty to bond dealers and credit rating agencies. Standard and Poor’s, Moody’s, and Fitch are entirely unelected and lack any democratic accountability, and yet are allowed to sit in easy judgment on our total economies, and to determine their prospects and scope for action. We can thank Michel Barnier, the EC Internal Market Commissioner, for seeking to constrain them. He deserves our support.
Rethinking money
We need a new paradigm in which we understand money and financial agencies as servants rather than as masters of the real economy. Money is virtual, not real. It does not obey the laws of thermodynamics : it can be created or destroyed. Commercial banks do this regularly. They operate lending ratios whereby they lend a multiple of the deposits lodged with them. Market economies ‘print money’ all the time in this way as a regular practice. A sustained total run on the banks would always cause them to collapse. The system is supported only by confidence. The only rule is that the amount of money in circulation has to be matched by real output, if its value is to be maintained. To allow monetary factors to determine policy for the real economy is like trying to drive a car by bending its speedometer needle.
An alternative diagnostic
So what alternative diagnostic of the ongoing debt crisis is available? A thought experiment might help. In an imaginary totally automated economy with no workers, there would be no wages, and therefore no effective monetised demand. Goods and services would therefore have to be allocated by government to consumers by some voucher or shareholder mechanism. As Bob Crow, the RMT union leader put it in his ‘Lunch with the Financial Times’ interview in March last year, ‘if you have robots build cars, how are robots going to buy them?’.
A more erudite version of the same concept comes from Professor Robert Solow, a distinguished emeritus professor at MIT and Nobel Economics Laureate, who points out that with burgeoning production from advanced technologies ‘the wage will absorb only a small fraction of all that output. The rest will be imputed to capital…the extreme case of this is the common scare about universal robots : labour is no longer needed at all. How will we then live? ….The ownership of capital will have to be democratised…(needing) some form of universal dividend…Not much thought has been given to this problem’ (in ‘Revisiting Keynes’ by Pecchi and Piga, MIT Press 2010, p92).
In this scenario, the total voucher spend by the government would represent an unavoidable debt which would never be paid off. We are not there, but we have strong elements of this scenario in our modern technological economies. The delinking of productivity and real wages makes debt inevitable, with people left trying to figure out how to dispute collections in an attempt to continue some sense of normalcy in their lives.
A general diagnostic for technologically advanced economies then emerges that whenever productivity exceeds real wages, and if the difference is not fed through to consumer demand via increased shareholder dividends or social transfer payments, then consumer demand will be insufficient to purchase output GDP. In this situation, which can and does occur, the shortfall in consumer demand can be made up by extended consumer credit and welfare payments, or output GDP can be cut in a recession. The diagnostic bears some resemblance to Marx’s and Keynes’s thinking on the implications for technology, automation and productivity on the economy, but should not be dismissed for this honourable association.
A recent history of the problem
2007 was the root of the present crisis. If we go back to UK economic data then, we find that between 2005 and 2007
- GDP and consumption continued to grow but household disposable income flattened
- in 2007 real household disposable income grew by only 0.1% whilst GDP grew by 3%
- household disposable income reduced as a percentage of consumption from 78.2% to 74.7%
- the gap was met by increased household credit which grew from £17bn to £55bn
This is shown in the following graphs (where ‘household borrowing’ refers to new household borrowing in each year):
The familiar dramatic increase in household credit is less apparent in the scale of the above GDP diagrams but is evident when graphed alone in the following diagram
£55bn new consumer debt in 2007 became essential to fund the purchase of output GDP. Without it GDP would have fallen due to decreased effective demand, and employment, wages and income would then have fallen as a consequence.
Vicious circles
The current system faces two alternative vicious circles, either that
1. increased productivity reduces the wage and household income element of GDP and this demand drop leads to a GDP recession
or 2. the demand gap is filled by increased consumer credit and government debt to fund welfare payments, which becomes un-repayable in the next period.
Neither is sustainable and leads to banks reducing consumer credit, and government cutting the real economy in the mistaken belief that this will eliminate its deficit. This is where we are now, and without a radical rethink, we will be chasing our tails for ever in the doomed attempt to write off deficits from an ever shrinking GDP. Those who call for increased government expenditure under a Plan B to raise GDP (which would have the effect of raising the tax take and reducing welfare payments and hence reducing the deficit) are derided by their critics who ask how it can be possible to incur debt to reduce debt. But the coalition’s Plan A insistence on cutting the economy to reduce the deficit has to explain how GDP can be increased by cutting GDP.
New thinking
An alternative paradigm is needed to frame an alternative policy. There is nothing wrong with the real economy. Its factories, transport and communications infrastructure, skilled labour, restaurants etc. are all fully operational and highly efficient. There is also plenty of real demand for goods and services, especially globally from developing country consumers. It is purely the financial system which is disabling the real economy, and it is the financial sector which therefore urgently needs re-engineering.
It is commonly said that banks lent too much credit in 2007, firstly in the US sub-prime mortgage market, and then widely in the UK economy. But the above analysis shows that £55bn of bank lending was exactly the right amount needed to purchase GDP output, a claim which is substantiated by the lack of inflation in goods and services markets both then and throughout the NICE decade. It is true that asset prices inflated, but this resulted from any credit beyond that £55bn. The £55bn consumer credit matched against GDP output was non-inflationary.
Distributive considerations
Productivity growth in excess of real wage growth, and the gap between consumer income and GDP output that this produces, has distributive consequences. Between social groups, it tends to disfavour the poor, who rely more on the wage element of income, who suffer the loss of low-skilled employment when automation displaces labour, and whose access to credit as a replacement for wages is weak. Welfare payments are their only recourse. Surprisingly, the Institute of Fiscal Studies report ‘Poverty and Inequality in the UK: 2011′ shows that increased welfare payments did overcome income disadvantage. According to the IFS study, child poverty at 20% is now the lowest since 1985, and pensioner poverty is currently lower than at any point in the last 50 years.
The sectoral distribution of GDP is also affected by automation. Manufacturing employment and real wages per unit of output will fall, and much of this employment is transferred to low wage service sectors of the economy, only some of which, like banking, are subject to automation and productivity improvement. From anecdotal evidence, increased low productivity, low-wage service sector employment has absorbed employment reduction in more automated manufacturing sectors, and masked the effect of productivity in reducing aggregate real wages. Population growth is another factor masking the demand deficiency resulting from the delinkage of productivity and real wages.
We could of course take the view that reduced consumption is exactly what we want as part of a new ascetic paradigm to conserve world resources. Competition for natural resources from China and India may well force this choice on us anyway. But if we do pursue this option, income redistribution to those newly unemployed through productivity gains unmatched by new demand will be an essential part of the paradigm. Some form of welfare payment which does not add to government debt would be needed.
A Citizen’s Income – the only route to stop debt being inevitable as productivity grows
If it is accepted that the delinkage of productivity and real wages will make an element of debt financing inevitable, then a possible way forwards is a non-repayable financial instrument, a universal credit. This would have to be non-repayable at both consumer and government level. Proposals for a citizen’s income are longstanding. Such an income would not be repayable by the consumer and could be financed without incurring government debt. This could be done by creating a public sector bank with a government deposit, and a lending ratio set to exactly meet the shortfall between output GDP made possible by increased productivity, and flat or declining real wages. If the £55bn incurred as consumer credit in 2007 had instead been funded in this way then the economy would not face the crisis that it faces today. We have to think outside the box. Calls for a plan B are stuck within the present paradigm. This new paradigm would re-engineer the financial sector and the management of inevitable debt. It would release the real economy from artificial financial constraint, and deliver sound finances built on productivity advances. It would also greatly enhance social cohesion.
by Citizens' Income Trust | Oct 14, 2012 | Opinion
Marion Ellison (ed.), Reinventing Social Solidarity across Europe, Policy Press, 2011, xv + 270 pp, hbk, 1 847 42727 4, £70
Social solidarity is ‘a contested, fluid, multilevel and multifaceted concept within the European polity, civil society and the public realm.’ This volume treats this solidarity as ‘a lived experience, a shared learning experience and a normative construct,’ (p.11) at the heart of which is a conflict between the EU’s Stability and Growth Pact, with predictable inequalities resulting from competitive labour markets, and a European Social Model predicated on human rights and social protections from the inequalities generated by both a globalizing economy and such policies as the Stability and Growth Pact. In the context of today’s austerity measures, the book seeks both an understanding of social solidarity in Europe and new means to create an enhanced social solidarity, nationally, within Europe, and globally. So is globalization a problem to solidarity? No. There has been no ‘race to the bottom’ amongst European welfare states, and people still find their solidarities in their families and communities. And yes, in the sense that national institutional solidarities now need to be supplemented by transnational ones, such as those generated by the EU.
Different chapters study what solidarity might mean in terms of social policy related to children, social movements (such as trade unionism), energy policy, immigration integration policy, and a European politics in which policy instruments might reduce rather than enhance social solidarity simply because the political process will always prioritise certain interests over others. The chapter which describes this last process is appropriately followed by one which shows that in post-communist European states the establishment of market economies has caused governments to discard such solidarities as predictable local labour markets.
A particularly interesting set of empirical results is represented by a table on p.219 which shows how people in different European countries differ in their attitude to government intervention to redistribute resources ( – the UK is midrange), but also that those differences are small compared to average EU acceptance of government intervention. The author of this chapter, Béla Janky, concludes that ‘Eurosceptic claims about the lack of any common ground for a Europe-wide social policy framework are unfounded’ (p.223).
The editor concludes that, whilst there are pressures towards increasing individualization and fragmentation, there are policy areas in which European social solidarity is more of a reality than it was (for instance, in energy policy), and it doesn’t seem unrealistic when he calls for a reinvention of social solidarity on a variety of levels.
Whilst books such as this can sometimes suffer from a sense of fragmentation born of the fact that each contributor has written about the subjects in which they personally are interested, the overall impression of this volume is that there is something called social solidarity and that in terms of its future there is everything to play for. Social solidarity at every level faces challenges, but there are also signs of increasing solidarity in particular policy areas, and that a broader social solidarity is perfectly possible.
by Citizens' Income Trust | Oct 13, 2012 | Opinion
Emma Carmel, Alfio Cerami and Theodoros Papadopoulos (eds), Migration and Welfare in the New Europe: Social protection and the challenges of integration, Policy Press, 2011, xiv + 261 pp, hbk, 1 847 42644 4, £70
The introductory chapter of this timely edited collection outlines the issues to be discussed throughout: policy combinations, institutions and political structures, and the resulting integration and inclusion of migrants. This is followed by a discussion of the role of emotions, beliefs, preferences and opportunities in policy-making.
The first part of the book contains chapters on the differences between different national migrant integration regimes (always the result of different political economics of labour and welfare); on the European Union’s attempt at a coherent migration policy which links utility, security and integration policies; on the contradiction between the right to emigrate and a destination country’s ability to deny entry (meaning that we need a new European migration morality); and on the causes of migration and of different degrees of labour market integration.
The second part contains studies of migration and social protection policies in different EU countries. In Italy, the relative importance of social protection provided to employees in large companies disadvantages migrants, who tend to work in smaller companies. Migrants are also disadvantaged by their weaker position in relation to welfare rights and their security of residence. Germany practises differential inclusion, with guest workers the least included, second-generation German-born people somewhat more included, and ethnic German repatriates the most included. The social security regime, being based largely on contribution records, disadvantages migrants. In Hungary, EU accession has added new elements to an already complex migration pattern.
The chapter on Finland contains the most detailed study of a social security system and its relationship to migration. In Finland’s case residency is a more important criterion than employment status or length of labour market participation. Because immigrants often don’t achieve rights to residency, their access to the main social security provisions remains employment-based and thus precarious, leaving them reliant on a low-level means-tested safety net.
The chapter on the UK, accurately entitled ‘wilful negligence … the absence of social protection in the UK,’ details UK immigrants’ lack of access to the labour market and to social security benefits, and also a detention regime which includes the incarceration of children. The UK has a long history of both permanent and temporary immigration, which has resulted in complex and differentiated labour market patterns. It’s a pity that a detailed case study doesn’t include a section on immigrants’ social security experiences. What does emerge is a picture of insecure recent immigrants and of exploited migrant workers.
The final section of the book integrates into an understanding of migrant experience of a number of disparate cultural and political factors, and here the UK’s multicultural policies fare rather better than our treatment of illegal immigrants and asylum-seekers awaiting determinations of their status. The first chapter in this section asks that welfare right should be viewed in the context of each cultural situation; the second studies the influence of urban, sub-national policy actors; and the third compares Israel’s positive attempts to integrate (certain groups of) immigrants with Europe’s more patchy experience.
The concluding chapter finds social security regulations to be discriminating, and it puts to us the challenge of creating ‘inclusion, integration and social protection’ (p.253) for migrants across Europe. Advocates of a Citizen’s Income approach to benefits reform will recognise this as a challenge which a Citizen’s Income would meet, but only if a Citizen’s Income is to be paid to every current resident, including new arrivals.
by Citizens' Income Trust | Oct 8, 2012 | Opinion
The ‘sensible’ view of Citizen’s Income (CI) is that it would pool income tax allowances and welfare benefits, as far as possible, into a single uniform payment, varying only with age paid to every citizen, without conditions, funded in the main by income tax. This model has been studied extensively, and can be discussed with policy makers and advisors who understand the mechanisms and procedures involved. But politically this is a complete non-starter: In his latest book Future Money[1], James Robertson comments “The conventional assumption has been that there is no way of funding a Citizen’s Income except by taxing people’s other incomes highly, and it might have to be at a rate as high as 70%. For many years that has been seen as ruling out a Citizen’s Income. Like many objections to otherwise desirable proposals, the assumption is due to inability or unwillingness to think outside a narrow box.” (p135)
But over the years I have encountered another radically different view about the funding of Basic/Citizen’s Income. There is, it is claimed, a huge pool of money which has been hi-jacked by the banks: they have used their power to create nearly all the money in circulation and have thereby greatly enriched themselves. Most people are under the delusion that it is governments not banks that create new money, but in fact only 3% of all the money (M4) in circulation is official Bank of England notes or coins. The remaining 97% has been created within the banking system and it is they who reap the benefit. These ‘mavericks’ at our meetings of BIRG (Basic Income Research Group) and then later Citizen’s Income have always argued that this ‘seigniorage[2]’ – the benefit from creating new money – rightfully belongs to the people, and could/should be used to provide a Basic Income. In addition, Robertson reminds us that there is also a vast amount of ‘economic rent’ which flows from the ownership of natural assets like land and airspace. This should be charged for, and together with the proceeds of seigniorage would provide more than enough to pay for an adequate Citizen’s Income.
This ‘free lunch’ basis for CI might in the past be dismissed as either Mad or Bad. It did not help that advocates of money reform who spoke at meetings of BIRG did not always put forward their ideas with much tact either! I say that the idea that BI/CI could be funded by seigniorage might be seen as madness, because no mainstream, conventional economist could be found who would subscribe to it.
But an even more telling criticism is that the holders of this alternative view are Bad people. In a vitriolic attack, Derek Wall, who was once the co-leader of the UK Green Party, lays into ‘Social Credit’[3]. It was Major Douglas who inspired the Social Credit movement in the 1930s, which could be described as an earlier manifestation of Basic Income funded by seigniorage. In the hands of others, Wall claims, this degenerated into an evil anti-Jewish banking sentiment. Even today’s advocates, he claims, are similarly tainted. It is noticeable that the Green Party does not support money-reform, and the NEF are somewhat ambivalent about it as well, perhaps as a reaction to this whiff of ‘dangerous madness’.
Is it any wonder then that Basic Income funded by the common-wealth of seigniorage and resource-charges is seen as too hot to handle, too dangerous to be involved with, the deranged delusions from a lunatic fringe or worse? It comes as a shock therefore to find that James Robertson, the utterly reasonable, and tireless campaigner for fresh thinking about society and the environment, is entirely in favour of seigniorage reform and land- and resource-based taxation. Using the proceeds of these two revenue streams would, he tells us would be more than sufficient to fund Citizen’s Income and more besides.
In this, Robertson’s latest book, he follows up on earlier inspiring works such as The Sane Alternative (1983), Future Work (1985), Future Wealth (1990). Robertson ran Turning Point conferences (which was where, in the early 1980’s I first encountered Basic Income). He was a founder of TOES, the ‘anti’-G8 economic summit forum, and of course he is a leading light at NEF (New Economics Foundation). Later his output has explored the transformation of tax away from penalising earned incomes towards resource-based taxes, especially land-value taxes. Sharing Our Common Heritage: Resource Taxes and Green Dividends (1998) explains how it could be done.
Then, hesitantly at first (as I read it) but later as in this book currently under review, Robertson has experienced an epiphany. It was indeed true that the money-system had been hi-jacked by the banks, and that huge wealth was being diverted to the top 1% thereby; that the control over the issue of new money should be returned to a public authority and used for the public good. Together with Joesph Huber, Robertson became converted to the idea that our money system should be prised away from the clutches of the bankers in Creating New Money: A Monetary Reform for the Information Age. This appeared in 2000, long before the 2008 financial crash. Since then Robertson has continued with the monetary reform theme, something which became much more pressing following the banking crash when vast sums were needed to rescue the financial system. So Future Money is a synthesis which knits together his earlier ideas, with the all-important reclamation of the money system. The aim, as always with Robertson’s books is to show how a credible “sane” alternative could give everyone a better life, while at the same time creating an ecologically sustainable world.
Robertson has a wealth of experience in the ways of government and governing, including spells at the UK Treasury and commercial banks, but his background is in Arts, not economics “In retrospect, I am glad not to have had a formal education in economics and money and to have learned about them in practice later within a wider context of ideas.” (p13)
Since Robertson has long been a supporter of the idea of CI, it comes as no surprise when he says that these revenues should be used in to fund a “Citizen’s Income payable to all citizens as a right. [..] It will recognise that responsible Citizen’s in a democratic society have a right to share a significant part of the public revenue from the value of common resources. It will enable people to become less dependent for welfare and work on big government, big business, big finance and foreign trade. Because all of those incur environmentally wasteful overhead costs, it will also have a conserving effect.” (p130)
There are a small number of ‘heterodox’ economists who would agree with Robertson about the existence of seigniorage, that it has been captured by the private banking system but that it could be re-directed for the benefit of the citizenry. Perhaps the most high-profile (although not referred to by Robertson) is Steve Keen. His book Debunking Economics (2011 2ed, Zed Books) is about the whole range of failures of the dominant neo-classical economics, especially their inability to recognise and incorporate money into their models. Few establishment figures will engage with Keen, and even open-minded economists like Paul Krugman still do not agree that money is ‘endogenous’[4]. However compelling evidence that the banking system benefits from a huge public subsidy can be found in a recent Bank of England paper[5] where the ‘free lunch’ of the banking system is estimated to be of the order of £120 bn. p.a., enough to fund a £40 per week Citizen’s Income for every man, woman and child in the U.K.
I would encourage readers of CI News to closely study this book. There is much more detail about the environmental and humanitarian reasons for reforming the way currency is produced and how resources should be taxed. You will have to decide for yourself if you think reclaiming seigniorage is a realistic method of funding CI, or is crazy dangerous nonsense. The safe alternative is to continue studying the present job-system and see how an added-on CI funded by punitive rates of income tax might work, however futile and politically infeasible that might be.
[1] Future Money: Breakdown or Breakthrough Green Books, Totnes, Devon 2012
[2] Robertson avoids the use of the obscure term ‘seigniorage’; I use it because it precisely defines the feature of in the money system which could be the main source of funding for BI.
[3] Derek Wall (2003) Social Credit: The Ecosocialism of Fools in Capitalism Nature Socialism, September 2003
[4] see Paul Krugman’s blog article deriding ‘endogenous money’: 2 Apr 2012 https://krugman.blogs.nytimes.com/2012/04/02/oh-my-steve-keen-edition/
[5] Noss, Joseph & Sowerbutts, Rhianon (May 2012) The Implicit Subsidy of Banks: Financial Stability Paper No 15 Bank of England.
