by Timothy Roscoe Carter | Feb 25, 2013 | Opinion
“What? You think the government should just give everybody money?! Regardless of whether they worked for it or not? Regardless of whether they even need it or not? Why do you think *that* would be a good idea?”
You are out in public. It just came up that you support a basic income guarantee, and someone just hit you with the above incredulous questions. Unless you are on a college campus or at an academic conference, you can probably expect your listeners’ attention to last roughly one minute before they are either intrigued and ask more questions, or they tune you out completely. What do you say?
Well, obviously there are a lot of different reasons why people support a basic income, and so your answer will depend in part on why you personally support a basic income. And it will also depend in part on what you think your listeners’ core beliefs are, and what may therefor persuade them. So there cannot be just one right answer.
With that in mind, I offer the following eleven suggestions.
All of the following arguments are my own derivative summaries and reinterpretations of other people’s ideas. The Keynesian and Georgist arguments are derived from the writings of their namesakes. The market utilitarian case is derived from the ideas of Milton Friedman, and the independentarian case is derived from the ideas of Karl Widerquist. I am also particularly indebted to Widerquist for inspiring the fairness case. None of the other arguments are original, but I have sadly forgotten the individuals from whom they are borrowed.
So please feel free to use any or all of them as you see fit to promote the abolition of poverty. They can be used in person or in speeches, in blog posts or comments, in Congressional hearings or your Facebook status, or anywhere else you see fit. Also feel free to modify them as necessary.
And yes, I have timed myself speaking all of them, and I was able to speak each of them at a normal speaking pace in one minute or less.
The one minute fairness case for a basic income guarantee:
Property is a social construct legally enforced by the government. If all people are considered equal, then absent any other considerations, each person should have an equal amount of property. So material equality should be the default. In a free market economy with a basic income at or below the highest sustainable rate, those who choose to live off of the basic income are not living off of the work of others. Rather, they are living off of less than their “fair share” of property and allowing the extra to be used by those who choose to work.
The one minute market utilitarian case for a basic income:
The free market is the greatest generator of wealth ever devised. Money is the most effective means of socially producing utility, as it allows each individual to obtain whatever needs and wants they subjectively require. However, one dollar in the hands of a poorer person produces greater utility than a dollar in the hands of a richer person, because the richer person can fulfill more of their more important needs and wants with the rest of their money than the poorer person can. So the transfer of money from a richer person to a poorer person increases overall utility. The government is incompetent at running people’s lives or regulating the economy, but the one thing it can do effectively is mail out checks. A basic income is most effective means of transferring money from the richer to the poorer with the least government interference and the least work disincentive. The natural limit on the amount of the basic income is the point where the work disincentive from the required taxes reduces wealth the point where the basic income would have to be reduced.
The one minute Keynesian case for a basic income:
Keynesian economics works when implemented correctly. But properly implementing Keynesian economics is politically very difficult. It requires politicians who are willing to spend a lot of money on stimulus when the government appears broke, and then turn around and become deficit hawks when the government is rolling in cash and everyone wants a piece of the pie. A basic income funded primarily from an income tax would become a massive institutionalized entitlement expected by the population whose cost would automatically increase and decrease in direct opposition to the economy. As unemployment rises, the number of net receivers goes up, and as unemployment falls, so will the number of net receivers. Keynes once famously said that the government should pay people to dig holes and fill them back up again. But why waste people’s time? Anyone who sits on the couch and watches TV while living off of a basic income will contribute as much to society as the hole diggers. And anyone who does anything more productive will create a net good for society.
The one minute human rights case for a basic income:
Poverty is not a natural tragedy like cancer or earthquakes. Poverty is a human caused tragedy like slavery or government oppression. Slavery is caused by societal recognition of humans as property. Government oppression is caused by governments punishing people for their beliefs or characteristics, and without due process of law. Poverty is caused by property laws that deny some people access to necessities. These types of tragedies can be ended by recognizing that humans have the right not to be subjected to tortuous conditions imposed by other humans. Humans have a right not to live in slavery. Humans have a right to be free of government oppression. And humans have a right not to live in poverty. A basic income is not a strategy for dealing with poverty; it it the elimination of poverty. The campaign for a basic income is a campaign for the abolition of poverty. It is the abolitionist movement of the 21st century.
The one minute Georgist case for a basic income:
Property is a product of creation, not of mere use. “I made this.” confers property rights, “Tag! It’s mine!” does not. Things that exist as a product of your labor must be yours, and for anyone else to appropriate them is to make you their slave. Land and natural resources, however, are not the products of people, but of nature or God. They are gifts to all of humanity. Individual property in land and natural resources may be practical or useful, but it is still theft. Utility might justify this theft, but compensation is still required. As the appropriation was done without consent, the compensation must be in the form that offers the greatest choice of use to the victims. That form is cash. The most efficient arrangement for payment is for the takers to pay the full rental or use value to a single entity which can then divide the proceeds equally among the population. Taxes are the tribute I pay to you for displacing you from land, the basic income is your dividend.
The one minute transhumanist case for a basic income:
Two hundred thousand years ago humans lived in hunter-gather societies. About 10 thousand years ago, humans began to live in agricultural societies, and then about 300 years ago, humans began to live in industrial societies. Since 30 to 50 years ago, we have lived in a service society. Theoretically, the last economic stage of society is a leisure society, where most people either work in the artistic or scientific fields, or do not work at all. So far, each phase has lasted only a small fraction of the time of the previous phase. If that pattern holds, service societies should last less than two generations, a time period nearing its end. Right now, worker productivity is advancing faster than the need for workers, and robots are inhabiting labs in research hospitals and at DARPA. It is time to prepare for a society in which we simply do not need everyone to work. A basic income will be needed to provide a living for people, and to provide customers for business.
The one minute conservative case for a basic income:
The welfare state may not be the society we would have created, but it has been here for 4 generations, people have come to expect and rely on it, and it would be extremely disruptive to society to get rid of it. But while we may not be able to get rid of the welfare state, we can reform it. The current welfare state necessitates an immense and expensive bureaucracy, it is prohibitively complicated for some of its intended beneficiaries to navigate, it puts bureaucrats in charge of the lives of the poor, it creates perverse incentives for people to avoid work and to remain poor, and it arbitrarily allows some people to fall through the cracks. A basic income would correct all of these problems. A basic income is simple to administer, treats all people equally, retains all rewards for hard work, savings, and entrepreneurship, and trusts the poor to make their own decisions about what to do with their money, taking these decisions out of the hands of paternalistic elitist politicians.
The one minute feminist case for a basic income:
Patriarchy has put the world’s wealth in the hands of men, prevented women from being professionals and entreprenuers, forced poor women into dead-end second-class labor jobs, and forced all women to become unpaid domestic servants and caretakers of the young, elderly, and disabled of their families. Women have been forced to be financially dependent on fathers or husbands who are often abusive. A basic income would change all of this. A basic income would be a massive transfer of wealth from men to women. Women would be free of financial dependence on any man, and the young, elderly, and disabled would all be fully supported. Women could afford to leave abusive husbands, those who chose to be caretakers would be fully compensated, and no woman would be forced into a dead-end job, and would instead be able to pursue her own financial goals as she saw fit.
The one minute (right) libertarian case for a basic income:
While it may have been theoretically possible to acquire property in a just manner soon after humans evolved, none was. Every square inch of inhabited land on earth can trace its title back to someone who acquired the land by force. All land titles on Earth are soaked in blood. And not just land titles. Thanks to past government spending, targeted tax breaks, intellectual property, corporate charters, slavery, and meddling regulations, no property or wealth can be said to have been justly acquired. If we assume that those who have the least are greatest net victims, a basic income would provide the best possible rectification with the least government control, producing the least unjust system of property distribution possible in the real world.
The one minute liberal case for a basic income:
A basic income would correct or ameliorate many inequities and inefficiencies inherent in market capitalism. The wages of unskilled and semi-skilled workers would rise as those who enjoy and are good at such work will no longer have to compete against those who are forced to seek such work out of financial necessity. The wages of highly skilled workers will fall as more people are able to take the time necessary to gain the skills to compete for those jobs, lowering the cost of legal, financial, and health care services. A guaranteed income will soften the blow to workers displaced by advancing technology and the creative destruction of the market. Job seekers will be able to take the time necessary to find work that is the best fit for them, increasing efficiency in the distribution of labor. And entrepreneurship will flourish as those wanting to start their own businesses will have an income to survive on during the long lean times that typically come when building a new enterprise.
The one minute independetarian case for a basic income:
Property rights are not natural, they are a social convention. But they give each individual freedom, as the essence of property is the right to exclude others, to have a place where no one else has dominion over you. The first rule should be that each individual has inalienable ownership over her own body and mind. But carving up all of nature outside of bodies leaves some people unnaturally without the means to obtain the necessities of life. Therefore each person must also have an inalienable property right to these necessities. Society owes you a living, because society is preventing you from foraging the land to obtain the necessities of life on your own. Society could rectify this problem by letting individuals forage for necessities wherever they wish, or by giving them the land they need to survive on their own, or by providing these necessities directly. But in modern societies, the most efficient way to provide for these necessities is with direct cash payments, a basic income.
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.
