Comparing a Universal Basic Income to Cash Transfers

Comparing a Universal Basic Income to Cash Transfers

by | Jul 17, 2017 | Opinion

Written by: Frank Kamanga

INTRODUCTION

This article is inspired by the article titled “Helicopter money and basic income: Friends or foes” authored by Stanislas Jourdan (2017). He made a very important attempt to clear up confusion between two similar and conflicting yet important terms in the global economy at this moment. Hıs article has opened doors for another attempt to compare basic income scheme and cash transfer schemes. This article will explain the definitions of cash transfers (CTs) and universal basic income (UBI), as well as institutional frameworks under which the programmes are implemented. It will also address financing arrangements for the programmes, and linkages between UBI, CT and Sustainable Development Goals, in an attempt to explain the justification of UBIs in the current state of the global economy. Policy issues related to both CTs and UBIs will also be highlighted.

Basic income and cash transfers are not novel ideas for poverty alleviation. A basic income scheme was initiated in North America in the 1970’s and 1980’s with support from prominent economists of that time. Following the successful implementation of such programmes, governments and the World Bank began implementing cash transfers in emerging and developing countries. With the rising discontent toward the neoliberal economic system and austerity measures, poverty alleviation measures such as Universal Basic Income (UBI) have been resuscitated back to life in developed economies. Gradually, governments in emerging and developing countries are carrying out pilot projects to assess the efficacy of basic income projects.

Emerging and developing countries like India and South Africa, which are implementing cash transfers, are also contemplating introducing basic income projects. This demonstrates that there are differences between these two concepts. Indeed, these two programs are similar regarding their purpose of alleviating poverty and their nature of implementation. However, the analysis below will show why UBI stands out as a different programme from cash transfers, and why our current economic circumstances means a basic income scheme should be implemented globally even in developing and emerging economies.

DEFINITION OF BASIC INCOME AND CASH TRANSFERS

CASH TRANSFERS

Cash Transfer Programmes are founded on social inclusion theory in the context of economic development. The social inclusion theory posits that governments should integrate the poor into the general economy by supporting them with a basic amount of cash.  Cash transfer programmes fall into two categories: conditional cash transfers and unconditional cash transfers. Under conditional cash transfers, recipients receive cash only if they can demonstrate that their behavior meets certain stated requirements. Under unconditional cash transfer programmes, the payout does not depend on individual behaviour (Forget E.L et al., 2013).

Conditional Cash Transfers (CCT) are used to encourage the behaviour of utilizing public services such as education and health services which lead to a reduction of poverty in the long run. For instance, in Mexico the conditional cash transfer programme provided cash to households on the condition that their children regularly attend schools and also access health services at clinics[1]. Proponents of conditional cash transfers argue that the scheme leads to better investments in human capital through access to social services that improve people’s knowledge and skills. The World Bank is a major supporter of the conditional cash transfer programme.

Meanwhile, advocates of the Unconditional Cash Transfer (UCT) programme look at the situation from a different perspective. They argue that poverty is cyclic and hard to break out of when there are conditions imposed on your spending. For instance, with restrictions on peoples’ spending, some basic needs are left out of the spending equation. To meet these basic needs, people may engage in other risky income generating activities such as sex work. When people are in poverty and desperate for money, we should not condition help on changing their behavior. Therefore, advocates of UCT argue cash should not be given according to certain behaviors. Rather, these resources should be made available to poor families so that they can make spending decisions consistent with their socio-economic priorities regardless of the work or job they are engaged in. UCT programmes are supported by human rights advocates and are consistent with a human rights based approach to development.

Unconditional cash transfers are not only premised on certain behavioural requirements, they also have lower administrative costs than conditional transfers (Capriati 2016).  In addition, in countries like Malawi unconditional cash transfers have also been merged with other social services like agricultural farm cooperatives and access to health services, hence improving their effectiveness. In this case, UCTs are more consistent with meeting a broader aspect of sustainable development goals.

This notwithstanding, with regards to impact, lessons from CCT and UCT programmes in Zomba city in Malawi have shown that both programmes have had positive results in terms of reducing child marriages, improving educational attendance, and avoiding early pregnancies. However, it has shown that UCT is relatively more effective in solving several challenges met by the families. This is because based on tastes, preferences, and priorities, families could decide how to spend money without constraints so that intended objectives can be met (Forget E.L et al., 2013).

BASIC INCOME

The concept of basic income is a relatively new phenomenon in the developing world as opposed to the developed world. In Canada, a basic income experiment called MINCOME was carried out as a means-tested negative income tax[2] in the 1970s. Meanwhile, a notable experiment was conducted in Namibia and currently two countries are carrying out pilot projects – Kenya and Uganda. Basic income guarantee or Unconditional Basic Income (UBI) is considered as a UCT income large enough to guarantee everyone in an economy or in the world a minimum level of financial resources on an individual basis without imposed conditions.

Basic Income mainly works on the principles of unconditionality and universality. Proponents of basic income also argue that the programme is based on the intrinsic value of human beings in an economy. This value is generated from their contribution to the creation of the general wealth of the society and also from the inherited value of our ancestors who created the wealth we are enjoying today (Jourdan S. 2017). Just like cash transfers, basic income plays quite an array of roles from poverty alleviation, school attendance promotion, work emancipation, gender balance incentivization, social protection, modernization and early child marriage prevention.

INSTITUTIONAL FRAMEWORK FOR BASIC INCOME AND CASH TRANSFER PROGRAMME

The institutional framework of these programmes can be analyzed in terms of implementation, sources of funding, policies and financial infrastructure. Firstly, given the diverse nature of objectives of both cash transfer and basic income projects, different non-governmental organizations and line ministries of central government can implement these projects. The government normally implements both basic income and cash transfer projects in the context of fiscal policies.

Financial sector tools such as mobile payment technology and policies also play a huge role in implementation of both basic income and cash transfer projects. GiveDirectly, a US based NGO, is able to implement a basic income project in Kenya and Uganda due to robust mobile technology payment systems established in these two economies.

FINANCING OF BASIC INCOME AND CASH TRANSFER PROGRAMME

Cash transfer programmes and UBI programmes share some differences in terms of how resources are to be mobilized. There is readily available information in terms of how cash transfer programmes are being implemented and funded in developing countries like Malawi. As for UBI, the information is scant but constantly flowing, as different suggestions on how the scheme should be financed are being put forward by proponents.

From an experience of cash transfer schemes in Malawi, these Conditional Cash Transfers are mainly funded by the World Bank and implemented by the government of Malawi. Meanwhile, Unconditional Cash Transfer schemes are implemented by Unicef, Oxfam, Government of Malawi and several non-governmental organizations. These programmes are financed by various donors including the Government of Germany, EU, World Bank, Irish Aid and the Government of Malawi. At the same time, the government of Netherlands is funding the design of a linkage and referral system of the Social Cash transfer programme.

As for the financing of the UBI programme, the topic is currently being addressed in different circles at policy and academic levels. Some of the topics being discussed include how the resources should be mobilized, what kind of tools should be used and who should fund the programme. Understanding this aspect of the UBI programme can assist in providing information on how to strategize campaigning and advocacy programmes for UBI in different countries.

It is claimed that there are currently no established, in-country funding mechanism for UBI in developing nations, except for external funds, as in the cases of Uganda and Kenya. However, in selected developed countries that are piloting the schemes, governments are implementing the projects through their fiscal space. Given the need for longevity of the schemes, some authors such as Young (2017), Stern (2017) and Santens (2017) have suggested sustainable ways for mobilizing resources for UBI in the United Kingdom and United States of America. Some of the methods may apply to both developing and developed countries, while others are restricted to developed countries. Here we will dwell on Young’s proposal for financing UBI and this can be can be categorized into three main groups: 1. Recalibrating existing tax and benefit systems 2. Replacing CCT 3. Communalizing common assets 4. Direct grants from the private sector can also be utilized.

Advocates for proposal one argue that for UBI to be politically feasible, it must be achieved using the existing infrastructure of taxation and spending. The idea is that UBI is currently at a conceptual stage. To materialize this scheme, governments must begin with existing resources (on a trial basis) and there is neither a need for radical and rapid changes to the system nor additional taxes. In this approach, the UBI scheme can be small in scale, targeting the most vulnerable people across the board. As in the case of developed nations such as the UK, resources can be mobilized through restructuring the existing, inefficient and unfair benefit systems. Under this proposition, UBI can be used as a subsistence or sub-subsistence level of income to be supplemented by earnings from employment and/or disability, housing, or child benefits.

One of the ways in which savings for UBI can be generated is through restructuring existing benefits, as explained by Malcom Torry of the Citizen’s Income Trust. He states that the administrative savings from dismantling the means-tested benefits system are in the range of £8-10 billion. In other words, it is very expensive to decipher who is and isn’t deserving of government support, especially when recipients must prove their worthiness. Restructuring the benefits to look more like a UBI scheme can not only help save money but would also be fairer.

The second proposal for financing UBI is simply replacing the CCT scheme with a UBI scheme in developing and emerging economies. India is already on the way to do this. UBI is more closely related to a UCT scheme, hence all the benefits of a UCT scheme over CCT also accrue to UBI.

The third proposition involves communalizing common assets. Some proponents state this UBI financing mechanism takes a more radical and systematic overhaul approach. These proponents look at financing UBI in its universality context and hence propose financing solutions that span across geographical boundaries of both developed and developing countries. These proponents argue for the abolishment of private ownership of resources – be it physical, cultural, biological, or economic. They argue that resources such as the biosphere, atmospheric carbon, fisheries and forests, and unearned income of technological change should be respected as the common property for all, rather than be the source of exploitative disparities from unequal access and power. The implementation of such a systematic and transformative change requires establishment of new policies, institutions and a new economic paradigm at a global level.

There are several prominent advocates who have come up with several ideas on how resources can be mobilized under the proposal of communalizing common assets. First, Barnes Boyce and James Boyce put forward that charges should be put in place by governments on access and use of ‘communally inherited assets’ and that revenues must be redistributed. They argue that charges could be placed, for example, on polluting the scarce resource that is the carrying capacity of our atmosphere, or on trades of stocks, bonds, and derivatives (the latter of which could raise $300 billion per year). Barnes and Boyce claim that charges on a portfolio of universal assets could grant a US citizen a UBI of $200 a month.

A wealth tax could also provide an alternative for resources for UBI ın some countries. Researchers such as Thomas Piketty suggest measures such as progressive capital taxation. Martin Faley suggests the Georgist land value tax (LVT) in the context of the UK. Faley claims that land taxes coupled with common licenses could fund a £4,500 annual UBI. A globalization fund could also strike a deal. Globalization has had some negative consequences as we can see from recent increased in nationalism and unemployment in developed and emerging economies. Multinational companies exploiting labor and cheap natural resources in developing countries whilst making billions of US dollars should be charged a globalization tax to be fed into the globalization fund. This fund can be used to support a global UBI dividend or grant.

The fourth industrial revolution is mainly characterized by automation of jobs and technological unemployment. Some economists and futurists have found leeway to press for resource mobilization to finance UBI. For instance, Economist Yannis Varoufakis and futurist Kartik Gada have each suggested that the labor savings from automation could (and should) pay for UBI. According to Varoufakis, the proposal is that one-part should be wealth tax and one-part should be ownership restructuring. That is, a small tax is levied on shares from every initial public offering put into a commons capital depository that in effect grants citizens property rights over new technologies that yield financial returns. The Commons Capital Depository would then pay out a UBI to all citizens.

The last proposal that is also being applied already is the financing of UBI activities with funds from the private sector. eBay is financing pilot projects in both Kenya and Uganda. More and more private companies can come in to support such projects in developing countries.

LINKAGES BETWEEN CASH TRANSFER AND UNIVERSAL BASIC INCOME AND SUSTAINABLE DEVELOPMENT GOALS

Cash transfer and basic income share the same theories of how they change people’s behavior or improve living conditions of people in the context of Sustainable Development Goals.

  1. CT programmes reduce poverty and increase income. As income increases, people spend money to solve diverse needs of their families and they also spend on luxury goods. SDG 1, 2, 3, 4, 5 and 9
  2. CTs and Basic income reduce risk. A CT or a Basic income is a form of social insurance that increases the planning horizon and allows one to take calculated risks. SDG 2,3,4
  3. CTs and Basic income reduce income inequality. SDG 10
  4. CTs and Basic income enhance social values of dignity and integrity, hence build communities through interaction. SDG 11, 16, 17

WHY UNIVERSAL BASIC INCOME NOW

There are quite a number of reasons to justify the policy shift in favour of basic income in both developing and developed countries. The first reason is that the basic income is guaranteed over a long period, thereby enabling people to make plans for major life decisions ahead of time. The longevity of UBI can also stimulate demand in the global economy, hence leading to increased production and employment in the production sector.

Additionally, just as with unconditional cash transfers, basic income schemes could be cheaper than providing in-kind transfers and conditional cash transfers. In-kind transfers take the form of goods and services like cattle, books, schools, and hospitals. It is claimed that projects involving the provision of such projects have huge administrative, implementation and logistics costs. Besides this, they constrain people on their freedom to spend money on the goods and services of their choice. However, thanks to mobile technologies, basic income programmes are implemented with ease and offer economic freedom on expenditure of the money.

Basic income is also conventionally universal and is regarded as a human right. Basic income programmes target people across the board in an economy. The cash is provided irrespective of your employment status, gender, region, physical ability. Rather, it is based on one’s inability to meet basic needs in a society. Therefore, beneficiaries in a basic income project are diverse and the impact on poverty reduction as well as the multiplier effect on the economy are likely to be huge.

Finally, just as with conditional cash transfers, basic income offers an opportunity for long term investment in human capital. From the recent evaluation survey of GiveDirectly’s basic income project in Kenya, 20 percent of respondents said that they were using the money for payments of school fees for either themselves or their children. As the project is expected to last for some years, recipients of the cash can make long term and secured plans to finance their studies, hence building human capital in the economy.

POLICY ISSUES FOR CTs AND UBI

  • Basic Income is more closely related to UCT. Therefore, in terms of cost structure, the cost per unit of outcome will be lower with a UCT and UBI scheme compared to conditional cash transfer scheme.
  • UBI has a greater potential for political advocacy and long-term stability despite its perceived greater cost, due to its universality.
  • Financial Modelling of UBI in Malawi must be conducted to assess the possibility of carrying UBI and UCT concurrently.

Frank Kamanga is a former Economist of the Central Bank of Malawi.  He is a co-founder of Global Hope Mobilization and Centre for Child Development of Research, two local NGOs in Malawi. He is member of the Basic Income Earth Network Outreach Committee and also Global Unification International UBI Africa Committee.

BIBLIOGRAPHY

Capriati M. (2016) https://www.givingwhatwecan.org/post/2016/07/whats-so-special-about-give-directlys-basic-income-pilot/ Accessed in April 2017

Forget, E.L, Peden A.D., and Strobel, S.B (2013). Cash Transfers, Basic Income and Community Building. Social Inclusion, 1(2), 84-91.

Jourdan S. (2017) helicopter money and basic income: friends or foes?

Santens S. (2017) How to Reform Welfare and Taxes to Provide Every American Citizen with a Basic Income. Accessed on 6th June 2017.

SDG knowledge platform.  https://sustainabledevelopment.un.org/?menu=1300.  Accessed in April 2017

Stern, A. (2017) Raising the floor. Accessed in June 2017

Young Charlie (2017). Conversation about Basic Income is a Mess. Here’s How to Make Sense of it. https://evonomics.com/basic-income-conversation-make-sense-charlie-young/. Accessed in April 2017.

[1]https://web.worldbank.org/archive/website00819C/WEB/PDF/CASE_-62.PDF

[2]A negative income tax is a progressive income tax system where people earning below a certain amount receive supplemental pay from the government instead of paying taxes to the government.

Review: Parijs presents ‘Basic Income’ book at Stanford

Review: Parijs presents ‘Basic Income’ book at Stanford

by | Jun 24, 2017 | Opinion

On Wednesday, April 12th, Philippe Van Parijs, co-founder of the Basic Income Earth Network, Emeritus Professor at the University of Louvain and former Director of the Hoover Chair in Economics and Social Ethics, presented his latest book on Basic Income at Stanford University.

He offered a powerful defense of UBI as an instrument of freedom and argued that it can be economically sustained and politically achieved—especially if political communities consider starting with a small UBI. Basic income should be designed, he argues, to go alongside publically funded services, such as quality healthcare and education, and should be given to all fiscal residents of a country.

A video of the event can be found here.

“I’ve listened to criticisms and questions about basic income in five continents and seven languages,” Van Parijs told an audience of more than a hundred students, teachers and members of the broader community. He remains convinced that the policy has no fatal flaws.

Co-written with Yannick Vanderborght, and with the heroic title Basic Income: A Radical Proposal for a Free Society and a Sane Economy, the book is an absolute must read for basic income enthusiasts and critics, advanced and beginners alike. As the idea of UBI spreads faster than ever throughout the world, it can be hard to keep track of all the major developments in the academic and political worlds. Their book is a seamless solution to this problem.

Over eight insightful chapters, the authors offer the most comprehensive survey ever produced of the scholarship surrounding the recent and less recent revivals of the old idea. Van Parijs and Vanderborght trace back the roots of the policy proposal in the history of public assistance and social insurance, as well as in utopian thinking from Thomas Paine to Charles Fourier, and Martin Luther King. As a scholar, writing and teaching on basic income, I cherish the more than 100 pages of notes and references at the end, which prove to be inexhaustible sources of knowledge.

We learned from Philippe’s talk more about the long journey that led Philippe where he is now. From his first (disappointing) encounter with Rawls over breakfast to his (equally disappointing) encounter with Dworkin in a taxi. On those occasions, both political philosophers challenged the view that liberal egalitarian justice requires a universal cash payment. He recounted for us how he nonetheless ended up convinced that basic income was the instrument of freedom.

In the book, the authors argue that UBI enables a fairer distribution of the most important good of all – the real freedom to lead one’s life as wished, through work and outside work. They make the case that UBI is ethically justifiable by taking on the most pervasive objection of all – that unconditional cash would allow an unfair freeriding of some on others.

Vanderborgth and Van Parijs also offer answers to the many other questions and objections to UBI that come up again and again in political debates. For a start, how would people who believe that work is a moral duty and see the welfare state as a moral hazard ever agree to a system where we don’t even require recipients to demonstrate a willingness to work? And even if we could get them to agree, how could we afford it? And how could such system be sustained? Presumably, if people get money for doing nothing, they will stop working, which will in turn make it impossible to afford a generous UBI. Should we give it to migrants? Won’t it create a dangerous pull effect? And, what about the global poor anyway? Each time, they dissect the objections and scrutinize the questions with the rigor of philosophers, the wise perspective of historians, the rationality of economists and the pragmatic outlook of political advocates.

We also learned more from the talk about how UBI can help build a sane economy. Automation and globalization are important threats to employment and workers’ rights. Van Parijs argued that UBI could be a possible solution to support displaced workers – allowing them to retrain, and giving them access to the means to lead a decent life. He also shared his vision of a form of work-sharing that could help prevent two opposite problems – the fact that so many work too much and burnout, and the fact that so many are depressed for being out of work. A ‘sane economy’, then, is one that works for the many and does not make so many of us stressed and unhealthy.

I remain convinced that one of the most exciting promises of basic income is that it can help us see a way out of the current dominant regressive mindset on public assistance. Existing benefits systems often condone an obsession with screening out a supposedly undeserving underclass: the “welfare queens” and benefits scroungers. At worst, politicians take advantage of this paradigm to get elected, promising to screen out the free riders. At best, they address the problem in a shortsighted way, making benefits even more conditional to show that they are preventing scroungers from abusing the system. In doing so, they strengthen the myth that benefit claimants are indeed undeserving of assistance. Van Parijs and Vanderborgth’s book proposes to try out the opposite strategy to help rebuild the welfare state: doing away with conditionality to avoid benefits traps while also rejecting means testing, so that more workers also benefit from public assistance.

The authors would prefer if everyone had access to the highest sustainable basic income, but they fear basic income will only work with a great deal of realism and pragmatism. The challenge is to strike the right balance between the ideal and the feasible – without compromising the vision and without wishful-thinking on what is achievable. For basic income to work, Van Parijs said at the end of his talk, the world needs visionaries, enraged activists, and opportunistic thinkers to work together. But don’t worry, he added, “I am sure that all three kinds can be found in this room”.

*** All Pictures are a courtesy of Christine Baker-Parrish

*** A longer review of the book by Juliana Bidadanure can be found on the Stanford Social innovation Review website here.

*** For more on the event, please read Sara Button’s review here.

Italy: Basic Income Network Italy releases new book “Guaranteed income and technological innovation, between algorithms and robotics”

Italy: Basic Income Network Italy releases new book “Guaranteed income and technological innovation, between algorithms and robotics”

by | Jun 22, 2017 | News

 

Basic Income Network – Italy has just released a new book: “Guaranteed income and technological innovation, between algorithms and robotics“, which will be available in bookstores on the 22nd of June, 2017. In addition, the book is available online through publisher Asterios Editore.

 

The book opens up a global topic of interest: the links between the fourth industrial revolution, robotics and artificial intelligence, platform capitalism, and basic income rights – to the Italian populus. The publication documents a debate that involved a large group of academics, scholars, researchers and activists who were ready to make a say in favor of basic income as a social guarantee. This is particularly important at the time of technological innovation, which requires new mental and cultural paradigms, even before political and institutional ones.

 

Within the book fifteen authors reveal variant perspectives, beliefs, and views on basic income. The contributors agree that social protections and its mechanisms need rethinking, in order to bring forth a guaranteed basic income.

 

A fil rouge runs through the words and ideas of the books essays: in the digital age, look at the present and toward the future in order to recognize a collective right that allows each individual to participate in the redistribution of wealth produced by social networking, among other rights. The political and social pushor a basic income is thus understood to challenge social injustice and enable an individual and collective self-determination within a new type of ​​society.

 

Because, most probably, as is quoted by Philippe Van Parijs in this book: “One day we will wonder how we could live without a basic income…”

 

Authors / articles in the book:

Gianmarco Mecozzi, Mutanti senza reddito garantito (Mutants without guaranteed income)

Giuseppe Allegri, Re UBI per una nuova società. Reddito di base, innovazione, tempi di vita (King UBI for a new society. Basic income, innovation, time of life)

Franco Berardi Bifo, Come attualizzare il possibile, ovvero: per l’autonomia progettuale della Silicon Valley Globale (How to update the possible: for the autonomy of the Global Silicon Valley)

Luigi Corvo, BIM – Basic Income Matters. Reddito di base e innovazione sociale (Basic Income Matters. Basic income and social innovation)

Giuseppe Bronzini, Reddito di base, lavoro, automazione: appunti per un nuovo garantismo sociale (Basic income, work, automation: notes for a new social security)

Francesca Bria, Reddito di cittadinanza nell’economia dei robot per dire no alla precarietà (Basic income in the robot economy to say no to precariousness)

Benedetto Vecchi, Il reddito di base oltre l’algoritmo digitale (Basic income beyond the digital algorithm)

Sandro Gobetti, Google al governo e reddito per tutti? (Google to the government and income for everyone?)

Silvano Cacciari, Potere deflattivo, tecnologia, (de-)globalizzazione e reddito di cittadinanza (Deflating Power, Technology, (de-) Globalization and Citizenship Income)

Franco Carlucci, Soft Machine 2.0. L’operaio sociale e l’uso capitalistico delle macchine (Soft Machine 2.0. The social worker and the capitalist use of machines)

Roberto Ciccarelli, Nel capitalismo digitale il reddito di base non si trova sugli alberi (In digital capitalism basic income doesn’t grow on trees)

Fabrizio Fassio e Giuseppe Nicolosi, L’aumento del tempo di lavoro nell’epoca della sua riducibilità técnica (The increase in working time in the era of its technical reducibility)

Mariano Di Palma, Robot n. 18, senza articolo. L’urgenza di un reddito minimo dentro la quarta rivoluzione industriale (Robot n. 18, without the article. The urgency of a minimum income in the fourth industrial revolution)

Andrea Fumagalli, Umani, macchine e reddito di base (Humans, machines and basic income)

 

More information at:

[In Italian]

“Guaranteed income and technological innovation, between algorithms and robotics”, Basic Income Network – Italy, Asterios, June 2017

United States: Hawai‘i to study Universal Basic Income and impact of job automation on social safety net

United States: Hawai‘i to study Universal Basic Income and impact of job automation on social safety net

by | Jun 18, 2017 | News

Representative Chris Lee. Credit to: Office of Representative Chris Lee

 

In the face of growing economic inequality and projections of increased disparities in the coming decades, Hawai‘i has passed a resolution to establish a Basic Economic Security Working Group. The working group will investigate the impact job automation will have on the residents of Hawai‘i and its social safety net programs, and investigate the feasibility of universal basic income models and other efforts to identify the best pathway forward to ensure residents are able to thrive, if you’re wanting to be a thriving Hawaii resident, you have the option to live on the big island of Hawaii if you so wished to.

Hawai‘i has the highest cost of living in the United States. It is thus no surprise that the rate of economic inequality in Hawai’i has been steadily rising for decades, and that the top 1% income shares have doubled since 1978. In response, House Concurrent Resolution 89 was passed in May 2017 to establish a Basic Economic Security Working Group, focusing on five main tasks:

  1. “Assess Hawai‘i’s job market exposure to automation technologies, globalization and disruptive innovation;
  2. Assess Hawai‘i’s existing spending on social safety net programs and other relevant expenditures, as well as expected spending on those programs in light of anticipated automation technologies, globalization, disruptive innovation, and job losses;
  3. Identify and analyze options to ensure economic security, including a partial universal basic income, full universal basic income and other mechanisms;
  4. Monitor studies, trials, and efforts in Hawai‘i and other jurisdictions relevant to the basic economic security working group; and
  5. Seek out partnerships to publish or fund relevant trials or studies to evaluate options”

In an interview with Basic Income News, the sponsor of the resolution, Representative Chris Lee, frames the working group in light of the broader political context of the United States: “Politics in D.C. necessitate our evaluation of these future options because current policies are only making things harder for middle and lower class families. We must ask ourselves, what can we do now to head down the right path to ensure a viable economy and sustainable ways of living?”

Representative Lee went on to claim that, when future socio-economic landscapes are viewed through the lens of innovation and automation, some form of a basic income “seems inevitable”. The representative states that it is imperative to “acknowledge there are real issues both in our economy and society that current policy is not equipped to deal with” and that our economic and social infrastructure must evolve to match the speed of technological innovations.

Given that, in 2016, the service industry composed the majority of the state’s total GDP, automation may be one of the greatest challenges to its economic security in the near future. This threat is even more pressing given projections of the United States losing almost half of all jobs to automation in the next two decades. Hawai‘i’s resolution is proactive in addressing the specters of job loss and increased reliance on social safety net programs by mapping the potential future impact and mitigating negative effects with evidence-based strategies to inform legislation.

The majority of households in Hawai‘i are families with children. Representative Lee is mindful of how their lives can be shaped by economic insecurity and is working to create pathways forward to ensure people can thrive.

 

More information at:

Bureau of Economic Analysis, Hawaii, U.S. Department of Commerce, 2016

Oliver Garret, “How The Coming Wave of Job Automation Will Affect You and the U.S.”, Forbes, February 23rd 2017

Hawaii State Legislature, Representative Chris Lee, 2017

House of Representatives Twenty-Ninth Legislature, HCR 89, Open States, May 2017

InfoPlease, Demographic Statistics Hawaii, June 2017

Emmie Martin, “These are the 15 Most Expensive US States”, CNBC Money, May 15th 2017

Carlyn Tani,”Hawaii’s Growing Inequality“, Hawaii Business, March 2015

Alf Hornborg, “How to turn an ocean liner: a proposal for voluntary degrowth by redesigning money for sustainability, justice, and resilience”

Alf Hornborg, “How to turn an ocean liner: a proposal for voluntary degrowth by redesigning money for sustainability, justice, and resilience”

by | Jun 15, 2017 | News, Research

In an article published in the Journal of Political Ecology, Professor Alf Hornborg of the human ecology division of Lund University proposes that each country establish a complementary currency for local use only, which would be distributed to all its residents as a basic income. In this way, humanity as a whole would regain justice and sustainability.

In pre-modern societies, monetized exchange was largely limited to long-distance trade in preciosities, while most basic needs were met through socially embedded relations of reciprocity and distribution. Radical institutional changes in the nineteenth century then made money a medium for obtaining all kinds of goods and services – what we might call “general-purpose money”.

Efficiency is the inherent logic in general-purpose money. Adam Smith identified the benefits of general-purpose money at the local level. Yet when such efficiency is pursued at the level of a globalized economy (possible because fossil fuels have minimized transport costs), the potential for power differences, polarization, exploitation and collateral damage is vastly greater. In this way, the claimed “efficiency” is perhaps even inverted. As long as we subscribe to the assumption of general-purpose money as the medium of exchange organizing human societies, exploitation and underpayment are inevitable implications of production processes.

Economists often deplore such negative aspects of globalization: environmental damage, increasing inequalities, growing regulations, and resource depletion. Yet few tend to consider general-purpose money as a cultural peculiarity to which there are alternatives. Not even Adam Smith drew this conclusion, nor did Karl Marx.

Hornborg suggests that current concerns with climate change and financial crises offer a historical moment for reflection on how the operation of the global economy might be reorganized in the interests of global sustainability, justice, and financial resilience. The societal objective must be to strike a balance between such distinct interests and concerns as market principles and capitalism, everyday local life versus global finance, and long-term sustainability and survival versus short-term gain. In Hornborg’s opinion, the solution is to establish ways of insulating these competing values from one another, rather than allowing one to be absorbed by the other.

To increase sustainability, reduce vulnerability, and diminish inequalities, he advocates a complementary currency issued as basic income. To the long list of questions one may have regarding this policy proposal, Hornborg provides some preliminary answers in his article.

In fact, addressing the negative aspects of general-purpose money itself is not a new idea. Silvio Gesell (1862-1930), a German-born entrepreneur living in Buenos Aires, was an early pioneer of this endeavor. John Maynard Keynes mentioned Gesell in his General Theory of Employment, Interest and Money:

“It is convenient to mention at this point the strange, unduly neglected prophet Silvio Gesell, whose work contains flashes of deep insight and who only just failed to reach down to the essence of the matter. …their significance only became apparent after I had reached my own conclusions in my own way. …I believe that the future will learn more from the spirit of Gesell than from that of Marx. The preface to The Nature Economic Order will indicate to the reader, if he will refer to it, the moral quality of Gesell. The answer to Marxism is, I think, to be found along the lines of this preface.”

“Gesell’s specific contribution to the theory of money and interest is as follows. In the first place, he distinguishes clearly between the rate of interest and the marginal efficiency of capital, and he argues that it is the rate of interest which sets a limit to the rate of growth of real capital. Next, he points out that the rate of interest is a purely monetary phenomenon…This led him to the famous prescription of ‘stamped’ money, with which his name is chiefly associated and which has received the blessing of Professor Irving Fisher. According to this proposal currency notes would only retain their value by being stamped each month, …with stamps purchased at a post office… The idea behind stamped money is sound… But there are many difficulties which Gesell did not face.”

From the above, the reader can identify the similarities between Hornborg’s and Gesell’s proposals, from different perspectives, for redesigning and constraining the power of ‘man-made’ general-purpose money.

Alf Hornborg, 2017, “How to turn an ocean liner: a proposal for voluntary degrowth by redesigning money for sustainability, justice, and resilience,” Journal of Political Ecology.

John Maynard Keynes, 1936, Chapter 23 of “The General Theory of Employment, Interest and Money,” Palgrave Macmillan.

Article Reviewed by Genevieve Shanahan.