by Citizens' Income Trust | Jul 19, 2013 | Opinion
Sophia Parker (ed.), The Squeezed Middle: The pressure on ordinary workers in America and Britain, Policy Press, 2013, 1 4473 0894 2, hbk, xii + 169 pp, £65, 1 4473 0893 5, pbk, xii + 169 pp, £21.99
This collection of essays tackles a major issue: the declining living standards of households on low to middle incomes (defined as households in income deciles 2 to 5). Both causes and partial solutions are explored. One major cause of declining living standards is the failure to maintain the value of national minimum wages, but another is the gravitation of the proceeds of economic growth towards households in the upper earning deciles, leaving lower earners struggling to afford mortgages, social care, and, in the US, health care. Partial solutions might be focused training, in-work benefits, more affordable housing, higher national minimum wages, employers paying a ‘living wage’, and jobs of better quality ( – the UK has a better record than the US here, particularly in relation to employment rights for agency and part-time workers). The authors suggest that attending to the politics of the situation is essential, and that an important direction of travel might be asset-based welfare provision such as child trust funds, although some of the current attempts at incentivising asset accumulation tend to privilege the already wealthy.
The volume’s concluding chapter finds the US experience to be worse than the UK’s, and warns the UK to avoid policies that have led the US towards ever greater inequality. A particular lesson to take to heart is that the welfare state, and particularly free health care, has protected lower and middle earners in the UK from some of the worst effects of the economic downturn suffered in the United States: so if the UK wishes to avoid the plummeting living standards of the US then maintaining a strong welfare state is essential.
However, as Lane Kenworthy explains, some elements of the welfare state might be more of a problem than a solution. Tax Credits (and Universal Credit) weaken employment incentives, particularly for second earners, ‘and may in fact make things worse for many families’ (p.40). Daniel Gitterman contributes a detailed study of the United States’ Earned Income Tax Credit, in the course of which he makes a few comparisons with the UK’s Tax Credits. He might have added that the US Tax Credits are close to being genuine (annual) tax credits, whereas the UK’s ‘Tax Credits’ are in fact means-tested benefits, with all the problems usually consequent upon means-testing. In their introduction, the editors write that households with net incomes in the second, third, fourth and fifth income deciles are ‘not heavily reliant on means-tested benefits’ (p.xi). This might be true in the US, but it is not true in the UK, where a high proportion of earners in the second and third income deciles will be heavily reliant on means-tested ‘Tax Credits’.
The book covers a lot of ground, in terms of both diagnosis and prescription. However, diagnosis of the employment disincentives imposed by means-tested Tax Credits is not followed up with any prescription for reform. A benefits system based more on universal benefits would not impose anything like the same level of employment disincentives as the UK’s current system. Child Benefit gets a mention (on p.95: a reference unfortunately not indexed), but only as part of an argument that higher out-of-work benefits reduce employment incentives: a highly misleading suggestion, because Child Benefit is paid at the same rate to households both in and out of employment, and so in no way contributes to employment disincentives. It is the deduction rates related to means-tested benefits that cause such disincentives, not unconditional benefits such as Child Benefit.
The declining living standards faced by households with below median incomes are not likely to see much improvement in the near future, and the volume under review will be a valuable tool as policy-makers consider the reforms that might improve living standards for households in income deciles two to five. Policy makers might also wish to consider the possibility that this section of the population would benefit substantially from the implementation of a Citizen’s Income.
by Citizens' Income Trust | Jul 12, 2013 | Opinion
Bernard Lietaer, Christian Arnsperger, Sally Goerner, and Stafan Brunnhuber, Money and Sustainability: The missing link, Triarchy Press for the Club of Rome, EU Chapter, 1 908009 7 53, pbk, 211 pp, £24
This report, written for a European group affiliated to the think tank The Club of Rome, stands in a long line of publications that identify the creation of money via bank debt as an economic, social, and ecological problem. Money created in this way, and the ways in which we have turned money into a variously packaged commodity, amplify boom and bust cycles, result in short term thinking, require economic growth to sustain the system, concentrate wealth, and damage the trust on which social capital is built. Repeated banking crises are a clear signal of a system in trouble.
The authors identify the fundamental problem as currency monopoly, and propose that the monopoly should be broken by an extension of existing experiments in complementary currencies.
The reason for this review in the Citizen’s Income Newsletter is not because this book is about a Citizen’s Income, or about the structure of tax and benefits systems. It isn’t. But it is an exercise parallel in many respects to the research that the Citizen’s Income Trust and others have done on feasible extensions of universal benefits. The book recognises that the current monetary system has to continue much as it is; it identifies problems with the current system, and argues convincingly that plural currencies at a variety of levels (local, national, and European) would be a partial solution to many of the current difficulties and would reduce the risk of future crises; it studies and evaluates existing experiments in alternative currencies; and it makes feasible proposals on the basis of those evaluations. Similarly, we have shown that a Citizen’s Income would be an adaptation of the existing tax and benefits system, that it would respond to a variety of current economic and social problems, that it would build on existing experience of universal benefits, and that it would be feasible.
This is not the place for a detailed critique of the authors’ nine specific proposals, but to this reviewer they appeared both feasible and desirable: as would be a Citizen’s Income.
This is a good book on how limited economic reforms could make a real difference to both our global society and its environment.
by Karl Widerquist | Jul 10, 2013 | News
In the beginning of 2009 more than 50,000 people supported the petition of Susanne Wiest, who demanded a Basic Income for Germany. Almost 2 years later a public hearing on the issue took place. And almost another 2 years later, on 28th June 2013, the topic was closed after 30 seconds without a further discussion.
The left-wing online journal “Neues Deutschland” commented in an article: From a political point of view this was a clandestinely funeral of an objective which some years ago attracted great attention – and which actually can not be eliminated with a usual form of ticking off.
The factions of the Green and Left Party voted against the finishing. In a statement of the Green Party they explain: It is important for the subscribers to combine the general principle of justice and emancipating social policy with the importance of public institutions and financial feasibility. Considering the increasing growth problem and broad restructuring of the economy by processes of rationalization we need in the long term a transformation of the social state.
Katja Kipping, the leader of the Left Party published also a personal statement against the finishing of the petition, because the principle objection and the social importance of a discussion on the Unconditional Basic Income is not taken into account. Considering the increasing social division in Germany and Europe I consider it for necessary to discuss alternative ideas and practical approaches seriously also in the German Bundestag to improve the social situation of the people.
Both parties, Left and Green, as well as the Pirate Party, suggest in their election manifestos an enquiry commission to continue the discussion on Basic Income within the German Bundestag. The petition brought this discussion into the parliament and the mentioned parties refuse a finishing of the petition in the meaning to end the discussion. The elections on 22nd September 2013 will show what is going to happen further.
Links used within the text (all in German):
Video of the public hearing: https://www.youtube.com/watch?v=NnEWMl8M6Hc
Article in Neues Deutschland: https://www.neues-deutschland.de/artikel/825759.html
Statemet of the Green Party: https://www.harald-terpe.de/index.php?id=3294
Statement of Katja Kipping: https://www.katja-kipping.de/kontext/controllers/document.php/216.a/7/d9f4f4.pdf
by Citizens' Income Trust | Mar 1, 2013 | Opinion
The thesis of this book is that there is a ‘good life’ which can be defined independently of our subjective desires, and that it is possible to determine the elements of that good life and some of the means for attaining it.
The first chapter sets out from Keynes’ prediction that increasing automation would enable us to experience a good life at the same time as working shorter hours: but Keynes ‘did not understand that capitalism would set up a new dynamic of want creation which would overwhelm traditional restraints of custom and good sense’ (p.42) – and, as the Skidelskys correctly note in chapter 2, capitalism ‘has given us wealth beyond measure, but has taken away the chief benefit of wealth: the consciousness of having enough’ (p.69).
Chapter 3 surveys pre-modern economic thought, and particularly Aristotle’s, for whom money is the servant of the good life rather than being an end in itself. The Skidelskys then divert us down two cul-de-sacs in order to back us out again. They explore the modern ‘happiness economics’, find it methodologically and ethically suspect, and decide that the pursuit of happiness is no more likely to lead to the good life than is the pursuit of money:
Our proper goal, as individuals and as citizens, is not just to be happy but to have reason to be happy. To have the good things of life – health, respect, friendship, leisure – is to have reason to be happy. (p.123)
Similarly, the authors urge us not to argue from the dangers of climate change to a necessity to reduce economic growth. They prefer a ‘good life environmentalism’: the pursuit of an objectively good life which requires us to treat nature kindly because ‘harmony with nature is part of the good life’ (p.140).
Chapter 6 is the heart of the book because it describes the good life in terms of a set of ‘basic goods’, defined as goods which are ‘universal, meaning that they belong to the good life as such … final, meaning that they are good in themselves, and not just as a means to some other good … sui generis, meaning that they are not part of some other good … indispensable, meaning that anyone who lacks them may be deemed to have suffered a serious loss or harm’ (pp.150-52). On the basis of this definition the authors list seven basic goods: health, security, respect, personality (‘the ability to frame and execute a plan of life reflective of one’s tastes, temperament and conception of the good’ (p.160)), harmony with nature, friendship, and leisure.
The authors study indicators related to the elements of the good life and find that in many ways life in the UK is less good than it was forty years ago. They recommend a ‘non-coercive paternalism’ (p.193), and at the heart of their prescription is an argument for a Citizen’s Income on the basis of their definition of the good life. For instance: leisure and self-directed activity are necessary constituents of the good life, so to enable more people to be employed part-time, which a Citizen’s Income would do, would enable more people to experience the good life.
It is unfortunate that the book advocates the pursuit of the good life purely in terms of our generation of homo sapiens, and explicitly does so in the chapter on ‘limits to growth’. A good life for the planet, and a good life for future generations, are surely just as important as the good life for us. The reader will need to decide whether the Skidelskys have made an adequate case for downplaying that importance. It is also a pity that the book contains no separate bibliography.
But having said that, it is a pleasure to see a book which in general so cogently combines a clearly formulated principle, diagnosis of our current plight, a clear route towards a desired end, and detailed policy prescription designed to take us along that route.
We are of course most encouraged that the Skidelskys have concluded that the attainment of the good life requires a Citizen’s Income.
Robert Skidelsky and Edward Skidelsky, How Much is Enough? The Love of Money, and the Case for the Good Life, Allen Lane/Penguin Books, 2012, xi+243 pp, hbk, 1 846 14448 6, £20
by Karl Widerquist | Feb 14, 2013 | Research
Summary, this paper offers a practical plan to resolve the world’s problem of exponential debt growth and to control inflation. The plans are based on a revision of the well-known Fisher Equation of exchange enabling it to take account of interest-bearing debt. They are designed to ensure that no low or middle income group in the community is worse off than it is now. The plan involves introducing a guaranteed minimum income (GMI) for each person in the country to replace the existing welfare system. The GMI can be funded on an income-positive basis by phasing out existing welfare transfer payments, by realigning existing tax thresholds and by introducing a wealth tax of 1% of all net assets. This paper shows that a fair result is produced using a flat tax of 41.5% on all earned income.”
In English, with French translation available.
Manning, Lowell, “How to introduce a guaranteed minimum income in New Zealand,” Integrated development.org. August 8, 2012
https://www.integrateddevelopment.org/lowellgmi.htm
