by Florie Barnhoorn | Oct 26, 2016 | News
The Dutch State Secretary for Social Affairs and Employment has sent a document to Members of Parliament proposing a basic income experiment. However, the proposed design has met criticism from many scientists, activists, and others instrumental in the original development of the experiment.
Jetta Klijnsma CC Roel Wijnants
On the last Friday of September 2016, the Dutch government decided to allow basic income experiments on a limited scale and under strict conditions. Mrs. Jetta Klijnsma, State Secretary for Social Affairs and Employment, has sent a document Ontwerpbesluit Experimenten Participatiewet (Design for Experiments in the context of the Participation Act) to the Members of Parliament in which she outlines the rules, conditions and goals of the forthcoming basic income experiments. Mrs. Klijnsma, (PvdA, Partij van de Arbeid / Labour Party) is optimistic. As soon as both Chambers of Parliament accept the proposed framework, she can give permission to start with the experiments–hopefully, January 1st 2017.
However, many of the pioneers involved in the experiments (including scientists, activists, city counsel members, local councilors, and civil servants) are less excited. In order to overcome political arguments–mainly coming from the VVD (People’s Party for Freedom and Democracy), a right-wing party that hates the idea of a basic income–the original study design has been changed in such a way that these stakeholders worry about the consequences for the pilots.
Proposed Design of the Dutch Basic Income Pilot
Before we return to their concerns, let’s look at the design of the experiment in more detail.
The research questions as they are now formulated are:
• Does the intervention in the research groups lead to acceptance of paid labor?
• Which intervention causes the most complete independence of social assistance benefit?
A maximum of 25 municipalities, or 4% of the total number of Dutch welfare claimants, will be allowed to participate in the experiments. According to Statline (Electronic Databank of Statistics Netherlands), there were 546.090 persons with a social assistance benefit in December 2015; thus, around 21.843 persons will be involved in the experiments. Only municipalities which have implemented the Participation Act in fullness will be selected for one of the pilots. The duration of the experiments is set at two years. Stakeholders criticize this as of ‘too limited duration’.
Each basic income experiment will consist of six groups. Larger municipalities will use all six groups, for smaller municipalities three groups are enough.
Welfare claimants are randomly assigned to one of these five groups:
1. A group who is exempt from formal obligations to find employment. Subjects in this group will not receive formal sanctions in case they fail to actively look for paid work [1]. However, after six and twelve months, the municipality will check whether sufficient efforts have voluntarily been made by the participant to find paid labor. When too few activities have been undertaken, the trial period will be terminated;
2. A group that will be subjected to additional obligations and duties during the experimental period in order to reintegrate them into the labor market, entailing at least a doubling of contacts with civil servants responsible for carrying out the Participation Act;
3. A group who is allowed to keep 50 percent of their earnings in addition to the welfare payments with a maximum of 199 EUR per month for single persons and 142 EUR for married couples (which is less than the legal minimum wage);
4. A combination of the above groups, whereby the first two groups always should be combined in an experiment;
5. A control group.
In addition to these five randomly-assigned groups, the experiments will use a reference group consisting of social assistance recipients living in the same municipality, but not participating in the experiment (e.g. benefit claimants in a neighboring municipality not involved in the trial).
Welfare claimants sign an agreement which states that their participation is strictly voluntary. However, it is forbidden to stop during the course of the experiment. They will receive their normal benefit allowances during the project (Sjir Hoeijmakers, email communication).
Criticism from Stakeholders
Meetings of activists in Groningen CC Zeptonn
Stakeholders are critical about the design of the basic income experiments. In a letter addressed to Members of Parliament, scientists of the four collaborating universities (Tilburg, Utrecht, Groningen and Wageningen) contend that reliable scientific research cannot be tested within the proposed framework.
For example, Professor Dr. Ruud Muffels from Tilburg University criticizes the introduction of a group with more government control. “The effects of sanctions have been extensively studied. I wonder what kind of information you want to find. It will also complicate the interpretation of the results of the pilot. If freedom has consequences – the participant can be banned from the experiment after one year when he or she is not ‘active enough’ in seeking a paid job – this line of inquiry cannot be tested. It might also create an ethically difficult dilemma, because we are looking for volunteers for the research, and we have to clarify the implications of their participation.”
As a consequence of these concerns, researchers like Dr. Muffels fear that the proposed framework will deter benefit claimants from participation in the experiments, due to the use of a group that will experience much more control.
The researchers call upon the MPs to pay attention to their concerns when the framework is discussed with the State Secretary for Social Affairs and Employment in the Parliamentary Committee for Social Affairs and Employment.
Divosa (Association of Executives in the Social Domain) also has doubts about the value of the experiments. According to Divosa’s vice-president Jellemiek Zock, “It is more difficult to measure the effects of the pilots, because they are more limited than in the original design. Besides, activities like taking a part-time job, starting a business, caring for children or other family members are excluded from the experiments. Nevertheless, given the situation in the present government – a coalition of VVD and PvdA – I think this is the most we can get at this moment. But we will proceed.”
Another stakeholder in the experiment says, “We wanted a simple pilot based on trust rather than repression. We wanted to give benefit claimants more freedom, more choice, more purchasing power. Now we have a complicated set of rules. What remains is a puzzle, which makes it difficult to shape the experiments and understand the results. However, we are glad to start.”
For her own part, the State Secretary for Social Affairs and Employment is content with the outcome: the proposed framework is still miles away from a really unconditional basic income.
[1] Under Dutch social laws, a benefit claimant is normally sanctioned when he or she is not actively looking for paid work. These sanctions are described in the Participation Act and executed by civil servants employed by a municipality.
Cover Photo CC OuiShare
Thanks to Kate McFarland for reviewing a draft of this article.
by Kate McFarland | Sep 27, 2016 | News
The Canadian Initiative for Basic Income has created an online petition asking Prime Minister Justin Trudeau and members of the Canadian Parliament to “implement a basic income program for eligible Canadians in a timely manner”. As of Monday, September 26, the petition has gathered nearly 22,000 signatures.
The petition was developed last spring by a group of participants in the Leadership and Community Engagement training of North York Community House (NYCH). To conclude the training, participants were asked to select one important practicum issue and to develop an action plan to generate change within the community. As one member ofCanadian Initiative for Basic Income described in a blog of the NYCH, the idea originated in a class exercise that required attendees to use one of several tools to determine the priority of issues. The group selected a two-by-two matrix that measured importance against urgency:
Out of all, we deemed basic income to be the one with both the highest urgency and most importance. This was due to our belief that our existing income security system in place has become ineffective when it comes to helping people afford life’s basic necessities – food, housing, and other general expenses (“NYCH Participants Lead Basic Income Petition”; September 12, 2016)
Although originally designed just to fulfill a class exercise, the petition gained over 15,000 signatures in the first week alone–with signatories coming from across the nation. In light of the petition’s success, the Canadian Initiative for Basic Income decided to continue the project, developing a more detailed proposal to submit to the government of Canada (which the group eventually hopes to have translated into French).
The full text of the letter (sans footnotes) reads as follows:
Dear Prime Minister Trudeau and Members of Parliament,
As Canadians in poverty, we are calling for strengthening the income security system with the adoption of a Basic Income policy. Our petition for Basic Income has generated over 20,000 signatures from across Canada.
The sharp surge in basic living expenses, added to a large wealth and income gap, precarious work, stagnant wages, and diminishing social services is forcing Canadians to live with ever poorer access to basic necessities and the mental and physical deprivation that accompany this way of life. Currently, over 4.9 million Canadians are living in poverty. A report by Statistics Canada lists Canada as having one of the highest percentages of low-paid workers among industrialized nations.
Existing federal and provincial income security programs have not achieved their intended goals, as evidenced by their failure to provide vulnerable recipients with the ability to afford basic living needs such as adequate housing and food. These needs are basic human rights, as set out in The International Covenant on Economic, Social and Cultural Rights, ratified by Canada on May 19, 1976. Yes, that was four decades ago and we refer to; Part 3, Article 11.
We believe that a basic income policy in tandem with the existing income security system will be the most effective way of providing Canadians living with poverty the ability to afford basic living expenses. There is a rich history behind Canada’s existing income security system, and though some reform may be necessary for a basic income policy to be adopted, dismantling the existing welfare system would be dangerous and may leave those that already live in poverty in a similar or worse state.
A basic income program will cost Canada just over 1% of its GDP. This level of spending is within Canada’s means. We strongly believe that Canadians can afford this relatively modest expenditure, given the scope of the proposed policy and the significant benefits it will provide. Basic income will pay for itself in numerous ways; by decreasing healthcare costs, reducing social problems, boosting the economy, and providing low income Canadians with secure and productive job opportunities.
Basic income experiments are already being carried out in various European countries – but such experiments are not unique to Europe. The Croll Report, published under the Trudeau government in the 1970s put basic income policy in a favorable light, and the corresponding pilot program implemented in Dauphine, Manitoba yielded successful results. We are calling on your government to reintroduce Basic Income and move forward with its adoption. A basic income policy will not just mean upholding Canada’s human rights values and obligations, it will reduce poverty and create a more equitable, inclusive, and sustainable society that will benefit every Canadian.
Sincerely,
Canadian Initiative for Basic Income
Feroza Mohammed is the lead coordinator for planning and organizing the group’s activities to move the petition forward. She comments on the inspiration and values behind this work:
We do believe that the existing income security system in place has become ineffective, by way of providing assistance that is unsustainable. People are struggling to meet their basic daily living expenses for food, housing, accessible services, transit, and good jobs, as recommended by residents through local community consultations, across the City of Toronto. I believe that a Basic Income is necessary to improve the living standards for the most vulnerable population within our society. Currently there are about twenty percent, or approximately five million people in Canada living in poverty. To quote from comments on the petition, “Poverty should not exist in Canada”. This resonates with my belief, and I hope the government will act to implement a strong Basic Income policy that will improve lives for all Canadians. A basic income will provide people with the ability to afford life’s basic necessities.
Reza Hajivandi, the lead policy research and analyst behind the petition, adds:
We believe that the time for the reform of income security is overdue. Current programs are not providing people with the basic resources to survive, let alone live in dignity. In this light, a Basic Income policy could be the right step to take. A BI would not only provide people with resources to live a dignified life, but it can also reduce the discriminatory surveillance mechanisms and other conditions that are prohibiting recipients from achieving their aspirations and goals in life. A BI would also act to create and extend solidarity amongst people. However, with all the positive impact of BI, we need to be very careful about how or what we dismantle from the existing system. This system is the culmination of many years of thinking and history, and without first having a thorough understanding and discussion of its history and design, notions of wiping out certain components or wiping the whole slate clean can be counterproductive and unhelpful to the basic income and larger social justice movement.
Created on the Change.org platform, the Canadian Initiative for Basic Income petition is not an official e-petition of the Canadian government. Thus, the petition is not en route to be presented in the House of Commons, and the government has no formal requirement to take any action in response. However, as Change.org points out in describing its function, “When hundreds or even thousands of people raise their voices about an issue they care about, the message is very hard to ignore.”
Read–and sign–the petition here.
Thanks to Feroza Mohammed and Reza Hajivandi for contributions to this article.
Photograph: Canadian Initiative for Basic Income.
Thanks, as always, to Kate’s supporters on Patreon.
by Florie Barnhoorn | Sep 15, 2016 | Opinion
Last August 21, the Dutch woke to find an interesting article in their morning paper, written by Mrs. Annemarie van Gaal. In her weekly Monday column she suggested abolishing the AOW and all other income schemes for individuals above 60 years of age, with their unworkable obligations, bureaucratic regulations, and fees and punishments. Instead, AOW recipients would receive an unconditional basic income of €1100 to €1200 a month. This would greatly decrease the seriousness in which they need to take these 9 considerations to make before you retire into account, decreasing worries and stress for the elderly.
For many people, the article came as a surprise, because it was published in the daily journal, De Telegraaf (The Telegraph), which is legendary for its right-wing liberal and right-wing populist bias. And a recent poll among right-wing voters revealed that the majority do not approve of the idea of a basic income.
The Dutch abbreviation ‘AOW’ means ‘Algemene Ouderdomswet‘ – the 1956 law installed a state pension for the elderly, above the age of 65. From 2016 onwards, the retirement age is expected to increase quickly: to the age of 66 in 2018, and to 67 in 2021. And as of 2022, entering the AOW scheme will be linked to the average life expectancy. This brings to attention another point, and that’s life insurance. People heading towards retirement should be considering setting up a life insurance policy with help from companies like az money, and they should be doing this well before they are claiming a pension. With the uncertain health effects of a prolonged working life, seniors unfortunately need to start thinking about what will happen to their families when they die.
The plan for the increase of the pension age was agreed upon by the current coalition of VVD (People’s Party for Freedom and Democracy) and PvdA (Labour Party) in order to cut government spending. These austerity measures are expected to save the Treasury €3.6 billion by 2024. De Telegraaf was a vocal supporter of the increase in the retirement age.
Mrs. van Galen is a well-known TV personality and businesswoman. In her television program, she teaches benefit claimants how to get a job. She demonstrates how much money the candidate will earn from accepting certain kinds of work, sends him to intensive job application training, and gives him a full makeover: a new haircut, new clothes, and if necessary, new teeth. Dress for success!
Her suggested basic income plan is very appealing because it would affect two major social problems in Dutch society.
The first problem concerns the growing group of people over 60 who have lost their jobs, often in the crisis of 2008-2009, and during the austerity measures that followed.
As Mrs. van Gaal puts it:
The unemployed above 60 are not to be envied. Unemployment among this group has never been so high. Their whole life they worked hard. Now they have lost their work and as a consequence have to deal with sharply declining living standards, whereas their chances to find a new full-time job is nearly zero, so the years to come will be full of uncertainty before they get the state pension (AOW), and what at that time will be left of their saved pensions?
Despite their dire prospects, the UWV (Employee Insurance Schemes Implementing Body) requires that the unemployed over 60 continues to apply for jobs, whether they can or not. The meager allowances of those who don’t (or can’t) are cut down or withdrawn. In other countries such as America, it can become a lot worse, elderly citizens with no allowances or health care end up forgotten about, without insurance these elderly are very prone to medical emergencies, requiring the aging population to think about insurance early on in their lives. When it comes to dental insurance for seniors, PPOs are the most common insurance plan. They offer a network of preselected dentists that they can choose from. Only if they were to visit one of those dentists will they save money. Otherwise, the elderly population has minimal options when it comes to oral healthcare. Is this how it is looking for the Dutch?
But for businesses to take on an older applicant, the ten different allowances and arrangements assigned to them creates a process so complicated that it’s frequently necessary to hire a third party simply to manage the process. Creating this kind of bureaucracy in the workplace does no one any good, and is certainly no way to encourage employment.
In recent years, the Dutch government has pumped hundreds of millions of euros into job training, networking events, and other arrangements for the older and unemployed. And the effectiveness of these measures is yet unknown, says the Court of Audit, and is hardly expected to dramatically increase employment prospects anytime soon.
The second issue with AOW, is that it’s almost an unconditional income – the state pension is dependant on your living situation. If you are going to live with another person, whether it is a partner, a family member who provides care, or a lodger, you are financially punished, whereas if you choose assisted living you may receive more. And if you have little or no saved pension, pension benefits as supplements are means-tested, so to earn some extra money is nearly impossible. The healthy and elderly will not move in with their children, for example, to babysit the grandchildren, because their income will only be reduced. Strange, indeed, because it would save the government a great amount spent on medical expenses and childcare allowances.
Mrs. van Gaal:
Ultimately, a basic income is the best route for the future, so let’s introduce it on a limited scale, namely into the group aged 60 years and above, regardless of [if] they work or not, irrespective of their living conditions. [And] if you live with another 60 plus [you would] have twice that amount. Look after your grandchildren, start volunteering, help your neighbors, go traveling or take up a small job for a few hours per week. I’m sure we will [have] a much better society. All seniors will take part in society without restrictions and rules, without being cut and without compromising. How nice.
The reaction to Mrs. van Gaal’s column was overwhelming. Within a few hours she was invited onto several talk shows, and many websites took notice of the column and hundreds of comments appeared online. One site recommended appointing her as the first female Prime Minister of The Netherlands.
However, in stark contrast, some politicians reacted bleakly to the proposal. After all, they had worked hard (and were well paid) to develop and defend the new retirement pension scheme and all other relevant legislation. Coalition partners, VVD and PvdA, consider the plan too radical, too expensive and ‘the wrong solution’ to this particular problem. The VVD even said it ‘abhors’ the idea of a basic income. One of their MP’s pointed out that society should not exclude the elderly, and that according to him, that’s what a basic income does. “Then we say to the elderly: you are no longer needed and that is not true. Their knowledge and experience are highly valued in the workplace.”
Norbert Klein, the leader of the Vrijzinnige Partij (Cultural Liberal Party), a party with one seat [in the Tweede Kamer], is pleased with the ideas of Van Gaal – but the plans do not go far enough for him. He has written a memorandum that calls for an unconditional basic income for every Dutch citizen from the age of 18 onwards. On September 19th this memorandum will be discussed with members for the Committee for Social Affairs and Employment of the Second Chamber of Parliament and the Minister for Social Affairs and Employment, Lodewijk Asscher of the PvdA.
Several organizations as well are not very sympathetic to the idea of an unconditional basic income for the 60 plus. “Mrs. van Gaal acts as an elephant in a China shop,” said a spokeswoman for the Unie-KBO, the union for the elderly, “but we are pleased with all the attention [these urgent matters are receiving].” Nibud, the National Institute for Family Finance Information, considers €1100 or €1200 too low to cover all household costs.
But a huge amount of readers reacted positively and enthusiastically. “An idea which is very close to my heart”, commented someone. “Abolish the bureaucracy for 60 plus,” another responded, “finally, someone who really understands the problems of older unemployed”. Readers, too, hinted at a political career for the Telegraaf columnist. “This is a plan which a sane man cannot ignore. Better and more pleasant than the plans that are figured out by the pundits in The Hague. The government may try to increase job opportunity for this group, but now it is clear that this policy fails.”
Annemarie van Gaal:
Dutch people want a simpler society. No more complicated rules, no hassle with endless discounts or correct taxes. We want it to be simpler, easier to understand and implement for everyone. The introduction of an unconditional basic income is inevitable over time. Utopia? No, it just requires some guts of our government.
Reviewed by Cameron McLeod
by Kate McFarland | Aug 5, 2016 | News
Amsterdam-based journalist Tracy Brown Hamilton has written an article about the Netherlands’ basic income experiments for The Atlantic.
In addition to providing some general background about basic income, Hamilton describes the upcoming Utrecht experiment in some detail:
The Utrecht proposal—called “Weten Wat Werkt,” or “Know What Works”—includes six test groups, the members of which will receive slightly different stipends under slightly different conditions. In addition to the group that will receive €960 per month without any work obligations, there is a group that will be given that, plus an additional €150 at the end of the month if they provide volunteer services, such as doing maintenance work on schoolyards. And there is another that will have the same option to volunteer, but will get the money at the beginning of the month and have to return it if they don’t volunteer. …
There are three other test groups. One is made up of welfare recipients who will keep receiving their benefits, but without their usual work obligations. Another is made up of welfare recipients who expressed interest in receiving the €960 stipend but will continue to receive only standard benefits. And then, lastly, there is a control group of welfare recipients who wanted to keep receiving their usual benefits.
Read the full article here:
Tracy Brown Hamilton, “The Netherlands’ Upcoming Money-for-Nothing Experiment,” The Atlantic, Jun 21, 2016.
“Utrecht Bikes” Photo CC Nietnagel
by Guest Contributor | May 10, 2016 | Opinion
To tackle spiraling deflationary trends, governments and central banks will soon have no other choice but to resort to printing money and giving it directly to the people.
Article by John Aziz, originally published on azionomics.com under the title “Universal Basic Income Is Inevitable, Unavoidable, and Incoming.”
The last time I saw universal basic income discussed on television, it was laughed away by a Conservative MP as an absurd idea. The government giving away wads of cash responsibility-free to the entire population sounds entirely fantastical in this austerity-bound age, where “we just don’t have the money” is repeated endlessly as a mantra. Money, they say, does not grow on trees. (Only as figures on the screen of a computer).
In this world, universal basic income seems like a rather distant prospect. Yes, there are some proposals, like Finland which is set to start local experiments in 2017 and Switzerland which is holding a referendum on universal basic income next month. I don’t expect the vote to pass. The current political climate is just too patriarchal. We live in a world where free choice is unfashionable. The mass media demonizes the poor as feckless and too lazy and ignorant to make good choices about how to spend their income. Better that the government spend huge chunks of GDP employing bureaucrats to administer tests, to moralize on the virtues of work, and sanction the profligate.
But this world is fast changing, and the more I study the basic facts of economic life in the early 21st century, the more inevitable universal basic income begins to seem.
And no, it’s not because of the robots that are coming to take our jobs, as Erik Brynjolfsson suggests in his excellent The Second Machine Age. While automation is a major economic disruptor that will transform our economy, assuming that robots will dissolve jobs entirely is just buying into the same Lump of Labour fallacy that the Luddites fell for. Automation frees humans from drudgery and opens up the economy to new opportunities. Where once vast swathes of the population toiled in the fields as subsistence farmers, mechanization allowed these people to become industrial workers, and their descendants to become information and creative workers.
As today’s industries are decimated, and as the market price of media falls closer and closer toward zero, new avenues will be opened up. To that end, Canada has seen a surge in startups in recent times. Towns that were once oblivious to people in the country have become a melting pot for fresh Fintech startup ideas. Case in point is this FinFund Media app that aims to simplify getting loans in The Pas for individuals by leveraging the power of local rural communities to send and receive money. Similarly, new industries will be born in a never-ending cycle of creative destruction to keep the economy churning. Yes, perhaps universal basic income will help ease the current transition that we are going through, but the transition is not the reason why universal basic income is inevitable.
Welcome to the world of hyperdeflation
So why is it inevitable? Take a look at Japan, and now the eurozone: economies where consumer price deflation has become an ongoing and entrenched reality. This occurrence has been married to economic stagnation and continued dips into recession. In Japan – which has been in the trap for over two decades – debt levels in the economy have remained high. The debt isn’t being inflated away as it would under a more “normal” rate of growth and inflation. And even in the countries that have avoided outright deflationary spirals, like the UK and the United States, inflation has been very low.
The most major reason, I am coming to believe, is rising efficiency and the growing superabundance of stuff. Cars are becoming more fuel efficient. Homes are becoming more fuel efficient. Vast quantities of solar energy and fracked oil are coming online. China’s growing economy continues to pump out vast quantities of consumer goods. And it’s not just this: people are better educated than ever before, and equipped with incredibly powerful productivity resources like laptops, iPads and smartphones. Information and media has fallen to an essentially free price. If price inflation is a function of the growth of the money supply against growth in the total amount of goods and services produced, then it is very clear why deflation and lowflation have become a problem in the developed world, even with central banks struggling to push out money to reinflate the credit bubble that burst in 2008.
Much, much more is coming down the pipeline. At the core of this As the cost of superabundant and super-accessible solar continues to fall, and as battery efficiencies continue to increase the price of energy for heating, lighting, cooking and transportation (e.g. self-driving electric cars, delivery trucks, and ultimately planes) is being slowly but powerfully pushed toward zero. Heck, if the cost of renewables continue to fall, and advances in AI and automation continue, in thirty or forty years most housework and yardwork will be renewables-powered, and done by robot. Water crises can be alleviated by solar-powered desalination, and resource pressures by solar-powered robot miners.
And just as computers and the internet have made huge quantities of media (such as this blog) free for users, 3-D printers and disassemblers will push the production of stuff much closer to free. People will simply be able to download blueprints from the internet, put their trash into a disassembler and print out new items. Obviously, this won’t work anytime soon for complex objects like smartphones, but every technology company in the world is hustling and grinding for more efficiency in their manufacturing processes. Not to mention that as more and more stuff is manufactured, and as we become more environmentally conscious and efficient at recycling, this huge global stockpile of stuff acts as another deflationary pressure.
These deflationary pressures will gradually seep into services as more and more processes become automated and powered by efficiency increasing machines, drones and robots. This will gradually come to encompass the old inflationary bugbears of medical care, educational costs and construction and maintenance costs. Of course, I don’t expect this dislocation to result in permanent incurable unemployment. People will find stuff to do, and new fields will open up, many of which we are yet to imagine. But the price trend is clear to me: lots and lots of lowflation and deflation. This, ultimately, is at the heart of capitalism. The race for efficiency. The race to do more with less (including less productivity). The race for the lowest costs.
I’ve written about this before. I jokingly called it “hyperdeflation.”
Global Japanization
And the obvious outcome, at the very least, is global Japan. This, of course, is not a complete disaster. Japan remains a relatively rich and stable country, even after twenty years of deflation. But Japan’s high level of debt – and particularly government debt – does pose a major concern. Yes, as a sovereign currency issuer borrowing in its own currency the Japanese government runs no risk of actual default. But slow growth and deflation are stagnationary. And without growth and inflation, the government will have to raise taxes to cover the deficit, spiking the punchbowl and continuing the cycle of debt deflation. And of course, all of the Bank of Japan’s attempts at reigniting inflation and inflating away that debt through complicated monetary operations in financial markets have up until now proven pretty ineffectual.
This is where some form of universal basic income comes in: ultimately, the most direct stimulus for lifting inflation and triggering productive economic activity is putting cash in the people’s hands. What I am suggesting is nothing less than printing money and giving it away to people – as opposed to trying to push it out through the complicated and convoluted transmission mechanism of financial sector lending. This will ultimately become governments’ major backstop against debt deflation, as well as the temporary joblessness and economic inequality created by technological acceleration. Everything else, thus far, has been pushing on a string. And the deflationary pressure is only going to become stronger as efficiency rises and rises.
Throw enough newly-created money into the economy, inject inflation, and nominal tax revenues can rise to cover the debt load. Similarly, if inflation gets too high, cut back on the money-creation or take money out of circulation and bring inflation into check, just as central banks have done for the last century.
The biggest obstacle to this, in my view, is the interests of those with lots of money, who like deflation because it increases their purchasing power. But in the end, rich people aren’t just sitting on hoards of cash. Most of them do have businesses that would benefit from their clients having higher incomes so as to increase spending, and thus their incomes. Indeed, in a debt-deflationary spiral with default cascades, many of these rentiers would face the same ruin as their clients, as their clients default on their obligations.
And yes, I know that there are legal obstacles to fully-blown ‘helicopter money‘, chiefly the notion of central bank independence. But I am an advocate of central bank independence, for a variety of reasons. Indeed, I don’t think that universal basic income should be a function of fiscal spending at all, not least because I think that dispassionate and economically literate central bankers tend to be better managers of monetary expansion and contraction than politically motivated – and generally less economically literate – politicians. So everything I am describing can and should be envisioned as a function of monetary policy. Indeed, what I am advocating for is a new set of core monetary policy tools for the 21st century.
