Malcolm Torry, Money for Everyone: Why we need a Citizen’s Income

by Citizens' Income Trust | Mar 28, 2014 | Opinion

Malcolm Torry, Money for Everyone: Why we need a Citizen’s Income, Policy Press, 2013, xiv + 300 pp, 1 44731 125 6, pbk, £24.99, 1 44731 124 9, hbk, £70

Malcolm Torry delivers a blockbuster argument in favour of a Citizen’s Income to wholly or partially replace current benefits. His book is well-researched, well-informed, well-written, and is articulate and readable. His main argument is that, given widespread acceptance of a benefits scheme of some sort, then a Citizen’s Income is by far the best option. Specifically it avoids the disincentives of very high marginal deduction rates of current benefits which create the familiar unemployment and poverty traps. According to Torry, a Citizen’s Income would incentivise employment, training, new business formation, women’s participation rates, and can even reduce teenage pregnancy in Namibia. It is socially cohesive. It is less expensive administratively, less intrusive into the private detail of people’s lives, and less distorting of the markets for labour, goods and services. The Iain Duncan Smith / Steve Webb universal credit comes close, but is based on households rather than individuals as a Citizen’s Income would be, and is therefore deficient.

Torry’s very thorough presentation is worthy of the LSE tradition to which it belongs, established by major figures such as Richard Titmuss whom he frequently quotes. It offers a substantial social commentary. The excellent essay on poverty in chapter 11 is a classic case. Torry works as a vicar in London, and so has widespread awareness and understanding of the life situation of people with lower income struggling with a range of adversity, and this gives him great insight into the effect of benefits systems in the population. His deep study of the benefit system itself enables him to offer a uniquely powerful synthesis. The strength and extent of his argument for a Citizen’s Income appears to render it uncontentious. It is only cynical civil servants whose jobs may be at risk who stand in the way, together with inertia in the political system.

Due to its thorough coverage, the book is long, and sometimes repetitive. The argument on marginal deduction rates is repeated too often. But the main weak point is the lack of attention to economics, since herein lies one of the most powerful objective arguments for a Citizen’s Income. Torry’s uncertainty in economics appears immediately on page 1 where he writes ‘Citizens might spend it (a Citizen’s Income) on goods and services, thus creating employment; or they might save it, making lending and investment possible’. The first part of this sentence is thoroughly Keynesian and correct, whilst the second part is thoroughly neo-classical and incorrect. Saving in the Keynesian paradigm does not enable investment, but by reducing demand, reduces investment which businesses plan to meet demand.

Only on page 122 does Torry mention the economics argument for a Citizen’s Income, where he presents Stewart Lansley’s argument that ‘income inequality reduces productivity’, so that wages and therefore consumption reduce, leading to the current crisis that only greater equality can resolve. Even this ignores an alternative powerful economics argument that the crisis has been driven by technology increasing productivity, reducing the wage and consumption element of output, raising output GDP above disposable consumer income, which has been corrected with unsustainable credit. According to this argument, the technology-led wage reduction is inevitable and inexorable, and contrary to Lansley’s proposal, only a Citizen’s Income can replace consumer credit in order to raise consumption to match output GDP. In this model the Citizen’s Income would need to be spent rather than saved, perhaps by being distributed on stored value cards with the value expiring over time. It needs however an alternative theory of money, i.e. that money is virtual and its distribution only has to respect output GDP and not be supported by gold reserves or government debt. This removes the need for Torry’s argument on the affordability of Citizen’s Income – it is output GDP which makes it affordable. These arguments would add considerably to Torry’s case. They also dismiss current deficit reduction and austerity policies as the nonsense they are.

Nathalie Morel, Bruno Palier and Joakim Palme (eds), Towards a Social Investment Welfare State? Ideas, policies and challenges

by Citizens' Income Trust | Mar 14, 2014 | Opinion

Nathalie Morel, Bruno Palier and Joakim Palme (eds), Towards a Social Investment Welfare State? Ideas, policies and challenges, Policy Press, 2012, xiv + 386 pp, pbk, 1 847 42925 4, £19.99, hbk, 1 847 42924 7, £70

Is the welfare state a cost or an investment? To take two examples: unemployment benefit is a cost; training for employment is an investment.

The 2009 conference and subsequent research project which gave birth to this most interesting book worked with a simple presupposition: that the welfare state of the twentieth century was a social cost welfare state, but that the welfare state of this century will be a production factor, investing in order to reap economic and social benefits for a world very different from that of the last century: hence active labour market policies and a greater emphasis on early years care.

The first chapter charts the early history of the investment welfare state in Sweden during the 1930s, the submergence of that idea by the Keynesian and neo-liberal welfare states, and the more recent resurgence in the form of widespread social investment policy trajectories. The second chapter discusses in depth the evolution of the welfare state from expansion, through retrenchment, and into the new ‘investment’ paradigm, and shows how countries which have taken this route have found the investment welfare state to be both positive for economic growth and coherent with the emerging knowledge economy. Chapter 3 studies the mix of state, market, family and community in Keynesian, neo-liberal and investment welfare states, and finds the investment welfare state to be both flexible and usefully ambiguous politically.

Chapter 4 asks to what extent OECD countries are developing investment welfare states (Scandinavian countries are, and English-speaking countries are developing cheaper versions), and chapter 5 shows how budgetary constraints have led to cost-cutting and to a market-based welfare state rather than to a social investment one.

The authors then tackle particular policy areas. Chapter 6 discusses such family-friendly policies as parental leave. Chapter 7 examines such different active labour market policies as the availability of training and benefits reduction for non-compliance, and identifies the problem that what the economy needs is upskilling, whereas what it gets is low-skill and no-skill employment and employees. Chapter 8 finds that social investment policies such as education improve both employment rates and the proportion of skilled employment. Chapter 9 shows how important both academic and experience-based learning are going to be, and how important it is that they should connect with each other.

The final chapters look to the future. An ageing population requires investment in intergenerational redistribution; the upheaval of the financial crisis might facilitate an unfreezing of welfare states and a resultant more consistent European social investment welfare state. Climate change requires social policy which promotes sustainability; social cohesion needs to be seen as ‘the necessary foundation for the learning economy’ (p.347), rather than as a burden; and we need a new economic model to match the emerging social investment welfare state.

The book provides a wide-ranging and intelligent discussion at the European level of an important new paradigm, with an occasional focus on particular countries – usually Scandinavian ones. What we need now is discussion focused on each European country in turn. The UK will provide an interesting case study. Here, social insurance characterised the Keynesian welfare state, and means-tested benefits the neo-liberal one: but what will characterise the social investment welfare state? One possibility of course is universal provision. Take Child Benefit as an example: It is a family-friendly policy; it promotes a flexible labour market (as it doesn’t change as employment status or earnings change), and it provides a secure base for family finances in a turbulent economic and social situation. An extension of universal benefits to working-age adults would facilitate learning (because lower marginal deduction rates would make it more worthwhile to seek further training in order to increase one’s family’s financial position), and it would be family-friendly because it would offer to couples more choice over employment patterns. If you would like to make an investment you may want to consider to choose the best robo-advisor.

The book’s direction is the right one. It’s a European social investment welfare state that we need: or rather, a global one. So why not a European Citizen’s Income? Or even a global one? It’s not beyond our capability, and it would be remarkably helpful to an investment welfare state.