by Citizens' Income Trust | Feb 4, 2013 | Opinion
Since the 1990s, on average the Indian economy has been growing at over 6% a year. Yet hundreds of millions remain mired in poverty, and inequality has grown steadily. For decades, although there are 1,200 centrally-funded social policies on the statute books and hundreds more at state level, successive governments have relied largely on the Public Distribution System (PDS) to redress poverty.
The PDS subsidises consumers via subsidised grain, rice, sugar and kerosene if they have a Below Poverty Line (BPL) card or something similar. Producers of many goods receive huge subsidies as well. Altogether, subsidies eat up 7% of GDP.
They do not work. The system is wasteful, inefficient, market-distorting, regressive and deeply corrupt. Rajiv Gandhi famously said that 85% of subsidised food did not reach the poor. The Deputy Chair of the Planning Commission said in 2009 that only 16% of it reached them. Others have estimated that for every Rupee spent 72% is lost in transit.
While continuing with the PDS, in 2005 the Congress Party, long regarded as the bastion of Indian democracy, launched a grandiose National Rural Employment Guarantee Scheme (NREGS), supposedly guaranteeing every rural household 100 days of labour a year at the minimum wage. Huge numbers have supposedly benefited, vast sums spent, many eulogies uttered.
In reality, ghosts have been resurrected, recorded as having done labour. Most rural people have had few if any days of labour under the scheme (renamed to give it the status of having Gandhi’s name preface it). Much of the money has gone into local bureaucrats’ pockets. One study estimated that only 8% of recipients had been employed for 100 days in one year. Another suggested that only a minority of projects had been completed, another that it has not reduced rural poverty at all. Corruption is endemic. The scheme only awaits a journalist to write a book entitled The Greatest Social Policy Scam in History.
Meanwhile, something remarkable has been brewing. A radical alternative has been gaining ground. In 2009, led by SEWA (the Self-Employed Women’s Association), we launched the first of three pilot cash transfer schemes. The principle is simple: Give people cash, a basic income, instead of subsidies or make-work labour. And do not attach conditions, directing people how to spend the money; they can work that out for themselves. We do not claim credit for what has happened since, for other factors have contributed. But the pilots have proved timely.
The first, financed by UNDP, took place in a low-income area of Delhi, where hundreds of households were offered the alternative of continuing with the subsidised items or receive a monthly cash transfer of equivalent value. Many initially chose the cash. Later, when we did the evaluation, many more wished to do so. Although a political campaign was organised, involving physical violence towards our women fieldworkers, the results have been very positive, with improvements to living standards.
Meanwhile, with financial help from UNICEF, we launched a bigger pilot in the state of Madhya Pradesh. In eight villages, for eighteen months, every man, woman and child has received an unconditional monthly cash transfer. Over 5,500 villagers have been recipients. We have been evaluating the effects by comparison with people living in comparable villages, in a so-called randomised control trial.
Such pilots take a long time. Politics does not wait. Suffice it to note that the results of this and the third pilot in tribal villages are heart-warming. Even though the amount paid is very modest, about 30% of bare subsistence, we have observed improvements in nutrition, school attendance and performance, women’s status, economic activity and sanitation. Many villagers have told us they want a substitution of cash for subsidies. More have come round to that as experience has been gained.
What seems to happen is that the cash provides liquidity and a sense of security that infuses confidence and gives people a greater sense of control over life. So the positive effects exceed the value of the transfer.
It is what has happened back in Delhi that is so intriguing. In the past few months, we have been asked to brief senior officials, and they have been emboldened to push cash transfers into the centre of national debate.
In November, the Prime Minister went on television to announce the government is to launch a cash transfer scheme, rolling it out to 51 districts in 2013 by raising the price of kerosene and compensating people by cash paid into bank accounts. Not to be outdone, on December 15, Delhi’s Chief Minister launched an unconditional cash transfer scheme in her state for those omitted from the cap put on BPL card holders. A torrent of media comment has followed.
The Congress Party has been converted. Earlier this month, its leader Sonia Gandhi, the Prime Minister and several Cabinet colleagues descended by helicopter on a village and announced its cash transfer policy to a crowd of 30,000.
Indian social policy is at a crossroads. Opposing cash transfers, a group of diehard supporters of the PDS have been promoting a Right to Food bill that would universalise the PDS and subsidised food. They have also organised hostile protests. They claim cash benefits would lead to abandonment of public social services.
They are being Canutish. The PDS is literally rotten, as Delhi’s Chief Minister has admitted. Often grain comes in sacks that contain numerous small stones to make up the weight; often the grain and rice are stale; often villagers travel long distances only to find the rations are not there. All this is ignored. Let them be supplicants, say the paternalists in effect.
The risk now is that, in the rush to operationalize cash transfers across the country, design faults and excessive politicisation will put back the cause for years. Here we have a lesson for government. In the villages receiving the basic income, the payments have been an extra, not a substitute for something. We asked everybody to open a bank account within three months of receiving their first payment. There were predictable teething problems. But soon, everybody had accounts, with help from our colleagues. In that time, suspicions were allayed and support for cash transfers strengthened.
The government is doing it the wrong way. It is raising the price of a subsidised item, kerosene, telling people they will be compensated through a bank and by means of an identity card, the Aardaar. But, as the government’s pilot has shown, many will lose in the short-term since they do not have accounts and cannot obtain the cash. This risks a backlash.
The solution must be based on realising that while villagers are always on the edge financially a government can take a medium-term perspective. If they rolled out their scheme to those 51 districts by offering extra money in the first year while stating that everybody must open a bank account in that time, the fiscal cost will be small. In the second year, they could phase out selected subsidies, sharing the gains by disbursing a third of the subsidy in additional payments while saving the fiscal coffers the other two-thirds. Remember that most money spent on subsidies does not reach the intended beneficiaries.
Will wisdom prevail? One cannot be optimistic. It is a pre-election year and Congress is set on making cash transfers what a leading politician has called “a game-changer”, an election-winning measure. This will galvanise opposition. Everybody would gain if only the politicians had the wisdom to de-politicise the reform. The Government should set up an independent Cash Transfers Commission to oversee the process and to ensure the level of benefits is set by economic criteria and not raised just before elections.
How much better it would be if unconditional, universal, individual cash benefits were rolled out slowly and quietly. We know they have made a great difference to the lives of those thousands of villagers in our pilots. We have heard their stories, seen their children and analysed the data gathered by our fieldworkers. There is a great chance of transforming Indian social policy. Let us hope the politicians take it.
by Guest Contributor | Dec 10, 2012 | Opinion
By Gary Flomenhotf
Not everyone follows the actions of central banks, such as the private bank cartel called the US federal reserve (the fed), but you should know what the fed is up to lately: QE3[1] PLUS! See article here. You may know that QE3 is a fed program to purchase $40 Billion in mortgage bonds per month from banks, basically taking crap off their hands and making US citizens pay for it. The latest plan is to add $45 billion in Treasury bonds to that. These are open market operations where the Treasury bonds are bought from banks, thereby increasing the money supply and supposedly lowering interest rates further.
The US Treasury pays interest on Treasury bonds, and the fed supposedly returns most of it to the US government as profit. But the fed only owns a small fraction of the US debt, much of it is owned by foreigners and banks. The government doesn’t get that interest back, and it is the cause of sovereign debt crises, when interest on governments’ debts becomes unpayable.
Just to remind people where the fed’s money comes from, the fed prints it, or nowadays types it into a computer account as a bank balance. Since the US Treasury outsourced the creation of money in 1913, the fed has produced a small part of the money supply directly, and the rest is created through fractional reserves by private banks, about 95%. This is called variously seigniorage, money creation, or monetary supply, which is a sovereign privilege of the state given over to central banks and private commercial banks worldwide. Under 100% reserve requirements, the central bank would create the entire money supply and not commercial banks. The IMF recently published a surprising essay called “The Chicago Plan Revisited” discussing this idea, first promoted by major economists in the 1920’ and 30’s. A trial balloon perhaps?
The Treasury could also issue the entire money supply as interest-free US Notes or bank balances and do away with the central bank entirely. The US Treasury has issued these notes in the past starting with Greenbacks issued by President Lincoln to finance the US Civil War. 100% reserve requirements are essential to end the loss of money creation to banks and the resultant interest paid on every dollar of money in the economy. Banks opposed the Chicago Plan in the 1930’s because it takes away their privilege of collecting interest on money they create from nothing, when they make loans using fractional reserves.
The total of QE3 PLUS is $85 Billion per month. Doesn’t sound like much these days with debts in the trillions, and derivatives in the hundreds of trillions, but let’s figure it out. Take the US population of about 315 million and divide into $85 billion and you get $270 per month or $3240 per year. How would you like that or $12,960 per year for a family of four as a basic income?
The fed is not allowed to finance citizens, states, or municipalities, only banks and the Treasury. And remember that US states are forbidden from issuing “bills of credit” by the Constitution (Article 1, Section 10, Clause 1). For more on this see Vermont currency commons website. Now this reminds me of a joke I heard when Iraq was writing their new constitution after we invaded and instituted “regime change”. “Why don’t they take our constitution, we’re not using it.” Congress is supposed to coin the money supply, not banks, as stated in Article I, Section 8, Clause 5. I see no reason to follow this prohibition since the national government isn’t following the Constitution, but let’s leave it be. States can create public banks, and these banks can issue credit that is not considered an illegal state bill of credit. States could also issue warrants or other IOUs as California has done on two occasions. See currency commons article on California.
The problem in Europe is that countries have given up their sovereign monetary policy when they joined the Eurozone, as US states did when they ratified the Constitution and joined the union in 1789. Even EU countries that haven’t joined the Euro like England, Denmark, and Sweden still let banks issue most of the money with interest, so they are at the mercy of the banksters. I suspect even Iceland, which told the bondholders to take a hike, is still letting banks create all the money with interest. Old habits die hard…
Anyone traveling to the Eastern Caribbean, for example, will find transactions taking place in Eastern Caribbean Dollars, US dollars, and Euros side-by-side without much difficulty. So there is no practical reason for countries to give away their monetary policy to a central authority. It is the interest paid on private money creation that is the problem, not the sovereign monetary authority of individual countries. For more on this see Dr. Margrit Kennedy’s website.
So what would happen if central bank quantitative easing and open market operations were redirected to basic income payments to individuals rather than loans to banks? Let’s not forget that the fed has already issued QE1 and QE2 without much result. QE1 was $1.25 trillion and QE2 was $600 billion for a total of $1.85 trillion. That is $5873 for every person in the US given to banks, in a form of “trickle-down” theory that it will eventually benefit the economy. Don’t you think it would have been more effective to pay directly in a dividend check to citizens amounting to $23,492 for a family of four? A sovereign state or country could issue its own public credit money without interest, and get out of the bankster racket that pays interest on money they create out of thin air. Guernsey did it starting in 1822. Any country or state could do it, and even issue it as an interest-free basic income, trickle-up, not “tinkle-down.”
About the author:
Gary Flomenhoft is an International Post-Graduate (IPRS) and University of Queensland Centennial Scholar and PhD Candidate at Centre for Social Responsibility in Mining. His research area is the economic value of common wealth and governance of Sovereign Wealth Funds.
Prior to enrolling at SMI, Gary was a faculty member for 11 years in Community and International Development and Natural Resources at the University of Vermont (UVM), serving as a Lecturer in Applied Economics, Renewable Energy, International Development, and Public Policy. He conducted many development projects in The Commonwealth of Dominica, St. Lucia, and Belize with students and local partners. He also originated and coordinated the Green Building Design Program at UVM.
He had a secondary appointment as a Research Associate and Fellow at the Gund Institute for Ecological Economics under Director Robert Constanza. His primary research was in public finance for the state of Vermont including green/environmental taxes, common wealth and common assets, subsidy reform, and public banking. His 2013 report on Vermont public banking formed the basis of the “10% for Vermont” legislation passed in 2014, which allocated $35 million of state funds to local investment. He directed the grant funded Green Tax and Common Assets project at the Gund Institute for seven years, where he originated the Vermont Common Assets Trust Fund (VCAT) bill, which was submitted to the legislature twice. His chapter on Vermont Common Assets appeared in the book “Exporting the Alaska Model”, which promotes the Alaska Permanent Fund and Dividend as a model for basic income around the world using Sovereign Wealth Funds.
[1] QE means quantitative easing, a fed policy of purchasing bank securities in order to increase the money supply to encourage additional lending by banks, and lower interest rates
by Karl Widerquist | Nov 25, 2012 | News
Twelfth Annual North American Basic Income Guarantee Congress: Basic Income and Economic Citizenship
Thursday May 9th to Saturday May 11th, 2013
Sheraton Hotel and Towers, New York City
The Twelfth Annual North American Basic Income Congress, Basic Income and Economic Citizenship, will take place in New York City on Thursday, May 9th through Saturday, May 11th, 2013. The congress is organized by the U.S. Basic Income Guarantee Network (USBIG) in cooperation with the Basic Income Canada Network (BICN/RCRG), and will be held in conjunction with the Annual Meeting of the Eastern Economic Association (EEA). Attendees at the North American Basic Income Congress are welcome to attend any of the EEA’s events.
Featured speakers include Carole Pateman, UCLA and Cardiff University, co-author of Basic Income Worldwide: Horizons of Reform; Sheri Berman, Barnard College, author of The Primacy of Politics: Social Democracy and the Making of Europe’s Twentieth Century; Jurgen De Wispelaere, University of Montréal, co-editor of The Ethics of Stakeholding; David Casassas, University of Barcelona, co-editor of Basic Income in the Age of Great Inequalities; James Riccio, MDRC, co-author of “Toward Reduced Poverty Across Generations: Early Findings from New York City’s Conditional Cash Transfer Program;” Darrick Hamilton, The New School, co-author of “Can ‘Baby Bonds’ Eliminate the Racial Wealth Gap in Putative Post-Racial America?” and Evelyn Forget, University of Manitoba, author of “The Town with No Poverty: A history of the North American Guaranteed Annual Income Social Experiments.”
All points of view are welcome, and proposals from any discipline are invited. For more information see the call for papers at: www.usbig.net.
Or contact the congress organizer, Almaz Zelleke of USBIG, at azelleke@gmail.com.
DEADLINE FOR PROPOSALS: November 30th, 2012
by Karl Widerquist | Aug 21, 2012 | News
ECOSY (the European Community Organisation of Socialist Youth) hosted a public debate on basic income at a seminar in a summer camp on July 21 in Savudrija, Croatia. ECOSY is the umbrella organization of the youth wings of the socialist and social democratic parties of Europe. David Lizoain, Secretary for Europe and the Economy of the Socialist Youth of Spain, defended the concept, which is official policy of the organization as of their last congress. Esa Suominen, adviser to the president of the service union of Finland, spoke against the idea. The debate was marked by a friendly exchange, and the Nordic delegates expressed a greater skepticism in general about the basic income. Later, Esa Suominen noted that it was positive to be able to debate the basic income in a calm setting, because the debate in Finland has a highly partisan nature, meaning that no one can enter into the ideas in depth.
Website of the Young European Socialists: https://www.youngsocialists.eu/
