by Citizens' Income Trust | Oct 15, 2012 | Opinion
The debt crisis persists. Bankruptcy is more common now than ever before, with bankruptcy attorneys in Harrisburg PA, and attorneys all over the world, dealing with increasing numbers of clients searching for advice on their debts and money worries. In the US, the Eurozone, and the UK, politicians are implementing dire austerity packages in order to reduce government deficits. Greece and Italy may be in the worst position, but the phenomenon deeply affects the majority of developed economies.
The new circumstances have led to the increase in the need for a debt collection agency for most banks. On the other hand, debt can quickly become overwhelming for companies who rely on business finance to stay afloat. If you’d like to learn more about ensuring your cashflow management system is as robust as possible in order to keep your business at its best, take a look at these debtor management tips.
Faulty thinking
How has this come about? The popular answer trotted out as the daily news mantra that governments have been reckless, bankers have been greedy, and consumers have been overspending, is too simplistic. The problem has deeper roots and causes, and will continue unabated unless these are better understood and addressed by policy.
Current talk is entirely monetarist. Economics is reduced to some sort of meta-accountancy. Keynes is derided by people who have never read him. Leading economics media commentators often have no formal economics training or degrees. Economics degrees themselves have often been restyled as ‘economics, finance and business’ degrees. The British Chancellor of the Exchequer tells the nation that it ‘cannot afford’ economic activity, which has to be cut because we simply ‘don’t have the money’. But the real economy is about real resources of people, skills, infrastructure, technology, land. All of these are available.
Standing back for a moment, isn’t it curious that human societies allow the money that they themselves create as an artefact to serve the real economy, then allow it to dictate their real economic behaviour? The tail really is wagging the dog. In the present structure, governments must raise money from the bond markets, who insist on repayment at interest rates which these markets determine according to their own level of confidence. Thus society and its governments are entirely subject to the prescriptions of bond dealers and credit rating agency speculators, who have no remit or capability in social leadership and management. Curious again, that UK political comment which is so troubled about ‘handing sovereignty to Brussels’, and to non-elected technocrats, is entirely supine in handing far greater sovereignty to bond dealers and credit rating agencies. Standard and Poor’s, Moody’s, and Fitch are entirely unelected and lack any democratic accountability, and yet are allowed to sit in easy judgment on our total economies, and to determine their prospects and scope for action. We can thank Michel Barnier, the EC Internal Market Commissioner, for seeking to constrain them. He deserves our support.
Rethinking money
We need a new paradigm in which we understand money and financial agencies as servants rather than as masters of the real economy. Money is virtual, not real. It does not obey the laws of thermodynamics : it can be created or destroyed. Commercial banks do this regularly. They operate lending ratios whereby they lend a multiple of the deposits lodged with them. Market economies ‘print money’ all the time in this way as a regular practice. A sustained total run on the banks would always cause them to collapse. The system is supported only by confidence. The only rule is that the amount of money in circulation has to be matched by real output, if its value is to be maintained. To allow monetary factors to determine policy for the real economy is like trying to drive a car by bending its speedometer needle.
An alternative diagnostic
So what alternative diagnostic of the ongoing debt crisis is available? A thought experiment might help. In an imaginary totally automated economy with no workers, there would be no wages, and therefore no effective monetised demand. Goods and services would therefore have to be allocated by government to consumers by some voucher or shareholder mechanism. As Bob Crow, the RMT union leader put it in his ‘Lunch with the Financial Times’ interview in March last year, ‘if you have robots build cars, how are robots going to buy them?’.
A more erudite version of the same concept comes from Professor Robert Solow, a distinguished emeritus professor at MIT and Nobel Economics Laureate, who points out that with burgeoning production from advanced technologies ‘the wage will absorb only a small fraction of all that output. The rest will be imputed to capital…the extreme case of this is the common scare about universal robots : labour is no longer needed at all. How will we then live? ….The ownership of capital will have to be democratised…(needing) some form of universal dividend…Not much thought has been given to this problem’ (in ‘Revisiting Keynes’ by Pecchi and Piga, MIT Press 2010, p92).
In this scenario, the total voucher spend by the government would represent an unavoidable debt which would never be paid off. We are not there, but we have strong elements of this scenario in our modern technological economies. The delinking of productivity and real wages makes debt inevitable, with people left trying to figure out how to dispute collections in an attempt to continue some sense of normalcy in their lives.
A general diagnostic for technologically advanced economies then emerges that whenever productivity exceeds real wages, and if the difference is not fed through to consumer demand via increased shareholder dividends or social transfer payments, then consumer demand will be insufficient to purchase output GDP. In this situation, which can and does occur, the shortfall in consumer demand can be made up by extended consumer credit and welfare payments, or output GDP can be cut in a recession. The diagnostic bears some resemblance to Marx’s and Keynes’s thinking on the implications for technology, automation and productivity on the economy, but should not be dismissed for this honourable association.
A recent history of the problem
2007 was the root of the present crisis. If we go back to UK economic data then, we find that between 2005 and 2007
- GDP and consumption continued to grow but household disposable income flattened
- in 2007 real household disposable income grew by only 0.1% whilst GDP grew by 3%
- household disposable income reduced as a percentage of consumption from 78.2% to 74.7%
- the gap was met by increased household credit which grew from £17bn to £55bn
This is shown in the following graphs (where ‘household borrowing’ refers to new household borrowing in each year):
The familiar dramatic increase in household credit is less apparent in the scale of the above GDP diagrams but is evident when graphed alone in the following diagram
£55bn new consumer debt in 2007 became essential to fund the purchase of output GDP. Without it GDP would have fallen due to decreased effective demand, and employment, wages and income would then have fallen as a consequence.
Vicious circles
The current system faces two alternative vicious circles, either that
1. increased productivity reduces the wage and household income element of GDP and this demand drop leads to a GDP recession
or 2. the demand gap is filled by increased consumer credit and government debt to fund welfare payments, which becomes un-repayable in the next period.
Neither is sustainable and leads to banks reducing consumer credit, and government cutting the real economy in the mistaken belief that this will eliminate its deficit. This is where we are now, and without a radical rethink, we will be chasing our tails for ever in the doomed attempt to write off deficits from an ever shrinking GDP. Those who call for increased government expenditure under a Plan B to raise GDP (which would have the effect of raising the tax take and reducing welfare payments and hence reducing the deficit) are derided by their critics who ask how it can be possible to incur debt to reduce debt. But the coalition’s Plan A insistence on cutting the economy to reduce the deficit has to explain how GDP can be increased by cutting GDP.
New thinking
An alternative paradigm is needed to frame an alternative policy. There is nothing wrong with the real economy. Its factories, transport and communications infrastructure, skilled labour, restaurants etc. are all fully operational and highly efficient. There is also plenty of real demand for goods and services, especially globally from developing country consumers. It is purely the financial system which is disabling the real economy, and it is the financial sector which therefore urgently needs re-engineering.
It is commonly said that banks lent too much credit in 2007, firstly in the US sub-prime mortgage market, and then widely in the UK economy. But the above analysis shows that £55bn of bank lending was exactly the right amount needed to purchase GDP output, a claim which is substantiated by the lack of inflation in goods and services markets both then and throughout the NICE decade. It is true that asset prices inflated, but this resulted from any credit beyond that £55bn. The £55bn consumer credit matched against GDP output was non-inflationary.
Distributive considerations
Productivity growth in excess of real wage growth, and the gap between consumer income and GDP output that this produces, has distributive consequences. Between social groups, it tends to disfavour the poor, who rely more on the wage element of income, who suffer the loss of low-skilled employment when automation displaces labour, and whose access to credit as a replacement for wages is weak. Welfare payments are their only recourse. Surprisingly, the Institute of Fiscal Studies report ‘Poverty and Inequality in the UK: 2011′ shows that increased welfare payments did overcome income disadvantage. According to the IFS study, child poverty at 20% is now the lowest since 1985, and pensioner poverty is currently lower than at any point in the last 50 years.
The sectoral distribution of GDP is also affected by automation. Manufacturing employment and real wages per unit of output will fall, and much of this employment is transferred to low wage service sectors of the economy, only some of which, like banking, are subject to automation and productivity improvement. From anecdotal evidence, increased low productivity, low-wage service sector employment has absorbed employment reduction in more automated manufacturing sectors, and masked the effect of productivity in reducing aggregate real wages. Population growth is another factor masking the demand deficiency resulting from the delinkage of productivity and real wages.
We could of course take the view that reduced consumption is exactly what we want as part of a new ascetic paradigm to conserve world resources. Competition for natural resources from China and India may well force this choice on us anyway. But if we do pursue this option, income redistribution to those newly unemployed through productivity gains unmatched by new demand will be an essential part of the paradigm. Some form of welfare payment which does not add to government debt would be needed.
A Citizen’s Income – the only route to stop debt being inevitable as productivity grows
If it is accepted that the delinkage of productivity and real wages will make an element of debt financing inevitable, then a possible way forwards is a non-repayable financial instrument, a universal credit. This would have to be non-repayable at both consumer and government level. Proposals for a citizen’s income are longstanding. Such an income would not be repayable by the consumer and could be financed without incurring government debt. This could be done by creating a public sector bank with a government deposit, and a lending ratio set to exactly meet the shortfall between output GDP made possible by increased productivity, and flat or declining real wages. If the £55bn incurred as consumer credit in 2007 had instead been funded in this way then the economy would not face the crisis that it faces today. We have to think outside the box. Calls for a plan B are stuck within the present paradigm. This new paradigm would re-engineer the financial sector and the management of inevitable debt. It would release the real economy from artificial financial constraint, and deliver sound finances built on productivity advances. It would also greatly enhance social cohesion.
by Karl Widerquist | Sep 12, 2011 | News, The Indepentarian
The coalition government of Mongolia is taking steps to make good on promises made in the 2008 election to introduce an Alaska-style resource dividend. Mongolia is a large, sparsely populated land-locked country sandwiched between Russian and China. About half of its citizens still live as nomadic herders. Most of the land in the country is unowned: herders can camp anywhere they find a spot. But the country has recently discovered some of the world’s most valuable mineral deposits, including gold, copper, coal, and other resources. International mining companies, under contract from the Mongolian government are already well on their way to begin exploitation of those resources. Revenues from exportation of those resources have the potential to more than double Mongolia’s GDP.
The Mongolian government is moving toward implementation of three methods to ensure that every Mongolia receives a financial benefit from that sale. The first method—proposed in the coalition governments draft budget for 2011—is the distribution of a dividend of 21,000 Mongolian Tughrik (about US$17) per person per month. Reports are sketchy, but if adopted, that would amount to about $204 per person, or $816 for a family of four by the end of the year. This is a large sum in such a poor country. Mongolia currently has a per capita GDP of about $3600 per year (less than one-tenth of U.S. GDP).
The second method is to make every Mongolian a shareholder in the state’s mining enterprise. The initial plan calls for 50 percent of the enterprise to be owned by the state; 30 percent by international investors; 10 percent by domestic investors; and the remaining 10 percent to be divided equally between all Mongolia citizens. That plan would make each Mongolian the owner of about 550 shares of stock. Initially citizens will be prohibited reselling their shares, and it is unclear whether this prohibition will be relaxed later. Government officials hope that the shares will eventually start paying dividends. Apparently this would mean a second source of basic income from the mining industry, which might replace or supplement the first.
The third method is the creation of a Sovereign Wealth Fund designed after studying the operation of the Alaska Permanent Fund, the Alberta Heritage Fund, and other existing Sovereign Wealth Funds. This fund could pay regular dividends like the Alaska fund but government officials indicated that it might only pay occasional dividends like the Alberta fund.
Government officials hope that once these policies take shape, they will relieve the abject poverty experienced in Mongolia’s capital city, Ulaanbataar, without interfering with the traditional nomadic lifestyle half of Mongolians practice. Terence Ortslan, Managing Director of a Canada-based mining research firm called TSO & Associates, said, “Mongolia should recognize and preserve nomadic lifestyle of its people but in modern level of quality of life that they deserve. I would call it ‘Modern nomadic lifestyle.’” For example Mongolian nomads could use their share of wealth to obtain devices to generate electricity from solar and wind energy.
These policies are just at the stage of transition from planning to implementation, and the form the will eventually take remains to be seen.
More information about these policies in Mongolia is online at the following links:
David Stanway and Khaliun Bayartsogt, “Mongolia frets as giant coal mine launch looms,” Reuters, Mon Aug 8, 2011
https://af.reuters.com/article/energyOilNews/idAFL3E7IP1CG20110808?sp=true
MDNews, “From January, every citizen will get MNT 21,000 per month”
https://www.mongoliaeconomy.com/?p=698
Dale Choi, market commentator of Frontier Securities, “Mongolia is to Set Up a Sovereign Wealth Fund,” UB Post, September 15, 2009 (Source: Bloomberg, Frontier Securities, September 11, 2009)
https://www.fonds-souverains.com/author/admin/page/1590/
D. Jargalsaikhan, “Ulaan Qatar” MongolNews. Friday, 25 February 2011 12:44
https://ubpost.mongolnews.mn/index.php/opinion/5825-ulaan-qatar
P. Shinebayar “Coalition Government Makes Historical Decision” April 5, 2011
https://ubpost.mongolnews.mn/index.php/national-news?layout=default&start=80
by Yannick Vanderborght | Aug 1, 2011 | Opinion
India might seem an infertile ground for basic income. For decades, social policy has been about the bureaucratic raj, through which subsidised items have been supposedly supplied directly to ‘the poor’, mainly through ration shops, and where subsidies in general have become deeply ingrained in the society, accounting for over 5% of GDP. However, within the past two years an extraordinary change has occurred. Suddenly, the whole of the political establishment is talking about the desirability or otherwise of “cash transfers” instead of subsidies.
The timing of this new political prominence is fortuitous, since we had been planning a pilot cash transfer scheme since 2008, effectively a basic income pilot, albeit called a ‘universal, unconditional, individual cash transfer’. It had its origins in a seminar in Ahmedabad at the headquarters of the Self-Employed Women’s Association (SEWA) of India, where I laid out the principles of a basic income and reviewed the arguments for universalism against selectivity and targeting, and unconditionality against conditionality. Initially, there was some resistance to the idea that each man and each woman should receive the cash transfer independently. SEWA leaders were inclined to push for it to be paid to women only. To their credit, they eventually agreed that it should be paid to men and women independently, with the children’s cash being given to the mother or principal child-carer. Initially too, some argued for conditionality, but in a subsequent meeting representatives from local SEWA branches came out vehemently against conditionality. This was wonderful.
It took a year to raise funds, during which time a team of researchers and SEWA leaders was formed to plan the work. It was decided to operationalise the pilot in villages in Madhya Pradesh. But as we were planning, another opportunity came up to operate a second smaller pilot in a district of Delhi. This was instigated and supported by the Delhi Government, and the design reflected that. The Delhi pilot involved giving households a ‘choice’ between continuing with the existing PDS ration scheme, based on what are called the BPL (Below Poverty Line) cards that the poor are supposed to possess, and taking a monthly cash transfer instead. Many opted for the cash.
Shortly after this small pilot was launched, local opposition was mobilised, with a street campaign based on a claim that we wished to take away food and other essentials from the poor, currently provided to some people through the BPL cards. This misrepresentation led to riots directed at our team and pressure being put on those residents who had opted to take the basic income cash to revert to the rations. The ration shop owners were involved in this, although the action was led by a so-called Right to Food group.
As of July 2011, the Delhi pilot has been maintained, thanks in part to behind-the-scenes support of the local government and to the courage of local SEWA members. There is even evidence that more residents are wishing to shift to the basic income. We are in the midst of the second round of a monitoring-and-evaluation survey of the impact of the basic transfers. And there has been a request from the Delhi Chief Minister to conduct a second pilot in another area.
Meanwhile, the pace of political debate has been rapid. There has been a press furore, with prominent critics, such as Jean Dreze, claiming those pushing for cash transfers are wishing to dismantle the social state. I have responded to that in several newspaper articles and interviews, and in mid-July addressed the National Advisory Committee responsible for advising the Congress Party leadership, and thus the Government, on social protection policy. I have also given several presentations to UN organisations, including a long seminar that was teleconferenced in seven cities of India.
Meanwhile, the bigger pilot in Madhya Pradesh has moved ahead. We have been doing everything possible to maintain a low profile, which is one reason for my reluctance to present a description to BIEN members. Some of those who oppose cash transfers refuse to accept the legitimacy of pilot tests, and want to disrupt them.
Anyhow, although we certainly do not want any publicity about where the pilot is being conducted, the essence of the methodology and objectives are worth noting, partly because they might be relevant for pilots in other countries.
First, we decided to conduct a variant of a randomised control trial (RCT), in which all residents in 8 villages were to be provided with the basic cash transfer while all residents in 12 similar villages were not. Note that the full randomista model would provide the “treatment” (i.e., cash transfer) to a sample of households selected at random from within each village, to be compared with similar households not provided with the “treatment”. In the case of cash transfers that would be fraught with practical and moral drawbacks. So, we opted to provide the cash transfer to every individual in 8 villages and to none in the 12 ‘control’ villages.
Partly for pragmatic reasons, or funding constraints, and partly because the amount represented about 40% of bare subsistence, the pilot opted to provide each adult with 200 Rupees a month and each child under the age of 14 100 Rupees a month. Again because of funding constraints, it was decided to run the pilot for 12 months, although we had initially planned to do so for 24 months.
In accordance with a long-advocated theoretical position, we designed the experiment with one innovative feature. My perspective – shared by many within BIEN – is that a basic income would work better if combined with existence of ‘basic Voice’, i.e, a collective body able to represent the interests of the vulnerable. After all, particularly in low-income areas, a person with cash is vulnerable to losing it to more powerful individuals or groups unless there is a body able to represent and defend their entitlements.
With this in mind, it was decided to design the RCT experiment so as to compare the outcomes in places where there was no Voice body with those where there was such a body. Fortunately, we had a good way of doing this. For SEWA is operational and embedded in some of the villages and not others. So, from a sampling frame of all ‘SEWA villages’ and a sampling frame of all ‘non-SEWA’ villages in the district selected, we drew a sample of four SEWA and four non-SEWA villages in which the basic cash transfer would be paid.
Once the design principles had been worked out, the first practical phase was the drawing up of a full listing of all households in the 20 villages, not an easy or speedy process. That done, we conducted a comprehensive baseline survey of all households, and launched the cash transfer in the following month. But while that was going on, one further obstacle had to be overcome. It was desirable to control for ‘financial inclusion’, by universalising the way by which individuals received the cash transfer and by ensuring everybody had a bank account. This is a major issue in India today. The majority of the population are ‘unbanked’.
Rolling out bank accounts has been ongoing, with a record of when they were opened being kept for all individuals. For the first two months, the cash transfers were made by direct transfer, with teams from the project going to each village on a designated day. The process has been time-consuming but fortunately without incident. We hope to switch to paying through bank accounts shortly.
While a baseline household and individual survey was conducted, a Community Survey was also conducted to obtain macro-level data. Both the baseline and community surveys will be repeated, with modifications to suit the new period, six months after the start of the pilot, defined as the time of the first cash transfer. These will be called the midline surveys. Then, six months after that the endline surveys will be conducted.
Before the pilot was launched, we drew up a list of hypotheses associated with basic income or cash transfers, all of which are familiar to members of BIEN. We will be testing each of those, and hope to produce a public report and a series of technical papers over the next 18 months.
During that time, we expect the public and political debates in India to evolve dramatically. It is unlikely that the project team will stay out of those debates, even if it wished to do so. The Government has set up an official committee to review basic subsidies and two Food Security Bills are currently the focus of political attention. Numerous economists and other social scientists have taken up positions for or against cash transfers, and no day goes by without at least one newspaper article adding to the debate.
All that can be wished at this stage is that reason will triumph over emotion, and that dispassionate analysis can lead to better social policy. The importance cannot be over-stated. After all, there are more people in India – over 300 million – who are in absolute poverty than in any other country of the world. If a basic income could be part of the way to cut that number drastically, that would be a wonderful contribution. But we must keep our feet on the ground as we grind out the difficult fieldwork and analysis before us.
by Citizens' Income Trust | Apr 30, 2011 | News
1000 Euro for everyone. Freedom. Equality. Basic Income is the title of a new book (€1.000 für Jeden: Freiheit. Gleichheit. Grundeinkommen in the original) by Götz W. Werner and Adrienne Goehler, published in August 2010. According to the Amazon.de website it is currently in place No. 1,563 of all books being sold, but in the category ‘Social Justice’ it is No. 1. It is clearly of considerable significance to find so much interest in a Citizen’s Income in a European country.
An interesting review of this book appears in the January Review of Books in Sp!ked. The first half of the review is factual and informative and is reproduced below (with permission from Sp!ked. You can read the original dated Friday 28 January 2011 at www.spiked-online.com/index.php/site/reviewofbooks_article/10136/ )
The idea that the state should give everyone a basic income has seized the imagination of Germany’s middle class and politicians.
by Johannes Richardt (head of PR and communications at Novo Argumente publishing house)
At the moment, more than €1 trillion flows into the more or less state-controlled German welfare complex every year. Representing one third of German GDP, this vast amount of money covers every social benefit, from child allowance to health insurance. If the economic stats were not striking enough, of the 80 million people living in Germany only 40 per cent earn a wage. So a large proportion of the population is dependent either partially or wholly upon the state.
But the German welfare state does not just provide a financial safety net. It also seeks to regulate the behaviour of benefits claimants through various forms of lifestyle intervention, such as dictating how much claimants should be allowed to spend on cigarettes. In this regard, the so-called Hartz IV legislation, passed in 2005 by the then ruling Green-Social Democrat coalition, is important. Named after its originator, Peter Hartz – then a social democratic trade unionist and manager of part state-owned Volkswagen before being imprisoned for embezzlement in 2007 – Hartz IV effectively revised the status of the unemployed. They were no longer citizens in need of assistance while out of work: they were deemed welfare dependent. They were no longer people fallen on hard times, but fully capable of getting back into work: they were psychologically dependent upon welfare and incapable of getting back into work.
Hartz IV not only produced a new form of state dependency; it also sought to prepare these damaged citizens for work. To this end, a new sector of senseless and unproductive labour for about 1.5 million of the unemployed benefits claimants was created (thus removing them from unemployment statistics). Under the pretext of empowering the unemployed by psychologically preparing them for the labour market, these benefits claimants are forced into absurd and degrading activities run by highly subsidised companies with Orwellian-sounding names like Neue Arbeit [New Work]. One example of this absurd work-for-work’s-sake philosophy is the Toys Company. In more than 60 factories around Germany, the formerly unemployed people work for an extra €1 per hour on top of their out-of-work benefits, recycling second-hand toys for poor children. One task is to check the completeness of second-hand puzzles. ‘The record for completing the 5000-piece puzzle is just 10 days’, explained Toys Company’s manager, ‘although unfortunately we found out that three pieces were missing’. Götz Werner and Adrienne Goehler refer to this example in their new book 1000 € für Jeden. Freiheit. Gleichheit. Grundeinkommen. (€1000 Each. Liberty. Equality. Basic Income.) They argue for a new model of state welfare distribution which would replace the bureaucratic, behaviour-management regime of Hartz IV with one based on a simple premise: the state would pay everyone a basic income.
At first sight their central idea of a basic income for everybody seems quite charming: Every citizen gets €1,000 from the state every month from cradle to grave. As Werner, the billionaire founder of a drugstore chain, and Goehler, president of the Hamburg Art Academy, note, €1000 represents more than just a living wage. They argue that it also enables people to participate in the cultural life of society.
Because this would be an amount that every person would be legally entitled to, there would be no more degrading means tests and interventions in the lives of benefits claimants. The welfare bureaucracy as Germans know it would be redundant: the unemployed would be freed from doing compulsory labour promoted by the state, and the rest of society would be freed from the imperative of wage labour provided by the market. Income would be separated from work. As one would not need to sell one’s labour in order to guarantee an income, the authors argue, people could choose their line of work, for whom they want to work and for how long. This would lead to a new society in which self-realisation, creativity and compassion replace the existential fears created by the current rat race.
The German political class is partially sympathetic to the idea of a basic income. Hence, with the exception of the Social Democratic Party (plus trade unions), all parties represented in parliament have been discussing various models of basic income at some point in the past few years. For instance, in its party programme, the liberal Free Democratic Party calls for a Bürgergeld (Citizen’s Income), an amount paid out whenever necessary but low enough to maintain the incentive to work. Elsewhere, the Greens call for a Bedarfsorientiere Grundsicherung (needs-based basic provision), and even within the conservative Christian Democrat Party there is support for a Solidiarisches Bürgergeld (solidarity citizen’s income).
… Support for the idea [also] comes from the German middle class. Campaign groups with names like ‘Freedom Instead of Full Employment’ and ‘Federal Agency of Income’ have emerged, advertising their ideas on various websites, in films and at events and demonstrations. It is important to note that support for a basic income does not come from unemployed and poorly educated low-wage employees. It comes from privileged and educated young professionals with middle-class backgrounds who, working in poorly-paid, insecure positions in the media and cultural sector, hope for an unconditional basic income to make their lives that little bit more secure. This is no struggle for abundance for all. For these metropolitan types, a basic income promises security, opportunities for self-realisation and psychological well-being.
It is to the fears and prejudices of this post-material milieu that the book €1000 Each speaks. In this way, the book exemplifies the rampant social pessimism so prominent in contemporary Western societies. The authors describe the insecure working conditions of the ‘creative class’, surviving on short-term contracts and project work, as the future for a society that has given up on the goal of well-paid and meaningful work for everyone. According to the authors, only a minority of people will earn their money in secure, long-term work. The rest of us will be left to the fate currently endured by the creative class, the ‘vanguard of precarious conditions’.
Referring to American sociologist Jeremy Rifkin’s 1995 book The End of Work, Werner and Goehler argue that the advance of globalisation, automation and rationalisation has led to a post-industrial society in which production can no longer serve as the basis of societal wealth. Economic growth, they assert, ‘is a dead duck’. Instead, Werner and Goehler urge us to focus on creativity as ‘the only remaining, sustainably exploitable resource of the twenty-first century’. This is why they argue for a basic income. Because to tap into this resource of creativity, while avoiding the social unrest that will come with the shortage of constant, paid work, requires everyone to be accorded a level of material security.
This is where the first half of the review ends. The second half of the review is highly critical of the whole idea of a Citizen’s Income: ‘Basic income, low aspiration: The idea that the state should give everyone a basic income has seized the imagination of Germany’s middle class and politicians. Their enthusiasm is testament only to the poverty of their ambition’ is the full title of the review. In the next issue of the Citizen’s Income Newsletter these anti-CI views will be reproduced and critically examined.
by Citizens' Income Trust | Apr 30, 2011 | Opinion
BIEN-Suisse, Le financement d’un revenu de base inconditionnel, Seismo, 2010, 204 pp, pbk, 2 88351 049 4, 38 SFr
We normally only review books in English, but with this edited collection we make an exception, not because it contains translations from our own publications, but because it is a sustained argument for the necessity and feasibility of a Citizen’s Income.
Peter Ulrich’s preface suggests that if Switzerland is to experience a society of citizens then it needs more equal incomes and more permeable social class boundaries. Increasing automation and the demands of sustainability will between them mean that not everyone will be employed full-time, so a Citizen’s Income will be needed to provide for the necessary more equal incomes and to enable everyone to be employed part-time. Ulrich recommends that 25% of Swiss GDP (the same proportion as is spent on income maintenance in Switzerland today) should be spent on providing every Swiss citizen with a Citizen’s Income of 1,500 SFr Citizen’s Income. Higher taxes would make a Citizen’s Income of 2,500 SFr per month possible.
Bridget Dommen-Meade’s introduction to the book summarises the chapters and links their discussions into an argument for a Swiss Citizen’s Income’s feasibility. Then come three chapters arguing for the feasibility of a Citizen’s Income in Switzerland: Bernard Kundig’s insightful study of long-term changes in the economy and in Swiss society leads into an argument for a Citizen’s Income funded by an increase in consumption taxes and flat income tax; Albert Jörriman suggests a mechanism which would result in the employed giving back an amount equal to the Citizen’s Income, and he suggests how provision for unemployment and disability might relate to a Citizen’s Income; and both Kundig and Jörriman suggest that a Citizen’s Income of 2,500 SFr per month should be feasible. [This is approximately £1,500 per month or £18,000 per annum]; and Jörriman argues that a Citizen’s Income of this level would not discourage paid employment and would encourage self-employment and co-operatives (p.81). Daniel Hani and Enno Schmidt argue for the same level of Citizen’s Income and also argue for funding by an increase in consumption taxation, and emphasise the additional labour market choices in which a Citizen’s Income would result.
The next few chapters are translations of published material about other countries. Marc de Basquiat argues for the feasibility of a Citizen’s Income of €12.60 per day in France; Ingmar Kumpmann and Ingrid Hohenleitner suggest a phased implementation of a Citizen’s Income in Germany, so that the effects on national income can be evaluated; and Pieter le Roux argues for a Citizen’s Income of R100 (about £10) per week per adult. He shows that even though a consumption tax increase considered by itself would be more regressive than an income tax increase, when considered alongside the establishment of a Citizen’s Income it would be progressive. The other two chapters are a translation of Anne Miller’s article on minimum income standards in the third issue of the Citizen’s Income Newsletter for 2009 and the Citizen’s Income Trust’s introductory booklet.
The chapters which advocate consumption taxes as a method of financing a Citizen’s Income give pause for thought to those of us in the UK who have for so long assumed that reduction of income tax allowances and possibly adjustment of income tax rates would be the best method. Also of interest are discussions about the labour market effects of a Citizen’s Income. If a partial Citizen’s Income is likely to provide greater employment market incentives than a full Citizen’s Income then it should be possible to find an optimum level of Citizen’s Income, though probably only from practical experience of different levels. As Dommen-Meade suggests, the long-term effects of a Citizen’s Income are more important than the short-term ones. She thinks the Swiss welfare system ripe for major change, and that a Citizen’s Income is the way to do it. ‘We are convinced …’ (p.27).
Perhaps the most significant finding is that in every European country studied a partial Citizen’s Income is found to be feasible. This raises again the question as to whether a pan-European partial Citizen’s Income might be possible. Not only would this offer all of the benefits which a Citizen’s Income in each country would offer, but it would also promote the efficiency of the European labour market, to the benefit of every European economy. The discussions of funding in the book suggest that such a pan-European Citizen’s Income should be funded by a European consumption tax collected nationally.
Such a Citizen’s Income would probably require Switzerland to join the EU: but that’s another discussion.
