In early February, members of Unconditional Basic Income Europe (UBIE) attended the launch of a new European movement for democracy named “DiEM25” and key speakers like Katja Kipping from the German Left Party and Caroline Lucas from the UK Greens called for a basic income to be one of the key demands for the new movement. Many of those in attendance agreed that UBIE and DiEM25 shared many of the same goals and a basic income could go a long way toward securing social citizenship and a life of dignity for every European.
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The Eurozone clearly needs a structural yet flexible central bank policy instrument that can be used to kick-start the economy as and when it is needed. A miniature version of the increasingly popular basic income policy would provide exactly this type of instrument.
By Willem Sas and Kevin Spiritus, originally published in Flemish Newspaper De Tijd, translation by Will Wachtmeister.
Can anyone remember what times were like before the crisis? When “cut-backs” was a word ascribed to the 1990s. When growth rates were healthy and inflation stable. When the benefits of a unified single European currency were still plain for all to see. Memories of those times have been fading rapidly. Especially so with persistent wage stagnation, mounting inequality and interest rates that have been reduced to basically their lowest possible level. Is there really no way out?
A policy response that is often put forward is looser monetary policy, the proverbial printing press. And since 9 March, the printing press has been in full swing in Europe too. Under the established label quantitative easing (QE), the European Central Bank has, after four years of hesitating, begun spending billions on buying up assets. This involves buying up private loans just as much as government bonds. The hope is essentially that this will stimulate both private and public investment.
Unfortunately, QE will not necessarily lead to more economic investment within the European Union. Insofar as public authorities aren’t able – or allowed – to invest, insofar as the financing doesn’t reach businesses and businesses don’t want to take on loans, QE will prove a fruitless endeavour. At the same time, QE could well lead to even more debt: by stimulating the economy through credit creation, it potentially blows more air into the bubbles caused by the most recent crisis. A massive buy-up of bonds and shares will in the end also cause asset-price rises, with the benefits going mainly to larger, wealthier investors.
This all means that success is far from guaranteed: the approach is fraught with risks and has damaging implications for equality. QE thus does not appear to be the best way forward for Europe. This is why there are economists who propagate a more efficient alternative, the so-called “helicopter money” approach. For as long as the economy fails to recover, newly printed money is simply distributed directly to the general population, as if it were dropped from a helicopter. Research shows that the money would be spent pretty much straight after it’s received, which would restore confidence to invest among businesses. It would also restore business confidence to take on new employees, who in turn respond by consuming more. And so the result becomes a virtuous circle.
But there are drawbacks. Sharing out helicopter money is a temporary measure that can only be adopted in exceptional circumstances. If at some point it transpires that the ECB has gone too far and created a threat of runaway inflation, it is very difficult to remove the newly created money from the economy. This is why there is a clear need for a structural and flexible policy measure which the central bank is able to use to kick-start the economy as and when it is necessary.
A variation on the helicopter theme, a monetary basic income, provides a way forward. Under this scenario, the ECB would distribute an amount of money to each citizen on a monthly basis, calculated as a percentage of average income (the amount therefore varies between countries). Let’s assume for the sake of simplicity that the amount is 400 euros a month throughout the Eurozone. It’s important that the individual Eurozone countries remain responsible for raising the 400 euros – for example by reducing benefit payments or tax allowance levels – whereupon they pay it back to the ECB.
So far, this is a neutral measure that shuffles money around without creating a stimulus. This remains the case except in times of crisis when the central bank increases the monthly payment to, say, 600 euros, until the economy recovers. Meanwhile, each national authority keeps its repayment levels fixed at 400 euros. The ECB thereby ends up printing an additional 200 euros per person per month, and this money is relatively quickly spent. As the economy recovers and growth and inflation figures rise, the basic income can be returned to the neutral level of 400 euros. In cases where the ECB had been too generous, the basic income level could even be lowered temporarily to 300 euros until inflation stabilizes. This would essentially remove money from the economy.
Viewed as a monetary policy instrument for tackling crises, this type of basic income can hardly be considered an indulgence. But there is more to it than that. The approach also does what it says on the tin: it is a miniature version of exactly the sort of basic income which increasingly features in public debate. Supporters claim that a structural basic income would provide a way of dealing with automation, growing inequality as well as the stress and agitation of everyday life. It would also enable people to be more creative and entrepreneurial.
This last point is far from a certainty and in effect represents the biggest drawback of a basic income policy. How many people would actually invest in new skills? And what will happen to the labour supply? There do exist several economic models that simulate the effects of minor reforms but when it comes to the effects of a comprehensive reform such as basic income, we’re very much in the dark.
As long as we can’t anticipate the consequences of introducing a basic income, making a case for it will remain difficult. And because the advantages will only really be felt when basic income is set at higher amounts, introducing it step by step is just as problematic.
Here our proposal for a limited monetary basic income offers yet another opportunity. To be sure, we don’t expect an amount that guarantees a dignified life to be introduced from the outset. But our proposal does allow economists to research the effects of a large income shock. When the central bank increases the monthly payment in times of crisis, this will generate a great deal of valuable evidence. As soon as the positive effects are ascertained, the neutral-level basic income can be increased step by step, eventually reaching the point of a fully-fledged basic income.
So we have stronger guarantees of success, less risk, and more equal opportunities to boot. That’s a better idea than quantitative easing for a start.
Willem Sas and Kevin Spiritus are completing their doctorates in public economics at the Center of Economic Studies at Belgian university KU Leuven.
Credit Picture CC Bobby Hidy
In general terms, power is “to make someone want what you want”. You can use hard power – physical force or punitive measures, such as economic sanctions – to achieve this goal. However, there is another way – you can appeal to the reason of those, whose behaviour you want to change, by rewarding (sometimes seducing or bribing) means. The latter is called soft power.
In this article I use the conflict between Russia and Ukraine to show how a basic income – a regular payment to individuals irrespective of their income – could strengthen soft power.
As some of you may already know, I witnessed 2013/14 the revolution in Ukraine. Last year, right after the revolution, Crimea was illegally annexed by Russia and soon after Russia-supported terrorists have started a military aggression against Ukraine in the east of the country. As a response, the European Union, the United States and several other countries have introduced economic sanctions against Russia. This was legally backed up by the General Assembly of the United Nations, when more than 100 countries voted to affirm the territorial integrity and sovereignty of Ukraine and made it very clear that the phoney ‘referendum’ in Crimea was illegitimate and illegal.
However, a group of investigative journalists found out that the realisation of the EU sanctions is not controlled. Each member state decides on its own, whether to implement the sanctions or not. As a result, almost no assets of sanctioned Russian and pro-Russian Ukrainian politicians, officers and businessmen were seized as intended by the EU. Later, the Institute for Economy Research in Vienna conducted a study on how the EU economy could be affected by their own sanctions. The findings showed that in a worst-case scenario about two million jobs and a value added of 100 billion euros could be lost within the European Union, if the sanctions were, in fact, implemented. On top of that, Ukraine is far from being the only problem in Europe. The euro crisis, the situation in Greece, and a swing to the far right are setting alarm bells ringing in the EU.
Thus, an euro-dividend proposed by Philippe van Parijs – a similar idea to basic income – would make the unemployment issue in the EU less dramatic, because it provides a social security net. Either proposal could solve the euro crisis or the situation in Greece, and also help stop driving excluded people to political extremists.
Now you may think that basic income would rather strengthen hard power than soft power, since the EU member states would get an opportunity to sanction Russia without having negative effects on their own economy. Your way of thinking is right. However, basic income does also strengthen soft power.
According to Joseph Nye of Harvard University, a country’s soft power rests on three resources: “its culture (in places where it is attractive to others), its political values (when it lives up to them at home and abroad), and its foreign policies (when others see them as legitimate and having moral authority).”
Taking these resources into account, a basic income could strengthen soft power, because it makes it easier for the EU to implement the foreign policy by imposing sanctions against Russia (legitimated by the UN) and, most importantly, by having a moral authority – as the EU would show it cares about its people and does not leave them economically alone with the effects of those sanctions.
This picture, which was at the barricades on the Maidan in Kyiv, shows that Ukraine wants to go with the EU instead of being dependant on Russian gas and adopting an authoritarian system like in Russia (picture by Ralf Haska)
Thinking back how the “Revolution of Dignity” in Ukraine started, it is obvious that the EU attracted Ukrainians with its culture and political values. When the former president Victor Yanukovych refused to sign a long-negotiated Association Agreement with the European Union, it caused deep indignation among many Ukrainians. Even now, when Ukraine is war-torn and facing huge economic recession, to a great extent, due to the corrupt regime of Yanukovych, the EU is still more attractive than the authoritarian regime of Russia to most Ukrainians.
However, Ukrainians have to pay an enormously high price for their European choice. Beside the fact that there is an on-going military conflict in Eastern Ukraine resulting in tragic human loses, displacement and destruction of homes and infrastructure, they have to accept painful reforms, which decrease their income. They have to face inflation, increasing costs (mainly for energy), the devaluation of the national currency (hryvna lost more than 100 per cent from its value before the revolution) and unemployment (thousands of civil servants lost their jobs in the state sector and the jobs in the private sector are not secure).
A basic income could help Ukraine solve several problems – mainly related to corruption and social politics. Ukrainians are not job-, but rather “income-less”: myriad volunteers have been helping and supporting more than a million internally displaced persons, the army, bereaved family members of killed or wounded civilians and soldiers all over the country. Even the most needy Ukrainians are willing to share what little they have to help and defend their country. The question may arise: what for?
If the EU is selling its moral values by caring more about the welfare of its economy and defending its assumed status quo rather than caring about the well-being of its people, it might lose its soft power by disappointing not only Ukrainians, but also its own people. Therefore, I think a basic income could strengthen soft power – by being attractive through common shared values and bringing back the end of the community of states to its origin: keeping peace within and among countries and in the world.
 Samantha Power, answer at Facebook, approximately 2:30 minutes, 16. May 2015
 Video of Joerg Eigendorf (English, approximately 3 minutes), Die Welt, 19. June 2015
 “Strange Bedfellows: Putin and Europe’s Far Right”, World Affairs, by Alina Polyakova, autumn 2014
 Video of the lecture by Philippe van Parijs: “No Eurozone Without a Eurodividend” (approximately 1,5 hours), BIEN-Congress in Munich 2012
 Interview with Guy Standing (approximately 2 minutes), 14. February 2010
 “The Future of Power” by Joseph S. Nye, chapter “Sources of Soft Power”, PublicAffairs, 2011
 “Opinion: Basic Income and the Ukrainian Revolution” by Joerg Drescher, 30. December 2013
 “Opinion: Universal and Guaranteed Income? A Matter of Basic Rights” by Emanuele Murra, 30. April 2012
Further readings on soft power:
A Theory of Soft Power and Korea’s Soft Power Strategy
New EU Commissioner, Marianne Thyssen, in an interview for Social Agenda magazine is asked “How can the EU Economic and Monetary Union become more social?” answering, in part “We should think in terms of minimum standards. For example, having a minimum income in every EU country, based on a reference budget.”
Social Agenda, “Marianne Thyssen, job creation and a fairer society (p23)”, Social Agenda, 23 December 2014
Does newly designated president of the EU Commission Jean-Claude Juncker endorse unconditional basic income? He claimed so back in 2006.
In 2006, the former Luxembourg prime minister jean-Claude Juncker declared: “In Europe we need a basic income for all.” In an interview published by German newspaper Frankfurter Rundschau on 20 november, Juncker affirmed: “The European Union must also be a social union” And to the question: “What are the minimum standards they hold in the EU for essential?”, Jean-Claude Juncker answered:
“A basic income. That means that anyone who lives in an EU member country is entitled to a minimum income has. This of course does not have to be the same everywhere. Brussels cannot set the height but should formulate basic rules for a social safety net”.
Now Juncker will assume the president of EC for a renewable term of five years. In an impassioned speech Juncker vowed to revive Europe’s economy with a €300bn industrial plan that aims to create jobs for the EU’s 25 million unemployed.
The aim is to restore once again a supply policy in support of the business system, aimed at re-industrialization of Europe (“We need a reindustrialisation of Europe” Juncker stated), just as the creation of wealth is induced more by immaterial production assets with higher added value and by knowledge economy. No mention of both the crisis of consumption and demand that of the increase in poverty. And of Basic Income, too.
Credit picture: CC European Peoples’ Party