Basic income

The case for a Basic Income

What is a Basic Income (often called Citizen’s Income)?

It is a flat-rate benefit paid to all adult citizens / qualifying residents designed to be sufficient for one person to live on – i.e. in principle equivalent to the poverty line in the country concerned. It is payable out of general taxation unconditionally (regardless of other sources of income) and does not affect entitlement to welfare benefits in kind (health care, education, special needs). It will:

  • Guarantee that everyone’s basic needs are covered by a non-means-tested weekly payment, as of right.
  • Replace benefits such as Job Seeker’s Allowance or other forms of income support, as well as replacing personal tax-free allowances.
  • Ensure that anyone who takes paid work will be better off financially for doing so (avoiding the “poverty traps” created by means-testing).
  • Make working part-time a more affordable option for many people who would prefer it.
  • Act as a safety-net to those considering self-employment, so that they have less to fear if their business isn’t successful.
  • Put an end to demeaning benefits procedures and form filling – as well as saving the substantial administrative costs of means-testing.
  • Recognise the economic value of the vast amount of presently unpaid work of family carers.
  • Permit the undertaking of other socially useful / creative (but non-commercial) activities which would not otherwise happen.
  • Raise everyone’s level of dignity and freedom by liberating them from the obligation to undertake paid work in order to survive.
  • Remove the need for governments to find or create jobs for people simply as a means of providing them with an income, an objective which currently justifies huge waste of resources – e.g. not only welfare-to-work schemes but urban redevelopment projects (including the Olympic park) and unnecessary infrastructure (such as HS2) – which could be devoted to more useful purposes.

Against these obvious benefits what are the likely objections?

  1. It would encourage idleness / drop-outs and thus be socially divisive and unjust

This is the most obvious and serious objection in that the idea of an unconditional Basic Income goes against the age-old cultural tradition that each individual should be expected to work in order to acquire entitlement to the means of subsistence. One can easily imagine hysterical tabloid headlines calling Basic Income a “spongers’ charter”. This would undeniably resonate with the mass of voters still deeply committed to a work culture, which probably helps to explain why the UK Green Party, although committed to the idea of BI in principle, has not felt it politically expedient to put it in its election manifesto, opting instead to campaign for highly questionable job creation programmes such as the “green new deal”.

Underlying this is a more serious, albeit unspoken, objection of the ruling élite: that the unconditional right to BI would free the masses from the control of the state / ruling class, which the latter has always exercised through the work culture (from the Poor Law onwards).

Such prejudice and vested interests can and must be confronted on at least two levels:

  1. As recognised more and more widely – even in the mainstream media – the jobs that were generally available 30-40 years ago aren’t there any more and are unlikely to return, particularly on a full time basis. This means that the ideal of “full employment” – always a rather meaningless concept – is no longer tenable in the UK or other industrialised countries (but never has been in the “developing” world). The underlying reasons for this are a combination of a) long-term decline in global economic growth since the 1970s and b) accelerating technological change leading to rising labour productivity. These processes have been compounded by the trend to “globalisation”, which has exposed labour in the industrialised countries to low-cost competition from China and other emerging markets.
  2. The idea that only those engaged in paid work (employment or self-employment) should have entitlement to an income has never been universally applied. In both capitalist and pre-capitalist societies it has been considered legitimate for owners of land or capital (investors) to live off the income (rent) from their investments without necessarily doing any work; indeed until around 100 years ago they had more political rights than those who did work but lacked the property qualification needed for voting rights. They are referred to by Marx as “clippers of coupons” and are familiar from literature (e.g. Bertie Wooster and the Drones Club). In a modern integrated economy it can be and has been claimed that we are all in a sense the owners of the assets that make up the wealth of society, especially as these have been accumulated over generations through the effort and contributions of all. We must obviously reject the right-wing propaganda which asserts that only bankers and company directors are wealth creators – all the more so now that all of us as taxpayers have had to bail out the banks. Rather we should take as our text Isaac Newton’s reminder that the human race has achieved its great advances in knowledge because we “stand on the shoulders of giants”. (Note that this view of common, rather than public / state, ownership is reinforced by the increasingly popular concepts of cognitive capital and the creative commons – which start from the recognition that productive assets are more and more intangible and hard to bring under exclusive private title, which in turn is a function of the IT / cyber revolution. Politically this is translating itself into a revolt against the very idea of “intellectual” property, reflected in the emergence of the Pirate Party as an important political force in Germany – which is also an advocate of BI).
  3. Since the BI would be set at a level of bare subsistence it would not deter most people from seeking some kind of additional source of income – indeed, precisely because it would be non-means-tested and therefore not subject to any poverty trap, it would give people greater incentive to look for work than the existing benefits system.
  1. It would be unaffordable

Studies carried out in the UK in 2009 (sponsored by the Citizen’s Income Trust) suggest that a “full” Citizen’s Income – equivalent to the poverty line (then around £170 a week) could be financed by raising the standard rate of income tax to 57 per cent – after netting off most savings including those from the existing welfare administration budget. However, this makes no allowance for other potential revenue increases – e.g. corporate, capital gains taxation or cutting tax avoidance / evasion.

It may be noted, however, that even though a significant increase in personal taxation may be required to fund an adequate level of BI,

  1. much higher rates of UK taxation (corporate as well as personal) have been applied in the past and were consistent with better economic performance than at present, and
  2. such high rates are currently the norm in Scandinavian countries, where income inequality (and the social ills that go with it) are much less in the Anglo-Saxon countries – see Wilkinson and Pickett, The Spirit Level).
  3. in addition huge amounts of national value added (GDP) that are currently diverted to wasteful investment (including chronically loss-making pension and other funds managed by the City) could be utilised to finance basic income payments that could then be far more usefully spent by individuals.

Conclusion

The above analysis demonstrates that the case for BI is on the one hand practical and economically logical and at the same time morally and ideologically coherent. It is important to recognise, however, that its adoption would imply the necessity for a number of other radical changes, particularly as the introduction of BI is predicated on the need to accept much lower (if not zero) global economic growth, and the related requirement to assure much more equal distribution of income. Given that people and enterprises will still have a propensity to enhance their own income at the expense of others unless restrained, markets will need to be managed / regulated in such a way as to discourage this – e.g. by setting a maximum ratio of highest to lowest rates of pay (e.g. 10:1), highly progressive income tax, restricting trade and investment flows between and within markets so as to limit competition. Hence it would mean ending the “race to the bottom”, the curse of the neo-liberal model of globalisation.

March 2013

5 thoughts on “Basic income”

  1. Like the clear and concise way you write Harry.

    I’ve just come across this idea of basic income from the guest on Max Keiser (KR543) , Barb Jacobson. ( Max should get you on the show) Interesting idea, however, after a bit of thought it occured to me that it could only work if the ability of semi-monopoly suppliers (especially of essential goods, utilities and services) to extract excess profit was curtailed in some way.

    The first thoughts of any company board would be “how can we extract this extra income to our benefit”. The danger would be that this extra ability to consume would, in time, be absorbed into the ‘going rate’ for essentials, leaving little to stimulate or boost consumption in other fields.

    However, if you believe that increasing consumption is a non-starter because of resource constraints, then I feel some kind of transition to some sort of command economy would be essential, especially in utilities, transport and some services. This was my next thought and so I believe your conclusion is spot on. I’ve not found any other article or blog so far making this conclusion – the general suggestion seems to be that a ‘basic income’ would help to return us to some model of BAU. My guess is that little or zero growth will be the norm.

  2. Sorry Harry, as much as I enjoy your writings, this idea is totally bonkers. Try working through the figures using the average UK income of £26,000 and your BI of £170/week. You would be over £50 a week worse off. Good luck selling that to the masses.

    • Unless I’ve misunderstood you, Andrew, you appear not to have grasped that the BI would be unconditional; hence someone on £26,000 / year would keep that on top – although of course the whole would be subject to tax at the normal rates.

  3. Pingback: Universal Basic Income – Marxism 2.0 – Imaginomix

 

 

In place of pensions – why there is no alternative to a Universal Basic Income

The global financial crisis (GFC) has now been on-going for 5 years. All the promises made by politicians in 2008 that they would soon be able to restore the system to stability have been proved hollow. Output and real incomes are still below the level of 2007 – in Britain and most industrialised countries. At the same time the huge debts, public and private, that brought the global economy to its knees – including the “toxic waste” on the banks’ balance sheets – are at least as great as ever.

Although this outcome was predictable, all mainstream political parties, media, trade unions and academic economists even now remain resolutely in denial and stuck in a sterile debate about whether the cure for continued stagnation is to cut or expand public spending – even though it has been obvious from the outset that neither strategy can possibly cut the massive debt burden that is crippling the economy. None of them can face the truth that most of this debt is unpayable and that the only solution is to write it off, in line with the dictates of market forces. In their desperation to avoid such an outcome – which would entail the mass insolvency of enterprises and the wiping out of stock markets and asset values round the world – most governments, including the UK, have now resorted to printing money (officially known as Quantitative Easing) – a practice normally associated with bankrupt governments such as Weimar Germany in the 1920s.

All this obscures the wider truth that
a) the capitalist economic model is as dangerously unstable as it always has been, and
b) in addition it has now been rendered completely obsolete by technological change, just as the rural / feudal economic order was put out of business by steam power 200 years ago.

The failure of our rulers to come to terms with this new reality is shown in their continued insistence that “full employment” is still attainable – presumably based on at least 97 per cent of the labour force being employed for at least 1600 hours a year for at least 40 years of their lives. This despite the fact that millions of jobs (in the UK alone) have been automated permanently out of existence over the last 40 years. In this climate of permanently high and rising unemployment the traditional Beveridge model of social welfare based on contributions from employees – which always depended on maintaining more or less full employment over the long term – has effectively collapsed.

Against this background – which is broadly similar across Europe and other industrialised countries – successive British governments’ attempts to recast the social welfare system look increasingly doomed to fail. Following the nightmare of the Working Tax Credit and other means-tested benefits in a climate of increasingly insecure employment we have to look forward to the coming fiasco of Universal Credit as it is rolled out with cross-party support. At the same time the future of the basic state pension (BSP) seems unclear; although in principle the Coalition’s earlier promise of a flat-rate “citizen’s pension” has now sunk without trace.

Where does this leave pensioners? Since the turn of the century they have seen the “promise” of occupational pensions – based on a guaranteed proportion of their lifetime earnings – increasingly broken, whether in the public or private sector, in response to growing weakness in the economy and financial markets. Although the non-funded, pay-as-you-go BSP model – financed through NI contributions – is much more efficient and viable than funded schemes, it is not clear there will be enough people in employment in future to enable the system to continue working as it has hitherto.

The only logical way forward in this situation must be a system based on a universal, non-means-tested Basic Income for all adults financed out of general taxation. Its essential features will be along the lines described below.

What is a Basic Income (often called Citizen’s Income)?

It is a flat-rate benefit paid to all adult citizens / qualifying residents designed to be sufficient for one person to live on – i.e. in principle equivalent to the poverty line in the country concerned. It is payable out of general taxation unconditionally (regardless of other sources of income) and does not affect entitlement to welfare benefits in kind (health care, education, special needs). It will:

Guarantee that everyone’s basic needs are covered by a non-means-tested weekly payment.
Replace benefits such as Job Seeker’s Allowance or other forms of income support, as well as replacing personal tax-free allowances.
Ensure that anyone who takes paid work will be better off financially for doing so (avoiding the “poverty traps” created by means-testing).
Make working part-time a more affordable option for many people who would prefer it.
Act as a safety-net to those considering self-employment, so that they have less to fear if their business isn’t successful.
Put an end to demeaning benefits procedures and form filling – as well as saving the substantial administrative costs of means-testing.
Recognise the economic value of the vast amount of presently unpaid work of family carers.
Permit the undertaking of other socially useful / creative (but non-commercial) activities which would not otherwise happen.
Raise everyone’s level of dignity and freedom by liberating them from the obligation to undertake paid work in order to survive.
Remove the need for governments to find or create jobs for people simply as a means of providing them with an income, an objective which currently justifies huge waste of resources – e.g. not only welfare-to-work schemes but urban redevelopment projects (such as the Olympic park) and unnecessary infrastructure (such as HS2).

For existing and prospective pensioners such a system would be especially liberating as it would effectively eliminate the distinction between them and other citizens in terms of entitlements – as well as the distinction between working life and retirement. The same applies to those, particularly women, who have devoted much of their adult lives to being family carers. Those who have made NI contributions under the current system could be compensated with appropriate payments as it was wound up.

Such a change to our system of income distribution may seem like a logical evolution from the traditional model, given that the opportunities for earning work-based entitlements are progressively disappearing along with much of the need for labour. But it is also clearly a very radical change from the pattern of economic and social organisation we’ve become used to in the 20th century. Likewise it is easy to see that it threatens the established power of those who have always controlled the masses by forcing them to seek work to survive. That is why they continue to try and prevent such rational alternatives from even being discussed in the mainstream media – or simply dismiss the idea as hopelessly unaffordable.

Despite their best efforts the idea of a Universal Basic Income is forcing itself on to the political agenda in more and more European countries, notably Germany, Italy and Spain. As a result it is now the subject of a European Citizens’ Initiative for an Unconditional Basic Income –http://basicincome2013.eu/ – which is promoting a petition to compel the European Parliament to discuss the idea. Even more significantly, perhaps, it is now to be the subject of a referendum in Switzerland, likely to happen in 2014.

Harry Shutt November 2013

 

 

5 thoughts on “Basic income

  1. Like the clear and concise way you write Harry.

    I’ve just come across this idea of basic income from the guest on Max Keiser (KR543) , Barb Jacobson. ( Max should get you on the show) Interesting idea, however, after a bit of thought it occured to me that it could only work if the ability of semi-monopoly suppliers (especially of essential goods, utilities and services) to extract excess profit was curtailed in some way.

    The first thoughts of any company board would be “how can we extract this extra income to our benefit”. The danger would be that this extra ability to consume would, in time, be absorbed into the ‘going rate’ for essentials, leaving little to stimulate or boost consumption in other fields.

    However, if you believe that increasing consumption is a non-starter because of resource constraints, then I feel some kind of transition to some sort of command economy would be essential, especially in utilities, transport and some services. This was my next thought and so I believe your conclusion is spot on. I’ve not found any other article or blog so far making this conclusion – the general suggestion seems to be that a ‘basic income’ would help to return us to some model of BAU. My guess is that little or zero growth will be the norm.

  2. Sorry Harry, as much as I enjoy your writings, this idea is totally bonkers. Try working through the figures using the average UK income of £26,000 and your BI of £170/week. You would be over £50 a week worse off. Good luck selling that to the masses.

    • Unless I’ve misunderstood you, Andrew, you appear not to have grasped that the BI would be unconditional; hence someone on £26,000 / year would keep that on top – although of course the whole would be subject to tax at the normal rates.

  3. Pingback: Universal Basic Income – Marxism 2.0 – Imaginomix

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s