Basic income

6The 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

4 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.

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