New Internationalist

Free money is no longer the stuff of utopia

Workers [Related Image]
If your income was guaranteed, what work would you do? USACE HQ under a Creative Commons Licence

For 40 years now I have been advocating for an unconditional Basic Income (BI) – a regular state payment to each citizen of the affluent societies, regardless of work status or household role, also called ‘Citizens Income’. During this time, the arguments in its favour have enormously strengthened. What seemed in the 1970s to be long-term threats to employment security, income equality and free civic participation, have become grim realities, especially for the youngest generation.

Advocates like me were always accused of idealism – of postulating a utopian society in which all would willingly co-operate for the common good. While advanced capitalism supplied growing real earnings for the majority of households (even if two or more members in employment were required to achieve this), why should that majority pay higher taxes to liberate unskilled – and perhaps unmotivated – claimants, made redundant through technological progress? Conditional, means-tested, ‘targeted’ benefits seemed more appropriate, as well as far cheaper.

Democratic arithmetic meant that the idea could never command political support until those on middle incomes began to feel the pinch. We can now see that this was happening long before it was widely recognized; average real earnings have been falling in the USA since the early 1980s and since 2000 in Britain. It was only the vast expansion of bank credit that disguised this shift, leading to the financial crash of 2008.

The prevailing economic orthodoxy of that period told us that as mass production was transferred to the newly-industrial countries of Asia and Latin America, new micro-technologies would provide better-paid work, demanding more sophisticated skills. Tax-benefit systems should facilitate this transition, while education and training enabled it. A Basic Income scheme presupposed a more radical transformation of societies than was necessary or desirable.

But the new IT revolution was quite unlike its nineteenth century equivalent in manufacturing. Instead of enhancing the productivity of a new class of workers, it created opportunities of immense wealth for a few innovative individuals. In February 2014, Facebook (started by a couple of Harvard students) paid US$19 billion for WhatsApp that was invented in 2007 by two down-at-heel computer engineers. The latter had only 55 employees.

New technology concentrates well-paid employment and leaves many with university degrees and skills training without security of income or work. Many middle-class young people are among the staggering 789,000 claimants on whom benefits sanctions (reductions or removals of regular payments) were imposed between November 2012 and November 2013 in Britain. In Italy, Spain and Greece, demonstrations against austerity policies have been led by well-educated protesters.

Meanwhile, the financial crash of 2008 showed that bank credit was an unsustainable basis for household incomes. The convergence of all three of these factors – the declining real value of salaries, a punitive and inappropriate benefits system and the lack of access to credit – makes this the first generation of young adults for whom the radicalism of Basic Income is its potential appeal.

A citizen’s wage would supply an egalitarian floor on which careers could be built, offsetting the insecurity of employment and polarization of rewards in transforming labour markets, but allowing enterprise and creativity to flourish. It would protect against the adverse effects of globalization by sharing some of the wealth generated by highly-mobile capital amongst less mobile human populations.

It would also supply a kind of credit which stabilized the financial system rather than propelling it between boom and bust. ‘Social credit’ was the term used by the 1930s movement that first framed the demand for BI; the need for a sounder source of financial security is as obvious today as it was during that crisis.

Ironically, in Britain, the introduction of the misleadingly-named Universal Credit gives the game away. It admits that radical reform is needed, but does little more than consolidate out-of-work benefits with the rapidly expanding tax credit system for those on low pay. Universal Credit will institutionalize means-testing more comprehensively, with all of its poverty traps and coercive sanctions.

The tragedy for the young generation is that the advantages of a Basic Income scheme have not been publicized. Until they are, demonstrations and protests will lack a coherent agenda to reverse the increasingly oppressive regime of global capitalism.

What do you think? In April’s magazine, Francine Mestrum and Barb Jacobson go head to head in our debate over the merits of a Basic Income.

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  1. #1 Alex 05 Mar 14

    PLEASE STOP CALLING IT 'FREE MONEY'.

    I am a big supporter of Universal Basic Income but it is NOT FREE. It is paid for by the taxes of other working people. Calling it 'free money' is the best way to alienate the right wing who will see it as anything but and be its major opposition. Don't give them any more ammunition than their selfishness already supplies on its own.

  2. #2 Niall McDevitt 05 Mar 14

    Prose poem on the theme: http://internationaltimes.it/ode-to-the-dole/

  3. #3 David Britten 05 Mar 14

    Of course the money is free, because it isn't real. Our money is backed up by nothing more substantial than thin air. When money is in short supply, national banks just create it and feed it into the banking system as debt, and they can create as much as they like this way. It's an insane system in an insane world so why not have free money. It makes as much sense as anything else these days.

  4. #4 Bill Rollinson 05 Mar 14

    I have been advocating this for years now, I see they are actually voting on it in Switzerland, http://www.bbc.co.uk/news/business-25415501
    With a figure of 2,500 Swiss francs a month?

  5. #5 Rupert Russell 06 Mar 14

    While I agree wholeheartedly with the principles of a citizens income I'm disappointed that you've failed to mention the elephant in the room; monetary policy. Just reading the first comment - 'this has to be paid for through taxation' - draws a deep sigh from my tired old lungs. One of the criticisms that is oft bandied about is that we can't afford such a credit system. In our current system where money is created as interest bearing debt by banks and other lending institutions basic income is indeed near impossible to finance. If we can tackle monetary policy then we can tackle basic income. The misconception that there isn't enough money is in dire need of being addressed. It's like saying there aren't enough inches or centimetres!

  6. #6 David Jenkins 07 Mar 14

    This issue needs a whole issue to do it justice. I hope in the future New Internationalist will commit to doing one, especially given the significance of similar policies being used in the majoritarian world (India/Brazil/Namibia).

  7. #7 Hazel Healy 18 Mar 14

    Alex: That's my fault, I wrote the headline, not Bill. I will admit that I was trying to attract attention to the piece - tends to draw the eye more than 'basic income'... But you're quite right, it isn't free.

  8. #8 godenich 19 Mar 14

    I'm still looking for the economic liberal argument for BI, say, ’A Subjective GDP-Indexed Producer/Consumer Liquidity Insurance Fiscal Stabilization Policy' that would give this idea some tooth and claw. I've done my own back-of-envelope scribblings and the notion may work over time. I'm looking for other arguments in the same vein. This idea seems as good or better than Milton Friedman's Negative Income Tax (NIT)
    -
    You don't have to be a social liberal or globalist to appreciate the economic merits of this idea.

  9. #9 Alan Durrant 15 Apr 14

    Good article. I am sure it's an inevitability but because of greed capitalism it will be a battle to accomplish. The Working Class, as always, only receive what they are prepared to fight for.Wage economy cannot last forever and when we accept that there will only be work for around 50% or less who will work and who will opt for the citizen's payment? There are a lot of permutations to contemplate but I am sure the eventual outcome will be state funded credits and hopefully an end to those who receive state payments being labelled as benefit scroungers.

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