The last time I saw universal basic income discussed on television, it was laughed away by a Conservative MP as an absurd idea. The government giving away wads of cash responsibility-free to the entire population sounds entirely fantastical in this austerity-bound age, where “we just don’t have the money” is repeated endlessly as a mantra. Money, they say, does not grow on trees. (Only as figures on the screen of a computer).
In this world, universal basic income seems like a rather distant prospect. Yes, there are some proposals, like Switzerland and Finland, both of which are holding a referendum on universal basic income. But I expect neither of them to pass. The current political climate is just too patriarchal. We live in a world where free choice is unfashionable. The mass media demonizes the poor as feckless and too lazy and ignorant to make good choices about how to spend their income. Better that the government spend huge chunks of GDP employing bureaucrats to administer tests, to moralize on the virtues of work, and sanction the profligate.
But this world is fast changing, and the more I study the basic facts of economic life in the early 21st century, the more inevitable universal basic income begins to seem.
And no, it’s not because of the robots that are coming to take our jobs, as Erik Brynjolfsson suggests in his excellent The Second Machine Age. While automation is a major economic disruptor that will transform our economy, assuming that robots will dissolve jobs entirely is just buying into the same Lump of Labour fallacy that the Luddites fell for. Automation frees humans from drudgery and opens up the economy to new opportunities. Where once vast swathes of the population toiled in the fields as subsistence farmers, mechanization allowed these people to become industrial workers, and their descendants to become information and creative workers. As today’s industries are decimated, and as the market price of media falls closer and closer toward zero, new avenues will be opened up. New industries will be born in a neverending cycle of creative destruction. Yes, perhaps universal basic income will help ease the current transition that we are going through, but the transition is not the reason why universal basic income is inevitable.
So why is it inevitable? Take a look at Japan, and now the eurozone: economies where consumer price deflation has become an ongoing and entrenched reality. This occurrence has been married to economic stagnation and continued dips into recession. In Japan — which has been in the trap for over two decades — debt levels in the economy have remained high. The debt isn’t being inflated away as it would under a more “normal” rate of growth and inflation. And even in the countries that have avoided outright deflationary spirals, like the UK and the United States, inflation has been very low.
The most major reason, I am coming to believe, is rising efficiency and the growing superabundance of stuff. Cars are becoming more fuel efficient. Homes are becoming more fuel efficient. Vast quantities of solar energy and fracked oil are coming online. China’s growing economy continues to pump out vast quantities of consumer goods. And it’s not just this: people are better educated than ever before, and equipped with incredibly powerful productivity resources like laptops, iPads and smartphones. Information and media has fallen to an essentially free price. If price inflation is a function of the growth of the money supply against growth in the total amount of goods and services produced, then it is very clear why deflation and lowflation have become a problem in the developed world, even with central banks struggling to push out money to reinflate the credit bubble that burst in 2008.
Much, much more is coming down the pipeline. At the core of this As the cost of superabundant and super-accessible solar continues to fall, and as battery efficiencies continue to increase the price of energy for heating, lighting, cooking and transportation (e.g. self-driving electric cars, delivery trucks, and ultimately planes) is being slowly but powerfully pushed toward zero. Heck, if the cost of renewables continue to fall, and advances in AI and automation continue, in thirty or forty years most housework and yardwork will be renewables-powered, and done by robot. Water crises can be alleviated by solar-powered desalination, and resource pressures by solar-powered robot miners.
And just as computers and the internet have made huge quantities of media (such as this blog) free for users, 3-D printers and disassemblers will push the production of stuff much closer to free. People will simply be able to download blueprints from the internet, put their trash into a disassembler and print out new items. Obviously, this won’t work anytime soon for complex objects like smartphones, but every technology company in the world is hustling and grinding for more efficiency in their manufacturing processes. Not to mention that as more and more stuff is manufactured, and as we become more environmentally conscious and efficient at recycling, this huge global stockpile of stuff acts as another deflationary pressure.
These deflationary pressures will gradually seep into services as more and more processes become automated and powered by efficiency increasing machines, drones and robots. This will gradually come to encompass the old inflationary bugbears of medical care, educational costs and construction and maintenance costs. Of course, I don’t expect this dislocation to result in permanent incurable unemployment. People will find stuff to do, and new fields will open up, many of which we are yet to imagine. But the price trend is clear to me: lots and lots of lowflation and deflation. This, ultimately, is at the heart of capitalism. The race for efficiency. The race to do more with less (including less productivity). The race for the lowest costs.
I’ve written about this before. I jokingly called it “hyperdeflation.”
And the obvious outcome, at the very least, is global Japan. This, of course, is not a complete disaster. Japan remains a relatively rich and stable country, even after twenty years of deflation. But Japan’s high level of debt — and particularly government debt — does pose a major concern. Yes, as a sovereign currency issuer borrowing in its own currency the Japanese government runs no risk of actual default. But slow growth and deflation are stagnationary. And without growth and inflation, the government will have to raise taxes to cover the deficit, spiking the punchbowl and continuing the cycle of debt deflation. And of course, all of the Bank of Japan’s attempts at reigniting inflation and inflating away that debt through complicated monetary operations in financial markets have up until now proven pretty ineffectual.
This is where some form of universal basic income comes in: ultimately, the most direct stimulus for lifting inflation and triggering productive economic activity is putting cash in the people’s hands. What I am suggesting is that printing money and giving it away to people — as opposed to trying to push it out through the complicated and convoluted transmission mechanism of financial sector lending — will ultimately become governments’ major backstop against debt deflation, as well as the temporary joblessness and economic inequality created by technological acceleration. Everything else, thus far, has been pushing on a string. And the deflationary pressure is only going to become stronger as efficiency rises and rises.
Throw enough newly-created money into the economy, inject inflation, and nominal tax revenues can rise to cover the debt load. Similarly, if inflation gets too high, cut back on the money-creation or take money out of circulation and bring inflation into check, just as central banks have done for the last century.
The biggest obstacle to this, in my view, is the interests of those with lots of money, who like deflation because it increases their purchasing power. But in the end, rich people aren’t just sitting on hoards of cash. Most of them do have businesses that would benefit from their clients having higher incomes so as to increase spending, and thus their incomes. Indeed, in a debt-deflationary spiral with default cascades, many of these rentiers would face the same ruin as their clients, as their clients default on their obligations.
And yes, I know that there are legal obstacles to fully-blown helicopter money, chiefly the notion of central bank independence. But I am an advocate of central bank independence, for a variety of reasons. Indeed, I don’t think that universal basic income should be a function of fiscal spending at all, not least because I think that dispassionate and economically literate central bankers tend to be better managers of monetary expansion and contraction than politically motivated — and generally less economically literate — politicians. So everything I am describing can and should be envisioned as a function of monetary policy. Indeed, what I am advocating for is a new set of core monetary policy tools for the 21st century.
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If everything will be produced by robots at basically zero costs in the future, why do we need any income ? Income is the receipt for work. So if work is going to be obsolete, abandon income, since all the products will be available for free in the stores. Perhaps even better, abandon stores. People can order everything they need from home on their computers from Amazon and the stuff (including food) will be delivered for free by intelligent robots. They only problem I foresee is: Who is going to take care of the tremendous amount of garbage this new world will be producing ?
Thanks for the excellent article. It opens up the door to a totally new way of thinking about our future on this planet.
For the same reason deflation on a large scale simply can’t be allowed. Mortgages.
Money will likely become less important. We’ll still need it. As for money being a reward for work… that’s what it *used* to be. It’s already not really a reward for work anymore. If it were, the middle class would make way more than they currently do.
The fact is that income and work have been decoupling since the late seventies. This is when automation set in. All profit gains went to the rich who controlled the machines. The working person never saw a dime from this.
In the future, due to the automation juggernaut, money will become even more decoupled from work. Basic income makes perfect sense in such a world.
Re: money as reward for work being something of the past, if you think that has changed you don’t understand human nature. But you’re in good company. Central bankers have proven time and again they don’t understand people, either.
Basic income sounds idyllic until you ask, “Where will it come from?” CBs have been creating money out of thin air for some time now, and look where that’s gotten us. If that unsustainable path is ever to end, the funding for basic income will have to come from higher tax rates on the few who earn money. As it stands now (in the US) taxing the top 1% earners at a rate of 100% would not be sufficient to cover the current expenditures of government.
So, where does this basic income come from?
Money is not created from thin air! When I write a post-dated check, the money which it represents can be used as if it were the real thing, but this is provisional and it must soon be paid for in proper spending-money. The banks are the same. The savings they use and which are thought to re-cycle several times have to be returned before being sent out again. Keynes started this misconception with his multiplier–as if he was not aware of the passage of time. It was a deliberate mistake– an “accident on purpose.”
Thanks to fractional reserve banking, money IS created out of thin air.
When you borrow from a bank, whether via a loan or the use of a credit card, the money is created and the money supply increases. But when you pay back the loan, the money disappears and the money supply decreases.
When you deposit money into a bank, that money doesn’t sit on a shelf. The amount you deposit becomes a debt to the bank, but the bank is allowed to lend multiples of that amount in new loans.
Most people don’t understand that money is debt, and the CBs would prefer you not know how it all works.
It is not “multiples” of its debt that the bank is allowed to lend, but the money itself, and it can only lend it once until it is returned. Paul seems to believe that this Keynes multiplier effect is actually true, but Keynes did not (deliberately) allow for the passage of time–his mythical multiplier still lives on in the minds of the unrealistic pseudo-scientific economists.
“Re: money as reward for work being something of the past, if you think that has changed you don’t understand human nature.”
Do a google image search for “the great decoupling”.
“But you’re in good company. Central bankers have proven time and again they don’t understand people, either.”
Please refrain from attacking me, rather the idea I have presented.
Obviously “work” has always been a four-letter word, but when did it become a derogatory four-letter word? Work creates self esteem when that work involves the creation of something worthwhile – whether it is building something by hand or writing a really good article. Money has traditionally been the measure of the worth of one’s efforts.
(Alas, for too many corporate cogs, work does not add to one’s self esteem which may explain why the idea of helicopter money has become popular.)
But money in exchange for…nothing is disheartening. Ask a few people on the dole.
You’re following the neo-austerian neo-Victorian fashion. Economics is not a morality play. A vast quantity of economic exchange today has nothing to do with work. It is about investment. UBI invests in the entire public and underpins demand.
I actually agree with you that work creates self-esteem, but there’s no reason to tie that to monetary exchange. Not everything has to have a marketplace value to have a value.
A UBI that is global, and funded with the interest on sovereign debt, through Commons shares, enfranchises each sovereign human in the economic system, invests in the entire public, and underpins global demand.
Couldn’t agree with Paul more: https://standardsoflife.org/principles/a-life-of-work/
UBI is the inverse of taxation, which is clearly the provenance of elected parliaments and congresses. An authority they are exercising already through various welfare programs. Are you seriously suggesting that power be handed to unelected central bankers that primarily represent the interests of moneyed powers?
Or instead one could replace welfare with UBI as you suggest (negative taxation), have the fiscal authorities issue debt through the usual mechanisms and the central banks agreeing to purchase that. Which is what has largely happened with various QE programs.
There needs to be a political process to work out how much UBI and to whom (e.g. Children at 50% going to parents’ accounts). A lot of complicated issues since UBI can replace government retirement programs as well.
I agree with your comment about central bankers. Here in NZ the CB has performed abysmally with regard to its prime function–generating inflation. In the US, Yellen is submitting to political pressure in raising interest rates prematurely. perhaps a middle ground between government and a CB is a properly formed (I.e. no ideological or party cronyism) fiscal council.
What if the power was handed to millions of local bankers?
By simply requiring sovereign debt to be backed with Commons shares, each adult human would collect an equal share of the interest, from their local bank, where the share is held in trust and invested by the local bank.
Current sovereign debt would pay about $10-20/ mo to each adult human, but the structure would exist, and the central banks would be encouraged to borrow more, at a sustainable rate, as revenue increases.
I managed to listen to 18 minutes of this diatribe before giving up. It is wrong on so many levels I could write a book to disprove it (and I may).
But for the sake of brevity, let’s start with this fact: the amount of money in existence is not static. The money supply ebbs and flows based on investment and borrowing. The algorithm mentioned would have to be readjusted every minute.
The tax mentioned would constantly reduce the bank balance of every person every time they earned another dollar and increase someone else’s balance. It would penalize earners even more than progressive income tax schedules presently in existence.
What is not mentioned (although it might be later if I could bear to listen to the rest of the speech) is the bureaucratic cost of managing this mess, which would siphon off a percentage of the money, benefiting no one but the bureaucrats.
Impressive you got 18mins in. I gave up after 1.
A NIRP inflation-like tax taxes an amount of money. Income tax taxes a flow of money. With a inflation-like tax all of the money you earn is yours to spend, but the longer you hold it the more is lost due to the tax. With a income tax a percentage of the more you earn is immediately taken the distributed to someone else. Wouldn’t it be better if you have a chance to spend your money (with an inflation-like tax) rather than have it taken immediately (with an income tax?) Having the choice to spend the money you earn is not a penalty. Replacing the income tax with a NIRP inflation-like tax is an indemnity that secures and protects earners even more then the progressive income tax presently in existence.
With a income tax a percentage of the *money* you earn is immediately taken the distributed to someone else.
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Wealthy organizations build robots because its cheaper to use them in the production process than hiring people to do the same thing, and they make fewer mistakes. So instead of becoming morons in these repetitive jobs, as workers used to be, we can now find cheaply made but highly priced goods we can no longer afford. I would rather be a moron.
All people are not created equal.
Some are clever, some are stupid. Stupid used to till a field, stupid used to work a biscuit packing line, stupid CANNOT innovate, invent or program or research or or or.
Basically, a very large proportion of the human populace needs a very simple task that they just repeat, then they go home and watch the Kardashians and feel happy. Human intelligence is not on some sort of evolutionary ride to the moon so that we can eliminate all the drudgery and repetition, we NEED the drudgery and repetition because it is all a very large chunk of the populace can do.
what about making society cash less and levy a negative interest on bank accounts…e.g if u have £100k in the bank you pay 0.25% interest a month ..this would make people spend money which would in turn stimulate the economy..obviously something would have to be done to stop people buying property…
Japan has tried that. Once again, central planners fail to understand people.
If someone is putting money into a savings account, they have a reason to save. When you take away part of those savings they save MORE, not less. If they wanted to spend it, they wouldn’t be putting money in a savings account in the first place.
Why would you want to stop people from buying property? Wouldn’t it be better if everyone owned their property outright and didn’t have to rent? It is the fact that people are “unpropertied” that makes them debt slaves and contributes to poverty. If you want to end poverty and get working people out of debt then you need to encourage them to buy property. So, obviously, something needs to be done to encourage people to buy property. An Negative Interest Rate inflation-like tax on bank accounts will encourage people to buy, sell and trade property in the market and if it is coupled with a Universal Basic Income it will cause balance in property ownership over time.
If you will please, consider this notion for a global system:
Duniter is developping a P2P Universal Dividend based money system on top of a Web of Trust of users. https://en.duniter.org/
Ah yes, right: Basic Income ALWAYS comes with Magic Money.
A BI would ALWAYS have to sit on top of a public service infrastructure, which means it competes for that (unless you have Magic Money).
BI is a dead end: https://properchangedotorg.files.wordpress.com/2016/03/ci-a-dead-end.pdf
How about not magic money, how about the interest on sovereign debt?
Simply requiring sovereign debt to be backed with Commons shares, that may be claimed by all adult humans, as compensation for signing a social contract that includes a requirement to deposit the share in trust at their local bank takes an existing cash stream and distributes it equally to all adult humans, and requires the reinvestment of a couple hundred trillion dollars currently backing sovereign debt.
Without taking anything from anyone, or increasing taxes.
Current sovereign debt would pay about $10-$20/ mo. and would be expandable as revenue increases, or as sovereigns decide to borrow more at a sustainable rate.
You know absolutely nothing about economics. It must be nice living in a dream world.
How is it that the suggested change would not produce the stated outcome?
Or do you know even less?
Are you still seeking the truth, or have you enlisted in one of the two armies?
Interesting comment. It’s almost as if you have been reading my website. 🙂
Seemed appropriate, since I invited you to read mine. I enjoyed the read.
It’s OK, we don’t need magic money, or multi-tiered fiat constructions.
We can do Basic Universal Services, and that IS affordable from a reasonable tax.
If you characterize the notion I’ve forwarded as multi-tiered, you are reading in something not presented.
As for micro-managing individuals’ existence, that is an unnecessary restriction of freedoms, and imposition of detailed programs, with the accompanying administrative costs.
People do not need this.
People need enfranchisement, in the simplest,and most equitable fashion possible. And this enfranchisement must be global, to provide global economic stability.
This guy appears to agree: “Globalized redistribution can of course hardly be expected to take the form of a complex, subtly structured welfare state that stipulates precisely what qualifies as a relevant need and the conditions under which, the way in which and the extent to which social solidarity will cover it. If it is ever to come into being, it will need to take the form of very simple benefits funded in a very simple way. Cultural heterogeneity being maximal at the world level, we cannot expect a sufficient consensus to arise on anything very detailed. But should this heterogeneity not also make us doubt that we shall ever get anything on that scale?” Philippe Van Parijs, 2011 “The Universal Basic Income Approach: From Europe to the World”
But… we can expect LOCALIZED redistribution to of course be expected to take the form of a complex, subtly structured, and locally defined basic social safety services.
the fact that it makes itself affordable being one amongst many advantages of Universal services. https://standardsoflife.org/standards/material-infrastructure/sustainable_economics/
But, go ahead, carry on arguing for the redistribution of money as the best way to deliver human solidarity. It’s a nice idea, it’s just not going to happen (because you are running up against millennia of evolution of human nature). See https://uklife.org/2015/01/15/promises/
Why should we expect that?
People can arrange their basic services themselves, based on their particular needs, desires, and living situations, if they have a basic income, without any government involvement whatsoever.
With that as a base, local social safety services would be saved that much effort, which is significant.
People can arrange these things with promises, in the form of contract, which is also supposed to be the basis of society, in the form of a social contract, which to this point is only a vague notion.
The basis of global enfranchisement is manifesting actual social contracts, actual written promises, between and among individuals and governments.
And the basic income derived from this enfranchisement is not a redistribution of money, as again you mischaracterize, but an initial distribution of the interest on global sovereign debt, which is reasonably shared by all who own it.
Perhaps, being so close, and straining to determine the best way to care for all the people, you lose track of the reality that people have been getting by in spite of all manner of controls placed on them. If we are to free people, to be their best selves, we can not seek to control them.
Pay them all their due, and let them make promises among themselves, within the constraints of a social contract.
Although I’m not a fan of powerful governments, what will you do with those individuals who do not keep their promises? Do you really believe all people will be honest and ethical? Laws, when regulated equally, and courts, when some don’t follow the rules, are necessary in any civilized structure. The fact that laws and punishment are often not distributed equally should be evidence that not all people act ethically. Your plan requires all people to act appropriately. Good luck with that.
Where did I suggest doing anything to alter the current legal system?
A major feature of the structure is that it simply codifies the assumed social contract, making it part of the law that one may accept, in exchange for a share of the Commons, and what ever additional provisions are included in the local social contract.
It doesn’t even require anyone to claim a share, but the law will more just for those who do, because they will be compensated for their cooperation.
Anyone violating any law will still be subject to existing, compliance and justice systems, whether or not they accept a social contract.
The fact that laws and punishment are often not distributed equally is hardly a reason to not distribute this income stream equally, and that is all this structure is intended to do.
I understand your position and I realize you don’t see a problem arising from people who may chose to opt in but then fail to comply with the contract’s terms. I like to think I am a realist. Sometimes realism involves justifiable pessimism.
When an attempt is made to extend a policy worldwide, one encounters the many cultural differences existent that makes universality unworkable. If the contract is subject to local laws it will not be consistent across the globe. It may well be worth pursuing locally – in some locales – but it doesn’t seem to be universally applicable.
To be economically feasible it would seem to need the participation of entire nations if not the cooperation of multiple nations. Unfortunately in this case, democracy works best in small groups (when it works at all).
In a novel I wrote (After the Blackout) I proposed a radical economic plan for a smallish town completely cut off from the rest of the world. While I believe it might work in those circumstance, I acknowledged it could not be expanded to a large geographic area. Micro- and macro-economics require drastically different approaches.
The participation of all nations is already in existence, in the form of banking regulations. This is simply a proposed banking regulation, to distribute the interest on sovereign debt directly to each adult individual on the planet, and to bring greater stability to exchange and trade.
Any problems associated with individuals defaulting on contracts, or what local laws are, or how those laws are enforced, have nothing to do with the distribution of a flow of income that is the reasonable property of all people, to all people.
A social contract would be the instrument one uses to claim a share. There is no reason that all social contracts should be the same, only that they claim a Commons share, that is the feature that allows the structure to work across cultural boundaries.
Again, criminal, and civil, justice systems currently exist, locally and internationally. This simple banking regulation would have nothing to do with any of that.
Thanks again, for your kind indulgence
What I keep forgetting to point out to folks with major social changes in their solutions, is that granting this level of enfranchisement in the global economic system does nothing to alter the validity or acceptability of those solutions.
Those solutions, and yours specifically would appropriately be presented as a local social contract, and if accepted by the enfranchised citizens, would be manifest. And that would be fine, though in most cases, the enfranchisement, and basic income derived from it, would tend to enable any beneficial change a community wishes to make.
Those millennia of human evolution have created the current system, which you propose significant changes to, where I suggest only the global, equal distribution of an existing income stream to the people, instead of wealthy investors.
You propose the government decide what basic needs are, and how they will be provided, and I suggest we just let the human nature make those decisions.
Your proposal would provide basic services for all the people of your country, and continue the extraction from poor countries. Where mine would provide access to sustainable interest loans to those countries, so they can prosper, as they support the prosperity, and stability of the rest of the world.
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Hier nennt der Autor Zeiten wie: Wegzeit zur und von der Arbeit;
Fahrzeiten mit dem Auto, den öffentlichen Verkehrsmitteln (Bahn, Bus,…); Wartezeiten jeder Art; Zeiten während Routinetätigkeiten (Hausarbeit,
Bewusst essen und genießen ist der Schlüssel zu einer
gesunden Ernährung im Alltag.
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A petition on Universal Basic Income. Sign if you like!
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The article admits that as a “sovereign currency issuer borrowing in its own currency, the Japanese government runs no risk of actual default” but then argues that “without growth and inflation, the government will have to raise taxes to cover the deficit”.
These two statements cannot both be true.
A currency issuer spending into the economy for good purpose MUST tend to stimulate growth in the economy, not depress it, and a sovereign currency issuer by definition does not need to raise “taxes to cover the deficit” – it can just pay it off.
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This is simply a proposed banking regulation, to distribute the interest on sovereign debt directly to each adult individual on the planet, and to bring greater stability to exchange and trade. The biggest obstacle to this, in my view, in the interests of those with lots of money, who like deflation because it increases their purchasing power. But in the end, rich people aren’t just sitting on hoards of cash.
That is a useful notion.
What’s it got to do with ornaments?