On May 31, 2016, John Kay writes on FT:
Swiss voters will decide in a referendum on June 5 whether to introduce a “basic income”. In proposed reforms to the social welfare system, all residents would be entitled to a guaranteed income of SFr30,000 ($30,275) a year from the state — unconditionally.
The concept of basic income has been discussed for decades. It has attractions for people at both ends of the political spectrum. For the left, it offers a simple and comprehensive answer to concerns about poverty and inequality. For those on the right, the plan discharges social obligation with minimum intrusion into personal affairs. The renewed popularity of this idea is part of the general revulsion against mainstream politics that is sweeping the west. Bernie Sanders, a candidate for the Democratic presidential nomination, has expressed sympathy for basic income while stopping short of endorsement. Yanis Varoufakis, the former finance minister of Greece, is a proponent. The scheme gains credibility from loose association with Brazil’s widely praised, but wholly different, bolsa família, which transfers cash to poor families with children in return for a commitment to keep their offspring in school. Yet simple arithmetic shows why these schemes cannot work. Decide what proportion of average income per head would be appropriate for basic income. Thirty per cent seems mean; perhaps 50 per cent is more reasonable? The figure you write down is the share of national income that would be absorbed by public expenditure on basic income. The Swiss government reckoned spending on social welfare would approximately double. To see the average tax rate implied, add the share of national income taken by other public sector activities — education, health, defence and transport. Either the basic income is impossibly low, or the expenditure on it is impossibly high. Most advocates of basic income prefer to keep the argument at the level of general principle rather than engage in the grubby practicalities of numbers. The Swiss proponents explain that basic income “arises from a general fundamental democratic right, the Right to Life”. But even they temper ideals with realism. Obviously children would receive less. Sadly this does not help with the basic maths: even 50 per cent of average earnings for children is insufficient for their support and the same is true for the elderly.
The Swiss supporters of the referendum solve this dilemma by saying that you are not entitled to basic income if you already receive SFr2,500 a month from an employer. Not only does this dramatically reduce costs but it would also have social consequences about which proponents wax lyrical: “Wages in the private sector would be liberated from securing the livelihood of the employee.” Perhaps the writers do understand the radicalism of this proposal. There could be no low-paid or part-time positions. Few work as refuse collector or shelf stacker for the love of the job. So such employment must pay more than the guaranteed basic income. Higher unemployment and radical redistribution of income would follow. Back in the real world, there are two ways to assess household needs for welfare. Contingent benefits target causes of poverty — old age, unemployment, disability, large or broken families. But it is costly and inappropriate to subsidise Warren Buffett, Rupert Murdoch and the Queen just because they are elderly. Income-related benefits address poverty more directly but diminish incentives to work. Social welfare systems everywhere make use of both types of information — contingent and income-related — to balance cost and effectiveness. That is why they are, inevitably, complex.
https://www.ft.com/content/65e606d8-270c-11e6-8ba3-cdd781d02d89
Let me address what is avoided in all articles about a universal basic income – alternatives.
While a Universal Basic Income sounds appealing to those solely dependent on a job or welfare, there is a far better way for EVERY child, woman and man to EARN more income by providing equal opportunity to acquire personal ownership in future wealth-creating, income-producing capital formation using insured (lending protection) capital credit, repayable out of the future earnings of the investments. This would not require anyone to pledge as collateral (past savings/equity as security for repayment).
Using such new owner-creation financial mechanisms would enable EVERY citizen to contribute productivity to the economy, create demand for a higher standard of living, while not taking from those who already are capital owners through taxation to support otherwise non-productive citizens.
We should be looking at how “the rich are getting richer,” not on how we can take and redistribute the earnings of the rich and middle class. Obviously, the distinction between the rich and the non-rich is that the rich OWN wealth-creating, income-producing capital assets, the very essence of technological progress, and the poor only have their labor to sell to the wealthy capital ownership class.
The fact that the core function of technological invention and innovation is to invent “tools” to reduce toil, enable otherwise impossible production, create new highly automated industries, and significantly change the way in which products and services are produced from labor intensive to capital intensive, should surprise no one who is conscious and who has even causally observed the constant shift to non-human productive inputs in the manufacturing, distribution, and sales of products, as well as the delivery of services, that has been occurring during their lifetime.
The urgency is to figure out means for people to earn an income without dependency on jobs. The focus should not be on a pro-job growth future but an alternative to wage dependency as economists across the board predict further losses as AI, robotics, and other technologies continue to be ushered in.
Such future invention and innovation should be financed using mechanisms that create new owners simultaneously with the growth of the economy, while respecting the private property rights who now own, and ensuring that any further concentrated capital ownership acquisition will be abated.
The fundamental challenge to be solved is how do we reinvent and redesign our economic institutions to keep pace with job destroying and devaluing technological innovation and invention so not all of the benefits of owning FUTURE productive capacity accrues to today’s wealthy 1 percent ownership class, and ownership is broadened so that EVERY American earns income through stock ownership dividends so they can afford to purchase the products and services produced by the technology economy.
A National Right To Capital Ownership Bill that restores the American dream should be advocated by the progressive movement, which addresses the reality of Americans facing job opportunity deterioration and devaluation due to tectonic shifts in the technologies of production.
The question that requires an answer is now timely before us. It was first posed by Kelso in the 1950s but has never been thoroughly discussed on the national stage. Nor has there been the proper education of our citizenry that addresses what economic justice is and what capital ownership is. Therefore, by ignoring such issues of economic justice and capital ownership, our leaders are ignoring the concentration of power through monopoly ownership of productive capital, with the result of denying the 99 percenters equal opportunity and access to become capital owners.
The question, as posed by Kelso is: “how are all individuals to be adequately productive when a tiny minority (capital owners) produce a major share and the vast majority (labor workers), a minor share of total goods and services,” and thus, “how do we get from a world in which the most productive factor—physical capital—is owned by a handful of people, to a world where the same factor is owned by a majority—and ultimately 100 percent—of the consumers, while respecting all the constitutional rights of present capital owners?”
There is a solution, which will result in double-digit economic growth and simultaneously broaden private, individual ownership so that EVERY American’s income significantly grows, providing the means to support themselves and their families with an affluent lifestyle. The Just Third Way Master Plan for America’s future is published at http://foreconomicjustice.org/?p=5797.
The solution is obvious but our leaders, academia, conventional economist and the media are oblivious to the necessity to broaden ownership in the new capital formation of the future simultaneously with the growth of the economy, which then becomes self-propelled as increasingly more Americans accumulate ownership shares and earn a new source of dividend income derived from their capital ownership in the “machines” that are replacing them or devaluing their labor value.
The solution will require the reform of the Federal Reserve Bank to create new owners of future productive capital investment in businesses simultaneously with the growth of the economy. The solution to broadening private, individual ownership of America’s future capital wealth requires that the Federal Reserve stop monetizing unproductive debt, including bailouts of banks “too big to fail” and Wall Street derivatives speculators, and begin creating an asset-backed currency that could enable every man, woman and child to establish a Capital Homestead Account or “CHA” (a super-IRA or asset tax-shelter for citizens) at their local bank to acquire a growing dividend-bearing stock portfolio to supplement their incomes from work and all other sources of income. Policies need to insert American citizens into the low or no-interest investment money loop to enable non- and undercapitalized Americans, including the working class and poor, to build wealth and become “customers with money.” The proposed Capital Homestead Act would produce this result.
The end result is that citizens would become empowered as owners to meet their own consumption needs and government would become more dependent on economically independent citizens, thus reversing current global trends where all citizens will eventually become dependent for their economic well-being on the State and whatever elite controls the coercive powers of government.
Support Monetary Justice at http://capitalhomestead.org/page/monetary-justice.
Support the Capital Homestead Act (aka Economic Democracy Act) at http://www.cesj.org/learn/capital-homesteading/, http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-a-plan-for-getting-ownership-income-and-power-to-every-citizen/, http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-summary/ and http://www.cesj.org/learn/capital-homesteading/ch-vehicles/.
