An Economic Bill of Rights for 21st Century: the Universal Basic Income

An Economic Bill of Rights for 21st Century

In the summer of 1967, King announced what was to be the most expansively radical adventure of his life – a national movement called the Poor People’s Campaign, mobilizing Black, White, Hispanic, Native American. It was to demand an annual $30bn federal investment to deliver full employment, guaranteed annual income, 300,000 units of low cost housing per year.

Tragically, Dr. King was assassinated on 4th April 1968, and the April 16 edition of USA Look magazine carried a posthumous article from King titled “Showdown for Nonviolence” — his last statement on the Poor People’s Campaign. The article warns of imminent social collapse and suggests that the Campaign presents government with what may be its last opportunity to achieve peaceful change — through an Economic Bill of Rights. Three weeks after Dr King’s death, the Committee of 100 — set up to lobby on behalf of the campaign – called for just this – an economic bill of rights with five planks to deliver economic justice.

  1. A meaningful job at a living wage
  2. A secure and adequate income for all those unable to find or do a job
  3. Access to land for economic uses:
  4. Access to capital for poor people and minorities to promote their own businesses:
  5. Ability for ordinary people to play a truly significant role in the government

Despite the intervening decades since the Poor People’s Campaign, it is true to say that Dr King would recognise the same issues today as he faced then – inequality, corporate power, racism and militarism. Now, we have other factors that also need to be incorporated – climate change, the total capture and consolidation of political power by the financial and business class; the globalisation of the neo-liberal agenda (north and south alike). So, it is imperative for our renewed Economic Bill of Rights to reflect this.

Among the big ideas, the one that will be integral for us to solve the first 2 demands of the 1968 Economic Bill of Rights in the 21st century is the universal basic income. Continue reading

Real wages in the UK have fallen by more than 10 per cent

Real wage change (%) Employment rate change (percentage points)
Greece

-10.4

-9.0

UK

-10.4

0.6

Portugal

-3.7

-5.4

Italy

0.9

-2.3

Czech Rep

1.1

1.0

Ireland

1.6

-7.9

Spain

2.8

-8.5

Netherlands

3.4

-1.7

Denmark

4.0

-3.2

Lithuania

4.3

5.5

Israel

4.3

1.9

Finland

4.3

-3.8

Belgium

4.4

-0.7

Japan

4.7

2.6

Latvia

4.9

-3.0

USA

6.4

-3.4

Austria

6.5

1.2

OECD average

6.7

-0.6

Slovenia

7.2

-4.3

Australia

7.2

-0.7

Hungary

9.3

5.9

Canada

9.4

-1.7

Sweden

10.1

-0.7

France

10.5

-1.8

Luxembourg

11.1

-1.2

Switzerland

11.3

0.5

Slovakia

12.3

0.9

Estonia

13.4

2.2

Germany

13.9

5.1

Poland

23.0

4.5

Continue reading

The Case for a Financial Transactions Tax

The report argues:

  • A financial transactions tax could likely raise over $105 billion annually (0.6 percent of GDP) based on 2015 trading volume. This estimate is roughly in the middle of recent estimates that ranged from as high as $580 billion to as low as $30 billion.
  • The full amount of this tax would be borne by the financial industry, and not individual holders of stock or pension funds and other institutional investors. Evidence suggests that trading volume is elastic with respect to price, meaning that any drop in trading volume resulting from the tax would reduce costs for end users by a larger amount than the tax would increase them.
  • It is reasonable to believe that the industry would be no less effective in serving its productive use (allocating capital) after the tax is in place. This means that one of the primary effects of the tax would be to reduce waste in the financial sector, reducing costs while having little or no effect on its principal purpose: to allocate capital effectively.
  • The revenue raised through an FTT would easily be large enough to cover the cost of free college tuition (among other social programs), although if nothing were done to stem the growth rate of college costs, it would eventually prove inadequate.

The report also notes that the financial sector is the main source of income for many of the highest earners in the economy. This means that downsizing the industry through an FTT could play an important role in reducing income inequality.

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The effects of poverty costs the UK £78bn a year

The Joseph Rowntree Foundation (JRF) estimates that the impact and cost of poverty accounts for £1 in every £5 spent on public services.

The biggest chunk of the £78bn figure comes from treating health conditions associated with poverty, which amounts to £29bn, while the costs for schools and police are also significant. A further £9bn is linked to the cost of benefits and lost tax revenues. …

The JRF report, called “counting the cost of UK poverty”, estimates that 25% of healthcare spending is associated with treating conditions connected to poverty.
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UBI isn’t really about welfare spending: It’s about tax policy. And it is affordable.

This would be a sound argument if it didn’t miss the point. UBI isn’t really about welfare spending: It’s about tax policy.

UBI is an unconditional cash transfer, which means that you get money from the government to spend however you want. That’s an unusual government spending program. In the US, besides Social Security, the government usually either spends money on a service (like health care or education) or gives conditional cash in the form of things like food stamps.

But the government also spends a lot of money each year on cash transfers through “tax expenditures,” which is the money the government doesn’t collect in taxes because of exclusions in the tax code. Except for the Earned Income Tax Credit, those expenditures almost always help the rich more than the poor. By replacing them with UBI, we would create a more progressive system. That, not the elimination of all government programs, should be the starting place for debates about UBI. Continue reading

Modest but sensible UBI schemes do not make the state any bigger than it already is in most rich countries

The people of Switzerland rejected a proposal for a universal basic income in a referendum last weekend. As Leonid Bershidsky writes, the right conclusion to draw is that the proposal — of paying every citizen a regular amount of money without a work (or any other) requirement — was pitched too high, too soon, and in a place least likely to need it. As he also writes, the wrong conclusion is to bury the idea. …

Claims about the supposed economic unfeasibility of UBI, however, have an unfortunate tendency to intellectual fogginess. …

The relevant reference to the right level of UBI is surely households’ disposable income — the amount they have left on average after taxes and transfers to cover their material standard of living. To be guaranteed 50 per cent of this surely qualifies as reasonable, perhaps too reasonable. But in the UK, for example, “disposable income” (what households have to spend) is less than two-thirds of national income (what the nation has to spend if it does not borrow from other countries). So paying 50 per cent of current disposable income to every citizen would, on its own, cost about 33 per cent of national income. Continue reading

The case for Universal Basic Income

But, after a Conservative government ended the project, in 1979, Mincome was buried. Decades later, Evelyn Forget, an economist at the University of Manitoba, dug up the numbers. And what she found was that life in Dauphin improved markedly. Hospitalization rates fell. More teen-agers stayed in school. And researchers who looked at Mincome’s impact on work rates discovered that they had barely dropped at all. The program had worked about as well as anyone could have hoped.

Mincome was a prototype of an idea that came to the fore in the sixties, and that is now popular again among economists and policy folks: a basic income guarantee. There are many versions of the idea, but the most interesting is what’s called a universal basic income: every year, every adult citizen in the U.S. would receive a stipend—ten thousand dollars is a number often mentioned. (Children would receive a smaller allowance.)

One striking thing about guaranteeing a basic income is that it’s always had support both on the left and on the right—albeit for different reasons. Martin Luther King embraced the idea, but so did the right-wing economist Milton Friedman, while the Nixon Administration even tried to get a basic-income guarantee through Congress. These days, among younger thinkers on the left, the U.B.I. is seen as a means to ending poverty, combatting rising inequality, and liberating workers from the burden of crappy jobs. For thinkers on the right, the U.B.I. seems like a simpler, and more libertarian, alternative to the thicket of anti-poverty and social-welfare programs. Continue reading

The decline of Britain; EU

Because we had survived the war intact we did not realise fully the motives or strength of the European search for unity. We underestimated the recovery powers of the continental countries and the great boost that could be given to their industrial development by membership of a common market. We overlooked one of the prime lessons of our own history, that we had been able to spearhead the industrial revolution in the eighteenth century, not because of our size—we only had a third of the population of France—but because, at a time when the countries of the continent were fragmented by internal tolls and tariff barriers, we were the biggest single market in Europe. We did not perceive fully how the Commonwealth would evolve and the reduced political and economic role that we would have in it. (For instance, we were taken aback when, in 1957, our proposal for a British-Canadian free trade area was turned down by Ottawa.) Continuing for long to believe that we had a unique part to play on the world scene because of our participation in Churchill’s three interlocking circles, we were concerned that too close a relationship with Europe would weaken our influence in the other two circles, those of the Commonwealth and America. Continue reading

The UK co-operative economy 2016

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Share of economic growth enjoyed by workers is at its lowest since the second world war

And the longer the slump goes on, the more the public tumbles to the fact that not only has growth been feebler, but ordinary workers have enjoyed much less of its benefits. Last year the rich countries’ thinktank, the OECD, made aremarkable concession. It acknowledged that the share of UK economic growth enjoyed by workers is now at its lowest since the second world war. Even more remarkably, it said the same or worse applied to workers across the capitalist west.

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IMF: Neoliberalism and austerity policies don’t work

Osborne said his austerity programme would give the government more flexibility in the event of a future crisis, but the IMF said taking out this sort of insurance policy would only be worth it if the benefits exceeded the costs.

“It turns out, however, that the cost could be large – much larger than the benefit. The reason is that, to get to a lower debt level, taxes that distort economic behaviour need to be raised temporarily or productive spending needs to be cut – or both. The costs of the tax increases or expenditure cuts required to bring down the debt may be much larger than the reduced crisis risk engendered by the lower debt.”

The economists rejected the notion that austerity could be good for growth by boosting the confidence of the private sector to invest. It said that in practice, “episodes of fiscal consolidation have been followed, on average, by drops rather than by expansions in output. On average, a consolidation of 1% of GDP increases the long-term unemployment rate by 0.6 percentage points.” Continue reading

Sectoral balances and Clinton’s budget surplus

A sectoral balances analysis starts with the recognition that the U.S. economy, like any national economy, is roughly comprised of three sectors. There’s the government sector: the federal government, the Federal Reserve, and the state and local governments. There’s the private domestic sector: individuals, households, businesses, the banks, all the major industries, etc. And then there’s the foreign sector: i.e. the rest of the world, or every entity outside the U.S. national border that we trade with.

Each of these three sectors are in a state of surplus or deficit at any given moment. The government is either taxing more than it spends (surplus) or spending more than it taxes (deficit). Households and businesses in the private domestic sector are either saving more than they’re spending (surplus) or vice versa (deficit). And the rest of the world is either exporting more to America than it imports (surplus), or importing from the U.S. more than it exports (deficit). (Perhaps confusingly, the foreign sector balance is the inverse of the U.S. trade balance; i.e. a surplus in the foreign sector actually means a U.S. trade deficit.)

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Britain needs to start making things again

At the end of 2015, inflation-adjusted income per capita in the UK was only 0.2% higher than its 2007 peak. This translates into an annual growth rate of 0.025% per year. How pathetic this performance is can be put into perspective by recalling that Japan’s per capita income during its so-called “lost two decades” between 1990 and 2010 grew at 1% a year. …

Unfortunately manufacturing had been so weakened since the 1980s that it didn’t have a hope of staging any such revival. Even with a massive devaluation, the UK’s trade balance in manufacturing goods (that is, manufacturing exports minus imports) as a proportion of GDP has hardly budged. The weakness of manufacturing is the main reason for the UK’s ever-growing deficit, which stood at 5.2% of GDP in 2015. Continue reading

Basic Income, Bullshit Jobs, Poverty and Military Spending

To begin with, basic income would give us all genuine freedom. Nowadays, numerous people are forced to spend their entire working lives doing jobs they consider to be pointless. Jobs like telemarketer, HR manager, social media strategist, PR advisor, and a whole host of administrative positions at hospitals, universities, and government offices. “Bullshit jobs,” the anthropologist David Graeber calls them. They’re the jobs that even the people doing them admit are, in essence, superfluous.

And we’re not talking about just a handful of people here. In a survey of 12,000 professionals by the Harvard Business Review, half said they felt their job had no “meaning and significance,” and an equal number were unable to relate to their company’s mission. Another recent poll among Brits revealed that as many as 37% think they have a bullshit job. Continue reading

Helicopter money – Inflation – Deflation

The only powerful argument against helicopter drops is the one that Heise and Hamada stress – the political risk of overuse. If monetary finance is no longer prohibited, politicians might use it to curry favor with political constituencies or to over-stimulate the economy ahead of an election. Hamada oddly suggests that proponents of monetary finance ignore this risk; but in my own IMF paper, and in Bernanke’s recent blog post, it is a central concern.

History provides many examples of excessive monetary finance, from Weimar Germany to the many emerging economies where governments have pressured central banks to finance large fiscal deficits, with high inflation the inevitable result. So a valid argument can be made that the dangers of excessive monetary finance are so great that it should be prohibited entirely, even if in some circumstances it would be the best policy.

But a valid argument is not necessarily a convincing one. After all, other policies to support demand growth, or a failure to implement any policy, can be equally dangerous. It was deflation, not hyperinflation, that destroyed the Weimar Republic. Hitler’s electoral breakthrough of 1932 was achieved amid rapidly falling prices.

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Anti-China TPP rhetoric is wrong

“As we speak, China is negotiating a trade deal that would carve up some of the fastest-growing markets in the world at our expense, putting American jobs, businesses and goods at risk.”

Actually this is not the way the economy works. If China reduces trade barriers with other countries in Asia, allowing the region to grow more rapidly, then it should also make the United States more prosperous. The region would be a bigger source of demand for U.S. exports and a more efficient provider of goods and services to the United States. That was exactly the logic of the Marshall Plan that helped to rebuild West Europe after World War II. Greater economic integration in the region, even if engineered in part by China, is something that the United States should applaud, not fear. Continue reading

The 5% and the Universal Basic Income

The idea of universal basic income is rapidly gaining traction among people who are worried about (or looking forward to, depending on your view) an ever-more automated future (where workers are replaced by robots and computers) and rising inequality in our society gets ever more acute. However, the idea of a basic income goes back centuries – from Thomas More, Johannes Ludovicus Vives, Marquis de Condorcet, to Thomas Paine and John Stuart Mill, they have all argued a basic income, in its various forms, as a way to solve some social ills and improve social welfare, resulting in a more civilised and equal society.[i]

The danger that we would be underwriting the failures is trivial compared with the benefits the guaranteed annual income would provide us. It would provide dignity for every citizen and choice for every citizen.

Margaret Mead

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Bernie Sanders’ economic plan

Good piece.

But the critics are missing the big picture, which is simple: The United States economy currently spends 17.1 percent of GDP on healthcare, while the UK, Australia, Canada, Germany, Japan, and France spend between 9.1 and 11.7 percent, respectively. All of these countries perform better than the United States, according to standard public-health measures such as average life expectancy. Within the context of the current US economy, the difference between spending 10 versus 17 percent of GDP on healthcare amounts to $1.3 trillion. That $1.3 trillion mark-up in US healthcare spending flows mainly into the coffers of big insurance and pharmaceutical companies. Do Sanders’s critics truly believe that it is impossible to devise a system whose administrative features roughly approximate those in Germany, Japan, the UK, France, Australia, or Canada? They have not advanced any serious arguments to support such a claim. Indeed, many of Sanders’s critics themselves have been proponents of single-payer prior to Sanders’s having incorporated it into his platform. Continue reading