The Problems with the Basic Income Discourse

Basic Income came into the mainstream media three or four years ago when Switzerland launched a petition for a national referendum. Since then, the mouvement has grown but it seems to be stalling in its growth. Pilot projects have been ended or closed and other projects have publicly explained how hard it is to run a basic income project. Nevertheless, thousands of people around the world continue to fight and mobilize for the most important social reform since universal health care. The question I ask myself and the mouvement is, “What is the best way to advocate for basic income?”

Google Search Result Trends for Basic Income over the past 5 years


 

State of Affairs

Since 2014, I have been active in the basic income community, acting as the Québec spokesperson for Canadian Basic Income Part Network and as a founding member of Revenu de Base Québec (Basic Income Québec). We have organized activities, met with political entities, conducted interviews and promoted basic income in Canada. I have participated in numerous conferences, read many books and discussed the topic of basic income with many people.

As Basic Income researcher and activities Karl Widerquist has pointed out, we are in the third wave of the basic income movement. He explains,

“Support for unconditional basic income (UBI) has grown so rapidly over the past few years that some might think the idea appeared out of nowhere. In fact, activists have been floating the plan – and other forms of a basic income guarantee (BIG) – for over a century. It experienced a small wave of support between 1910 and 1940, followed by a down period in the 40s and 50s. A second and larger wave of support happened in the 60s and 70s, followed by another down period in most countries until the early 2000s. Today’s discussion took off around 2010 and has grown in strength with each passing year. It is UBI’s third, and by far its largest, wave of support yet.”

However, this third wave has no guarantee of success. Most importantly, the current basic income mouvement is full of contradictory ideas, incompatible political views and overly simplistic ideas of social change. I will not go into each argument in detail, but suffice to say that the mouvement will likely be undone by itself, not by a malicious external actor or a passive general population. Any successful mouvement must focus on a message and propose a concrete change. The civil rights mouvement in the states advocated for equal rights and voting rights for black Americans, the French revolutionaries advocated for a National Assembly made up of normal(ish) citizens and the women’s voting rights mouvement advocated for the right to vote. Basic income seems simple on the surface, but most mouvements are not clear in what they are asking for or why. Without clarity, we will not succeed in gaining the mass political support that is necessary for changing our social safety net and the power structure of society.

Four common arguments I hear for Basic Income:

  1. Automation will force us to implement a basic income
  2. We can pay for a basic income through more taxes
  3. Massive inequality will force us to implement a basic income
  4. Basic income can be implemented without structural reforms to our monetary system

Automation will force us to implement a basic income

In this age of low cost access to high technology and the constant improvement of Artificial Intelligence (AI), automation is seen as a path towards basic income. We are told that our work will be automated and robots and software will do anywhere between 10-50% of what humans are currently doing. This mass automation will create mass unemployment and we thus we need to implement a tax on AI and robots and use those taxes to fund a basic income. Sounds nice.

The issue with this argument is that it goes against all historical evidence of the impacts of technology on labour and society. There is absolutely no evidence anywhere, at any time, in any country, that automation and new technology created permanent and structural unemployment. Yet, we are told that this time is different and we need to prepare. Why it is different remains very unclear. All historical evidence points to the fact that as we automate an industry, all we do is shift resources to a new industry. The transition can be painful and many people struggle to shift jobs, but the main impact of higher levels of automation (otherwise known as efficiency gains) is increased consumption.

One such example of increased consumption when you expect the opposite is the claim of dematerialization – the idea that new technology allows us to replace physical things and will reduce our consumption of raw materials. Vaclav Smil outlines this phenomenon in his excellent book Making the Modern World,

“In an overwhelming majority of cases, these complex, dynamic interactions of cheaper energy, less expensive raw materials, and cheaper manufacture have resulted in such ubiquitous ownership of an increasing range of products and more frequent use of a widening array of services that even the most impressive relative weight reductions accompanying these consumption increases could not be translated into any absolute cuts in the overall use of materials. Indeed, there can be no doubt that relative dematerialization has been a key (and not infrequently the dominant) factor promoting often massive expansion of total material consumption. Less has thus been an enabling agent of more.”

Basically Vaclav Smil is saying that though we have dematerialized industries (paper vs. Digital, phones vs. Letters, digital cameras,…) – all we do is consume more of those materials in other industries.

This counterintuitive phenomenon was first described in relation to energy consumption by William Stanley Jevons, an English economist in 1865,

“It is wholly a confusion of ideas to suppose that the economical use of fuels is equivalent to a diminished consumption. The very contrary is the truth. As a rule, new modes of economy will lead to an increase of consumption according to a principle recognised in many parallel instances
(Jevons, 1865, p. 140;).”

He is saying that savings from increased efficiency of energy conversions have been a factor in promoting more frequent use of that energy source and in driving up the overall use of the energy source. Personally, I can attest to the fact that the reduced cost of air travel has led me to travel more (it’s not just me). The reduced cost of food has led me to eat better food. The lowered cost of telecommunications has led me to get a better phone and send more emails, etc. The list is long.

A few years ago I saw the Canadian ecologist David Suzuki speak. He explained that when he grew up in the 1950s, houses in Canada were on average 1000 square feet. Today Canadian houses are well over 2500 square feet on average. He explained that if only we could stay in 1000 square feet, our consumption levels would be such that the environment would be in better shape and our lives would be better. The problem is, humans enjoy creature comforts. We could all live with less, but we do not want to and never will.

Some on the left blame this on our capitalist marketing driven society that leads us to become mindless consumers. But even they do not shun the luxuries of modern life. They do not give up their phones, safer cars, lower priced clothes or other items that were brought to them thanks to higher efficiency and cheaper labour. The truth is humans want to feel safe and lead rich lives. We do not actually want more than 6-8 weeks of vacation a year and we prefer nice stuff over time. This is just human nature and it is malleable to a certain extent, but not that much.

Bullshit Jobs

A subsection of the Automation Debate, is that we have created a enormous quantitates of “Bullshit Jobs”, a term coined by anthropologist David Graeber. These jobs are defined as soul crushing, mindless jobs that entail either bureaucracy or producing some service that is not really “needed” by society.

My engineering program at University was a Co-Op program, meaning we were placed or took jobs in our field when we were not following courses. I distinctly remember a classmate who got a promising Coop position at a mine in British Columbia. When he returned from his job at the end fo the semester, he explained what he did. He was responsible for monitoring the pH levels of a variety of materials in the mine and titrating the substances and then logging the information in Excel. The job was excessively boring as he was repeating the same task day after day. At the end of his internship, he asked his employer why they did not buy a titivating machine to automate his job. They explained that they compared the cost of the machine with the cost of his internship and decided he was cheaper.

The lesson here is that the cost of labour is a major driver of automation. Had he cost more, they would have bought the machine. Henry Ford said, “If you need a machine and don’t buy it, then you will ultimately find that you have paid for it and don’t have it.”. This is generally true. Increasing labour costs will lead to more automation, but it will just lead to higher productivity and more consumption, not unemployment. Basic income will likely drive up labour costs as workers will have more negotiating power.

Another subsection of the automation argument is that we do not need to work, or we do not need to work in a patriarchal capital directed economy where we do not have freedom. While we could easily debate the benefits and downsides of cooperative organizations vs. hierarchical ones, I prefer to focus on the fact that people get most of their human interactions, identity and self worth through the work that they do. The work we engage in and the people we spend our days with are a huge part of our lives.

Though our work environments are never perfect and our work is never as engaging as we might want, the net benefit of working with other people towards a common goal – even if it is making hamburgers at a fast food chain – responds to our basic human need to feel we are part of something larger than ourselves. This topic of alienation in the workplace is well studied, needless to say I will not resolve the question here. But, if the Basic Income mouvement needs to change one thing – it is to stop labelling people’s jobs as pointless or bullshit. They are not and it is insulting to tell someone that their job is stupid and useless, because if you do you are in a rather direct sense insulting the person for the choices they made or had to make.

So, in conclusion, automation will not lead to mass unemployment, just more consumption and do not tell people there jobs are useless, because they usually are not.

We can pay for a basic income through more taxes

The way you pay for basic income determines what basic income is and how it is perceived. If basic income is paid though increased taxes it will make people perceive it as another social welfare program. This is a massive problem. Last time I checked, people are not marching in the streets for more welfare programs – rather the opposite.

Many participants in the basic income Mouvement do not see paying for BI through taxes as a problem. They proudly proclaim that we can pay for basic income, which at a rate of 1000$ per person per month generally amounts to doubling the government’s budget, through taxes on the rich and corporations. The practical implementation of such a radical tax increase in a globalized world with high capital mobility boggles my mind.

At a recent basic income talk in Montréal, I asked Evelyn Forget, the famed researcher who studies the 1970s Mincome basic income project in Manitoba, “How should we fund basic income?”

She responded that “increase everyone’s taxes and the taxes on corporations.” While there is certainly room to increase taxes on certain parts of society, you cannot double state revenues through income or corporate tax increases. No economist, politician or sensible person thinks that a basic income is fundable through tax increases and if the basic income mouvement proposes this as the path forward it will realize that it has no political or social support from the middle class, who already feel overtaxed and underrepresented (see Brexit, Trump,…). Proposing large tax increases is a death sentence for the basic sentence movement.

Two factors severely limit our ability to raise taxes. First, capital is more mobile than ever. Companies and people can move their money and investments across boarders and into new legal entities faster than government can catch up. If the basic income mouvement proposes to increase taxes to pay for a basic income, they will find that a tax increase of 20-40% is required. This will position basic income as a social welfare program that is transferring money from hard working citizens (who pay the majority of taxes in modern society) to people who want to engage in their passion for African drums.

Basic income advocates need to clearly state that BI will not be paid through income tax, otherwise, the mouvement will never succeed. There are other taxes we could use, but not labour related taxes.

Massive inequality will force us to implement a basic income

Another argument is that the increasing inequality in society will lead to basic income. Again, I do not think there is much historical evidence that massive inequality is met with better distribution of resources by the society’s leaders. The only way to improve distribution of ressources is through social mouvements and though BI may be a social mouvement in some senses, there is nothing inevitable about it correcting inequality. We lived under aristocracy and insane inequality for all of human history and the European revolutions took hundreds of years of work to build materialize (with many failed attempts). The communist revolutions in Russia, China and elsewhere were battles drenched in blood. The only way to reduce inequality is through a massive social battle (usually bloody). Generally speaking, people are willing to live under massive inequality for centuries (not saying this is good, just true).

Even today, fear is an important driver of the modern economy. You cannot eliminate all of that with a basic income. There are some jobs that need to get done, we need people to take out the garbage, man the airports, clear the roads and do the millions of other low paying jobs that a modern global civilization requires. Should these people be paid more? Yes! Should they have better working conditions? Yes! Should they have better social protection? Yes! Should they be better recognized by society? Yes! But, is basic income the solution to their precarious social position, as proposed by Guy Standing? No.

Unions, higher minimum wage and better social programs for daycare, medicare and education are the solutions. Basic income is not a replacement for the social safety net or labour law improvements, it is complimentary. There are a lot of jobs that need to get done and the way to close the inequality gap between low paying jobs and high paying jobs is too increase minimum wage and wages in general (see Australia, Europe,…). Inequality will not lead to basic income and basic income is not a solution to inequality – though it will help.

Basic income can be implemented without structural reforms to our monetary system

Let’s be honest, a real basic income is a massive injection of capital into the lower part of society. This injection of capital into the economy can be done; we saw it happen with the quantitative easing of the banking sector after 2008 where trillions of dollars were injected into the economy without inflationary consequences.

First, it is important that we clarify what money is. Most people think of money as a physical thing, which of course it is not (see Gold standard people). Sometimes they think of it as an immaterial thing that government manipulates and it should be made physical or restricted (see Bitcoin). In the end, money is an accounting system with credit and debt. A central government controls this system (that was not always the case) and tries to keep the credit and debt in check as the economy grows or contracts. Your dollars are simply credit from the government – it is money the government will give you, but in the meantime you can trade it for goods and services. See Graeber on the history debt. This system of credit and debt is pretty good (see modern society), but it has some accounting problems.

Some basic income advocates such as Stanislas Jourdain of BI France have moved from the BI mouvement to a quantitative easing for the people mouvement. There are also basic income advocates who are Social Creditists. Social Creditists are an old and fascinating mouvement who advocate for a form of basic income that is calculated through the purchasing power of consumers and the costs of doing business. They state,

“The faulty nature of the financial system has two fundamental and complementary aspects. On the one hand, the financial system, as it presently operates, generates an ever-increasing gap between the rate at which the prices of ultimate goods and services are produced and the consumer incomes that are simultaneously liberated in the course of their production. This is primarily, though not exclusively, due to the way in which real capital (machines and equipment) are financed and their costs accounted for under existing financial and industrial cost accountancy conventions and the concomitant displacement of human labour. On the other hand, a particular monopoly, i.e. the monopoly of credit-creation currently exercised by banking institutions, makes use of this artificial scarcity of consumer credit to enforce a self-serving policy on the members of economic associations. They relieve the lack of consumer credit (chiefly by issuing loans) but only on asymmetrical terms that transfer purchasing power, property, and control over the economic policy of governments, businesses, and individuals to themselves.

8.The solution to these problems is to create and issue a sufficient volume of debt-free money in the form of the compensated price and the National Dividend to equate the rate of flow of final prices with the rate of flow of consumer purchasing power. This would restore balance or financial equilibrium to the circular flow while simultaneously ensuring that all prices are fully liquidated as they come on to the consumer market. A sufficiency in the rate at which consumer credit is injected into the economy would also provide adequate support for the issuance of additional producer credit up to the physical capacity of the economy or the psychological satiety of the consumer. The rate of flow of producer credit would be released so as to finally correspond isomorphically to the real demand of consumers. Whatever production is physically possible and desired by the population could be made financially possible.”

http://www.socred.org/s-c-theory/what-is-social-credit

While they do not mention a basic income explicitly, the consequences of their proposal are pretty clear. They are particularly concerned about the correction of accounting issues in the modern economy reflected in the gap between wage growth and purchasing power. This blog post cannot outline all the challenges and benefits of that, but suffise to say they are advocating for massive monetary policy changes.

At the end of the day, a real basic income will require monetary policy changes to balance the growing inequality of return on capital with the growth in labour wages. This can be done in a few ways, but basic income may be the most elegant solution. It is important that Basic Income advocates properly understand money and the system that creates and destroys it. We cannot take shortcuts and a real basic income mouvement will advocate for reforms to the monetary system that compensates humans for their participation in society.

Conclusion: A dividend or death

At least to me, it is clear that if the Basic Income mouvement wants to continue to grow, we need to stop stating things that are not true. We cannot pay for basic income through income tax, automation will not lead to unemployment or to a basic income, basic income is not going to solve inequality and monetary reform is necessary to basic income. We need to build a coherent message that is based on a concrete proposal for reforming society and changing the very nature of our relationship to money, debt and labour.

In my opinion, the only viable path for basic income to be put in place is through a dividend system. This system would pay out from our common ressources, state corporations and the issuance of new money at a calculated rate. It’s not complicated and frankly, I think it is an easier sell than a vague and idealistic proposal of taxing the rich or letting robots pay for basic income.

Published on November 17, 2018