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2011-12-10

Basic income – an idea to bring stability to our economies

Update 2012-01-06: There is an initiative for a Europe-wide basic income. If the case I make below convinces you then consider supporting it.

This post outlines some of the challenges that our current economies are faced with and explains how a basic income can be a solution.

Problems we are facing

Many economies currently face crises. In a way, crises mean that capitalism works, that the system adapts to changing circumstances. Why then are they so negative for the humans in the economies? What other challenges are our economies facing?
  • Reliance on growth. We need the economy of a country to grow in order to ensure the well-being of its citizens. It would be nice if we could decouple these two factors. It’s the nature of complex systems (such as societies, ecosystems, organisms) to fluctuate. We shouldn’t have to worry about those fluctuations. Fighting them is nearly impossible, anyway.
  • Jobs needing to be protected makes economies less flexible. Because people losing their jobs is so negative in the current economy, we often protect jobs and industries that are no longer relevant.
  • We are taxing work. If taxing is about punishing then why punish people for working? Taxation doesn’t play well with modern ways of organizing work: freelance work is difficult to tax; freelancers, companies and the upper class increasingly escape taxation, and work can easily become illegal (even some positive gestures, where people simply want to help).
  • Employment will cease to be the norm. Sociologist Richard Sennett estimates that before long, 30% of our workforce are enough to run the economy.
  • Modern life has become much too complicated with all of its taxes, laws and insurances. With other parts of modern life already being complicated enough, it would be nice if we could simplify these parts of it. To do so, we will have to adopt a pragmatic “big picture” approach and simplify many of the detailed rules and regulations that have long ceased to fulfill their original goal – to ensure justice. Consult [5] for examples of how the complexities of modern life are bad for us (health, wasted money, etc.).

Partial solution: a basic income

In many ways, we don’t control the economy, it controls us. Does it have to be this way? It would be very helpful if we could handle jobs differently: jobs are not something worth preserving, we need to allow them to fluctuate. What needs to be protected are livelihoods. The basic income is a mechanism that does that which works as follows:
  • Fixed income: Every citizen of a state gets a fixed income each month, starting at birth. How much a state would be able to pay needs to be found out, one number that is frequently mentioned is 1000 EUR (about $1300).
  • Simpler benefit dispensation: Basic income replaces all of the following benefits: Unemployment benefits, pensions, child benefits, social benefits. All of the accompanying bureaucracy can be dissolved.
  • Simpler tax collection: The money the state currently gets from labor will be replaced by an increased value-added tax (VAT). Note that this does not make products more expensive, because it simply replaces the costs of labor with the VAT.
From the standpoints of societal stability and environmental protection, we should strive for an increased global exchange of ideas and an increased local exchange of goods. The latter goal can be supported by the basic income if part of it is paid in a local currency (think cities, not states).

Advantages

The basic income makes our tax systems simpler and leads to more freedom for both employers and employees.
  • Benefits for employers: Work becomes cheaper, because it’s not taxed, any more. Additionally, fun jobs will require even less pay. Labor rights will be much reduced, you’ll probably be able to fire people at will.
  • Benefits for employees: You get the freedom to say no to a job. Thus, I expect jobs to either pay well or be enjoyable.
  • More people can afford to do volunteer work (which are often good for society).
  • We can allow economic fluctuations to play out freely.
  • Illegal labor becomes a non-issue.
  • Children pay for themselves. There is some risk in this being exploited, so the situation will have to be monitored carefully.
  • Happier society. For our economies to be sustainable in the long run, we will need to lead simpler lives. The reduction of existential worries afforded by the basic income means that we will be happier and freer while leading those lives.

Objections

The initial question we have to ask is: Is the basic income something that we want to have? Is it an appealing idea? Then the next question is: Could it work? Many smart people think so and if we have answered the first question positively, we should be motivated to make it work. The following are answers to commonly voiced objections.
  • Is a basic income really viable? We can start small and if things work out then we can increase the basic income. The idea itself is sound – quoting Wikipedia:
    Winners of the Nobel Prize in Economics who fully support a basic income include Herbert Simon, Friedrich Hayek, James Meade, Robert Solow, and Milton Friedman.
    These are not some hippies who hate capitalism.
  • But isn’t a basic income communism? No, it’s just a different way of organizing capitalism, a different way of distributing the money that (in most countries) is already being distributed. In many ways, it is also capitalism brought to its logical conclusion. Right now, in most economic sectors, employers have all the power. If employees aren’t forced to take a job, salaries become truly market-driven. Furthermore, you can give the markets a freer reign and, e.g., let whole industries die if losing one’s job isn’t a threat, any more.
  • Will people still work? Three facts will lead to work still getting done. First, the basic income will be low enough that it only covers the basic necessities. Hence, you will need to work if you want to live in a city, want to travel, want to buy a computer, etc. The appeal of buying those things won’t go away and will prod people to even accept unpleasant jobs if they pay money. Second, it’s human nature to want to be creative and do something. For example: Götz Werner, the founder of the German drugstore chain dm and a proponent of the basic income tells us that several of his employees are housewives who don’t work for financial reasons, but because they like their jobs. Third, people who are either incapable of working or unwilling won’t be needed by society in the future, because there won’t be enough jobs for everyone, anyway. The basic income means that society does not have to worry about them. I don’t think forcing them to work has ever done any good.

Remaining challenges

Moving away from a job-centric society means that great changes are ahead. And those always come with great challenges.
  • Providing structure to people’s lives: Society is currently organized around jobs. One of their functions is to socially integrate people and to keep them entertained. With less jobs, we will have to find other ways of doing so.
  • The system will fight back: There are people who profit from the current complexities of the system who have a lot of power. Making the necessary changes and simplifications for a basic income will be met with opposition from their side and may well be the biggest obstacle for implementing it.
  • Insurances: We could further simplify our lives if some basic insurances were automatically paid (at the very least, minimal health insurance). If you don’t want to be bothered by this kind of decision, you won’t be. If you are willing to put work into this area of your life, you can get better deals etc. Helping people with these issues will become an even greater job opportunity in the future.

Conclusion

Instead of desperately trying to get back to the status quo, we need a compelling vision for the future, now more than ever. On the downside, we have to live more modestly (eat local food, be conscious about recycling and energy consumption, etc.). On the upside, we presently stand a chance to really simplify our lives and increase our happiness (both are linked, to a degree [5]). And a basic income can play an important part, by simplifying the tax system and reducing existential anxieties. It is not a revolution, but an evolution of our system which increases the likelihood that it will work.

Related reading

  1. Basic Income Earth Network (BIEN)
  2. Unternimm die Zukunft – Götz W. Werner und das Grundeinkommen [in German]
  3. Economic inequality is bad, even for the rich
  4. Ensuring the long-term survival of our civilization
  5. Choice is a paradox: there can be too much of it

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