In this episode we look at the idea of Basic Incomes.
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Welcome to Money Myths Episode 6 – Basic Incomes
My name is Brian Leslie and I'm the editor of Sustainable Economics magazine.
Before we get started, I have a few things to mention.
This is part six of the series. If you haven't seen the Series Introduction and parts 1 to 5, I would suggest that you watch them first, in order, as we aim to build the series on the basis that viewers have seen these episodes.
The other episodes are available through the rss feed or the site that you downloaded this episode from. They are also available through our web site (www.moneymyths.org.uk). Please visit the site, where you will find information about the series, a list of episodes, links to further information and details of how to contact us to ask questions or make comments, as well as full transcripts of each show.
We very much appreciate getting your feedback and questions which will be answered at the end of the series. Please keep sending your questions to us via the email address on the web site.
As in previous episodes, I am referring to the British Banking System for this series. However, the system in most countries is the same and has a similar history. I leave it up to you to substitute your own Central Bank, Government, Ruler, and so on.
<Announcement of the DVD>
Since the last episode the G20 meeting took place in London. Before and during the meeting there were various non-violent protests against the current economic and political systems.
On the Wednesday, I joined a demonstration that was converging on the Bank of England, calling for monetary reform.
During the demonstration I handed out nearly 2000 leaflets that I wrote for the occasion, explaining the problems that I have addressed in this series.
I titled it, ‘Economic Essentials for Dummies’. It was accepted readily, and many people came to ask for it, or for extra copies.
There was a very large police presence. They were as happy and friendly as usual – as you may have seen in the mainstream media.
When the demonstration reached the Bank of England the police blocked all of the roads into and out of the area in a move that the police call ‘kettling’.
I found myself and the small group I was with, trapped, close to the Bank, within the area that was crushed-in by the police lines. I understand that about 5500 people were involved in that protest.
Eventually, after a few hours, my group found a small side-road which was not closed, but other groups were held trapped for many hours.
There were almost no violent incidents, apart from police-violence, which is now subject to official investigation.
For a fuller description of the demonstrations, see the links page on the MoneyMyths site.
So, what about the G20 meeting itself?
Fine words but little substance. As I had expected, they are attempting to patch-up the failed system rather than considering fundamental reform. This was really a missed opportunity to put the system right.
The basis of the deal is to continue growth with little regard for climate change or ‘peak oil’.
The ‘Special Drawing Rights’ that they announced will be a much-needed creation of new money but, by proposing to lend it into circulation rather than to spend it into circulation or making grants with it, they are continuing the destructive growth of debt.
It appears that ‘Third World’ countries that are already suffering from the burden of debt will be encouraged to borrow even more.
Now on with the main topic of this episode – Basic Incomes.So what is a Basic Income?
In brief, if every citizen were to be given an unconditional income additional to any earnings and sufficient for a modest standard of living – a Basic Income – this would have widely beneficial effects on individuals and society.
My introduction to this idea came between the two World Wars, when it was being promoted as ‘National Dividends’.
Why should there be a Basic Income?
The argument was that, with the development of mechanisation, all reasonable needs for a modest standard of living could be met with only a small fraction of the available workforce. Therefore, everyone should be entitled to a share of the potential abundance which could be produced, without any need for ‘full employment’, or for everlasting ‘economic growth’ to maintain it.
In fact, it was argued, modern productive potential was due far more to society’s inheritance from the past, of skills and knowledge and of the infrastructure of tools, machines, buildings, roads, railways, and so on, than to any current efforts to produce. Therefore, we should all be entitled as of right to a share of that abundance.
Others argue that we should all be entitled to a share of the ‘free gifts’ of Nature on which we all depend, and in a money-dominated society, Basic Incomes would be recognition of our right to that share.
So, who has suggested we should have Basic Incomes?
Basic Incomes, in one form or another, have been suggested by many groups and individuals since the 19th century.
In 1944, the “Beveridge Commission” produced a report, which formed the basis for the post-war Labour government’s social security system.
Lady Rhys Williams, a prominent Liberal member of the Commission, had suggested Basic Incomes as a better option than ‘unemployment benefit’ as a way of achieving its aims. This was rejected by the Trade Unionists who dominated the Commission, because of their fixation on the idea of ‘full employment’.
Margaret Thatcher’s government considered introducing Basic Incomes, and later, the Labour Peer, Lord Meghnad Desai produced a costed proposal for them, showing that, even within the current system, it was financially possible. Basic Incomes have also been part of the Green Party’s policy right from its foundation.
In the USA, ‘Guaranteed Income’ was a mainstream idea in the 1960s. Advocates included Martin Luther King, George McGovern, Daniel Patrick Moynihan, Gerald Ford, and Richard Nixon. Leading economists who supported it ranged from Milton Friedman to James Tobin to John Kenneth Galbraith. In 1970 a ‘Guaranteed Income’ plan was passed in the House of Representatives with two-thirds of the vote, but then it was narrowly defeated in the Senate.
What would a Basic Income mean for society?
If introduced, being paid to everyone, Basic Incomes would replace most benefits such as Job-Seeker’s Allowance, Child Benefit, Working Families Tax Credit and State Pensions. Being unconditional, they would end the ‘poverty trap’, which ‘means-tested benefits’ create.
The current system makes it difficult for people on ‘benefits’ to take on any paid work, unless very well paid, without being worse off through loss of the benefits.
Even ‘voluntary work’ is seen as a bad thing, as it makes the person unavailable for ‘paid employment’.
The Minimum Wage legislation should be repealed when Basic Incomes are introduced. With Basic Incomes to fall back on, employees would be able to reject unacceptable terms of employment.
This would lead to a change in the way that jobs are valued. Unpleasant but essential jobs would have to be well paid to attract workers, and easy, pleasant jobs would be less well paid.
Basic Incomes would also make co-operatives and self-employment financially much more secure, and able to compete on more equal terms with the corporations – which would have to pay acceptable levels of pay to retain their workforce.
How would all this be paid for?
If the reform I advocate is adopted, in the period of change from bank-debt-based money to state-created money the State will have adequate new money to spend, to fund generous Basic Incomes as well as a ‘Green New Deal’.
Spent into existence in this way, it would enable the outstanding debts to be paid off, without needing further debts to be taken on, just to maintain the money supply.
The Bank of England is now doing some ‘quantitative easing’. This seems to be newspeak for creating money ‘out of nothing’, without clearly admitting it!
-Or is it? The talk is of ‘taxpayers’ paying for it for generations to come. In the USA, Congressman Dennis Kucinich explained:
"Here is a very quick explanation of the $700 billion bailout within the context of the mechanics of our monetary and banking system:
The taxpayers loan money to the banks. But the taxpayers do not have the money. So we have to borrow it from the banks to give it back to the banks. But the banks do not have the money to loan to the government. So they create it into existence (through a mechanism called fractional reserve) and then loan it to us, at interest, so we can then give it back to them. - Confused?
This is the system. This is the standard mechanism used to expand the money supply on a daily basis, not a special one designed only for the "$700 billion" transaction. People will explain this to you in many different ways, but this is what it comes down to.”
However, instead of doing what reformers advocate – issuing it to the Government for it to spend – it is lending it to the troubled banks, in an attempt to recover the system, which has caused all the trouble in the first place.
This is why, if we do not change the system as I advocate, we will suffer higher taxation, a reduction in public and social services and health care, and have to accept a lower standard of living for generations to come.
If the new money was spent as we advocate, funding generous Basic Incomes as well as the other needs of society, the levels of debt should rapidly reduce, while the amounts available to put into personal savings accounts should rise.
With banks forbidden from further money creation, these savings would provide the banks with the money they would then need for making such loans as were still wanted.
Once the changeover was complete, the government would again be mainly dependent on tax-receipts and user fees for income.
However, with no interest to pay out on a National Debt and very little administration cost for Social Security, the extra burden that the funding of Basic Incomes would impose should be easily covered by tax-receipts and user fees.
The nature of taxation, however, should change. This will be covered in the next episode.
With a money supply circulating without the debt which accompanies its creation under the present system, people in general would be far better off, and able to pay tax. The ‘financial industry’ would be severely restricted in its ability to drain the profits from the productive industries.
Borrowing-costs, in the form of interest charges, would be far less, so prices should tend to fall as debts reduce, instead of rising.
Basic Incomes, coupled with the reduced need to borrow, would tend to reduce the extremes between rich and poor.
Once all the interest bearing, debt-based money, had been replaced by money spent into circulation by the Government, few debts would be left. With Basic
Incomes in place and an adequate supply of money circulating, few people would need to go into debt to survive, and repayment of borrowings should generally be easily afforded.
My lifelong view of ‘the economy’ has been based on the conviction that 'what is physically possible and socially and ecologically desirable must be financially possible’. Orthodox economics denies this. Money should be our servant, not our master!
What about work? Who would do it and why?
The present system occupies most people in work that, with these changes, would no longer be needed. Persuasive advertising; telephone ‘cold-calling’; dealing with the mountains of paper waste caused by a system that is churning out an endless stream of deliberately short-lived goods instead of long-lasting, good quality and easily repaired goods; and so on.
We are fast exhausting the supply of various natural resources, causing growing levels of toxic pollution, and causing climate change by gross over-use of fossil fuels.
With proper use of modern technology to produce the goods needed by society, and without the gross waste involved in the present competitive system, we could not only quickly reduce or eliminate use of fossil fuels, but, after a transition period, we could relieve most people of the need to earn more, to seek paid employment or to work long hours.
At the moment, the jobs that are most needed are usually badly paid. Some are also dirty, unpleasant or dangerous. At the same time, some of the least needed jobs are highly paid. With Basic Incomes it would give people the choice to accept or reject employment and this would mean that wages should rise for the unpleasant but needed jobs and the pay would be reduced for the easier, less needed jobs.
The desperate competition generated by the present debt-generating money system would be ended by these reforms, and cooperative working should flourish.
At the end of the last episode, I noted that modern productive potential can supply all the goods needed with ever-less work. We should, long ago, have been enjoying a ‘leisure society’ – worldwide.
Basic Incomes, or Citizens’ Incomes, would be a way of distributing an unconditional claim to a share of that productive potential, and of ‘Nature’s bounty’.
In a reformed system, we would need more work in some occupations. These would include: organic food growing, repair of goods and infrastructure, research, parenting, education, health care, etc. Many unnecessary and destructive jobs could be eliminated.
With the use of modern technology and fewer resources wasted, we could provide all that is needed for only a fraction of what is now used, in terms of both materials and labour. Leisure activities should grow!
Coming shortly: how taxation should change.