Sunday, November 14, 2010

Grundeinkommen (Basic, or Guaranteed Income)

I am now convinced that the simplest approach will prove to be the most effective — the solution to poverty is to abolish it directly by a now widely discussed measure: the guaranteed income.
Martin Luther King


Almost two years ago Susanne Wiest, a native of Bavaria now working in a Kindergarten somewhere in Mecklenburg-Vorpommern, started a citizen's initiative to introduce in Germany a guaranteed income. It is, to her great surprise, rapidly gathering momentum, to the extent that it is today the most successful such initiative, having collected around 50,000 signatures in the first few weeks of its life, and subsequently 90,000 fans on Facebook. It now has political support from the Green Party (Bündnis 90/Die Grünen), with Susanne Wiest having presented the idea to the Bundestag earlier this week (on 8th November 2010).

In brief, the idea is to give every citizen in Germany an income, regardless of age and gender. Wiest suggests €1,500 for every adult, and €1,000 for every child. The idea, for those smelling the overly controlling hand of socialism, is not to equalize income, but to equalize opportunity. For example, for those earning more than €1,500 monthly, the employer would pay €1,500 less than before. I.e. for someone earning €3,000, the employer would pay €1,500. In this way income differentials would remain while eradicating poverty, but society could still 'objectively value,' via the established price mechanism – while such remains necessary – the various job skills.

Furthermore, the scheme would put no pressure on the employer to compete with the guaranteed income on money terms, rather it would demand more creative and flexible employment contracts and work conditions. It would also almost certainly generate growing equality in the work place. A guaranteed income would be an instrumental element in creating a fairer labour market. Implemented carefully, and conjoined with a revolution in the money creation system, employment itself would be revolutionized for the better, with employer and employee equally dependent upon one another. Only in this way can the best that market processes have to offer operate to the benefit of society generally.

The idea that we today have a 'labour market' is of course a one sided joke where, currently and for centuries, the employer tends to be the one laughing. For example, most people in former East Germany cannot find decent work, and when they do it is for less than €1,500, for which they do 40+ hours a week. These are not market conditions, where people seeking work can pick and choose from the many jobs on offer; the unemployed are powerless, totally at the mercy of employers. A guaranteed income would quickly create a genuine labour market in which a job seeker would actually have some choice in the matter, have real bargaining power. Again, the idea is not to equalize income, it is to equalize the opportunity to live a life of dignity. Current welfare payments stave off starvation, but not much else, and certainly bestow no dignity on those receiving them.

Opponents raise the expected objections, which have been engagingly addressed by Professor Goetz Werner et al in a recent study. The principal objection is that too few would want to work. Werner's detailed survey of over 2,000 people, from the unemployed as well as different income levels, shows in fact a desire among the unemployed to work, among the employed to work less, such that the amount of work offered to employers would be more or less as today. And, because the nature of work, as well as the direction of the economy, would be profoundly changed were the guaranteed income to be introduced, the 'people are lazy' objection has no teeth.

In my case, I would want to work less at my job, say three days a week, or around 25 hours. I would also no longer aggressively save my money as I now do (I was unemployed for over a decade and have a very small pension pot), which means what I earn would not be hoarded. I would also have more time for my family and to fight for those environmental issues which mean so much to me, as well as do more for the elderly perhaps, and other socially worthy causes. I would also, with my increased spending power, buy only environmentally friendly products, many of which I currently cannot afford. This rough decision-set probably applies to many others in my approximate position.

'Freedom' is just a propaganda buzz word until the power and material security to be independent is available to all. The current system has failed miserably to deliver the very freedom it touts as its defining quality and crowning achievement. A guaranteed income, in conjunction with others, can deliver genuine independence, alongside recognition of interdependence, which would be so healing to all.

What concerns me about this idea is possible rampant economic growth and the unreadiness of society for the changes it would affect, if other needed changes are not simultaneously affected. I don't think a guaranteed income can be coldly introduced into the current system and be healthy for society, nor, perhaps, should it be introduced in one country alone. What would happen to immigration policy, for example? I don't fear inflation initially, since we have enormous overcapacity on the production side, but as society adjusted to the scheme, other changes, perhaps deeper and more upsetting to the status quo, would be needed to deal with that possibility. I seek such changes, but feel they would need to be transparently anticipated from the outset, baked into the guaranteed income cake in the form of a road map perhaps, as part of a broad and multi-pronged programme to change radically society's direction worldwide.

My interest remains the pursual of a post-scarcity, resource-based economy, but my focus is on how to get there, since it is a long way from here. I believe the way is growing clearer. Right now it looks likes this: MMT with 100% reserve banking + guaranteed income + revolution in education + the total embracing of technology/automation in the interest of humanity and the environment + revolution in economics. If a resource-based economy is a viable system, these steps, taken pretty much simultaneously or as linked steps in a bold programme for change, would lead us to that discovery.

13 comments:

Greg said...

Good post.... again.

I think its a great idea and I'm not sure rampant growth would be an issue. I think people would be less likely to over spend out of credit and simply spend out of the guaranteed income. It would likely remove desperation which I think sometimes contributes to peoples irrational spending habits.

The key is not to change anyones relative standing in society but simply to raise the floor.

Many today feel that the floor should be absolute destitution. We need to make them argue for that and not hide behind the "We cant afford it" The bond markets will reject it" crap they spew.

Toby said...

"Many today feel that the floor should be absolute destitution. We need to make them argue for that and not hide behind the "We cant afford it" The bond markets will reject it" crap they spew."

Agreed, in spades, and this is the heart of the matter. Two Sundays ago I was on the metro with my family, when an opera singer, no doubt destitute, got on board and performed a song (he accompanied himself with a guitar). His voice was so powerful it distorted in that confined space, but also so beautiful I had to hold back my tears. Even my two young daughters gave him money from their purses.

We have a deeply broken system, and a perverse and very sick idea about destitution as a necessary spur to hard work. Certainly that opera singer did not learn to sing because he feared destitution, just as I did not learn my skills out of that fear. The economy rewards skills arbitrarily, sometimes in this field, sometimes in that. It is literally impossible to have all people 'needed' by the economy all the time. Why should emotionless money movements and technological changes determine who lives in physical comfort and who not, when there is plenty of physical comfort to go around?

None of this is to say that I seek destitution or do not fear it, but that the motivational factors driving humans 'forward' are many and varied. Humans want to feel valued by their community in some fashion. Merely having sufficient money not to starve or freeze does not bestow respect and kudos ... other (very complex) factors operate there. A guaranteed income is, to my mind, an efficient and generous way of sharing the base comforts that mankind, via civilization, can provide. What each of us does after that would be up to us, as it should be, but at least we would have the monetary effectiveness to participate in society at sufficient depth to do something with our lives.

(That was way longer than I intended. Sorry.)

Greg said...

Unfortunately to many this idea suggests a nanny state that wont require us to innovate and therefore rewards failure. I think many of the Chartalists (MMT crowd)simply have a different view of what we should consider achievement. Achievement is what you do AFTER you've been fed, clothed, housed and have health care. Those four things are simply part and parcel to existence. One cannot even begin to "live", in our truly unique human sense, until those things are covered and not being strived for. Whether all Chartalists would express it this way or not, I sense from reading what pretty much all these guys have written over the last few months, that they share this sentiment about lifes basics.

The beauty of MMT is the non ideological nature of it and the fact that I as a leftist can reach this view about what we can do with our currency from a human rights perspective while someone like Warren who is more conservative might reach the same conclusion based on the idea that each of these people with basic needs met and a basic job guaranteed will better facilitate commerce by providing more customers for the private sector.

Once you stop worrying about what the govt debt or deficit is you can really get around to getting something done.

Toby said...

That's a very important question: what should we consider achievement? Why should we remain tightly bound to an idea of progress -- it really is only an idea -- that it is about working harder and harder to earn money and buy ever bigger and shinier things?

I shall be posting further blogs on this, but I had a brief conversation with a father of one of my daughter's school friends about 'modern' man as compared to 'primitive' man. He has worked with so-called primitive peoples whom he rates as more highly intelligent and capable of quick study than we 'modern' types. For example, he had no trouble teaching 'primitives' electronics, whereas the 20-something students tasked with learning quickly how to live in a jungle performed far worse.

Of course, this goes back to the nanny state idea, but do we seek a return to pure jungle conditions to avoid any comfort? If we have efficient cities, even 'pure' market economics and a minimal government -- whatever that really means in practice -- would produce a system nothing like the cooperative tribal living enjoyed by the world's 'primitive' peoples. Cooperation among them is essential, as is mutual support. To quote one of the Piraha, "I store my food in the belly of my brother." And, of course, all are his brothers. (As a side note, we see 'store' here as a societal or network function, 'contained' in generosity/sharing and mutual dependencies.)

These are not easy questions. What is nannying? When is it good, when is it bad? Is necessity really the only mother of invention? How necessary is invention? Are humans creative/inventive because life is 'hard,' or because we have large brains and opposable thumbs? And so on.

"Once you stop worrying about what the govt debt or deficit is you can really get around to getting something done."

Exactly. On this point, I'm no longer sure that debt has any relevance at all at govt. level. It should have nothing to do with money creation anywhere in society in my view. Banks should be 100% reserve constrained, and lend out money they actually have on deposit.

And so on and so on.

Greg said...

Found this today

http://bilbo.economicoutlook.net/blog/?p=5130

Its amazing how these things turn up when Im discussing certain things with certain people. Is it serendipity or is not an accident at all?

I think (and hope) there is a huge underground movement to explore these issues in just the manner you and I both seem to describe. The modern generation wont accept the answers that currently come form the political and economic leaders of today. I think the current power structure is morally bankrupt and will be exposed as such (already have been in my book). This faux populist right wing movement MAY last 12- 18 months before their biases get exposed in spades. They are nothing but front groups for enormous private interests, they are not interested in Americans just the America dollar.

While I feel like the tide has turned against me in some ways, I hold out hope that the much larger, undetectable for now tide is going to move things in a trajectory much different than our current power brokers are anticipating. One thing about TPTB they are prone to misreading badly their control of things. They dont understand nature because they want to dictate to nature. I am certain that no human ideology can dictate ANYTHING to nature.

I do buy the "Hopey Changey thing" Just not in its current package.


Regarding your idea about 100% reserve constrained banks, how about looking at this analysis

http://bilbo.economicoutlook.net/blog/?p=7299


Cheers

Toby said...

"I think (and hope) there is a huge underground movement to explore these issues in just the manner you and I both seem to describe."

Agree again. My sense is of deep and broad change taking place beyond the misdirecting gaze of the MSM. The question is whether it coalesces to form a new and effective consensus. At societal level consensus is always hard won.

Thanks for the links, I'll check them out...

Toby said...

I skimmed the article on 100% reserve banking, but it wasn't written for my position on this issue.

The reason I see it as necessary is that I don't want money to be a money-for-more-money tool at all -- money creation should only be allowed the sovereign, not private businesses. Economic 'growth' would be greatly impacted by such a transformation, but the western world has made an idol of growth, and this is an area where MMT and I part company. I don't care that all sorts of exotic financing becomes impossible, and overdrafts too, and I also don't care that economic activity would be changed radically by it.

My interest is in the steady demotion of money's role in society to as low a point as culturally possible, ditto for the importance of economics, which needs to be trashed and rebuilt. Money should have the function only of enabling trade, with the lesser and auxiliary functions of measure of value and unit of account, and this only to the degree that trade is at all necessary. Wealth should be seen as arising from societal and environmental health (a component of which is a healthy money system). A guaranteed income is part of this process, as is a change in education to an optional, open system (not classroom based) teaching people to become independent and mature problem-solvers whose natural curiosity is fostered and encouraged every step of the way. A revolution in waged-work is likewise needed, and an ever ever-diminishing working week should be pursued. This process would include an ever-smaller governmental domain, the humane and purposeful automation of all grunt-work, and as certain goods and services can healthily be produced human-labour free, so those things should be given away for free. This is happening on the internet to an important degree (blogger software for instance!), so people are slowly getting used to this, particularly the younger generation. City design comes into this too (see The Venus Project), as does renewable energy, a revolution in transport, and on and on. Almost nothing would be left untouched by this.

These steps are so unlikely to be globally embraced in one fell swoop as to be virtually irrelevant to current debate. However, as the breakdown of today's horribly broken system continues -- I believe the breakdown will get deeper and deeper -- only ideas that today seem impossibly radical will be left to explore. That's my time-horizon; the coming century. I'm trying to think very long-term on this blog (and on my website, and in the book I am writing), and thereby trying to influence the long term debate down the generations, not today's rapidly changing mud-slinging contest.

The direction for me is 'resource-based economy.' This profoundly excludes me from the mainstream, so much so that I plug my little blog here and hope for nothing except perhaps results I may never personally witness.

Yes, I'm a weirdo, and now I'm out of the closet!

Greg said...

I cant disagree with anything you say here. I too hope and expect profound changes to the way we "do" money and economics. Many Americans will be in for the worst of the adjustments and they will take some swings as they go down, its simply in their nature unfortunately (I may be looking to expat somewhere...hows Germany?)

My interest in MMT simply gives me a paradigm for explaining today. I agree about the growth but I think if you asked Mr Mitchell, he would not believe in nor advocate a perpetually growing economic model either. MMT doesnt require growth it only describes how to have growth AND price stability.

Funny, I dont see you as weird at all, maybe I'm weird too. (dont comment!!)

Toby said...

"Funny, I dont see you as weird at all, maybe I'm weird too."

No comment. ;-)

If you speak German, Germany has a lot to offer, although there is much here that rubs me up the wrong way. They are a very conservative people and often incredibly inflexible in their thinking. On the whole the culture is too hierarchical for my taste, although the social politeness this engenders is very pleasant, and people tend to be more mature here than in e.g. the UK. Education is good compared to the UK and US, though declining. Here the problem of disappearing money is felt in schools, businesses, local govt, all over, but I don't think there's any escape from that anywhere. Let's hope the slim chance of some sort of guaranteed income comes true.

If I could speak Icelandic and didn't mind long winters (they're too long in Berlin already!), Iceland would be very interesting. If they would have me. Very low population there. And there are people there in positions of influence considering some radical ideas...

Greg said...

You seem to be most attracted to the northern part of the northern hemisphere. What about New Zealand or Aussie land? I've thought A LOT about those two places.

Toby said...

Yeah, absolutely. If we've still as a family got another adventure in us (exploring another land and culture) New Zealand would interest me, especially the sub-tropical northern regions. Actually I'm a summer guy, love the sun and warmth, dislike winter and cold. Asia really attracts me too, but to really really really go and live there and settle down, is one helluva undertaking, so it remains fantasy. Another fantasy I have is buying an old yacht with enough space for my whole family (me, my wife and two daughters), kit it out with an electric motor, wind turbines, solar panels etc, and sail the world indefinitely. I looked into it quite deeply and the thing stopping me is piracy. That seems to be a serious problem, and seeing as the Europe to Asia routes interest us the most, there's really no way of avoiding the Somalis.

Guess it's gonna have to be Berlin until further notice...

Roger Lewis said...

Hi Toby, just linked this epic piece of yours to the BBC Stephanie Flanders Blog on the BBC.
Positively revolutionary stuff from Stephanie today, by her standards.
http://www.bbc.co.uk/news/business-19070470

Toby said...

Thanks for the shout, Roger. It's good to see this stuff making into the mainstream, but judging from the commentary there's still a very long way to go...