Fixed-field grain agriculture has been promoted by the state and has been, historically, the foundation of its power. In turn, sedentary agriculture leads to property rights in land, the patriarchal family enterprise, and an emphasis, also encouraged by the state, on large families. Grain farming is, in this respect, inherently expansionary, generating, when not checked by disease or famine, a surplus population, which is obliged to move and colonize new lands. By any long-run perspective, then, it is grain agriculture that is “nomadic” and aggressive, constantly reproducing copies of itself, while, as Hugh Brody notes, foragers and hunters, relying on a single area and demographically far more stable, seem by comparison “profoundly settled."
James C Scott
My last three (full) posts looked closely at Ralph Boes’ efforts in the twinned battlefields of Hartz IV (unemployment benefit in Germany) and guaranteed income. The third tackled the surprisingly subtle question of what it is to work, concluding there is nothing which is not work. This is a controversial position, since it implies ‘Money For Nothing’ would be a social good, if set up wisely. However, despite my best efforts, mainstream culture appears still to be many leagues from wanting to implement such a system. Resolutely ignoring the mainstream’s resolute refusal to be imaginative, this post looks briefly at how guaranteed income (GI) might be ‘financed’.
As our cultural, ‘spiritual’ and scientific relationships with and understandings of the nature of Universe change at the fringes and begin to penetrate the core, we are simultaneously presented with systemic and resource-related challenges we seem doomed to respond to inappropriately. Our great machinery cannot respond flexibly enough. We necessarily lack the institutional wisdom required to produce ‘solutions’ to these challenges. The wisdom contained in existing institutions and habits of thought is itself generating the breakdown. As R. H. Tawney put it, “Systems prepare their own overthrow by a preliminary period of petrification.” We are stiffening towards collapse.
We face profound and widespread difficulties today because of the seemingly unstoppable, machine-like momentum of our broader system, a system which evolved, as naturally as any other, in response to a set of circumstances which no longer applies. Because of their make-up, our governing institutions, as well as our almost worldwide cultural attitudes to value, dessert, earning and money, are now in open breakdown. They can never again be as helpful or pragmatically constructive as they once were, unless they are revolutionised. Scarcity is a foundational cornerstone of our system, but it is crumbling (not only because of digital technologies); as are our notions of “red in tooth and claw” or “selfish gene” competition; as is dualism in its now creaking manifestations as nature-nurture, mind-body, heaven-earth, good-evil, and so on. Multiple core beliefs are breaking down simultaneously, can no longer provide the solid ground on which a culture can thrive, but are the foundational beliefs of the institutions tasked with guiding civilisation through these stormy seas. And while the mainstream surely accepts Eisntein’s maxim, that a problem cannot be solved with the thinking which created it, it is ‘congenitally’ and constitutionally incapable of radical thinking. Yet it is exactly radical thinking we need to be able to see that GI income is financeable, indeed, that “financeable” isn’t really the right word.
Happily, we also seem compelled to transcend the old wisdom (not completely, but significantly) and fumble forwards towards the slow creation of new systems. But new ideas will of course produce errors and tragedies, new visions will be greeted with suspicion and fear. It must be so, since we will remain profoundly invested on multiple levels in the old for any number of reasons. ‘Twas ever thus. There can be no clean cut either, no Day 1 of the New, no Final Sunset for the old. Life is seamless; the ‘new’ emerges from and is sustained by the soil of the ‘old’. And two opposites are true, depending on your perspective; nothing new under the sun, and, change is the only constant.
A long aside on scarcity before we begin in earnest: Scarcity is not a Bad Thing, just as abundance is not a Good Thing. Different circumstances and attitudes can turn either state of affairs into a disaster or a blessing. What I see happening now is a quickening (and very challenging) switch from supply-side to demand-side scarcity. More exactly, there is a scarcity of attention emerging (which happens to be exposing our immaturity and narcissism, but that’s another topic) in the face of an oceanic over-abundance of digital produce to be consumed (as well as an overabundance of material goods such as houses and cars). Practically speaking, we need each other economically ever less, humanly ever more. We’re very out of practice with the latter, far too reliant on the former.
Money – a technology evolved (in part and in its later history) for dealing with the challenges of supply-side scarcity – has been our master and guide for too long. I assert it is out of date in its current form, and that we don’t yet know how to move on. The problem is that we have been using economic activity to grease society’s wheels for millennia, and it’s a hard habit to break. Economic exchange (market activity) apportions societal value, distributes the scarce fruits of society’s economic efforts. So for a very long time, possessing and earning money (we can think of money as value commoditised) has been our most visible and readily understandable proof of positive economic contribution (value) to society, while money has also been almost the sole embodiment of purchasing power. Money is thus a very powerful and deeply embedded cultural technology, and GI flies in its face.
Nevertheless, two things must hold for money in its current form (commoditized and quantified value possessing purchasing power) to be an on-going social good:
- The economy must require a sufficient proportion of human labour relative to population for the production of goods and services, such that labour can be the primary mechanism for distributing purchasing power and a sense of self-worth (value); and
- Supply-side scarcity, which means demand must predominantly exceed supply over time.
When there’s more than enough stuff to go around, as Consumerism’s grip on cultural imagination fades, when automation becomes so sophisticated there are “lights-out” factories which need no humans at all on the factory floor, as population growth slows and the earth’s carrying capacity is stressed to breaking point by human greed and productive might, and when people look to become writers or painters or photographers or editors or film makers or musicians (what’s left for humans economically are creative pursuits) at a time when the product of these efforts is increasingly digitisable and thus endlessly reproducible at almost no cost, money loses its utility. Not completely – this is a transition period – but sufficiently to produce the crises we see around us. If what producers of stories, songs, film, art etc., need is an audience, and the audience is scarce while the product is abundant, what cannot square that circle of scarcity is money. I don’t see how paying someone to consume your product can work. Attention paid for cannot be satisfying, replenishing, or inspiring; if attention comes with a price tag, it is not genuine. And the math of buying consumers does not suggest a functioning exchange-based economy.
On the one hand, at least we can say it is clear where new growth is coming from! What is not clear is how to build an old-fashioned market around that growth; the growth of the scarcity of meaningful consumers. In the meantime, buying and selling remains essential, hence purchasing power remains a vital quality sellers require of their potential customers. This is of course a perennial problem of capitalism, but This Time It’s Different. This time, the growth area cannot be sufficiently monetized on a waged-labour basis to equip sufficient numbers of people with sufficient purchasing power to keep society together in its current form. Put crudely, we are suffering societal breakdown for want of a new mechanism for furnishing people with sufficient purchasing power.
Hence guaranteed income (“GI”) is essential, not as a silver bullet, not as a permanent solution, not as the introduction of nirvana, but rather for buying us some cultural breathing space, as a period of relatively safe experimentation in which we teach ourselves new relationships with money and value. But, however and wherever GI first emerges, it needs to be financed.
Before I look at numbers, I must point out that when we talk of financing GI, money must come second in our consideration to goods and services. We are not asking if there is enough money (which is in fact a stupid question; it implies you can eat or drink money, or grow food out of it, etc.), we are asking if there are enough goods and services to go around. Money is a mere agreement which happens to have the very demanding job of both measuring and storing value (being both measure and store is impossible; think of meters or grams), while functioning as society’s primary ‘medium’ of exchange (as a commodity, money cannot be a medium, but that’s the topic of other posts). GI necessarily demotes money’s societal importance, moves human dignity to the centre of societal concern where it belongs, and demands a very different state apparatus; a far simpler and more elegant state, should GI be implemented properly. In short, imagining GI working, tossing around possible mechanisms for bringing it to sustained working life, demands we think outside the box. Remember, money is not now, nor can it ever be wealth. The fable of King Midas is a powerful reminder of this simple truth.
Finally, and despite the above paragraph, money remains the key. We need the correct money system and a more mature and relaxed relationship with the utility value of monetary ‘wealth’ for GI to function, to be welcomed, to be wanted. For such a systemic cultural transformation to emerge, we need the right institutions in place, an evolution which further requires the right political (I don’t mean party political) and business will, a well-informed public, a revolution in education, and so on. Again, this is not an easy task, just an extremely important one.
And that was the longest introduction to a blog post I have ever written.
On now to some scene-setting numbers I’ve drawn from German sources. Germany has around 80,000,000 souls. I’m going to use Götz Werner’s proposed monthly GI amounts of 1,000€ for adults, and 500€ for children (say to 18 yrs). Something like 18,000,000 Germans are under 18, so we have a very rough annual ‘bill’ of 852€bn. To put that into perspective, Wolfgang Schäuble said in a recent interview (German) that the yearly cost of Germany’s many social systems is a little over 1tn€, or over 12,000€ per year per head. Thus, even within today’s money system and money-centric notions of financing and value, there appears to be ‘enough’ money to finance GI. There’s far more subtlety to it than this crude representation allows, but such numbers at least give us a sense of the scale of the monetary task, that GI is not idle fantasy – it is the cultural, I would say visceral objection to ‘Money for Nothing’ which is our main problem, as is our cultural conviction that money is wealth.
The general challenge we explore here, regardless of numbers, is to withdraw sufficient money from the system, smoothly and fairly, then pump it back in without causing inflation, in a dynamic loop. The amount pumped back to each citizen must ensure a decent shot at dignity (dignity cannot be guaranteed), and also enshrine the right to ‘laziness’; the financial security from which to say "No" to poorly paid work in poor working conditions.
The first of the three options we look at is financing GI via one tax, a flat sales tax set at the current equivalent of all taxes in Germany (Götz Werner’s proposed solution). The single sales tax would be close to 50% and inescapable when buying and selling. Gone would be all other taxation.
To most non-Europeans, 50% must seem brutal, but the point is not that the state is too costly or interfering, rather that money itself is not our focus; I repeat, money is not wealth, cannot store value, should not be hoarded at the cost of all else. Dignity in a social system encouraging cooperation and trust is our goal, a focus which should do a far better job of ‘storing’ value than fearfully or greedily hoarding money is supposed to do. An elegantly financed GI would actually mean far less Big Brother, less Nanny State, and encourage (even require) more trust in our fellow human beings. And no more accountants, no tax loopholes, no monolithic and labyrinthine state apparatus no one understands. I suspect also that education and health would become increasingly ‘privatised’, with a renaissance in both towards openness and excellence, away from dogma, subterfuge, and compulsion. This applies generally to all GI models (at least potentially), but I make the point here to emphasise that despite what might appear like an eye-wateringly high sales tax, this is not about growing the state. It would shrink the state and demote money. Those two processes go hand in hand.
A GI income would grow into, not on top of existing salary levels. For those earning less than 1,000€/month, new deals would have to be drawn up, better working conditions offered, fewer hours, etc. For those earning more, their employer would be paying them 1,000€ less a month, but their overall income would remain the same. Some will be tempted to other careers, or to a period of re-education, and thereby open up their positions to others. I suspect such jostling and settling in would initiate a revolution in employment law, employment contracts, working conditions, office politics, hierarchical structures, the way freelancing works, etc. And the base security GI provides would revolutionise insurance, particularly health insurance and pensions. This would likely take a lot of the charisma out of the stock markets too!
‘Financing’ GI through a flat sales tax has one distinct advantage; it would require no adjustments to the money system. This advantage is why I don’t support it. I fear GI financed this way would fail (it relies on economic activity for its funding and does not cure us of our systemic addiction to growth), and thus risk jeopardising the deeper reforms society so dearly needs. On the other hand, this solution presents less change for the public to swallow in one mouthful, and that is not something to dismiss lightly. If there were to be a multiphase easing into The New along a path of successive and interrelated reforms, this first proposal might be the way to get the ball rolling, gently introduce the mainstream to the radical new. Implemented in isolation, without any concrete action taken in other critical areas, I fear this could do more harm than good.
The second financing option is via negative interest. Conceptually, negative interest is not as offensive a proposal as its moniker at first suggests. Because we all Just Know money should grow, should ‘work’ for us, should not lie idle, the idea of it shrinking by design, see it rotting like so many uneaten apples, seems like theft. Money offers us security against all sorts of things; apples rotting in a bowl do not. If money rots, what is there that can ensure the security we reflexively hunger for? Well, nothing (property, land and other ‘stores’ of value would have to be taxed or rented to individuals from the commons, since they come from the commons and cannot rightly belong to an individual – a topic for other posts). But so what? There never has been certain security, only the short term illusion of it, brought about (in recent decades) by cheap energy, massive improvements in hygiene and our ballooning productive might. Far better than money (other things properly in place) at helping to deliver security are: healthy soil well-tended and treated, clean air, clean water, and a society in which trust can thrive. It is likely negative interest money would encourage us to invest in such things, help shift our focus from the false security of money and private property, to the truer security of investing in nourishing and maintaining those networked systems we emerge from and are sustained by.
Imagine negative interest as a constant shrinkage of the money supply. GI is then that shrinkage pumped back in. Money out (negative interest), money in (guaranteed income); the economy as lungs breathing automatically. Financed thus, it is not a sales tax dependent on economic activity which keeps the system working, but the functioning of the money system itself. The GI amount pumped back in would likely be half as much as in the flat sales tax proposal, but this is not a problem. Rico Albrecht of Wissensmanufaktur and co-architect of Plan B has calculated that the amount of money transferred yearly in Germany as a direct consequence of interest is 450€bn; a little more than half the amount mentioned above. But goods and services would be roughly half as expensive, since usury is a hidden tax in all prices which would disappear in a negative interest money system. There would also be no sales tax, and no income tax, and this would deflate prices too. Only things like environmentally damaging activity and private property need be taxed, and this ‘income’ would be added to the GI pot.
I’ve favoured the negative interest solution for some time now, but am beginning to see flaws in it. The first is credit creation, and funding small and large scale business ideas. We don’t want to have a system which stifles the entrepreneurial spirit, so need market suppleness at the local and international level. In “Sacred Economics”, Charles Eisenstein, a keen proponent of negative interest, suggests commercial banks would loan out (and thus create new) money as they do now, only at e.g. -1% or 0% interest, with the base rate at something like -5%. The differential generates their profits. However, wouldn’t this create the exact same systemic addiction to growth we have now? For it is the difference between the amount owed and the amount available which generates the systemic shortage in the money supply, not the + or – sign in front of the interest rate. If banks accrue interest-based profits by extending credit-money more expensive than non-credit money, we have the growth problem, the rat race, the game of musical chairs, all over again, since the amount of debt owed is necessarily more than the amount of money in existence (P < P+I). But, having institutions or businesses with wisdom in the area of funding new ideas is an important societal function we ought not to lose. If we have negative interest money and wanted to enable a steady-state economy, we would need a credit-extension mechanism in which banks could not create new money for interest-based profit. I will not make any detailed suggestions here (this post is already too long), but simply leave this issue out there. 100% reserve banking is one idea that could be coupled with negative interest, or some variant of Islamic banking. The ideas are there, I’m just not sure which would be best.
The third and last financing option we look at is that proposed by Franz Hörmann. Hörmann’s is the most revolutionary, and thus the idea least likely to meet with a sympathetic mainstream ear. This does not bother him, however, since he is now investing his energies in building on-the-ground social networks capable of introducing the required changes without the permission of the state or major corporations. If he gets his (and his compatriots’) ideas up and running, the proof will be in the pudding, so to speak, and people can join in as they choose, iron out the kinks, and generally get the ball rolling. Democracy in action.
As background to Hörmann’s proposal, I should point out that he envisions separate monetary circuits for each distinct economic process, i.e. raw material extraction would require its own accountancy records, processing and production its own, then retail, then GI, and perhaps others depending on what works best. Hörmann also proposes money creation by individuals directly for the purposes of buying and selling services (a little like time dollars or LETS), but this as a separate and supplemental monetary circuit to GI and the others.
In Hörmann’s proposal, GI would flow from a democratic and fully transparent ‘central bank’ directly to people’s ‘accounts’ (uniquely identified ‘repositories’ which stay with people from birth to death), whereupon the ‘money’ subsequently used to buy basics such as food, clothes, local travel etc., returns directly to the ‘central bank’ whence it came, and promptly disappears. ‘Money’ earned by those working some number of hours to provide services (such as selling food or clothing or local transport) is generated on top of the GI and likewise issues from the ‘central bank’ whither it returns once spent, again to disappear. No interest rates, no debt to be repaid, no storing of value; money becomes a pure function, a temporary voucher created automatically for enabling economic transactions, and cannot itself be a commodity anyone can profit from. What such a system would foster, inescapably, is a totally new relationship with money and value. Services would become the focus of human-to-human economic exchange, not property and commodity ownership and profiting therefrom, and could be conducted in an almost endless variety of ways, with all sorts of money-types enabling all sorts of economic activity as required, or people could do things for each other 'for free', as mood and desire determined.
Common to the latter two proposals is the demotion of money as a store of value. I see this as essential to a new money system, and hope our reflexive need to protect ourselves from the vagaries of life with non-rotting, perpetually growing money can be transcended. For it is decay cooperating with growth which generates cycles which enable life and therefore wealth. Without sufficiently deep and integral decay and recycling woven into the fabric of our money system, we have a cancerous situation tending powerfully to gross imbalances over time, which then cause unnecessarily violent re-balancing upheavals. The current system of credit-creation at interest does include the destruction of money, as does the issuance of government debt, does include economic cycles (though the systemic emphasis is absolutely on perpetual growth), but cannot be as robust or adaptive as now required to avoid catastrophe this century. While money strains but must fail to be both measure and store of value, falsely claims to be a medium of exchange while also being a commodity which can self-multiply ‘magically’ to produce ever-expanding ‘wealth’ for those possessing enough of it, it cannot support and foster a society with human dignity and environmental concern as its focus.
In conclusion, I turn to the quote which opens this post. I suspect many will not have discerned its relevance. It is this: the state is a growth machine whose core dynamic is the exploitation of the ruled in favour of the rulers. Its cultural momentum, its myth-based sense of itself (e.g. as golden vessel of the glorious arc of human progress) infuses everything we state-citizens do, from economics to religion to science to parenthood etc. GI and the required attendant changes to the money system end the state project in its current form. This does not mean the end of hierarchy and the joyous rebirth of egalitarianism or anarchy, but rather, in my opinion, a new fusion of the two, with an emphasis on the latter due to the open nature of information access and the demotion of money as a store of wealth. Money storing wealth cements hierarchical class divisions in place, enables dynasties, corporations in their current form, and all other multigenerational transmissions of power. Putting an end to that puts an end to the state. But my position is not that ‘primitivism’ is better (or worse) than 'cultured' civilisation, but that new circumstances demand adaption, that today’s circumstances are pushing us, perhaps inexorably, towards open society, open money, open education, a far broader distribution of power and wealth than before, as well as a new sense of what wealth is and what generates it. The state – either as a living system or self-sustaining dynamic – must resist the changes I believe are unstoppable. Resisting as mightily as the state can, it causes much destruction and suffering. As a direct consequence of this, we are living through very difficult and precarious times, so I close with one of my favourite Charles Eisenstein quotes:
The more beautiful world our heart tells us is possible is inevitable. It is going to happen. 100% sure. And it will only happen through the exertion of our full efforts and the application of all of our gifts. If you don’t apply all of your gifts to this, then it’s not going to happen. Yet it is inevitable that it will happen.