Should we have a basic income?

Over 400 years BC, a massive seam of silver was discovered in the mines in Athens. Naturally, how to distribute this new-found wealth provoked great debate. Aristides, a statesman of the time, proposed that the profit be distributed among the Athenian citizens.

The way in which natural resources – not only mining, but water, natural forests, arable land, and the sea – are allocated has always been and remains a major concern of humanity. In Australia, a combination of the mining boom and the global financial crisis is said to have caused a two-speed economy that saw some grow very rich while others became poorer.

Even more alarmingly, there exist companies who have designs on natural resources which everyone should have a fundamental right to – those resources needed for survival.

Needs, wants – and rights

I’ve written before about ‘needs’ versus ‘wants’. But while there are arguments that even ‘needs’ are not absolute (you need things to eat, for example, but whether those things are truffle-laden gold leaf-encrusted wagyu steaks with a side of champagne and caviar, or ground up grains mixed in with dirt and shards of stone, cooked over a fire burning animal dung (which is a sad reality for many)), there are some things which are absolute.

We all breathe. We need oxygen to survive.

We are all 70% water. We need hydration to survive.

To distinguish these as absolute needs, as a society, we call them ‘rights’.

The price of air

Fortunately, we are not yet charged for air. As the brilliant book The Ragged Trousered Philanthropists states:

‘The only reason they have not monopolized the daylight and the air is that it is not possible to do it. If it were possible to construct huge gasometers and to draw together and compress within them the whole of the atmosphere, it would have been done long ago, and we should have been compelled to work for them in order to get money to buy air to breathe.’

The price of water

As for water, things couldn’t be more different. Although the United Nations describes water and sanitation as ‘human rights‘, and while in Arizona, it is reportedly illegal to refuse someone a glass of water (an excellent law in my view!), in 2013, a group of corporations pressured the World Water Council to redefine water as a human ‘need’ rather than a ‘right’. So-called ‘third world’ countries know of this problem only too well. As Newsweek reports, ‘In the late 1990s the World Bank infamously required scores of impoverished countries—most notably Bolivia—to privatize their water supplies as a condition of desperately needed economic assistance.’ The only difference is that now, ‘global water barons have set their sights on a more appealing target: countries with dwindling water supplies and aging infrastructure, but better economies than Bolivia’s’ – those countries who can afford to pay. Like China, and the US.

Monopolising water

‘Because water infrastructure is too expensive to allow multiple providers, the only real competition occurs during the bidding process… After that, the private utility has a virtual monopoly’ says Wenonah Hauter, executive director of Food and Water Watch.

And what a monopoly that is – being the sole provider of something everyone needs to consume. A monopoly of supply and demand.

The word monopoly is derived from the Greek monopolion, ‘mono-‘ meaning ‘one’ and ‘polein‘ meaning ‘to sell’. Most of us are probably first exposed to the word through the board game. The game Monopoly was invented by anti-monopolist Lizzie Phillips, in the hopes of illustrating the negative effects of monopolisation and to explain the single tax theory of Henry George.

George’s ideas of produced and derived value

Georgism holds that ‘while people should own the value they produce themselves, economic value derived from land (including natural resources and natural opportunities) should belong equally to all members of society’. Sound familiar? The notion to me is strongly reminiscent of Aristides’ proposal.

In modern times, the concept of a ‘citizen’s dividend’ was based on this principle. In large part, it became known in the US and UK through early proponent Thomas Paine’s essay Agrarian Justice, in which he stated: ‘Men did not make the earth. It is the value of the improvements only, and not the earth itself, that is individual property. Every proprietor owes to the community a ground rent for the land which he holds.’ ‘Economists since Adam Smith have observed that, unlike other taxes, a public levy on land value does not cause economic inefficiency.’

Paine viewed inheritance as being partly a common fund as well as natural resources – it is perhaps notable that the richest person in Australia last year owes her wealth to a combination of natural resources and inheritance.

In Australia, Oxfam reports, the richest 1% own as much as the poorest 60% of the population combined.

Worldwide, in 2010, just 388 individuals had as much as the poorest 3.6 billion (yes, that’s billion with a B) people. That’s almost half of the world’s population.

Today, however, things are even more unequal. It’s not 388 individuals anymore, but just 62 people who own as much as the poorest 3.6 billion. A citizen’s dividend would go some way to helping redress abject poverty.

A citizen’s dividend

On its Wikipedia page, the citizen’s dividend is described as a ‘proposed policy’, as it seems, no matter how logical, it is one which has never been fully enacted anywhere. There are some experiments though – in Alaska, a Permanent Fund initially seeded in the state’s revenue from natural resources (in particular, petroleum, as well as other mineral resources) pays out a dividend to all citizens – including children.

In a country in which it is reported that 1 in 5 children live in poverty, Alaska now has one of the lowest poverty rates overall, and ‘only’ 14% of children live in poor families (compared to 21% nationwide).

A concept related to the citizen’s dividend is universal basic income. A basic income can be considered a way of making sure ‘that every citizen of a country has their basic human needs met‘. So far, no country seems to have fully implemented a basic income for its citizens.

If this all seems unrealistic and pie-in-the-sky, consider Tressel’s comments in The Ragged Trousered Philanthropists about what would happen if it were possible to charge for air. The voices objecting sound chillingly familiar:

And if that seemingly impossible thing were accomplished tomorrow, you would see thousands of people dying for want of air – or of the money to buy it – even as now thousands are dying for want of the other necessities of life. You would see people going about gasping for breath, and telling each other that the likes of them could not expect to have air to breathe unless they had the money to pay for it. Most of you here, for instance, would think and say so. Even as you think at present that it’s right for so few people to own the Earth, the Minerals and the Water, which are all just as necessary as is the air. In exactly the same spirit as you now say: “It’s Their Land,” “It’s Their Water,” “It’s Their Coal,” “It’s Their Iron,” so you would say “It’s Their Air,” “These are their gasometers, and what right have the likes of us to expect them to allow us to breathe for nothing?”

I find it hard to believe that this book was written over a century ago. It is now part of the public domain, and well worth reading.

Won’t everyone become lazy?

The idea of a citizen’s dividend or a basic income is not for everyone to have the same.

It is not to dissuade people from working.

It is to prevent people from having to work in useless or damaging jobs simply so they can eat, to prevent people from starving or dying of thirst because they cannot find employment, and to ensure that all children grow up with at least the basics.

Some inequality is inevitable, but the inequality we see today is truly mindboggling in scale.

 

So what happened to the silver?

Sadly, Aristide’s idea to distribute the silver profits among all Athenians was opposed by Themistocles, who proposed a military purpose instead. I don’t need to tell you that the money indeed ended up being spent on building warships for the Athenian navy.

In Greece, where I am currently writing from, the walls are covered in graffiti. Italy, where we recently came from, is the same. At least some of the messages are clearly anti-establishment and economic in nature. Graffiti, described as ‘urban sport for the disenfranchised‘ is, of course, nothing new, dating back to Ancient Egypt, Ancient Greece, and the Roman Empire, and is visible worldwide.

In the park in Athens, a sign over the rubbish bin implores ‘ΔΗΜΟΣ ΑΘΗΝΑΙΩΝ’ (the people of Athens) ‘Environmental protection relies on the citizen’s culture’. (To the credit of the Athenian denizens, the park is one of the tidiest I’ve set foot in!)

An unconditional basic income

While some have argued that a unconditional basic income will become a necessity as technology takes over more of our jobs – something I hinted at in my last post, and which you can see a lot more of in this excellent video, Tim Worstall argues the real reason it is a good idea is to prevent the huge marginal tax rates faced by those at the bottom of the pile.

What’s that? The people who earn the least money might be paying the highest tax rate?

As Worstall convincingly argues, traditional welfare schemes frequently create a disincentive to work.

Say you work just enough to no longer be eligible for welfare. In addition to no longer receiving a government payment, you will no longer be eligible for all of the other concessions that go along with it – lower priced transportation tickets, for example. Someone who is unemployed does not have to go to work each day, yet the person earning minimum wage may have to pay full price to get there. And there’s a slew of other benefits you’ll miss out on too – lower priced medications, reduced entry to entertainment, assistance with bills in winter etc. depending on your location. (Some governments have special low-income schemes that help alleviate this issue).

Welfare recipients are treated with suspicion and scorn, especially in the media. Think about how often the words ‘welfare cheats’ come up in current affairs programs compared to ‘tax avoidance’, yet the tax avoidance of major corporations costs society far more than welfare cheats do. As James Ball writes of the UK situation, welfare fraud is a ‘drop in the ocean‘, and in the US, Think by Numbers points out that the totality of social welfare is far less than what the government pays out in so-called ‘corporate welfare‘ in any case.

In Australia, while around a third of the budget is spent on welfare, by far the largest chunk of this pie goes to the aged pension. The $10.5 billion spent on those who are unemployed or sick (it’s not broken down further) is less than the $10.6 billion the government spends funding non-government schools (which, incidentally, is also more than they spend on funding public universities, at $9.6 billion, or on government schools, at a paltry $6.4 billion). These figures are even more sickening when you consider the following:

  • Government schools provide education for 2.4 million students while non-government schools only serve 1.3 million. This means government schools teach two-thirds of the Australia’s school students, but receive only a little over one-third of the funding devoted to schools – equivalent to approx. $2,600 per student annually.
  • Non-government schools (an ironic name given the amount of government funding they receive) receive around $8,100 per student annually. This is far more than a Youth Allowance recipient living at home would receive to live off of in an entire year, and almost as much as an unemployed youth living away from home would receive (at approx. $8,700).

Current welfare provides very little financial incentive for people to work in the sorts of low-paying jobs that are relatively easy to obtain without relevant training, experience, or connections (and even these aren’t always available), and the way in which it is distributed is frequently damaging to the self-esteem of recipients.

While I was and remain very grateful for government assistance in completing my university degree (something I have more than paid back in tax by now, and am happy to help others instead!) my experiences reporting the meager income I earned in part-time work outside my study were wholly negative. Undoubtedly the staff have some abrasive personalities to deal with, are under-resourced, and stressed, but rarely have I experienced interactions that invariably left me feeling so bad about myself. If someone studying toward a higher degree and gainfully employed could be made to feel this way, I hate to think how horrible the system must be for those struggling to find work.

How could an unconditional basic income help?

The key, as it so often does, lies in the definition: Firstly, unconditional. If the basic income is unconditional, everyone receives it, so recipients – and importantly, their children – need not feel stigmatised or maligned. Secondly, ‘the important word here is basic’ says Worstall. Such an income would not be designed to provide a ‘comfortable’ lifestyle, but one that ensures everyone can cover their needs.

According to Paul Mason, while social security costs would increase, healthcare costs associated with diseases of poverty – such as high blood pressure and type II diabetes, associated with stress, would decrease. As a study conducted in Ireland calculated, a basic income could be affordable with a 45% tax rate – which might sound steep and have you up in arms already – but it also found that under such an arrangement, This would lead to an improvement in income for the majority of the population‘.

Basic IncomeDo you think we should have a basic income? Let me know your thoughts below.

Today’s featured image is the view from Areopagus Hill in Athens, Greece – the location of an ancient council, later called Mars Hill by the Romans, and the location of Saint Paul’s Areopagus sermon – one of the three key themes of which was idols of gold, silver, and stone as objects of false worship.

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7 thoughts on “Should we have a basic income?

  1. Have you heard of The Non-Tax Dollar? It could pay for basic income and more! You should visit nontaxdollar.com and see. Governments require income to operate, just like any corporation, or individual. Taxes are their only income. We feel that should change. Cryptocurrency is worth billions now, not because they have government backing, but because they have a system that people trust. Our government needs the same type of system, one that isn’t linked to taxes. Visit nontaxdollar.com

    1. Thanks for your comment Michael. I’ve checked out your site, and it’s an interesting proposal.
      I believe that, while taxes are certainly a large source of government income, they aren’t necessarily the only one. Rents or royalties on natural resources are one example (as I’ve elaborated upon in this post), but fees such as road tolls, interest payments on government loans, and even in some countries, investments in research and technology are income sources too.
      You’re absolutely right that trust is an essential contributor to the success of any currency, and that’s why so many coins and notes feature symbols of government or sovereign power (https://www.enrichmentality.com/what-is-money/) – after all, they’re supposed to be the most trustworthy institutions.
      After reading through the Non-Tax Dollar proposal, it’s not quite clear to me how a cryptocurrency backed by nothing other than the US government’s promise would differ significantly from cash or government bonds which are also valued according to people’s level of trust in the government’s ability to make good on those promises.
      I also think you’re right to point out the many existing examples of the government ‘printing money’ which, in my experience, most people are unaware of I’m not American, so I don’t know how people would react there, but I do know that Americans and Australians tend to register pretty similarly on financial literacy tests (https://www.enrichmentality.com/what-is-financial-literacy/), so I wouldn’t be surprised if awareness of this issue was fairly similar. When people do become aware of these instances, such as in the case of the various stimulus packages administered in the aftermath of the financial crisis, most tend to react with fear of the kind of hyperinflation that has been seen in Zimbabwe (https://www.enrichmentality.com/is-my-money-losing-its-meaning/), and is currently occurring in Venezuela (https://www.enrichmentality.com/can-end-poverty/). For a currency based on trust, that would seem to be a pretty major issue – especially when general trust in the government has been declining for some time. I’m also curious as to how the proposal would work if more than one country came on board? I wonder if this is part of the reason that Bitcoin has been so successful – that people are moving towards a more global economy and society and away from the trusting the established authorities of nation-states. But for every Bitcoin success story, there is are myriad failed cryptocurrencies that couldn’t establish the widespread levels of trust needed to succeed.
      As I said, the idea is intriguing, and I really look forward to reading the results of your study. If I’ve misunderstood the proposal as it stands, I’d love to hear more. Thanks again for your comment.

  2. As a financial planner, I totally understand where you’re coming from.
    I read your site fairly often and I enjoy your posts. I shared this on twitter and my followers enjoyed it too.
    Kepp up the good work!

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