The transition problem for minimum income policies

by John Quiggin on August 8, 2012

I was planning this as a followup to my earlier post on the feasibility of guaranteed minimum income (GMI) and universal basic income (UBI) policies[1]. Chris has opened debate on some of the fundamental issues associated with a Rawlsian transition, so there might be some benefits in a parallel discussion of the specifics of these policies, which seem to me to capture a fair bit of what Rawls had in mind.

Although the two kinds of policies can be made roughly equivalent in terms of their effects on the distribution of income net of taxes and transfers, they seem (to me, at any rate) to indicate quite different political approaches, and therefore different transition paths, each with their own difficulties.

For UBI, it seems natural to start with existing examples of unconditional and universal payments, such as the Alaska Permanent Fund, and the issue of shares in formerly state-owned enterprises in some transition economies. The natural approach, which seems close to what Chris is discussing, would be to accumulate a steadily increasing stock of income-generating public capital, and use the return to capital to fund a Basic Income Payment.

The easy case is then the capital comes as a windfall, for example from mineral discoveries. But this is unlikely to be sufficient, except in the most favorable cases. Norway has probably done a better job of managing oil wealth than any other country and has accumulated about $600 billion, or around $120 000 per person, in its Government Pension Fund. Carefully invested, it might return $6000 per person per year. That’s impressive, but nowhere near enough to fund a poverty-line UBI.

So, any serious approach must, as Chris suggests involve transferring a large proportion of existing wealth from its private owners to the public. Leaving aside questions of justice, I can’t see an obvious transition path here. The problem, as illustrated by the existing wealth-based funds, is that it takes a lot of capital to generate a return that would finance a UBI at or above the poverty line. In the US context, you’d need something much larger than the Social Security Trust Fund (2.7 trillion) to get near the target. On the other hand, it’s hard to see how a universal payment at a level far below the poverty line could mobilise the kind of popular support needed for a policy of radical redistribution. Obviously, lots of people have thought about UBI, so maybe there is an answer to this problem I haven’t seen. I’ll be interested to see what commenters have to say.

For a GMI, the transition path looks a lot more feasible, though still way out of the realm of current political feasibility – more so in some countries than in others, but outside the Overton window everywhere. As I said previously, the approach would be to raise existing conditional benefits to a level on which people can live decently (in most developed countries, basic incomes for old people are at this level or not far from it, but other benefits are often less) and then to relax conditionality. The relaxation could be done in stages, rather than by instituting an unconditional payment instantly. For example, work tests for the unemployed could be relaxed or abandoned for those engaged in voluntary work or artistic endeavours, or bringing up children.

Of course, recent policy shifts have been exactly in the opposite direction (such as US welfare reform) and have been fairly popular. So, even the first steps towards a GMI would require a radically different political and economic context. Partly, as with UBI, this would involve identifying the wealthy, rather than the undeserving poor, as the primary source of the economic problems faced by the middle 60-80 per cent of households, and ensuring that the burden of tax fell on them. At least as importantly, though, such a policy can only achieve mass support in a context where workers in general are doing much better than at present, and expect to do still better in the future. That means genuinely full employment[2], reversal of the post-1980 trend to wage inequality, and some combination of a restored trade union movement and pro-worker government intervention. In this context, people would, I think, see the option of a GMI as something that enhances their own wellbeing by saying that they can do without a job if they have to, even if their current job is good enough that they wouldn’t want to quit, rather than an additional burden on hard-pressed workers, handed over to lazy layabouts.

In summary, I don’t think a transition to a GMI would be easy, but I think it could form part of a ‘real utopian’ vision more appealing than the shades of grey offered by (US-style) neoliberals and Third Way advocates. As I’ve argued quite a few times, the left needs a genuine hope for a better world to oppose to the angry tribalism of the right. Cautious and sensible management of a declining status quo, as offered by Blair, Obama and others, is not enough.

fn1. Precise definitions vary, but I’m going to use GMI to refer to any policy designed to ensure that no-one falls below some given income level, and UBI to refer to a policy that pays a given amount to everyone in the community, regardless of their economic circumstances. A UBI implies substantially more expenditure, and therefore more taxation than a GMI, but broadly speaking the two will have similar effects on the distribution of income, after taxes and transfers, at least until we consider administrative costs and effects on participation in employment.

fn2. We had a big, and not very satisfactory, discussion of this recently – I’ll offer as a working definition, the situation prevailing in Australia in the 1960s when, for most kinds of jobs, there were more vacancies than unemployed workers. That makes an employed worker’s (implicit or explicit) threat of going elsewhere more credible than the boss’s threat of dismissal.

{ 47 comments }

1

reason 08.08.12 at 7:39 am

John,
I’ve been on holiday so I haven’t read your previous post (link?), but I don’t see why UBI has to be paid out of capital – or why if it is based on capital couldn’t just be based on land (i.e. a Georgian type ULV tax). Surely the route to introduce it, is to start small and increase it steadily, cutting conditional benefits as you go. What is wrong with that?

2

reason 08.08.12 at 7:43 am

P.S. I see UBI as an ALTERNATIVE to union strength in supporting worker rights, and UBI as a step to supporting higher levels of employment (because of more distributed purchasing power, so some of your conflicts are to me just mistaken). But yes establishing political support is the problem – especially as it involves cutting conditional benefits and probably reducing asset values in some way (albeit slowly).

3

reason 08.08.12 at 7:54 am

It seems to me, that the answer to your transition process (assuming asset rather than tax financing) may lie in a much ignored post in Chris Bertrams thread. Use inheritance taxes to set up an asset fund.

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sanbikinoraion 08.08.12 at 10:31 am

Another way in that comes to mind is of government-issued carbon credits that are, for example, redeemable against petrol taxes and domestic energy taxes initially, and most definitely tradeable. That will set a market value for them, and everyone will get the same amount every year. Govt can introduce additional green taxes or allow carbon credits to be used against, eg. VAT. Not sure how to get to a full UBI/GMI from there, but it may be a start.

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Chad Satterlee 08.08.12 at 10:40 am

I’ve been thinking seriously about the transition question in terms of Roemer’s market socialist model, i.e. the socialisation of equity with a Dworkin-type clamshell economy to pay out dividends on a per capita basis. In Australia at least, assuming 27% of national income goes to corporate profits and median household income is 40000 dollars, that works out to about 11000 dollars per annum to each household in capital income. Would that not be a pretty solid UBI? I’d be interested in people’s views on some forward mapping scenarios of getting to that – it’d be pretty easy to administer such a scheme via electronic accounting but you’d need to find a way to “end” the capitalist stock market in a way that minimises disruption..

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John Quiggin 08.08.12 at 12:30 pm

@Chad I think Aust median household income is more like $63000. ABS often quotes an equivalised per person number, which may be what you are citing here. Even so, $11 000 per person is way below Oz poverty line.

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Chad Satterlee 08.08.12 at 12:41 pm

In that case you would be up to 17000 per annum, on top of wages and standard welfare transfers

8

understudy 08.08.12 at 1:32 pm

Also, just a quick google on Aussie corporate profits for 2010 was closer to 17% of GDP, and also highly volatile. Highly cyclical taxes on corporate profits are not a great fit for a stable, growing UBI or GMI

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reason 08.08.12 at 2:07 pm

John,
i don’t have the numbers in front of me, but if you cut the income tax free income level and replaced it with a UBI of equivalent (including for children instead of deductions) it would seem to me to be a significant first step. Then cut unemployment insurance by an equivalent amount. Then make carbon taxes revenue neutral by distributing the revenue evenly. Boy we a long way already.

10

Josh G. 08.08.12 at 2:45 pm

Although both UBI and GMI are way outside the Overton Window at this time in the US, the GMI is a much harder sell. Even if the numbers are economically equivalent, the optics of a GMI are much worse: you’re specifically giving a handout to people who aren’t working, which is a means-tested benefit. And you’re implicitly doing it at the expense of workers. As the saying goes, programs for the poor are poor programs. A means-tested benefit is far easier to cut back than a universal one: witness Bill Clinton ending welfare as we know it. Means-tested benefits also create perverse incentives, since the effective marginal tax rate can be well over 100% for income that pushes workers out of the program’s range. Even if you ramp down the benefit over a range to avoid it getting quite this bad, it still means that low-income workers feel that they’re getting screwed while non-workers are getting a free ride.

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Jon D 08.08.12 at 2:59 pm

It seems like you don’t really see a use for UBI/GMI unless it is above the poverty line. However, I see two compelling reasons why a smaller UBI would still be useful.

First, a smaller UBI could replace a number of conditional programs that already exist. These are things like providing rent assistance or subsidizing food purchases. An equivalent UBI would allow people to prioritize for themselves what they want in life, would remove the administrative overhead of determining who is worthy, would avoid restrictions about use (you only get rent assistance if you live in this area, you can only use your food stamps to buy these goods), and would avoid the difficulty and stress of needing to apply and be approved for these programs. It would enhance the dignity of everyone involved. And since it is universal it would remove the stigma of receiving it, just as there is no stigma associated with receiving social security checks in the US.

Second, a UBI could allow a lot more options for people when it comes to profession even if the UBI by itself does not bring them up to the poverty line. Somebody can make several thousand dollars a year programming Flash games, doing odd jobs like mowing lawns, making and selling crafts on the Internet, performing music, acting, etc. In many cases, these can be hobbies which they are monetizing to make a bit of extra money. Combined with a UBI, this income could be enough to live on even if the UBI alone would not be.

I’m also not sure I buy the definition of poverty you give. Is the formula you give just intended as a rough estimate for your back-of-the-envelope calculations? Or is it a well-established international measure of poverty within a country? I’m not familiar enough with the literature to be able to tell the difference.

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JW Mason 08.08.12 at 3:08 pm

Agree with Josh G. above.

Also, we shouldn’t underestimate the practical costs of means-testing. If you’ve had any contact with income-support programs in the US, you know what an enormous effort — extending to basic program design — goes into preventing fraud. This not only makes the programs much costlier and more cumbersome than they need to be, and excludes many people who meet the fundamental criteria but are deemed ineligible for one reason or another. it also makes getting support extremely time-consuming, humiliating and demoralizing.

I think if we want a feasible utopia, we are much better off with genuinely universal provision of *something*, where the something is as modest as it needs to be to meet your standards of feasibility. Public schools, public parks, public transportation, etc.

Somewhat OT, but I really wish this approach had been taken with health care reform. (And that’s why these discussions matter — they help shape the next big liberal legislative project, which will come along sooner or later.) Instead of building a ramshackle, crazy-quilt system that purports to (tho it doesn’t really) fix the whole problem, why not build a simple, genuinely universal (and generalizable) system that fixes part of the problem. Medicare should have been the model. If Medicare for all isn’t feasible, why not Medicare for kids?

I think part of the problem is a lack of any positive vision of the public sphere as a good in itself. I would like our feasible utopia to be less about redistributing private wealth, and more about expanding collective wealth.

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Watson Ladd 08.08.12 at 3:24 pm

JQ, I’m confused. It would seem to me that so long as the total income of the population doesn’t increase, the means exist to achieve whatever distribution you want through taxation of capital and labor if we are ignoring dynamic effects, because after all the money exists. If you wanted to achieve a GMI, just expand EITC and raise the top rate/remove dividend deductions etc. Given that the capital costs for the US government are at historic lows, the US should be able to make a big profit in the stock market right now, selling Treasuries and buying stocks which it can trivially manage to get 2% a year real. So it shouldn’t be that hard to get the money if you have the political will to get the result.

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Marshall 08.08.12 at 6:41 pm

I think a key part of the transition would be to incent successful people with something other than money. Don’t know what that would be … reserved seats at the opera? … but likely it would run counter to the usual left-progressive desire for egalitarianism.

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Stephen 08.08.12 at 7:23 pm

If there were only one country in the world, much of the above would be fine. (Though if all the world were treated as one country, I fear the global UBI/GMI would be utterly unacceptable for most Australians, USAians, etc.)

Given many countries in the world, we have to ask: is the UBI/GMI to apply to all the citizens of the country that is to adopt it, or to all the residents?

If to all the citizens but not to non-citizen residents, then if naturalisation is difficult either we must accept that non-citizens will have to take jobs paying well below the UBI/GMI- with predictable adverse effects – or we must ensure that non-citizens will be excluded from employment, if not deported. If naturalisation is easy, we must expect a great influx of non-citizens expecting rapid access to the UBI/GMI, again with (from the point of view of existing citizens) adverse effects; unless we have rigorous immigration controls, and deportation of those who evade them.

If to all residents, then again we have predictable adverse effects, unless we have rigorous immigration controls, and deportation.

Please note that I am not arguing, as things are, for either more rigorous immigration controls, or for exclusion of non-citizens from employment, or for massive deportation of illegal residents. I am merely pointing out that, as a matter of practical politics, those who might favor UBI/GMI are mostly unlikely to accept what seem to me to be the necessary consequences, and vice versa. That would be a serious political problem

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John Quiggin 08.08.12 at 7:51 pm

@Jon D “a smaller UBI could replace a number of conditional programs that already exist. These are things like providing rent assistance or subsidizing food purchases. “

But a UBI would be a massively expensive way of doing this compared to just changing these programs to cash payments. Food stamps are (AFAIK) unique to the US, and their existence certainly shows how far away from current political reality ideas like GMI/UBI are. Rental assistance is defensible if it’s a supplement to benefit payments who don’t own their own home. It depends how prescriptive it is.

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John Quiggin 08.08.12 at 7:57 pm

@JWM and Josh D – the optics are better until you look at things like the required tax rate and the transition path. I’d be interested in a more direct response to the problems I’ve raised in this respect.

I agree with JWM that as far as universality is concerned, public goods are the way to go, and I’ve pointed to public provision of free healthcare (outside the US) as an example where something like feasible utopia has been achieved. Even at this level, the US is problematic because nearly everything is done at the local or state level, even when federal money is being used. But Medicare for kids sounds like a great idea!

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John Quiggin 08.08.12 at 8:08 pm

@Stephen I agree that these are big problems. I had a go at them here. A short summary of my view is that part of the vision has to be the ending of extreme poverty at a global level, which you could see as a global UBI, though at a much lower level than that available in rich countries.

Since I like putting numbers on things, a global UBI at $2/person/day would cost $5 trillion which is close to 10 per cent of world income, and almost certainly not feasible. But if we assume that the UBI is covered at the national level for everyone outside the bottom billion, the transfers involved would be around $800 billion a year or about 1 per cent of global income. That’s utopian in the current political context, but entirely feasible.

http://johnquiggin.com/2010/10/24/cosmopolitan-social-democracy/

19

JW Mason 08.08.12 at 8:27 pm

the optics are better until you look at things like the required tax rate and the transition path.

Say we agre that the best case is UBI but it’s not politically feasible. Feasible provisions of basic income will have to be limited in some way. Your suggestion is to limit them by means-testing. my argument is that means-testing is one of the worse ways to scale back a universal income grant, so this is far from the feasible second-best. Better is a universal grant limited to some particularly needful and/or politically attractive subpopulation, on the model of Social Security. A universal grant for children is the obvious possibility. Even better, IMO, is the universal provision of a greater range of public gods and services — health care, higher education, child care, paid sick days, parks and other public amenities. I think a retreat from UBI on this margin is better not just because it avoids all the problems with means-testing (stigmatization, wasteful fraud prevention measures, perverse incentives) but because it expands the space of public goods rather than just redistributing private claims.

(Personally, I would prefer outright public provision of basic goods to a universal basic income, because for me the decommodification of social life is as important a goal as egalitarianism. But even if you wouldn’t go that far, the arguments above still work.)

20

John Quiggin 08.08.12 at 8:42 pm

@JWM Oz and US/EU perspectives on means-testing are very different. In Oz, means testing is viewed as part of a redistributive package, just like progressive taxation, and the tax-welfare system is, in general, treated as a whole, so we look at the effective marginal rate of tax (marginal tax rate + benefit clawback rate) and try to keep that from getting too high anywhere in the system.

Again, I agree on the public goods stuff. I’m not proposing UBI/GMI as a panacea, just saying that income support of some kind has to be a big part of the package – maybe en route to full-scale decommodification, but that’s a long way off.

Finally, I restate the point of the post – starting from scratch, you might argue the merits of tax-funded v means-tested payments. But, starting with a lot of conditional benefits (with the conditionality in most cases implying limited means), it seems a lot easier to expand and extend those than to build up a universal payment. Still, the idea of paying subgroups has some appeal as a way to go.

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JW Mason 08.08.12 at 8:47 pm

Fair enough. I admit I’m coming from a US perspective, and I don’t think we disagree on anything really important here.

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John Quiggin 08.08.12 at 10:05 pm

@JWM Thanks for discussion – it’s helped me a lot

@World – still keen for more comments

23

UserGoogol 08.09.12 at 12:35 am

The distinction between a UBI and a GMI seems like it would be smoothed over significantly through legal technicalities: namely, by implementing the universal income as a refundable tax credit. That way, you can pay “everyone” a certain amount of money but payments to people making above a certain amount of money get cancelled out before they have to make their way onto the balance sheet.

24

Curmudgeon 08.09.12 at 1:30 am

“He who does not work shall not eat” is so deeply ingrained into most cultures that a program that is seen as transferring wealth from people who are seen to stand for the national image [1] to an undeserving lazy outgroup [2] will never be politically viable. For a GMI or UBI to be workable it must be seen either as a payment to everyone due simply because of citizenship [3] or a payment to those who are performing socially desirable [4] but unpaid tasks.

[1] In the US, this would be the kind of people who listen to AM hate radio. The redneck working class isn’t a majority but is viewed as Real America by those who make the decisions. Income redistribution programs (IRPs) that are seen to come at the cost of people who embody the national myth will be a non-starter.

[2] In the US non-whites are, of course, the most hated out group. Immigrants serve the analogous role in Europe. IRPs that are seen to benefit mostly outgroups will be non-viable. For IRPs to work they must be seen as benefiting people who fit into category (1).

[3] Supporting a minimal IRP of the redistribution of resource royalties would allow IRPs to be framed as a benefit of citizenship on the basis that the land belongs to everyone. Getting a foot in the door with a royalties-funded IRP could provide an avenue to expand the program using other funding sources.

[4] Proposing a transitional IRP for artistic endeavors, childcare, charity work, etc, may be successful in cultures that still recognize the value of society as something independent of economic markets. The latter clause excludes the US and UK as they have become parasitic markets that marginally tolerate their host societies rather than societies that are supported by markets. The concept of socially useful but uneconomic tasks is a category error as far as the political cultures of the UK and US are concerned.

25

reason 08.09.12 at 9:06 am

As for immigrants, I see this as requiring citizenship OR some significant qualification period. I don’t see that as particularly difficult or unfair.

John,
I still don’t understand your predilection for means tested benefits. For me the UserGoogol is on the right track. The right approach is to see this is net terms and to gradually cut conditional benefits and replace them with UBI. Politics then to me would involve much clearer choices – higher UBI and higher tax rates versus lower UBI and lower tax rates. We would stop arguing in terms of principles and start arguing in terms of rates.

26

John Quiggin 08.09.12 at 10:50 am

@Reason, I don’t think means testing is the right way to think about existing conditional benefits. You get them not by virtue of having a low income, but by virtue of some condition that prevents you earning an income. If you don’t satisfy the conditions, you don’ get the benefit, regardless of means.

What that means is that the transition path you suggest involves a lot of pain for no gain until the UBI is enough to live on. Consider your path at the point where you’ve cut existing benefits by $3000 and put in a $3000 UBI. That’s a budget cost of around $1 trillion a year for the US, but how is anyone qualitatively better off than before – existing beneficiaries have their position unchanged, and no one else has enough to live on. And you can take that a long way further – even at $10 000 you’re not getting any real change, AFAICT, and you’ve now doubled gross spending.

Of course, UserGoogol is right – you can just go for a progressive adjustment to the income tax scale, with the UBI being entirely notional for anyone on an average income. I’d happily support that, but it’s not really a UBI, and doesn’t seem to promise any transformation in our relationship with work.

27

LSTB 08.09.12 at 11:44 am

“The problem, as illustrated by the existing wealth-based funds, is that it takes a lot of capital to generate a return that would finance a UBI at or above the poverty line. In the US context, you’d need something much larger than the Social Security Trust Fund (2.7 trillion) to get near the target.”

reason (#1), above, is right. UBI wouldn’t be paid out of capital but out of land rents, which includes land, spectrum rights, geosynchronous orbit leases, taxi medallions, etc., then add congestion and carbon taxes. Whether that’s enough for a UBI is a different issue, but at least shifting taxes onto land removes distortions and encourages efficient land use, raising wages.

28

reason 08.09.12 at 12:07 pm

“existing beneficiaries have their position unchanged, and no one else has enough to live on”

No one is worse off – so there are plenty of people with enough to live on. And a UBI (even a small one) will act as a wage subsidy for marginal employees. Some people will be better off (otherwise it wouldn’t cost anything). But yes you might need some tax increases – hence my suggestion of cutting the tax free income or basic deduction levels.

29

reason 08.09.12 at 12:08 pm

John,
besides which, you missing a key point. As the UBI rises, the number of conditional beneficiaries will fall. You can make savings in bureaucracy.

30

reason 08.09.12 at 12:24 pm

Re Curmudgeon’s take, I prefer a UBI to be called a “national dividend”. And yes ideally, a lot of it would be financed by green taxes, ulv taxes and resource rentals.

31

donpaskini 08.09.12 at 2:17 pm

This is interesting to compare with the growth of cash transfers in poorer countries, which Duncan Green discusses here – http://www.oxfamblogs.org/fp2p/?p=2547

Lessons from these programmes are that they usually start small and then get scaled up, and that transfers to pensioners and children are the best entry points to win political consensus and public support.

32

SamChevre 08.09.12 at 7:00 pm

Consider your path at the point where you’ve cut existing benefits by $3000 and put in a $3000 UBI. That’s a budget cost of around $1 trillion a year for the US, but how is anyone qualitatively better off than before – existing beneficiaries have their position unchanged, and no one else has enough to live on.

But you don’t need enough to live on to be significantly better off. Someone who earned just barely enough to live on, and now has an income $3000 more than just barely enough to live on, is much better off.

33

Stephen 08.09.12 at 8:21 pm

JQ @18
Glad we agree it’s a serious problem. But – like you, I look at numbers, and have spent much of my life doing so – I’m not sure that the ending of extreme poverty at a global level as you suggest, however desirable, will actually help with the problems I foresee. An UBI of $2/day, or say $800/yr, even though well above the per capita income of the poorest countries at present and so acting against extreme poverty, must still be far below the UBI acceptable for the US or for Australia. At which point my previous dilemma strikes again: people who would favour an UBI in their own countries at US/Australian rates will mostly oppose the steps (rigorous anti-immigration and deportation policies, prohibition of employment of non-citizens, blocks to naturalisation) needed to make those policies work; and vice versa.
I can’t easily see a way round that political dilemma: can you?

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John Quiggin 08.09.12 at 8:58 pm

@reason (#29). You have this the wrong way around. My approach to GMI would start with relaxing conditionality and therefore save admin costs from the beginning. A small UBI, with offsetting reductions in the value of existing benefits, but no change in conditions, would have no impact on admin costs

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John Quiggin 08.09.12 at 9:03 pm

@Stephen I agree this is a dilemma, but it’s one we already face. On the whole, I think the policies I’m proposing will make it less severe, not more.

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john c. halasz 08.10.12 at 10:13 pm

I think it’s a roughly reasonable thesis that the distribution of income follows from the structure of production, and that if one wants to change the former, that would entail changes in the structure of production and the forms of social organization attending upon it. And not least because the linkage between production/labor and income, however ideologically illusory, means that those who would perhaps benefit most from changes in the distribution of income might well be those who would most oppose them. Given that we live in a world dominated by oligopolistic capitalism, the prime driver of which is the functional “imperative” to maintain the value of privately invested capital by means of the rate-of-profit and which is thus dependent on the contradictory realities of excess production and large economic rents, (complicated nowadays especially by the generalized corporate strategy of globalization and financialization, as flip sides of the same coin), it’s not just likely that the resulting distribution of income will reproduce itself together with its mode-of-production, but that the level and composition of consumption demand and thus of basic incomes will be constantly adapted to serve the re-production of that system.

IOW why assume a basic income level corresponding to the prevailing price levels imposed by current output and its arrangements? If the aim of a basic income policy is the de-commodification of labor, (or, more broadly, of many other attendant aspects of social life, such as household activity, child-rearing, education, health, political participation and cultural activity), then why assume that a threshold for a decent standard-of-living for all, in terms of quality-of-life and personal and collective freedom, is set by the current level of prices and output and to be secured simply by a redistribution of income. (Historically, capitalism has been fairly successful at inducing increases in productive efficiency, despite many at least partly self-induced crises, but efficiency is consumption is anethema to it and its “spirit”). By divorcing the distribution of income from the mode of its production, a reformist agenda not only renders it little likely that that a more just distribution could be achieved, but reproduces the “utility” of consumption as the prime justification of the system. (Even as rampant environmental and resource crises render expanded consumption increasingly doubtful to achieve: are 200 million automobiles for a nation of 300 million people really an efficient transportation system?) Rather shouldn’t the starting point for exploring the attainment of a more just and sustainable socio-economic order be an examination of alternative selection criteria for productive investment and technical development in place of the “private” property regime that currently prevails?

The main take-away from that old eponymous satirical epic was that capital is neither a hoard of gold, nor a set of machines, but rather an ensemble of social relations, whose modus operandi, however, is such as to generate the “socially necessary illusion” that a set of inter-related human activities must appear as a set of deterministic relations between things. What gets called “utopian” are those practical possibilities that such a system must perforce deny, exclude and repress.

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minnesotaj 08.11.12 at 2:48 am

What about a “personal balance sheet” view of basic income in which key themes of innovation, risk, and liberty were used to drive core provisions of healthcare, mass transit, and education? It seems to me that you’d have a working (in the US) argument to say that those who no longer worry about losing healthcare, paying student loans, or for their (2nd) car (and the US average auto expense is something crazy like $6000++/annum), you would create richer pool of innovators/risk takers, and more (political and personal) freedom of speech and association (cf. corporate tracking of social media, especially).

In a parallel vein, getting more people into simple things like garden vegetables (the ~40M acres of cultivated lawn in the US = $320B in organic produce [cornell study at $8K/acre organic market gardening]) — we leave too many things to market pricing/dynamics that need not be (maybe shouldn’t be) priced at all. Getting the balance sheet on this (or this off the balance sheet?) would also go a long way to easing basic income — since the basic income would shrink.

So, a piecemeal transition path of funding transportation, healthcare, and education, plus some incentives (property tax rebates) for people to take Bermuda grass out of production, and you’d have a slow, a la carte path to basic income.

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John Quiggin 08.11.12 at 3:43 am

@jch If you read the previous post, which had the actual analysis, you’ll see that (except for a couple of illustrative asides) everything is in percentage terms, so there’s no particular assumption about levels of consumption. Roughly speaking the assumption is that norms about an adequate income have enough of a relative component that we can use a benchmark like “30 per cent of average income”.

It’s true that the analysis assumes a society somewhat like all those that have prevailed for the last century or two (including ‘socialist’ states) , in which most people work for wages. I don’t know how you would start talking about the feasibility of a basic income if you first need to assume a society in which relations of production are already fundamentally different to anything we know.

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Andrew Cady 08.11.12 at 4:38 am

What’s giving everyone in the USA $20k/yr free going to do to the price of rent?

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Salient 08.11.12 at 12:55 pm

What’s giving everyone in the USA $20k/yr free going to do to the price of rent?

To answer the question a bit obliquely, it’s hard to say something about the whole country. But in the midst of nearly 0% homelessness and supply already exceeding demand, if we can’t rely on capitalist market incentives to ensure landlords will maintain competitively low rates despite a universal national increase in income, that says more about the failure of market incentives to meet the population’s needs than it does about the failure of the universal income increase to meet the population’s needs. [This is one of those 'if P, then Q' type statements that's actually intended as a 'since P, Q' type of statement. It's kind of incredible how natural and automatic it is to convert the latter into the former. But that's a different thread's topic, nevermind.]

FWIW, when someone drags out the Econ 101 supply and demand charts to ‘prove’ rent prices will absorb a UBI with little benefit to the population, I think the proper response is to hear them out and then say, “Congratulations! You’ve made an excellent argument for the nationalization of housing property. In fact, you’ve completely convinced me! So, how would you like to proceed?”

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Will 08.11.12 at 7:46 pm

@Salient-

To play devil’s advocate: the assumption is that supply of housing stock will not rise as much as demand does, because land/location is for the most part fixed. Increasing housing means either building far from centers of activity, or building more densely in the centers, which is often hindered by local laws.

Several commenters above have indeed proposed funding a UBI through a confiscatory tax on land rents (a cousin of your “nationalization of housing property”). JQ has not engaged these arguments, I suspect because he’s trying to figure out how to get to an income guarantee without assuming any ponies, and the land value tax has proven to be a perennial pony that you cannot get political actors to embrace.

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john c. halasz 08.11.12 at 11:44 pm

John quiggen @ 38L

(The capital q on my keyboard doesn’t work).

I’m not at all making an assumption of a money-free or wage-less economy. I’m simply making the commonplace assumption that one person’s cost-price is another person’s income and that the price structure which in the main determines the distribution of income can’t simply be assumed to be an immutable given, (to be read off of N.I.P.A.)

“There is no such thing as a free lunch” is already a malignant slogan, because hungry, malnourished school children obviously don’t learn very well and the small cost is vastly outweighed by the benefit of such programs, but there is in fact a “free lunch” involved here, as many other commenters have variously mentioned or alluded to, viz. economic rents, (which is precisely what that right-wing slogan was meant to obfuscate), and how those feed into the cost structure and thus the interlinked distribution-of-income and cost-of-living. And analyzing how economic rents are woven into the structure of production and investment, (and correspondingly the demand for labor), while a very complex matter, is a key issue here. And altering the pattern of production and employment to reduce real costs-of-living rather than to augment private profits and expand consumption requirements, (with contradictory effects on labor demand, employment levels and wages), though a tall order, is not an impossible issue and equally worth of consideration.

Just to give a simple empirical example, the U.S. minimum wage peaked in 1968 at $10.31/hr. in current $, compared to $7.25 nowadays. But, though I can’t remember the exact percentages, since I heard it on the radio (NPR), the cost of rental housing then was a sharply lower % of income than it is nowadays. (I believe the median cost of housing services in the 1960′s was about 25% of median household income, compared to 40% nowadays. And as for “hedonic adjustments”, I did find a chart that had U.S. nationally indexed real housing prices rising between 1970 and 2011 by only 25%, as opposed to the Case Schiller index, which is only for existing, previously sold homes). (Health care and education costs are more notorious, but their egregious rises seem to be a specifically U.S. dysfunction).

Capitalism has always featured a precarious tension between its productive and its extractive aspects, but in the recent neo-liberal era, its extractive vs. productive balance has been increasingly working in reverse, resulting in increasing disinvestment and mal-investment, while shifting the distribution of socially produced surpluses increasingly toward capital and away from labor, which expresses itself both as declining wage incomes and increasing costs-of-living for the wage classes, (which I think has everything to do with globalization/financialization as the dominant strategy for maintaining oligopoly rents). Which is why I don’t think that talking in terms of fixed percentages of nominal price measures, however index-adjusted quite cuts the cake.

But the basic point is that the structure of production, (even if it occurs more on the level of “appearance” than “essence”), will largely determine the distribution of income .and so long as social recognitions, (since norms, being counter-factuals, can only be said to “exist”, if anchored at the level of (struggles for) recognition between persons), are tied to work as a contribution to social production, then changing the basis of those recognitions from “work” as disciplinary resentment and occupational status to fruitful activity will require changing the structuring of production and the political economy of power relations that result from it. Which again is why I don’t think that hypostatizing “a society somewhat like all those that have prevailed for the last century or two ” quite cuts the mustard,- (mixed metaphor alert!),- since that is ahistorical and seems to derive from the egodic assumption of neo-classical economics, and, as the advertizing disclaimer goes, “past performance is no guarantee of future success” with regard to the sustainability of current trends.

Policy proposals are not that hard to come up with. Taxes on wealth and economic rents, where persistently identifiable, would be a start. Downsizing the system of banking and finance, which has been a prime source for generating and channeling such rents would also be obvious. I would advocate for an “heroic” full employment macro fiscal policy, including government as employer of last resort programs, precisely in order break down the bifurcation of the work force into productive and unproductive segments, on which capitalism depends both functionally and ideologically, and thus to enable a reduction in required working hours and a fairer distribution and recognition of working burdens. And public investment, beyond the narrowly tailored non-rival public goods argument, and a publicly guided indicative industrial policy should be in the mix. And most of all, though the tallest task of all, a restoration of the full Keynes on Bretton Woods, including the ICE/Bancor proposal, as an FX and trade regime, would be required to restore the relative policy autonomy of governments over against the extra-territorial powers of the Wall St.MNC complex. But, of course, all that just amounts to wishful thinking, so long as the prevailing structure of production and the resulting political economy of power-relations remains in force. (Though it is true that “we” have accumulated much better economic policy knowledge, some of it of long standing, over the years. However, that that better policy knowledge is seemingly never applied, in favor of much worse, speaks to the point. Economics, as much as the capitalism it rationalizes, has been “working in reverse”).

In contrast to the prevailing doxa among the CT “collective”, I don’t put much stock in “normative political philosophy” and the elaboration of norms in abstraction from the functional grid from which they emerge and too which they respond, whether in rationalization or opposition to its constraints, (which, after all, is to abstract as well from the context of social relations to which they would apply). “Utopian” is means inherently infeasible, not because it’s somehow metaphysically impossible, but because it speaks to practical possibilities that are forcibly denied and excluded from the horizons of the prevailing order.

I hope the foregoing serves to clarify the differences in our respective POVs.

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reason 08.13.12 at 9:50 am

Re land rents, effects work in two directions here.
1. Living on low market incomes in less popular locations becomes a much more attractive strategy.
2. Demand at the bottom end of the housing market will increase (not much affect in the middle should be seen as the net benefit will be zero in that range).
3. Demand at the top may be reduced with more redistribution.

How these effects balance out is indeterminate, but my guess is that effect 1 may be more powerful that effect 2.

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Watson Ladd 08.13.12 at 11:28 am

But how much of that change is the result of everyone wanting to live in New York? Housing prices and wages are both high in a small number of cities: Paris, London, New York, LA, etc. The concentration of economic activity may be a factor as well.

45

reason 08.14.12 at 3:14 pm

Watson Ladd,
I don’t won’t to live in New York City. And given a reasonable income living in Byron Bay looks an attractive option to me.

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Watson Ladd 08.14.12 at 3:27 pm

Right, right. But your preferences are atypical for a lot of people. I was talking to john c. about how preference changes might change prices. For instance, if more people want to spend more on bigger cars, then the average price of a car goes up, even if the affordability of the same car remains the same. A basic income policy probably wouldn’t change housing preferences. It might however make high-unemployment areas into stable communities financed mostly by transfers stimulating local economic activity. (Think small New England town financed by retirees, only more general).

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reason 08.14.12 at 4:17 pm

Watson Ladd @47
Yes exactly, and the question is whether that is a good thing or a bad thing. But note, that this doesn’t really stay that way (also for towns financed by retirees). Eventually one of two things will happen:
a. The stable income will foster successful companies that start to export from this stable base
b. People will drain away looking for more opportunity.

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