Someone with some political and economic experience sent me a note after they had read my blog on answering the question ‘How are you going to pay for it?' They liked what I had said but asked:
I wonder what you would say if, hypothetically, government ran only a single program –UBI. If that was the sole govt expenditure, how could the “we will work for it” answer work?
The question is hypothetical, of course, but is none the worse for it. What it asks is how can the answer I provided work if we are not requiring people to work for the benefit they get? UBI does, of course, meet this criterion, but then so too do many other benefits. Can it fairly be said that such a policy can be justified by the claim it will be paid for by the “we will work for it” response?
Let me avoid the universal basic income v job guarantee argument when responding. Clearly this is an issue; maybe it was my correspondent's real concern. But benefits extend beyond those of working age now and will always do so. We will always have the young, pensioners and those unable to work from infirmity.
So, can we argue that providing for those people (and by extension those provided with benefits because they cannot find work) can pay for itself by ‘working for it'? My answer is that it can. But the answer requires another question to be asked first. That is ‘What is the state for?'
That, of course, is a pretty big question. But I would suggest, in the same breath as I asked the question, that it is to protect those who live within its domain including the young, the old, the infirm for whatever reason and those unable to work, again for whatever the reason might be. In other words, one of its primary functions is to protect and provide for the vulnerable. In so doing it fulfils the moral imperative stated in every wisdom tradition that our duty is to have regard to the needs of others just as we have such regard for our own needs.
But it so happens that in providing in this way that it does something else. It actually increases the well-being of everyone. That is because the process of caring does provide work for those who want it. And, because those who have limited resources tend to spend all of their incomes, the process of caring does, in a financial sense, increase the overall level of demand in the economy. That is because redistribution is, by definition, from those with more resources, and so the capacity to save, which is an act that reduces effective demand in the economy. That means redistributing does itself create the demand for labour and the demand for goods and services which does, in turn, ensure that those who want to work have gainful employment to undertake. In other words, redistribution, whether via a UBI or not, does actually generate the means to work which will pay for it.
And remember that the shortage in the world of the wealthy is of demand and not supply. And as Keynes pointed out long ago, this is an inherent problem with all market-based economies: they have the natural inclination to produce too little demand to use available resources (and most especially labour) to best effect. Redistribution addresses this issue of a shortage of demand then and meets the obligation of the state and that which most of us accept to care for others.
To come back to the question then. How do we answer the question, briefly, if the proposed spend is to be in benefits? It is to say, firstly, that if the questioner thinks it is not the role of government to protect the vulnerable in society by all means possible then they have clearly asked the wrong question by asking how we pay for it: they should be addressing some much more existential issues instead. But if they do agree that is the role of government then the answer is that "Redistribution provides people with the income that creates the additional demand that creates the new jobs in society that delivers the wealth, and so the taxes, that pays for the redistribution that takes place."
In other words, redistribution does itself create the opportunity for people to work to pay for the redistribution to take place.
I expect I could find a snappier way of saying this, but I think you can discern my direction of travel and that it fits into the general model.
One final thing: it's obviously worth noting that there are limits, which must be related to marginal propensities to save and consume. I am not suggesting these need be equalised, not least because we can only estimate them anyway. So, proxies have to be used. But we already have those: they are inequality measures. And I am not suggesting the elimination of all inequalities either; there are strong arguments to suggest that is unfair, and widely thought to be so. So the aim is to redistribute until agreed ratios on inequality are reached. I suggest Danny Dorling's work be the guide on this.
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“as Keynes pointed out long ago, this is an inherent problem with all market-based economies: they have the natural inclination to produce too little demand to use available resources (and most especially labour) to best effect” – don’t you think Keynes himself might have said “as the character Owen in the ‘Great Money Trick’ scene in Robert Tressell’s ‘The Ragged Trousered Philanthropists’ pointed out long ago …”?
The great money trick – Robert Tressell is at: https://libcom.org/library/great-money-trick-robert-tressell
We also have inequalities of time to redistribute, not just income. There are very many people who have lots of income and not enough time to spend it, and many others who have little income but a lot of time to fill.
Redistribution means that the time of the second group can be transferred to the first so they have a little more leisure, and the money of the first group can be transferred to the second so they have a little more spending.
Aah, but some neoliberal will come along and say ‘it’s a free country, why shouldn’t I work 72 hours a week if I want to, with another 15 hours a week commuting, rarely spending or volunteering, earn a massive income, have no free time to reflect on life, build up my savings and retire 10 years earlier than the next person’. This sort of behaviour is easily solved by taxing or at least not subsidising savings but we should also consider applying a tax on the number of years of retirement taken before the standard retirement age ( ill health excepted ). If you tax something you get less of it, and letting healthy adult people lay idle means less supply of carers and other labour to meet demand for it. We have to consider this as if we don’t the time and income inequality problem will persist.
If I read this correctly, you’re advocating taking something away from people (time and earnings) and giving it to others. I just can’t get behind that. There are so many ways in which people can fill their time if they are so inclined… why not let people use their imaginations rather than make them carry out pastimes traditionally called “work”?
Yours strikes me as a pretty small way of thinking. The work that’s currently done is not the be all and end all of human existence. People can fulfill themselves in many ways, carrying out tasks that are traditionally not considered paid work, without ever having to worry about what the person next door is up to. If your neighbour chooses to work 72 hours a week and retire early, who are you to say that they can’t? Get on with your own life. The policy you suggest is nothing more than petty interference.
We need a Universal Basic Income to allow all citizens to provide themselves with the the necessities, freeing them up to choose how to productively spend their time (and I think the vast majority of people will be productive).
As for your suggestion of taxing pensions that are taken early – have you never heard of actuarial reductions? Pensions that are taken early lose roughly 5% of their value per year. So, if someone with a state retirement age of 67 wants to retire at 60, they will lose around 35% of their pension by doing so. I’m surprised you didn’t know this.
I’m all for a fairer society, but there’s no need to get nasty about it. Nobody has to lose. What you’re suggesting above sounds vindictive.
Jang Sung Taek says:
“We also have inequalities of time to redistribute, not just income.”
Wealthy time-poor people pay poor time-rich people to stand in queues for them for instance…..
There’s a deeper question implicit in all this: what do we value?
If, on average, we value our young, elderly, infirm, ill and injured being cared for then the work of looking after them pays for itself and is worth the effort in exactly the same way that doing anything else we value is worth it whether it be building bridges, doing science, designing new cars, cooking fancy food or creating films to show at the cinema.
It’s easy to overcomplicate money – at its heart it’s just a tool to help us agree what we value enmasse and individually and then help us coordinate those near infinite different personal value systems to motivate efforts whose aggregate outcome is maximally acceptable to all of us.
“I expect I could find a snappier way of saying this”
Probably. A snappier answer might be that the primary purpose of income in a capitalist society is to provide demand for goods and services.
The people that own the means of production ( who own, make, and sell stuff) will soon go bust if the public generally is to poor to buy them. So income is redistributed to keep demand alive and mass production moving along. Simple.
Simple realities such as this are tiresomely confused with traditional moral notions about working, owning and earning which are increasingly redundant but understandable. The common discourse can nonetheless be naive on all sides of the ideological divide. People assuming that welfare benefits are about and charity when they are there to stabilise consumer demand and make unemployment (bosses like unemployment) viable. Many assume that immigration is about altruism and diversity. From the capitalist perspective it is there to suppress wages, maintain aggregate growth and expand the domestic market. And make no mistake the Tories might make welfare harder, rort it with private agencies or try to load it up with shame and stigma but they wouldn’t be rid of it altogether. The true corporate capitalist knows that it serves an economic purpose.
At any rate we are moving toward an automated world of permanent excess capacity if we haven’t got there already. Meaning that consumption needs can be met without employing everyone full time or needing to use all the capital that we have or could have.
In that world distribution is first and foremost or at least equal with survival and ecology. Everything else is covered. Shortage is optional, unnecessary and should be obsolete.
Thanks
Do you think there’s going to be no demand for services which only humans can supply? Or perhaps you believe that childcare can be delivered by robots and robot ballet and robot football will be popular.
I confess I am not sure what you are saying here Carol
Like many Carol is trying find some sort of reassurance in the idea that robots can’t do everything.
Of course they can’t do everything but if (when) automation eliminates 40, 50 or 60% of current hours worked then that is the end of the world as we know it. The expectation of full-time work being available for everyone will be obsolete. The idea that ‘the market’ is capable of allocating labour and income will also be obsolete (as it should be already).
The fact that machines can’t do everything is scarcely worth making.
Richard, it was a response to Marco’s “At any rate we are moving toward an automated world of permanent excess capacity if we haven’t got there already. Meaning that consumption needs can be met without employing everyone full time or needing to use all the capital that we have or could have.”
Which challenges the Jobs Guarantee
And supports UBI
Correction: a point that is scarcely worth making.
Anyhow..
Given no restriction on income I’d postulate that demand would be infinite. It then becomes a capacity issue. Which is the natural limiter on spending as Richard repeats on this blog.
Richard,
I’d agree that it supports UBI. I’m not sure that it challenges the Jobs Guarantee. Quite the opposite. At any rate JG and UBI are not either/or options. We can have both.
Marcus,
You are free to postulate whatever you want without explanation. The presence of excess capacity since 2008 (or 1975 depending of one’s definition) has not resulted in “infinite demand” and I’m not sure where you think this infinite demand would be coming from.
Initially it would appear that the relationship between inequality and low income is the ‘limiter on spending’. Without getting into this too much I would then invite you to observe that for the rich and very rich the propensity to consume is low or very low. The richer they get the less they spend as a proportion of income. That indicates that wants and needs are limited as such and there is no such thing as infinite demand.
Marco Fante says:
“The people that own the means of production ( who own, make, and sell stuff) will soon go bust if the public generally is to poor to buy them. …”
I think some people in the former category are beginning to get the message as they see household names on the high street closing stores and
closing down altogether.
Revelation comes slowly to those who live distanced from reality, and insulated from its consequences. Some few will perhaps notice before it is too late (?) The rest will blame someone else, probably the government they despise, for failing to ‘do something about it’.
Elimination of all inequalities is unfair?
Elliott says:
“Elimination of all inequalities is unfair?”
In terms of the rights of the individual; No.
In terms of financial and life outcomes equality taken to absurdity is ….absurd.
Fairness respects input as well as outcome. Rewards may not always be monetary, but they are due where they have been deserved.
It isn’t a simple equation always, and we have to consider carefully how much weighting we give to effort aswell as to success. (If we’re interested in the concept of fairness at all)
I think you should post this up Richard as a discussion post.
It answers the ” How we pay for it ” question and it is the best I’ve seen.
Money Matters! Why Monetary Theory and Policy Is a Critical Terrain For the left
https://thenextsystem.org/learn/stories/money-matters-why-monetary-theory-and-policy-critical-terrain-left
Now becoming a blog