The Citizen’s Income

Guest post by Jeremy Williams of the blog Make Wealth History -which thinks about sustainability, transition towns, post-growth economics, and what it means to live well in a consumer society.

One of the recurring ideas that crops up in alternative economics circles is the citizen’s income. In a nutshell, it’s a universal and unconditional payment made to every adult in the country, every month. This provides everyone with a ‘guaranteed minimum income’, which is an alternative name for it.

We have it in a form in the UK already, through child benefit payments. A full scale citizens income would include adults too, with different rates for different stages of life. Everyone would receive it, and it would replace child benefit, state pensions, unemployment benefits and a host of other tax credits.

Reactions to this idea generally divide in two. The first group is ‘brilliant – free money from the government’. The second comes from those who think about it a moment longer and realise that it would be funded through taxes. Then they ask why you’d want to give benefits to rich people as well as poor people.

A fair question, but there is some sensible thinking behind the idea of the citizens income that makes it more than the national pocket-money scheme it appears at first glance. It’s also one of those ideas that has been advocated by politicians and economists from right across the spectrum. It’s been a recurring policy in the Green Party, but free-marketer Milton Friedman was a fan too. Martin Luther King called for it. So did Napoleon. It was discussed by the Labour Party in Britain in the 50s, and by the Republican Party in the US in the 60s. Bertrand Russell wrote that it allowed society to enjoy the best of anarchism and socialism at the same time, as part of a largely forgotten libertarian socialism movement. There aren’t many ideas that can cross these sorts of ideological boundaries so freely, and when you find one it’s well worth investigating it a little further.

A fair benefits system
The first reason to take a citizens income seriously is that in a society that runs social security programmes of any kind, you will have net contributors and net takers. Some people work hard all their lives, save for their retirement and maybe even have private healthcare insurance. Where social programmes are fairly generous, there’s a risk that such people end up as net losers in financial terms, paying for the sections of society that can’t or won’t work.

The usual political response is to this problem is to cut benefits to ‘make work pay’, so that ‘spongers’ can’t live off the hard work of others. That’s legitimate, and a system that pays people not to work is obviously self-defeating, but it only deals with half the problem. If you cut benefits right down, you punish those who are legitimately out of work, and still end up with a large section of society that are net contributors. You can never create a fair system. All you can do is shift the burden back and forth between sectors of society, usually on the basis of who is most likely to vote for you.

The citizens’ income fixes that by securing a share for everyone. There would be no unemployment benefits, because everyone would get an equal cut of our shared wealth. The sum wouldn’t be enough to live on in any great comfort, so it wouldn’t encourage idleness, but it would be enough to provide a safety net for hard times. Everyone would get it regardless, so there would be no winners and losers in the benefits system. The endless arguing over benefits scroungers and the ‘hard-working’ middle would be solved at a stroke – everyone gets treated equally.

Rewarding unpaid work
Another good reason for paying a citizen’s income is the vast amount of unpaid work that goes on in the economy. As things currently stand, you only get paid if you have a formal job. But just because you aren’t in a job doesn’t mean you aren’t working. Some of the most important work in the country is currently going unpaid.

Consider someone who chooses to drop out of work to care for an elderly parent. There is a cost to that care, and if the son or daughter wasn’t doing that care for free, it would have to be picked up by the state. Instead, that person has opted to take those costs in the form of lost wages.

The same is true of parenting. If you put your children into childcare and go to work, this creates two jobs – one of you and one for the carer. This is good for GDP, which counts all economic activity as positive, but it’s not good for the child or for the parent. This is rather perverse. Raising children is valued if it is done by a stranger, but is technically ‘worthless’ if parents do it themselves. All of society benefits when children are brought up well, and society suffers when children are brought up badly, so it is in our interests to value parenting.

Carers, parents and volunteers provide services to society that would be worth billions, but that work goes unrewarded. A citizen’s income would not be ‘paying’ people to do these things, since everybody else would get it too, but it would mean that those who choose to do important but unpaid work aren’t penalised financially for making that decision. Since a disproportionate amount of unpaid work is done by women, this would also be good for social equality.

A dividend in the national wealth
The forms of wealth that are most familiar to us are personal, accumulated through  personal effort for the benefit of individuals. There are other kinds of wealth too though, things that are shared in common. That includes the atmosphere, the oceans, airwaves and airspace, and plenty of other things that belong to nobody and therefore to everybody.

As things currently stand, businesses get to use most of these shared resources without paying for them. Society picks up the cost collectively, so a public resource gets run down for private gain.

Consider a factory that pollutes the air. There are costs (externalities) that the factory owner doesn’t pay, from environmental degradation, to asthma and other health problems, and perhaps even a changing climate. Society pays those costs instead, even though the resource that the factory has used – the atmosphere its chimneys discharge into – belongs to all of us.

Environmental taxes already catch some of these costs, but the revenue usually just goes into the central pot of government spending, so we’re not really compensated as individuals. The same goes for our natural resource wealth. Revenue from Britain’s North Sea oil just goes into government spending, but other oil-rich parts of the world see it as a natural wealth that should be shared more equally – see Alaska or Norway.

A citizen’s income recognises that we’re all shareholders in our natural capital. We all suffer when it is abused, so why shouldn’t we all benefit when it is used well? One of the key ways to fund the citizen’s income is to levy a price on the commons. Businesses that use shared resources pay for the privilege, and those of us that are stakeholders in those resources are compensated. In that sense, the citizen’s income is not a universal benefit, but a dividend in our shared national wealth.

Smaller government and personal freedom
One of the interesting things about the citizens income is that it has been championed by both sides of the political divide. It is good for society and for the poor, but it’s also good for personal freedom and reduces the size of government.

Because it would be unconditional and automatic, you could sweep away whole swathes of bureaucracy that currently assesses, administers and polices the benefits system. You’d still need a few means-tested benefits for certain cases, such as disability, but many more general benefits and tax credits would be rolled up together. Many government services focused on poverty would be rendered obsolete, along with state pensions. Benefits fraud would be dramatically reduced. There are lots of potential efficiency gains from a citizens income, and hence a smaller state apparatus.

The citizens income is also good for personal freedom because it would give everybody an equal platform to build from. It would give people a safety net for those who wanted to retrain or start their own businesses. And of course you are receiving a dividend from the government in cash, for you to spend however you want. It would be entirely up to you whether you saved it, spent it or gave it away.

Funding a citizens income
So a citizens income sounds great in theory, but can we afford it, especially in times of austerity? I’ve already mentioned the savings from simplifying the benefits system, and state pensions, child benefits and unemployment benefits all offset the cost. I’ve also mentioned environmental and resource levies. The other big funding option goes right back to the earliest proponents of the idea.

The roots of the citizens income go back to Thomas More’s Utopia, surface again in the French Revolution, and are perhaps best articulated by the revolutionary Thomas Paine. “The earth in its natural uncultivated state,” he wrote, is “the common property of the human race.” Private ownership and use of land deprives others of their “natural inheritance”, and so they should be compensated. In other words, the citizens income is best paired with our old friend the Land Value Tax.

To me, the citizens income is one of those ideas that we’ll keep circling around and eventually settle on, although perhaps not any time soon. We’ve come quite close in the past. The Nixon administration got so far as to pass a guaranteed minimum income through Congress under the name Family Assistance Programme, but it was rejected by the Senate in 1972. There are several smaller-scale measures in place, including Child Benefit and some of the other universal benefits brought in by Britain’s Labour government.

There’s only one place that runs a “genuine” citizens income, according to the international network BIEN, which campaigns on these issues. That’s the aforementioned Alaska. It won’t be the last, but it is now more likely to emerge in the global south than in the social democracies of Europe. Brazil has passed a law mandating a basic guaranteed income, although implementing it has been slow. There’s been a big debate about it in South Africa, and Namibia has run a pilot project. India is halfway through a trial at the moment in two different regions, to measure its effect on poverty.

The citizens income has been talked to death countless times in Western politics, but it could still have its moment.

Photo from wwarby via Flickr

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Comments

  1. Hi Next Starfish,

    I posted a comment a week back about this article. It said it was awaiting moderation and now I don’t see it.

    I would like to hear your thoughts about the incentives a citizen’s income induces. I generally like the idea and think it could work. My fear is that by giving a dividend to citizen’s based off of the revenue generated by our government due to the privatization of natural resources, citizen’s would be incented to procure the development of more and more of our natural resources. This in turn would be disastrous for our environment. Essentially by structuring the citizen’s income like a corporate dividend, which is tied to a corporation’s profits, citizens would be akin to shareholders in that they would want to see the maximization of the government’s profits. And thus, would not take into account the externalities.

    • Mihir – sorry I lost your previous comment, sometimes the spam filters are a little aggressive :o(

      Good question – the question of incentives is obviously important, both for the individual and wider society. Regarding the later, I think you raise an interesting point.

      I would imagine unless there is a clear stated intention to ‘redistribute’ a percentage of GDP in the form of a future citizen’s income, most people wouldn’t view it in the same way as a shareholder dividend. After all things like education, health, infrastructure investment etc are all state funded now, but probably not seen quite that way. I could be wrong about this though, money in the pocket is a bit more immediate !

      As you suggest, if this drives an economy to engage in more depletion of non-renewable resources for short term gain then what have we achieved, and this is why decoupling the economic growth from natural resource use is so important. That said, I don’t believe it’s entirely possible to do that – but mature economies have more potential to do this (with digital and service based models) than developing economies – which still need to build and make physical stuff. – http://bit.ly/PqUDmQ

      I’m planning on writing about decoupling shortly – happy to hear any more views you might have.

  2. Anne – I’ve been lucky enough to work four days a week for a couple of years now, as does my wife. We’ve adjusted to the 20% fall in income – but have found life far far more enjoyable and less stressful as a result, and we’ve both been able to devote a lot more time into various other things; from hobbies to community projects as you suggest.

    I don’t know if you saw my previous article about reducing the work week, materialism and ‘peak work’, but it sounds very much like we’re on the same page :o)

    http://nextstarfish.com/?p=8408

  3. Gareth Richards says:

    It sounds a terrible idea, but I’m sure lazy people will vote for it. The most depressing news in the article is it seems to be Green party policy, which unfortunately dovetails nicely with their anti GM, anti nuclear and pro homeopathic medicine nonsense. We really need a better Green party, does anyone care which ideology we use to repair the planets climate? Linking Green party ideology to socialist ideology is one of the causes of the rights general antagonism with the issues of climate change.

    • Gareth – obviously not one for you, but as I’ve written before, I’ve come around to the idea after initially being skeptical.

      I think you’ve got it wrong, if you’re saying Citizen’s Income represents ‘socialist ideology’ – unless you’re calling Milton Friedman a socialist ? The interesting thing about it, is that it isn’t actually an idea from the left at all, and introducing it would achieve several of the objectives of the right, as Jeremy points out – from smaller government, through to ‘not rewarding’ economic inactivity – as you receive the income whether you work or not.

      As for a better Green Party, I’d agree with you there, but to answer your own question ‘does anyone care which ideology we use to fix the climate’, I’d suggest the answer is yes. The ideology will dictate who pays the price for it (economic and social), and that’s rather important to a lot of people . . . just saying.

      I think the problem with the Green party is almost the opposite to what you suggest – it’s not that they’re not focused enough on climate, it’s that they appear too focused on climate and other environmental issues to secure broad appeal – economics, welfare, jobs, home and foreign affairs are all examples of exactly the territory they need to engage with if they’re to attract a wider proportion of voters . . . and I’m speaking as a supporter.

      • Gareth Richards says:

        Steve one question for you, if you think that backing a competing ideology to yours would better save the planet would you back it (assuming there is nothing morally repugnant in the ideology of course).

        If your a Green party supporter I urge you to listen to this interview with it’s new leader. http://poddelusion.co.uk/blog/2012/09/06/episode-152-7th-september-2012/

        • That’s quite a good question – I think you might have given me an idea for a new post.

          There’s a lot of unpacking to do in questions like this.

          I don’t imagine too many of us think we have ‘an ideology’, I certainly don’t – this site’s manifesto tries to make clear that life is complicated and rarely black and white. Like all of us, I’m more drawn to certain ideas and facets than others, and I find some concepts more emotionally acceptable than others – I’d like to think that if presented with sufficient evidence to sway my opinion, I’d be honest enough to back it . . . on a small scale that’s exactly what I’ve done with citizen’s income, initially I was against, now I’m in favour.

          Any ‘ideology’ has pros and cons, it’s just about what we choose to favour, accept, ignore, champion , and how much emotional and intellectual investment we’ve put into developing our own ‘position’, and how willing we are to accept change.

          I’ve heard similar interviews with Natalie Bennett before – it’s fair to say she and I disagree about a good number of things, but life is generally like that, and public life in particular. Both life and politics are about learning to get along with people with who you disagree about certain things in order to achieve a common aim. Bottom line, we don’t all share the same world view – that doesn’t necessarily make us bad people, or bad politicians.

          When I say I’m a supporter of the Green party, what I really mean I’m a supporter of all ‘progressive’ elements and people in political life – whether that’s David Cameron and Ken Clarke (despite the rest of the Conservatives being ‘not really my cup of tea’), the Labour Party (despite it’s recent Leaderships being ‘not really my cup of tea’) and anyone else who I think are ‘fighting the good fight’ regardless of party colours, allegences or ideologies . . . of course what I mean by progressive is a whole other discussion :)

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