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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The End of Growth & Keeping Out the Giraffes

Sometimes we are so focussed on our own here and now, that we can miss the bigger picture.

It’s also sometimes hard to see ourselves as others see us.

In the UK, like the rest of the developed world, we’ve become used to the idea that, on average, our standard of living will rise every year.

We’ve come to expect we will all own more and newer cars, more and better consumer goods, have more choice of food, and take more holidays to ever more exotic locations; not to mention having better health care, better roads and trains and earlier retirements in more comfortable financial circumstances.

It’s understandable – this is the way it was for the last generation, and the one before that, in fact for the majority of the last two hundred years or so, with a few temporary blips due to wars, recessions and a depression. For most of us in the rich world, things have been generally getting better, and as a result we’ve gotten used to the idea of continual economic growth and increased prosperity.

But for the last few years things have been different – stationary or falling wages coupled with increasing energy, transport and food costs are making us worse off. Our jobs are less secure, our retirements will be further away and will be less comfortable than we’d imagined, and we’re also having to come to terms with the cuts in our public services.

While some commentators talk of ‘market corrections’ and ‘U-shaped returns to growth’, increasing numbers take the view that the current financial turmoil is not simply another blip on the long-term path of continued growth, but represents a more fundamental change.

They argue that increasing scarcity of resources, especially cheap oil, coupled with rising aspirations and demand in the developing world, mean the period of continual economic growth for the rich world is over, and that  in fact we’ve been living beyond our means for several decades, building-up huge national and personal debts as a result.

This isn’t an economics blog, and I’m no economist – but I am persuaded by many of the arguments presented in books like Meadows and Rander’s  Limits to Growth and Tim Jackson’s Prosperity Without Growth (which interestingly is also on Ed Milliband’s summer reading list). Tim Jackson’s similarly titled report Prosperity Without Growth, produced for the now axed Sustainable Development Commission is available for free download, and is a very interesting read.

The key argument is simple: growth cannot continue forever – in a world of finite resources there must be limits. Trying to return to ‘business as usual’, isn’t going to work. We need to find a different way of doing things, and change from our current growth-based economic model, to something more sustainable.

For the luckier ones amongst us, who still have jobs, and can keep putting food on the table, it will no doubt mean lowering our expectations for the future – keeping our cars for longer, not doing so much home improvement, fewer gadgets, less exotic holidays, and no-doubt working for longer before our retirement. But there will be others less fortunate, facing real hardship – struggling with bills, debt, unemployment and the loss of support services. In tough times it always seems to be the most vulnerable who suffer even more.

One of the aims of this blog is to encourage us all to consider what action we can take in support those most in need, locally and across the world. We should do what we can to find enough time in our lives, not just to ‘keep out the giraffes’, but to do the simple things to help both ourselves and those around us – from donating a few tins of baked beans to a food bank every week, to offering to run an elderly neighbour somewhere, now that the bus service has been cut.

There’s something else equally important we in the rich world might want to do as well: remind ourselves that even in the current economic situation we’re still rich.

When we look around us, and compare ourselves with our friends, colleagues, neighbours – and especially what we see in the media, we can easily convince ourselves we aren’t that well-off. But our world isn’t the world !

If you earn more than £13,000 a year, you’re one of the 10% of highest earning people on the planet. If you’re lucky enough to earn more than £26,000, you’re in the top 1%! Visit The Global Rich List to check out how your income compares.

(Tim Jackson’s video below explains the giraffes !)

Limits to Growth                        Economic Reality Check           The Exponential Function

Dennis Meadows                        Tim Jackson                              Albert Bartlett

Photo by Ted Murphy via Flickr

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