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

RELATED ARTICLES – Jubilee: A Shout for Joy, 10 Ideas for the New Week, More Equal than Others, The End of Growth and Keeping Out the Giraffes10 Ways to Have Enough Money and Stuff 

Jubilee: A Shout for Joy

If you’re living in the UK it’s a busy summer.

First we had the Queen’s Diamond Jubilee, then (for the English anyway) the dubious pleasure of cheering on the England football team in the Euros, and in a few weeks we’ll be hosting the London Olympics – all with the added fun and excitement of the traditional British rainy season in June and July!

It’s the first of these I want to ask you to briefly consider: the Jubilee.

Not another debate about the pros and cons of a constitutional monarchy, but the word Jubilee itself.

Originally it meant something very different to celebrating the length of a King’s or Queen’s reign. In the Old Testament it means a year in which debts are cancelled and slaves are freed – etymologically it’s often described as literally meaning shout for joy‘.

Releasing slaves and freeing people from debt, obligation and bondage, is a recurring theme in the Old Testament, which very clearly considered ongoing cycles of debt as a bad thing – something to be avoided wherever possible.

It also contained another piece of economic instruction – a prohibition against something called usury.

Usury is the charging of excessive interest on debt, though some interpretations consider the prohibition to be against the charging of any interest at all. The usual literal translation of usury is ‘a bite’ – relating to the painful process of being charged interest.

Usury is still prohibited under Jewish tradition and Islam – though Christianity largely seems to have stopped being concerned by it centuries ago.

Interesting stuff, but the real question is – what, if anything, does this mean for us today ?

The charging of interest is something so deeply embedded in our economies and culture, that we not only take it for granted, but generally fail to see it for what it is: a mechanism by which money flows from the poor, who need to borrow, to the rich, who can afford to lend.

The charging of interest, therefore, is a powerful driver of inequality – both between the rich and poor of our own societies, and also between rich and poor countries.

Another consequence of an interest based economy is that it requires the economy to continually grow in order to service it – a company borrowing it’s start-up costs at a rate of 7%, will have to grow by 7% the following year to repay the interest.

Needless to say infinite continual growth is simply not possible, due to real-world limits and constraints, and this endless need to deliver growth, many argue, exacerbates resource depletion, environmental degradation and aggressive competition for resources.

Unfortunately our entire banking system is based on the concepts of debt and interest.

If you were the first customer of a brand new bank and were to deposit £100 in the bank, you’d be given a debit card with the ability to withdraw £100 at any time. The bank would have your £100 and you would have a promise from the bank that you could withdraw it at some time in the future.

If you were the second customer of the bank and wanted to borrow some money, the bank might lend you £90 (keeping the required 10% fraction in reserve) and give you a debit card which grants you the ability to withdraw £90 at any time, on the basis that you would then pay it back (plus interest) at some point in the future.

The first customer has £100 available and the second customer has £90 available: £190 is now available to be spent in the real-economy. In effect the bank has created £90 from nothing.

With successive deposits and loans this original £100 of ‘real money’ (what economists call the monetary base or central bank money) can be transformed into several thousand pounds of ‘debt backed money’ (what economists call commercial bank money). Over 95% of the money supply in the UK economy has been created by commercial banks.

This process of money creation through lending and debt creation is referred to as fractional reserve banking,with banks effectively creating money by putting their customers into debt – financing today by endebting the future.

For many, this understanding goes against the grain and can be a little difficult to accept.

The economist John Kenneth Galbraith taught at Harvard for many years and served in the administrations of Franklin D. Roosevelt, Harry S. Truman, John F. Kennedy, and Lyndon B. Johnson, famously said: “The process by which money is created is so simple that the mind is repelled.”

Ninety percent of the world’s population owns just fifteen percent of the wealth.

Or to put it another way ten percent of the world’s population owns eighty five percent.

Perhaps it’s time to reconsider how we organise the world’s money.

 

If you’ve got a couple of hours to spare and want to learn the origins of the words tally and stock – not to mention how the Wizard of Oz was supposedly originally a protest against exploitative banking – watch Bill Still’s fascinating documentary on the left below.

If you’ve only got 7 minutes to spend, the bank run scene from the fantastic It’s a Wonderful Life is there on the right for you :o

 

Photo from digitalworldmoney via Flickr

RELATED ARTICLES – More Equal than Others, The End of Growth and Keeping Out the Giraffes10 Ways to Have Enough Money and Stuff

Money is NOT the Root of all Evil

A guest post by Eric, a blogger from the site Coffee and Warm Showers. Eric made a decision to ‘escape the rat race’ and lead a conscious life – quitting his job, moving to the Idaho countryside and having downsized and de-stressed, is now living a life he describes as ‘anything but ordinary”.

We’ve all been lied to.

Our entire lives we’ve heard “money is the root of all evil.”  And it’s not true.

We’ve cautiously went along in life, striving to make more of it without losing our sanity.  Without getting greedy and falling into the “evil” arena where only corrupt CEO’s, attorneys, and politicians play.

Unfortunately, I think we’ve all been focusing on the wrong root cause of this evil.  We’ve all been blaming money itself like it has a mind of its own.  When someone stabs a former co-worker in the back for the promotion they’ve both been battling it out for its likely because of the money.  9 times out of 10 there was no personal vendetta in this situation.  Just looking out for #1.

“If I got that job I’d be able to finally afford that car I’ve been eyeing for years now.”

“I’d finally be able to buy my wife that house she’s been dreaming about.”

“I’d finally be able to pay off my credit card debt!”

The problem with this is that the money itself isn’t evil or even the root of all evil.  I would be willing to say that money is the root of all indifference.

A quick personal story.

In the last nine months, I’ve been promoted twice.  I’ve doubled my salary in one year.  I’m making more than others at my age and my career growth at this company doesn’t look like its ending any time soon.  I’m on the fast track to success and leading my department in the next year or two.

2 weeks ago – I quit my job.  That’s right.  Literally just told my boss I quit without having anything else lined up, no other income.  And not only was I quitting, but I was moving to a small town in Idaho, population ~6,000 people, and not a job opportunity in sight.

Dumb move?  Possibly.  Depends on who you ask I guess.  But I’ve been preparing for the last year for this.  Although I’ve recently doubled my salary, I didn’t allow myself to spend a lot of extra money because I knew what I would be doing.

You’ll find that when you make money and then lose it somehow, you start to appreciate the small things more.  You save money and live frugally.  When you buy something, you really weigh out the pros and cons – do I really need this?

I’ve mentioned in a previous post that the less possessions you have, the more free you are.  I whole-heartedly believe that’s true.  If you have less things, you have less clutter – less to maintain, and if you have less to maintain you have more time to spend on the things that matter and the things that truly make you happy.

It’s not that money is the root of all evil.  I believe people are the ones that are evil in those circumstances.  Money always just ends up being a factor in the equation.

Where money stands in this equation though is on the other side.  Having money (and this is more likely as your wealth increases) causes you to be indifferent.  The smaller things are no longer thought about.  Minor purchases (and sometimes large purchases) are not given a second thought because, well hey – you can afford it.

As you accumulate more and more you must maintain it all.  Now you’ve set expectations with those around you that you will maintain this lifestyle and you start to battle it out for money for only one reason.  You become oblivious to the things the money is buying or taking away.

Challenge:

In no way do I encourage anyone to up and quit their job, especially in this economy.  I thought long and hard about this and ultimately found my window of opportunity and took it.

However, I do challenge you to look at what you are using your money for.  How are you making your decisions?

Do you catch yourself saying things like, “I wish we could go, but I just don’t have the money right now.”  Why don’t you have the money?  Maybe you would have it if you laid off of the Sbux for a couple of weeks?

Even worse, do you catch yourself buying things just because you can?

Trial period: Start this week.  Cut your income in half.  Take whatever you get on your next paycheck and put half in savings and use the other half to pay bills and buy things you need or add value to your life.

After a couple of weeks, re-evaluate.  Was it possible?  If so, how did it feel?  How does it feel to know you can live similarly (maybe even better!) on half the income.  Oh and don’t forget that you also have a bigger savings account now!

Find ways here and there every day to cut costs.  It’s one of the most empowering feelings when you realize that you don’t need as much money as you thought.  Once you do this for a while, truly living becomes easier.

You become a happier person.  Don’t let money or the fight for it drive your decisions.  Make decisions based off of what makes you happy and adds value to your life.  When you do that every decision you make becomes important and worth caring about.

Photo by Images_of_Money via Flickr

RELATED ARTICLES – 10 Ways You Can Have Enough Money and Stuff,  10 Ways to Simplify Your Life

Forget About the Price Tag

Anyone thinking that being ‘green and ethical’ is expensive, and only for those who are better off, is kind of missing the point.

It’s really about making better choices, not filling our lives with rubbish, and hopefully being happier as a result. Moving to a ‘greener and more ethical’ lifstyle should cost us all a lot less !

 

SAVE MONEY AT HOME

Even if you don’t feel like wearing a jumper at home to keep warm you can save energy. Turn down your hot water thermostat by a degree or two and bleed your radiators so they work efficiently. Reflective panels, or even silver foil behind them will also help radiate heat back into the room. Only run the washing machine and dishwasher when full and get to grips with the economy cycles and settings. For most washes try turning the temperature down to 30 degrees. If you have cheaper electricity at night (Economy 7) consider running your washing machine and dishwasher then to take advantage. If you have central heating room thermostats make sure they are in the right place, and not set too high. Clean the coils at the back of the fridge to keep them efficient and keeping your freezer full also helps. Close doors and windows properly and hunt out draughts and seal or block them. Use curtains and blinds to keep in heat when cold, or shut out sunlight when hot. Consider turning off the heating in some rooms if they’re barely used for periods.

Get free or subsidised loft or cavity wall insulation. If you own your home and have a south facing roof, consider signing-up for free solar panels – the installer takes the government grant (feed in tariff), but you save the electricity. It goes without saying, but turn lights off when not in use, and use efficient lights and bulbs. Consider using a multi-socket on groups of electrical appliances so you can turn them all off/on easily and avoid leaving things on standby – plugging TV recorders and similar items that need to be left on into a different socket. Consider getting a wireless energy monitor to encourage you to save more electricity, or sign-up to trial a smart meter from your energy company, free of charge.

 

SAVE MONEY IN THE KITCHEN

Many of us could do with eating a little less food full stop, but it’s also true that most of us waste a great deal of what we do buy. Minimise waste by using things before they go off, making use of leftovers in soups/stews/casseroles etc, storing things better (not always in the fridge), and controlling portion size to reduce waste off the plate. You might also be able to minimise wastage, save money and make life easier by buying and cooking in bulk and freezing meals – having something ready to go in the freezer will also reduce the temptation to eat out or get a takeaway when you’re tired or rushed. Some people take part in communal cooking clubs -cooking in bulk then swapping dishes with each other.

Knowing the cost of things when shopping for food helps, as does shopping from a list, and the classic ‘not shopping when hungry’ to limit impulse purchases. Keep a range of healthy (and cheaper) snacks at home, in the car, and at work, to avoid so much splurging on snack foods. Making your own lunches in advance also helps. Avoid routinely buying expensive high street coffee by investing in a flask and making your own. Never buy bottled water – take an empty water bottle with you to fill from the tap. While you’re at it give-up buying paper towels, and simply use washable tea towels again.

Meat is generally an expensive item, and it also has a significantly greater environmental impact than non-meat foods, so consider expanding your range of non-meat cooking and eating a little less. Perhaps consider trying meat-free Mondays.

Try to buy locally produced food that’s in season – it’s often cheaper and keeps your money in the local community. Even better, if you have the space and time, grow your own food. If you grow enough you can always barter your excess with your friends.

Try turning the oven off a few minutes before the end of cooking, the heat will remain, and you’ll save a few minutes of electricity. Afterwards opening the oven door will allow the warm inside to vent and help heat the kitchen, and reduce the length of time the oven fan has to run to cool the oven after turning the oven off. When not in use be sure to turn appliances such as the cooker, dishwasher, washing machine and microwave off, rather than leaving on standby. Use hot cooking water from cooking to scald weeds, but avoid letting too much steam escape into the house – as it presents both a damp and mold hazard, humid air also takes more energy to heat than dry air.

 

SAVE MONEY SHOPPING

Turn mindless shopping into mindful shopping – don’t buy things impulsively, or recreationally. Keep track of what you’re spending, and how much you’ve got left in your budget – credit cards can make us loose touch with the value of money. Consider how many hours you’ve had to work to pay for what you’re spending. Ignore the pressure to overshop – buy one get one free is only good value if you really need two! Allow yourself time for a reflective pause before committing to buying – ask yourself: do I really need this, do I need it now, what if I wait before buying it, where will I put it, can I share someone elses ? If you’re a problem shopper consider self, or group help.

Know the origin of what you’re buying as much as possible. Try to make ethical choices wherever you can, often ethical items are no more expensive than non-ethical items – such as Cadbury’s Dairy Milk, which is now Fairtrade. Ethical Consumer magazine and many other sources give ethical summaries of various products. Check out smaller ethical providers and retailers, who often have no high street presence, but can be found easily online. Wherever possible buying things that will last, or can be repaired or upgraded, will be both cheaper in the long run, and have a lower environmental footprint.

For some items like books, newspapers and magazines, consider whether you really need to buy at all. All newspapers have online editions, most of them free, as do many magazines. Books can be borrowed free from public libraries, many of which now have their catalogues available for online searching. Borrow from a friend, and pass on books of your own that you’ve finished with. There may be a local book swap club or store, or you could investigate online book swapping.

Buy things second hand where you can – charity shops can be variable, but bargain hunters know which ones are best. Car boot sales, jumble sales, or yard sales are other possibilities. Scan local sources, or use Ebay, Amazon or other online retailers who sell second hand items, like computer game, DVD and electronics retailer CEX. You may even be able to get what you want free from Freecycle. Alternatively consider renting rather than buying – easier than ever in the digital age. Try to sell-on or give away your own items when you no longer need, rather than sending them to landfill.

Consider getting more involved in challenging overconsumption, sign-up with Buy Nothing Day, Commercial Alert , the Christian Reclaim Christmas Group Ready-Steady-Slow, or even the very silly Rev Billy.

 

SAVE MONEY TRAVELLING

Minimise the amount of travelling you need to do by grouping tasks and errands together. Make sure your tyres are at the correct pressure, both for safety and economy, and consider your driving habits – if you do enough mileage you might consider getting some eco-driving lessons. Obviously walk, cycle or use public transport where you can, and it might be practical in some circumstances to car share, either for regular communiting, or simply in giving your friends or neighbours a lift from time to time or offering to pick-up some shopping for them if you’re going into town – we often bemoan both the number of cars on the road, and the lack of social contact in society, but sometimes struggle to do much about it.

It’s often more fuel and cost efficient to get shopping delivered, than making a special trip to the store. All major UK supermarkets now do home delivery, with the cost depending upon distance, demand and time of day. Sometimes delivery can be arranged for free.

If you’re able, consider discussing working from home with your employer – to save you both travel time and fuel costs. It might be that you’re able to do without your car at all, saving road tax, maintenance and servicing and depreciation, as well as fuel. It’s always possible to hire a car for holidays and other specific trips, and in some places car share clubs may be available.

Photo by Chris Parker UK