There are plenty of reasons to think that the institution of a Universal Basic Income (UBI) is a good idea. Personally, I came to accept the inevitability of a basic income following a realization that an increase in job automation over the coming years stands to put most of us out of work. You can add to this a host of other reasons to support basic income, ranging from increased personal liberty to ending poverty. For whatever reason you like best, the idea of giving people a basic amount of money to live seems to be increasingly accepted as a good one, but the concept seems to hit a brick-wall when we arrive at the question of how to fund it.
Basic income gets bogged down in the same muddy question that mires every political conversation in memory: How can we afford it?
Typically the numbers look something like this. I’ll use Canada as an example but these numbers are fairly typical for western countries. In Canada there are currently approximately 25 million working age people, if we were to give each of them a UBI of $15 000 this would give a total of about 375B dollars. This would actually significantly exceed the total expenditures of the Canadian federal government, at somewhere around 280B.
And this is where the conversation usually ends, UBI would be nice to have, but clearly we can’t afford it.
But this is not where we should stop.
If we really accept that modern society should function to deliver each and every person a minimum living standard regardless of their ability to find gainful employment then we must be willing to look deeper. In order to have a credible discussion about funding UBI, I believe we must look beyond the world of government and private debt and probe deeper into the economic physiology of the modern world.
In this post I will try to make the case that a Universal Basic Income should be viewed not as a new government program but rather as a new mechanism for money creation. UBI would represent such a enormous change in the way that modern economies operate that it really goes beyond the role of the government, and should instead be regulated by those institutions which control the creation of money.
While the total expenditure of the Canadian government is something like 280B dollars, the total amount of wealth created each year is a much larger amount. The GDP of Canada is approximately 1.8T dollars, or about 5 times more than would be necessary to provide a basic income of $15000 to all adults. Clearly, in the context of the overall economic activity a basic income is something that is possible, but is also something that would have to be instituted over time and in a very careful manner to avoid pitfalls like inflation.
Unfortunately, it is exceedingly difficult to discuss the role of monetary policy and central banks without donning either a tinfoil-hat or a dunce cap. Discussion about the fundamental role of central banks and monetary policy are sheltered by a hot stew of complexity, public ignorance and political reluctance. Political discussions stay neatly within the lines of economic indicators and tax policy, and rarely reach to grasp a wider picture.
While we currently lack any credible public discourse when it comes to the issue of monetary policy in general, there are several factors which lead me to believe that this is slowly changing. Fueled by both the emergence of cryptocurrencies as the first legitimate alternative to central banks and the general open-nature of discussion on the internet, people are increasingly aware of the true nature of money and debt. While it still might surprise the average person on the street that the money for their mortgages is simply created out of thin air, this fact seems to be common knowledge on the internet. Word is out, money is debt and debt is money.
As it stands today, money is created when people or organizations ask for it. So long as they can demonstrate that there is a reasonable expectation that they will be able to repay that loan plus interest, money will be created for them. In times of slow economic growth, central banks lower the interest rates in order to encourage those with even marginal profitability to take loans. Since 2008, interest rates have remained at historical lows across the developed world and yet we still face relatively slow growth and chronic unemployment. In normal times central bankers would expect explosive economic growth with lending rates hovering in the 1% range, but 6 years on and we have yet to see signs of anything more than normal or below normal growth.
The modern system of monetary policy evolved in a very different time, a time when economic growth truly was tied to the number of people you had working for you. Nowadays, companies like What’s App can accrue billions of dollars in value with only a few tens of employees. It would seem that economic value is becoming increasingly divorced from raw employment numbers. while at the same time the economy as a whole remains addicted to employment as the only real means of wealth distribution. Today, the only real way to put money in the hands of consumers is for them to find work; weak jobs growth and wage increases leads to weak growth overall. If automation takes off, as many think it could, then our current economic troubles may be nothing more than a prelude.
It is time to start weaning the economy off of its addiction to jobs.
I believe that we should envision UBI not just as a new spin on government safety nets, but rather as an alternative monetary policy. A new means to create money directly in the hands of those who support the economy, the consumers. The vast majority of this money would be quickly cycled back into the system as people spent the money and stimulated the economy. In modern economies, where output and growth is so heavily dependent on consumer spending, and UBI would be one of the most direct means to stimulate such spending.
The major risk of a system of UBI based on money creation rather than taxation would be the prospect of massive inflation. By suddenly putting a lot more money in the hands of consumers, the price of many goods could rise quickly. Fortunately, central banks are already adept at managing inflation through manipulating interest rates. By matching increases in the money supply with higher interest rates for new debt, central banks should be able to manage the inflationary implications of UBI. If UBI is introduced starting with a small amount, say $1000/person/year and increasing this by $1000/person/year, then central banks could also give the economy time to adapt to the new reality of UBI.
The beauty of a such a system of UBI based on monetary policy is manifold. It adds to, and can coexist with the current system. It can be instituted over time to avoid disruption. It avoids the bureaucratic complexity of taxation. This kind of UBI would also be out of reach for governments which are ruled by short term political interests, instead it would be responsibly implemented and managed by those who are already managing economy. The list goes on…
Ultimately, I believe that UBI makes sense because it will allow us to wean the economy off its addiction to jobs and begin to unlock the immense possibility for growth that is offered by automation. Whether we like it or not, we live in a world of managed economies where central bankers wield financial tools of immense power. With UBI as monetary policy I believe that we could realize an economy that is not only a stronger and more stable, but more importantly we might finally have an economy that could be considered humane.
That’s the kind of economy I could believe in.
I realize that this idea of UBI as a new monetary policy is probably only a dream, but I think we should dream big. I also wanted to add that the long term legitimacy and sustainability of the economy is fully dependent on finding balance with environmental concerns. We can have economic prosperity and environmental sustainability, but unless we have both we are going to end up with neither.
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I agree with a lot of the premises of this. My main question would be, what is motivating people to do the more menial jobs that are not covered by automation, (I’m not actually sure these would exist in a fully automated world). So would you envision those people who want more, would attempt to get a job in a field that they are passionate about? is there a way for the motivated to succeed and accumulate more than others? How do we deal with people who don’t really want to do anything and use the money not on the economy but on vices for themselves?
I’ve always loved the idea, since first watching Star Trek and thinking of a world without money because basic necessities are met. People are free to explore their passions, whatever they may be.
In the end though, a lot of people are just not very good people, and that could cause huge issues that would taint the entire vision/philosophy.
I think the answer to your question is surprisingly simple. In a world of basic income, we would have to pay people to do shitty, dangerous, boring, and otherwise undesirable work. In such a world, people would have the opportunity to walk away from their work and not worry about being able to put food in their mouth or a roof over their head.
Put succinctly, a basic income would give low income workers the ability to demand a fair wage.
This is how the economy is supposed to work. The economy is not supposed to be a tool to allow rich and talented individuals to get preposterously cheap labour out of the ignorant and untalented individuals of the world.
Would the price of things go up? In some cases yes, in some cases surely no. People will still work because it is a basic income, it would not provide for the luxuries and status that people lust after.
People would work, but they would not have to work, that is the point.
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Hello, I think that’s a very good idea of implementing basic-income.
But I will give some more conclusions. – Money is only “allowance to take goods out of the store”. – So we have two sites. One is the economy, which produces goods and services, and second you have grasp-allowance, which is today given through “money”.
Now, there is the opportunity to give allowance “to take away” in different forms. One is “money”. Or you give the people “blue” or red papers, or something else.
But I think, it could work this way:
Everyone has a bank-account and a bank-card. This bank-card will be recharged every month with 1000 UBI-Coins and at the end of the month, if not every coin is used, the rest will be deleted and in the new month you have again 1000 UBI-Coins.
These 1000 UBI-Coins is the UBI (universal basic income), as an accepted currency in our economy for this purpose. – This means, that more than one currency is possible and manageable.
Why should we do this with an extra currency? It would be separated from speculations and mismanagement and only for the safeness of human existence.
But the far most important thing is the economy. – You can only eat goods and not “money” or grasp-allowance. There must be always people or robots, which are producing all the time for all people the amount of necessary goods.
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