André Gorz and the importance of refusing work

Twenty years ago the French philosopher André Gorz warned of the crucial difference between a basic income that enabled its recipients to refuse work and one designed to prompt them to take any on offer.

At a time when basic income advocates were a novelty, Gorz foresaw the dangers ‘inherent in demanding continuous income for discontinuous work’. Basic income was, according to one contemporary conservative advocate, not an end in itself, but the means for everyone to ‘fit themselves into this new system’.

The idea, said Gorz, was ‘to enable employment to become intermittent, and [it] may even encourage such intermittent employment’.

But a ‘sufficient’ unconditional basic income had precisely the opposite logic. “The aim,” he wrote in 1997’s Reclaiming Work, “is not to force the recipients to accept any kind of work on any terms whatsoever, but to free them from the constraints of the labour market. The basic social income must enable them to refuse work [my italics] and reject ‘inhuman’ working conditions.”

Far from encouraging work and entrepreneurship, Gorz wanted a basic income, in line with the ideas of libertarian communists and socialists of past eras, to lead to ‘less employment and less selling of labour and services’. He looked forward to the ‘elimination of work as the dominant form of activity’ and its replacement by myriad forms of ‘personal activity’.

In the late ‘90s, few policy-makers paid serious attention to proposals for a basic income. Now, by contrast, basic income pilots are springing up like mushrooms after a cloudburst. Experiments are planned, or are in progress, in Finland, Canada, the Netherlands and Scotland.  The kind of basic income they embody, however, is closer to Gorz’s nightmare than his dream of liberation.

Intermittent employment, through zero hours contracts, extreme part-time work, freelancing and the burgeoning gig economy, was only just emerging into the sunlight in the 1990s. But now it is an established fact of life for millions of people. And all the basic income pilots, without exception, take intermittent employment as a given, even a desideratum. Basic income, in other words, becomes a means for people to ‘fit themselves into this new system’.

In Finland, the centre-right government hopes the basic income pilot will help participants ‘take short-term jobs’ and ‘encourage people to seek and accept work’. The BI pilot in Ontario, Canada, though set at a more for generous level than in Finland, aims to ‘strengthen the incentive to work’.  In the Dutch city of Utrecht, the ruling socially liberal D66 party, which has initiated a BI experiment directed solely at the unemployed, is committed to ‘strengthening the economy for entrepreneurs, be they big multinationals or small-scale freelancers.

This all suggests that these basic income pilots, besides being more humane that punitive welfare systems, will be good for the economy. But ‘sufficient’, Gorz-style basic income, aimed at facilitating the refusal rather than the acceptance of work, while sounding utopian, may in fact be more economically beneficial. This is because it works to a counter western societies’ now permanent over-supply of labour.

A basic income that is i) substantial and ii) paid to everyone, not just the unemployed and the poor would, according to one article on radical implications of basic income, ‘simultaneously push up the wage rate for unattractive, unrewarding (which no one is now forced to accept in order to survive) and bring down the average wage rate for attractive, intrinsically rewarding work (because fundamental needs are covered anyway)’.

Or, as one of the organisers of the Swiss group, Generation Basic Income (which advocates a monthly ‘basic income max’ of nearly £2,000 a month), puts it: ‘Income from labour will be renegotiated ….Good work that people like to do, will be cheaper. Poor work that people do not like to do, will be better paid, because no-one can be blackmailed with their existence to do it.’

Many basic income advocates stress the inexorability of automation as demonstrating a ‘like it or not’ justification of an unconditional income. But so-called advanced economies, certainly the UK, are de-industrialised without being fully automated. In many ways, they are running on the easy availability of abundant cheap labour. There are now 20,000 hand car washes in Britain, while the automated version – rollover car wash machines – have halved in number in a decade.  This is reverse automation.

 A substantial basic income, that enabled the refusal of work, could turn off the labour tap and spur automation in a way that ‘incentivising employment’ basic income won’t.

In short we don’t need to create more low paid work but this is just what the intermittent employment model of basic income is predicated upon doing. A ubiquitous justification of this model is that it gives the recipients the confidence to start their own business because they won’t face starvation if they fail. It’s hard to argue with the logic except that the last thing we need is more small businesses. Self-employment in the UK, in the most un-basic income conditions imaginable, has already increased by 26% in the last ten years, and now encompasses 15% of the workforce. Simultaneously, since 2008, the income of the self-employed has dropped by a quarter.

The reason is that the ranks of the self-employed have been boosted by a legion of small-scale service businesses – cleaners, gardeners, dog walkers, website designers, personal trainers, nutritionists – that are often barely able to keep their head above water financially. Introducing an insufficient basic income would boost the number of these services immensely and – because they would be many more freelance dog walkers for busy dog owners to choose from – would water down self-employed income even more.

Ventures like Task Rabbit, which matches freelance contractors with people seeking help with tasks like moving or cleaning, have spread across the US and are now growing in the UK. According to the chief executive of one ‘crowdworking’ US company, technology now enables employers to recruit people for ten minute tasks, pay them a tiny amount of money and then ‘get rid of them when you don’t need them anymore’. This is as good a description of a capitalist dystopia as I can find, and it’s an economy that would be massively emboldened by the guilt erasing incentivising employment model of basic income.

The above may seem churlish in the context of a welfare state that has morphed into a punishment state, and relishes denying income to the sick and disabled, forcing them to beg at food banks. Compared to this, unconditional income is little short of an epiphany. But when I think of the future in the light of a basic income predicated on incentivising work, I can’t help but envisage millions of self-employed task bunnies meekly serving the myriad whims of the elite. Labour will have never been so cheap or so abundant. No-one will starve but everyone will be exploited.

The spectacular and unheeded failure of corporate tax cuts

“When corporate tax bills are cut,” Oxfam remarked matter-of-factly earlier this month, “governments balance their books by reducing public spending or by raising taxes such as VAT, which fall disproportionately on poor people.”

A 0.8% cut in corporate taxation across the 35 OECD countries between 2007 and 2014, the charity pointed out, was accompanied by a 1.5% increase in the average VAT rate. VAT (or sales tax in America) is a flat ‘regressive’ tax. When you buy a packet of chocolate digestives you pay the same amount in tax as Richard Branson, Rupert Murdoch or Bill Gates. This switch is, quite simply, a huge redistribution of wealth from poor to rich.

But while corporation tax has been reduced across the world in response to economic crisis and has been heading resolutely southwards ever since the 1980s, we are about to see corporate tax cuts on monster truck tyres. Donald Trump wants a US corporate tax rate of 15% compared to the current 35%. Theresa May’s ambition meanwhile is for the lowest corporate tax rate in the G20 (lower than Trump’s America, in other words, which is in the G20). Britain’s corporate tax rate is 17%, 11 percentage points lower than when the Tories took office in 2010 (the previous Labour government also reduced it).

This is the other arms race. Except in this one, governments fight to give money away, not accrue weapons.

I could spend paragraphs fulminating about the injustice of continually cutting taxes for the richest people on the planet while the poorest shoulder all the pain of a policy designed to repair the damage caused by a financial crisis they weren’t responsible for. I could waste energy pointing out the bizarre logic of claiming to cut a government deficit by deliberating slashing your income. But I’ll content myself with one salient fact – corporate tax cuts are presented as invigorating the economy, freeing more money for investment and jobs. They’re about making Britain ‘super competitive’, proclaiming we’re open for business, increasing research and development spending blah, blah, blah. But on that score, they’re a spectacular failure. An unexpurgated flop.  But it’s a failure almost everybody manages not to notice.

The fallacy

Because corporation tax cuts do not stimulate investment. Quite the opposite.  According to economist Michael Burke the private sector investment ratio in Britain (gross fixed capital formation as a proportion of firms’ operating surplus,) peaked at 76% in 1975, dropping to just 53% in 2008. By 2012, it had plummeted to 42.9%. By a strange coincidence in 1975 corporation tax in Britain, at 52%, was the highest it’s ever been. That’s at the same time as the peak in the investment ratio. In 2008 the corporate tax rate was 28% and in 2012, 24%.

According to Burke, corporation tax cuts are based on the ‘fallacy’ that they will ‘spur investment’. The investment rate has fallen by around a third in Britain since 1970, the same period that has seen corporation tax cut by more than 50%.

Other countries paint a similar picture. The investment ratio in the US peaked in 1979 at 69%. In 2008 it was 56% and it declined further to 46% in 2012. In Canada, which has undergone three waves of corporate tax ‘reform’ since the ‘80s, business investment has fallen steadily for two decades. In the words of one economist, Michal Rozworski, “For every dollar earned before tax, only about 60 cents goes back into maintaining and expanding business capital.  Compare this to 80 or more cents just a decade ago.”

But the political class of the western countries refuses to see the obvious. Decades of evidence that corporate tax cuts don’t work in the sense of producing more private sector investment, are met with renewed determination to institute even more drastic reductions. Even business seems to be saying, 'enough is enough'.

As Burke points out, a dynamic capitalist economy could well produce an investment ratio of over 100%, financed by borrowing in the expectation of greater profits in the future. So 69% (the US 1979 peak) is nothing to write home about, and 46% is “a sign of enfeeblement”.

The cash mountain

One rather glaring indicator that a further corporate tax giveaway won’t generate new streams of investment is that the corporate sector is already sitting on a mountain of cash that it is not using. Worldwide, this unused mass of money was estimated at $7 trillion in 2014. This year non-financial US corporations alone were judged to have $1.68 trillion in spare cash. All this while ‘underinvesting’  is the order of the day and there is pressure from shareholders to increase capital expenditure.

Apart from sitting in bank accounts, where does this mountain of cash go? The answer is in increased dividends to already bloated shareholders (which may be other companies), in share buy backs so that the company, in stock market terms, appears much healthier than it actually is, or in acquiring other companies. So the corporate sector comes across very active (mergers and acquisitions are at an all-time high), but this fevered activity just worsens inequality and increases the value of assets while producing very little of worth to society. Actual investment – new products, new machinery, new workplaces – is frequently perceived as too risky.

One theory that may tentatively rear its head at this point is that there is a negative correlation between reduced corporate taxation and investment – in other words, higher corporate taxation (and it was much higher in previous decades) is actually responsible, in some little known way, for greater levels of investment. The anthropologist David Graeber goes some way down this path in his essay Of Flying Cars and the Declining Rate of Profit, suggesting that the heyday of corporate research in the 1950s and ‘60s was really the outcome of high rates of tax – companies preferred to divert money into research, investment and rising wages rather than seeing it appropriated by the government. When that environment was transformed in the tax cutting, deregulating ‘80s and ‘90s the incentive, so to speak, for research and investment vanished.

“In other words,” writes Graeber, “tax cuts and financial reforms had almost precisely the opposite effect as their proponents claimed they would.”

Apple won’t make those ‘darn computers’ in America

Donald Trump’s proposed tax holiday for US multinationals repatriating cash gives credence to what Graeber is saying. Prior to 1986, corporations had to pay a 15% tax penalty for hoarding cash. Under Ronald Reagan, though, multinationals were allowed to hold unlimited amounts of cash provided they did so overseas. This produced a huge influx of money into tax havens. Rather than reinstituting the penalty on squirrelling away profits in other countries, Trump is proposing reduced taxation on repatriated cash as a way of incentivizing investment in manufacturing. The last time this trick was tried (under George W Bush in 2004), more than 90% of the repatriated money was used for share buybacks, increased dividends and larger salaries for executives. Another example, if one were needed, of corporate tax cuts having an altogether different effect to the one advertised.

But I think we have to look further than Graeber’s implicit suggestion that higher corporate tax is integrally linked to higher levels of private investment. If corporations are actively preferring alternatives to investment, such as share buybacks, bigger dividends or hoarding cash, the question is why has investment become so unappealing? Why has capitalism, which presents itself as a the apogee of a vigorous system transforming the world for the better, become so feeble?

Part two to follow