Should the Left support Basic Income?

This article first appeared on the New Compass website

2016 will see basic income rise up political consciousness. Trials and referenda will take place across Europe. Should the Left support basic income? Half a century ago, the famous psychoanalyst and Frankfurt School theorist, Erich Fromm, examined the psychological effects of giving everyone a guaranteed income. His thoughts are instructive. He thought it a 'great step' but that without other changes, it is not enough to really change society.

From occupying the fringes of debate just a few years ago, basic income – the idea that the state should pay an unconditional income to each person as of right – has swiftly climbed up the political agenda. Finland has announced a basic income trial, Utrecht and 19 other Dutch municipalities are planning to introduce a pilot scheme some time in 2016 paying a small group of benefit claimants €876 a month. Also this year, notwithstanding the opposition of the Swiss Parliament, Switzerland will hold a referendum on the nationwide introduction of a basic income set at a much higher level - US$ 19,800 a year.

What should be the attitude of the libertarian Left to basic income? Is it a way of liberating people from an increasingly cruel and, in any case vanishing, welfare system and exploitative job market? Or does it shovel free money towards the already wealthy and save a dysfunctional capitalism from itself?

Before jumping to conclusions, it is worth weighing the opinions of radical thinkers throughout history on basic income. The idea is far from new. The English revolutionary Thomas Paine proposed something similar in 1797. And the German psychoanalyst and Frankfurt School theorist Erich Fromm advocated ‘a universal subsistence guarantee’ in his famous 1955 book The Sane Society. In 1966, he considered the issue in more depth in an essay entitled The Psychological Aspects of the Guaranteed Income.

Individual freedom

The most important reason for accepting the concept of a basic income, Fromm says, is that it would drastically increase the freedom of the individual. Up to this point in history, freedom has been constrained by the use of force on the part of rulers, but also by “the threat of starvation against all who were unwilling to accept the conditions of work and social existence that were imposed on them.”

A guaranteed income becomes for the first time possible in conditions of economic abundance or, in Murray Bookchin’s phrase, post-scarcity. This lifts the threat of starvation and makes genuine independence feasible. “Nobody would have to accept conditions of work merely because he otherwise would be afraid of starving – a talented or ambitious man or woman could learn new skills to prepare himself or herself for a different kind of occupation,” Fromm writes. “A woman could leave her husband, an adolescent his family.”

This “right to live, regardless”, as Fromm puts it, is the most important justification of a basic income, in my opinion. We live in societies in the West which are stiffening the ‘threat of starvation’ just as economic abundance becomes a realisable possibility. Over 90% of unemployed Greeks and nearly two-thirds of Spaniards, countries where unemployment is staggeringly high, do not receive any unemployment benefits. An estimated 1.5 million people in Britain use food banks. Welfare benefits have become increasingly conditional on satisfactory ‘job search’ activities, conditions which are imposed on sick and disabled people as well, with the withdrawal of income an ever-present threat.

What this means is that many more people than before are dependent on others, often older relatives or partners, and powerless before a labour market eager to exploit them. Or simply destitute. Precarious ‘bullshit’ jobs, or ‘shit work’ as Spanish labour unions call them, have mushroomed. In Britain, research has shown that spiralling flexible employment practices are causing widespread anxiety, stress and ‘depressed mental states’ because of the financial and social uncertainty they entail.

A basic income could restore independence and freedom to people whose lives are increasingly blighted as a result of economic circumstances, performing a role similar to that undertaken by trade unions and collective bargaining in the era of full employment. “Income from labour will be renegotiated,” says Enno Schmidt, one of the organisers of the Swiss group, Generation Basic Income. “No-one can be blackmailed with their existence” to do work they don’t wish to. “With a basic income, I can say no to a bad deal.”

The non-work society

Basic income can liberate people from the necessity of making a living and allow other non-market activities to flourish that, while not materially productive, nonetheless make life meaningful and have important functions. This might be looking after children, artistic creation, managing a chronic illness or education for the sake of it, not utilitarian ‘self-improvement’. “This right to live, to have food, shelter, medical care, education etc,” writes Fromm, “is an intrinsic human right that cannot be restricted by any condition, not even the one that the individual must be socially ‘useful’”.

This principle, of “the right to live regardless”, whatever someone’s personal utility might be, should, in my opinion, adorn any society that does not seek to oppress its members. However that society is organised.

To the above activities should be added democratic self-management of the community. Genuine democracy is not possible in a time-pressed, hurried society. Basic income should increase the free time available to many members of society and make direct management of the community feasible, not just theoretically desirable. The practices of democracy could be learnt by experience if work fades into the background.

To many of its advocates, basic income is explicitly about relegating the centrality of work in people’s lives, permitting a collective breathing space for other, undirected activities to come to the fore. Marilola Wili of Generation Basic Income maintains that the idea represents a paradigm shift in what work means. It can “unpredictably set human forces free in ways one may have never thought about”, she says.

The great step

However, basic income alone will not produce the paradigm shift that is required. “The great step of a guaranteed income will, in my opinion, succeed,” writes Fromm, “only if it is accompanied by changes in other spheres.” The danger of a basic income is precisely that it assumes changes in other spheres are not necessary and merely bolts on to our current capitalist society, leaving its deep flaws intact.

One such area is consumption. Basic income has been presented as a solution to the lack of demand in the economy. Under this justification, basic income becomes the ‘salvation of capitalism’, by buttressing weak consumer buying power and replacing the economically destructive growth of household debt and credit. Basic income stimulates the economy and increases corporate profits while, at the same time, giving workers more freedom and nullifying the threat of impending technological unemployment. What’s not to like?

Actually plenty. Under this scenario, basic income becomes a crutch that permits an ecologically and socially destructive economic system to preserve itself, neutralising its contradictions and performing a redistribution of wealth to blunt its oligarchic tendencies. Corporations can continue selling endless individual gadgets, continue forming monopolies, continue commercialising the pores of everyday life, and continue offshoring production to areas of the globe with dirt cheap labour and transporting the goods back to the rich world, thus causing global warming. They can continue doing this because basic income intervenes to ensure a market for their products in the wealthy countries.

Fromm contrasts two types of consumption; ‘maximal’ consumption which we currently have and ‘optimal’ consumption, which entails consumption for public use through amenities like theatres, libraries and parks. “Guaranteed income without a change from the principle of maximal consumption would only take care of certain problems,” writes Fromm, “but would not have the radical effect it should.”

I believe that a serious post-capitalist Left cannot just pit good collective consumption against bad individualised consumption. Myriad individual products make life function and liberate people from toil. But it is abundantly clear that a radical change in consumption needs to take place. Goods needs to be built to last, disposable consumption ended and the practice of transporting products across the world vastly curtailed. In short, the capitalist engine behind contemporary consumption needs to be switched off. “Such a change from maximal to optimal consumption would require drastic changes in production patterns,” writes Fromm, “and also a drastic reduction of the appetite-whetting, brainwashing techniques of advertising.” This is something basic income alone will not do. And it should be remembered that the western lifestyle of the 1960s, the lifestyle Fromm derided as ‘maximal consumption’, is considered healthy and moderate in retrospect by many climate activists, compared to hyper consumption now.

However, it must be borne in mind that Fromm wrote his essay at the height of the post-war boom and in the wealthiest country in history at the time, the United States. In 2016, it is quite conceivable that basic income will be employed to keep consumption going at ‘basic’ levels should a new and drastic economic crash occur, one that cannot be bailed out by governments. Basic income could, therefore, perform a rescue act to stop society from collapsing. Which is rather a different thing to providing a long-term surrogate for the perpetually expanding market that capitalism requires but cannot itself manufacture.

Not just for the precariat

It should also be recognised that basic income, in its pure form, is not just for the so-called precariat. The Dutch pilots are for benefit claimants only but under most basic income proposals everyone gets the same, wealthy and poor alike. A basic income would be paid to all adults. It is conceivable that a basic income would allow the wealthy or comfortably off to stop working altogether, become self-employed or switch to a less demanding job. These are quite plausible scenarios, and many wealthy people do seek an escape from their high-pressure lives. But, equally, it could also simply supply an additional mass of money to the already wealthy, an issue that applies particularly to the’ basic income max’ proposals of $20,000 or $30,000 a year. This money could be used to buy more property or invest on the stock market. Thus actually reinforcing inequality and bolstering financial speculation.

Fromm concludes that the “full effect” of guaranteed income will only happen if combined with a change in the habits of consumption, a new humanistic attitude and a “renaissance of truly democratic methods”. He envisages a new Lower house (he was living in the US at the time so presumably he means the House of Representatives) which summarises “decisions arrived at by hundreds of thousands of face to face groups, active participation of all members working in any kind of enterprise.” He warns of the danger of a state that nourishes all acquiring dictatorial qualities that can only be “overcome by a simultaneous, drastic increase in democratic procedure in all spheres of social activities.”

I believe a ‘welfare state’ that restricts itself to automatically paying all members of society a guaranteed income would actually have much less power than one that makes welfare provisional on myriad conditions and intrudes shamelessly into the lives of benefit recipients. However, Fromm is right that the ‘great step’ of a basic income is not a panacea. Any just society should grant its citizens economic freedom, and for that reason alone the Left should support a basic income. But basic income does not render other changes in society any less necessary and we should not be lulled into thinking it could.

 

The price of freedom. Can we afford an unconditonal basic income?

This blog has previously scrutinised the case for a universal basic income and how it might play out in practice. But in a sense these are subsidiary to a more fundamental issue– namely how could a basic income be financed? An unconditional income for everyone might be theoretically desirable, a sympathetic sceptic would object, but what’s the point in speculating about how it could work when the astronomical costs of implementing it render such speculations idle fantasy? In any event, through austerity, society is furiously paddling in the opposite direction.

Firstly, it should be remembered that a basic income would likely save lots of money in certain areas. It would mean the abolition of many social security benefits and the end of the current obsession with checking up on people’s work seeking activities. No job diaries, no Work Programme, no Work Capability Assessment. There wouldn’t be any ‘benefit cheats’ under a basic income, because if the money comes without conditions, it’s impossible to cheat.

In addition, there would be less direct savings, too. I think a basic income would quickly produce a healthier society, both physically and mentally. The space, choices and ‘de-pressurisation’ it would afford, would lead to a smaller financial burden on public health services and fewer drug prescriptions. If the current neo-liberal capitalist society is, in essence, a social problem generating machine (and one which rudely lumbers society with endless disturbances to deal with), basic income is a problem reducer. Fewer problems, less expense.

But, even if all this is borne in mind, a universal basic income would seem, on the surface, to be monumentally expensive. In 2009, the economist Harry Shutt estimated, based on figures from the UK Citizen’s Income Trust, that the cost of a basic income in Britain was equivalent to an income tax rate of 57% or “around double the current basic rate of tax and national insurance”. The economics editor of the UK’s Channel 4 News, Paul Mason, believes, on a rudimentary calculation, that a subsistence level basic income of £6,000 a year would cost £290 billion. This contrasts with a current UK ‘welfare bill’ of £167 billion or 23% of government spending (memo to the British public: nearly half this amount goes on pensions). Mason factors in the benefits of a basic income: no tax relief needed for those on low or moderate incomes and lower health spending, but concedes that a “fiscal gap would be closed through raising tax – so this is not a cheap or easy solution”.

And while there are other kinds of taxes that can be utilised – a land value tax or a financial transactions tax for example – closing this fiscal gap invariably centres on one suspect, income tax.

And in the Mason case, we are talking about an income floor type of basic income. Wouldn’t the more generous kind of basic income, US$30,000 or £20,000 per person, be decisively beyond the bounds of affordability?

But it’s interesting that if you put the question of financing the basic income to the people that have thought most deeply about it, the Swiss group, Generation Basic Income, they come up with a very different solution. And Generation Basic Income aren’t proponents of a half-hearted basic income either. They advocate what might be called, ‘basic income max’ –  an annual rate of around £21,000 for every adult and half that amount for children. They will be taking that proposal into a referendum on the issue in Switzerland in 2016.

One of Generation Basic Income’s spokesmen, Enno Schmidt, is adamant that a universal basic income should not be funded out of income tax. “Whoever wants to fund basic income with income tax, has not understood it,” he says.*

Schmidt’s argument is that a basic income funded from increased income tax would be passed on in prices of goods, thus producing an endless demand for a greater basic income and generating spiralling inflation. Moreover, funding a basic income through income tax will reinforce the impression of those with well-paying jobs subsidising those without this income. “The people who earn money with their work will say: we work and pay our labouriously earned money to others who are lazy,” Schmidt argues.

His answer is that a basic income should be granted through an annual tax-free allowance and funded through a consumption tax, the equivalent, I guess, of VAT in the UK or the sales tax in the US. A consumption tax, incorporating the financing of the basic income, would, Schmidt estimates, need to be set at around 50% of prices. This is obviously much higher than it is at present – VAT is currently 20%, in the UK, for example.

Schmidt believes that, with the introduction of a ‘basic income max’ for everybody of £20k annually, prices, including wages, would fall dramatically. But with the introduction of the basic income consumption tax, prices would rise again to their original level. “Prices remain with this tax as high as they were for the consumer,” he says.

His argument is that consumption tax is a fair way of funding the basic income because how much a person contributes is determined by how much they ‘take’ in consumption. “The consumption tax is not unjust,” he says. “Whoever buys a lot, pays a lot for basic income elsewhere,” he says. Whoever takes a lot of performance from others for their benefit, contributes greatly to the basic income.”

I can certainly see the immense problems that ensue from trying to fund basic income from income tax. Over and above everything, this method involves paying for basic income in mammoth tax rises, before the benefits of unconditional income can be seen. They have to be taken on faith.

The consumption tax method of funding basic income is new and, I confess, I don’t understand all its ramifications. Two issues do immediately spring to mind, however. One is that consumption taxes are, nowadays, regressive – everyone, the billionaire and the homeless person, pays them at the same rate. In the past, (in the UK in pre-EU days for example), luxury items had a larger tax rate attached to them. Should a consumption tax for a basic income have graduated rates for more expensive goods?

The other question that arises is whether this kind of arrangement would lead to an enforced frugality? Because many people would deny themselves consumption, and thus paying the accompanying tax, if that’s where it would mostly be applied. Would a basic income, ironically, put basic goods out of the reach of most people? It’s important to remember that basic income would not, automatically, redistribute income. There would still be immensely rich people on the basis of their wage income and ownership of assets. Huge inequality could remain.

Ultimately, I’m not convinced that a universal basic income is possible without tapping the immense wealth that exists at the summit of society, held by corporations and a tiny minority of individuals. The charity Oxfam has famously estimated that a mere 85 people control as much wealth as half the population of the world. And the situation is rapidly getting worse. Oxfam says that the wealthy have captured opportunities from the poor and middle classes, skewing the political and economic system in their favour.

Real progress will not arise through tax redistribution, through increasing tax on the wealthy, as the clamour for a basic income tacitly acknowledges. It has to go deeper than that. "If change is ever to occur," asserts Gar Alperovitz in his 2002 book, America Beyond Capitalism, "an assault must ultimately be made on the underlying relationships that have produced the inequality in the first place - especially those involving control and ownership of the nation's wealth."

One of the earliest advocates of a basic income, the French thinker, Andre Gorz, thought an unconditional income would enable people to refuse work because it would bring about "the pooling of socially produced wealth". I still think we need to concentrate on the difficult part, the socialist part, which is how to produce the pooling.

*From correspondence with the author

Here is Part One

And Part Two