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The Vienna Conference of the Basic Income European Network (BIEN);
 Austria, 12-14 September 1996.

© 1996 Keith Rankin


CONFERENCE THEME:

From Thomas Paine to James Meade

History suggests that what is not 'politically possible' can change quite radically and quite rapidly over the years; and nothing can become politically possible unless it is first proposed and discussed by some body of persons.
   James Meade (1978), Nobel Laureate in Economics 1977.
 

INTRODUCTION

The Basic Income European Network was formed by mainly 'left-wing' scholars across Western Europe in 1986 to discuss the social, economic and political implications of the introduction of a universal basic income as a partial or complete alternative to the conditional welfare programmes that underpinned the post-war consensus in European social policy; a consensus eroded by the emergence of mass unemployment in the early 1980s. The subsequent period from the mid-1980s has proved to be one of economic growth accompanied by diminishing employment security and rising labour supply.

The basic income alternative has a long pedigree. The specific stimulus to the formation of BIEN was, however, the 1986 publication of an argument by Philippe van Parijs and Robert van der Veen for a basic income as a "capitalist route to communism", bypassing the "socialist" phase of Marxian development. The publication stimulated much debate within, especially, Western Europe's socialist academic community.

In an earlier incarnation, the idea of a limited basic income as a negative income tax had been widely debated in the United States in the 1960s and early 1970s. Negative Income Tax had both liberal and conservative supporters. Despite a number of reassuring pilot experiments which suggested that an unconditional income without an accompanying means test would not lead to a mass exit from the full-time labour force, the idea waned as the big idea in the English-speaking world from the late-1970s was to deal with "government failure" and the relative growth of the public sector by reducing taxes and public expenditure; an idea seemingly incompatible with any realistic proposal to base welfare on a bedrock of universal transfer payments. A social dividend approach, which no longer treated basic incomes as redistributive transfers became more promising in the new fiscally conservative environment of the 1980s and 1990s.

The 1996 conference had the aim of bringing together many of the strands of thought around the underlying idea of unconditional citizens' incomes. The background is one in which the welfare state per se is on the back foot, in the face of ongoing fiscal conservatism and of globalisation which subjects sovereign states to similar kinds of market pressures to those faced by competing firms and workers. Thus the key themes of the convention were the history of basic income ideas, history as a process of change, the need for eclecticism over philosophical purity, and an acceptance that pragmatic policy prescriptions are required to resolve through the democratic process a problem which amounts to one of increasing social disinheritance in advanced nations.

 

PLENARY 1: PAINE AND BEYOND

Bernard Vincent
Professor of American History and Civilization
University of Orleans, France

Gar Alperovitz
Director,
National Center for Economic & Security Alternatives
Washington DC, USA

Walter van Trier
St. Ignatius University
Antwerp, Belgium

Bridget Dommen-Meade
United Nations
Geneva, Switzerland

Film: Alaska Permanent Fund

The opening plenary session focused on Thomas Paine's tract Agrarian Justice and James Meade's Agathotopia.

Philippe van Parijs first brought Thomas Paine into the contemporary European basic income debate, in his essay "Competing Justifications for Basic Income" in the 1992 anthology Arguing for Basic Income, edited by van Parijs. Any person interested in basic income would be rewarded, I feel, by reading Paine's short essay, his final "major work".

Bernard Vincent examined the circumstances in which Agrarian Justice was written, and its context within Paine's overall philosophy. Paine wrote his essay in part as a protest about the 1795 French proposal to institute a private property qualification for citizenship. This has clear echoes of modern debates (eg Rob Watts vs. Jocelyn Pixley in Australia) about the conditionality of citizenship, as well as about debates relating to the economic implications of citizenship.

Paine argued that it is only civilised society that makes private property possible, and that private property generates inequality as it enables economic growth. Paine argued for a capitalised basic income and an age pension, as compensation for the property dispossession inherent in capitalist civilisation.

He certainly did not oppose capitalism. But, like Marx, Paine saw capitalism evolving either into something better or into a higher form. Vincent noted that Paine had a "proto-Marxist" view of socio-economic debt; payment of wages that are too low leads to an unpaid debt owed by the employing classes. The essence of this theme indeed emerges very much, in James Meade's last book Full Employment Regained? Meade argues for a social dividend / citizens income as compensation for the low wages required to ensure full-employment and minimal inflation in the modern market economy.

Gar Alperovitz, from America, gave a very interesting presentation on "Distributing our Technological Inheritance". He argued that the argument for basic income as a return on our social inheritance was by far and away the most powerful argument for basic income; furthermore his technological argument stems directly from that of Paine, only with the concept of "land" broadened to reflect 200 additional years of economic history. As such, Alperovitz argued for the importance of introducing history to the basic income debate; both looking backward to the arguments and circumstances of Paine, and looking forward to understanding the introduction of basic income as an evolving process rather than as some dramatic one-off switch in fiscal or social welfare policy. Basic income involved the development of "a second income stream" for each person. Basic income, therefore, is an issue of economic dynamics, not one to be understood simply in terms of comparative static incentives.

Alperovitz also noted that there were many good ideas of economic dynamics useful to the promotion of basic income, coming from both the left and the right of the economics profession; ie ideas from people thinking about issues other than basic incomes. In a sense this view reflects the importance of lateral thinking in the historical development of both technology and ideas. He cited Paul Romer on the left and Louis Kelso on the right (author of The Capitalist Manifesto). He noted that many good ideas which can be developed by social liberals do in fact come from conservatives. This theme reappeared later in the conference when the possibility was suggested that basic incomes would first be introduced in an economically conservative country - eg USA - rather than a socially liberal country like Sweden or the Netherlands. [Indeed the fact that there was no-one from Sweden at the conference was the subject of an early remark, and the backtracking of political will for basic income in the Netherlands was an underlying sub-plot of the conference.]

Alperovitz calculated that 96% of the GDP of the developed world is due in essence to inherited factors of production - ie to social capital broadly defined (the resources of the public domain) and to private fixed capital.

Chairman for the session, Edwin Morley-Fletcher (from Italy), noted the connections between the themes presented so far, and the writings of Henry George.

Walter van Trier (Secretary of BIEN) is a historian of economic thought. Van Trier discussed Meade's various social dividend proposals, especially with respect to his 1989 book Agathotopia (available from the Treasury library; but see Meade in Alternatives to Capitalism [ed. A.B. Atkinson, 1993] or Liberty, Equality and Efficiency: apologia pro agathotopia mea [also 1993]), and also looked at how the social dividend idea came to Meade. Van Trier identified four versions of social dividend in Meade's writings:

  1. A redistributive mechanism; ie a simple negative income tax.
  2. A Keynesian automatic stabiliser through its role as a minimum income benchmark.
  3. A social dividend as a transitional phase in a longer term process of restructuring the distribution of private property.
  4. As in Agathotopia, a secure income stream to offset the insecure wage/profit incomes that arise from worker-owner partnerships.

While many believe that Meade's interest dates back to Lady Juliet Rhys-Williams work in the late 1930s and 1940s, van Trier has traced references earlier to people such as Major C.H. Douglas and G.D.H. Cole. While the young Meade (born in 1907) rejected Douglas's A+B social credit theorem, he never rejected the national dividend concept. Van Trier concludes that the idea of a national dividend was in fact very widely discussed in British intellectual and political circles in the inter-war years, and that Meade absorbed much of those debates, while finally settling with the Keynesian world-view, which (along with the War creating a full-employment high wage environment) pre-empted the advocacy of a basic income (and as Guy Standing noted in his introductory comments, still does). Unlike others converted to Keynesianism, Meade never dropped the social dividend idea, seeing it as a means to both efficiency and relative equality.

Meade's daughter Bridget compared and contrasted Paine with Meade. While Paine was a highly politicised writer and Meade was a careful and detached academic from a privileged background, they shared the same classically-spirited ideas of liberty and equality; of "real freedom for all" (to cite the title of Philippe van Parijs's 1995 book). Meade had certainly read and enjoyed much of Paine's writing.

The session finished with a film about the Alaska Permanent Fund. This is social dividend scheme funded by a 25% royalty on Alaska's oil and gas production (50% of any newly discovered and developed resources). The fund is managed much like a contributory public superannuation fund. Dividends of about US$1,000 are paid annually to each man, woman and child resident in Alaska. The payments are hardly adequate as benefits - which they are not. Nor are they reliable, in the sense that the exact amount is not known in advance, and can fluctuate quite a bit from year to year. Nevertheless, the fund does reflect some of the ideals of an unconditional cash income as a social inheritance; it is both popular and well-understood, and is immune from attack by right-wing opponents of basic income. The way is open to a wider definition of the resource base from which royalties are liable, to declaring in advance an amount below which the dividend will not fall, and to gradually merging it with the rest of the tax system (ie much as social insurance contributions, the "one shilling and six pence in the pound" superannuation contributions and ordinary taxes were merged together in New Zealand in 1964).

 

COUNTRY SURVEYS

Eighteen representatives from nineteen countries gave short presentations about the strength of basic income advocacy in their countries, and current developments in tax-benefit policies. I represented New Zealand and Australia.

The general pattern was one of pessimism; that political parties are unable to take on board an idea that is yet to enter mainstream economic debate. There have been significant political reverses in the countries of NW Europe that had been toying with the basic income idea in the early 1990s. Basic income remains an idea that is subject to much misinformed criticism, and has yet to register sufficiently in some countries - eg in the Americas - to be even the subject of misinformed criticism. (This problem does of course represent differences in language use. The network now accepts that basic incomes, social dividends and negative income taxes are essentially the same thing; all involve a universal unconditional payment to all citizens of an eligible age.)

The contribution from Brazil was interesting in that a form of basic income is passing through the legislature this year (1996). It is unusual in that it is a basic income only for children, and is being introduced as an answer to Brazil's horrendous child labour problem. The payment suggested is made to parents, and has one condition; namely that the child for whom the basic income is paid is attending school full-time. This opens up an area of argument that can be understood by social conservatives; that a basic income, although unethical in that it may breech the strongly held view of economic scarcity - that 'there is no such thing as a free lunch' - may be argued for as a lesser evil; ie free lunches are less unethical than child labour.

The US contribution of Charles Clark, author of Economic Theory and Natural Philosophy (1994) and co-author of "Basic Income, Inequality, and Unemployment: Rethinking the Linkage between Work and Welfare" in the 1996 Journal of Economic Issues, was particularly well received. Clark suggested - only partly flippantly - that the United States would be first to introduce a universal basic income because America is leading the way in destroying the twentieth century welfare state and therefore would be first in the queue for a workable economic solution to the ensuing social problems.

Prior to Clark, I presented an optimistic view about the political possibilities for implementing unconditional income policies in New Zealand and Australia, based partly on Clark's reasoning. New Zealand has the "advantage" (like the US) of being one of the more rapid destroyers of the old-style universal welfare state, while also being small and with a heritage of setting examples that others have followed. Australia has the advantage of seeing the direction the USA, UK and New Zealand are headed, so has the option of bringing genuine alternatives to the welfare minimalism espoused by the neo-liberal (ie as in ACT) neo-conservative (ie as in the Christian Coalition) juggernaut. I also noted that the introduction of more activists into Parliament could facilitate the process.

The text of my address to the conference follows. Note that this text includes some material that I omitted from my presentation, due to time constraint. All omitted parts are bracketed in the following text:

NEW ZEALAND

In New Zealand we call BI "Universal Basic Income" (UBI), following from an article I wrote in 1991. The movement is activist. There is no serious debate within academic circles but there is some activist input from an eclectic mix of academics. The academic community is not unsupportive of the basic income concept, and is listening to those who are leading the debate. There are recent signs of interest from the trade union movement.
Sources of activism include the Green movement, which became politically active in the early 1970s, feminists, advocates of Henry George and of James Robertson, Social Credit monetary reformers, unemployed workers rights activists, voluntary sector activists, and the dominant public sector union (PSA).
The activist group is informally known as UBINZ, and is co-ordinated by Ian Ritchie, who arranged for me to be here.
My academic speciality is economic history and the history of economics. [This perspective favours the development of new ways of looking at past and present systems of income distribution. I get inspiration from classical economics, from concepts of growth accounting and from ideas about social capital. While I am happy to wear the label 'social capitalist', I take a broad perspective on the issue of what constitutes social capital. These perspectives give me a 'macro' approach, emphasising the concept of sovereignty over the 'micro' concept of citizenship.] I have arranged to distribute copies of a paper I presented recently to an economists' conference in New Zealand. This paper explores some of the issues raised in our session this morning [esp. by Professor Gar Alperowitz of the US 'National Centre for Economic and Security Alternatives'].
From 1984, New Zealand has been through a fundamental neo-liberal reform process called 'Rogernomics', in deference to both our Finance Minister and the American process of 'Reaganomics'. The reforms involved the introduction of a flattened income tax scale - 3 steps (15%, 28% and 33%) coming in at the equivalent of 30,000 Deutschmarks per year; ie much like the mooted German tax scale described by the German representative. And they involved a shift to a tightly targeted welfare system. Unemployment, inequality and worker poverty have been consequences of the neo-liberal reforms.
Jane Kelsey, like me from the University of Auckland, in her book Economic Fundamentalism: the New Zealand Experiment, details the experience and outlines some solutions, including universal basic income. A sample copy of the book is available for you to inspect.
New Zealand is a likely place for a UBI to take root, partly as a reaction to excessive neo-liberalism and partly because we have been able to introduce a new proportional voting system which will bring activists and genuine debate into Parliament on October 12 this year. Furthermore, mainstream political journalists have already begun to use the term 'social dividend'.

AUSTRALIA

Australian politics is now characterised by people who seek to use New Zealand's neo-liberal reforms as a model, and by those who seek to find and promote alternatives to 'the New Zealand solution'. The new Liberal government is in essence a supporter of our 'New Right' reforms.
The issue of basic income is more academic, less activist, than in New Zealand. Discussions reflect labour market problems and poverty issues. These began in the 1970s, died in the 1980s, and have been revived in the 1990s. The Australian debates have widened to reflect other issues such as citizenship, participation, social security failure and social surveillance, and environmental sustainability.
The two main academic proponents of basic income in Australia are John Tomlinson and Rob Watts. I have arranged to make available papers by both writers.
Tomlinson is concerned about the new neo-conservative rhetoric of "self-provision of income support". His most recent paper addresses basic income in the context of intergenerational social contracts, and environmental sustainability.
Rob Watts promotes the use of the concept of "agency" as the basis of citizenship.
[I will finish by quoting from him. Watts says: "I would suggest we look at linking our social security system, wage income system and pattern of unpaid domestic and voluntary work to offer a fundamental guarantee of social citizenship rights to all Australians. ... If one is to be a full citizen, one must support agency. To have agency requires that material subsistence is secured in ways that do not humiliate, oppress or demean, in a way that does not discourage efforts to escape poverty or disparage efforts to obtain training opportunities or employment."]
For Watts, universal agency, made possible by a universal basic income, makes full participation possible. Participation is a consequence of income, not a condition for it.
 

PLENARY 2: BASIC INCOME VS. SUBSIDISED EMPLOYMENT

George Vobruba
Professor of Social Policy
University of Leipzig, Germany

Guy Standing
Director of Labour Market Research
International Labour Organisation (ILO),
Geneva, Switzerland

Rick van der Ploeg
Professor of Political Economy,
University of Amsterdam
Member of the Dutch Parliament

In this session, the two speakers from 'Lutheran/Calvinist' countries (Germany and the Netherlands) were opposed to universal basic income, while the British director of Labour Market Research at the ILO in Geneva was the staunch supporter. I felt that, whereas the first plenary session - while explicitly historical - was about where basic income is headed, this session - while explicitly on policies for the near future - was actually about where the basic income debate had got stuck in Europe.

George Vobruba was sceptical about many of the claims made by basic income advocates, especially about the whole issue and existence of the poverty trap as a disincentive for the unemployed to seek work. While he produced a number of facts and figures and charts, he did not fully address the poverty trap issue. Advocates of basic incomes have always accepted that many people choose to work in the face of strong disincentives, even when the gap between a weekly wage and a benefit is narrow.

Guy Standing noted that all sorts of alternative ways of using the labour market as the primary institution of incomes policy had been tried out, as an excuse for not fronting up to the need by politicians and their advisers to take the basic income alternative seriously. He reaffirmed the existence and significance of the poverty trap, and suggested that the "anomic" behaviour observed in today's youth could to a large extent be linked the disincentive effects of "selective" (ie targeted) welfare forms.

Standing went through, and largely discounted, the main benefits of employment subsidisation (which employers like, despite the interventionist nature of the programmes; it is interesting that some people in New Zealand and elsewhere oppose basic income because they believe it is a kind of employment subsidy, ie that it is not an alternative to subsidised employment). He also noted the differences in the social agendas of the two approaches to social policy - one is a reaffirmation of the work and growth ethics above all other ethics, whereas the UBI is based much more on the primacy of real freedom and the coexistence of equality and sustainability. In other words, the promotion of job subsidies is linked to the acceptance of if not the explicit promotion of exploitation of both labour and land.

The disadvantages of job subsidies included the "Aunty Effect" (putting relatives on one's payroll to collect subsidies; significant given the importance in the 1990s of small firms), the "Dead Souls Effect" (leaving departed workers on the payroll) and the Substitution Effect (no net increase in jobs despite subsidies).

A useful reference to Guy Standing's work at the ILO is the book which he co-edited: Towards Social Adjustment; Labour Market Issues in Structural Adjustment, published by the ILO in 1991. His argument for basic income is "The Need for a New Social Consensus" published in Arguing for Basic Income [ed. P. van Parijs 1992].

Rick van der Ploeg, a Labour MP in the Netherlands, was essentially opposed to basic income, but claimed to favour it in the very long run; in essence this is the position of the NZ Alliance's economic advisors; basic income is a nice ideal, but we need a much bigger economic cake first.

Van der Ploeg raised most of the usual arguments against basic income: high cost (especially of transfers to people above the "social minimum" who don't need assistance), the suggestion that workers will accept lower wages from their employers (while not noting that that is exactly what employment subsidies are about), the fear that right-wing versions of basic income will make poverty worse rather than better, the fear of 'free-riding' (eg people choosing to surf rather than work). He sees a loss of economic efficiency (optimal tax rate analysis does yield this conclusion, which assumes that basic incomes are redistributions, unlike the Paine view which presents basic incomes as distributions of property income which enhance economic efficiency). He noted that even the Greens in the Netherlands have abandoned basic income as party policy, as have the Liberal Democrats in the UK.

An issue raised by both Vobruba and van der Ploeg was the impact of basic income on school leavers. Both suggested that they might see it as an alternative to both employment and tertiary education. I agree that this argument does need to be addressed. I believe that the answer depends very much on whether our communities are 'atomised' or 'socialised'. Also, the particular means through which basic incomes are paid may be important. That is, I think that a social dividend should, wherever possible, be paid as a tax credit through an organisation to which the recipient is affiliated; eg students would receive their basic income through the educational institution, just as the staff of that institution would.

Commenting from the floor, Philippe van Parijs accepted that there are some right-wing advocates who see a basic income as a means of setting a low upper limit on social assistance (we can call this the 'Trojan Horse' argument against basic income). But he also noted that conservative social theorists such as Sam Brittan advocate versions of basic income that are coherent and not ungenerous. Van Parijs pointed out that criticisms tend to focus on a version of UBI in which the basic income is set at the social minimum. The reality is that the basic income argument has moved, with most analysis focusing on an unconditional payment set at a level of two-thirds to three-quarters of the social minimum (ie partial basic income, social dividends and citizens income is now where the action is at; not a full UBI). Indeed the increasing use of the name 'citizens income' by no means represents a sell-out of basic income ideals. It is an acknowledgement that:

  1. the practical task is to deal with the issue of unconditionality (adequacy has already been dealt with in the post-WW2 welfare state), and
  2. that citizens income divorces the concept from any explicit tie with the social minimum (ie a citizens income can be less or more than the social minimum).

Regardless of these points about nomenclature, the term 'basic income' remains the most widely used name for the concept.

Overall, this session was rather negative, with each speaker speaking about either basic income or employment subsidies, but not about both; ie the speakers each spoke only about the alternative which they opposed.

 

WORKSHOPS

The workshops were conducted as parallel sessions, so it was only possible to attend three sessions out of a total of nine. Workshop papers were distributed on registration, and copies of them all will be held at UBINZ. My paper is enclosed as an addendum to this report.

The themes varied from those explicitly based on Paine's theme of social inheritance, various other approaches to the justification of an unconditional income, and various practical proposals for different countries, mainly for a partial basic income.

My contribution fitted well into the underlying themes, especially relating to practicality and property. Indeed my 'social wage' approach is reflected elsewhere through concepts of "basic income in kind" (van Parijs) and "a giant basic income" which includes cash and non-cash forms of social income. Recognising the emerging issue - that of reconciling income taxes with resource taxes - I emphasised in my presentation my idea of:

"Income Tax = Company Tax = Public Domain Rental".

This approach certainly went down well with the workshop participants.

Tim Knight, in the same workshop session as myself, also presented an "accounting" version of basic income, that essentially combined new technology with a new way of looking at Britain's existing system, to come up with a costless proposal (ie no extra taxes). Like Paine, he focused on lifetime income as the basis of any social dividend.

The importance of considering basic income / citizens income / social dividends as being linked to social inheritance and property is coming through most strongly in the papers from English-speaking countries, and is increasingly being seen as the way forward. It is also these countries that suffer most from overwork, ie from many of the aspects of poverty and inequality that cannot be simply linked to unemployment. Thus it is the European countries in which Basic Income is on the defensive, with advocates forever having to justify an unconditional income in the face of an entrenched ethic that demands to use work as the basis of income determination and sees the problem only as one of labour market failure. These countries have a long and deep tradition of maintaining social cohesion through the management of the labour market, supplemented by generous but conditional public welfare programmes. Indeed, the host city of Vienna can be seen as an excellent testimony to the past success of European social democracy.

Robert Needham from Oxford University presented an interesting paper about the social importance of free time. As such, it echoed ideas in my paper "The Factor Distribution of Income, a Matter of Classical Importance" [paper presented to the New Zealand Association of Economists Conference, Auckland, August 1996] which notes the way that the public domain - ie our social inheritance - is built up largely from creative activity made possible by poverty-free free time. Needham cited Jon Elster, a left-wing social theorist and sceptic on basic income, as arguing against basic income because higher taxes will cause creative people to have less free time (this is called the "income effect" by economists). This argument against basic income is interesting because it is the exact opposite of what New Zealand's neo-liberals and America's supply-siders argue. They argue that tax cuts, not tax increases, cause high income earners to work harder (ie to do more paid work). Textbook economics can in fact sustain both arguments. José Martinez from Spain, reaffirmed those arguments about time and creativity.

Stuart White, also from Oxford, looked at ways of dealing with the 'reciprocity' argument against basic income; ie the argument that people (eg the voluntary unemployed) will 'free-ride' on the efforts of those who choose to work. The discussion - chaired by Robert van der Veen who had in an earlier workshop presented a related though more technical paper - noted that the free rider problem only becomes potentially significant if the basic income is set at the social minimum. It seems to me that conditional benefits can actually make free-riding more likely, in that the poverty/unemployment trap holds people in a state of full rather than partial unemployment. Indeed, it can be said that, under conditional benefit structures, people move to (or stay in) communities where they know they are unlikely to be able to get a job.

The tone of the conference was often one of impatience with arguments based on the old issues - like the free-rider problem. So Francesco Silva, an eminent Italian economist, raised (in this workshop) the point that modern economic growth theory clearly attributes genuine economic growth to "social externalities", and that this argument - about social inputs to production, about social inheritance - is so powerful that it renders much of the earlier discussion as near to irrelevant. Clearly, a person receiving a basic income as a social dividend can be no more a free rider than can be any person possessing privately inherited wealth. I sensed that the southern Europeans - especially the Italians and Spanish - have come to grips with this argument more easily than have those from the north. Indeed, Italy has a long and wonderful tradition of scholarship in the history of economic thought. Silva's comments closely echoed the key theme of my paper (see above) on "the Factor Distribution of Income".

 

PLENARY 3: VISIONS OF BASIC INCOME

Kurt Rothschild
Professor Emeritus of Political Economy
University of Linz, Austria

Claus Offe Professor of Political Science
Humboldt University, Berlin

Philippe van Parijs
Professor of Economic and Social Ethics
Catholic University of Louvain, Belgium

Kurt Rothschild is Austria's most eminent post-war economist. (Austria is a country famous for its contribution to economic thought; indeed an economist - Eugen Bohm-Bawerk - is represented on Austria's 100 shilling note, the equivalent of our $10 note.) John E. King, a renowned historian of economics from Australia, has written a paper "Kurt Rothschild and The Alternative Austrian Economics" in the 1994 Cambridge Journal of Economics. Recent (1993) books by Rothschild include Ethics and Economic Theory: Ideas, Models, Dilemmas and Employment, Wages, and Income Distribution: Critical Essays in Economics.

Rothschild focused on the issue of why economics and economists are so little disposed to the idea of basic income (leaving aside the fact that at least four Nobel prize winners - Tinbergen, Friedman, Meade, Tobin - have been advocates of a social dividend or a negative income tax). Indeed, he notes that economists have played a much larger role in many other debates, so the problem is not their reticence, per se.

Rather, Rothschild argues that neo-classical economics - as distinct from the classical economics that gave inspiration to Paine, to economic history, and to modern day Italian scholars such as Francesco Silva - takes its inspiration from the mechanical sciences, especially physics. In seeking general laws, across all space and all time, neo-classical economics neglected history, which inhibits the derivation of formally exact "laws of economics". Rothschild cited Joseph Schumpeter as an economist - indeed an Austrian economist of great eminence - who appreciated the importance of history, and appreciated economies as dynamic entities rather than systems pre-disposed to static equilibrium. The mechanistic approach gives a strong bias to the study of the market aspects of the economy (ie priced commodities), and therefore to the production of goods rather than to other forms of well-being (such as free time) which cannot be produced through the market or valued in simple monetary terms.

The basic assumption of neo-classical economics is that of scarcity (as expressed in the "no free lunch" aphorism); neo-classical economists see the world as perpetually half-empty. On the other hand, the key problem of classical economics was the division of the social surplus (the free lunch if you will). Thus basic income principles more easily follow from a classical macro/social approach (noting that Adam Smith was just 14 years older than Thomas Paine, and noting that Austrian economics takes its inspiration from Adam Smith) which assumes a social free lunch (like a world perpetually half full) than the neo-classical micro/individual approach which rails at the idea of an individual (parasite/bludger) free-riding by seeking to live off a the social surplus. Classical economics simply accepted that the agrarian landed interest was parasitic, and that each landlord had a (property) right to be so. (Inefficiency arises in the classical system from the pattern of expenditure of landlords - conspicuous consumption rather than capitalist accumulation - and not from any lack of entitlement to their income.) A society dominated by gentleman land-owners could not have invoked the work ethic as the basis of all distribution.

Rothschild noted three economists who did support basic income, calling them a "Rainbow Coalition" reflecting the values of the political economist (Meade), the technocrat (Atkinson) and the libertarian (Friedman).

Claus Offe focused on T.H. Marshall's schematics of rights (as in "Citizenship and Social Class", the 1949 Alfred Marshall lectures), commencing with the civic rights emphasised in, for example, Paine's political works. The next level of rights were political and the third level was socio-economic rights. The latter, Marshall equated to workers rights (indirectly extended to workers families and retired workers), but largely reflecting the context of the late 1940s, in which the world economy was in a rebuilding and expansionist phase. Offe argued that the world economy had reached a stage in which a fourth set of Marshallian rights was imperative, and that Marshall's arguments did allow for new rights to emerge as the work imperative diminished. Walter van Trier, from the audience, quoted from Marshall to show that he did support the development of a basic income based on the social heritage of a civilised society. Offe fully agreed, arguing that any interpretation that Marshall explicitly tied citizenship to employment was an interpretation that failed to properly locate Marshall in historical context.

Marshall's schematics correlate well with Thomas Paine's vision. Writing about Agrarian Justice in Thomas Paine: Apostle of Freedom (1994), Jack Fruchtman notes that Paine "had emerged from Lockean liberalism to make a case practically for social democracy". In this work more than any other, Paine was classed as a visionary ahead of his time, who had foreseen up to and beyond Marshall's three levels of rights.

Offe moved onto the theme of the "free lunch" which, as Rothschild had noted, offends many economists, and conservative opinion generally. Thus Offe's view as to why economists do not support basic income concepts en masse relates to the conservative mental barrier incumbent in the scarcity supposition "there is no such thing as a free lunch". As noted from the workshop discussion, growth economists are now coming to recognise that our social inheritance constitutes a collective free lunch and it is only a matter of time before the profession generally can accept the possibility of a subdivision of this social surplus into individual income streams. In other words, the logic of Paine's social inheritance argument is so powerful that economists are embracing it and cannot avoid facing up to its implications.

Even though economics claims to be a "positive" (ie amoral) science, Offe claims that it is the moral imperative rather than the logic of the free lunch aphorism that engenders conservatism within economics. (An alternative argument would be that it is the values and interests of the employers of and the audiences of economists that determine what mainstream economics must be. Thus academic economists are less conservative because their main audience is comparatively disinterested economists, ie neither government nor business.) Thus basic income is, intuitively, seen as a massive threat to the social order because it sanctions the possibility of a free lunch that is sufficient to fully sustain an individual free-rider. While society might be able to sustain a few upper class free riders, it cannot expose itself to the possibility of a mass withdrawal from the labour force. Therefore, to deter free riding, each individual must pay for their sustenance, in the form of a loss of privilege (eg a loss of some citizenship rights) if not in the form of market income. Thus a conditional participation income - as a form of 'workfare' - is the route more favoured by economists than basic income.

Offe concluded by stating that "full male breadwinner employment in the future is both unlikely and undesirable". (Here he is talking as a sociologist about a twentieth century social order; he is not stating that widespread involuntary unemployment is acceptable. Technically, full employment is fully consistent with a high choice society which happens to have a low level of participation in the market economy. 'Full employment' and 'high market employment' are not the same thing.) Thus the direction signalled by basic incomes was a social imperative. Basic income systems are, by definition, all of those distributional systems which allow people who do not own private property a share of their society's income at no personal cost. By definition, universal unconditional incomes are the only alternative to fully conditional incomes.

Offe argues that, given the strong intuitive barriers which inhibit the creation of a social consensus in favour of unconditional incomes, an strategy of opportunistic gradualism must be accepted. Examples of changes in the desired direction that should be embraced include:

  1. the use of a child's basic income to keep children out of the labour market.
  2. a willingness to start at a low level of basic income to get people used to the idea that some unconditional income is morally acceptable.
  3. to focus initially on existing sources of taxation, only gradually introducing new types of taxation as the amount of unconditional income rises.

Gradualism is necessary, says Offe, because in difficult times people tend to fall back on their conservative intuitions. We must go through an extended process of social learning; a process that also involves social unlearning. Perhaps the economics profession has more unlearning than most, with respect to this issue which strikes at the heart of the scarcity assumption.

In the final address, Philippe van Parijs, author of Real Freedom for All, spoke about the terrible poverty that exists in the world's richest country, the United States. While he sees the breakdown of the US welfare system as an inevitable consequence of often well-intentioned targeting, he feels that much of the targeting has been done as part of a deliberate agenda to discredit social welfare, per se.

Van Parijs's vision of social progress is one of growing freedom for all, not just some, in accordance with "maximin" or lexicographic "leximin" criteria. Poverty is a direct impediment to freedom; a poor person is not free. Western society cannot afford to simply theorise about basic incomes any more. We have to get serious about promoting the next step in the evolution of social democracy. Advanced societies are imploding under the weight of their own ignorance of societal self-interest and their lack of vision about what constitutes the common good. As Thomas Paine noted, civilisations have to reform themselves in order to ensure that no group of citizens becomes worse off as a result of the civilising process.

As part of getting real, basic income proponents must become ruthlessly opportunistic, should exploit all opportunities that involve some movement in the direction of unconditionality, and must be willing to accept odd bedfellows (indeed the NZ Christian Coalition's married mothers wage can be supported as a thin end of a wedge to a universal caregivers wage which in turn leads to a citizens' income), and to accept many disappointments. Ideally, Europe can avert a US-style welfare backlash, rather than waiting for the full forces of creative destruction to take effect in the wake of unacceptable levels of societal pain.

Supporters of basic incomes should promote their ideas in an undogmatic way, and should listen closely to their critics, van Parijs urged. In a sense, it is debate that makes democratic change possible, not just the force of a single line of argument. So basic incomes should be placed on the agenda for discussion whenever there is a forum about any aspect of life that can benefit from basic income. No matter how many times the idea is knocked down by critics who have better media access, for example, the idea can be brought back next time. The trouble with TINA [there is no alternative] is that she stifles public debate. The European network now has a powerful suite of arguments for a basic income, including arguments that can be understood by a property-owning elite who cannot themselves argue that only labour market contributions should be recognised for income allocation purposes. The opponents of basic income should be obliged to justify why any citizens should not be paid a citizens' income.

 

CONCLUSION

I am optimistic that New Zealand can play a leading role in the global evolution of basic income as a policy option. The key is to turn the present climate of pessimism on its head, by making the existing forces for institutional destruction into ones that forge creative yet practical income distribution policies. This fits in with the Schumpetarian idea that long-run socio-economic growth is driven by forces of creative destruction and innovative rejuvenation. An opportunistic reformer does not seek destruction, but does take advantages of opportunities brought about by economic crises. Thus learning experiences such as that of the Great Depression, which formed minds such as that of James Meade, and those of the American and French Revolutions which formed the worldview of Thomas Paine, are themselves engines that drives progressive social change.

As noted in the conference's introductory quotation from Meade, societies turn to good new ideas when the old ideas become unworkable. But they can only do that so long as the logic of the new idea has been worked through sufficiently before they enter the political mainstream. UBINZ and BIEN need to be there, so that when UBI does get the nod, it can take the rostrum as a developed paradigm; as a genuine way forward.

By focusing on basic income as a social dividend - as a collective property income - we have a philosophical argument that is simple, that cannot easily be dismissed, and that can appeal across the whole political spectrum. Thus, for example, Thomas Paine had such appeal; he has been called a libertarian, a social democrat, a proto-communist, an apostle of freedom and a political saint. He found an argument with near universal appeal, which, of course made him unpopular with the politicians of his day in all three countries in which he was a part of: Britain, America and France.

The property approach actually removes the need to justify "unconditional" transfers, because basic income ceases to be seen as a gift; rather it becomes interest accruing to the universal ownership of publicly inherited property, much of which is intangible (eg knowledge and 'civilised' culture). Once it is accepted that ownership of property is a direct consequence of citizenship, and that citizenship is defined virtually without condition (ie essentially in terms of legal residence and, perhaps, adulthood) then many of the arguments that appear to justify redistributive transfers to the indolent and to persons earning above the social minimum become redundant. It becomes necessary for opponents of basic income to justify reasons why citizens should be denied income from collectively owned property, and to justify why some people should not have citizenship rights. The burden of proof falls on those who would impose conditions to inheritance.

The key theme thus to emerge from the 1996 BIEN meeting can be said to be that of income through social inheritance; and that requires no more justification than does bank interest or company dividends or private inheritance. (Indeed, past moral arguments relating to the very slow acceptance of interest as a practical payment rather than as usury may provide a historical precedent to understanding the resistance to basic income.) In Vienna, the way was cleared to develop practical visions for basic income, not simply academic justifications. Practical visions mean the development of ways from the precipice of societal disorder; not instant utopia. The idea that everyone is entitled, unconditionally, to some share of the social product is an idea which can be sold to a wide range of people; indeed it has been sold to the vast majority of Alaskans. The idea of a universal basic income at or above the "social minimum" cannot be sold, in the short or the medium term, and BIEN no longer aims to promote that idea. Nor is the ideal of eliminating all forms of supplementary assistance seen as practical. That is not to say that Meade's long term vision of agathotopia - the good place - should ever be lost sight of.

 


Rankin File