A grumpy old man in favour of a basic income scheme

The “free money” giveaway or basic income or universal income scheme being proposed by a few people is a great idea but one that is probably impossible to implement.  However it is nice to dream and fun to think out how to solve economic problems; so here goes.

The basic questions are where does the money come from and how to give the money to people?

The simple answer to the first question is that with a universal income scheme there will no longer be a need for subsidies to producers.  A more difficult answer is that the introduction of an income scheme would be the ideal time to reinvent money.

Generally subsidies (sometimes as tax exemptions)  are given to firms to encourage them to establish plants and provide employment or to save the business and save jobs.  This is great for those who get the jobs or whose employment is saved but it leaves a lot people with nothing.  Subsidies also distort prices so that when we make purchasing decisions based on price we are not necessarily getting the item that was cheapest or most efficient to produce.

Money is something most of us use daily and is probably the least well understood of all the things that are a part of our economy.  When central banks were doing quantitative easing there was some disbelief that they could create money out of nothing.  This is because we have for so long associated money with gold that we think of it as a commodity with value in itself.  It might be better to think of it as a tool with which to facilitate the exchange of goods and services.  It represents purchasing power.

Most of what we use as money is created by bankers making loans.  How this works is explained at numerous locations throughout the world-wide web.  My own version along with some of the problems with fractional reserve money is included in the essay “LETS go to market: Dealing with the economic crisis” on this weblog.

One way to reinvent money and implement a universal income scheme would be to take the concept of “local exchange trading system”  and expand it to the national level.  A good part of the essay talks about how this could work and again  I refer you to the essay.  There are many details to be worked out and many problems to be overcome.  The mechanics of the money supply would be easy.  Getting people to accept new ways of thinking about money would be extremely difficult.   Getting people to accept that others should be allowed to do as they wish, whether that be creating art works or drinking beer, would also be difficult.  Getting people to change their vested interests would probably be impossible.

One of my concerns is that our economic order is going to return to something similar to what existed before the industrial revolution in which there was a small group living in relative luxury and the balance of the population lived at a subsistence level. (The ultimate inequality)  I am concerned because I think our economy is possibly going into an extended period of decline.  While there are lots of energy and mineral resources left on this planet the energy required to extract them is becoming more and more excessive to the point it will be less viable.  Without resources it will difficult to maintain everyone at what has been the North American standard of living.

An income scheme would make it a lot easier to cope with an economy on a downward slope.

More and more I am getting to be a grumpy old man.  My generation has been very lucky in the time and place we have lived out our lives.  More and more I am recognizing the next generations, including my grand children, are going to have to deal with a lot of economic pain.  I hope I am wrong and if not I hope I won’t have to see it.

 

If you liked this post your are invited to comment, press the like button and/or click  one of the share buttons. If you disagree you are invited to say why in a comment.  While I like the idea of sharing this platform, my personality is such that I don’t reply to many comments.

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One Response

  1. You started with an important question (How can this be implemented) but then you moved to your own obsession with the nature and creation of money.
    Now, universal minimum revenue means providing a basket of “basic” goods and services to everybody on an egalitarian basis.
    I suppose it refers to basic needs: lodging, food, health, education, etc.
    In Western welfare societies (like in Western and Northern Europe and in Canada where you live) it is supposed to be available to everybody. Relatively to other societies and to previous historical times, these basic needs are indeed available to the entire population. (this is why Western/Northern Europe countries are so attractive to the masses of the underdeveloped world).
    The problem is that the future of the welfare states is far from being brilliant.
    As a matter of fact it seems to be disintegrating under our very own eyes and this is what explains your pessimism.
    Now, one could argue that today more than at any other time there is enough “wealth”, so that if it were better distributed, it could assure this basic basket of minimum standard of living to a much greater portion of humanity, if not to the entire population of the planet?
    But of course this is not a realistic view of the world! Redistribution systems can work ONLY, at best and at largest, on a national basis , among people who share the same identity/belonging/system of trust and solidarity.
    It is not a question of money creation BUT a political question, a problem of organization of society. To this date no other system than the Nation-State has proven viable and operational. Of course this leaves open the issue of international order.

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