Basic Incomes and Social Credit
By John Taylor; 2009 Oct 11, Mashiyyat 15, 166 BE
I have been mildly sick for the past few days. To keep my mind off my misery, I found myself listening over and over to the series of videos available at the Money Myths website. This guy, Brian Leslie, is an advocate of what I believe is called social credit. In most of his videos he offers an interesting explanation of what money is and where it comes from.
The bulk of his time is spent railing against what he calls our debt-based economy. Instead of spending their way out, governments are borrowing their way out of this recession. That is great for moneyed elites, not so great for everybody else. Instead of generating its money supply using its own resources, such as changing the fractional reserve rate, governments simply borrow from the banks. This assumes that the financial industry is the engine of productivity, but it is not. Even when governments have to bail out the big banks, they still borrow money to do so.
I am especially intrigued by Episode Six, which discusses what Leslie, the editor of Sustainable Economics Magazine, calls "basic incomes." I had heard of the idea, though the term I knew was "guaranteed annual income." In Canada we have a guaranteed income for seniors, but it is unfortunately not for the whole population. The idea of a basic income has always seemed sensible, since every other way of helping the poor, unemployed and disabled comes with so many strings that it all but criminalizes the disadvantaged if they try to perform the basic duty of working. Here is this economist's explanation of what a basic income would mean for society, taken from the transcript of the web cast included on this website.
"... being paid to everyone, Basic Incomes would replace most benefits such as Job-Seekers Allowance, Child Benefit, Working Families Tax Credit and State Pensions. Being unconditional, they would end the poverty trap, which means-tested benefits create. The current system makes it difficult for people on benefits to take on any paid work, unless very well paid, without being worse off through loss of the benefits. Even voluntary work is seen as a bad thing, as it makes the person unavailable for paid employment. The Minimum Wage legislation should be repealed when Basic Incomes are introduced. With Basic Incomes to fall back on, employees would be able to reject unacceptable terms of employment." (http://moneymyths.org.uk/)
As Leslie says, this idea of a basic income has a long history and has been put forward many times over the past century by politicians from all parts of the spectrum, from right to left. By making a basic income a human right governments would save tremendous amounts of money that is wasted confirming eligibility for dozens of support programs. I knew that, but some consequences of the idea for the labour market I had never thought of:
"The present system occupies most people in work that, with these changes, would no longer be needed. Persuasive advertising; telephone cold-calling; dealing with the mountains of paper waste caused by a system that is churning out an endless stream of deliberately short-lived goods instead of long-lasting, good quality and easily repaired goods; and so on... This (standard incomes) would lead to a change in the way that jobs are valued. Unpleasant but essential jobs would have to be well paid to attract workers, and easy, pleasant jobs would be less well paid. Basic Incomes would also make co-operatives and self-employment financially much more secure, and able to compete on more equal terms with the corporations which would have to pay acceptable levels of pay to retain their workforce."
He contends that even back in the 1930's governments had enough money to pay out a basic income for everybody. The trick is simple, just switch from creating money out of debt to creating it directly out of the assets of the state.
"If the reform I advocate is adopted, in the period of change from bank-debt-based money to state-created money the State will have adequate new money to spend, to fund generous Basic Incomes as well as a Green New Deal. Spent into existence in this way, it would enable the outstanding debts to be paid off, without needing further debts to be taken on, just to maintain the money supply."
I do not claim to understand how this alone would be enough for the funds to appear, though it seems clear that national governments are spending tremendous funds just on the interest to national debts. What he seems to ignore is the fact that much of this debt is caused by simple criminality. Rich individuals and corporations can easily avoid taxes by hiding funds in "offshore" accounts. Meanwhile, in a democracy it is verboten to raise taxes. It has nonetheless been calculated that if the US raised taxes just a little, they could easily pay off their national debt. But to even talk about more taxes is political suicide. And for good reason. The middle and lower classes are carrying all the tax burden already and are understandably reluctant to pay even more.
As it is, both government and advertising act as debt pushers and the average person in the West is heavily in debt. This makes the burden of taxation seem heavier than it already is. If there were a standard income, people would have basic needs covered and be free to work as volunteers, or to work in order to pay taxes and save their money.
"With a money supply circulating without the debt which accompanies its creation under the present system, people in general would be far better off, and able to pay tax. The financial industry would be severely restricted in its ability to drain the profits from the productive industries. Borrowing-costs, in the form of interest charges, would be far less, so prices should tend to fall as debts reduce, instead of rising."
In one video, Leslie cites a chart of the findings of one economist, who found that between half and three quarters of the price of everything we buy goes to debt payments somewhere down the line. If that is true, his points are valid when he says that the financial industry is a predatory leach rather than a productive industry, and when he predicts that prices would drop if we all went cold turkey on lending and borrowing.
From the point of view of a Baha'i, the most enticing prospect of standard incomes is the prospect of a more equitable economy. Even the competitiveness characteristic of our present work world, according to him, would be eliminated by a standard income.
"Basic Incomes, coupled with the reduced need to borrow, would tend to reduce the extremes between rich and poor. ... At the moment, the jobs that are most needed are usually badly paid. Some are also dirty, unpleasant or dangerous. At the same time, some of the least needed jobs are highly paid. With Basic Incomes it would give people the choice to accept or reject employment and this would mean that wages should rise for the unpleasant but needed jobs and the pay would be reduced for the easier, less needed jobs. The desperate competition generated by the present debt-generating money system would be ended by these reforms, and cooperative working should flourish. These would include: organic food growing, repair of goods and infrastructure, research, parenting, education, health care, etc. Many unnecessary and destructive jobs could be eliminated."
He seems confident that this measure could be adopted without changes to the present nationalist order, but I have my doubts. Too much money is flowing into the hands of the military industrial complex and organized criminals for this ever to happen without a major fight. In my opinion, it is likely only to be possible after the formation of a world government.