Free money for everyone?

Everyone should be rich

“No whining, everyone should be rich, vote Opposition Party, together for ourselves.” The Opposition Party was a fictional political party in the Netherlands run by two dubious characters. The creators of the fiction, Van Kooten and De Bie, intended to mock populist politicians. An opinion poll revealed that if the Opposition Party had been for real, it would have fetched a few seats in parliament in 1981. Why can’t everyone be rich? Maybe it is because poor people haven’t enough money.

Perhaps everyone should get some money for free. This is called a universal basic income. Nowadays most people make money by doing a job. That is because without people working nothing will be done and nothing will be made. This has been true for as long as humans exist. On the other hand, there may be more people than needed for the work that needs to be done. This has also been true for as long as humans exist.

Pointless jobs

For most of history people worked only a few hours per day on average. This changed with the Industrial Revolution. Idleness became frowned upon as factory owners promoted the belief that everyone has a duty to work long hours. Nowadays many people do jobs that do not contribute to making products or services people need and also do not benefit society. And a pointless job can make you unhappy, or very rich.

Executing a job, whether it is useful or not, uses resources. People drive in cars to offices which are heated or air-conditioned. If a pointless job consumes materials and energy that are in short supply, or pollutes the environment, there is a compelling reason to axe it. It may even be better to give people some money to remain idle. The anthropologist David Graeber estimates that at least a third of all jobs are pointless.1 There is no good measure as to determine which jobs are pointless.

For instance, Graeber mentions the job of a receptionist at a publisher. The receptionist had nothing to do, except for taking up an occasional telephone call. Another employee could easily have done this alongside other tasks, but without a separate receptionist no-one would take the publisher seriously. Graeber contends that the best indication of a job being pointless is when people who do the job themselves believe it is.1 Only, without a receptionist the publisher may have gone bankrupt, so the job may be important.

A game of Monopoly

Wealth is becoming increasingly concentrated. The super rich have increased their share of global wealth in recent decades. Whether or not it was at the expense of the rest is a matter of political debate. To keep the economy going and to forestall a catastrophic economic collapse, there may no be no other option than to make the rich hand out money to the rest, either via negative interest rates on their debts or a redistribution of income, for instance a universal basic income. To see why, one can think of the capitalist economy as a game of Monopoly.

If you have played Monopoly, you may have observed that at first players build capital in the form of houses and hotels. You can get rich by making the right investments. There is also an element of luck involved. The game ends when most players are bankrupt. The game can be extended by letting the rest borrow money from the winners. The winners can enjoy being rich while the rest can stay in the game. Of course, the rest can never repay their debts. The players could stop pretending and let the winners hand out money to the rest so that the game can continue. That might happen via a negative interest rate on the debts or taxing the houses, streets and hotels, and giving this money to the losers.

monopoly1935

The alternative would be to start from square one, or more precisely, remove all the houses and the hotels, and start a new game. That might be fun for a game but in the real economy this would be a horrendous disaster. Imagine all the houses, roads, and factories gone. There would be nothing to buy and everyone would be poor. Economists figured this out long ago. The famous economist John Maynard Keynes thought that the state should borrow money from the winners and spend it so that the rest would be employed and have some money to spend so that the game could continue.2

Keynes’ plan did get a lot of attention and that’s why he is so famous. His followers are called Keynesians. Other economists weren’t so pleased. Governments could now justify lavish spending by borrowing money from the rich to spend it on public works or lower taxes, leaving a debt to be paid by future generations. Keynes also advised governments to reduce spending when the economy is doing well,2 but this rarely happened.

If there is no starting from square one, the rich are getting richer while the rest isn’t getting ahead. And the state borrowing money from the winners can make things worse as interest must be paid. In this way everyone ends up paying taxes to pay interest to the rich. This could become a huge problem in the long run but Keynes wasn’t interested in the long run. “In the long run we’re all dead,” he said. Now the long run has passed and Keynes is dead.

The game of Monopoly has a bank too. The bank is a magical source of money. Every time you finish a round, a fixed sum is given to you. That is great for a game. If it wasn’t for this everlasting fountain of money, the game would have ended after a few rounds. Monopoly already has a universal basic income and it can help to keep the economy going. But adding money to the real economy can make money worth less. If people have more money, prices often go up as there is more money to buy the same stuff.

For example, if everyone craves for that latest model mobile phone, producers can raise prices, unless people run out of money and can’t buy them. In a game of Monopoly the prices of rents are fixed but the prices of streets may rise. If you want to buy a street from another player when there is a lot of money in the game, you often pay more than the initial price. The rich may end bidding up prices of streets. In the real economy the prices of assets like stocks and real estate are rising.

Realising our full potential?

The proponents of a universal basic income tell us that it will all be fine and dandy and that we will be free to realise our dreams. If you always wanted to become a blogger or a vlogger, you can become one with a universal basic income. That is because you don’t have to work for a living.

The opponents of a universal basic income paint a dismal picture of people sinking into an abyss of idleness filled with writing blogs nobody wants to read and making videos nobody wants to see. A job can make you feel useful. And there must be a compelling reason to do unattractive jobs, otherwise they won’t be done, they argue.

Many countries already have benefits for people without a job. Unattractive low paying jobs are often done by immigrants who don’t have access to those benefits. Nevertheless, if there is an income guarantee, people will only do a job if it benefits them either emotionally or financially. In other words, jobs have to be attractive.

In the distant future we may not work any more and entertain ourselves inside our own virtual realities. This may mean that everyone is provided for and has little or no material needs and money has become meaningless. If this is to happen, we may need a universal basic income. But that may still take a while.

Machines taking over?

In the future machines may become better than humans at most jobs. Until very recently only simple tasks have been taken over by machines. This already put a lot of people out of work. The surplus of workers could be employed in the government and the service sector. Machines in the future can do much more. Self driving cars may replace human drivers and cause fewer accidents. Robots can care for the elderly and this could be an improvement as robots don’t have moods. Computers will be better at diagnosing diseases and robots will be better at operating patients.

Few professions appear safe from the coming onslaught. Economists tell us that robots will create an ample supply of new jobs for humans, for example programming and maintaining them, but that may be wishful thinking. There is however one big problem blocking progress, or our descend into the abyss of idleness if you like. If people lose their jobs they also lose their income so that they don’t have the money to spend on the products and services these machines produce. Progress may halt because of that.

And perhaps there will be a lack of energy in the future so that the opposite happens. Production may have to be decentralised and human labour may be going to replace machines. If humanity is to curb its energy and materials use in order to deal with the limits our planet poses on our activities, the need for an income guarantee might not materialise, because more human labour is needed, even when the resource consuming pointless jobs are axed.

The labour market

If there is an income guarantee that is sufficient to live off, people don’t need jobs. In that case there may be no need for minimum wages. In this way people can do a job cheaper than machines if they really like to do it. And so humans could still care for the elderly in the future while robots could do the heavy lifting. And that may be good because when humans do jobs because they like to do them, and not because they need the money, they may have better moods. Compared to existing welfare schemes, there is more inventive to work as people gain more from doing jobs financially.

That sounds great. And perhaps it will work out this way. An income guarantee can improve the bargaining position of workers. It might lead to the following situation:

  • unattractive jobs that machines can do will be done by machines;
  • unattractive jobs that machines can’t do will be paid well;
  • attractive jobs that machines can do will be paid poorly as there will be volunteers;
  • attractive jobs that machines can’t do will be done by humans, but it is hard to predict how these jobs will be paid.

Obstacles on the way

There will be obstacles on the way. Some of them may be hard to predict as they will emerge once the income guarantee has been introduced. A few questions can be raised already. For instance, does an income guarantee make people fill their time with idleness or does it give them the possibility to realise their potential? And does society benefit from that potential realising? Perhaps we have too many artists already. Perhaps giving people money for free isn’t such a good idea after all.

A better alternative might be to combine an income guarantee with a duty to look for a job. This is currently done in Denmark. The Danish labour market is flexible. That makes it easier for companies to adapt their workforce to market requirements so the level of employment is high. The lack of job security is offset by employment security, education schemes and generous unemployment benefits.

An income guarantee may require high taxes. Taxes is Denmark are high but incomes are too. If machines are to replace human labour, other sources of taxing may have to replace the income tax. It may not be desirable to allow people to be idle as a job can make people feel useful. An income guarantee may not work if the wealthy don’t pay for it. In a game of Monopoly the winners must hand over money to the rest to stay in the game. This may be done via wealth taxes, but also via negative interest rates.

It may still be a good idea to introduce a universal basic income for the poorest people in the world to be paid for by a global wealth tax. The poorest may already benefit from a small amount of money like one euro per day. Putting more money in their hands, may improve the economy of developing nations. NGOs could distribute the money. If one billion people were to receive this allowance, it would cost 365 billion euro per year, a pittance compared to what is currently spent on weapons and wars.

Featured image: De Tegenpartij poster. Van Kooten and De Bie (1981). [copyright info]

Other image: Monopoly game.

1. Bullshit Jobs. David Graeber (2018). Simon & Schuster.
2. General Theory of Employment, Money and Interest. John Maynard Keynes (1936). Palgrave Macmillan.
3. Danish Employment Policy. Jan Hendeliowitz. Employment Region Copenhagen & Zealand, The Danish National Labour Market Authority (2008). https://www.oecd.org/employment/leed/40575308.pdf

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