Does money make you happy?

Part 2) by Theobald Tiger

How do we regard Portugal and the world in this context, when we investigate the situation of people? Do we have the impression that our society and our governments constructively promote the abilities of the individual? If we talk about the unconditional basic income (UBI) and imagine that we would be able to live without material need in the future, that would be a building block for the promotion and the basis of what people need to be able to develop more freely: in education, in experiencing cultural and ethical values such as compassion, friendship and human happiness. In the second part, ECO123 discusses whether every individual should receive an unconditional basic income from the state of at least 500 euros.

As far as the economy is concerned, those in favour of the unconditional basic income (UBI) argue that more than half of European citizens in the modern welfare state are already dependent on the incomes of others or on benefits: unemployment benefit, social benefits, student grants, pensions etc. Owing to the fact that society is getting older, they say, this situation will continue to intensify. At the same time, the need for labour in industry is falling structurally through ongoing processes of rationalisation. But let us have a closer look at the developments of the last 50 years.

Today, the world economy is slowly waking up, as if from a wonderful dream. Because the crisis is a crisis of growth. If you look closely, return on capital of businesses in the western market economies has been falling since the mid-1970s. We are investing as much as before, or even more, but the profits are no longer as high. Through diminishing marginal returns, the incentives for investments recede. This has negative consequences for the economy as a whole. 1973 was the last year with full employment in all OECD countries. Since the start of the 1980s, people have also been asked about their emotional well-being. Despite unlimited new offerings for consumption, they are not becoming subjectively happier.*¹

The fundamental principle of our economy is: efficient utilization of capital, maximisation of returns. Money is supposed to flow to where it increases most quickly. Through the expansion of credit, indebtedness is growing globally. Since 1973, the USA has been continuously importing more than it exports. The massive inflow of capital allows government debt to continue growing, to more than 18 trillion US dollars in 2015. The debt clock never stops ticking. (http://www.usdebtclock.org)

The incredible thing about the so-called financial market, about loans and their bundled securitization is that the financial products are worth no more than the paper they are printed on: no more than the claim on the computer, than the promise they bear that the loans will be repaid at some stage, which sooner or later can only be done with new loans. The volume of credit is no longer limited by real commercial success, but only by the extent of future expectations. People are placing a big bet on value creation and growth that will only come about in the future. Investors act with expectations as if these were goods and services that really exist. This growth, which until recently was still based on fossil fuels, has been essentially hollow since Peak Oil at the end of the 1970s, and one bubble simply chases another.

The potential for profits on the virtual financial markets hides the fact that a fundamental innovative boost to the real economy is overdue, a new industrial revolution that would provide people with jobs in large numbers. The boom on the financial markets conceals the stagnation of the world economy with falling growth rates. Real value creation is leveraged into something abstract. It is about creating “money from money”, about “letting money work for itself”. The fundamental pattern of these crises is always the same. At some point, investors notice that there is too little real value underlying specific promises of payment. The ground slips away from under the speculators’ feet. The consequences are always similar: capital outflow, credit defaults, bankruptcy, recession, unemployment. So far, no one has stopped the speculation.

Who does the earth belong to?

Money that is chased around the planet on the basis of greed, envy and excessiveness, which create the breeding-ground that enables an employee of a small service company with a salary of €750 a month to buy an apartment in Lisbon in 2008 worth €150,000 completely on credit. The bank even lends him €180,000, after they manipulate the value of the apartment upwards. In 2010, after the real estate bubble burst, the employee may still own his apartment but its value had to be “rectified” downwards. In 2015, the same apartment that he bought on credit in 2008, is only worth €80,000. That’s what the market’s like, the credit adviser tells him, shrugging his shoulders. In the meantime, the bank put the apartment up for compulsory auction because the employee, who was now out of work, could no longer pay the instalments on his loan. He now lives in an English-speaking country. The debts of private households, but in particular government debt in the USA, in Europe and especially Portugal have grown astronomically in the meantime.

Capital in the form of receivables and debts is simply moved around. A perfidious cycle comes into being. States get into debt with the banks in order to rescue the banks that are themselves highly indebted. In the course of time, this becomes increasingly expensive because the growing government debt levels mean that the countries’ creditworthiness falls and the interest rates go up. With the states’ aid money, the banks are intended to buy government bonds, in other words loan money to the countries, so that their governments can borrow money more cheaply i.e. at lower interest rates from the banks. An absurd business.

The 5,000 year history of debt*² has shown that there are only four ways of reducing debt: through a “debt haircut”, through economic growth, through inflation and through revolution. A worldwide debt haircut would mean that every creditor standing behind a loan would waive his claim. The consequence would be the global bankruptcy of banks, insurance companies and all other major institutional investors, in principle a crash.
Inflation would produce a similar scenario. So there would just be the old recipe: economic growth. The hope of being able to “grow out of debt” because the burden of debt falls in relation to economic performance. David Graeber writes that every coup, every revolution begins with debt, when a society can no longer pay…

Twilight of the gods.

According to Ugo Bardi,* there is every reason to believe that there are simply not enough resources on the earth any more. The rise of the western industrialised nations is based on the exploitation of natural resources that are no longer available to humanity (in the emerging economies too) on the same scale. Added to this are the consequences of climate change and the strain on the environment. The struggle for the raw materials that are still available has already begun. Until today, one of the biggest questions facing humanity in the 21st century, about the path towards a post-fossil society, remains completely unanswered.

Today, experts prefer to argue about the date of Peak Oil and the amount of petroleum extracted, which is falling slowly but surely, than to think about alternatives. The worldwide transport system and globalised trade are based almost exclusively on petroleum or natural gas. One of the few people who do think about this is the Briton Rob Hopkins. The futurologist, environmental activist and founder of the Transition movement sees the solution in a worldwide local network of ecological agriculture that makes the European transatlantic free trade agreement TTIP unnecessary and favours short transport routes.

When the financial crisis hit in 2008, a crisis began that confronts our whole economic and social system with an unsolved problem: by no means everyone has to work for goods to be produced. Progress systematically destroys human work, because in the microcosm of a company, work is a cost factor which is eliminated when there is a cheaper alternative. So, why not pay all citizens an unconditional basic income and cut out all social payments such as unemployment benefit, pensions, student grants, child and housing benefits?

Contradictions in business and economic logic can no longer be resolved. In all economic sectors, sophisticated computers, telecommunications, robots and other technologies of the information age are replacing human labour at lightning speed. The hope that jobs lost in industry would be replaced by jobs in the service sector proved to be unfounded. The current world population of 7.3 billion is in the middle of an upheaval on an even greater scale than the industrial revolution. Work will disappear in the long term, at least for a large part of the population.

According to the American thought leader Jeremy Rifkin*³, soon only 20% of the population will have to work in order to satisfy global demand. 80% will have to be kept busy with “bread and circuses”.

The work society, which was supposed to make it possible for every individual to lead a decent life, is dying out. In Portugal and in other countries in Europe, large sections of the middle class have been sliding into poverty since 2008. This is but the beginning of a development that will become more pronounced in the coming years. Less and less work will be divided between more and more people. The slices of the social cake are becoming smaller and smaller. People in Europe who only now are on the verge of a future that will completely change their lives, are already feeling this pressure. Professional and family pressures are growing. The ones who have less education get no kind of work at all any more. Those who still manage to find a job have to work longer and harder, and they get paid less, get less social protection, have less pension entitlement and no recognition. The ones who are highly educated leave Portugal and head for Britain, Germany, Luxembourg, Switzerland, the Arab Emirates. Smart, clever people do not have to fear poverty perhaps, but they fight to maintain the welfare of their families. They fight against their own expectations, against their personal failure, against the accusation of not having made the most of their opportunities. In the process, the unscrupulous make their way through the hierarchies to the top. The sensitive ones fall by the wayside and wonder why the world has become so difficult.

The people at each end of the scale have one thing in common: they accept the increasing pressure they have to bear as given, as a general condition. That’s life, they say. Economic power knows no culprits. But perhaps, right now, we are living at a critical moment, which enables a paradigm shift to occur and the unconditional basic income to come into being. As long ago as 1516, Thomas More first started a discussion about the UBI in his book “Utopia”. Many thought leaders and philosophers have since taken up the topic, such as Charles Montesquieu, who wrote in 1712: “The state owes all its inhabitants a secure living, nourishment, suitable clothing and a lifestyle that does not harm their health.”

John Stuart Mill also commented positively about the unconditional basic income in 1869 in his second book, entitled The Principles of Political Economy. He saw the striving for growth as an obsession. Erich Fromm too argued in 1955 for a basic income that was not dependent on work in his book The Sane Society, justifying this with the right to turn down a job for personal reasons without having to suffer hunger or social ostracism.

We watch daily as the political leaders of Europe regularly come together in Brussels. One meeting follows on the heels of another. In despair, they seek an end to the crisis about Greece. They try to “save the euro”, but actually they just want to prevent a loss of confidence in the unsecured financial system. Politicians in Portugal and in Europe conceal the true problems of the crisis. Why does politics hold on to the existing system so tightly? The answer is quite simple. There are informal meetings of representatives of politics, business and the media, the circles and stages of power, opportunities for influencing important political decisions. An appropriate reaction to the challenges of the world economy would mean daring to change the system completely. But no one who has benefited from the current system has an interest in that: the economic elite who make yet more money from their money, and can by real goods with it.

Of course politicians fear the chaos that would result from an uncontrolled collapse of the economy: a credit crunch, recession, insolvencies, unemployment, a collapse of the social systems, massive losses of welfare. A collapse with unforeseeable consequences: wars.

The globally dominant economic system only functions as long as more jobs are created than are lost. There is no industry of the future in sight that will provide work for people again in huge numbers. Our capitalist economy is tuned for growth and has so far found no answer to this. Neither is natural, steady economic growth possible any longer. The financial market super-bubble, which has been dragging this problem around with it for almost 30 years, is likely to burst soon. The central banks are still delaying the final loss of confidence in the monetary system a little.

The market-liberal assumption that, for example, profits on the financial markets help the economy or that lower salaries stem unemployment, have turned out to be false. Despite that, the old economic elites and the politicians cling on to the system while the middle classes lose their prosperity and poverty returns to the “rich” west. The message sold to people by the media is that there is “no alternative” to this situation. But soon it will be a historic necessity to start thinking about alternatives. For the 21st century, there are several questions.

How can unsecured financial assets be removed from the economy without it collapsing completely?

What sort of economic system functions without permanent growth?

What would a dignified society look like where a large part of the population no longer had to work?

With this crisis policy it is unclear how long it will take for a chain reaction to start. Uncontrolled bankruptcy of the Greek state could trigger the crash. Even if it were possible somehow to cut the unsecured financial instruments and thereby the debts in a controlled manner – without a collapse of the economy, without social unrest and civil wars – the long-term question would still be unresolved.

What sustainable system of production and distribution would enable people in a post-work society to live in dignity and peace? The answer leads much further that to new drafts of economic and political systems. It is a question about the essence of humanity. Perhaps we can still manage to create a fair, sound but simple tax system, which makes those people pay who live beyond their means and rewards those who live within the limits set by the 1997 Kyoto protocol. Kyoto says that every European citizen is entitled to not more than 3,000 kg of CO² emissions per year. Furthermore, money should return to being what it is, a genuine medium of exchange for goods and services. One day, our grandchildren will ask us: what did you leave us descendants apart from rubbish?

Do we want to make the effort or bury our heads in the sand? We could put values such as compassion and solidarity at the heart of an ethical economy, which would be based on ecology. Perhaps people will then turn to needs that go beyond consumption, that serve people’s inner growth and personal development. Perhaps we will then devote ourselves more to the things in life that do not disappear once we have used them up, but only start to grow and multiply through being shared: love, reason, imagination.

With the creation of the unconditional basic income for every citizen in Portugal, in Europe, or on the planet, we will motivate endeavours to do something for our own sakes and not (only) to ask about the returns when the issue is investments. But just because it is fun, because it satisfies people’s interests, or because it represents a big challenge for us. The best example: an author writing a story.