Unconditional Basic Income

An essay by Theobald Tiger

Do you know the feeling? You do something just for your own sake. Simply because it’s fun. Because you’re interested in it. Or because it represents a challenge. The best example: an author writes a story. A fashion designer creates a hat. A painter paints a picture. Then the other side of the coin: you carry out a particular task because you expect some advantage from it, for example, a reward, a salary, a profit, a return on an investment etc. Or because you wish to avoid disadvantages or a punishment.
Do we go to work in order to earn money, or do we earn money in order to work? While crisis follows crisis in the daily media, ECO123 is doing something different and, here and now, reflecting on economic utopias. Why shouldn’t we focus on the dream for a better world, for a happier future? What would a country and its people look like where thoughts, opinions and actions were free, where its citizens would no longer have to worry about their own existence? In the first part of our two-part series on economics, we are going to look at the unconditional basic income. This is about every citizen being provided with a specific sum of money every month irrespective of whether they go to work or not. Philosophers and economists have been arguing about this topic for over 500 years, and the associated question…

Does money make you voracious?

… or not? Can a society, a country, a state afford to pay an unconditional salary to every adult citizen, female or male, poor or rich, no matter what their race, religion or nationality? The question that this leads to is: would people still work if they didn’t have to work because they would, in any case, get – let’s put a figure on it for the sake of this article – €500 a month from the state? (Let us have your views at www.eco123.info)

People who are sceptical about the unconditional basic income are convinced that such a monthly payment would be unfair because it would favour the lazy ones among us and disadvantage the hard-working. And anyway, such a handout would be impossible to finance.

Is that true? Couldn’t countries like Portugal or Greece, Ireland or Spain or even the highly indebted USA, France, Great Britain or Germany not afford to pay an unconditional basic income (UBI) if a majority of their inhabitants wanted this? What would a UBI of €500 cost, and what would result from it? Firstly, it would make it possible for everyone to lead a life of dignity without fear for their own existence. The UBI would create the conditions for individual freedom and for self-fulfilment. No one would have to hire themselves out for a job that they didn’t even want. The result? A life without stress and with fewer debts.

Let’s go back in the history of the last two generations and turn the clocks back. Let us reflect on the current crisis scenarios. Today in crisis stories, there are news reports every day about a lost generation in Spain that can find no work despite being very well educated, and about people in Greece who can find no work who are shooting themselves because they have no more money to live off and have no idea how things are supposed to continue. Bank crisis, debt crisis, euro crisis. It’s been like this for seven years now. It appears not to be entirely clear who exactly is involved in the crisis: politicians, economists, banks, state budgets, all of us? Or could it be that everything is linked?

Journalist Phillip Laage*¹, who spent many months in Brussels during the EU crisis completing a voluntary traineeship and observing exactly what was going on, writes that, in his view, the crisis is not a European one. “In order to understand why the present economic and financial crisis will no longer stop, you have to analyse the innermost operating principle of the dominant worldwide economic system.“ It was about the rules of this order, he continues, from which all subsequent developments were derived. When this fundamental principle works and when it no longer works explains the rise and the presumed fall of the system.

Our economic system is based on the contradiction between the economic principle of profit maximisation, with declining resources and continuous population growth and the consequences. Profit as the difference between income and expenditure: an entrepreneur invests in something and gets more out at the end than he or she put in. It is about using the means of production in question – capital, labour, machinery, specialist knowledge, time, energy – as profitably as possible. That’s the way it was a hundred years ago, and it’s still like that today. The vendor on the fish market works according to this principle, the medium-sized wine producer, the hedge fund in Wall Street. No trader, entrepreneur or investor says: when I set all the income and expenditure off against each other, there will be a black zero at the end. Such people would be laughed at – and their companies would soon be taken over by a competitor.

That is the logic of competition in the market economy. It’s about producing better goods and services at lower cost and in a shorter time. Every company – whether in Portugal or anywhere else in the world – wants to make a profit. In that way, the value of all the goods and services that are produced increases, the gross domestic product (GDP). An increase in GDP signifies economic growth. Every business strives for the greatest possible profit. The economy as a whole strives for growth.

But let’s have a closer look. What does this economic growth look like after 50 years? It is exponential growth. Growth: that still sounds as though it’s mainly about prosperity. It sounds like the development of a society, in the end like life itself: because plants grow, trees and children grow (up) too. Why shouldn’t businesses and economies grow? Because it is a linear growth.

This answer is linked to the question as to how profit arises at the micro-level of growth. Let’s assume that Tesla produces 1,000 cars a month with 1,000 employees. At some stage, this company will buy robots that can assemble its cars automatically, that can even do precision electronic work flawlessly. (https://youtu.be/8_lfxPI5ObM,) The company will presumably lay off the 80% of its employees that it no longer needs to produce its cars. It doesn’t pay salaries out of the goodness of its heart. It is competing with Japanese and German suppliers (see our title story about the Portuguese electric car VEECO on page xy). Tesla has to cut costs. It acts in strict accordance with the economic principle. But what happens when the laid off workers can’t afford cars anymore because they only receive unemployment benefit? They disappear as consumers, as a source of demand. A company has to ask itself: who is going to buy our electric cars if we only need 15 developers, five designers and 180 workers to produce 1,000 cars a day?

What happens if there is a lack of purchasing power or if the market is saturated? If human labour can be replaced by machines and computers, the superfluous employees will be laid off – every business works in accordance with this principle. Or they have their goods produced in countries where wages are low. That is what has happened to industrial agriculture, to the textile industries of Portugal, Britain and Germany. Right now, the same thing is happening in industrial production with Tesla’s new battery factory in Mexico. The service sector is also developing in the same direction: Indian call centres are working for Vodafone and much of the European banking sector.

The industrial revolution among the weavers in the 19th, or in farming in the 20th and of computers and robots in the 21st century destroys more work than it creates. And our present economic system has no answer. This is where the contradiction begins. More and more work is taken away from humans: by machines, computers, robots. Work places fall victim to so-called technical progress in all professions. In parallel, the population is expanding fast: increasing numbers of people have less and less work. The question of distribution becomes more urgent than ever. Climate change and overpopulation do the rest. We are standing at the beginning of a change that will completely change our lives. That’s why there will be no end to the crisis either.

How will it still be possible in the 21st century to maintain the social state of the 20th century with unemployment and sickness benefit, child and housing benefit, student grants, pensions etc? How will it still be possible in 10 or 20 years’ time for the state to finance hospitals and bureaucratic monsters like the job centre and Portuguese state social insurance; where state employees “take it easy” from Monday to Friday compared to workers in professions in the free economy where every job that comes in has to be fought for seven days a week? Hasn’t the time come – if not now, then when? – for us to consider the unconditional basic income for all?

With decreasing volumes of work for humans there are lower and lower salaries, less purchasing power, less consumption, lower tax revenues, and increasing numbers of unemployed. The more industries can do without human labour, the more harm is done to the economy and to society. It is the great capitalist contradiction between the business logic of companies and the logic of economies as a whole: the closer each unit in the system gets to its inherent goal, the more the system destroys itself as a whole.

This contradiction is like a seed containing all the deformities of the present economic system. This contradiction explains the division of the world into so many poor people and so few rich ones, excess on the one hand, privation on the other. The story of this contradiction is more exciting than any thriller, it is the story of peace and prosperity, of exploitation and poverty. In the end, it is the story of humans as slaves of the modern to the point of overexpansion, at the frontier of the present where we stand today.

Because our system only works as long as there is enough new work and enough resources are available. Until recently, most people thought that things had to keep going like this with prosperity and growth at the expense of nature. The Italian scientist Ugo Bardi*² from Florence writes very vividly about the way in which the age of dwindling resources (crude oil, coal, gas, iron ore, wood etc.) is shifting people into a permanently increasing state of stress, of more and more people, who manage the economy according to the same principle and are increasingly unrestrained about exploiting our planet. An apocalyptic mood. In such circumstances, how can an unconditional basic income for everyone still be implemented economically?

(End of Part 1) … to be continued in the next edition.