Monday, September 19, 2016

Bill Mitchell — Is there a case for a basic income guarantee – Part 1

This is Part 2 in my mini-series on my version of the debate between employment guarantees and income guarantees. This discussion will form part of the Part 3 of my next book (with co-author, Italian journalist Thomas Fazi) which traces the way the Left fell prey to what we call the globalisation myth and started to believe that the state had withered and was powerless in the face of the transnational movements of goods and services and capital flows. Accordingly, social democratic politicians frequently opine that national economic policy must be acceptable to the global financial markets and compromise the well-being of their citizens as a result. In Part 3 of the book, which we are now completing, we aim to present a ‘Progressive Manifesto’ to guide policy design and policy choices for progressive governments. We also hope that the ‘Manifesto’ will empower community groups by demonstrating that the TINA mantra, where these alleged goals of the amorphous global financial markets are prioritised over real goals like full employment, renewable energy and revitalised manufacturing sectors is bereft and a range of policy options, now taboo in this neo-liberal world, are available. Wherever one turns these days, a so-called progressive pops up with a megaphone (conceptual) shouting that a basic income guarantee is the panacea for all manner of evil – starting back some years ago with unemployment and moving more recently, as that rationale was exposed, to the need to counter the expected ravages of the second machine age. As regular readers will know I am a leading advocate for employment guarantees. I consider basic income proposals to represent a surrender to the neo-liberal forces – an acceptance of the inevitability of mass unemployment. Further, the robot argument doesn’t cut it. Anyway, in Part 1 – Work is important for human well-being – I considered the need to broaden the definition of productive work. I also emphasised the importance of an on-going availability of work for human well-being. In Part 2, we sketch the arguments that have been advanced to justify the basic income proposal and find them inconsistent, illogical and deficient.
Bill Mitchell – billy blog
Is there a case for a basic income guarantee – Part 1
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia


Random said...

This is delusional stuff. In the UK there is little change of BIG or JG. Same anywhere with a right wing electorate. Conservatives already have "workfare" they are happy with and will probably not provide support for JG.

As Neil's recommendation on Medium "S Wilson" says:

"The Conservatives went on to win a working majority in the UK Parliament election of 2015, even after Chancellor Osborne had introduced the controversial restrictions to Child Benefit in 2010 and 2013. The Labour manifesto heading into the 2015 election made no undertaking to re-establish a universal Child Benefit on the Barbara Castle model.

If a political movement cannot win a working majority on the principle of a universal basic income for the most helpless in society, how can the proposal be won for those who are considered able to help themselves?"

Let's talk practical stuff first, like politics.

In the past two dozen years both conservatives and new labour have provided a massively generous tax free far-from-basic income for landlords and homeowners cashed in via remortgages in Southern England only:
«In 2001, the average price of a house was £121,769 and the average salary was £16,557, according to the National Housing Federation. A decade on, the typical price of a property is 94% higher at £236,518, while average wages are up 29% to £21,330»

That is an average of North and South, so more than that, but screw it we will take it as it is.

This means that in those 10 years landlords of average UK 2-up-2-down terraced houses (including a recession, and is more than that) have enjoyed a "basic income" of (usually) tax-free capital gains of around £12,000 per year (£200 per week), on top of £14,000 after-tax average earnings, all thanks to a bubble of unlimited credit arranged by various governments who have been very popular as 60-70% of voters are property speculators. To the point that the current one have decided that their main vote-buying strategy to support their core southern voters is to reward those core voters with another massive round of credit fueled property speculation in the South, and damn the losers in the North and the celtic fringe.

This "basic income" of £12,000 a year has also been a purely regressive income redistribution from people from less property to people with more property.

In other words, a form of "basic income" is reality that has been happening for decades, and the average UK voter is a property speculator who has been very satisfied with making a large additional "basic income" squeezed from people poorer than themselves, and wishes that those people poorer than themselves had lower wages and a higher unemployment rate so that landlords would find cheaper hired help.

Thus it is not just striped suit wearing capitalists as in but also most UK voters who want to drive down their costs, as many of them are more invested in property than labour, especially of course if they are retired wannabe ladies of the manor, whose aim is to soak the poor and murder children for personal gain.

Bob said...

A future job guarantee may well take the form of work camps and army conscription. In the meantime there is ISIS.

Bob said...

I understand the necessity of advancing the academic arguments for a JG, regardless of their reception by the elites and the public.

Unknown said...

I think Bill's argument breaks down when he justifies the case against a BIG by stating that "Work is important for human well being" Having a BIG does not mean that the person getting it will remain "idle" - it is just that they will find things to do for themselves and the society around them. Why does it have to be "a job given by somebody else?" Why does it have to be a job "for pay"? All of that goes hand in hand with a JG - a very patronizing approach IMO which basically says that the elite knows best about what the "hoi polloi" should be doing.

Andrew Anderson said...

Thanks Unknown. I get tired of repeating what you've just said - about the endless, nonsensical conflation of work with being a wage slave; as if one requires the other.

Matthew Franko said...

You would still have to pay productive people a lot more than the BIG to make sure the work got done... which then you would still have your "class" thing and "inequality" thing as those productive people would make a lot more than the BIG people....

So you cant advocate for a BIG and be a part of the Picketty brigade at the same time.... its one or the other... if you are for a BIG then you cant complain about "inequality" as is all the rage now either...

Unknown said...


Neither the JG or BIG have any impact on inequality. Inequality primarily comes from taxation policy (mainly income tax) - as is clearly shown in the Saez and Picketty data sets.

Calgacus said...

Unknown: I agree that some of Bill Mitchell's arguments are not the most convincing. But you (& AA) have it backwards.

The UBI / BIG is the tyrannical, top-down, patronizing, "elite knows best" approach. The JG is the democratic, libertarian approach that empowers "hoi polloi".

The fact that the UBI / BIG involves MONEY answers your questions. Sure - a non-monetary "UBI" is workable - that's much of what governments do. The best things in life are free public goods. But that is not what the deluded UBI / BIG ers mean.

Unknown said...


In a sense I agree with you. However, there are three things that should be granted as a citizen's right and covered by a UBI - food shelter and clothing. How you cover those is a policy matter, and as you state, the compensation need not be monetary. Once these essential needs are met, the rest can be covered by a JG/Market. Anything else results in wage slavery at the lowere income levels.

Neil Wilson said...

"Why does it have to be "a job given by somebody else?""

If things self-organised, then there would be no need for a Job Guarantee or any other form of state intervention in the first place.

There is no more chance of 'laissez faire' providing things for everybody to do than there is in the system 'clearing' to provide everybody with a private sector job. It just doesn't happen or it already would have. After all you just 'start a business' and magically you'll have a sustainable income - not.

There are already millions of people on the level of support proposed for Basic Income with no possibility of obtaining other work - because the basic Says Law clearing structure does not operate as the mainstream suggest. The labour market matches people to tasks. Ultimately at some point you have to have something that matches tasks to people and gets those organised if you want to deal with the Scourge of Idleness.

So once you are doing something anyway, then we organise it so that you do something that shows your participation and that you enjoy doing, something that others consider useful, and then you get paid for it.

And it has to be organised or there won't be sufficient things to do so that everybody can show that they are participating.

This is all basic Beveridge stuff about creating sufficient liquidity in the Labour market so that it is a Seller's market.

UBI people are laissez faire individuals who believe in a free market in things to do. That is as much of a delusion as any other free market belief.

Neil Wilson said...

"However, there are three things that should be granted as a citizen's right and covered by a UBI - food shelter and clothing"

And who are you going to force to work creating housing, food and clothing to give to people who have provided you with nothing in return?

Taking output from people with no return is the reason aristocrats ended up with their heads on spikes, and the reason communist states failed. It cannot stand and humans will not accept it. We expect reciprocation.

Ultimately you have to do something unless society's strictures have exempted you by reason of age or infirmity. So if you have to do something anyway, then just pay that something at a living wage and all is sorted with minimum change.

Not only that but you maintain your spend side auto-stabiliser, can pay out a wage that is five times any basic income amount proposed so far, and you have much lower tax rates. So you don't trigger psychological loss aversion either by giving somebody something and then taking it away again immediately.

It's pretty clear to me that there is a psychology element here. Those who believe in UBI really do believe that the world owes them a living. And clearly that attitude will have to be heavily defeated in the polls before the message sinks in that the rest of the world doesn't believe it owes you a living. You have to show you have earned it, and you have to show that first before you get anything.

Neil Wilson said...

"Neither the JG or BIG have any impact on inequality."

Yes it does. It changes the labour market from a buyers market to a sellers market. And that makes all the difference in the world because at that point the profit share has to compete rather than extract. The parasite economy collapses.

Picketty is just another New Keynesian pushing the tired old argument that you need to clobber the rich because - reasons. Finding new ways to tax the rich does nothing to affect their power over the world. It just puts their back up.

Which appeals to the mindset of those who believe the world owes them a living, and that they have a right to steal resources from others without doing anything in return. Which amusingly enough is precisely the attitude of the 'rich' they apparently despise.

JG and wage policy in general increases the amount of output produced - all of which is allocated to the lower end. Trickle down is adjusted to bottom up. It pulls the bottom up without any real need to pull the top down.

Calgacus said...

Unknown, glad you agree. But most pro-UBI / BIG ers - like AA - are extremely confused & believe that money and a basic income have magical properties.

There is not the slightest question that a monetary UBI would wreck any modern society in magically short time. Ordinary people would keep working, sure - much harder for much less reward. And those on top would make out like bandits.

Full employment, the JG has a great and positive impact on equality. Clearly shown worldwide in the postwar era. That's one of the reasons the bad guys hate(d) it so much. Tax rates, not so much. Capitalists get what they spend - including on taxes, for without full employment, government spending is directly to them, or in their control, or ends up in their oligopolistic hands.

Matthew Franko said...

Neil says: "And who are you going to force to work creating housing, food and clothing to give to people who have provided you with nothing in return?"

You wont have to force them you have to pay them so they make a lot more munnie than the BIG... so they would get the BIG and maybe double that with what they make working or perhaps more...

But then you get "inequality!" so you have to get off the "inequality!" band wagon... and then the "class" people would be seeing "classes" develop and have a shit-fit so youd have to give up on the whole "class" thing too...

Unknown the Saez/Picketty stuff doesnt even consider Transfer Payments so even if you gave everyone $1M BIG via a Transfer Payment then they would still have to think everyone was poor... they are politicians and unqualified for working in this area...

Neil Wilson said...

"You wont have to force them you have to pay them so they make a lot more munnie than the BIG"

It goes beyond the munnie argument.

Ultimately a spending chain including output from the recipient has a larger pool of output goods/services than a spending chain including no output from the recipient.

So the munnie is worth less in real terms - more of it, smaller pool of output to spread it across. Essentially not only did the BIG recipient get goods/services created by others by they got to keep anything they create themselves as well if they want to.

It's the same process you get with the very wealthy, and is the reason they are resented too.

Andrew Anderson said...

"And who are you going to force to work creating housing, food and clothing to give to people who have provided you with nothing in return?" Neil

As if paying people to waste their time does anything but destroy goods and services as well as human morale and dignity.

Meanwhile, according to Neil, it's good to FORCE the poor to lend to depository institutions to lower the borrowing costs of the rich, the most so-called credit worthy.

Pious hypocrisy much, Neil?