Sunday, December 27, 2009

A basic income for all

Despite moderate optimism on the economic outlook, there seems, however, to be a broad agreement that unemployment will continue to increase in 2010 and beyond. Apart from a minority of those unemployed who will find a job in line with their qualifications, the mass of unemployed will be divided in three categories: those that will have to accept lower wages for living below their qualification and education level; long term unemployed who will wait years before being employed; those, mainly over 50 who will never find a job. The main reason is that the crisis will lead to major restructuring of businesses; as a result of productivity gains the number of people made redundant will increase dramatically.

In this regard, traditional policies consisting of providing temporary benefits to the unemployed appear inadequate today. It is time to replace the old scheme with a new system which could yield huge benefits for the individuals as well as for the society as a whole. The idea of a Basic Income or Guaranteed Minimum Income is now gaining support in many countries such as Germany and Brazil. In substance, it aims to decouple income and work; as there are less jobs - but not less persons with their own needs and rights, governments need to find a way to distribute resources to people without a job. In its ideal form, a Basic Income is granted independent of other income (including salaries) , with no other requirement than citizenship. A Basic Income scheme aims to provide each citizen with a sum of money that is sufficient to live on. In some cases it is proposed in the form of a citizen's dividend (transfer) or a negative income tax (a guarantee) for citizenship. According to its supporters*, it has the advantage to grant to each unemployed the freedom to find an adequate job without having to accept unfair conditions for employment . But it is also seen as a powerful means to combat poverty and avoid economic insecurity (which is the main enemy of stability and democracy!) . However, critics have pointed out the potential work disincentives created by such a program, and have cast doubts over its implementability.

In fact, the idea of a Basic Income is an old one. It was put forward for the first time by the British political writer Thomas Paine as compensation for "loss of his or her natural inheritance, by the introduction of the system of landed property"(Agrarian Justice, 1795). It was an issue for debate among left wing parties for many decades. In his book Where Do We Go From Here: Chaos or Community? (1967) Martin Luther King wrote: "I am now convinced that the simplest approach will prove to be the most effective — the solution to poverty is to abolish it directly by a now widely discussed measure: the guaranteed income". In 1968, James Tobin, Paul Samuelson and John Kenneth Galbraith and another 1,200 economists signed a document calling for the US Congress to introduce in that year a system of income guarantees and supplements. In the US, a commission nominated by President Johnson published in 1969 a report which recommended to substitute all anti-poverty measures with a special program to provide to all American citizens an annual guaranteed income. It was not unconditional, as the income was dependent on economic needs. But the bill on a guaranteed income was rejected by the Senate after being approved by the Congress.

In France, there were many discussions in the 80s about the issue of a basic income on the basis of the arguments put forward by French economist and philosopher André Gorz** . He wrote:
"The connection between more and better has been broken; our needs for many products and services are already more than adequately met, and many of our as-yet- unsatisfied needs will be met not by producing more, but by producing differently, producing other things, or even producing less. This is especially true as regards our needs for air, water, space, silence, beauty, time and human contact...
"From the point where it takes only 1,000 hours per year or 20,000 to 30,000 hours per lifetime to create an amount of wealth equal to or greater than the amount we create at the present time in 1,600 hours per year or 40,000 to 50,000 hours in a working life, we must all be able to obtain a real income equal to or higher than our current salaries in exchange for a greatly reduced quantity of work...
"Neither is it true any longer that the more each individual works, the better off everyone will be. The present crisis has stimulated technological change of an unprecedented scale and speed: `the micro-chip revolution'. The object and indeed the effect of this revolution has been to make rapidly increasing savings in labour, in the industrial, administrative and service sectors. Increasing production is secured in these sectors by decreasing amounts of labour. As a result, the social process of production no longer needs everyone to work in it on a full-time basis. The work ethic ceases to be viable in such a situation and workbased society is thrown into crisis..."
In the 90s, many studies from different countries and institutions (notably ILO) have found common ground for the idea of basic income. The Basic Income Earth Network (BIEN) has argued that one of the benefits of a basic income is that it has a lower overall cost than that of the current social welfare benefits. Research based on local cases show that a basic income does not lead to the formation of an idle class nor companies offered lower wages. Simulations suggest that the budgetary cost could be sustainable in view of the fact that it would replace existing social schemes (unemployment benefits, early retirement schemes, etc.) that are often inefficient and costly.

In fact, there are different models of basic income support. Pro-free market economists Friedrick Von Hayek and later Milton Friedman worked on the idea of creating a minimum income for all citizens to become “public services buyers”. All services would come from this income. From a practical point of view, this proposal would be relatively easy to implement, but in practice, it would lead to the necessity of redirecting all government resources receipts to a single and universal provider. In possession of these resources, the citizen would decide which type of education, healthcare or food he would utilize; he would analyze costs and make the best choice. The idea of universal income derives in their view from the assumption that the State is inefficient at distributing resources efficiently, leading to wastefulness and deviations.

But this view must be challenged on the grounds of equity, not only efficiency. The basic income should not be seen as a means to dismantle the Welfare State. In times of crisis, such form of income support becomes essential to ensure economic security and avoid social chaos. Of course, this will not happen overnight; we still need feasibility studies, experimentation at local level, impact assessments and political discussions. In Germany, the left wing party, Die Linke has promoted the idea of an unconditional basic income at the level of a federal work community and it is gaining support from many NGOs, including from Austria and Switzerland.

European left parties - or what remains - should make similar proposals to their own electorate- as an alternative to proposed tax cuts by right wing parties- not for mere electoral reasons, but because mass unemployment is putting our democracies in danger.

* See the paper of Ph. Von Parijs from Catholic University of Louvain (UCL)
** A.Gorz, Critique de la Raison Economique Eds Galilée 1969

Friday, December 25, 2009

Healthcare reform: a victory for democracy

The Senate voted Thursday 24 December the bill to overhaul the US health care system and to guarantee access to health insurance for tens of millions of Americans. If the bill becomes law, it would be a milestone in the history of US social policy, comparable to the creation of Social Security in 1935 and Medicare in 1965. It is a historic achievement - after several attempts by Roosevelt, Kennedy and Clinton- putting an end to an iniquitous system where healthcare is mostly controlled by private insurance companies which provide coverage only to the healthy and those which can afford the high costs of the premium. The significance of the reform is that health is not a market good but a right, something which cannot be left to market forces for people most in need. Incidentally, the USA has one of the lowest life expectancy index among the wealthiest capitalist economies.

The reform should cover 95% of the population giving access to health insurance through public subsidies. The Congressional Budget office estimates that the bill would provide coverage to 31 million uninsured people, but still leave 23 million uninsured in 2019. One-third of those remaining uninsured would be illegal immigrants.

It is not meant to be a national health system like in most European countries. The funding mechanism is, however, complicated and expensive. The bill would require most Americans to have health insurance, would add 15 million people to the Medicaid and would subsidize private coverage for low- and middle-income people, at a cost to the government of $871 billion over 10 years.

The strong opposition of the republicans and right wing ideologists show how this reform is far reaching and limits the power of the health insurance companies. It is a victory for democracy and human rights.

Monday, December 21, 2009

Copenhagen is just the start of a process

Most analysts and press coverage talked about the failure about negotiations on climate change. Yet, the outcome of the Copenhagen summit was largely foreseen. It is true that too high expectations were placed on the talks. So what went wrong?

Climate change is too big an issue to be resolved at once. It is thus difficult to judge on the sole fact that the agreements were not binding- the Kyoto protocol was legally binding but had essentially no effect on the global emissions. We can also mention the (morally justified) protests of the third world countries. So let's be realistic.

This is an issue of balance of power in which the actions of 20 nations really matter. This is the first time in history that all leading economies had come together to take action on global warming. In its final declaration*, the Copenhagen summit did not reach an agreement on quantified targets on global emissions by 2020. However, it registered a number of key advances. The US administration (unlike the previous one) is now committed to curb gas emissions. There is some financing from rich to poor countries to help combat the consequences of global warming. Nations have also agreed on a deal on deforestation, which is a major source of carbon emissions.

The big developing nations - which will be responsible for future growth of gas emissions- have come close to acknowledge that there will be no solution without a contribution from them. We are not there yet- and there will no doubt be more fractious negotiations to come. The whole issue is about what model of development all nations want to pursue. China, India or Brazil cannot simply continue in their development path in a business as usual scenario- which is in fact not simply an imitation of the development model experienced by the most developed nations. We're also talking about meeting basic needs of the population such clean water, electricity (especially in rural areas) and other public utilities.

The time has also come to change direction. The major producers of carbon emissions - above all China and the US- should agree on introducing a carbon tax. This proposal has been dismissed as being politically impossible, but this seems to be the only way forward. China and India will never agree on binding quotas. That is fair as nobody can predict how much fossil fuel the rapidly growing economies will need by 2020. These economies should instead not grow on a business-as-usual path, but pursue their economic development while decreasing their carbon emissions.

Another key lesson from the summit is also the role of the UN. There has been a lot of criticism on its ability to solve the world's most pressing problems. Should key nations negotiate among themselves, and let others endorse (or not) as they wish? This would in my view be morally irresponsible: all countries should be part of the deal as problems should be addressed equitably. This is perhaps more difficult, as countries must, according to UN rules, reach a consensus before a binding decision is made. For a climate change agreement covering many complex areas, hundreds of negotiators had to meet in dozens of working groups to work on draft technical documents. But in the long run, the UN method will pay off and will prove its effectiveness in forging a treaty on climate change. This will depend on common will which should prevail against narrow and selfish interests of the single nations.