Unconditional Basic Income

A Basic Income Detached from performance for All Citizens Without Exception (?)

An Article in the Compendium of Market-Based Social-Ecological Economics

Key issues in view of the neoliberal crisis:
How can we guarantee employment and fair income?
How can we protect the environment effectively?
How should we shape the economic globalization?
What should the economic sciences contribute?
What must be the vital tasks of economic policy?
How can we legitimize economic policy democratically?

Click here for the list of all articles: Compendium
Click here for the German-language version: Bedingungsloses Grundeinkommen

Table of Contents

  1. Overview
  2. Introduction
  3. Motives for the Demand
  4. Critical Assessment
  5. The Complementarity of Human Work
  6. The Economic Consequences
  7. Conclusion

1. Overview

The demand for an unconditional basic income for all citizens is born partly from the increasing unequal distribution and poverty, partly from political protest against the existing economic order. In any case, it is an economically and socially ill-considered, even counterproductive demand. For it distracts from the actual economic causes, which must be overcome on the way to a sustainable economic order geared towards full employment.

2. Introduction

The term »unconditional basic income« is used to describe a fictitious, state-financed permanent benefit that is intended to accrue monthly to all citizens without exception and that is supposed to approximately correspond to the amount of the applicable minimum subsistence level. The demand for it is mainly raised by representatives of the »left« political spectrum, but is also gaining supporters who represent other political convictions. As the name suggests, the payment is not meant to be linked to any conditions, not even to the amount of other incomes. Apart from age-related gradations for children, all citizens should be entitled to receive the same amount without exception.

3. Motives for the Demand

The motives for the demand are clear: First and foremost it is postulated that the labor demand for dependent gainful employment is strongly declining because of increasing industrial productivity and that it’s about time to redefine the concept of labor. The material existence should be secured by means of a state-financed basic income to give citizens the freedom to engage in self-determined activities in the social, cultural and ecological fields, i.e. activities that don’t serve to secure the livelihood. In ideologically exaggerated terms, some advocates even call for »overcoming the exploitation of dependent workers«.

4. Critical Assessment

The demand for an unconditional basic income is to be criticized from a social, economic and ultimately also from a cultural point of view: Such an income would enable citizens to turn their backs on the community of solidarity at any time at their own discretion and without necessity, even without contributing their part through voluntary activities. Those of the population who would still be engaged in gainful employment would lose their motivation to secure the livelihood of those who consciously choose not to make a solidarity contribution. The overall economic equilibrium including the financial basis for the basic income would soon go astray as a result of social tensions, and economic decline would be inevitable.

Moreover, there would be a devastating influence on children, especially those who grow up in families living exclusively on an unconditional basic income. The first generation would already lose any sense of social solidarity, economic value creation and self-reliant livelihood. Today’s »Hartz IV family« (a term used in Germany for families living on social benefits), which is a widespread social phenomenon caused by underemployment and unemployment under the neoliberal economic doctrine, would be granted the status of a politically intended normal family.

For the working population, the basic right to participate in economic life freely at any time and to get a fair share of the economic outturn, supplemented by the obligation to secure one’s own livelihood, would be undermined by a right to idleness. The complementarity of gainful employment on the one hand and voluntary as well as family work on the other, which is indispensable for society, would lose its mutually stimulating effect. For children, the right and obligation to school education, which prepare them for the rights and obligations of adult life, would be disparaged by the bad example of beneficiaries of an unconditional basic income, and education would be declared an exercise left to their own discretion, the significance of which would have to remain hidden to them for the rest of their lives.

It should be noted that the basic right to participate in economic life freely at any time is enshrined in various supranational human rights declarations, but unfortunately and incomprehensibly under the term basic right to work, an ambiguous expression that boils down to the simple right to search for a job – without the warranty to find a job – and therefore is pure eyewash and does not ensure legal enforceability.

To ensure legal enforceability of the right for citizens to participate in economic life freely at any time, an economic order is required that is geared towards full employment by means of dynamically controlled subsidiary economic structures. Dynamic control means that expanding companies are motivated to split up by means of progressive taxation so that the resulting parts are forced to the lowest possible level of the economic structure in accordance with their production technology. Thus, a uniform distribution of economic activity is granted at all levels throughout an economic area ensuring a dynamic equilibrium on the labor market, i.e., the labor demand of companies and the labor supply of the working population are automatically balanced at all times.

5. The Complementarity of Human Work

In industrial societies based on the division of labor, three types of work need to be distinguished: gainful employment, family work and voluntary work:

  1. Gainful employment
    serves to secure material livelihoods of all citizens, provided it goes along with the basic right to participate in economic life at any time and in free choice (the unconditional guarantee for gainful employment made possible by structual measures as stated above). Only under this condition does gainful employment at the same time create the basis for participation in the rest of social life. Societies that do not enforce this right for everyone and at all times sin against their citizens and reduce them to paupers.
  2. Family work
    includes collaborative housework, raising children and caring for the elderly. It is crucial to understand that citizens are only encouraged and enabled to start a family and to do family work when they can rely on the necessary financial basis provided by the unconditional right to participate in economic life as stated above. Since family work represents an indispensable added value for the preservation of society, it should be remunerated indirectly, for example by crediting contributions to solidarity insurance schemes for sickness, accident, unemployment and old-age provision or by tax relief.
  3. Voluntary work
    also presupposes the unconditional right to participate in economic life as stated above. Only citizens who are integrated into society through gainful employment can volunteer on the basis of a secure material existence. Then, voluntary work is the ultimate form of social solidarity. The amount of voluntary work can grow if productivity gains are used for shorter working hours and higher wages.

In principle: Just as economic life is a part of cultural life, the unconditional basic right to participate in economic life is a part of human dignity and cannot be relativized and subordinated to other rights. This right, which is concretized in full employment, must be given absolute priority in a sustainable economic order. Gainful employment is therefore by no means a phased-out model. Quite the contrary is true: It meets the demands for humanity that are so difficult to meet in industrial societies in that it creates the foundation for raising children and caring for the elderly – within the framework of a sustainable family policy. And it is by its very nature more than earning a living because it demands and promotes cooperation, brings recognition and generates self-esteem, enables professional dedication and participation in social and economic developments and, last but not least, decides on personal ties, relations and social status (see also the article Full Employment).

6. The Economic Consequences

From an economic point of view, it should be noted that the advocates of an unconditional basic income justify their demand, as indicated, with the supposedly increasing neoliberal productivity and the resulting, supposedly inevitable mass unemployment. However, neoliberal productivity only seems to rise to an ever higher level because the extremely high social and ecological costs it constantly causes are ignored and not included in the product prices and in the calculation of productivity. In reality, therefore, the neoliberal system is characterized by apparent productivity that comes with irresponsible destruction in society and the environment, while the actual neoliberal productivity, if truthfully calculated, would show a negativ value (for further details I recommend the article Efficiency and Productivity).

It should not be overlooked that under neoliberal conditions productive decentralized local labor is replaced by seemingly productive centralized labor, that demand on the labor market is declining and the volume of labor and income are distributed more and more unevenly, that regional structures and economic cycles are dissolving and national tax revenues shrinking, while at the same time countless jobs of high social and ecological importance and urgency remain largely undone or are done at dumping wages, mostly based on undeclared work, because they can no longer be financed from public funds and can no longer be carried out profitably in the private sector.

Small and medium-sized enterprises, which are the basis and source of all higher level economic activities, continue to lose their local and regional production facilities due to the neoliberal process of centralization. Agriculture feels compelled to set aside land and to intensively cultivate the remaining fields and pastures with industrial methods contrary to the required ecological rationality. And the list of undone jobs is getting longer and longer. Especially eye-catching are: neglected childcare and care for the elderly, school hours lost due to a shortage of teachers, the reduction of medical services, the declining cultural offer, the cancellation of scientific research and teaching distant from the market, the qualitative decline of public and private consultancy services as well as the direct and preventive measures against environmental damage. In the craft trade sector, it is the countless tasks that wait in vain to be carried out or are done in undeclared work.

Under these circumstances, there is nothing to support the assertion that society basically runs out of work, or that, with increasing industrialization, there is a »natural« lack of work that inevitably leads to mass unemployment, and that this development is historically inevitable and without alternative. All the evidence suggests, in fact, that the simultaneous occurrence of the massive rise in forced inactivity on the one hand and undone tasks on the other is an unmistakable sign of fundamental deficiencies in the economic and political system. These shortcomings can be traced back to a single cause: the predatory competition on open global markets, in which all emerging and developed countries participate and help to fuel without necessity. This »competition« forces participating countries to constantly adjust the costs of their domestic- and export-oriented production and the prices of their products by lowering wages and social and environmental standards to the falling world level set by those countries who practice the most unscrupulous dumping (see for more details Economic Dumping).

On the other hand, by trading on open global markets high-wage developed countries are flooded with low-priced imports, with their domestic producers being unprotected and at the mercy of foreign price dumping. Although they try to hold their ground with dumping countermeasures they have no prospect of success, because the downward spiral destroys the vital balance of productivity, wages and purchasing power. As purchasing power declines, more and more domestic economic cycles come to a standstill and further accelerate the downward spiral. Thus, especially developed countries are forced into a neoliberal vicious circle, from which there is no escape, as long as they do not summon up the courage to exit from the destructive system (for a deeper insight see the article Neoliberal Vicious Circle).

In their justification, the advocates of an unconditional basic income also overlook a key point: that, under a socially and ecologically oriented economic order, increasing productivity basically induces rising wages and/or shorter working hours, thus guaranteeing an optimal distribution of the volume of work and income among the working population at all times, and that productivity, wages and purchasing power are in a constant dynamic equilibrium. Under social-ecological conditions, productivity increases are therefore employment neutral.

The neoliberal system, on the other hand, with its high apparent productivity and absurd cost pressure, offers no scope for wage increases and reductions in working hours. An unconditional basic income can therefore not be justified by reference to the increasing neoliberal productivity. Moreover, the current state of high neoliberal apparent productivity has no influence on the fact that those citizens who generate the economic value added with full commitment are not inclined to finance those among their fellow citizens who are not willing to contribute to the national product by engaging in productive gainful employment.

Anyone who wants to advocate an unconditional basic income can only credibly do so in the active role of an economical producer – be it in a self-employed or employed capacity – to set a »good example« and to show the willingness to finance the livelihood of a number of fellow citizens who are unwilling to engage in gainful employment. On the donor side, however, there has so far been no civic initiative. It is characteristic of the proponents’ intentions that their well-organized political commitment represents the recipient side without exception.

By making the neoliberal reality the basis of their demand, the proponents contribute, even if their demand is not taken seriously, to the stabilization of the neoliberal system. The neoliberal protagonists would be careful not to support the demand, but they take note of it with a wink, because it confirms the success of their indoctrination – in this case regarding the alleged productivity- and wealth-promoting effects to be expected from high concentration of economic capital and power and territorial specialization in connection with unregulated competition on open global markets (see also the article Neoliberal Economic Doctrine).

Since the financing of the unconditional basic income is dogmatically linked by the advocates to the neoliberal understanding of productivity, the introduction of a basic income would accelerate the process of increasing neoliberal (apparent) productivity considerably and contribute to destroying the already dwindling conditions for small-scale economic cycles, for decentralized economic structures, for decentralized political responsibility, and for an economic equilibrium directed towards full employment. However, this scenario is hypothetical, because an unconditional basic income cannot be financed as long as national economies are exposing themselves to the cut-throat competition on open global markets and the resulting cost pressure.

A calculation for Germany illustrates the absurdity of the financing of an unconditional basic income: Even under the restrictive assumption that only one third of the 45 million gainfully employed in Germany would opt for a basic income for themselves and their family members and would give up their gainful employment at the same time, and that consequently only one third of the 83 million German citizens would receive a basic income of, say, 1,000 euros per month, 332 billion euros would have to be spent annually. This is six times the amount that the German federal government spent in 2017 for labor market benefits and programs and is equivalent to the total 2017 German federal budget of 329 billion euros.

Under the less restrictive assumption that all 83 million German citizens would receive an unconditional basic income of 1,000 euros, 996 billion euros would have to be spent annually, which is three times the amount of the German federal budget.

A basic income could only be financed realistically under four conditions:

  1. full employment,
  2. the discontinuation of all other social benefits,
  3. a progressive taxation with a maximum tax rate of at least 90 percent,
  4. and under the assumption that the basic income would not be granted unconditionally, and that only a tiny minority of citizens would opt for it, so that predominantly only those who are in fact unable to work would receive it.

It is obvious that these conditions are paradoxical, because, when implementing them, an unconditional basic income would be superfluous: the desired goals, namely living wages and optimal income distribution, also as a prerequisite for family work and voluntary work, would have been achieved already.

7. Conclusion

The demand for an unconditional basic income is born out of the plight caused by the social devastations of the neoliberal economic system. The risk associated with the demand is that it contributes to preventing any dealing with the causes of the devastations and thus contributes to stabilizing the current system unnecessarily. The paradox of the demand arises from the fact that an unconditional basic income could not be financed under neoliberal conditions, whereas under social-ecological conditions – with full employment and tax progression based on solidarity – it could be financed, but there would be no need for its implementation and it would be out of the question anyway for ethical, social and economic reasons.

It is highly counterproductive to unnecessarily stabilize the ruling neoliberal system with demands for an unconditional basic income. Rather, the centralist structures of this system must be overcome through demands for national economic autonomy in domestic and foreign trade and demands for democratically legitimized decentralized (subsidiary) structures in politics and economy.

As a supplement I recommend the following articels: Economic Globalization, Demography and Retirement Provision, Economic Ethics, Economic Subsidiarity, Building Subsidiary Economic Structures and Sustainable Social Welfare.

Note on the COVID-19 Pandemic

The pandemic has noticeably revealed the significant weaknesses of the neoliberal economic system for everyone, above all the shortage of medical, but also other products, caused by disruptions in the absurdly networked value and supply chains across the globe.

The analyses of the neoliberal system as well as the principles and practical procedures based on them for building a sustainable system, which are presented in this compendium, thereby obtain an unexpected topicality. Now is the time to seize the opportunity and build up economic policy pressure to enforce the development of an economic order that is sustainably oriented towards social and ecological welfare.

The following article refers to the targeted arguments contained in the Compendium: COVID-19 and Globalization
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Click here for the German-language version: Bedingungsloses Grundeinkommen.

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