WORK, FAMILIES AND THE STATE: PROBLEMS AND POSSIBILITIES FOR THE 21ST CENTURY
PAPER BY LOWELL MANNING 19 Epiha St, Paraparaumu 6450, New Zealand Tel/fax +64-4-2986890 Email [EMAIL PROTECTED] October, 1997
DEVELOPMENT OF BASIC INCOME AS A RESPONSE TO CHANGES IN WORK, POVERTY, AND THE BREAK UP OF THE WELFARE STATE
COMPRISING A BRIEF SUMMARY OF A THESIS BY WALTER VAN TRIER Every One a King, 476 pages, Department of Sociology, Katholieke Universiteit Leuven, Belgium, 1995.
THE NEW AGE OF ENLIGHTENMENT
This paper summarises Walter Van Trier's intensive review of the origins and development of basic income.
Van Trier realises the current resurgence of interest in basic income is due to the breakdown of the Keynes-Beveridge Social Contract. Recently, the Contract has led to growing unemployment and poverty and poor yet unsustainable real economic growth. The nature of work has changed dramatically, and so has the structure of the family. The way we regulate our financial policy and economy has become such a shambles we seem to lurch from one financial crisis to the next. The sovereign power of nations to manage their own affairs for the benefit of their people is being challenged by globalisation and the growth of powerful multinational corporations.
Yet Van Trier doesn't really take the final step in his journey. At best we can now say the Welfare State has passed its use-by date, but Van Trier presents it as a success story whose crowning achievement may yet be to evolve a basic income.
It may be more accurate albeit with the benefit of hindsight, to say the Welfare State was the wrong path all along; a kind of economic dead-end; a failed research programme in economics. Basic income pre- dated Keynes and the Welfare State by many years, yet it may simply be that the leading economists of the day, like Meade and Soddy were simply overwhelmed by the political impact of the new Keynesian theories.
Basic income didn't arise from academic economists, but from ordinary people like Milner and Douglas whose concerns were, in the end, humanitarian. Their underlying purpose was not about economic abstractions on which to base policy. The genesis of basic income rests firmly in the belief systems of the Quakers who formed the State Bonus League and the humanist morality of the countless ordinary people who have formed the backbone of the Social Credit Movement over the years.
Being classed as "heretic" because their founders didn't have the right academic pedigree is beside the point. It's beside the point whether or not they arrived at basic income concepts independently. And it's also beside the point that some of their ideas were shown to be wrong or impractical when properly subjected to close scrutiny. That's only human - look where the Welfare State has now led us, despite best intentions! The Quakers and Social Credit are not about political agendas, personal power, fame or privilege. They are concerned about the wellbeing of ordinary people in their everyday world, and simply seek to develop ideas that will help satisfy their value systems.
That is why the Quakers have survived for centuries. That is why the Social Credit Movement has survived despite periodic setbacks and again has two MPs in the New Zealand Parliament. That is why both movements remain committed to basic income. That is why their members are intimately active in the "current resurgence of interest" in basic income as an idea for the future.
Really good ideas endure BECAUSE they are not bought and sold in the marketplace of politics and careers. And basic income is one of them.
INTRODUCTION
"Every One a King" traces the origins of basic income in Britain between World War 1 and World War 2, and its relationship to the economic and political structures of the times. This is the main genesis of basic income proposals as we know them today.
Van Trier offers the interesting idea that implementing basic income might be seen as the final accomplishment of the existing welfare state: - As a step towards better achieving "better" goals (eliminating poverty, de-linking incomes from work, providing an effective mechanism to fight inflation) - For its integrative powers (universality is inclusive for society and family) - To express individual citizenship rights and personal freedom in the post industrial world - By combining liberty and equality with economic efficiency
This paper does not pretend to do more than summarise some of the more important elements of the book. Nor is it intended as a substitute for a careful reading of Van Trier's thesis or the vast resource material he has used.
The prologue recognises the 18th Century influence of Thomas Paine and Thomas Spence, and the books by William Morris and Edward Bellamy in the late 19th Century but the thesis itself is centred on detailed studies of: A - The Milner/ Pickard State Bonus Proposals 1918- 1922 B - The Douglas/Orage/Social Credit/Economic Freedom League National Dividend proposals 1919-19351 C - The Meade/Cole/Rhys-Williams Social Dividend Proposals in the Keynesian period during the development of the Welfare State
Dennis Milner and Major Clifford Douglas, were both engineers and amateur economists who seem to have developed their ideas separately in response to the social and financial problems arising from the first world war. There are clear links between these two and subsequent events that Van Trier records but, in my view, understates.
The State Bonus League was the joint effort of the Milners and Pickard who were Quakers. Pickard was a life-long friend of Margaret Wilson who was also a Quaker and secretary of the prominent Oxford branch of the League of Nations. Margaret Wilson married James Meade in 1933. The Pickards and Meades both lived in Geneva and were neighbours in Hampstead, London. James Meade was also influenced by an aunt who was a Social Credit supporter. (p448)
Despite these connections, there is no trace of the State Bonus in Meade's work, until he took the practical proposal from Lady Rhys-Williams in 1948! Van Trier concludes Meade never knew his close friend Pickard had advocated a social reconstruction programme that fitted his world view long before he presented it in "Agathotopia" in 1989.2
In a more general sense, Van Trier postulated Cole might be the torch bearer between Milner, the Douglas debates, and the early Keynesian debates, passing it finally to James Meade, who passed it to Rhys- Williams, then on to Hermione Parker and BIRG, but concludes the history does not support any such clear line of development, in part because Cole is little mentioned in the basic income literature.
THE MILNER-PICKARD PROPOSALS
The "Scheme for a State Bonus" (5 shillings a week) 1918, 16 pages and the " Higher Production by a Bonus on National Output. A Proposal for a Minimum Income for All varying with National Productivity" (8 shillings a week), 1920, 127 pages; were both written by Quaker-influenced Dennis Milner (and first wife Mabel).3
Milner's proposal considered about 20% of the National Income was enough to fund his proposal. It would be implemented by way of a 20% deduction (flat- rate tax) from all incomes which would be a dedicated pool for his Minimum Income payments.4
The idea was promoted as a "Higher Production" proposal. If production were to increase by 25%, the TOTAL incomes of even the richest people will not be affected by the payment of the Minimum Income. Even without the higher production, Milner calculated that 87% of people would be better off.5 Milner looked at the various issues relating to introducing his Minimum Income in much the same way as some of us are doing today, though in the terminology of the 1920's. One of his main achievements was that he attempted to quantify the proposal and study its effects, such as willingness to work, impact on wage levels, effect on national finance, and its impact on "economic motive" (or in more modern terms, economic efficiency).
A State Bonus League flourished briefly, but there are no contemporary references to the Bonus Scheme after 1922. There were links between the League and the Labour Party and a remit was prepared for its conference in June, 1920. The State Bonus was considered by a Party Committee in 1921, and rejected, apparently because the proposal cut across existing Labour policy.
The details of the Committee memorandum (pp125, 126) make familiar reading, as they and very similar to the sorts of arguments still being put up against UBI today: 6 7: - High taxation - Doubts about the claimed simplicity of implementation - It would create shock waves in the financial, industrial and commercial systems - Flat tax conflicts with Labour's progressive tax policies - It would be Inflationary to the extent extra taxes are reflected back in prices - Size of Minimum Income was too small - Widows, mothers, and children's' needs were already covered by existing Party policy - Bonus payments could be used as Strike Pay (as support during national strikes) - Minimum wages might go down, not up as Milner assumed - A Bonus paid to the father didn't ensure the independence of the wife and children - Worker purchasing power could be increased by other means like raising wages and limiting business profit - Advantages for assisting to provide education opportunities was already in policy - Bonus will increase incomes available for rent, so Labour's housing policy was seen as more appropriate.
Van Trier makes the important point that NOBODY QUESTIONED THE UNCONDITIONALITY OF THE BONUS at any time throughout the debate on the State Bonus. In effect unconditionality appears to have been accepted.
Another important booklet written at the time was "A Reasonable Revolution ", by Bertram Pickard, 1919, 78 pages. Pickard was a Quaker friend of Milner's, closely involved with the State Bonus League. His arguments are orientated towards a wider public audience and he specifically regards the State Bonus as a RIGHT (to life, and indirectly to land - p98).8
According to Van Trier, the State Bonus proposal died because Milner went to the USA and lost the support of the Quakers and a more "uplifting" movement, Social Credit, arose.9
MAJOR DOUGLAS, SOCIAL CREDIT AND THE NATIONAL DIVIDEND10
The concept of an unconditional and universal payment is at the core of the Social Credit Movement in its various forms.11 Van Trier writes that Douglas' theory about the inherent lack of purchasing power was "not exact at all', and that basic income was not part of his original ideas. He says economists had to look at Social Credit because of the ground swell of lay support it received, and that Orage, not Douglas was the main influence behind Social Credit (Orage edited the weekly "The New Age" in which Douglas first published his ideas).
It seems personal material on Douglas is hard to come by, and apparently both Douglas and Social Credit were under scrutiny from the British Secret Service, whose records on the matter have still not been made public! Douglas was long-winded in his writing and presentation and his delivery was complicated, "making it very hard to follow the argument". Moreover, he had no grounding at all in economic or banking theory.
Van Trier quotes two fragments first published in serial form in The New Age, 26/6/1919 and 19/2/1920. The first contains the proposition about a shortfall of purchasing power and the second the much debated A+B Theorem.12 However, Douglas' two main books are "Economic Democracy", published early in 1920, and "Credit-Power and Democracy", published late in 1920 - though both were serialised in the New Age beforehand.
Van Trier then studies the Douglas Reform Proposal (Just Price ) that was the basis of Douglas' proposals to reform the economic system. The original Douglas Reform Proposal related to mining, where part of the profits from the mines were to be paid to the miners as dividends. Eventually such schemes would lead to the situation where dividends replace wages, as the basis of issuing income (money) to consumers.13 Apparently, Douglas himself did not promote a National Dividend until the early 1930's, after it had been entrenched in the Social Credit Movement for many years. Importantly, Social Credit's National Dividend was justified in part on the basis of "cultural inheritance", the wealth base of the community, derived in part on the efforts of past generations.
The first Douglas-derived Dividend proposal seems to have appeared in a six-penny pamphlet "Dividends for All " written by W Allen Young, at the end of 1921. It was said to be clearer than Douglas' writings, and apparently incorporated various other writings over the previous 20 years or more, including Milner. In essence, Allen Young sought to link consumer demand with the ability of industry to produce, but it was directed towards the reform of the Mining industry rather than towards a true National Dividend.
The first time Douglas presented a firm policy proposal of any kind was in the Glasgow Evening Times "A Draft Social Credit Scheme for Scotland" on 11/3/32. This clearly expressed the national dividend. The scheme involved creating a national capital account register containing the estimated value of all assets including the public domain, abolishing private shareholdings and land sales (except to the government).14 Under the Scheme, each family would receive a tax free dividend of about 300 pounds a year, based on dividing 1% of the total wealth by the population. However, because families with incomes greater than 4 x the dividend were excluded, the dividend was not truly universal.
There was to be a discount rate of at least 25% for the banks, and an assisted price scheme for business. Consumers would present their receipted accounts at their bank and receive their 25% discount in cash, and the banks would be reimbursed the same amount by a Scottish Treasury Credit. The Scottish capital account would be reduced by these amounts and increased by the value of all capital development. There was to be a reduction in hours of work, and wages would be reduced by 25% in all (union) organised industries (up to a maximum of 20% of the national dividend), Those not accepting suitable work during the first 5 years of the scheme could be disqualified from receiving a dividend payment.15
Later Keynes in his "General Theory" credited Douglas for keeping the issue of effective demand alive. And although Douglas apparently influenced major economists like Meade and Robbins in the 1930's, the underconsumption theories lost out to those of business cycles and the development of econometrics. In the end, according to Van Trier, it was not the price mechanism or lack of purchasing power that created mainstream attention, but Douglas' claim of a specific mechanism that resulted in an ever widening gap.
In 1922, Frank Ramsey proved mathematically using calculus that the A+B Theorem was unfounded, using scientific null-hypothesis. He showed that below-cost pricing was justified (and in a dynamic, as distinct from a stationary, economy) only when dividends are paid on less than the national capital, and when the rate of interest on new investment is less than that included in costs.16
Further academic debate followed Douglas' submissions to the Macmillan Committee in 1930 (in UK) and 1932 (in NZ). It came mainly from economists like Durbin, Gaitskell, and Robbins, all of whom were linked to London School of Economics and Labour/Fabian politics, and Hawtrey. It also followed Hayek's 1931 lectures on "Prices and Production".
Durbin showed using Hayek's technique, that current incomes aren't the same as current total costs in a multi-stage production system. In the absence of hoarding, consumers' income should equal the costs of the last stage of production. However, her analysis left out the problem of savings and was limited to consumption goods. Robbins took capital replacement into account, distinguishing net from gross income, concluding the opposite of the Douglas position (p215). Hawtrey recognised depreciation doesn't result in direct income streams to consumers in the same way as other investment payments (Hawtrey was a senior treasury civil servant, not an orthodox academic economist). He sympathised with Douglas' general outlook and emphasis that the amount of money sourced from banks governs incomes generated by production and the source of demand for the products.17
Douglas challenged Say's Law (supply creates its own demand) and the Quantity Theory of Money. Mainstream economists found his analysis wanting.18 This didn't mean the Social Credit Movement was irrelevant, since the evidence suggests Douglas was not the centre of the Social Credit National Dividend movement.
FINLAY
Finlay took a much broader view of what Douglas was saying. While Van Trier shows Finlay's view was not justified in fact, it does seem to have been in keeping with the views of many Social Credit followers. Finlay believed Douglas was emphasising the power of credit (B) over consumers(A) and the resulting enforced poverty of the community, which formed the real core of the Social Credit Movement. He took the view Just Price was not the final word on the Douglas Reform Proposal and that its real centre- piece was the National Dividend.19
However, Douglas did at various times emphasise individuality. He also supported the idea of "use- value" speaking against "systems that are not there for men" (p243).
ORAGE AND "THE NEW AGE"
Van Trier regards Orage as the main mover and shaker of the Douglas movement, using Douglas' writings to advance his own socialist/anti-capitalist agenda. Douglas was eventually referred to Harrison (English Review) and Orage (The New Age) after he'd tried unsuccessfully to get other Journals to publish his work. "The New Age" weekly seems to have been avant- garde in literary terms. It was a main source of the Guild Socialist Movement. Unlike Douglas, Orage himself was very well connected.
It appears Orage's brilliant editing made the Douglas writings comprehensible, and it was this that laid the foundation stones for the Social Credit Movement. One such superb article, "Towards National Guilds" is reproduced by Van Trier on pp 265-267.20 Apparently Douglas was not the journalistic saviour for Orage and the New Age that Orage had perhaps hoped for, as his support for Social Credit seems to have alienated some "New Age" readers. Nevertheless, the reverse was also true later when Orage went overseas and a new editor was appointed.
Orage was impressed with: - the idea of naturally unlimited production (scarcity need not be the cornerstone of economics)21 - the community is the owner of public wealth by inheritance and current labour is the owner of the productive mechanism (dividend as of right) - there is no magic in owning the means of production, (prices should fall as our communal powers of production increase,)22 - price is only the regulator between supply and demand23
Van Trier writes : "If the ownership of the means of direct production was still in the hands of capitalists, the real controlling device was money whose ultimate ownership was vested in the financial and not in the productive system" (p276).
Orage left England in 1922, returning in 1932 to edit The New English Weekly, where he again took up the cause of Social Credit. Van Trier forms the opinion the National Dividend was the outcome of merging the Orage framework with the Douglas theory, because the Just Price Mechanism was impractical. Van Trier explores in some detail Orage's ideas about efficiency, the purported link between over- production and an absence of spending power, the idea that credit included the ability and will to produce, and the idea that human energy is the most costly of all energy. Orage died in 1934 following a BBC series with Keynes, Robbins and Henderson, after warning listeners to "Mind the gap!" and offering as remedy:
- the National Credit Account - a Dividend gradually replacing wages - a system of scientific Pricing.
The term Social Credit seems to have been first used when describing Clause 2 of the Draft Scheme for the Mining Industry. Douglas' ideas had some common ground with the National Guild League philosophies supported by Orage, but the Guild Conference rejected the Douglas Scheme in December 1920. The dissidents formed Social Credit study groups all over the country and the first conference was organised in January 1924.
At just its second conference in 1925, Social Credit split into the Douglas School under the name Social Credit, and the Economic Freedom League under Nobel laureate Soddy and others. One of them, Kitson, in "Unemployment" wrote that following introduction of new technology, "every improvement must be accompanied by a fall in prices or an increase in the volume of purchasing power, otherwise its tendency must be to increase unemployment"; and "The root cause of the world's economic evils is the irrational and fraudulent systems which the monetary and banking laws of all nations have established".24
Van Trier makes reference to the formation in 1933 of the Green Shirt Movement for Social Credit led by John Hargrave who had worked with Baden Powell establishing the Boy Scouts. This was followed in 1935 by the formation of the Social Credit Party for Great Britain and Northern Ireland. These events gave Social Credit an activist wing it had never had before.
Douglas' belated support from 1932/34 on for the National Dividend brought him more into line with other parts of the movement ( like the Prosperity Campaign and League to Abolish Poverty) that were backed by powerful supporters like Lord Tavistock and the Dean of Canterbury. A small booklet edited by William Ward in 1935 "the National Dividend. the Instrument to the Abolition of Poverty" included contributions from a wide variety of such well known people. The contribution of the Marquis of Tavistock (7 questions and answers on the National Dividend) is reproduced by Van Trier on p308 and confirms a 60 year history for specific Basic Income proposals derived from Social Credit though not necessarily from Douglas himself.
The unifying proposition among the contributors was UNIVERSALITY. Marshall Hattersley was a Cambridge educated mathematician and a prominent member of the Economic Freedom League who influenced people like Hargrave in their presentation of the issues of unemployment and the national dividend. Hattersley wrote several significant books including "the Commmunity's Credit....",1921/22 ;"Men Machines and Money....", 1927; and "The Age of Plenty...", 1929. Van Trier reviews each of these works at length (pp 315 to 327). There is apparently no direct reference to Douglas, but rather to Soddy and Kitson. So a systematic argument existed justifying the introduction of National Dividends that is nowhere to be found in the writings of either Douglas or Orage at that time.25
THE SOCIAL DIVIDEND OF JAMES MEADE AND THE KEYNES CONNECTION
Nobel laureate James Meade's "Agathotopia", Aberdeen University press 1989, 56 pages, written when he was some 89 years old, reviews some 60 years of academic writing on the problem of "poverty among plenty" and a Social Dividend. His advocacy for it suggests the Keynesian full employment philosophy needs to be changed in response to the post- industrial age. Meade also points out the similarities between minimum basic income models and the "allegedly neo- liberal negative income tax proposals". Yet he was a pillar, if not THE pillar of the construction of the Welfare State!
The idea of a social dividend "as basic income was then called" ( the term "basic income" apparently didn't replace "social dividend" until the end of the 1980's) also permeates the work of other early Keynesians besides Meade, perhaps because of the ongoing debate about market socialism around that time. The objective of full employment, market socialist literature, and the social objectives of the economists of the time provided a stage on which social dividends could be debated.
James Meade has consistently referred to Social Dividend throughout most of his long academic career, beginning in 1936 with "An introduction to Economic Analysis and Policy" which was reviewed by Keynes in 1938. His principles: - no economic resources must stand idle - they must produce the greatest quantity of products people want - incomes must be distributed to give the greatest possible satisfaction overall - an optimum standard of living requires a proper balance between work and leisure (optimal relationship among factors of production, labour and capital)
The 1936 book doesn't give a mechanism about how a social dividend would be implemented. But Its does refer to socialisation of property, hinting at promoting equal ownership among all members of the community.(p358). For example, heavy estate duties could be distributed as a social dividend. Distribution of State revenue by Social dividend is justified as an anti-cyclical device, and as an extension of more traditional measures like banking policy and public works. Meade's initial proposals were slightly modified in "Consumer Credits and Unemployment", 1938. "Consumer Credits... was supported by Keynes as "one of the possible means of levelling out fluctuations in effective demand", though his support was qualified. But the term social dividend was missing from this book.
Meade returned to the social dividend in "Planning and the Price Mechanism", 1948 where according to Van Trier, the social dividend is reduced to an income redistribution policy. It includes a section on Lady Rhys-Williams' Rationalisation of Income Distribution. This was a proposal she worked out in 1942/43 as an alternative to the Beveridge report "Social Security and its Allied Services". Meade found her alternative to be an "exceedingly stimulating proposal" (p356). It offered bureaucratic simplification, increased personal freedom, greater equality of incomes, and moreover, he wrote, "the system would afford a perfect instrument for the most effective and prompt control over total national expenditures in the interest of avoiding inflation and deflation". However, he was concerned about adverse effects on work incentives due to the universality principle. Yet, despite these comments, Meade made no reference to his own earlier 1936 book.
Meade apparently didn't revisit the distributist state until he published the booklet "Equality, Efficiency and Ownership of Property" in 1965. That work looks at the effect of automation as it reduces the portion wages occupy in the national income. He realised that under present arrangements automation would produce a wealthy elite and a huge group of disadvantaged unemployed and low-wage earners. His strategic options for dealing with this were: - The Trade Union State (real minimum wage level for all labour) - The Welfare State (taxes on rich to subsidise the incomes of the poor -progressive tax) - A Property Owning Democracy (modified distributist state from his 1936 work) - The Socialist State (combining real wage rates and equitably distributing profits generated from social ownership of property)
Van Trier gives on p363 a typology of Meades "Social Dividends": - As a redistributive Instrument "Poverty in the Welfare State", in "Oxford Economic Papers", 1978 - narrow policy, direct intervention (eradication of poverty) - As a Steering mechanism (1936 work) broad policy goal, direct intervention (full employment without inflation through social dividend) - As a Societal Framework (1965 work) narrow policy goal, radical intervention (social ownership of property) - As Institutional Support (Agathotopia, 1989), broad policy goal and radical intervention (Capitalist firms become Capital-Labour partnerships)26
However, Van Trier suggests that Meade's support for a social dividend may not taken any particular form until after Lady Rhys-Williams proposals, (1943 on).
THE CONTRIBUTIONS OF ABBA LERNER AND OSCAR LANGE
Market socialism derives from 1930's journal articles about the theoretical and practical viability of a planned economy, published in the journals "Economic Review" and "Review of Economic Studies". Abba Lerner was one of the contributors along with Oscar Lange. Lerner was a Keynesian sympathiser, and helped clarify the writings of the more famous economists of the time.
His 1944 book "Economics of Control" received strong support from Keynes and formed the basis for his subsequent work on Functional finance. It contains the first logically based analysis of distributional optimality.
However, even Milton Friedman and James Meade found the book difficult to understand.
Lerner said Government should intervene to prevent inflation and unemployment, and unlike Oscar Lange, proposed paying a social dividend that is independent of the amount of work done. The issue faced by the market socialists like Lange was how to distribute the profits from socialised industries. A social dividend, suggested in his essay,
"On the Economic Theory of Socialism", 1936, was an obvious solution. According to Philippe van Parijs, the Lange articles did not contain the idea of a basic income or "social dividend" in the present sense of the words. It was more of a "lump sum" idea and not necessarily payable to each individual.
However, there are strong similarities between Meades and Lerner. Van Trier traces back the origin of "social dividend" from Meade in 1936, (where social dividend and national dividend are both used similarly), through Social Credit and the National Dividend to Walker's "social dividend theory of taxation" in the 1880's. Aside from the Social Credit Movement, the boundaries of the various academic circles (Van Trier identifies 4 of them) participating in economic debate at the time, are blurred.
He looks at the work of Joan Robinson of the Cambridge Circus circle, known for framing the concept of "disguised unemployment". She also recognised that the dole and work schemes like the one tried at Upholland do not remedy unemployment or increase effective market demand though they may reduce the ill-effects of unemployment.
He looks at the work of GDH Cole at Oxford, a leader of the Guild Socialists and the Fabian society. There are substantial references to social dividend in his 1940's books, particularly support for direct creation of additional purchasing power in "Money: Its Present and Future", 1944. This is despite his rejection of an inherent deficiency of purchasing power as Douglas was claiming. For him social dividends were a means to control incomes paid to producers, which he thought was difficult or impossible in a private enterprise system. However, Cole's references to Social Dividend go back to 1935 in connection with the planned economy. A planned economy requires control of the money supply and planning of incomes, and also subsidising prices to eliminate real demand fluctuations. So he envisaged the social dividend to be larger than wages; (10 shilling/week for those under 15, 1 pound a week for those between 15 and 20 and 1 pound 10 shillings for those over 20). Van Trier concludes that Cole used social dividend in a similar sense to basic income.27
An older work of Cole quoted in an appendix to
"Money...." says:
"I regard the social dividend as an
indispensable instrument...., both for securing that
human independence of the individual on which the
Distributists have particularly insisted, and for
ensuring that production shall be pushed to the
limits set by the demand for leisure, and not held by
allegation that it pays better to leave productive
resources unused when they cannot be so employed as
to show a "profit" over total "financial costs". I
regard it too, as a necessary recognition of the
essentially social character of production, which
depends not only on the current efforts of the
individual producers, but also on the accumulated
stores of knowledge which are the common birthright
of us all." 28BASIC INCOMES RECONSIDERED
Van Trier aims to contribute to a better understanding through the 3 'guided tours" of State Bonus, Social Credit and Social Dividend Keynesianism to add light to the debate about basic incomes in general. What does the basic income experience tell us about the process of institutional reform and the crisis of the Welfare State.? What lessons does the past provide in the present environment?
- basic income proposals need to extend beyond the minimal model - such extension is unavoidable if debate is to be socially meaningful - the extension itself creates the primary element defining each proposal29
The minimal model does not convey the real meaning and experience of previous basic income proposals, and doesn't answer the important questions of the present. Everyone has their own frame of reference, so there will be no universal agreement about why it makes a difference.30 The choices of extension may be highly political according to their perceived/demonstrated impact on the economy. For example, Van Trier says on p423 that any imaginable UBI proposal will somehow involve the lowering of the average net wage rate.31
State Bonus, Social Credit and Social Dividend vary in most of their features beyond the minimal model, according to Van Trier. He suggests that in presenting basic incomes to newcomers you have to step outside the square of the minimal model, (which Van Trier says on p426 has been expressed by Philippe Van Parijs in a theoretical formula). One such feature that cannot be avoided is the level of the unconditional income, which has varied dramatically among the various proposals. Practically, the level must be sustainable, but in the end it will be somewhat arbitrary such as, for example, Milner's 20% of national income (5 shillings per person) which was related to the Old Age Pension Act of 1908. [27]
Obviously in the debate on poverty, the figures should also relate to the "scientific" poverty lines. Milner upgraded his proposal to 8 shillings per person, apparently on such evidence p 422.32 Van Trier sees the State Bonus as partial, limited and even as a short term measure, whereas Social Credit and its National Dividend is more general and would "mean an important, even irreversible step forward, but not a step towards, rather a step into a new society" p425.
So far, the Milner State Bonus is the earliest known specific proposal for a basic income, and while many others may have inspired Milner (Paine, Russell Ruskin, and many others) they didn't actually work out a specific proposal. For example Hobhouse in "Liberalism" 1911 referred to "providing access to the means of production,..(and)..guaranteeing the individual a certain share of the common stock". But the arguments were not specific, clear or compelling. Moreover they related to the break up of the Poor law and to the Old Age Pensions Act of 1909.
Van Trier believes that to "qualify" as a basic income proposal there had to be an acceptance of something existing that no one rightfully claimed; there had to be a basis for distributing it unconditionally among all citizens; and there needed to be a mechanism to do so.33
He sees the Milner State Bonus as an attempt at institutional social policy reform. He views the National Dividend of the Social Credit Movement, promoting leisure in an era of abundance as a story about the rise and fall "of a most peculiar social movement". He thinks the Social Dividend of Meade and Lerner was about restructuring the economy in a Keynesian framework, making it part of a particular research programme within economics.34
The Social Credit Movement and State Bonus league both meet the criteria of social movements. A similar status might possibly be argued for Social Dividend Keynesianism too. So would a basic income itself also qualify as a social movement?
Van Trier agrees Social Credit and State Bonus were more than movements for basic incomes and that they appear to have existed independently. They weren't parts of a greater movement, nor was an unconditional and universal income guarantee the (sole) end of their activities, but part of a package of reforms; whereas a specialised lobby for basic income is quite recent (such as BIRG, BIEN, UBINZ).
Nevertheless all three have in common a more just society in which (in the words of TH Marshall) every individual would be granted his "modicum of economic welfare and his share of the social heritage". They all propose unconditional cash payments to each and every individual; and Van Trier says these two principles are the defining characteristic of basic incomes proposals. The movements have, at least in part, the same ends though their means might not even be compatible. There may also be a crossover of people, organisations and promotional techniques (Hargrave being a spectacular example, as was Social Credit's participation in the League to Abolish Poverty, as was the Quaker influence - Thomas Paine's father was a Quaker, so is Kenneth Boulding. Another common link is with practical disciplines like engineering : Douglas and Milner were engineers... Paine built bridges, Meade and Lerner concentrate on efficiency and control that also imply practical applications.) The basic income writings tend to be written in "engineering style" and the proposals do not derive from people at the centre of dominant social movements.35
Van Trier sees six features of basic income literature: - neutrality (not privileging any sector of society) - technicality ( implementing basic income is a technical rather than political matter) - abundance ( there is plenty of scope for increased sustainable production) - a third way (middle road between capitalism and communism/socialism) - they are reluctant utopians (guaranteeing security and freedom rather than presenting a vision of what the world should look like) - enabling and inducing (moral regulation instead of coercion)
In the end, Van Trier sees the State Bonus and Social Credit as "heretic" movements that didn't become respectable to economists because of their "core defects", but Meade and Lerner "extracted from these heretic theories the rational and scientific core of the social dividend proposal", keeping the idea alive for others to pick up on. He says extracting the idea involves much more than just picking out the basic income concept - it also requires a steering mechanism for the economy, a recognition that wages in the modern era are insufficient to guarantee living standards, a recognition of the development and changes in economics itself (concepts like marginal utility and consumer sovereignty), and recognition that basic income will have a profound effect on economic behaviour about which little research is available.36 On p456 Van Trier sees basic income as the end of the Welfare State.37
Not only does basic income disrupt the current world- view of the welfare state, it disconnects the link between income and work, and hence the oft-stated goal of full employment.38
The single dominant feature of basic income is that it offers every person absolute security, albeit at a minimal level. This makes it a powerful weapon against poverty. It offers transparency, an escape from the poverty trap, an escape from the stigma of unemployment, and provides easy entry to the labour market : In so doing it provides dignity and allows people to exercise responsibility over their own lives.
Van Trier believes the resurgence of interest in basic income is due to the breakdown of what he calls the Keynes-Beveridge Social Contract, producing unemployment and poverty, and seriously eroding potential for real sustainable economic growth. The regulatory mechanisms are a shambles.39 Globalisation and the growth of powerful corporate multinationals are weakening the sovereign power of nations. As Van Trier says, p463, the "job" has gone in its traditional sense, and the future depends on how we go about reconstructing the idea of a job, and how it generates an income. Full employment can only mean a return to a traditional style of labour market, and that is a non-starter, because the nature of work has changed irrevocably and the old style no longer represents the realities of life, and definitely won't do so in the future, either.40
As he says, the day of the regulated labour market is gone, but it fulfilled a crucial and very productive role for most of this century. Basic income ideas have been present through most of the period, but were subdued for nearly 30 years before reappearing at the end of the 1970's.41
CONCLUDING REMARKS
Linking basic incomes to the welfare state means addressing people as citizens rather than workers, and addressing the conflict between the social rights of workers and the right to work. Full employment has always been something of a false god. In a world where traditional jobs are unlikely ever to permit full employment, disconnecting income and jobs is a way to secure more real freedom for everyone. Basic income looks like a win-win scenario.
Social insurance was originally seen as a way to prevent insecurity among workers. Basic income could be seen as the next step to providing greater individual choice and freedom than the welfare state ever could. After all, the desire for personal freedom and the extension of personal autonomy was at the heart of the basic income movements in the inter- war years, and remains so today.
Lowell Manning 13/10/97
----------------------------------------------------- ----------------------------------------------------- ----- 1 The thesis is especially relevant in the manner in which it inadvertently ties together the various strands evident in Democrat policy today. 2 Van Trier completely misses the vital point that Quakers and Social Creditors (now known in New Zealand as the NZ Democratic Party) have not only survived throughout the tumultuous 80 year period but are still extremely active in the basic income debate. 3 Van Trier writes 13 pages on the Quaker connections, pp 109-122, that, in my view show only a limited understanding of Quakerism. 4 There is a striking similarity here with the paper recently circulated in UBINZ by Kevin Free. 5 This really means households in today's terms, since relatively few wives worked at that time, though many women had recently experienced work in the war industries. 6 Time has made it easier to counter many of the criticisms, and logic deals with others: for example, if the Minimum Income equals or exceeds current welfare support, what conclusions are to be drawn from a claim the Minimum Income is too small? 7 Interestingly, Milner saw his State Bonus as different from redistribution of income (p142), a point I have also been making recently myself ( though redistribution is a secondary effect of UBI) 8 Pickard's references to E Rathbone's 1917 report of the "Equality of Pay and the Family Committee" suggesting a National Endowment of Motherhood, shows the concept of compensation for unpaid work had also already been recognised by that time. 9 This comment is significant, because it appears to recognise, even if subconsciously, that Social Credit was a wider phenomenon than the State Bonus. These views are confirmed elsewhere in the Thesis where Van Trier recognises the notion of the "middle road" between Capitalism and Communism/Socialism and the endurance of Social Credit and its National Dividend long after ONE of Douglas' main ideas, the A+B theorem had been discredited, at least in the form it was originally presented. 10 Van Trier devotes 200 pages to Major Douglas, 'his" National Dividend and the Social Credit Movement." 11 It is still a centre-piece of NZ Democratic Party policy. 12 My view has always been that the sum total of B is effectively zero when taken in the macro sense, since each firm's B payments become part of another's A payments ( income, profit, dividend). (ref also p202 top). But Douglas' argument may apply in the dynamic sense, where the value of production increases (from improving productivity, or an increased consumption base, for example) from one cycle to the next. A shortfall could occur unless there is an equivalent increase in the purchasing power of prospective consumer groups. This view seems to be sustained by Van Trier on pp 164-168 "the Archaeology of the A+B theorem". It is suggested there that the only means of covering them is presently bank debt. An example p 175-176 implies this is so unless prices were to fall as productivity increases. Yet reducing prices is hardly the market trend for profit maximisation, except in 'new" industries like computers and electronics where productivity gains in recent years have been spectacular and competition is fierce. 13 The Just Price idea stands capitalism on its head: It says a gap between incomes and prices can be overcome not by increasing incomes to match prices, but by decreasing prices below cost so they match incomes! The two approaches, even if backed by sound theory are contradictory methods to achieve the same objective, and I think it would be difficult if not impossible for them to co-exist - presumably this is why Douglas did not himself promote the National Dividend at the time, and presumably why Social Credit was mistakenly taken as an antithesis of the Welfare State during the Keynesian period. 14 The world hasn't gone very far in the past 60 years has it? This proposal recognised the need for proper measurement of wealth to measure economic success and to use as the basis for public policy, particularly that in the public domain. There is now a groundswell of support for major change in economic measurement throughout the world, a process in which the Democratic Party is also still very active, and on which I have written several papers. I must say, that Van Trier and most others have completely overlooked this major contribution of Social Credit to the current world economic debate. That he did so is probably because of his focus on basic income, perhaps without recognising that how wealth and economic activity are measured is relevant, if not central to any sustainable basic income proposal. 15 Superficially, I think there are elements of the State Bonus Scheme in this. But the main problem with it relates to the cancellation of the extra currency used to pay the discount. Instead of a nominally constant amount of money circulating round and round, the Scheme meant the money supply could increase by up to 25% of consumption expenditure per year (depending on how much of the cash was returned as deposits to the banks). Douglas believed the shortfall in purchasing power was very large, but even if that were the case, the inflationary impact of his proposal would quickly become obvious unless the surplus currency was taken out of circulation. 16 It seems to me Ramsey's work on this matter deserves much greater attention, as Douglas was plainly wrong, and the interest on the money supply itself is a central part of Democrat policy on inherent inflation in the financial system and the drift of wealth from the poor to the rich through the banking system. 17 The Douglas Theorem really denies the concept of value-added. The net payments from an enterprise can't exceed, it seems to me, the total value-added on which, for example GST is payable in NZ. So, if Douglas were right, GST couldn't work! But this aside, the influence of the banking system on production and demand WAS recognised, and has been a core feature of present Democrat policy for many years. 18 One of the real issues that arises is : now there is no control on the quantity of money in the banking system, how do we know incomes provide enough purchasing power without increasing our dependence on credit? The truth is that they don't, because consumer credit is now escalating quickly. Worse still, the problem is only revealing itself retrospectively. 19 I think what Finlay said IS closer to our present views, even though (or perhaps because) it didn't actually come directly from Douglas. 20 Where Orage speaks about energy in his explanations of Douglas, (as Douglas himself did), the reference appears to be to what we would today call resources, whether they be human or natural. The process of production necessarily involves a resource of some kind, like labour, intellectual property, materials or natural goods like air, water and so on. Douglas and Orage seem to have called this energy. Waste, and inefficiency are also energy loss factors and there is little doubt Orage saw a link between such energy factors and individual well-being. 21 This is, in my view, not strictly true, because sustainability implies scarcity in the long run. 22 Workers couldn't guarantee production, work, or wages, even if they were the owners, because they couldn't control demand through purchasing power. 23 The money tickets analogy Douglas made becomes more significant once FINANCE, rather than the community, controls the amount of credit, (that is, the money supply). "Value" may be economically less flexible than the notion of "price". We can enhance value instead of lowering prices. Demand creates value whereas supply merely satisfies demand. 24 There is little doubt present Democrat policy is more closely aligned to the Economic Freedom League than it is to Douglas Social Credit, and this has apparently has been the case for many years. 25 Social Credit in New Zealand has long been ridiculed for matters with which it need not necessarily have been associated. The Social Credit Movement has always had mainstream economic support, including Nobel laureates like Soddy, derived from the Economic Freedom League and other completely "respectable" organisations like the League to Abolish Poverty, among others. Core Democratic Party economic policy is substantially derived from that source. The Social Credit Association in New Zealand was almost certainly formed by Douglas Social Credit supporters, (presumably boosted at the time of Douglas' submissions to the Macmillan Commission here in 1932). But it is equally probable it soon became a focus for all followers of the Social Credit Movement, especially once the Social Credit Political League was formed in 1954. Could it be that Social Credit's internal identity crises over the years were due in part to a misunderstanding of its own history? 26 This is rather similar to Democrat/Social Credit proposals for worker ownership and participation in business that have been policy for many years. 27 It is no accident my provision for children under 18 of $45, adults $115 (excluding the "household" provision of $140), is in close proportion to these figures, or that the figures of Milner were related to the Old Age Pension in much the same way mine are to Universal Superannuation levels. 28 This gels surprisingly well with my own approaches to the UBI debate in various papers in recent years, as well as with the thrust of Democrat/Social Credit policy. 29 This confirms the line taken by UBINZ in respect of general (UBINZ ) v specific proposals (eg the Democrat /Alliance studies). 30 The need to pursue an extended rather than minimal line has several times been reconfirmed by UBINZ. 31 This is questionable, but if shown to be true could take a lot of heat out of the present UBI debate. 32 It would be well worth comparing the work of Charles Waldegrave in NZ with the current UBI proposals as well as using present Social Welfare provisions. 33 Perhaps this puts the Democrat/Alliance proposal in context? Also the real difference in the present UBI debate is that with modern communications, the implementation mechanism is now readily available whereas it was much more difficult in the past. 34 I am at a loss as to why the three approaches should be reduced like this, even were the stated emphasis to be demonstrated - Van Trier is struggling to unify what doesn't need to be unified - a point he takes up himself on p443 "The most important lesson to be drawn from the basic incomes debate in general is its signalling fundamental processes of social change and deep institutional reconstruction......" 35 It's very easy to find in NZ too, right up to the present - in UBINZ, and the Electoral Reform and Environmental movements, for example - and Quakers keep popping up, even in neighbourhood action groups, as does the engineering connection! 36 Van Trier also completely misses the point that 80 years down the track BOTH the originating movements (the Quakers and, Democrats/Social Credit) are not only alive and well, but continuing to contribute to the debate in New Zealand and elsewhere!! 37 My present work proposes to abolish the department of Social Welfare! 38 Universality/unconditional as of right payments are almost alien to the Welfare State, because they are NOT supplements to all other income. Rather, they are the baseline of income, and all other income is supplementary! In effect, basic income conceptually turns traditional economics on its head. (And this is so, in my view, despite the fact that Universal Superannuation and universal child benefits are, or were before they were effectively means tested, already a limited form of basic income, payable to particular groups in society. 39 This is especially so in the financial policy area, which is why it remain THE primary area of Democrat policy. 40 Until now, the residual efforts of the New Labour Party in New Zealand to resurrect it have somewhat slowed the development of basic income within the Alliance, though this may be changing. 41 This is definitely not the case in New Zealand where Social Credit has been extremely active - even more so since the Social Contract became strained.
_________________________________________________________________
MSN 8 with e-mail virus protection service: 2 months FREE* http://join.msn.com/?page=features/virus
==^================================================================ This email was sent to: [EMAIL PROTECTED]
EASY UNSUBSCRIBE click here: http://topica.com/u/?a84IaC.bcVIgP.YXJjaGl2 Or send an email to: [EMAIL PROTECTED]
TOPICA - Start your own email discussion group. FREE! http://www.topica.com/partner/tag02/create/index2.html ==^================================================================
