An End to Musical Chairs: A Rumination on the Basic Income

Since everyone is welcome aboard the train of life, don't we all deserve a ticket?

Since everyone is welcome aboard the train of life, don’t we all deserve a ticket?

I was walking toward the central transit hub of my town recently, when, shortly prior to passing over the railroad tracks that the train I may or may not have intended to catch would cross on its way to the train station, I noticed something strange: the pizza shop on the corner of the tracks had shut down. This in itself would not have been so unusual had I not noticed moments prior an Irish pub around the corner with a similar fate. What became of the owners? I wondered. Was the economy this poor? What of the value these places generated?, and other similar thoughts crossed my brain as I continued onward to the transit station.

It had not occurred to me, since I’d been out of the country for two years on a set of long-term academic engagements of the most regal sort, that the government had recently implemented a guaranteed basic income. I hadn’t realized it, of course, because my family’s wealth and its social stature had always allowed me the finer things in life – academic scholarsip, the pursuit of ideas, etc. The thought that a few thousand dollars a year would make a huge impact on society had never occurred to me. My Siddharthan moment, however, had to wait at least until I entered the train station.

I casually asked the station attendant (who was also the portier, and bartender, as well as waiter and cook: it was a small town) what became of the pizza parlor and the Irish pub. “Danny” (the pizza shop owner) “went back to university to study and become a civil engineer” responded the porter-ticket-attendant-waiter-bartender-janitor. “I think I hear it was something he always wanted to do, but because his family’s poor, he could never afford it, until the basic income. And the pub owner – bless me, I forgot his name – has gone off to write novels, or so I hear.” He stamped my ticket and I walked over to the platform. The things one hears in a small town…

The above, fictional excursion explores a few potential consequences of a basic income policy. Of course, the thought experiment was intended more as daydream than as analytical investigation. Ernst Bloch commented that daydreams are the “inception point” of utopian thinking. Perhaps he was right. In any case, it is clear that the effects of a basic income on the underlying social forces at play in any society would be non-negligible. What these would explicitly entail, ín what direction and at what magnitudes are all worthwhile questions to engage with respect to the implementation of a basic income policy.

The thesis of this (slightly shortened) essay will be that the argument for the basic income could greatly be strengthened by including empirical analyses of the social consequences of the basic income, such as its implications on the incentive structure. Arguably, both incentive to save and invest, as well as incentive to participate in otherwise non-existent or severely reduced levels of innovation would all be impacted by the policy, as would factors of environmental sustainability. The project of humanist valuation (a view of morality which places the human being at the center of decision-making processes), additionally, would be impacted by the basic income, by way of allowing a quantification of the “worth” of human liberty. I will deal with each of these issues individually in the paragraphs to follow, and they are dealt with at more length in another essay.

The incentive to save and invest

Our pizza shop owner and Irish pub proprietor could utilize the implications of their basic income to free up resources while furthering their business interests. While this may sound like a rather dull or irrelevant issue, the resources that are saved by circumventing the costs of various public subsidies and other programs to encourage growth and expansion would be arguably tremendous. If a shop owner no longer had to appropriate surplus value while carrying out renovations or expansions in order to pay rent on his land in the meantime because his subsistence was guaranteed by a basic income, this greatly changes the incentives structure for the shop owner. The fact that his income would not hinge wholly on the business would also increase freedom. His relation to the business becomes less that of a player in a game of musical chairs (as soon as the “music” of sales stops, so does his golden goose stop laying eggs and he loses his business) and more that of a member of a community of peers, each looking out for the common interest of all. Perhaps a small changeover from the status quo, but arguably not an irrelevant one.

Furthermore, the incentive to save by households would arguably be affected by such a policy, as is argued in an essay by Birdsall, Pincknewy, et al. They see the rate of income of a household not as an exogenously given factor determined by external forces, but as a mutual co-factor, determined both by household preferences, as well as outside rates such as the market rate of money and the marginal return on investment. The addition of a basic income would, arguably, augment these factors, by making the marginal cost of, say, a college education much lower. Birdsall, et al. use the example of indigent farmers in east Africa, who never borrow for longer terms than one season “because they lack the collateral”. The basic income would increase their leverage by granting them access to a piece of the social product by way of a “social dividend”, which several have argued everyone is entitled to anyway.

One can imagine a far more participatory community of peers emerging from such a policy, wherein the relative costs of, say, entering the workforce are for the first time presented in their true theoretical, abstract form: one could potentially “sell one’s labor on the market” if one had what Babcock, et alia refer to as an exit option, but arguably not before, since one’s subsistence — failing a basic income — hinges on performing this action (this is as much a market transaction as handing a purse over to a mugger at gunpoint is one). As such, the “Job market” would, for the first time, exist as such with the introduction of a minimum guaranteed income.

Incentive to Innovate

The liberal accolade Friedrich Hayek suggests absolute liberty as an imperative for a functioning dynamic society. His argument, in paraphrase, goes something like the following: because we cannot be sure where future innovation will stem from, and who our “leaders” will be, we must guarantee absolute freedom and liberty to all. This, of course, is a functionalist definition of liberty, with its own pitfalls and shortcomings, but let us accept it for the time being. If our purpose is, at present, merely to argue for the efficacy of a basic income, we can make due with (accept with minor reservations the views of) certain trumpeters of the status quo, as long as their views correlate with the argument at hand. Hayek’s point, a proto-liberal formalization of the doctrine of “Perfect liberty” certainly congrues with the argument for a basic income. Indeed, Hayek supported one.

One can note that the incentive to innovate, to think and act creatively, and to come up with new solutions to existing problems is non-negligibly impacted by ensuring the basic necessities of subsistence are met. One simply has to do a basic cost accounting to confirm this: if we, say, attribute the costs of subsistence to “fixed costs” of the living organism, lowering these costs by granting a voucher covering them at birth automatically reduces the level of our “break even” point required to meet subsistence. This, in turn, allows for more risky, creative and innovative activity by way of dedicating less resources to “making ends meet”. A bit of a vulgar analysis, but I hope it gets the point across with at least moderate success.

More enriching than the above would probably be an analysis of the psychosocial implications of various constraints on freedom, such as empirical studies on “prison blues” experienced by captives and inmates on creative thinking. These would have potential significance for determining the impact of a basic income on factors of creativity that such a simple schemata as that presented above do not present. The above, however, is meant to represent a broad sketch of the form some of these effects might take. Of course, “liberty” is just that: an abstract valuue. As Jodi Dean has commented, to suggest content for the eventual freedom already in some way delimits it (as does, to a certain extent, the daydream which began this piece). Real “freedom” is ultimately a negative value, so the cost accounting method may be the clearest representation available at present, though complementary research is certainly desirable.

Impact on environmental sustainability

Paul Lafargue, and others like him, comment on the inherent crisis nature of the capitalist system of production, lamenting that while the “angry, bearded” Christian God “rested for all eternity” after six days’ labor, “the supreme example of ideal laziness”, the average worker “redoubles his ardour” as a consequence of industrialization, “as if he wished to compete with the machine”. Indeed, the natural consequence of this for Lafargue, as well as Rosa Luxemburg, V.I. Lenin and others, was a system beset by a “crisis of production” (or overproduction, to be more precise), in which the “battering down of all Chinese Walls” and the opening of all ports to business was of the imperative to maintaining the system of growth and accumulation.

Naturally, there are human consequences to this crisis. As Harvard economist Juliet Schor pointed out in her acclaimed and influential essay, The Overworked American, Americans used the increased productivity that resulted from technological change not to purchase more leisure like their European counterparts, but to buy more commodities (which in turn required more labor to produce…), doubling the consumption level over a period of around thirty years, an astronomical feat. Whether all of this consumption is progressive in the sense of improving the standards of living of the general populace is certainly questionable. Schor and others conclude otherwise, explaining much of the “consumption orgy” as a “desire to own status items”. Doctrines like “planned obsolescence” and the role of the PR and advertising industries in “manufacturing demand” certainly raise questions (not least of which ethical ones), and even the Federal Reserve Board projects a “3 to 5 year span” for “durable commodities” (things like cars, computers and refrigerators). After that, cars, computers and refrigerators are presumably traded in or compacted and recycled, or worse.

These findings seem to confirm the idea that the present order is built on unsustainable foundations, resting on a parochially ingrained notion of limitless resources. Amory Lovins comments in the book Natural Capitalism that The Wall Street Journal “doesn’t have a column devoted to the latest news about [natural resources], because [they have] been for the most part irrelevant to business planning”. Work like that of Paul Burkett and Herman Daly have tried to reconcile the tasks of left ecology with economic reasoning, with some success. Awareness of environmental issues seems at an all time high, in part thanks to activism and agitation by dedicated people, like Burkett and Daly, and others. Hopefully that trend will continue as time goes on.

The impact, specifically, a policy such as a basic income would have on the ecological catastrophe of overproduction-overconsumption cycles (what Schor refers to as “work-and-spend” cycles) is a matter of interest for those with concern for resolving the crisis. The concept of a “social dividend”, which Oskar Lange and James Meade pioneered, is relevant here. Lange and Meade admitted that “[distribution in proportion to work] conflicts with efficiency in the weak sense of Pareto optimality, by providing excessive incentives to work.” That is to say, rewarding persons merely and exclusively for engaging in remunerative work creates perverse incentives, where at the extreme, say, you would forego helping your grandmother clean her house because you could earn a bit more in the workplace. To combat this, a “social dividend” would guarantee to every participating member of society a certain part of the social whole, which is guaranteed to them as such. It would be like being given a ticket to ride a train you are already on, a form of redistributive justice.

The consequences of this are apparent. Whereas, today, the incentives are almost exclusively lodged in social status and recognition by way of what Veblen referred to as “conspicuous consumption”, the “social dividend” ensures that the worth and dignity of each individual is not merely tied to the amount of productive effort they expend in profitable tasks, but derives, at least in part from their mere participation in society. It has been argued that only in this way can what Rawls referred to as the “worth of liberty” be guaranteed to all: “At first approximation, the worth or real value of a person’s liberty depends on the resources the person has at her command to make use of her liberty. So it is therefore necessary that the distribution of opportunity – understood as access to the means that people need for doing what they might want to do–be designed to offer the greatest possible real opportunity to those with least opportunities, subject to everyone’s formal freedom being respected.”

The Project of Humanistic Valuation

The question of “hurting” “job-creation” with the introduction of the basic income can be retorted, as did Phillipe Van Parijs, with the simple statement of “So what?”. It is arguably not the role of society to create “paying jobs”, or to act as an intermediary between the job market and the unemployed. The very idea hinges on an environment where the division of labor is such that productive functions exist to occupy all members of society. As it happens, the increasing use of labor-saving technologies and techniques in the workplace means a sum marginal reduction in jobs created for every new production facility which produces goods. Being that this trend is only increasing around the world, it would be surprising to see anything but the “Mini-Jobs” the U.K., German, Australian and other reserve armies of unemployed has been reduced to appearing as fruition to schemes to “create jobs”. The bureaucratic overhead (ie., costs) involved in such regimes is itself tremendous (and, as studies have shown, ineffectual). An alternative is therefore desirable.

For an example of the effects of automation, one can take Apple Computer’s new production facility in the US: a very capital intensive production facility that employs primarily specialized, highly skilled labor (in low quantities). According to labor economist Dan Luria, the Apple plant will employ about 200 people and achieve an output of around 1 million units a year, a labor to output ratio of 2 ten thousandths (that is, one percent of two percent). These trends are set to continue (as, for instance, in China). A basic income is certainly a policy to keep on the horizon, as traditional “work” is displaced by automation. A basic income would ensure that subsistence needs are met, and met with dignity (something “workfare” cannot, and does not attempt to, fulfil)

Babcock point to some of the grave concerns with “workfare” — a portmanteau of “work” and “welfare” which designates neoliberal job market reforms that attempt to “mimic” full employment through various means including privatizing job search, the institution of sanctions, and creating individualized “contracts” designed to efficiently guide “job seekers” (the unemployed, underemployed and traditionally marginalized classes) to the first available means of employment. Firstly, they state, ”[R]ather than discovering and responding to client [clients are “jobseekers”, ie., the unemployed] needs, caseworkers tended to define client needs to fit the available slots [and] avoid eliciting service claims” (Brodkin (1997, p. 8). Caseworkers assigned clients with limited education to job search, which helped the caseworkers meet their caseload participation rates. Furthermore, they avoided eliciting or ignored information about drug use or mental illness since such cases would require more administrative effort. In this way, clients with multiple problems became viewed as the problems. Second, caseworkers learned to ration resources based on their perceptions of clients. The rare education slots were only given to clients who seemed ”serious about getting an education” (Brodkin (1997, p. 9). If a caseworker was working with a troublesome” client, the client – even with a very low literacy level – would be sent to search for jobs as their activity.” The social consequences of such a policy are immediately obvious, and at once morally outrageous. As opposed to dynamic, intelligent beings, humans are instead viewed as so many cogs in a machine, an obtuse and repulsive image.

Secondly, it appears that the responsibility of developing “individualized” contracts that cater to the skill set and preferences of “clients” often goes unmet. State Babcock, et al., “[S]tudies show that caseworkers in welfare offices are struggling to balance the need for the individualized attention required to make an individualized work plan and the need to establish program eligibility. In Wisconsin, Chicago, and other states, caseworkers focus on the original goals of establishing eligibility over employment counseling. Indeed, caseworkers received little training about how to create individualized work plans with clients. They have created their own methods of quickly assessing clients, including placing them in community service jobs and sending them on job searches even when clients do not meet the skill and educational requirements. The caseworkers also learn how to ignore or not ask about issues that will complicate the case planning, such as domestic violence, substance abuse, and mental health history. Making these adjustments allows caseworkers to meet performance goals without ever addressing the needs of clients.” Thus, it seems, “lowering the rolls”, or fitting the unemployed to imposed constraints, as opposed to vice versa predominates in many “workfare programs”, as the evidence above suggests.

A number of ethical and moral questions are raised by the above, and when one considers, additionally, the “sanctions” regime that accompany many modern “workfare” programs (such as TANF in the U.S., the U.K. jobseekers’ program, as well as German and Dutch variants), the picture becomes even more troubling. Several studies conclude that large swaths of the affected populace either has a poor grasp, or no comprehension of, the sanctions regimes, and, according to at least one study, even a large proportion of caseworkers were not sufficiently familiar with them: “only 14 out of 25 case managers interviewed were able to accurately describe [their own] sanction and compliance policies.”

All of this seems to work contrary to liberal ideas of justice, freedom and liberty. In fact, many of the workfare” programs severely counter traditional notions of “liberty” of the individual, in that they “sanction” individuals for not toeing the line prescribed by the bureaucracy. This means the policies are often “neoliberal” in name (in so far as they attempt to solve problems by atomizing and tinkering in an ultimately globalized and interdependent world), but can more realistically be described as authoritarian. Certain findings within the U.K. of employers taking advantage of “job seekers’ allowance” in order to fill a need for cheap, readily available labor (the case of Tesco) also points to underlying, structural flaws with the system of workfare, and suggests other alternatives are necessary, if the interests of society at large are to receive any treatment.

This is not to speak of the psychological impacts a basic income would have on the individual. I address this more in another essay (see Questioning the Economic Beatitude), as well as a prior post on this site.

Addendum: Citizens of the EU can sign this EU initiative to push to institute an EU-wide basic income. The initiative has little chance of success, as more than 90% of the required signatures are still outstanding with something more than 3 months remaining, but it’s definitely worth the few moments required to show support for this vital issue.

About Jerome Nikolai Warren

I am a German-American who has ties to both countries. I speak fluent German and English, and passable Spanish and French. I can also mutter and curse in Turkish and Russian. I am at present a grad student of economics in Germany. In a prior life I studied dabbling, basically (religious studies, philosophy, political science) at the University of Alabama. My favorite piece of music is probably the Mass in B-minor by J.S. Bach, my favorite artwork is "The Blue Rider" by Kandinsky; my favorite building is New York's Pennsylvania Station, sadly demolished in 1963. I tweet (rarely) @dagmarholstadt, and also manage this site's Twitter account @OfContradiction.
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