Every dollar in existence today is owed to someone, somewhere, for more than it’s worth. Until this changes, nothing changes.
Every dollar in existence today is owed to someone, somewhere, for more than it’s worth. Until this changes, nothing changes.
Particular desires are universal, but universal desires are always particular
Everyone has “selfish” wants, which are often very similar between individuals, creating demand for markets. For example, everyone wants food and shelter. Markets tend to satisfy those wants, at least to some degree, so people tend to appreciate markets.
However, everyone’s version of a “good society” is different. Most people are dissatisfied with how society is run now, but their visions of what a better future would look like, and how to get there, are often radically different. There is usually no “accretion of desire” like that which leads to the creation and political popularity of markets.
This situation is overturned, however, when markets fail or seem to fail. When markets are no longer meeting people’s desires, either because they stimulate desires far beyond what they can provide to the average person (i.e. when everyone starts wanting the “Hollywood” lifestyle), or in cases that markets actually fail on their own terms (falling price of labor relative to productive capacity, extreme inflation in ultra-inelastic markets where no substitute goods are available such as healthcare, etc.), then the political gravity that naturally favors markets has the potential to be upset.
The 20th century saw Communist movements take over the two largest countries in the world not because markets had failed on their own terms, but simply because they had been disrupted by war. In other words, an exogenous failure. Markets were not strong enough to avoid being destroyed in wartime. The 21st century might see something similar due to an endogenous failure of markets, due to advances in automation, monopoly capture of formerly free-market economies, etc.
I actually hope this does not happen because markets are incredible forces for good. But we who are on the pro-market side need to think about how we can give markets the appropriate political “armature” to survive both internal and external threats to their existence.
Should a Basic Income be conditional or unconditional?
I think that at least initially a Basic Income should be conditional. There are several reasons that I take this stance:
1.) Political feasibility. The main problem BI advocates face is that on first glance the idea seems like “money to be lazy,” rather than what it really is, an efficient means to distribute productivity dividends within an economy. A BI program with a work requirement would be a lot more feasible politically than an unconditional basic income.
2.) Economic efficiency. An unconditional basic income would face the problem of people who wish to “drop out” of the economy for whatever reason, but who still have marketable skills, skills often acquired at public expense through public schools and/or subsidized student loans. The loss of the contribution that these skills make to the economy is an inefficiency that UBI cannot avoid.
3.) Social efficiency. We must consider what a work requirement in a Basic Income scheme would look like. Theoretically, Basic Income becomes feasible as increasing automation eliminates jobs and drives down wages. A work requirement would have two positive effects:
What constitutes a “full-time” worker could be subject to political debate and change over time. For example, mothers caring for young children could automatically be considered full-time workers. The number of hours per week needed to qualify as full-time would also be adjustable, and, ideally, decreased over time as technological progress obsoletes more and more human skill sets.
Is there too little or too much money in the economy?
We have to get beyond this debate over whether there is too much or too little money in the economy, because it’s both: There’s too much money in the wrong places (excess reserves) and too little money in the right places (infrastructure, education and capital investment.)
Universal programs are more robust than means-tested ones
Means-tested programs always engender a set of perverse incentives. When government benefits are only available to the poor or the disabled, there is an incentive to stay poor (or pretend that you’re poor, by working off the books), or to pretend that you’re disabled (witness the massive abuse of the SSI system, which has become Welfare for White People in many areas.)
Universal programs, by being available to all, avoid these pitfalls. And they are more robust politically, too. Means-tested welfare programs will always carry with them a class-based and racial stigma that make them vulnerable to political attack. Universal programs largely avoid this. Witness the relative popularity of Social Security retirement benefits, as compared to, say, Food Stamps.
This is why recent proposals to turn Social Security into a means-tested program are dangerous. As a commenter to this article put it:
“Republicans want means testing because this will make Social Security appear the same as welfare and make it easier to do away with. They can initially set the cut off high and then let inflation bring them down until only the poor receive payments. It is then easy to attack.”
Won’t a Basic Income just make people lazy?
A basic income will be just that, basic. It will be enough to pay for basic food, basic housing, basic clothes. It should not provide any of the luxuries or gadgets that people have become accustomed to, such as smartphones or sushi dinners. One of the first maxims of economics is that desire is limitless. People will always want the shiny new thing, and be willing to work for it.
A basic income should actually decrease “laziness,” since it will stop the widespread practice of people faking or exaggerating illness or injury to get on Disability.
The government is already printing money
People tend to be uncomfortable with the idea of “the government printing money,” and given some ugly incidents with hyperinflation in recent history, this is understandable. But opponents should consider that when the Federal Reserve buys government bonds, it is essentially providing a way for the government to print money and lend it back to itself, with the banks taking a cut, a process that has been dubbed “stealth monetization.”
So in fact this dreaded money-printing is already going on, and has been for some time. Even when the country was technically on the Gold Standard, there wasn’t nearly enough gold to exchange for all the dollars in the economy at the set rate of exchange.
So the question then becomes, not should we print money, because we already are, but why are we giving the banks a cut of it for doing essentially nothing?
And why are we letting the banks, through the Fed, control how much money is printed and what it is bought with it?
The Fed is the legally deputized agent of Congress in charge of the currency. Its authority comes from Congress and can be returned to Congress.
The Goals of the Money Revolution
1.) End Central Bank control of the money supply
Whether this is done through Chartalism, private currencies, or some combination of the two, it must be done. Currency is the lifeblood of any modern economy, and it should not be controlled by a private monopoly. Either a public monopoly or a private free market of competing currencies is preferable to the current arrangement.
A Chartalist system will reduce or perhaps eventually even eliminate the need for governments to collect taxes, allowing business and individual tax rates to be lowered, stimulating the economy. The Money Revolution will be about creating new wealth, not redistributing existing wealth.
At the same time, the existence of competing private currencies will put a check on any excess money-printing by the government that is done for purely short-term political gain, as opposed to sound economic reasons.
2.) Create a robust social safety net, including Universal Health Care and a Basic Income, both as a moral imperative and to improve economic efficiency
Many of the regulations that impose serious dead-weight losses on the economy, for example minimum wage laws and the requirement that companies offer health insurance coverage, are only in place because the State is not fulfilling its duties with respect to the welfare of its citizens.
The American system of having companies act as government-subsidized welfare providers (for example through the tax deduction for offering health insurance) is dishonest and distorts the political dialogue in this country. It has established a “shadow welfare state,” where employed persons believe that they are receiving market goods in exchange for the value of their labor when they are really receiving state benefits in disguise.
Creating a robust social safety net, including a Basic Income, will remove the political pressure that sustains these costly regulations and the shadow welfare state that lurks behind them. Wages should be set by the free market, not government dictat, and requiring employers to offer health coverage places an undue burden on free enterprise.
A Basic Income in place of a minimum wage would dismantle the huge and coercive welfare bureaucracy. It would apply equally to all citizens, removing the disincentive to work which is inherent in the current welfare system.
Once the new system is in place, governments will no longer fear the consequences of allowing large corporations or banks to fold. Unemployment will simply mean the period in which one searches for a new job, rather than being a term of dread. The era of Too Big to Fail in which governments keep “zombie” firms operating for political reasons will be at an end.
3.) Establish a clear delineation between the duties of the private sector and those of the public sector
Markets work best in most sectors of the economy, but not all. Defense, infrastructure, health care and to some extent education are all public-sector duties. Markets have been shown to work poorly or to be extremely corrupting in these sectors.
On the other hand, agriculture, auto manufacturing and mortgages are clearly private-sector duties. The government should exit these sectors of the economy and let private markets function as they should. The massive corporate welfare that exists in these sectors is a drag on the economy and a theft from the taxpayer.
The prices currently seen in the equity and mortgage markets are political prices, not market prices. The destruction of the price discovery mechanism in these markets is incredibly harmful to the efficient functioning of the economy.
4.) Formulate a strong, consistent ideology that can implement and maintain these goals
Thomas Jefferson held that there was a “Wall of Separation” between Church and State in the Constitution, not just to protect the State from the Church, but to protect the Church from the State.
The modern economy needs a new Wall of Separation, this time between Market and State, to protect both entities from each other. Public financing for elections should be a critical part of this New Wall, as well as the development of laws forbidding the “revolving door” between government and the businesses it regulates.
Such radical changes can only gain acceptance if all parts of the political spectrum come to see them as necessary and inevitable. Advocates must present the Money Revolution to Conservatives and Libertarians as a way to preserve and extend the domain of free enterprise (which it is), to Moderates as a way to safeguard social stability (which it is), and to Liberals as a way to strengthen and protect social welfare (which it is.)
Could chartalism and Bitcoin could work together?
Chartalism, the idea that governments can create money ex nihilo unconstrained by anything other than inflation, and Bitcoin, an alternative currency with a strictly limited supply, are universally seen as being at opposite ends of the ideological spectrum when it comes to monetary economics.
I have a sneaking suspicion that this is not the case, and that the new economic and monetary system that will emerge will involve both a chartalist element and something resembling Bitcoin, if not Bitcoin itself.
This is merely a protoplasm of an idea in my head right now, not a fully thought-out position. But I know it involves separating what have been considered two of the essential features of a currency: Currency as a means of exchange, and currency as a store of value.
Right now all currencies try to fulfill both roles. But what if they were separated? What if a chartalist token served as the means of exchange, and a capped currency like Bitcoin served as the (inherently appreciating) store of value?
The only thing he was ever right about…
“Reagan proved that deficits don’t matter.” – Dick Cheney, January 9, 2004