The Ethics of Universal Basic Income

This essay was inspired from readings by economists such as Yanis Varoufakis and Robert Reich. My goal with this essay is to articulate an argument that defends the rational for a universal basic income.

I have a deep belief in the capacity for human minds to work things out for themselves if they don’t have to live in terror.

A basic income is not a question of whether we like it or not, for it will be a major part of any attempt to civilize capitalism. What we are seeing today is capitalism going through a spasm caused by its own generation’s technology undermining itself. In the 20th century, we had the stabilization and civilization of capitalism through the rise of Social Democracy through the New Deal in the U.S. and the social democratic developments in Europe. But this paradigm is finished and it cannot be revived; but let us remind ourselves of what the Social Democratic and New Deal tradition is all about. First, redistribution of income within waged labour, a kind of insurance for the working class. Let us consider the National Distribution Insurance scheme in Britain after the WWII, and unemployment insurance in the U.S., same with health provision, pension, etc. These were important redistributive measures with regards to insuring and redistribution within the working class. Second, the redistribution between capital and labour, between the rents and labor. This takes the form in minimum wages that are negotiated by the state, and a process of collective bargaining – usually triangular involving trade unions, employers, and the state. And of course taxation: transfers through the taxation system.

This economic transition is dying in the water mainly because of two earthquakes on both sides of the Atlantic. First, the process of financialization which created a huge wedge between capital and labor; creating a new form of capital: financialized capital. This essentially depleted both labor and industrial capital. And this inexorable financialization drive erupted in 2008. So in 1991 socialism died with the fall of the collapse of the Soviet Union, and then after 2008 Capitalism died. We have a new regime now: Bankruptocracy. It’s rules by bankrupt banks. The more bankrupt banks the greater its capacity to mobilize and usurp economic grants and economic value from the rest of society. And the problem with bankruptocracy is that we have a cynical massive transfer of wealth from income and value from production to the financialized and financial sector that remains insolvent in reality, despite the cynical transfer. This has created two things. First, deflationary enforces. Ask anyone working in the central bank of Switzerland today, or the bank of Japan or the bank of England, or the FED – they can’t sleep at night about the fact that about half of the global economy now is languishing now in negative interest rate, and this is a reflection of the collapse of the social democratic and New Deal bargain of the 20th century. The world after 2008 cannot be understood in terms that made since to the world before 2008 – just like the world after 1929 cannot be understood in terms that made sense in the gold exchange era prior to 1929.

With the deflationary process, we have now the first plank of Social Democratic system dead in the water because the working class can no longer insure itself. Its result is stagnate wages and now its young people are caught up in a duel labor market. The insurance amongst wage laborers is simply not possible because wages have stagnated to such an extent that it is impossible for the working class to insure itself. Furthermore, redistribution between capital and labor is becoming increasingly impossible for a main reason: the politics that have become quite toxic, whether its Greece and Troika, and the Congress vetoing the White House and the White House vetoing Congress. The Social Democratic ideal requires political governance and Europe and the U.S. are ungovernable as we speak.

The second earthquake is artificial intelligence (AI). AI will very soon consume over-repetitive routine work or algorithmic work – especially once machine pass the Turing Test. Once this happens it will impossible for you or I to understand if the person we are speaking with on the phone is a human or machine. Once we have that, we are going to have a massive displacement effect, which, for the first time in human history is going to overwhelm the job creation effect. The net result will be more job destruction than job creation, because, remember the bankruptocracy that I referred to came at the tail end of a 30-year replacement of manufacturing jobs in the developing world with low-wage repetitive work. Thus, the bulk of the jobs created to replace the jobs lost after 2008, 1975 and 1983 were low-waged routine jobs that will be cut immediately once AI overcomes the Touring Test. This displacement is going to reinforce the deflationary forces that keep are central bankers awake at night because it will eliminate a significant measure of aggregate demand. Moreover, it will create an even greater level of income inequality, and a disparity between savings and investment. This disparity between savings and investment will force the rate of interest even below its current low levels.

So this is why a basic income will become a necessary part of civilization and stabilizing the country. This struggle is an ethical one, and an ethical one that doesn’t just simply spring out of a position from the “have’s” but also from a position of the “have not’s”. From Social Democrats, from Leftists, from those whose own since of dignity responds naturally against the idea of something for nothing. This is why it’s important to couch basic income as what it is: it is the idea that we are going to overturn the current narrative of life under Capitalism. The current narrative, the dominant paradigm is what? That we have private production of wealth which is then appropriated by the state for social purposes. In reality, our wealth production is collective, it is social, and only then is it privately appropriated. Unless we make this shift in the narrative, we are not going to be able to succeed or even convince those who would benefit from basic income that it is worthwhile struggling for it.

Take an IPhone, pick it up, and open it. What do you find in it? You find a variety of technologies and each one of them was created by a government grant. None of them was produced by Apple, none by Google – all were produced from some government grant. This is why I’m referring to the collective production of wealth which is then privately appropriated. If you begin thinking of it in this way, then it is easier to start to think of basic income as a dividend. A dividend that goes to the collective that was responsible for collectively producing the wealth, and the gadgets, and the products, and the markets. Because this false and illusory separation between the market and the state, needs to be dissolved. There would have been no markets if there were no states, there is no Capitalism if there were no state, no Apple or Google if there were no state; and similarly there would be no state if there are no private entrepreneurs and no state if there were no firms, we need to dissolve this false division.

And we have to attack the narrative head on: basic income is about giving money to the underserving, it is about giving money to the rich, it is about giving money to the beach bums. So we should not be sidetracked simply talking about good people getting money that they deserve; we should talk about underserving people that get money courtesy of the fact that they are members of a society that is collectively producing wealth. And on top of this, we need to add to the narrative stabilization. Think about it, in Europe and U.S. today, a basic income would really help central bankers go to sleep at night. It will be counter deflationary, it will be a unique defense against the slow burning recessionary impact of 2008.

Now there are decent arguments against basic income that we must not avoid. For instance, the rich do not need a basic income. Sure, but they don’t need to have the first ten-thousand dollars that they make being tax exempt either. And nobody’s worried about that. Surely, we hear, “it is better to target the money we have around those that are deserving.” Yes, but you have to think about the other side of the coin. To separate the deserving from the undeserving you need a bureaucracy whose purpose is to do that. Bbureaucracies tend to replicate itself, bureaucrats love to replicate themselves and to reproduce their power over society and to do so by producing a stigma attached to those whom they consider to be undeserving. It is very similar to psychiatry, remember Michael Foucault, the story about the madhouse where he illustrates how you create a narrative of reason and unreason and a power structure; and the person who has the certificate to be the psychiatrist has the power to say who is sane and who has the right to be a free citizen.

Another argument says that people should have the right to a job but not a right to basic income. And that we should be promoting work, not sloth.  Well, I think there are two points here that should be said: (1) Nothing stops us in society from censoring those who are idle. But why should we have them starve? (2) The right to turn down a job is essential for a well-functioning labour market and for a civilized society. And to have the right, a genuine right to turn down a job you must have an outside option; because desperate people will accept to do desperate things. Janitors on college campuses, for instance, in decades past use to know the faculty, they were part of the institution. And then what happened? They were sub-contracted by firms who hire by night people who are faceless, and turned-over all the time, paid less, and not institutionally connected. But why did this process spin out of control? It did because the janitors had no outside option. No right to say “no” to the sub-contracted contractors.

Here are some essential points, from a social perspective, not just a macro-economic perspective. The micro and the sociological level needs to be addressed.  Social Democracy put forth the idea a social safety net. Well we need to counter this. Nets are very good about catching you when you are falling. But when you are caught in them, it is often very difficult to get out of them. So think of basic income as a foundation, not a net. A floor on which to stand. Libertarian economist and theorists who claim that liberty is a driving force define liberty in a negative sense, in the sense of the absence of constraints, of volunteerism. If you say “yes” to a contract that contract must be a free contract, therefore it must be some act of free will. Well it’s not. The mafia loves to give us offers we can’t refuse. The fact that we say “yes” to them doesn’t mean that they were chosen freely. The fact that the Greek government said “yes” to Troika does not mean that it was a voluntary transaction. To have a free contract, each side must have the capacity to say “no.” Freedom in action requires a basic income.

Finally, a basic income will allow for creative work. To replace the kind of routine, algorithmic work, that is anyway being replaced by AI. So we need to ameliorate the ill effects of capitalism undermining itself by producing gadgets that itself cannot survive. Then we need to create a system whereby society stakes claim to the return of aggregate capital and this claim becomes an income stream that goes to everyone. I don’t see why myself, or my future children have a right to a trust fund, why Paris Hilton when nobody else does? Think of basic income as a trust fund for all of our children to be financed by dividends from our aggregate capital which was after-all created collectively.


~ Wes Fornes


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