Transitioning (4): Introducing an Economic Transition Income

Fourth in a series on the transition to a sustainable economy.

Excerpted from Christian Arnsperger:

“The frugal economy will be a “socio-diverse” network of communities experimenting with frugal ways of life, a loose network of local economies producing primarily for the local population. There will still be some long-distance trade, but with transportation having become so expensive, there will be far more of decentralization, i.e., increasing de-globalization and re-localization. Frugality will have to go along with decreased purchasing power, meaning that in the sustainable niche people will have to make do with lower real incomes. Otherwise we will only perpetuate short-term consumerism. But happily, a rejection of consumerism is precisely what motivates those who venture into frugality. Those who really strive in the mainstream financial and industrial capitalist economy are unlikely to be those who will first move toward frugal ways. The most constructive way of engineering the transition would be to allow both ways to co-exist as the economy slows, rather than squeezing down everyone’s incomes right away. In other words, the more people whose center of gravity shifts toward sustainability — with on-the-spot job opportunities linked to renewable energy, more cooperative relationships with friends and neighbors, and families pulling together as family enterprises become increasingly necessary — the easier the transition will be for those who initially remain in the mainstream economy. And if the pioneers in this effort do their job well, those who follow later as the economy slows will at least know what to expect, and the shift will be more acceptable to them as their mainstream incomes drop.

This frugal economy will be wishful thinking unless a way of encouraging it is created. The underlying issue is how gradual, smooth, and thus bearable, the transition will be. Will it encourage the cooperation that has always sustained cultural evolution, or will it foster the Darwinian hell of a survival of the most aggressive? Many of us are still under the spell of technophilia, wanting to believe that some miracle technology will make growth possible and postpone the need for change. There is also a resistance to anything seen as “going backwards,” and a reluctance to embrace what is viewed as marginality or impracticability. The sustainable niche, however, is not the end of work, nor is it the realm of idle hippies, as the mainstream media often like to portray it. It will mean more work and less consumption, but also a shared commitment to neighbors, with more regard for the well-being of all, rather than trying to stand out from others in a large, impersonal economy. Critical resources will be carefully protected while keeping their use to the minimum possible, and with a high regard to preserving both the beauty and health of environment that everyone is dependent on. But beyond that, those who gain a taste for frugality and its advantages should be able to count on public assistance when taking the plunge into a different way of life, whether in an urban neighborhood, small green firm, community farm, or homestead. This will only be possible if the mainstream economy remains healthy, since that will make it possible to assist those who are creating of sustainable ways of life. Ideally, therefore, the sustainable economy would function in parallel with the mainstream economy as it declines — hopefully slowly enough so as to stretch out the time available for those who are still accustomed to the mainstream economy. Income support should be low enough to appeal to people who want to live simply, yet high enough for them to get by that way and develop a preference for frugality over unsustainable ways, while being able to count on health care and education.

The challenge is to provide assistance to those interested in the sustainable economy, while simultaneously contributing to the primary need of keeping the mainstream economy on track. We will focus here on one possible such scheme, a welfare reform measure known as the Family Assistance Program (FAP), which was first proposed by U.S. President Richard Nixon in the 1970s. It provided an incentive for recipients to find work by allowing them to keep a portion of the FAP payment as their incomes rose. By the time a modest income base was reached the FAP payment would have declined to zero. Because the FAP would be administered through the Internal Revenue Service, it was often referred to as a “negative income tax.” That’s how I will conceive it from now on, too, using the acronym ETI: Economic Transition Income. The ETI would not only help those wishing to move in sustainable directions, but would also reduce the stigma of welfare for the poor. This stigma would be reduced even further if ETI payments were used by educated young people — and, more generally, by those who gave up jobs in the mainstream economy — to build sustainable ways of life. Creative people could be among the first to use ETI payments as they explore new avenues of living sustainably, but so could those who wanted to try traditional ways that are difficult to uphold now, especially in intentional communities formed around shared values.

An additional benefit of the ETI, however, would be its contribution to keeping the overall economy in balance while maintaining a stable labor market– which is essential for a smooth transition. This could be done by altering the amount of ETI payments, much as a central bank adjusts interest rates. If, for example, more workers were needed in the mainstream economy, the ETI payments could be reduced enough to draw those marginally involved in the sustainable economy back into the mainstream economy. The more likely problem, at least in the beginning stages of the transition, is apt to be a surplus of people still seeking work in the slowing mainstream economy, threatening to drive wages down and trigger a deflationary spiral. In such circumstances, the ETI payment would have to be increased to entice workers into exploring the sustainable territory, since that will require a certain amount of resourcefulness when there are, as yet, few actual past experiences to draw on. This is where the efforts of the pioneers will be so important, especially as they find the ways that others can follow with better prospects for success, and which can then be expanded in other directions as more experiences are gained. Along this process, giving the ETI a try will become less of a venture into unknown territory, and more one of learning from others. Young people are especially apt to pass information around as they compare the sustainable alternatives with the choices they have in the mainstream economy. As the sustainable economy evolves, it will offer a steadily greater range of opportunities to be explored. These opportunities will be seen as adding to the range of alternatives available in the sustainable niche, but will also leave the mainstream economy more secure because it will be less vulnerable to deflationary forces. Anything that works in the sustainable economy will attract attention and then be replicated and adapted. As the range of alternatives increases, it would become easier for people to find the openings they feel most comfortable in, and to acquire the skills that contribute to a snowballing transition in sustainable directions.

As the difficulties of getting started in the sustainable economy are reduced with more experiences and more people joining it, the ETI payments will decrease automatically, if for no other reason than more people are receiving them, which also means that fewer people are working in the mainstream economy to generate the tax revenues to pay them. As time passes, the sustainable economy will be able to continue more on its own, with lower ETI payments and then none at all. At all times, however, those receiving the assistance will have to accept that the payments will fluctuate with the needs of the overall economy, especially the tax revenues that can be generated as incomes in the mainstream economy will slip along with the energy available to it.

Hopefully the transition will be as slow as possible, and with rising incentives for using energy ever more efficiently to stretch out the time it is available. How well this proceeds will depend on the ongoing health of the mainstream economy, and whether it is chugging along fine or struggling with unanticipated setbacks, shortages, or instabilities. If its health can be maintained, the sustainable economy will become the place where most dynamism is focused on the fascinating task of finding the ways of life that work best in the emerging circumstances, and on using renewable forms of energy as effectively as possible. Conservation taxes, ETI payments, and existing fiscal and monetary tools should be more than enough to keep the transition on track between inflation and recession, and with balanced budgets. The guaranteed income would then genuinely act as a transition income. This will be all the more easy as the vast amounts of money going into trying to keep the mainstream economy growing are reduced as sustainability replaces growth as the goal. The pace of change will slow as sustainable ways emerge that have the capacity to go on indefinitely while making frugal — full and fruitful — use of resources, in stable ways such as those that have been valued throughout human history. The issue would not be so much one of cost, since the income support to the “frugalists” would have to be quite modest to assure that the ways of life created could be supported with renewable forms of energy. It would be a fraction of the cost of creating jobs in the mainstream economy– which, for instance, under President Obama’s 2009 stimulus program was about $200,000 per job created. Even if the new “growth” jobs were successfully created, they would still increase the demand for oil that drives up its price. All such mechanisms would be halted as sustainability replaced growth as the goal. Public budgets could be balanced as the building of sustainable ways of life gets under way. The main motivation in all of this will be to create livelihoods that have ongoing value, as opposed to a job that often provides little beyond a paycheck. A key to economic survival will be to learn how to get by with a lower real income. There are many opportunities to do this, and they will become important as needing less income increases the range of economic opportunities available.

An ETI is not a basic income. It isn’t given “for free” to everyone, whether rich or poor, on top of whatever income they are already earning. The State only pays the gap between what one is earning and the guaranteed income level. Of course, there is always the chance that the bulk of the population will just pocket the income guarantee and either continue playing the financial and industrial capitalist game, or drop out of it through permanent inactivity. This is, as we know, one of the main arguments against any sort of unconditional income support. I am not minimizing this risk. However, I believe the argument as it is most frequently voiced draws too much on assumptions inherited from mainstream economic theory: People are naturally lazy, they want to work as little as possible while getting the highest possible income, and given half a chance they’ll slouch in front of the TV with a beer or a Coke (paid for with dole money) instead of investing in socially or economically worthwhile activities. My own take on the human condition is that this description of many people’s behavior is indeed empirically valid, but that it betrays the alienating effects of capitalism and consumerism more than it reflects a deeply entrenched “human nature.” (Disagreement on this crucial point is one of the watersheds that separate those of us who are optimistic about a transition and those of us who are skeptical.) I start out from the conviction that, given the chance and the right framework conditions, most people will indeed embrace alternatives, linked to both economic democracy (see next post) and to a reasonably frugal life. The presumption behind the ETI mechanism is that appropriate income redistribution can act as a “transition pioneer trigger.”

Sure enough, this requires that such a guaranteed-income scheme be viewed as part of larger package in which includes the circulation of ideas and the creation of public forums (inside and outside of mainstream education institutions) where the alternatives to the current system are discussed. Of course, part of the circulation will occur spontaneously as (a) pioneers start sharing their experiences with society at large and (b) the media become increasingly curious about these “fringe” phenomena. This is, to some extent, occurring already. More generally, the ETI has all the more chances to trigger extensive “emigration” towards the frugality frontier if the extended concept of equality of opportunity I have been expounding in earlier posts has become a well-circulating intellectual and political currency — that is, if enough citizens have started to realize that what is currently being sold to us under the name of equal opportunities is a needlessly truncated notion. Clearly, without some sort of guaranteed income, many citizens today who would like to make the transition to a frugal life will be afraid to do so, because they might lose most, or too much, of the (direct and indirect) income support currently associated with participating in the capitalist social democracy. A guaranteed-income scheme is a crucial centerpiece of any genuine equal-opportunity policy that includes the chance to act on one’s “alternative” choice. And quite obviously, unless the rest of the framework conditions being discussed in this Part 4 are put into place roughly in sync with the ETI, perverse effects are likely to occur due to the fact that, for instance, not all trading partners of the country adopting an ETI scheme are themselves adhering to the de-growth compact.”

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