“Where will the government find the money?” is no longer a valid objection to providing an economic safety net for the people. The government can find the money in the same place it just found more than $5 trillion for Wall Street and Corporate America: the central bank can print it. In an April 9 post commenting on the $1.77 trillion handed to Wall Street under the CARES Act, Wolf Richter observed, “If the Fed had sent that $1.77 Trillion to the 130 million households in the US, each household would have received $13,600. But no, this was helicopter money exclusively for Wall Street and for asset holders.”

“Helicopter money” – money simply issued by the central bank and injected into the economy – could be used in many ways, including building infrastructure, capitalizing a national infrastructure and development bank, providing free state university tuition, or funding Medicare, social security, or a universal basic income. In the current crisis, in which a government-mandated shutdown has left households more vulnerable than at any time since the Great Depression, a UBI seems the most direct and efficient way to get money to everyone who needs it. But critics argue that it will just trigger inflation and collapse the dollar. As gold proponent Mike Maloney complained on an April 16 podcast:

Typing extra digits into computers does not make us wealthy. If this insane theory of printing money for almost everyone on a permanent basis takes hold, the value of the dollars in your purse or pocketbook will … just continue to erode …. I just want someone to explain to me how this is going to work.

Having done quite a bit of study on that, I thought I would take on the challenge. Here is how and why a central bank-financed UBI can work without eroding the dollar.

In a Debt-Based System, the Consumer Economy Is Chronically Short of Money

First, some basics of modern money. We do not have a fixed and stable money system. We have a credit system, in which money is created and destroyed by banks every day. Money is created as a deposit when the bank makes a loan and is extinguished when the loan is repaid, as explained in detail by the Bank of England here. When fewer loans are being created than are being repaid, the money supply shrinks, a phenomenon called “debt deflation.” Deflation then triggers recession and depression. The term “helicopter money” was coined to describe the cure for that much-feared syndrome. Economist Milton Friedman said it was easy to cure a deflation: just print money and rain it down from helicopters on the people.

Our money supply is in a chronic state of deflation, due to the way money comes into existence. Banks create the principal but not the interest needed to repay their loans, so more money is always owed back than was created in the original loans. Thus debt always grows faster than the money supply, as can be seen in this chart from WorkableEconomics.com:

When the debt burden grow so large that borrowers cannot take on more, they pay down old loans without taking out new ones and the money supply shrinks or deflates.

Critics of this “debt virus” theory say the gap between debt and the money available to repay can be filled through the “velocity of money.” Debts are repaid over time, and if the payments received collectively by the lenders are spent back into the economy, they are collectively available to the debtors to pay their next monthly balances. (See a fuller explanation here.) The flaw in this argument is that money created as a loan is extinguished on repayment and is not available to be spent back into the economy. Repayment zeros out the debit by which it was created, and the money just disappears.

Another problem with the “velocity of money” argument is that lenders don’t typically spend their profits back into the consumer economy. In fact, we have two economies – the consumer/producer economy where goods and services are produced and traded, and the financialized economy where money chases “yields” without producing new goods and services. The financialized economy is essentially a parasite on the real economy, and it now contains most of the money in the system. In an unwritten policy called the “Fed put”, the central bank routinely manipulates the money supply to prop up financial markets. That means corporate owners and investors can make more and faster money in the financialized economy than by investing in workers and equipment. Bankers, investors and other “savers” put their money in stocks and bonds, hide it in offshore tax havens, send it abroad, or just keep it in cash. At the end of 2018, US corporations were sitting on $1.7 trillion in cash, and 70% of $100 bills were held overseas.

Meanwhile the producer/consumer economy is left with insufficient investment and insufficient demand. According to a July 2017 paper from the Roosevelt Institute called “What Recovery? The Case for Continued Expansionary Policy at the Fed”:

GDP remains well below both the long-run trend and the level predicted by forecasters a decade ago. In 2016, real per capita GDP was 10% below the Congressional Budget Office’s (CBO) 2006 forecast, and shows no signs of returning to the predicted level.

The report showed that the most likely explanation for this lackluster growth was inadequate demand. Wages were stagnant; and before producers would produce, they needed customers knocking on their doors.

In ancient Mesopotamia, the gap between debt and the money available to repay it was corrected with periodic debt “jubilees” – forgiveness of loans that wiped the slate clean. But today the lenders are not kings and temples. They are private bankers who don’t engage in debt forgiveness because their mandate is to maximize shareholder profits, and because by doing so they would risk insolvency themselves. But there is another way to avoid the debt gap, and that is by filling it with regular injections of new debt-free money.

How Much Money Needs to Be Injected to Stabilize the Money Supply?

The mandated shutdown from the coronavirus has exacerbated the debt crisis, but the economy was suffering from an unprecedented buildup of debt well before that. A UBI would address the gap between consumer debt and the money available to repay it; but there are equivalent gaps for business debt, federal debt, and state and municipal debt, leaving room for quite a bit of helicopter money before debt deflation would turn into inflation.

Looking just at the consumer debt gap, in 2019 80% of US households had to borrow to meet expenses. See this chart provided by Lance Roberts in an April 2019 article on Seeking Alpha:

After the 2008 financial crisis, income and debt combined were not sufficient to fill the gap. By April 2019, about one-third of student loans and car loans were defaulting or had already defaulted. The predictable result was a growing wave of personal bankruptcies, bank bankruptcies, and debt deflation.

Roberts showed in a second chart that by 2019, the gap between annual real disposable income and the cost of living was over $15,000 per person, and the annual deficit that could not be filled even by borrowing was over $3,200:

Assume, then, a national dividend dropped directly into people’s bank accounts of $1,200 per month or $14,200 per year. This would come close to the average $15,000 needed to fill the gap between real disposable income and the cost of living. If the 80% of recipients needing to borrow to meet expenses used the money to repay their consumer debts (credit cards, student debt, medical bills, etc.), that money would void out debt and disappear. These loan repayments (or some of them) could be made mandatory and automatic. The other 20% of recipients, who don’t need to borrow to meet expenses, would not need their national dividends for that purpose either. Most would save it or invest it in non-consumer markets. And the money that was actually spent on consumer goods and services would help fill the 10% gap between real and potential GDP, allowing supply to rise with demand, keeping prices stable. The end result would be no net increase in the consumer price index.

The current economic shutdown will necessarily result in shortages, and the prices of those commodities can be expected to inflate; but it won’t be the result of “demand/pull” inflation triggered by helicopter money. It will be “cost/push” inflation from factory closures, supply disruptions, and increased business costs.

International Precedents

Critics of central bank money injections point to the notorious hyperinflations of history – in Weimar Germany, Zimbabwe, Venezuela, etc. These disasters, however, were not caused by government money-printing to stimulate the economy. According to Prof. Michael Hudson, who has studied the question extensively, “Every hyperinflation in history has been caused by foreign debt service collapsing the exchange rate. The problem almost always has resulted from wartime foreign currency strains, not domestic spending.”

For contemporary examples of governments injecting new money to fund domestic growth, we can look to China and Japan. In the last two decades, China’s M2 money supply grew from 11 trillion yuan to 194 trillion yuan, a nearly 1,800% increase. Yet the average inflation rate of its Consumer Price Index hovered between 2% and 3% during that period. The flood of money injected into the economy did not trigger an inflationary crisis because China’s GDP grew at the same fast clip, allowing supply and demand to rise together. Another factor was the Chinese propensity to save. As incomes went up, the percent of income spent on goods and services went down.

In Japan, the massive stimulus programs called “Abenomics” have been funded through bond purchases by the Japanese central bank. The Bank of Japan has now “monetized” nearly half the government’s debt, injecting new money into the economy by purchasing government bonds with yen created on the bank’s books. If the US Fed did that, it would own $12 trillion in US government bonds, over three times the $3.6 trillion in Treasury debt it holds now. Yet Japan’s inflation rate remains stubbornly below the BOJ’s 2% target. Deflation continues to be a greater concern in Japan than inflation, despite unprecedented debt monetization by its central bank.

UBI and Fears of the “Nanny State”

Wary critics warn that a UBI is the road to totalitarianism, the “cashless society,” dependence on the “nanny state,” and mandatory digital IDs. But none of those outcomes need accompany a UBI. It does not make people dependent on the government, so long as they can work. It is just supplementary income, similar to the dividends investors get from their stocks. A UBI does not make people lazy, as numerous studies have shown. To the contrary, they become more productive than without it. And a UBI does not mean cash would be eliminated. Over 90% of the money supply is already digital. UBI payments can be distributed digitally without changing the system we have.

A UBI can serve the goals both of fiscal policy, providing a vital safety net for citizens in desperate times, and of monetary policy, by stabilizing the money supply. The consumer/producer economy actually needs regular injections of helicopter money to remain sustainable, stimulate economic productivity, and avoid deflationary recessions.

Republished from EllenBrown.com

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Guy Standing: Given that wages cannot be expected to provide the precariat with security, the system must find alternative ways of doing so. The secret lies in capturing rental income for society. We should want what Keynes predicted but which has yet to pass—“euthanasia of the rentier.” One way of capturing rental income for society would be to bring the commons into policy discourse. In the neoliberal era, the commons—natural, social, civil, cultural, and intellectual—have been plundered via enclosure, commodification, privatization, and colonization. This rent-seeking is an injustice and should be reversed.

The income from using commons resources should belong to every commoner equally. Accordingly, the tax system should shift from earned income and consumption to taxing commercial uses of the commons, thereby helping in their preservation. Levies on income gained from using our commons should become major sources of public revenue. This means such measures as a land value tax, a wealth transfer tax, ecological taxes such as a carbon tax, a water use levy, levies on income from intellectual property and on use of our personal data, a “frequent flyer levy,” and levies on all income generated by use of natural resources that should belong to us as commoners.

Fed by these levies, a Commons Fund could be set up as a democratic variant of the sovereign wealth funds that exist in over sixty countries. Then, the questions would become how to use the funds in a transformative way. The Fund should be operated on proper economic lines, adhering to investment rules geared to socially beneficial forms of capital, taking into account ecological principles and tax-paying propriety.

The Fund’s governance must be democratic and separated from the government of the day, to minimize the possibility of manipulation by politicians before elections. And every commoner should be an equal beneficiary, their stake in the Fund being an economic right, rather than dependent on contributions, as was the case with laborist welfare schemes. Everybody, regardless of taxpaying capacity, should gain, by virtue of being commoners.

The commons has been nurtured by many generations and exists for future generations. As Edmund Burke recognized, we are “temporary custodians of our commonwealth” and have the responsibility of passing on to the next generation our commons in at least as good a condition as we found it. Thus, levies on exhaustible commons resources should be preserved for future generations as well as serve existing generations. To respect this principle, only revenue generated by the Fund’s investments should be distributed to today’s commoners—you and me. This rule is applied in the world’s outstanding example, the Norwegian Pension Fund Global, which, drawing from Norway’s share of North Sea oil, generates a net annual return of 4% that can be disbursed to the populace.5

What is proposed here is even more transformative. The levies would be placed on all forms of commons, including non-exhaustible commons resources. Land, water, air, wind, and ideas are among non-exhaustible resources, and part of our commons. Some commons resources are replenishable, such as forests. Including non-exhaustible commons resources in the financing of the Fund is key to the transformative strategy. The only equitable way of disbursing proceeds from the Commons Fund is to give equal amounts to everybody deemed to be a commoner, and the easiest way would be to distribute “social dividends” or “commons dividends.”

Sharing the commons is one ethical rationale for basic incomes, which are justifiable for other ethical reasons as well, including ecological justice, freedom, and basic security.

Photo by acb

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Our aim in this report is to explore how trade unions and co‐operatives can work together to challenge precarity and secure decent work.

The world of work in the 21st century has a markedly different pattern from that of the 20th century. The two‐tiered structure that has emerged since 2007 out of austerity and automation has been well described as an hour‐glass.

In the top half there is a shrinking traditional workforce with standard 40 hour contracts, residual pensions and full employment rights and below, lies what Martin Smith of the GMB described as:

….a second growing group where technology creates an on demand working culture dominated by their smart phone of precarious work, low paid, zero hours, tiny hours, agency, self‐employed jobs.

The aim of this report is to describe more clearly the plight of the growing precariat and to identify and capture examples of best practice where unions and co‐ operatives are working together to challenge the erosion of political, social, economic and cultural rights.

Guy Standing and his work on A Precariat Charter describes why a loss of ‘social income’ won by trade union struggles over decades characterises most clearly the plight of the precariat in the 21st century: their conversion from full citizens into denizens with curtailed rights.

The precariat lacks access to non‐wage perks such as paid vacations, medical leave, company pensions and so on. It also lacks rights‐based state benefits, linked to legal entitlements, leaving it dependent on discretionary insecure benefits, if any. And it lacks access to community benefits, in the form of a strong commons (public services and amenities).

GMB commissioned research that interviewed precarious workers and found:

 Unions remain deeply supported and identified as being on their side.

 Traditional forms of collective bargaining are largely seen as inaccessible within a realistic timeframe of an organising campaign.

 Union approaches are best focused around meeting their needs.

 Union messaging that works best include: ‘Britain needs a pay rise’, ’Work you can build a life on’, and ‘Fair treatment at work.’

For this report we have surveyed and interviewed numerous officers and members of UK and other trade unions abroad as well as those working in co‐operatives. A consultation day was held in Manchester and four case studies have been put together in the next four sections to highlight innovative practices.  Though it is early days, these organising strategies are either emerging in the UK or, with focused support from the trade union or co‐operative movements, could emerge and be embedded.

The report illustrates each organising strategy and draws together broader and crosscutting findings and recommendations.

Read the report here

Photo by jon crel

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The Charter of the Forest was sealed 800 years ago. Its defence of the property-less and of ‘the commons’, means the Right would prefer to ignore it – and progressives need to celebrate and renew it.

Dr. Guy Standing talks about the Charter of the Forest and its relevance 800 years on. Originally published in Open Democracy.

Guy Standing: Eight hundred years ago this month, after the death of a detested king and the defeat of a French invasion in the Battle of Lincoln, one of the foundation stones of the British constitution was laid down. It was the Charter of the Forest, sealed in St Paul’s on November 6, 1217, alongside a shortened Charter of Liberties from 2 years earlier (which became the Magna Carta).

The Charter of the Forest was the first environmental charter forced on any government. It was the first to assert the rights of the property-less, of the commoners, and of the commons. It also made a modest advance for feminism, as it coincided with recognition of the rights of widows to have access to means of subsistence and to refuse to be remarried.

The Charter has the distinction of having been on the statute books for longer than any other piece of legislation. It was repealed 754 years later, in 1971, by a Tory government.

In 2015, while spending lavishly on celebrating the Magna Carta anniversary, the government was asked in a written question in the House of Lords whether it would be celebrating the Charter this year. A Minister of Justice, Lord Faulks, airily dismissed the idea, stating that it was unimportant, without international significance.

Yet earlier this year the American Bar Association suggested the Charter of the Forest had been a foundation of the American Constitution and that it was more important now than ever before. They were right.

It is scarcely surprising that the political Right want to ignore the Charter. It is about the economic rights of the property-less, limiting private property rights and rolling back the enclosure of land, returning vast expanses to the commons. It was remarkably subversive. Sadly, whereas every school child is taught about the Magna Carta, few hear of the Charter.

Yet for hundreds of years the Charter led the Magna Carta. It had to be read out in every church in England four times a year. It inspired struggles against enclosure and the plunder of the commons by the monarchy, aristocracy and emerging capitalist class, famously influencing the Diggers and Levellers in the 17th century, and protests against enclosure in the 18th and 19th.

At the heart of the Charter, which is hard to understand unless words that have faded from use are interpreted, is the concept of the commons and the need to protect them and to compensate commoners for their loss. It is scarcely surprising that a government that is privatising and commercialising the remaining commons should wish to ignore it.

In 1066, William the Conqueror not only distributed parts of the commons to his bandits but also turned large tracts of them into ‘royal forests’ – ie, his own hunting grounds. By the time of the Domesday Book in 1086, there were 25 such forests. William’s successors expanded and turned them into revenue-raising zones to help pay for their wars. By 1217, there were 143 royal forests.

The Charter achieved a reversal, and forced the monarchy to recognise the right of free men and women to pursue their livelihoods in forests. The notion of forest was much broader than it is today, and included villages and areas with few trees, such as Dartmoor and Exmoor. The forest was where commoners lived and worked collaboratively.

The Charter has 17 articles, which assert the eternal right of free men and women to work on their own volition in ways that would yield all elements of subsistence on the commons, including such basics as the right to pick fruit, the right to gather wood for buildings and other purposes, the right to dig and use clay for utensils and housing, the right to pasture animals, the right to fish, the right to take peat for fuel, the right to water, and even the right to take honey.

The Charter should be regarded as one of the most radical in our history, since it asserted the right of commoners to obtain raw materials and the means of production, and gave specific meaning to the right to work.

It also set in train the development of local councils and judiciary, notably through the system of Verderers, which paved the way for magistrate courts. In modern parlance, it extended agency freedom, giving commoners voice in managing the commons, as well as system freedom, by opposing enclosure.

The Charter set the foundation for what is now called the communal stewardship of pooled assets and resources. Its ethos is the antithesis of the Government’s pretentious Natural Capital Committee, which is trying to capitalise the natural commons, to make them ‘profitable’. The commons exist for a way of living, not profits.

Over the centuries, the ethos of the Charter has been under constant attack. The Tudors were the most egregious, with Henry VIII confiscating ten million acres and disbursing them to favourites, the descendants of whom still possess hundreds of thousands of acres. The enclosure act of 1845 was another mass landgrab, mocking the pretensions of private property rights. Between 1760 and 1870, over 4,000 acts of Parliament, instituted by a landowning elite, confiscated seven million acres of commons. It is no exaggeration to say that the land ownership structure of Britain today is the result of organised theft.

Despite having endured centuries of abuse, the ethos of the Charter is still alive. But one feature of the neo-liberal economic paradigm that has shaped recent governments is a disregard for the commons, which the current British government has turned into a plunder under cover of the ‘austerity’ terminology. In the USA, the Trump administration has quietly prepared for the giveaway of millions of acres of federal commons.

For neo-liberals, the commons have no price, and therefore no value. So, they can be sold for windfall gains, or given away to their backers. By asserting the right to subsistence on the commons, the Charter recognised an alternative principle, something our ancestors defended with courage. We must do so now. We must resist the plunder of the commons and revive them.

A group is organising a series of events to do so. Everybody is free to join. Developing national and localised Charters of the Commons should go alongside the worthy Charter of Trees, Woods and People that will be issued on the anniversary day. Our modest efforts will not only emphasise environmental principles enshrined in the Charter, but also its subversive commitment to the right to subsistence that underpins the basic income movement of today.

The campaign began with an event laden with symbolism, a barge trip on the Thames from Windsor to Runnymede on September 17, where a public event highlighting the need for a Charter of the Commons was held under the awesome 2,500 year old Ankerwycke yew. The Runnymede meadow symbolises the commons. An earlier Tory government tried to privatise it, but an occupy movement organised by Britain’s first woman barrister succeeded in blocking the auction.

The barge trip’s symbolism does not stop there. Margaret Thatcher privatised our water in 1989. She gave nine corporations regional monopolies and gave them over 400,000 acres from the commons. Today, those corporations, mostly foreign owned, are among the country’s largest 50 landowners. They mock the principles of the Charter of the Forest. Thames Water, while paying its foreign shareholders £1.6 billion, has been convicted and had its hands slapped for pouring 1.4 billion tonnes of untreated sewage into the Thames, and is also doing too little to fix leaks. The Charter asserted that the commoners had the right to water. It should be a public good, and be renationalised as a matter of high priority.

As well as an event in Sherwood Forest emphasising fracking, there is an event in Durham, where one of the two originals of the Charter is preserved.

And on November 7, a meeting in the House of Commons will discuss a draft Charter of the Commons. In Lincoln, where the other original Charter is held, the Labour Party is organising an event on November 11.

Further information can be obtained from www.charteroftheforest800.org . If any organisation feels their agenda is relevant and that has not been contacted, let us know. We want all voices to be heard, all commoners to stand up and all of us to remember that reviving the commons is about recovering the future.

Image: Ampthill Forest, Bedfordshire. Flickr/UK Garden Photos, Some rights reserved.

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I looked forward to reading this book based on previous readings of Guy Standing’s work, based on his status as both a labor organizer and a theorist of the precariat’s role in the economy. I wasn’t disappointed.

At the outset, Standing explains what he means by “rentier capitalism.”

They assert a belief in ‘free markets’ and want us to believe that economic policies are extending them. That is untrue. Today we have the most unfree market system ever created….

How can politicians look into TV cameras and say we have a free market system when patents guarantee monopoly incomes for twenty years, preventing anyone from competing? How can they claim there are free markets when copyright rules give a guaranteed income for seventy years after a person’s death? How can they claim free markets exist when one person or company is given a subsidy and not others, or when they sell off the commons that belong to all of us, at a discount, to a favoured individual or company, or when Uber, TaskRabbit and their ilk act as unregulated labour brokers, profiting from the labour of others?

Far from trying to stop these negations of free markets, governments are creating rules that allow and encourage them. That is what this book is about.

Rather than rents declining in modern society with the eclipse of feudal landlordism, instead rents are more central to plutocratic incomes than ever before.

…today, a tiny minority of people and corporate interests across the world are accumulating vast wealth and power from rental income, not only from housing and land but from a range of other assets, natural and created. ‘Rentiers’ of all kinds are in unparalleled ascendancy and the neo-liberal state is only too keen to oblige their greed.

Rentiers derive income from ownership, possession or control of assets that are scarce or artificially made scarce. Most familiar is rental income from land, property, mineral exploitation or financial investments, but other sources have grown too. They include the income lenders gain from debt interest; income from ownership of ‘intellectual property’ (such as patents, copyright, brands and trademarks); capital gains on investments; ‘above normal’ company profits (when a firm has a dominant market position that allows it to charge high prices or dictate terms); income from government subsidies; and income of financial and other intermediaries derived from third-party transactions.

Rather than a “free market,” the neoliberal global economy praised as “free trade” by policy wonks is actually “a global framework of institutions and regulations that enable elites to maximise their rental income.”

Standing says 31% of Western corporate profits today, as opposed to 17% in 1999, are in industries where profits are rents on artificial scarcities like patents, copyrights and trademarks enforced under the neoliberal treaty regime established in the ’90s. To take one example, Apple — thanks to patents, copyrights and trademarks — runs a 40% gross profit on the iPhone. Two-thirds of drug research is funded by taxpayers, while patents add $140 billion to the annual price of drugs in the United States.

And Standing makes short work of the propaganda myth in favor of so-called “intellectual property”; rather than being a reward for innovation, the main actual purpose of patents is to prevent others from innovating. This is especially egregious, considering that most of the new technologies and products under patent were developed with heavy tapayer R&D subsidies, and then enclosed for private profit.

Alongside rents on the artificial scarcity of ideas, the state provides enormous rents to the propertied classes through the enclosure of land and natural resource commons, dating back to the enclosure of peasant land in early modern Europe, the engrossment of land (both vacant and native-occupied) in settler societies like America and Australia, the hacienda system in Latin America, the nullification of peasant land rights by colonial powers in Asia and Africa, and the looting of oil and mineral resources. Property claims to all these forms of looted land and resources have persisted in the hands of Western capital under neocolonialism, and one of the main functions of the state is to enforce such titles — in the name of “defending private property rights” — against attempts at reclamation by their rightful owners.

In addition to the above sources of rent through scarcity, another source of income to the rentier classes is taxpayer subsidies. Standing mentions the usual things — bailouts, corporate welfare to specific industries, and the way the welfare state subsidizes the reduction of wages by socializing the cost of reproducing labor power. But he neglects the most important ways in which the state socializes major operating costs of capital as a whole (which James O’Connor discussed in The Fiscal Crisis of the State).

As corporate profits tripled in real dollars since the 1980s, wages have stagnated and deindustrialization has caused the precariat to skyrocket as a percentage of the labor force. This last trend has further accelarated in just the past few years with the rise of the gig economy. Wages in the industrialized countries ceased to be linked to productivity from about 1980 on.

Neoliberal ideologues have pushed a propaganda line of austerity since 2008, Standing says, claiming falsely that the crash was caused by ordinary people living beyond their means, and that high public debt hinders growth.

In attacking this narrative, he is quite right. In reality the crash was caused by neoliberalism itself. People “lived beyond their means” because their means had been stagnant since the 80s and they had been increasingly forced to rely on consumer debt or borrowing against home equity to make ends meet. Neoliberalism also drives people into enormous student debt through the combination of credentialing inflation and the explosion of tuition costs — largely driven by administrative salaries — in higher education.

And the working class’s stagnating purchasing power coupled with the skyrocketing incomes of rentier elites meant that capitalism’s chronic crisis of over-accumulation and excess investment capital without profitable outlets continued to get worse, and the propertied classes relied increasingly on bubbles in the FIRE economy. That’s pretty much the same thing that led to the crash in 1929.

Public debt actually saves the economy, or at least delays the collapse that would otherwise result from surplus capital and underconsumption. Government deficits compensate for some of the lack of spending by a public with stagnant wages, and the government debt soaks up trillions of dollars worth of investment capital in the form of government bonds with a guaranteed rate of return — dollars that otherwise would become part of the capital glut and drive down the rate of return on investment in the private economy. Government debt is like a farm price support system for capital.

But the austerity propaganda machine tries to persuade the public that the proper way to address the crash is by using lower wages and a slashed safety net to prop up the face value of the assets that financial elites gambled on and lost.

In criticizing neoliberal capitalism, Standing is not nostalgic for the New Deal or Social Democratic era. Rather, he repeats a criticism from his other books: the “labourism” entailed in Social Democracy. Labourism privileges members of the industrial proletariat engaged in full-time wage labor at the expense of the lumpenproletariat, and lionizes industry at the expense of the social economy.

It was the zenith of social democracy. However, the model that underpinned the Great Transformation made ‘labour’, not all forms of work, pivotal. Socialists, communists and social democrats all subscribed to ‘labourism’. Those in full-time jobs obtained rising real wages, a growing array of ‘contributory’ non-wage benefits, and entitlements to social security for themselves and their family. Those who did not fit this model were left behind. As long as the latter were a small minority, supported by a means-tested social safety net, the system worked well enough. The proverbial worm began to turn when that minority started to grow.

The essence of labourism was that labour rights – more correctly, entitlements – should be provided to those (mostly men) who performed labour and to their spouse and children. As workers previously had little security, this was a progressive step. But it was inherently sexist and hierarchical, privileging those doing regular paid labour over those doing other forms of work, unpaid and outside the labour market, such as childcare and work in the community.

Labourism promoted the view that the more labour people did the more privileged they should be, and the less they did the less privileged they should be…. Labourism also led to dysfunctional aspects of the welfare state. To give regular employees labour-based security, there was a shift from wages to non-wage benefits, such as company pensions, paid holidays, maternity leave and sickness benefits.

This cemented a form of structural inequality between those in stable, full-time employment and those forced to take unstable or casual jobs, or doing more unpaid work than paid labour.

Standing makes it clear that the so-called “sharing economy” is nothing of the sort. Uber and similar platforms simply collect rents on physical capital owned by the drivers.

In one respect, the on-demand economy reverses a capitalist mantra. Instead of being owned by capitalists, the main means of production are ‘owned’ by the taskers – the precariat. The platforms maximise profits through ownership and control of the technological apparatus, protected by patents and other forms of intellectual property rights, and by the exploitation of labour through tasking and unpaid work. Labour brokers are rentiers, earning a lot for doing little, if we accept their claim that they are just providing technology to put clients in touch with ‘independent contractors’ of services.

Predictably, as the premier theorist of the precariat, Standing concludes by framing the precariat as what Marxists call the “revolutionary subject” of resistance to capitalism and the creation of a post-capitalist successor society. The traditional industrial proletariat, as Standing has argued in previous books, has become largely irrelevant to radical politics.

Only the precariat has the potential, in terms of size, growth and structured disadvantage, to articulate a progressive response to rentier capitalism and its corruption. The lumpen-precariat, the underclass, does not have the agency to act, although some in it might join protests, as they did in 2011. Literally, as beggars, they cannot afford to be choosers.

So, the revolt must be led by the precariat and those around them. But, to have a chance of success, it must have three features: a sense of unity around commonly held beliefs; a sustainable understanding of the flaws, inequities and unsustainability of existing arrangements; and a reasonably clear vision of feasible goals….

To curb the adverse distributional effects of a rentier economy, a new distribution system must be constructed in which wage earners and others receive part of the income accruing to rent and profits. Wages by themselves will not sustain living standards. In the twentieth century, it made sense to focus on wage bargaining. That will not work now. The struggle must be to build a new system. While wages will continue to stagnate, innovative ways must be found to limit and share rental income and to share profits. Otherwise inequality will continue to grow, with ugly social and political consequences.

As one important means of resistance, Standing proposes the “social strike” — millions of people in the streets for extended periods at a time — on the model of Occupy and M15.

As an agenda, he enumerates the following laundry list

• elimination of the patent system for technologies developed at public expense, and radical scaling back of the duration other patents are in effect combined with compulsory licensing
• elimination of all corporate subsidies
• the removal of money from politics
• regulation of the gig economy with mandatory employer insurance
• the replacement of legal licensing regimes for most professions, except those with genuine public safety rationales, with collective self-governance
• reasonable on-call pay
• using revenue from taxing rental income and natural resource extraction to create sovereign wealth funds which pay a social dividend or basic income

The proposal for regulating the gig economy strikes me as the most-wrong headed on his platform. In the past I’ve expressed an openness to see regulation as a net benefit for liberty if it imposes secondary restrictions on the abuse of privilege that results from primary interventions by the state (e.g. in the specific case of Net Neutrality). Nevertheless it would make far more sense to directly target the primary state interventions that enable phony “sharing economy” platforms like Uber and Airbnb — namely ceasing to enforce the legal foundations for such proprietary, walled garden apps — while at the same time promoting radical union seeding of the gig economy labor force and jailbreaking the apps, in order to replace the existing capitalist gig economy with ecosystems of genuinely cooperative/peer-to-peer alternatives instead. Another important innovation we need to see more of is cooperative/p2p social safety nets organized through a revived guild system of freelance and gig economy workers.

I’m generally friendly to proposals for Social Credit/Citizen’s Dividends/Basic Income funded by taxes on economic rent or negative externalities (CO2 tax), as transitional measures. That is, so long as the state continues to exist and to enforce monopolies and artificial scarcities, and to be funded by taxes, taxes on income derived from artificial scarcities amount to a net reduction in exploitation. And the replacement by the intrusive welfare state, whose actual purpose is (in the words of Frances Piven and Richard Cloward) regulating the poor, by an unconditional subsistence income for everyone is also a step in the right direction.

If there is to be a Basic Income, it cannot be feasibly be funded by a tax on income — for political reasons if nothing else — but by the creation of social equity in the property of the rentier classes.

I recommend this book, along with the rest of Standing’s body of work, as an example of the kind of outside-the-box thinking the Left needs in place of the dinosaur Old Left’s organization and policy models if it is to be relevant to the new economy.

Photo by Pete Lewis

The post Book of the Day: The Corruption of Capitalism, by Guy Standing appeared first on P2P Foundation.

“There is a lie at the heart of global capitalism. Politicians, financiers and global bureaucrats claim to believe in free competitive markets, but have constructed the most unfree market system ever. It is corrupt because income is channelled to the owners of property – financial, physical and intellectual – at the expense of society.

This book reveals how global capitalism is rigged in favour of rentiers to the detriment of all of us, especially the precariat. A plutocracy and elite enriches itself, not through production of goods and services, but through ownership of assets, including intellectual property, aided by subsidies, tax breaks, debt mechanisms, revolving doors between politics and business, and the privatisation of public services. Rentier capitalism is entrenched by the corruption of democracy, manipulated by the plutocracy and an elite-dominated media.

Meanwhile, wages stagnate as labour markets are transformed by outsourcing, automation and the on-demand economy, generating more rental income while expanding the precariat.

The Corruption of Capitalism argues that rentier capitalism is fostering revolt, and concludes by outlining a new income distribution system that would achieve the extinction of the rentier while promoting sustainable growth.”

More details can be found here.

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Mark Twain wrote of the late nineteenth Century as a Gilded Age in America, in which vast inequality and insecurity were masked by a veneer of wealth concentrated in the hands of the few. In his new book Guy Standing suggests that we are now living through a Second Gilded Age. Only this time, it’s global.

Guy Standing, best-selling author of The Precariat, argues that governments and international institutions have combined to build the most unfree market economy ever created. It is a deeply corrupt system in which income and wealth are increasingly channelled to the owners of property – financial, physical and intellectual – at the expense of everyone else.

The book reveals how global capitalism is rigged in favour of this ‘rentier’ class to the detriment of workers – not just those in low-paid jobs, but many professionals and entrepreneurs. While wages stagnate, rental income has soared. A powerful plutocracy and elite has enriched itself, not through production of goods and services, but through ownership of assets, including patents and other forms of intellectual property, and the private exploitation of scarce resources.

It has been aided by government subsidies, tax breaks, corrupt deals and the ongoing privatisation of public services. Debt has become an integral part of the system. Meanwhile, labour markets are being transformed by outsourcing, automation and the rise of the on-demand economy, generating more rental income for the few while creating an ever larger precariat.

The age of rentier capitalism has been entrenched by the corruption of democracy, manipulated by the plutocracy and aided by its concentrated ownership of the media. The Corruption of Capitalism shows why the rise of rentier capitalism must be reversed. If it is not, dire social and political consequences will follow.

Advance praise for The Corruption of Capitalism:

“The Basic Income is an idea whose time has come, and Guy Standing has pioneered our understanding of it … As we move into an age where work and leisure become blurred, and work dissociated from incomes, Standing’s analysis is vital.”

Paul Mason, author of Postcapitalism: A Guide To Our Future

“Guy Standing’s incisive critique … should put politicians and ruling elites on the alert.”

John McDonnell, shadow Chancellor of the Exchequer

“In this thoughtful book, Guy Standing focuses on the central problem of modern capitalism … and suggests useful and important solutions.”

Robert Reich, Labor Secretary to President Clinton, 1993–97

Guy Standing is a professor at the School of Oriental and African Studies, University of London, and a Fellow of the Academy of Social Sciences. He was previously Professor of Economic Security at the University of Bath, Professor of Labour Economics at Monash University, and Director of the Socio-Economic Security Programme of the International Labour Organization, in the United Nations. He is a co-founder and honorary co-president of the Basic Income Earth Network. His books include A Precariat Charter: From Denizens to Citizens (2014); The Precariat: The New Dangerous Class (2011), Work after Globalization: Building Occupational Citizenship (2009), and Basic Income – A Transformative Policy for India (2015).

Photo by Pulpolux !!!

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