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

The post Guy Standing’s Commons Fund for the Precariat. appeared first on P2P Foundation.

Consider how odd this is: the demand for goods is used as a proxy for the relative accessibility of non-renewable resources — yet the increasing scarcity of fossil fuels isn’t showing up in the price we pay at the gas pump. Same with water and rare minerals, which are not valued according to their declining availability. Nor does eco-value appear on the spreadsheets of most stock traders, insurance companies or other businesses.

What’s causing such rampant misreporting and misallocation? I’ve come to see this now as more a problem of accountability than accounting. Frankly, the challenge is to admit our mistakes and reconceptualize the modern system of economic valuation, starting with the theory that it’s based on a fundamental law of equilibrium. Take, for example, Adam Smith’s idea that the efforts of individuals in pursuing their own interests naturally benefit society, or the notion that an organic circular flow exists between market prices and people’s incomes. Are these assumptions valid? And what do we mean by economic balance? Is it a principle of physics or biology?

Let’s begin by asking, is supply and demand truly able to manage the thresholds of resources which an environment can sustain, or to ensure that these resources are allocated sufficiently for the population living in that environment?

In both classical and Keynesian economics, the ratio between the supply of a quantity of a good or service and the demand for it is determined by the price of this quantity. What is tallied on the supply-side of this equation are production costs, which include labor, capital, expectations of future prices and suppliers, and the technology that’s used in production. The relative availability of materials and energy for production is also listed as a supply cost, although seldom in ecological terms. The rate at which people and their organizations may harvest or use a particular resource within its regenerative capacity is not normally registered on the supply side as an ecological yield, but as a financial outlay. Nor are the negative effects of pollution, waste, ill-health or risk typically included in production costs.

Conversely, the demand side of the market economy measures consumer income, tastes and preferences, prices of related goods and services, expectations about future prices and incomes, and the number of potential consumers. Rather than reflect actual human need, demand is a measure of individual consumption at the point of sale. It’s simply the price at which a person is willing to pay for something, signifying how much cash or credit is exchanged in the transaction. But what’s not measured by demand is the individual’s accessibility to breathable air, clean water, nutritious food, adequate shelter, or meaningful security, love, belonging and inclusion. Subjective expressions of need, beauty, volunteer labor, loss of commons or health and safety risks are simply not involved in the transmission of demand through the cash register, barcode scanner or wireless purchase.

A similar structure for market equilibrium is applied in banking and finance. Just as the supply-demand formula in microeconomics is based on a functional connection between producers and consumers, the supply-demand ledger is used in macroeconomics to express a similar type of relationship between lenders and borrowers. Here, the equilibrium between the money supply and the demand for money is adjusted through an interest rate, which represents the price that is charged for money.

Once again, this represents a certain kind of transactional balance within the marketplace, but does not reflect the broader relationship between the ecology and its population. When all that’s expressed in the standard supply-demand equation is the price of a particular commodity or good, or an interest rate which signifies the price of money, neither resource preservation and replenishment rates nor specific measures of the human need for this resource are accounted. Nor does the supply-demand equation convey the underlying costs of social harm or environmental damage that may be incurred.

This disequilibrium in value has also led to deep political biases in how the supply-demand model should be applied in society. On one hand, classical and neo-classical economists say that ‘supply creates its own demand’. They promote strong policies for investment and production through individual initiative and limited government intervention in the economy, while rationalizing endless resource extraction, production, growth and waste. In using supply-demand for their scale of balance, these analysts rarely question why the exponential values in the economy are so disjointed from the biological growth rates which occur in the natural world.

On the other hand, Keynesian economists say that boosting wages and purchasing power generates demand. They promote policies of shared investment and production through intervention by a government in its economy, while ignoring the destructive competition which this creates between available resources and the needs of a population for these resources. Here, Keynesians are little different than classical economists: both schools assume that meeting human needs is dependent on extractive production, expanding population, continuous demand, increasing personal income, rising consumption and the unintended but inevitable byproducts of manufactured pollution and disposable waste.

Neither choice is correct because the basic theory of market equilibrium ignores environmental and social costs, deeply misinterpreting the dynamic link between ecological support systems and the people who depend on them. This vital connection is seen simply as a ‘supply chain’ through which a quantity of something demanded by consumers or borrowers is delivered to them based on the quantity that firms or banks can supply. Neither the classical or Keynesian approaches to supply and demand reflect the constraints to the productive capacity of Earth’s resource base or the maximum size of a population which can be maintained indefinitely within that environment.

Our economic proxies for environmental balance are directly to blame for these fateful miscalculations. As a subsystem of a larger ecosystem, the supply-demand model does little to equalize the natural sources of productive input with the natural sinks of consumed output or waste, leading to massive market failure. Under the illusion of supply-demand equilibrium, human population is now using the basic resources of food, water, energy and minerals faster than Nature can replenish them to meet the needs of its people. To reverse this critical overshoot, we’ll have to transform our epistemology, our ideologies, our institutions and rules, as well as our methods of accounting.

All of this requires a clearer understanding of the interactions between the biosphere and human society. The ecological threshold of available resources and the allocations of those resources to meet the needs of a population are actually opposing forces which continuously counteract one another. This dynamic principle exists between every species and its environment: living organisms react to changes in their ecosystem and make adjustments to survive.

Through this constant interplay between natural and physical forces, instead of supply creating its own demand through prices or demand being dependent on income, the signaling of need by an organism routinely triggers the creation of its own supply. These self-regulating forces work in Nature and within the biology of the human body; they must also work in human societies. Measuring the replenishment of renewable and non-renewable resources will enable a society to sustain their yield relative to the offsetting needs demonstrated by the size and growth of the human population.

These divergent forces must be given an empirical basis in socioeconomic policy beyond the inept framework of supply-demand. Counterbalancing the needs of a population with its resource support systems requires a major readjustment. Here’s how this might work. What’s now included on the supply side as extraction, production and waste is redefined as the self-organization of resources within the ecological limits of the planet for their regeneration. And what’s now reported on the demand side as a measure of income is redefined as the  of people in meeting their daily requirements through the common use of these resources.

When supply becomes an ecological value and demand becomes the value of human need, ‘build it and they will come’ is transformed into ‘demonstrate the need and it is met’. Now, instead of a crude approximation for economic equilibrium, we have an actual measure for the cooperative activities of people managing their resources to meet their needs — a measure based on the level of regenerative output which their ecology can optimally ‘carry’ or sustain.

The term for this dynamic equilibrium between people and their environment, which points the way out of our supply-demand matrix, is biocapacity. Biocapacity expresses the intrinsic value of sustainability within an ecosystem. It is based on the thresholds of resources which can be sustained in an environment as measured against the allocations of resources sufficient to meet the needs of its population. Through this ecosystem value, biocapacity offers direct indicators and guidelines to help us organize our own sufficiency through the steadily fluctuating, self-adjusting metabolism of society as a living system.

Note: James Quilligan presented these comments at the Global Thresholds and Allocations Council (GTAC) Kickoff Meeting at the Royal Dutch Federation of Accountants in Amsterdam, convened by Reporting 3.0 on 31 January 2018, in a session on Allocation Approaches with fellow speaker Mark McElroy of the Center for Sustainable Organizations, moderated by Bill Baue of Reporting 3.0. The 35+ global experts gathered at the meeting sat in rapt attention while James spoke, and broke into spontaneous applause when he finished. Please see the GTAC Landing Page on the Reporting 3.0 website for links to the GTAC Concept Note, Meeting Presentation Deck, and Meeting Program (with abstracts by all speakers, including GRI Co-Founder Allen White, Johan Rockström of the Stockholm Resilience Centre, Doughnut Economic author Kate Raworth, Future Fit Foundation CEO Geoff Kendall, International Integrated Reporting Council Managing Director Neil Stevenson, and many others.)

This article was first published in Sustainable Brands.

Photo by steinertree

The post Beyond Supply and Demand: The Dynamic Equilibrium Between Global Thresholds and Allocations appeared first on P2P Foundation.

Juan Urrutía: Good morning to everyone, and welcome to this poor mountainside in beautiful Madrid [province]. I am sorry I wasn’t able to arrive yesterday and even more sorry I won’t be able to stay and sleep here tonight. I’m sorry because “conversation” has taken on a special meaning for Las Indias, since it is both a fundamental instrument in search of Communitarianism (the Communard Manifesto largely serves this “conversation”) and a component element of the “good life.”

And, obviously, I thank the Indianos, who I feel part of, for the invitation to open the conversation of Somero 2016, where the Indianos have come together to think about this moment the world is living through, to listen to themselves and each other about how enough can be produced to create Abundance, lead to a “Good Life,” and collaborate to sustain a “Good Society.” This change between the approach to Somero 2015 and Somero 2016 is a good starting point for my talk. From ideas to revolutionize the world, we move to discuss a new world that… has not arrived yet.

Introduction

Let me announce from the beginning that I may not be able to rise to the occasion of this new stage, because I don’t think that any idea emerges from my words that need introduction to a community in the clear and obvious Direct Economy (making beer for example). At best, there will be words related to teaching and learning, and to knowledge and wisdom, that try to clarify these distinctions, suggesting that perhaps two paths can be opened, i) the one that goes from teaching to learning, and ii) from knowledge to wisdom.

In any case, I’m going to try to stick to the title suggested by Las Indias, “Keynes, the Good Life, and Abundance,” and accepted by me with pleasure, and which provides three crucial conditions, since I will have to talk about three things that have been “put upon” me:

1. Politics, trying to identify the kind of social and power relationships in which The Good Life arises, or can arise.
2. Economy, freely explaining the future of the economic system which, if we do it well, could lead us to abundance.
3. Keynes, someone I hold to be exemplary, as a macroeconomist and public servant in various positions—university, finance, etc. And he was a practitioner of a good life in Bloomsbury.

Politics: for a petty-bourgeois liberalism

What I’m going to to tell you under this rubric was written 25 years ago and reproduced in June of 2014. In any case, I will follow a summary that David and Natalia worked on in their day.

Fifteen years ago, I tried react against the revolutionary American neo-conservativism during the mandate of Bush, Jr., that justified the beginning of the Iraq war. To do so, I had to declare myself anti-revolutionary and petty bourgeois, a gesture that I was enthusiastic about, since neo-conservativism was “the revolution” of the moment (we remember the Azores). The bourgeoisie was identified with the unity of Big Businesses, Finance, and State, gelled by news media subjected to the power of these three institutions. I will now review the characteristics of this “counter-revolution” that proposed to face the “neoconservative revolution”:

1. The primacy of freedom
   1. The need for individual ethics (individual responsibility)
   2. Truth before happiness (not all means are legitimate)
   3. Rebellion and experimentation (as we’ll see in Keynes)
   4. Diversity (demanded by individual freedom and the corresponding responsibility)
   5. Freedom before utility (which demands private property)
   6. The universalization of human rights, or if you prefer, “generalization,” since universalization is a issue debated among the Indianos.
2. The primacy of individualism, which, although it may seem contradictory, puts identity ahead of individualism (we will see later that this community identity in competition maintains diversity)
3. The primacy of spontaneous order
   1. Participatory “project-ism” (which would allow interventionism to Keynes or Stiglitz)
   2. Small, strong State (of all the forms of power, confederation is my favorite)
   3. A “functionariate” of the elite (Keynes is an example)

I have always thought that all these characteristics were to be found in Keynes.

Economy: Abundance

Once I declared that I belonged to the petty bourgeoisie (at least as a professor), it then fell to me try to convince people that, a) the best economic form is the market, b) as long as this market does not create rents, and c) it creates abundance. Once this task is fulfilled, I will be able to move on to discuss what The Good Life consists of.

Identarian community

We can only describe here in outline form how communities are formed through an evolutionary game consisting of forming pairs randomly and constantly making them play a game such that a network is formed, a process in which social habits or memes appear until a balance is arrived at in the evolutionary game, called the Evolutionary Stable Strategy, or the “mutant-proof balance,” since no one is interested in going outside the guidelines of conduct in the balance.

Fraternity and possibility of abundance

In the balance of the evolutionary game, fraternity happens, a term that includes friendship and the pleasure of being together. This fraternity has two crucial characteristics, which are mutual trust and the credibility of commitments. If the network we’re in is really distributed, we come upon the possibility of abundance because a) transaction costs decrease through mutual trust, b) the network effect, or Matthew Effect, happens, according to which, “to him who has, more will be given,” due precisely to the fact that joining a very dense network decreases costs and c) economies of scope appear, according to which, more is earned by expanding the range of products manufactured by a company than by increasing the production of a single product. At the limit, we find the balance of perfect competition in a digital world, like today’s world taken to its limit.

Problems

Before reaching the limit, however, not everything is rosy.

1. Revolution is dependent on the threshold of rebellion of the epistemic condition (or, who knows, common knowledge at its limit) and the density of the network. Example: in conservative communities, revolution is easier the less dense the network is, as in England.
2. The Communal. This a good that is non-rival in consumption but suffers from exhaustability. The market treats these semi-public goods and existing solutions as bad, unless they are perfect and local. As the increase in digital goods increases the volume of these goods, the kingdom of abundance is not so easy to reach, generally, and meanwhile, bad solutions are created, such as a) laws on intellectual property, b) funding of knowledge through public money, or c) disincentives on the rankings of scientists.
3. Dissipation of rents. As no one has any monopoly power in perfect competition, because the threat of simply going away is credible, there are no rents in it. But even in that case, the State could create them in favor of the powerful. As an example, let’s think about the financial beach bars of so-called “fintech,” which could reduce part of the power of banks and wait to see how that possibility evolves. Also, we should remember the distinction between pleasure, produced by struggle, and comfort, created by enjoyment (Hirschman).

“The good life” and “the good society”

The problem with translation

I want identify the way of life to which I think a commoner aspires. I’m going to call it “The Good Life” [English words used in the original Spanish text], but immediately I find myself “Lost in Translation.” A “Good Society” is a set of individuals that lead a “Good Life.” Then, if I want know how translate a “Good Society” I have to translate first “Good Life.”

It has been tried many times. Sometimes as the good life (in the sense of holding to a good life), sometimes as a good life (the opposite of a bad life, like that of a criminal, let’s say).

I dare to try define the meaning of “The Good Life”:

The Good Life denotes a way of life that includes a certain care with things, living or dead, that surround us, so that they will remain there; an absence of abuse of things or self; a certain modesty (or only a small degree of arrogance) in the attitude towards life, except when facing the powerful.

Therefore, a good translation could be a dignified life, or full, or modest, or collected. I’ll stick with a dignified (or full) life, which I think can only be exercised in petty bourgeois liberalism.

Accordingly, I suggest that we translate “The Good Society” as a worthy society which, naturally, would include equality of opportunities.

The Bloomsbury Group

This group, so strange to us, can be the real corollary of what I now call petty bourgeois liberalism. The mix was very heterogeneous, because it included people like Virginia Woolf, J.M. Keynes, B. Russell, and others with highly variable positions and practices; but everyone had some common characteristics, such as a) pride in their education, b) a break with Victorian classicalism and c) pride in being light to the world.

Its situation in the world was, in some sense, like ours today, given technological changes and the need to reinvent themselves. Keynes belonged to this group, which met at home of the Bell sisters in Russell Square. Only this way can it be understood that he wrote The Economic Possibilities for Our Grandchildren, whose subtitle in Castillian Spanish is “What is Needed for a Good Life?” while in the original, “…for a Good Society” is used, which brings us back again to the problem of translation. In any case, it should be clear by now that a “Good Society” includes self-realization of the individual members that it is made up of.

Quantification of the Good Society

The two Skidelskis (Robert and Edward, father and son) make an effort to quantify the income necessary for a family to lead a “Good Life.” But they themselves say that this quantification is not very important: “Progress should be measured not by the traditional yardsticks of growth or per-capita income;” but by the seven elements of a “good life” or full life. These yardsticks are 1) health, 2) security, 3) respect, 4) personality (individual identity, perhaps “being someone”?), 5) harmony with nature, 6) friendship (fraternity) and 7) leisure.

In any case, I hurry to say that these are not the pillars of wisdom but only some ideas we will never be able to stop talking about in a community. Let us look at two qualified opinions on education, related, without a doubt, to several of the yardsticks. Phelps:

We will all have to turn from the classical fixation on wealth accumulation and efficiency to a modern Economics that places imagination and creativity at the center of economic life.

And Sen recalled that debates were the teaching methodology in the old University of Nalanda (the oldest in the world).

I dare to conclude this section saying that education must focus on values associated with the Humanities, in which efficiency and wealth do not stand out as much as happiness and the meaning of work well done, which are only acquired in an institution in which the primary consideration is learning through debate, without so much emphasis on study, which seemed to be so necessary in the last century.

Final Comments

And to finish, I’m going to limit myself to highlighting that Keynes and his teachings illustrate everything that he tried explain on the topics of liberalism, abundance, and the worthy life. I am going to do so by providing some quotes, both from John Maynard himself, and from Joaquín Estefanía in his lengthy introduction to the essays on persuasion by the master.

Estefanía

The academic economy did not stimulate his inventiveness, but the great problems of the applied economy and their discussion were able to drive his passion; then he set in motion his great intellectual faculties and his qualities of persuasion.
p.37.

I will not try to improve on Estefanía, but I want make it clear that we should clarify if there really is a distinction between a) applied economy vs. academic economy, b) inventive vs. intellectual faculties, and c) political persuasion vs. academic persuasion.

His scholars remind us over and over that for our author, the “good life” is the sole rational objective of economic effort; the rest—the deficit, debt, inflation and deflation—mere intermediate and instrumental stages.
p.51

This quote raises two concerns for me: a) to limit oneself to quoting only macroeconomic problems as topics of economic studies is not adequate, although the same affirmation would be appropriate even if he had added microeconomic issues. b) To what extent is the “good life” Estefanía refers to is specific to Bloomsbury?

Keynes

In the essay “Am I a liberal?”:

In a period of extreme abundance there is the maximum of individual liberty, the minimum of coercive control through government, and individual bargaining takes the place of rationing.

It’s not well-written, but it fits with my political talk, and what it means is that in the kingdom of abundance, we can live without spending all day thinking, and that lets us live the “good life.”

We have to invent new wisdom for a new age. And in the meantime we must, if we are to do any good, appear unorthodox, troublesome, dangerous, disobedient to them that begat us.

Here, it is fitting to remember the distinctions we’ve made between an education that, at another level, is Kontraren Kontra [contrarian] (although we are).

In “The Economic Possibilities for Our Grandchildren“:

The strenuous purposeful money-makers may carry all of us along with them into the lap of economic abundance. But it will be those peoples, who can keep alive, and cultivate into a fuller perfection, the art of life itself and do not sell themselves for the means of life, who will be able to enjoy the abundance when it comes.

Here, I would like to recall a detail personal. The economic wisdom of our parents, at least of my father: never spend your equity, and spend the interest on it very wisely.

The course of affairs will simply be that there will be ever larger and larger classes and groups of people from whom problems of economic necessity have been practically removed.

Abundance will arrive, but little by little, and by socioeconomic levels. And only as long as the rich do not abuse it by creating rents.

Conclusion

If I had to single out something from what has been said so far, I’d choose an implication that is not at all obvious, and, really, I haven’t said anything about. Namely, “performativity.” And I’ve built myself a quote, as if this idea of mine was memorable: When people are prepared to live in abundance, true abundance (not foolish waste), then it will happen.

If I am right, our task as communards is to build a new way of life.

Translated by Steve Herrick from the original (in Spanish)

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Photo: “We don’t worship work: basic income”

A few days ago, Yanis Varoufakis defended the idea of a universal minimum income independent of work and social coverage, the basic income, as the structural reform needed to end the crisis.

The first thing to do with Varoufakis, as with anyone who makes an argument, is to understand their frame of analysis and its objectives. The center of Varoufakis’ economic thought is an old idea that has tortured many of the great economists of history, like Ricardo, Marx, or Keynes. The idea is simple and powerful: crises happen because, by itself, capitalism is unable to create an effective demand capable of absorbing all of its production.

Varoufakis’ critique of Keynes

For Keynes, the main way to escape from this tendency is rebalance the relationship between consumption and investment. The way is monetary policy—making credit more accessible to produce inflation and incentivize families to spend more before their savings lose value—and, as an exception, public spending, making the State a substitute for the nonexistent increase in family spending. But in general, Keynesians have also applauded redistribution of rents (which might or might not mean direct public expense). Basically, the Keynesian solution consists of using the State (the central bank or government apparatus) to turn chronic over-accumulation into effective demand, preferably from families, but also from the State. In reality, Keynes didn’t care how that was produced, with a “New Deal” or with a “welfare State,” but it’s logical that in the postwar consensus, Keynesianism converged with social-democratic models.

What Varoufakis tells us is that this model isn’t going to work any more. On the one hand, it’s the legacy of neoliberalism, financialization, that makes it impossible to significantly expand credit even more.

On the other hand, there’s a peculiar idea: that the robotification of services through Artificial Intelligence represents a new kind of innovation for him, a new way of increasing productivity in which—according to him—for the first time in history, unemployment created by the conversion of the affected sectors (services) wouldn’t be absorbed over the long term by new sectors (we’ll comment later on this idea). This structural trend of growing unemployment would make social security systems as we understand them today nonviable, which is to say, labor organized via the State that makes payments towards the pensions and health expenses of not only active workers, but pensioners and the unemployed. The global result, Varoufakis tells us, is Keynesianism’s vision of hell: an insurmountable imbalance between savings/investment/accumulation and family and State consumption (effective demand) that produces a permanent deflationary trend.

But, following Keynesian logic, given that those who have the least are the ones can save the least, creating a minimum income that’s delinked from work, “just because,” would increase effective demand without substantially increasing savings (which equals investment, or what the Marxists would call “accumulation”). To put it crudely: everything distributed through the minimum income would become consumption without affecting investment and savings. The economy would grow again, and would do so in a much more balanced way. The amount of the minimum income would become a simple, standalone lever, and the economic planners of the twenty-first century would play with it in very much the way the central bankers of the twentieth century played with interest rates. That way, a minimum equal income for everyone, Varoufakis tells us, is the most effective way to confront the deflationary trends that manifest capitalism’s inability to balance itself.

At this point, the idea of the State giving up insurance systems (health, unemployment, retirement) and a part of social policies (direct grants for social inclusion) in favor of a equal minimum universal income for everyone is already sufficiently justified for him. As of this moment, the discussion is settled, and the rest of the arguments are already merely “politics,” enticement, rhetoric, or making the case. He makes this quite clear in his presentation. After the description of the problem of the crisis and the reasoning of his solution, he puts all those arguments into a little box that he calls “narrative” and instructs the audience on how to use it. And that’s where Varoufakis is mistaken.

He’s thinking not like the good economist that he is, but like a typical economist of a financial institution, or like a consultant for an international organization, providing a solution to a single problem—the deflationary trends that weaken growth—without considering anything else. He’s not thinking like Keynes thought, except insofar as Keynesians now run the World Bank and other temples of the “international class.” And he’s wrong because the impact and social meaning of public policies are measured by much more than their effect on interest rates.

What would Europe be like with a basic income?

First off, there’s a series of important economic critiques of Varoufakis’ argument. By centering on the monetary aspect of the crisis, he leaves aside the transformations in the productive base of capitalism, the seeds of which have been there since its origin, and which financial capital only magnifies. What’s more, he’s missing something fundamental that Mason and Bauwens could see: that the reduction of optimal productive scales—of which AI is a part—together with distributed networks, provide an opportunity for a profound change in the economic system: going from producing value to producing abundance. As a result, he doesn’t see the most basic thing: just because big businesses aren’t going to absorb the surplus of labor that they themselves produce, that doesn’t mean that this surplus is going to be permanent, or that the working class has no other alternative than living life subsidized by State rents.

But beyond theory and the existence of alternatives that go beyond Keynesian patches, the narrative of the “guaranteed minimum income” (previously known as “basic income”) hides a good part of its moral, social, and political costs.

The loss of the centrality of work feeds xenophobia

To begin with, it places most of the middle class and the working class in a situation of direct dependence on the State. The logic of the public insurance system was that the State administered pension, health, and unemployment funds. But these, in the end, depended on labor. As says Varoufakis: “labor insured itself.” By becoming a purely redistributive system, disconnected from work, the center definitively becomes the State. But the “really existing” State is not a universal State, and not even a “universalist republican State.” It is fundamentally and universally a nation-State. It is the kind of State that manufactures national identity and is legitimized through it. In the nation-State, being a citizen is the result of having its nationality, which is why it’s inherited from parents. That’s why hundreds of thousands of Argentines, for example, vote in Spain, even in local elections, without having ever resided there and without anyone minding much.

That perverse logic, which questions the citizenship of many who contribute and exalts that of many others who haven’t so much as visited, would be reinforced in the world of the universal minimum income. In the world of the basic income, it’s not creative citizenship—what you contribute to society through your work—but national identity that guarantees you a minimum income. As Varoufakis himself says, in a regime of “guaranteed minimum income,” it’s the transfers from the State that make you a citizen, independent of your contribution. To me, that seems like a true moral perversion. But its political consequences are still worse.

The Europe of the basic income would no longer be the Europe that considers migrants on the basis of what they contribute to social security, but a double-walled Europe that would see migrants as more people the “social dividend” that Varoufakis talks about has to be distributed to. They become competitors in the zero-sum game that the distribution of a given benefit always is, and not as workers whose work creates value and supports everyone’s social security and pensions.

One of the main reasons that racism is growing across Europe is the loss of the centrality of work, due to the increasing importance of grants and social assistance to many precarious families. That’s why the narratives of the extreme right are again gaining traction in the working class. Do we want to reinforce them?

The story that Varoufakis proposes puts us in a world where xenophobic narratives would be legitimated. It’s no coincidence that the country where we’re seeing the most openly discriminatory and xenophobic public policies is Denmark, where the link between work and public rents is already almost non-existent. It’s hard to believe that someone like Varoufakis doesn’t see the causal relationship between change in the narrative that’s fundamental to redistribution and the growth of an ethnic and xenophobic nationalism.

Basic income at the cost of more inequality?

But he also doesn’t seem to realize, as we’ve seen in the Swiss campaign for the referendum, that it opens the door to a brutally regressive tax system and an exponential rise in inequality.

In Switzerland, the promoters of the referendum proposed to finance the basic income with a VAT of 50%. That’s very high, they recognized, but they assured us that there would no longer be an income tax or social taxes, that fraud would automatically be reduced, and that there would be less interference in prices mechanisms, which is why the economy as a whole would be more efficient and competitive. That’s all true. But there’s a problem: someone who has little income spends it all on survival. They pay 50% in taxes on what they earn. But as income increases, the percentage that we use for consumption is smaller and smaller. The percentage they would pay in taxes is the same. It’s the drama of indirect taxes. They’re regressive, which is to say, the more you earn, the smaller the percentage of your revenue you have to pay. Indirect taxation favors inequality, taking proportionally more from those who most need that money. So, the weight of modern tax systems falls on direct taxes, in which each income “bracket” pays a higher rate than the one below.

It wouldn’t necessarily have to be this way. A basic income can be built on a more balanced tax system, but advocates of the basic income can’t just gratuitously advocate a move to a tax system based only on indirect taxes. They know that superimposing a real basic income, equivalent to a minimum wage, on a system of direct and progressive taxes would raise fiscal pressure to the point of making most small businesses nonviable, which would drive unemployment up.

Why is the basic income an attractive strategy?

The basic income is an attractive proposal because fits very nicely into the spirit of our time.

On the one hand, there’s the argument from individual empowerment, which is very important. The social experience of unemployment, with all its stigma and guilt, makes it odious for us to deal with the State, and even more so to tell some functionary about our misfortunes, to have to bear the scrutiny of a functionary or a family doctor to get sick leave. The basic income is as desirable as the abolition of customer service by telephone operators. It has the same kind of attraction that makes more and more people replace visits to their bank with a web page or an app.

On the other hand, it’s something “new” that can apparently overcome wearisome partisan divisions. The libertarian Right sees it as a corrected and expanded version of school vouchers. The new Left sees the centrality of the State as an acceptance of its values, and believes it’s found the alternative to the European social/Christian democratic model that was so rattled by neoliberalism.

It’s also logical that it would attract technocrats and academics, and even some critical economists as well-liked as Varoufakis. The idea of reducing the central part of social policies to a redistributive variable (the amount of the minimum equal income for everyone) opens up not only a theoretical playing field in macroeconomics, but the possibility of an independent agency that sets it the way central banks set interest rates. The economy and economists would return to the center of practical economic policy, and politicians would see their power reduced in favor of analytical arguments.

There’s no doubt: the basic income starts with good intentions. And yet, it would be a grave mistake.

The hidden face of the basic income

The main problem with the basic income is that it would mean the definitive end of the centrality of work in the social narrative. It’s not just a moral problem, it’s that we will only be able to win sovereignty over the economy if we take the other path. In this, Mason is completely right to once again defend the theory of labor value, even if only to put work, the transformative capacity of our species, at the center of the social and economic problem.

If worrying about the end of the centrality of work sounds too philosophical, its direct consequences are quite practical: the rise of the centrality of the nation-State and national identity in daily life, with the consequent legitimization of nationalism and xenophobia.

And if this wasn’t enough, a very possible reinforcement of the rising trend of inequality because of the kind of regressive tax system proposed as fiscal base of this model. And if it tries to balance itself, which seems inevitable, there will be a still greater reduction of the SME and freelancer community and jobs, to the benefit of Big Business.

In summary, it attacks everything in the world we live in that makes it possible think about and work for a good society that can advance towards overcoming scarcity and inequality.

Varoufakis is mistaken. Very much so.

Translated by Steve Herrick from the original

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