Moral Aspects of Basic Income
The fall of Adam and Eve is a metaphor for the demise of our hunter-gatherer lifestyle. Eden is the recollection of an oppressed peasantry of the more humane world of their happier ancestors. Before we bit the apple, we lived off the fat of the land. Hunter-gatherers lived longer, ate better, and worked less than their agriculturalist descendants. Average adult height, an excellent proxy for childhood nutrition did not return to levels seen in the Palaeolithic until a mere 150 years ago.
Archaeologists tell us the invention of farming may well have been the greatest calamity to befall our species. Kings and slaves, property and war all were by-products of agriculture. Even today, even when forced onto marginal lands, hunter-gather tribes often prefer to retain their old ways rather than till the soil. “Why work hard when god made so many mongongo nuts?” ask the !Kung of southern Africa.
The lifestyle of hunter gathers is much more easygoing than that of serfs and peasants. Subsistence agriculturalists worked from sunup to sundown. Hunter-gatherers “worked” a few hours a day. That was enough to feed and clothe and house their families. The rest of the time they could socialize, play games, tell stories. And “work” back then was hunting antelope with your mates or strolling through the savannah looking for nuts and berries. Farmers overwhelmed hunter-gatherers, not because their lives were more pleasant but because farming makes land so much more productive.
Of course, we cannot go back to those happier days. Farming can feed up to 100 times as many people from the same plot of land and soon farmers outnumbered hunter-gatherers. An expanding population locked humanity into a constant and arduous grind. Until now.
To hunt in the morning, to fish in the afternoon, rear cattle in the evening, criticize after dinner. . . , without ever becoming hunter, fisherman, shepherd or critic.
Malthus had the bad luck to make publish his theory just at the moment it ceased to be true. From the invention of agriculture until the industrial revolution, median incomes remained stagnant. Technological progress like the heavy plough in the 9th century or windmills in the 12th allowed population to expand but didn’t raise the standard of living. A Roman peasant transported by time machine to 1750 would have found more similarities than differences. At the height of the Roman Empire, world per capita GDP was $465 (in 1990 dollars). In 1820 it had gone up merely a 1/3 to $666.
All this changed in the mid 19th century. Starting around 1820, capitalism and technology together transformed the world. Population exploded and so did living standards. Today per capita GDP is over $7,600, more than ten times what it was in the 19th century. Even India now has a higher per capita GDP than Western Europe did in 1900. We are richer than our ancestors ever dreamed. World GDP is more than 250 times higher than it was before the industrial revolution.
Yet we don’t feel rich. Despite being surrounded by abundance, we worry about not having enough. Fear of scarcity is bred in our bones. I often think the appeal of austerity is an atavistic remnant of our past history. In a world short of essentials, profligacy can be fatal. Lent comes in February because by that point in winter peasants had run out of tasty food to eat. A religion that insisted on lavish feasts in winter would have its adherents starve to death by spring.
Today, we have the opposite problem. Larry Summers’ secular stagnation is a manifestation of the incredible productivity of capitalism. Low interest rates are a sign of the increased productivity of capital. High unemployment is a sign of the increased productivity of labour. Labour and capital are cheap because we don’t need much of them to create an unprecedented amount of goods and services. Indeed, we can make much more than we can afford to buy.
Our stagnant world economy, smaller today than it was six years ago suffers not from a lack of supply but a lack of demand. Indeed, ever since the Great Depression demand has been capitalism’s only Achilles heel. Each year, productivity increases mean that we can make more goods with fewer inputs. In 1920 it took 3 man-hours to make a ton of steel. Today 3 men can make 1000 tons in an hour. In 1980, camera, lighting and editing equipment required to produce a broadcast quality documentary cost at least $200,000. Today you can buy even better gear for less than $5,000.
Both capital and labour are much more productive than they used to be. Mostly, this is a good thing. Producing more with less makes society richer. Greater supply should mean abundance for all. The problem is on the demand side. Productivity increases are great on the micro level and are great for supply but for aggregate demand they can end up being destructive. If you can make more with less labour, and so get rid of workers, who will be able to afford to buy the stuff you now make? After all, your workers are also consumers.
As long as consumers keep their wallets closed, firms have no incentive to hire. Firms won’t invest in productive capacity when goods are still sitting on the shelf. So far, the trickle down tactic of quantitative easing to stimulate asset prices has been disappointing. Yes share prices have been rising but wages have not followed. It is time to try a trickle up policy.
A number of us here at Pieria have argued that a basic income guarantee (also called a negative income tax) will not only reignite the economy and overcome secular stagnation, it will be the salvation of capitalism. Yes, it provides a safety net for the most unfortunate and yes, it reduces inequality, but most important, by creating steady and dependable demand, it cures capitalism’s only weakness, over-production. By putting money in consumers’ pockets, a basic income guarantees consistent demand and so gives the private sector confidence to hire and invest.
The economics of this proposal strike me as clear and convincing. I want to focus now on its ethical implications. On the one hand, helping the poorest citizens seems the Christian (or Muslim or Jewish or Buddhist or humane) thing to do. In a wealthy society, it is unnecessarily cruel that anyone among us should lack shelter, warmth and food. A negative income tax takes care of our most vulnerable without creating another government bureaucracy.
On the other hand, one can cogently argue that paying citizens without requiring work in return could turn us all into lazy and useless layabouts. That is the fear behind Mitt Romney’s division of America between “makers” and “takers”, behind right wing opposition to the welfare state. Generation after generation on the dole is not an attractive prospect. We certainly don’t want to end up like the fat slobs in the animated film Wall.E, stuffing our faces while slouching on barcoloungers, watching TV, unable to do fend for ourselves. Even working sunup to sundown is preferable to that.
Perhaps there is another option. Ever since the invention of agriculture, we have struggled in a world of scarcity. Today, to a degree our great grandparents would have found astonishing, scarcity has been banished. The bottleneck to growth is no longer supply but demand. We can, once again, as we did in Eden, live off the fat of the land. Maybe the basic income guarantee can help return us to a lifestyle more suited to our species, kinder, more relaxed, more generous, a lifestyle that harkens back to our evolutionary roots on the savannahs of East Africa.
Economics are the method; the object is to change the soul.
In a fascinating article, John Grey tells us that when she was elected, Margaret Thatcher goal wasn’t neoliberal economics but rather on recreating the staid and traditional England of her youth. She believed cutting the role of the state and increasing the power of free markets was a means to reinvigorate the respectable bourgeois she remembered from her father’s grocery store. She was off by 180 degrees. She deregulated and privatised, eviscerated labour unions and cut taxes but the old fashioned values she cherished are further away than ever.
[Thatcher] fully shared Hayek’s view that free markets reinforce ‘traditional values’, which is an inversion of their actual effect. The conservative country of which she dreamed had more in common with Britain in the 1950s, an artefact of Labour collectivism, than it did with the one that emerged from her free-market policies. A highly mobile labour market enforces a regime of continuous change. The type of personality that thrives in these conditions is the opposite of the stolid, dutiful bourgeois Thatcher envisioned. Skill in re-inventing yourself is the key virtue, along with a readiness to cut your losses as soon as any commitment becomes unprofitable or unexciting. Thatcher’s economic revolution was meant to go along with something like a social restoration. Instead, it led to Britain as it is today, a society obsessed with the idea of personal self-realisation, more liberal in sexual matters, less monocultural and less class-bound, more insecure and more unequal.
If a conservative is someone who cherishes the time-honoured ways, is a bit odd that conservatives should exalt free markets. After all, capitalism is the most revolutionary force the world has ever known. Whenever it meets a traditional society, it turns it upside down. The rise of fundamentalism, in the Islamic world, in America, in India, is a global phenomenon and so requires a global explanation. The simplest is that capitalism, by shattering age-old relationships leaves many of us lost and alienated without the ancient verities that gave logic to our lives. “All that is solid melts into air. All freed, fast-frozen relations, with their train of ancient and venerable prejudices and opinions, are swept away, all new-formed ones become antiquated before they can ossify.”
Capitalism has been magnificent in producing wealth and increasing productivity. Unfortunately, It happily serves our baser instincts. GDP goes up whether we spend on guns and Internet porn or education and opera tickets. When money is the measure of the man, when consumption is our only goal our culture becomes shallower, and perhaps so do our relationships. And it is getting worse.
Thrift was the original capitalist virtue. According to Max Weber, upright burghers would limit consumption in order to purchase productive machinery or finance transoceanic voyages. By avoiding sumptuous consumption, our frugal protocapitalist could invest his capital and so increase society’s productive capacity. That was admirable. That was then.
Today, thrift is passé. These days, we serve capitalism by buying stuff, even stuff we don’t need. Thrift no longer has much economic purpose. We have a savings glut, we have a labour glut, what we don’t have is a consumption glut. The world economy doesn’t require prudent savers, it needs us to max out our credit cards just to keep unemployment below 7%. No wonder our children are obsessed with buying the coolest football boots or the dress they saw in Vogue. It is as consumers that we best serve global capitalism. Sadly this addiction to consumption may offer a bump to GDP but it does not create happiness.
What makes us happy, as Adam Smith recognized in The Theory of Moral Sentiments (the book he thought his masterpiece) is the regard of others. What brings me joy is not a new toy but the look on my wife’s face that tells me she loves me. What makes me happy at work is not the corner office but what that symbolizes: the sense that my boss admires and respects my talent and effort. A man buys an expensive watch because he thinks it will impress his mates but sadly, no one even notices. When a middle aged man pulls up in a candy red Ferrari, he rarely makes the impression he had hoped when he put down his credit card.
What we admire in others are not their possessions but rather the same virtues we admired back in the Palaeolithic: kindness, loyalty, bravery, generosity, beauty, strength and a sense of humour. Check out the personals ads: a sense of humour trumps an expensive watch every time. Today most of us work long hours, seeing our children less than we would like while others are utterly idle, unable to find work at all. We act as though we live in a world of scarcity when actually will live in a world our ancestors would have thought abundant beyond their wildest dreams. In terms of material comfort, you and I and even the guy in the hoodie down at the council estate live better than Charlemagne or Cleopatra.
Hunter-gatherers shared. Farmers and factory workers, for the most part, did not. In many tribes, a successful hunter would give away 90% of the meat from his kill. He certainly gained respect (and perhaps female companionship) for his prowess but the families of mediocre hunters also got to eat. Anthropologists suggest this propensity for generosity served everyone’s interests. Since no one family can eat an entire buffalo and even the best hunter sometimes goes a while without a kill, sharing the proceeds of a hunt is not just generous, it is an economically sensible insurance policy. So is a basic income guarantee.
We can afford a basic income guarantee. We can give every citizen enough money to survive. It will stimulate an economy starved of demand. It will make our society more equitable. It will feed the hungry and house the homeless. It respects the individual. It provides a constant level of demand that firms can depend on and so stimulate the animal spirits of businessmen. It will strengthen workers bargaining position because they will be able to tell their employers to “take this job and shove it.” It will also reduce labour costs since firms won’t be required to provide a living wage. It will give us more free time to dance and play and love our children. I would also suggest, it might just end up making us better human beings.