Monday, 13 May 2013

Why Citizens Income/Universal Pension/Income Guarantee can't work

Sometimes I find the quality of debate depressing. In this paper, supposedly on idleness, there isn't a single mention of generating a permanent direct job programme that ensures that people have something to do. It's all indirect and hairy fairy. Irritating. Stick tax rates up on rich people and give it to the poor; that'll cure it. Nirvana will be with us by Tuesday lunch. Honestly, the ideas haven't really evolved since Robin Hood's days.

If the market equilibrium processes worked we wouldn't need to intervene.

Stuff for people to do doesn't turn up magically - it has to be created and organised. You can't just give people money and expect it all to sort itself out. The economic system has systematically failed to create adequate work for people to do. Why on earth would anybody think that if you just shuffle the cash around it would magically create an adequate standard of living? It's a pipe-dream.

If there is one thing to be taken from MMT it is that there is no direct connection between money and stuff. The monetary circuit and the real production circuit have no direct link. Instead the process operates more like electrical induction. Sometimes the flow of money induces lots of efficient real production, sometimes the same flow of money induces nothing of real benefit at all.

Assuming a one-to-one correlation between money and stuff is a dangerous simplification that will lead you into error.

I'm very grateful that Pavlina Tcherneva has taken the time to write up the argument for why we need a proper Job Guarantee - an alternative job offer available to all at the living wage working to further the public good - that helps anchor the monetary and real circuits together. And I can do no more than offer a quote from that paper - which I would encourage you all to read in full.

For a genuine transformation within the marketplace or the household, an active agent of change is needed. Income support programs are passive agents of change – they make their recipients invisible and hide them from the sphere of most socio-economic life. Even if income afforded greater degree of freedom to individuals, transformative changes occur when individual action is harnessed by institutions that can propel the collective interests forward. The JG is just such an institution—it puts human needs first and redefines what is “efficient” from what is “profitable” to what is “socially useful”. It engages its members directly in the goal of advancing the public purpose and is therefore a program that promotes inclusion.