Why the world should adopt a basic income

Stephanie Kelton, economic adviser to Bernie Sanders, visited Australia recently, to promote the evolving new economic heterodoxy known as Modern Monetary Theory.

It achieves above poverty level participation not by instituting Universal Basic Income, but by guaranteeing actual (real) full employment ie zero involuntary underemployment.

Basic concept: sovereign governments can create their own currency to ensure continuous maximum sustainable use of available resources, including labour resources that are excess to private sector resource allocation at any given point of time in the business cycle, without causing inflation.

Of course, if the private sector would always achieve this outcome (actual full employment as defined above, at above poverty level wages) then everything would be fine, but the private sector alone never achieves this.

Here is a clear and relatively easy to follow description of MMT:

https://blog.usejournal.com/how-modern-monetary-theory-changed-my-mind-d98a67a1556d

 

You may be giving US Civics Education too much credit. The US is getting its act together in terms of education.

And even though I did have a good grounding in the subject, no one ever even whispered about the fundamental manipulation of the popular-vote by the Electoral College for the presidency) and Gerrymandering (for state and national legislatures).

Both are blatant manipulations of the popular-vote and regardless of how stoopid one may think their voters are, it is insufficient reason to manipulate them. And should be outlawed!

Still, when one witnesses the millions that can be spent for the presidency, one should not wonder that the rich are behind the manipulations. The payback is well worth the money!

PS: Another rip-off worth mentioning is that of the US Discretionary Budget (which is that part of the budget after all other financial expenses are paid). Since long-date the the gargantuan proportion of that budget (close to 50%) has been spent on the Defense. US 208 Discretionary Spending Pie-chart:

 

Would it be even possible for a study of the influence of the instinctive, as opposed to the conscious mind on an individual's world view and consequent position on the Left/Right divide, to be included in a Civics Education course?

Eg, I reckon Libertarianism would be exposed for what it is: unregulated a-moral (instinctive) self interest, dressed up as ethical concern for individual liberty. Hence Libertarianism's delusional concepts of voluntary co-operation not requiring rule of law, and hence the possibility of capitalism within anarchism producing a functioning well-ordered community.

Gerrymander: an expression of the self-interest of the powerful; that's why "no one ever even whispered about the fundamental manipulation of the popular-vote" - the powerful involved in curriculum formation would not allow it to be examined.

Exactly: self-interest of the rich. The poor are no match.

Here's a novel idea: there should be no money at all spent in democratic elections. Zilch, zero. (except for the machinery required to determine the vote count).

As for the military industrial complex, it's the ultimate a-moral expression of self-interest, expanded to the national sphere, with 'defence' expenditure costing the globe a cool $1 trillion every year.

[Footnote: pure reason tells us that an international rules based system is incompatible with absolute national sovereignty; but poor reason is no match for blind (unconscious) instinct. Hence the insanity of a UNSC with veto power claimed by each permanent member.....UN 'Security' Council?... well, as many people have been killed in wars since 1946, as died in WW2.]
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On a personal level, I have concluded from your previous responses to some of my posts that you regard me as being on the "looney left".

[On the surface, the political centre would seem to be the reasonable position, but there are problems with this; eg centrist Macron has overseen mass unrest with property damage in France almost equivalent to that of past US race riots in US cities].

Question: Would you regard MMT and its promoters such as Stephanie Kelton, as part of the "Looney Left"?

(It would be better if you read the linked article in my previous post before answering that question).

 

Wrong, and quite wrong.

A lot depends upon where you are located anyway. But, in the US, you've a way to go to be classified as "looney".

 

As long as they earn it I have no problem, everyone should go out and earn what their labor is worth. But don't expect someone else's income be handed to you.

 

Ok.....and in any case what you think of my political stance is not important (my fault, I should not have posed the proposition in that manner).

What is important is the possibility of freeing government funding (the public sector) from reliance solely on private sector sources (ie via taxation, bonds and, ridiculously, charity).

You only have to look at Bluesguy's response to the basic income concept (post #630 above), to realise we have a problem.

[Bluesguy's tag line parroting Winston Churchill's ideological blinkers - an ideological anachronism from the days of the Cold War - suggest he will be incapable of even considering MMT as a concept].

But the following quote (from the opening paragraph in the MMT article linked in my post #626) confronts this problem head on:

"Modern Monetary Theory (MMT) completely changed my mind about how the US government can dramatically increase equality and the overall wealth of Americans. To every “socialist” policy out there, it answers the “how will you pay for it?”"

Basically, the state can guarantee full employment at above poverty-level wages (ie achieve zero involuntary underemployment) and thereby eliminate poverty, by creating the currency to fund socially useful but non-resource consuming activity, thereby not competing with private sector activity (to avoid inflation).

For example, a teacher's assistant could be funded in this manner (ie by public sector capacity to create funds for specified purposes), because there would be no additional draw on a nation's resources (other than presently unemployed labour); and the person so employed would be able to look forward to planning his own above poverty level lifestyle, allowing for self-improvement, etc. and the possibility of moving to higher paid private sector employment.

 

Have a look at my above post....(your response will be an interesting case study....)

 

Pray tell, how is that humanly possible?

There is no "state" on earth that does not derive its functional funding from taxation - both direct personal and corporate.

Clarify the statement above please. Give me a few "real" examples of taxation that is "other than private sector sourced". Which simply means we the public pay taxation out of either our income-revenue or upon income derived from interest-bearing certificates or the sale of securities at a profit.

The only other source of taxation is corporate. (Ie. private.)

 

That is what MMT is all about, if you are interested you can do some research on the topic; you will find some of my own understanding of MMT below, but you should do your own thinking on the topic.

That is correct: and indeed I can give no examples of taxation (public funds) not derived from the private sector (personal and corporate) - hence the impetus for MMT.

Re corporate taxation: notice we are seeing a competitive "race to the bottom" with company taxation, as corporates increasingly inhabit the international space, and seek the lowest taxing jurisdictions. And as for personal taxation, there is always a handy tax haven for the rich to turn to...)

A clue to MMT is contained in Bluesguy's statement in post #630:
"everyone should go out and earn what their labour is worth"..... but he omitted "worth, in the private sector".

MMT places value on socially useful activity outside of the private sector, that can be funded by sovereign nations who have control over printing their own currency. Funds derived in this manner, if used for specific, non-inflationary activity*, can assist in guaranteeing full employment, regardless of the 'waxing and waning' of private sector employment, over the term of the business cycle. The idea sees employees moving between the public and private sectors, as required to maintain zero involuntary underemployment at all times.

[*eg, the example I gave where economic activity does not involve an increase in resource demand, such as teachers' assistants, nurses' assistants, street litter collection - there is something to suit the capacity of all currently involuntarily underemployed people, including at the tertiary level: how many worthwhile research projects go begging because of 'lack of public funds'? - when the main 'resource' to be 'consumed' by such research activity is time and mental effort, (again, assuming existing underemployment of such personnel.)]

Note: I understand some MMT proponents have economic degrees at high academic levels.....so perhaps the concept is not so easily dismissed.

 

OK, go it. For the purpose of thread-clarity its definition is worth noting:

Seems like bunk to me.

The only reason why anyone (internationally, banks, or individuals or other countries) would want to hold a currency in their reserves is for purposes of "safety". Like a pressure valve that goes off when the pressure gets to high.

The US, which is a (if not "the") key currency held by other countries has the privilege ONLY for as long as it trades competitively goods&services internationally denominated in dollars. Should the EU (for instance) start producing/selling better/cheaper products, then the dollar exchange would suffer and countries would start hording the Euro. (In fact, many have but in far lesser amounts than they have dollars.)

Meaning what?

Meaning that any currency is a medium of exchange (thus a "mechanism") and not an overriding rule of international trade. The only reason the dollar is the dominant currency held by many foreign nations is due to the fact that trade makes it a device that is easy to get into as well as get out. Once there is an alternative - and there is (called the "Euro") - then the dollar does not have the preeminence it once had. It must then share the top-place as an "international currency held in savings because of its intrinsic value".

That "intrinsic value" is due to the fact that it is easy to get into and out of; but should anything happen drastically to the US economy (a giant plague that reduces drastically employment, for instance), then other currency would find favor. And there other such currencies, like the Swiss Franc for instance - just not enough of the currency to make it a popular "trade currency".

PS: Moreover this bit (about Chartalism) is pure bunk:

Money exists because "barter" was woefully inefficient as a medium of exchange. Who would want to buy a ton of tomatoes purchased by the offer of one live horse in exchange? Or, should that be only half-a-horse (which is of course physically impossible)!

All of which means what? This: That the dollar is Fiat Money, and as such is having its day in the sun because the American sun (economy) is shining. That does not mean necessarily that the dollar will be a Fiat Currency forever* ...

*And should Donald Dork really go off on a real bender, just watch how much the world wants to hold dollars ...

 

I didn't omit anything. Don't put words in my mouth.

 

Business Impact Universal basic income had a rough 2018
Some of the biggest and most promising experiments were plagued by delays and shutdowns.

Problem 2: Funding

As you might imagine, giving away free money is expensive. Private tests must rely on generous donors and often struggle to raise the cash they need. Y Combinator has had to raise $60 million from individuals, national foundations, and local philanthropic groups. It has said the test won’t start until all the funding is obtained. Government projects, on the other hand, have to get support from tax-paying citizens and politicians. Lisa MacLeod, Ontario’s minister in charge of social services, cited the high cost of the project ($150 million in Canadian dollars) as the reason for the cuts and said it was “clearly not the answer for Ontario families.”
https://www.technologyreview.com/s/612640/universal-basic-income-had-a-rough-2018/

It doesn't grow on trees.

 

You said: "everyone should go out and earn what their labour is worth".

And who determines "what their labour is worth?"

'Value' need not be solely determined by neoliberal markets. MMT explains how value can be assigned alongside/outside of the market.

So, if MMT stands up to scrutiny, your statement is indeed incomplete.

 

"The key assertion of MMT is that sovereign governments that are the sole supplier of national currency can issue currency of any denomination, and in physical or non-physical forms. Consequently, these governments have an unlimited financial ability to pay for the things they wish to purchase and to fulfill promised future payments" .

I understand this to mean that a (single) sovereign government, that is the "sole" supplier of its own currency, can create its own currency in physical or non-physical forms, limited only by "the availability of natural resources". Do you agree? (I think you have a different understanding, given your detour into international trade and status of particular currencies).

[Imagine, for a moment, a portion of economic activity within a nation that does not have implications for external trade).

On barter: originally value was determined by voluntary agreement between individuals (that yearned-for anachronism of Libertarians); but eventually a king ("the state") decided value - and hence whether his subjects should produce more weapons and less food.

Hence Chartalism : "...a theory of money which argues that money originated with states' attempts to direct economic activity rather than as a spontaneous solution to the problems with barter".

 

The marketplace. No my statement was complete. Who decides what you not doing sometime to earn your income is worth? What was the something of value you exchanged for it?

 

No, I don't.

The backing of a currency by having sufficient means in precious commodities (gold, diamonds, oil, etc.) is of no consequence whatsoever.

A nation's money stands on it's ability to be exchanged to both buy and sell goods/services internationally. At the first sign of internal trouble in terms of those to traded items then currency falls and ultimately fails.

Those holding the currencies take the hit. Which is why countries like to keep in their "reserve"s" that dollar and the euro ...

 

I have read some more of the MMT article linked in my post #626; I must say the links contained in that article move into very complicated technicalities - and it's obvious there are sharp disagreements among the various economics "schools". So I suppose it's no surprise you don't agree with my reading of the quoted "definition" of MMT.

So let's keep it simple:

From a theoretical standpoint; would you agree that a unit within, say, the IMF, 'could' create the funds required for every nation to be able to pay teachers to educate all the nation's young people, without implications for inflation, either nationally or globally - and hence eliminate the necessity for government to tax its citizens to pay for this education (as at present )? - because the education process 'consumes' only time and mental effort, which are unlimited - and free - as is the air we breathe?

 

Purely theoretical, and admittedly a good idea. Education is the only solution to world peace. But I suspect that such is a long way off. At least another 30/40 years. (Which does not mean we must give up on the idea.)

It will not happen in our time ...

 

Yes....it seems we have a 'chicken and egg' situation; ignorance is hindering the necessary cooperation that would enable the institution of 'free' universal education, and it is exactly 'free' universal education that is required to overcome this ignorance and its associated terrorism, fundamentalism, poverty and war.

In the meantime, MMT enthusiasts/economists might be illuminating a pathway heading in the right direction.

 

The question being: "Where is the money coming from?".

Well, people are confronting that issue head on:

https://blog.usejournal.com/how-modern-monetary-theory-changed-my-mind-d98a67a1556d

From the 2nd sentence in that article:

"To every “socialist” policy out there, it (MMT) answers the “how will you pay for it?” question.

Note: from the responses to, and links referred to, in the article, I suspect a final decision on the issues raised is beyond our (yours and my) paygrade....but nevertheless, here is an evolving economic heterodoxy (MMT) that deals with the "where's the money coming from" question head on.

And then we have Ellen Brown tackling the topic of the OP (ie, BIG) head on.

https://ellenbrown.com/2018/12/28/universal-basic-income-is-easier-than-it-looks/

 

Something I have gleaned recently is that the Right hate the "immorality" of those (or at least those not completely demoralised by their circumstances) who, unable to compete in the neoliberal economy*, dare to ask the community (government) for a 'hand up' (as opposed to the 'hand out' despised by the Right - despised because their own (ie the Right's) ability to acquire wealth will be compromised).

* hence the blame game: they are in poverty because they deserve it, etc etc. when in reality life in a neoliberal economy is much more complex than such simplistic assertions imply.

 

I happen to the think that the link between adequate Civics Education and an honest system of governance are the tightest any nation can enforce.

Those that don't achieve that in secondary-schooling sink into the mud* eventually ...

*Talk about sinking into the mud - have a look at what is happening in Italy. (See here. The Left-vote has been rent asunder by Europe's inactivity over the horde of migrants having been added to already morose economies.)

 

By MMT, you mean, at it's basics, to just print any money you need. There is nothing particularly modern about that notion, and has had quite a historical trail of damage. However, I'm amenable to the scientific method, so if some country wants to give it a try under the auspices of MMT, I say go at it. I'll sit back and enjoy the popcorn.

 

We've had the 'MV=PT' cultists quadruple unemployment. That's nothing compared to the 'new classical' bat**** variety. That's Burgundy Wine Cheddar Cheese Popcorn.

 

No it isn't. It is a bit more complex.

But not that much. Read about: Modern Monetary Theory

You need some instruction regarding MMT ...