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Basic Income: good in the boom, essential in the crisis

By Rubén Lo Vuolo and Daniel Raventós - posted Thursday, 16 July 2009


Basic income (BI) is a guaranteed regular income (ideally above the poverty line) paid by the State to each full member or accredited resident of a society, regardless of whether he or she wishes to engage in paid employment, or is rich or poor, whatever his or her sources of income might be, and irrespective of cohabitation arrangements in the domestic sphere. Today’s economic crisis invites reflection on the role a basic income might play as an effective way of combating some of its worst effects, especially in protecting some of the hardest-hit groups.

Evidence from the Kingdom of Spain and the Republic of Argentina shows how the problems are similar, although with different content, in both more and less developed countries. Although the epicentre of the crisis is in the rich countries and the United States in particular, it exacerbates the problems specific to the less-developed countries that have also benefited from the boom of recent years thanks to inflated demand from the richer countries, high commodity-market prices and low finance costs. This created a feeling of bonanza, nourishing the belief that problems of unemployment, poverty and income distribution could be palliated by a spill-over of economic growth in a globalised world. The facts reveal another picture.

The United States Government responded to the crisis by awarding money to agents who had recklessly, if not criminally, administered financial assets. This very accommodating public aid, summarily disbursed to the very people who caused the crisis, contrasts interestingly with policies like BI that aim directly to confront the problems of the more vulnerable casualties of the crisis. While public funds are being shelled out to save the businesses of people who still seem to be raking in succulent emoluments, it is still not accepted that ordinary citizens, the most needy, should be given a BI because such a “hand-out” would be a disincentive to work.

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The objection to BI, then, is not a matter of an idea that it is unreasonable to use public monies to distribute income, or that it is inefficient to regulate markets.

Systematically overlooked is the key question of to whose benefit are markets regulated and income distributed. The present crisis is one of a model of growth regulated and propelled by finance, one of its core characteristics being an inflation of assets and credit expansion slanted towards the better-off sectors.

This process of financiarisation of the economy went hand-in-hand with a major regressive distribution of income and greater elasticity of occupational earnings in both central and peripheral countries. Families were forced to supplement their earnings with income derived from the inflation of the assets they held in the capital market (pension funds, investment funds) and the credits (especially mortgages) they obtained by offering these assets as a guarantee. For the poor, at most financial globalisation held out microcredits in relatively few cases. Instead of being “beneficiaries of rights”, however, they became debtors and clients of the institutions that “integrate” them into the financial system.

Much is being said about the need for new regulatory institutions in the face of the failure of multilateral organisms to prevent or administer economic crisis, and hardly anything about the need to revise the policies and institutions that distribute income and the right to an income. This is where BI comes in as a rational way of distributing income in a more stable and egalitarian way to people who live from their labour.

It is also a complementary measure in providing a cushion when jobs are threatened by unemployment and the self-same adjustments that are now in the pipeline for “confronting” the crisis. The reorganisation of the world economy is not just a matter of finance. It is a problem of the whole system of protecting society from the consequences of the crisis unleashed by fundamentalist believers in the untrammelled market and perpetual growth.

A few figures illustrate the magnitude of the problem. In one year (February 2008 to February 2009), official unemployment figures in Spain rocketed up by 1.1 million. The forecasts of 13 survey services show that the average official figure for unemployment will have risen to 18 per cent by the end of 2009 while the unemployment figure for 2007 was 8.2 per cent. Eurostat data shows that of all the countries in the European Union, Spain is the one that has lost most jobs.

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Unfortunately, it is not possible to give detailed figures for Argentina because, since the beginning of 2007, the government has taken over the Instituto Nacional de Estadísticas y Censos (National Statistics and Census Institute), which has led to distortion in all social and economic indicators. Nevertheless, in the last trimester of 2008, several alternative indicators showed a brusque downturn in economic growth and a rise in unemployment. According to ECLAC (Economic Commission for Latin America and the Caribbean), 2008 signalled the end of a six-year period of growth in Latin America and heralded increased unemployment and an expanding informal sector.

In the last 30 years, the percentage of people below the poverty line in Spain has remained at around 20 per cent. While economic growth has maintained the proportion of poor people stable, negative or very small positive figures will mean a spectacular rise in their numbers. In the case of Argentina, official data indicated that between 2006 and midway through 2008 poverty figures had dropped from 27 per cent to 21 per cent, private estimates set the new figures at 33 per cent. This was before people began to feel the pinch of the crisis and the economic downturn at the end of 2008.

What might a policy like BI equivalent to or just above the poverty line contribute to situations that have already appeared and those that are being predicted?

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About the Authors

Rubén Lo Vuolo (CIEPP, Buenos Aires) is an Argentine economist and president of the Red Argentina por el Ingreso Ciudadano (REDAIC - Argentine Citizens' Income Network). He is the author of "Estrategia económica para la Argentina. Propuestas" (Siglo XXI, 2003).

Daniel Raventós (University of Barcelona) is a lecturer in the the Faculty of Economics at the University of Barcelona, member of editorial board of Sin Permiso, president of the Xarxa Renda Bàsica (Basic Income Network) and the author of Basic Income: The Material Conditions of Freedom (Pluto Press, 2007).

Other articles by these Authors

All articles by Rubén Lo Vuolo
All articles by Daniel Raventós

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