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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 and the hardest hit

First, with an indefinite BI a job loss would not have such distressing effects on the well-being of the casualties of the system. The fast-growing numbers of the unemployed perforce creates pressure on workers to accept precarious, unstable employment of any kind, without social security. A universal and unconditional BI would mitigate these problems in the sense that workers competing for jobs would have more margin for choice in the certainty of receiving a guaranteed income whatever their employment situation.

Second, BI offers a measure of risk reduction for people embarking on certain projects of self-employment. This is true for those who have some cushioning (mostly family) that enables them to plan a business undertaking rationally and reasonably, and those for whom self-employment is the only job possibility open to them in the absence of paid work in the formal sector.

In the latter case, the risk involved is not only one of losing the original investment but also the means of subsistence, which makes any decision much more anxiety-ridden. BI is more efficient than micro-credits in stimulating the creation of small businesses and co-operatives because it is universal and it means a permanent, stable income that would not generate debts (or usurious interest). BI would also be a better guarantee of being able to cope, even if partially, for those who do not make a success of their small business ventures.

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Third, BI would represent, in the case of strikes, a kind of unconditional resistance fund, offering an improved bargaining position to workers who would better equipped to confront the labour conflict: nowadays, depending on how long a strike lasts, salaries can be cut to levels that are barely sustainable if - as tends to be the case with the great majority of workers - no alternative resources are available.

Labour conflicts are notably on the rise as a result of the crisis, since this does not only entail loss of jobs but also cuts in salaries and other benefits of being employed. BI could play a very significant role in defending jobs and working conditions.

Contrary to what some people think, BI is not an alternative that substitutes for income earned in a job but it is an instrument that can shore up the position of the employee in the workplace. A universal and unconditional BI would make it possible for workers to unite in their struggle around a right that would benefit them all, whatever the situation of any specific activity, while also offering more breathing space for holding out in a strike.

Fourth, a BI would be one element that would help to stave off the more serious consequences of poverty and could even put an end to it. BI might have a role as a way of preventing the ranks of the poor from swelling even more, a goal that has never been achieved by the host of welfare programs that operate - in Latin America, for example - on the principle that proof of need must be demonstrated before benefits are awarded. The need that must be proven is often so dire that members of this vulnerable segment of the population are often unable even to try to present proof of what is so patently evident. The crisis reveals the failings of Conditional Cash Transfer Programs, which are massively present throughout Latin America, in responding in a timely and appropriate fashion to the needs of the hardest-hit groups.

Fifth, one much-discussed matter that arises with the crisis is the need to sustain family consumption patterns, to keep demand levels stable and thereby to restore confidence and the spirit of investment. During the boom years, many families enjoyed a consumption capacity well beyond their means thanks to the inflated prices of investment fund assets, along with liberal consumer credits, and especially mortgages. Now the adjustment will come not only by making inroads on this extra income but because salaries will have to drop too and part of them will go towards debt repayment.

BI is a much more streamlined and egalitarian way of distributing consumer power to sustain demand, especially in the countries with levels of inequality like those of Latin America where domestic demand has mostly been maintained by the luxury consumption of the well-off. BI is not only a just way of distributing income towards the more vulnerable groups without causing stigmatisation but it is also efficient in spreading and hence stabilising consumer demand in the domestic economy.

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The reasons we have given to explain why a BI would be more pertinent than ever in the current worldwide economic situation do not invalidate the arguments in support of the proposal in a technically hypothetical situation of full employment and economic prosperity. Indeed, the proposal adapts to the cyclical mode in which economic and social systems evolve, a process that, far from happening smoothly and continuously, lurches from crisis to crisis and that is constantly restructuring its organisational models.

In times of economic crisis, when millions of euros have been dished out in support of “financial mismanagers”, arguments that question the distribution of public funds among the neediest sectors of the population are at best spurious. There can no longer be any doubt about it: the problem is not one of funds but of the political volition to distribute them with one or other end in mind. Moreover, the different impacts of the crisis will be even more devastating because of the lack of political commitment to go ahead with proposals like that of BI in more buoyant moments.

Blind trust in the positive effects of a short-term cycle of economic, employment and credit growth should be replaced by constant reformulation of fiscal transfers in order to bring a BI into operation and thereby underpin the growth cycle and avoid the worst effects of crises. The credit a citizen should have is not the one tied to a home mortgage but the one that is his or hers as the right to exist and to live in society.

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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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