Citizen’s Income Newsletter 2007 – Issue 2

Editorial

There are some landmark articles in this issue of the Citizen’s Income Newsletter.

We report on our questionnaire survey of the House of Lords. We have achieved a statistically significant response rate, and the results are highly significant. We would encourage our readers to study the tables carefully. We are enormously grateful to Baroness Barker, Lord Desai and Lord Beaumont for their help with this project.

This edition also contains news items, conference reports, and book reviews, amongst which there is a review of the new journal, Basic Income Studies, and an appropriately combative review of Charles Murray’s equally combative advocacy of a Citizen’s Income.


Main article

Both the House of Commons and the House of Lords support a Citizen’s Income approach to the reform of tax and benefits

The House of Commons

Three years ago, with the help of Dr. Lynne Jones MP and Sir Archy Kirkwood MP (then Chair of the Work and Pensions Select Committee), the Citizen’s Income Trust distributed a questionnaire to all MPs. Seventy-one completed questionnaires and eleven letters were returned. The level of support for a Citizen’s Income was considerable. Forty-one respondents were in favour, and only eleven against; and of particular interest to Sir Archy Kirkwood and Dr. Jones was the level of support for a Royal Commission: forty-six in favour, and only sixteen against. (Sir Patrick Cormack MP, one of the respondents, commented in his letter: ‘I have long advocated a Royal Commission to look at the Welfare State fifty years on’.)

The House of Lords

With the support of Baroness Barker, Lord Desai and Lord Beaumont, we have now distributed a questionnaire to every member of the House of Lords. Again we have achieved a substantial response: one hundred and thirty-four responses altogether.

Again the level of support for a Citizen’s Income has been considerable: seventy-three respondents were in favour and only fourteen against. And this time support for a Royal Commission on income maintenance was even higher: eighty-three in favour and only twenty-seven against.

The full results of the survey are as follows:

(The figures in brackets are percentages of respondents for that party. Where these do not add up to 100% it is because some respondents didn’t answer the question).

1. Does our tax and benefits system meet the needs of our society and economy ?

Commons Lords

Yes

No

Yes

No

Con
3 (18)
8 (47)
3 (9)
24 (75)
Labour
9 (24)
24 (63)
1 (4)
25 (93)
Lib Dem
0 (0)
20 (100)
0 (0)
20 (95)
Crossbench
3 (7)
36 (80)
Bishops
0 (0)
5 (83)
Other
1 (14)
6 (86)
1 (33)
2 (67)
Total
13 (16)
58 (71)
8 (6)
112 (84)

2. Does the system need radical change ?

Commons Lords
Yes
No
Yes
No
Con
9 (53)
1 (6)
26 (81)
2 (6)
Labour
21 (55)
11 (29)
25 (93)
1 (4)
Lib Dem
20 (100)
0 (0)
19 (90)
0 (0)
Crossbench
32 (71)
5 (11)
Bishops
5 (83)
0 (0)
Other
5 (71)
2 (29)
2 (67)
1 (33)
Total
55 (67)
14 (17)
109 (81)
9 (6)

3. Do you think that change needs all-party support ?

Commons Lords
Yes
No
Yes
No
Con
8 (47)
2 (12)
19 (59)
9 (28)
Labour
22 (58)
7 (18)
26 (79)
6 (18)
Lib Dem
13 (65)
6 (30)
19 (90)
0 (0)
Crossbench
34 (76)
4 (9)
Bishops
5 (83)
0 (0)
Other
7 (100)
0 (0)
2 (67)
1 (33)
Total
50 (61)
15 (18)
105 (75)
20 (14)

4. Would you like to help achieve such all-party agreement ?

Commons Lords
Yes
No
Yes
No
Con
6 (35)
2 (12)
14 (44)
13 (41)
Labour
21 (55)
7 (18)
12 (44)
9 (33)
Lib Dem
15 (75)
5 (25)
10 (48)
7 (33)
Crossbench
13 (29)
15 (33)
Bishops
4 (67)
0 (0)
Other
6 (86)
0 (0)
1 (33)
1 (33)
Total
48 (59)
14 (17)
54 (40)
45 (34)

5. Would a Royal Commission on income maintenance be a good idea ?

Commons Lords
Yes
No
Yes
No
Con
3 (18)
6 (35)
11 (35)
13 (42)
Labour
24 (63)
6 (16)
19 (70)
4 (15)
Lib Dem
14 (70)
3 (15)
17 (81)
2 (10)
Crossbench
31 (69)
6 (13)
Bishops
4 (67)
1 (17)
Other
5 (71)
1 (14)
1 (33)
1 (33)
Total
46 (56)
16 (20)
83 (62)
27 (30)

6. Might a Citizen’s Income be a useful basis for reform ?

Commons Lords
Yes
No
Yes
No
Con
2 (12)
4 (24)
11 (34)
10 (31)
Labour
16 (42)
5 (13)
17 (63)
1 (4)
Lib Dem
16 (80)
2 (10)
15 (71)
0 (0)
Crossbench
26 (58)
3 (7)
Bishops
3 (50)
0 (0)
Other
7 (100)
0 (0)
1 (33)
0 (0)
Total
41 (50)
11 (13)
73 (54)
14 (10)

7. Would you like to know more about the Citizen’s Income option for reform ?

Commons Lords
Yes
No
Yes
No
Con
8 (47)
3 (18)
16 (50)
11 (34)
Labour
26 (68)
5 (13)
18 (67)
4 (15)
Lib Dem
11 (55)
8 (40)
13 (62)
4 (19)
Crossbench
27 (60)
10 (22)
Bishops
4 (67)
1 (17)
Other
7 (100)
0 (0)
2 (67)
1 (33)
Total
52 (63)
16 (20)
80 (60)
31 (23)

News

Richard Clements: In November the Citizen’s Income Trust was sorry to hear of the death of Richard Clements. After being editor of Tribune and running Neil Kinnock’s office, Richard was Director of the Citizen’s Income Trust from 1993 to 1996, when sadly he had to retire because of his own ill health and to look after his wife Bridget. He was a most effective Director, and we were very sorry when he had to leave. Not surprisingly, he was particularly good at raising the profile of the Citizen’s Income debate in the press. To see an obituary in the Guardian, see http://www.guardian.co.uk/obituaries/story/0,,1955580,00.html

Last December the Department for Work and Pensions reported: ‘Our benefits are complex to administer. Our IS/IT systems are not as integrated as they could be. Sometimes we fail to follow our procedures. The result is that, in 2005/06, we overpaid an estimated £1.9 billion through official and customer error – equivalent to 1.7% of total expenditure. ….. Our aim is to prevent new error from occurring by simplifying benefit rules so they are simpler to understand and administer’ (Department for Work and Pensions, Touchbase, December 2006).

The London School of Economics has published Casepaper 114: Work-Life Balance in a Low-Income Neighbourhood by Hartley Dean and Alice Coulter: http://sticerd.lse.ac.uk/dps/case/cp/CASEpaper114.pdf.’This paper reports findings from a study, based on in-depth interviews with 42 economically active parents from a low-income neighbourhood. Participants supported the idea of work-life balance, but many found it difficult to achieve. …. Pay levels are insufficient and, though benefits/tax credits help, they are complex and badly administered. ….. The clearest finding was that participants tended to be fundamentally disempowered – by the unpredictability of the labour market, the dominance of a ‘business case’ rationale, their lack of confidence in childcare provision and a lack of belief in their employment and benefit rights.’

HM Revenue and Customs has decided that from November 2006 tax credit recipients must inform them immediately about a range of changes in their circumstances: if they were working 30 hours or more a week and now work less than 30; if they were working between 16 and 30 hours a week and now work less than 16; if their income goes up or down; if their benefits change; if their child leaves home; if a child over 16 leaves full time school or college or goes to university; if, for any other reason, they can no longer claim tax credits for their child; if their childcare costs go down by £10 a week or more and the change lasts for more than four weeks in a row, or the cost goes down to zero; if a partner moves in or out; if they leave the country for eight weeks or more; if they move home or change their bank account (www.hmrc.gov.uk/changes).

The Flanders region of Belgium has developed a tariff-based solution to its water affordability problems. Since 1997, the first 15m3 per annum per person in each household is provided free of charge, and beyond that limit water is charged for (Organisation for Economic Co-operation and Development (OECD), 2003, Social issues in the provision and pricing of water services, Paris: OECD).

Mark Wadsworth: The Citizen’s Income Trust’s new Research and Press Officer is Mark Wadsworth. Educated in business law, tax accounting, accounting and finance, Mark works as a tax consultant and has a longstanding interest in the reform of tax and benefit systems. As with all of the Citizen’s Income Trust’s trustees and staff members, Mark is working for the Trust in a voluntary capacity, and we are most grateful to him for offering his time in this way. Email Mark at: mark.wadsworth@citizensincome.org.


Conference reports

The Eleventh BIEN Congress

Cape Town University, Cape Town, South Africa, November 4-6, 2006

by Karl Widerquist

The Basic Income Earth Network (BIEN) held its Eleventh Congress in Cape Town, South Africa, last November. This was BIEN’s first Congress since expanding to a worldwide Network in 2004. Until then BIEN had stood for the Basic Income European Network. However, because BIEN was the only international basic income network, national networks outside Europe had been asking for membership of BIEN since the late 1990s. This has now happened

Most members of the new BIEN agreed that South Africa was the best place to have BIEN’s first conference outside of Europe because a grassroots movement for basic income has been growing in South Africa since the fall of Apartheid. Many of the churches, trade unions, HIV activist groups, and other progressive organizations, support basic income in South Africa, although most of the leadership of the ruling African National Congress remains opposed to the idea. Ingrid Van Niekerk, of the Institute for Economic Policy Research in Cape Town, organized the Congress.

Cape Town proved to be a good venue for the Eleventh BIEN Congress. Several basic income activists from Southern Africa participated, including Thabisile Msezane, Senior Vice-President of the South African Council of Churches; Zackie Achmat, of the Treatment Action Campaign; and Tovhowani Josephine Tshivhase, Member of Parliament for the ANC. One of the Congress’s most dramatic events was when Bishop Zaphania Kameeta, of the Evangelical Lutheran Church, slammed his hand on the podium and said ‘Words! Words! Words!’ Kameeta argued that people should begin to create a fund from private donations that could eventually grow large enough to finance a basic income in a developing nation.

Archbishop Emeritus Desmond Tutu, who won the Noble Peace Prize for his work in the anti-Apartheid movement, was unable to attend the Congress in person because he was out of the country at the time. Instead he addressed the Congress by video tape, in which he strongly endorsed the basic income movement. Archbishop Tutu’s address can be seen on YouTube at: http://www.youtube.com/watch?v=gf3n-L5FDy0.

The Congress proved to be a boost to the basic income movement in South Africa. The event was followed by a large amount of discussion of the proposal in the South African press, and the day after the Congress the ANC Minister for Social Development gave his personal endorsement to the policy.

The prospect for basic income in other developing countries was also widely discussed at the conference. Claudia and Dirk Haarmann discussed basic income as a strategy for economic empowerment in Namibia, Maria da Silva discussed the Scholarship Family Program as a step toward basic income in Brazil, and Pablo Yanes suggested that the Universal Citizen Pension in Mexico City was an opportunity to open the debate on basic income in Mexico, where, despite booming trade with the United States, 40 million out of 100 million citizens live in extreme poverty.

Other presentations at the Congress examined diverse aspects of the basic income debate. Michael Howard, of the University of Maine at Orono, won the Basic Income Studies essay prize for his proposal for a resource dividend for the NAFTA region (Canada, the United States, and Mexico), and Shamshad Begum Sayed, Head of Women Affairs Human Rights Foundation in Johannesburg, discussed the Islamic case for basic income. According to Sayed, one of the pillars of Islam is not voluntary charity but rather the mandatory redistribution of wealth from rich to poor. Other presentations by Philippe Van Parijs (Belgium), Robert Van Der Veen (the Netherlands), Senator Eduardo Suplicy (Brazil), Daniel Raventos (Spain), Jennifer Mays (Australia), Julieta Elgarte (Argentina), Eric Patry (Switzerland), and Guy Standing (Great Britain) gave the Congress a rounded, international perspective.

After the Congress, BIEN held its Eleventh General Assembly. The first item on the agenda was a series of proposals to completely overhaul the statutes that have served BIEN with minor alterations since 1988. All of the proposed amendments were approved unanimously and the new rules seemed to work well as the meeting went on to more contentious issues such as a proposal to endorse specific government proposals. The Assembly approved Dublin as the venue for the 2008 BIEN Congress. All of the members of the Executive Committee who stood for a further term were re-elected. Jurgen de Wispelaere decided not to stand, and was replaced by Louise Haagh, of the University of York (UK). Eri Noguchi, Ingrid Van Niekerk, Karl Widerquist, and David Casassas retained positions on the committee. Sean Healy, of the Council of the Religious of Ireland, was later added to the Executive Committee as the representative of the local organizing committee of the Dublin Congress. At the close of the meeting, and following their re-election as BIEN’s co-chairs, Senator Eduardo Suplicy and Guy Standing made a joint announcement that they would retire as chairs when their new terms expire in 2008.

New York Interlude: A report on the Sixth USBIG Congress, 23-25 February 2007

by Anne Miller

The sixth annual congress of the US Basic Income Guarantee (USBIG) Network took place at the Crown Plaza Hotel, Times Square, in New York City, on Friday 23 to Sunday 25 February 2007. It was held in conjunction with the Eastern Economics Association’s annual meeting, and organised with apparent simplicity and effectiveness by Karl Widerquist, aided by the USBIG committee. A core of about 30 enthusiasts patronised the whole USBIG programme, while possibly another 20 or so wandered in and out from the main conference to give, or listen to, a paper. This provided a way in which the BI ideas might pollinate the minds of more traditional economists. The relatively small number present lent an intimate and friendly atmosphere to the proceedings, and made it possible to get to know new acquaintances more easily. Participants from the USA were joined by delegates from Canada, New Zealand, South Africa, Brazil, Netherlands and Ireland, as well as from the UK. I was impressed with the level of knowledge and technical detail displayed by the participants, compared with some larger conferences where newcomers present papers, but use technical terms in inappropriate ways (such as ‘means-tested basic incomes’).

The programme was organised into eleven sessions, the themes of which included ‘The Ethics of BIG’; ‘Finance and the Basic Income Guarantee’; ‘Family Care Work and Gender’; ‘The Politics of Basic Income’, which covered two sessions; ‘Economic Issues of BIG’; ‘Alternative Anti-Poverty Programs’; and ‘A Debate: Income guarantees vs. Job Guarantees’.

I felt very privileged to have been invited to give the opening address, which I entitled ‘Basic Income, Necessary but not Sufficient: some women’s issues’, in which I chose to answer the question ‘To what extent could a basic income meet the problem that women do about two-thirds of the world’s unpaid domestic and care-giving work and receive only about a third of the world’s income?’ My conclusion was that a BI scheme could help to keep women and children out of poverty, and it could be adjusted somewhat to help redress the balance slightly. However, in order to bring about real equality for women in their care-giving roles, other major policy instruments would have to be brought to bear.

It is impossible to summarise every paper, but two in particular stood out for me. In his paper, ‘The Rise and Fall of a Basic income Guarantee Bill in the United States Congress’, Al Sheahan recorded the work involved, and the frustrations experienced, in getting a bill introduced into the US Congress in 2006. From the initial suggestion during the 1st USBIG conference in 2002, that USBIG needed a BIG bill in the US Congress, through the introduction by Californian Democrat, Bob Filner, of a bill with the catchy title ‘The Tax Cut for the Rest of Us Act’, given the number HR 5257 on 2 May 2006, to its subsequent languishing, due to the lack of support from any Republican co-sponsors, Sheahan charted the steep learning curve of a small group of amateurs who made no pretence of having any political expertise. The bill proposed a moderate annual $2000 ‘refundable standard tax credit’ per adult and $1000 per child, which would operate through the federal income tax forms, even for those without any income. They hoped that it would be financed by rolling back the Bush tax cuts for the wealthiest Americans, which reportedly cost the Treasury $224 billion per year. While the immediate outcome was disappointing, all had not been lost. The small group had gained much experience, the bill was a peg on which to hang discussion within the wider community, and Bob Filner was willing to give it another go in the next administration.

Before continuing, it is worth summarising some figures for the USA.

According to the Central Intelligence Agency’s World Fact Book, www.cia.gov/cia/publications/factbook/geos/us.html Econs:

  • GDP for the USA was $12.98 trillion, ie. $12,980,000,000,000 (2006 estimate);
  • GDP per capita was $43,600 (2006 estimate);
  • The public debt is 64.7% of GDP (2005);
  • The real growth rate was 3.2%; the inflation rate (consumer prices) was 2.5%;
  • The unemployment rate was 4.6%;
  • The national (federal) minimum wage rate is $5.15 per hour;
  • The population living below the poverty line was 12%;
  • In 1997, the concentration of household income by % shares were: lowest 10%: 1.8% , highest 10%: 30.5%;
  • The Gini coefficient as an index of inequality of household income was 45 (2004);
  • ‘Since 1975, practically all the gains in household income have gone to the top 20% of households;’
  • The current exchange rate is roughly £ / $ = 2, which gives a rough indication of the value of the above dollar figures in £ sterling
  • GDP per capita for the UK in 2005 was £20,338, and the National Minimum Wage currently is £5.35 per hour.

The second paper, ‘Time to change America by Challenging Economic Fundamentals’ by Richard Cook, who spent 21 years as an analyst with the US Treasury Department, began by cataloguing the symptoms of decline that are evident in the American economy. He noted that ‘the USA has supported its domestic economy through trade domination of most of the rest of the world’, but now the world is changing, and China and India are becoming major players. The US Treasury has an enormous deficit, which has been purchased in recent years by China and Japan. However, the worldwide dollar hegemony is beginning to slip, the value of the dollar having been declining continuously for more than half a century, and now China is starting to offload its dollars. The wars in Afghanistan and Iraq are adding to the US debt. The domestic situation is really bad for the 12% who live below the official poverty line, but economic insecurity is a feature of life for all except for the richest 20% of the population, who have never had it so good. The federal national minimum wage of $5.15 per hour is insufficient to keep a family of three out of poverty. Cook continued by describing the features of economic life which dog ordinary Americans, including high unemployment, easy access to debt, soaring costs for higher education and health care, a house price bubble which has burst, and a negative US household savings rate. ‘The solutions to the economic side of the problem proposed by the Democratic leadership in Congress would only nibble around the edges.’ When the US economy is in even deeper trouble, then the politicians might be prepared to look at more radical proposals. Cook offered a raft of other more progressive solutions, including the introduction of a guaranteed annual income for all citizens. Even $2,000 for an adult and $1,000 for each child ‘would be a first step toward a true basic income guarantee that could eliminate the scourges of poverty and homelessness that give the lie to every politician who claims our economy is either fair or fundamentally sound’. An added advantage is that it would give a much-needed boost to the flagging demand side of the US economy, which cannot match the output poured out by the supply side.

Two other interesting topics were raised during the conference. One was a discussion about whether the BIG should be based on justice, being a dividend from the economy or the land (via a Land Value Tax, LVT, for instance), in which everyone was a shareholder, and thus everyone should receive the same, regardless of age (child or pensioner) and need, or whether it should be a grant based on compassion and therefore vary according to need. Michael Collins from Eire was using an analysis of deprivation data to fix a level for a BI, and Almaz Zelleke was looking at alternative combinations of levels for single adults, lone parents and children in the USA that would meet certain criteria. A full BIG was often put forward at the poverty subsistence level of about $10,000 per annum (about 22.9% of GDP per head) for a single able bodied adult in the USA (comparable to £5,000 pa in the UK, roughly £100 pw, which is regarded as quite generous and optimistic in many quarters in the UK, especially compared with the current Income Support levels). An alternative level of $6,000 pa was also discussed. Several advocates of LVT were among the participants, and the advantages of LVT for tackling the enormous inequalities of wealth, (perhaps in addition to an income tax for redistributing income) were obvious.

The second was the question of whether asylum seekers and immigrants should be eligible for the BIG. The fact that one illegal immigrant had frozen to death on the outskirts of New York just before the conference began gave an added poignancy to the question. The welfare programmes in the USA are very limited and are being cut back fast by the Bush administration. Tensions are built up if immigrants are perceived to be receiving more than the locals, but if the locals are getting very little anyway, it is hard to undercut them except by giving the immigrants nothing. The incidence of a BIG would change this, and the question is whether immigrants would get the same as the locals, or have to fulfil some residency qualification first, over a few years. Many of those present wanted immigrants to be treated compassionately, but had no answer as to the unintended consequences that might occur. Sean Healy of the Conference of Religious of Ireland, CORI, pointed out that since the enlargement of the EU, the number of people now in Ireland who had not been born in Ireland was 12%, or 1 in 8, which was a higher proportion than in the USA. Michael Howard put forward a proposal for a guaranteed minimum income for the NAFTA countries of Canada, USA and Mexico. In some ways, this is a debate that should take place in the context of a BI in all countries, with subsidies from rich countries to poorer ones, such that there is less incentive to emigrate to avoid the grinding poverty in the poorest countries.

There were many more very interesting papers. Richard Caputo compared how far countries differed according to their various anti-poverty programmes, and examined how far they had progressed in their attempts to introduce a BI. Brazil came out best, so far. Nadine Schenk’s paper ‘Political Constraints to Implementing a Basic Income Grant in South Africa’, gave an analysis of the steps that are needed to rally support for the idea in order get a bill on the statute books. Michael Samson and Ingrid Van Niekerk gave evidence about how universal benefits promote development in less developed countries, giving examples from South Africa. In all, it was a very satisfying and stimulating event.

Further information about the USBIG Network, can be gained from its website, http://www.usbig.net/. Some of the papers will be posted on the website. To be put on the USBIG NEWSLETTER mailing list, e.mail Karl Widerquist atKarl@Widerquist.com.


Short notices

Guy Palmer, Tom MacInnes and Peter Kenway, Monitoring poverty and social exclusion 2006, Joseph Rowntree Foundation, York, 2006, paperback, 978 1 85935 535 0, £16.95, or downloadable from www.jrf.org.uk or www.poverty.org.uk.

The Monitoring poverty and social exclusion report for 2006 contains the usual wealth of detail and relevant comment. Of particular interest is the conclusion that half of the children who remain in poverty are in families already doing paid work, which suggests that the proposition that paid work is the way out of poverty does not apply for many households. The authors say that the underlying problem is low pay and that a low-paid couple can only avoid poverty if both partners are in paid employment. Another interpretation would take more account of high marginal withdrawal rates which mean that because of benefit and tax credit withdrawal increasing earned income translates into gross income which increases at a far lower rate than the rate at which earned income rises.

The report rightly welcomes lower poverty rates among pensioners, especially single pensioners, though the authors correctly conclude that means-tested benefits such as Pension Credit do not address the root of the pensions problem.

The researchers conclude that the overall picture is one of success and neglect rather than one of success and failure. Where government has taken action there has been measurable reduction in poverty. Where it has not taken action, poverty and inequality have continued to increase. Given the continuing poverty amongst working age adults and families with children which the report discovers, action on the structure of the tax and benefits system would seem to be the next piece of necessary action.

 

Robert Chote, Carl Emmerson, Andrew Leicester and David Miles (eds.), The IFS Green Budget: January 2007, Institute for Fiscal Studies, London, 2007, 250pp, pbk., 1 903274 48 6

Amongst the editors’ proposals to Gordon Brown as he prepares for his budget speech on the 21st March are suggestions for improving the financial position of couples with children:

‘Increasing the working tax credit for all couples with children would particularly help low-income one-earner couples, but would discourage them from increasing their income, for example through adding an earner or working longer hours.

‘Increasing the working tax credit only for two-earner couples would reverse a recent trend by strengthening the incentive for low- to middle-income couples to have both adults in work, but would also discourage such families from seeking increases in income through other means.

‘A transferable personal allowance for families with a child under 6 would benefit the majority of one-earner couples with a young child, regardless of income, but would act to discourage such families from having both adults in work.

‘All three proposals would reduce the ‘couple penalty’ in the tax credit system because they give extra support to couples with children but not to lone-parent families.’

Needless to say, an (individualised) Citizen’s Income would reduce the couple penalty without reducing employment incentives.

 

Asghar Zaidi, Mattia Makovec and Michael Fuchs, Transition from Work to Retirement in EU25, CASEpaper 112, Centre for Analysis of Social Exclusion, London, 2006

The researchers seek trends in the employment patterns of older workers in the European Union with the aim of identifying policy initiatives which would encourage more flexible and later retirement. In most of the countries which were in the EU before its recent substantial enlargement nearly half of adults over fifty years old are either unemployed or inactive, living on a mixture of early retirement pensions and benefits, though recent pensions reforms will probably induce many of them to work until they are older. The statistics show that older workers are either in full-time employment or are inactive, which can make the transition into retirement problematic. The authors therefore identify a need for policies which will encourage part-time employment in order to promote flexible and later retirement. What the authors call the current ‘cliff-edge’ fall into retirement isn’t good for people, and for more flexible retirement to be more of a possibility would therefore be good for people’s health.


Review article

Charles Murray, In Our Hands: A plan to replace the welfare state, The American Enterprise Institute Press, Washington DC, 2006, 230pp, hbk, 0 8447 4223 6, £10.50/$20

Those of us who have supported CI for years may feel that perhaps we could do without an endorsement for our ideas from the likes of Charles Murray. He achieved notoriety in 1994 with his book (co-written with Herrnstein) on ‘The Bell Curve’, which seemed to suggest that racism was acceptable, because some races are irredeemably less intelligent than others. This was a development to his on-going obsession with a social-welfare created under-class, in an earlier book Losing Ground (1984). Murray is a man who seems to relish notoriety, and to enjoy antagonising those who do not agree with him. He also appears to be a good-natured prankster who will follow whatever outrageous trail his high intellect leads him to. But make no mistake, Murray is highly influential in right-wing policy circles, and his endorsement of CI is a significant landmark. His name on the cover will ensure that this book will probably sell more, and be read by more people than all the other books on Citizen’s Income put together.

Not that he calls it CI, nor does he make any reference to the wealth of literature already available on the subject, from, for example Philippe van Parijs. (This seems to be a deliberate snub. He operates in a well-funded right wing think-tank, the American Enterprise Institute, and acknowledges the assistance of many fellow researchers – some of whom must have pointed out the existing body of information on CI). Indeed, his Plan, to ‘convert all transfer payments to a single cash payment for everyone age twenty-one and older’ (p9) has no name other than ‘The Plan’. By converting all welfare payments, Murray calculates that a payment of $10,000 (£5,100) p.a. could be made. But there is a twist-once earnings from other sources, mostly jobs, exceeds $25,000, the payment will be surtaxed at 20%. This means those individually earning more than $50,000 will receive no net Plan-money.

Murray does acknowledge one source for this idea-negative income tax (NIT), as proposed by Milton Friedman. During the 1970s a version of NIT was tried out, but the results were so abysmal that it was quietly shelved. * High marginal rates of tax destroyed work-incentives for the low paid. Murray’s Plan overcomes this effect of NIT and thus rehabilitates Friedman’s earlier idea. For both of these right-wing market fundamentalists, welfare payments of any kind are anathema. Ideally they would like to abolish welfare, but NIT or the newer Murray-Plan is a ‘way of reaching out across the political divide between libertarians and social-democrats, offering a compromise for dealing with human needs without entailing the suffocating and soulless welfare state’ (p xii).

In his eagerness to embrace market solutions Murray also proposes to abolish state-funded pensions as well as such state-sponsored medical schemes as exist in the US (Medicare and Medicaid). With an unshakeable belief in the beneficence of market-provision, Murray calculates that basic health insurance for all, as well as adequate retirement pensions can be provided by abstracting $3,000 from the $10,000 payment under his Plan. This is, to say the least, highly contentious. By flogging his Friedmanesque hobbyhorse of free markets he distracts from his main argument. In reality his Plan pays each individual $7,000 per year (that’s about $20 or £10 per day). In the UK our negative experiences of private-sector pension provisions (Maxwell, mis-selling scandals) and our positive experience of the NHS (better life expectancy than the US for half the GDP cost) supports the idea that state provision is not always as malign as Murray imagines.

Murray goes on to explain that his planned $7,000 p.a. individually paid to all those over the age of 21 would cure involuntary poverty. No mention is made of Child Benefits-none are payable in the US apart from tax allowances. The main losers from the Plan would be single mothers; Murray suggests that they have an alternative source of income to hand in the form of the fathers of their children. All these ‘dead-beat dads’ will be known to possess an income under the Plan, as well as an identifiable bank account. With a little help from the authorities, single mothers can enforce their claim against the fathers. If that fails, mother can escape poverty by taking a part-time job at the minimum wage, says Murray (p57). Curiously for a right-wing ideologue, Murray does not challenge minimum wage legislation; indeed many of his justifications for his Plan are predicated on minimum wage legislation continuing-a strange anomaly.

The labour market would be affected by the Plan in various ways: employment traps (disincentives to taking a job) caused by conditional welfare payments would vanish, so more would choose to work. Wives of well-paid men (Murray only reads off traditional gender stereotypes) might prefer to stay at home, content with their Plan-money. Some might choose to work fewer hours in jobs. Overall Murray feels the total hours worked in the economy would drop, but only slightly.

Warming to his theme of the underclass, Murray lapses from his libertarian ideals and shows his visceral hatred for two groups in particular: Young (under 21) mothers, will have the full rigours of economic destitution applied, and have every incentive to behave, to avoid pregnancy and find work at any job going. Also any male who does not get a job, if under 21 will equally have the goad of destitution, or if over 21 and he chooses to loaf at home with parents or girl-friend, will soon find that he must pay up part of his Plan money or be ‘kicked out’, as Murray puts it (p67).

Why the systematic meanness towards the under 21s in particular? Murray is worried that they might be tempted to become hippie drop-outs. Of course a major activity for most 18 to 21-year-olds in the US is education. With no Plan-money to support them, how will they pay their way? Murray suggests two courses of action: rely on welfare in the form of subsidised student loans and grants, or mortgage their future Plan payments. (I am sure the second would be illegal; the first seems exactly the sort of state-subsidy that Basic Income should replace. Murray seems determined to rescue his studied parsimony towards youngsters at all costs, even violating his own principles). Not that gap years for the over-21s are to be frowned on. Murray shows his more magnanimous side here: Yes, if a few older guys decided to be beach bums for a year or two, he is relaxed about that. In time such inactivity will pall, and these layabouts will re-integrate into decent hard-working society.

In framing his Plan, and identifying its consequences, Murray feels confident that it would work, and with the right push behind it should pass through as legislation. Those of us who have studied schemes for Basic or Citizen’s Income over the years will first look at winners and losers to identify a constituency for change: It is here that the Plan looks weak indeed. The 18-21 year-olds, who can both vote and serve in the military, who find themselves excluded from this payment would be (rightly) outraged. The underclass which Murray fears so greatly could become a swollen and enraged mob. This is neither politic nor libertarian. More important politically would be the large group in the middle, the ‘ordinary decent hard working families’ that politicians like to wax lyrical about. Although the Plan cleverly avoids the traps caused by the 100% withdrawal rate of the old NIT schemes, other difficulties arise at a later stage. Those with incomes between $25,000 and $75,000 would be hit with a higher income tax rate, as much as 7% higher for those on a very middling income of $50,000 (based on Murray’s graph on p149). I doubt if middle America would vote for such a scheme. Left out, and so un-engaged in most of the benefits and drawbacks of Murray’s Plan, are the well-off. Anyone earning more than $100,000 will not be affected by the Plan (apart from his wife, of course, as explained above!). These movers and shakers will see no reason to support such a Plan, even less so if it unleashes a horde of destitute 18-21 year-olds on society. I am very dubious about the practical politics of the Plan, but stranger things have emanated from right-wing US think-tanks and have been adopted by compliant administrations.

It is a relief to turn to the bigger picture, and the message of hope for better lives for all that Murray proposes. Unfortunately he cannot miss an opportunity to take a swipe at European social welfare states. These are held responsible for the misery of divorce, the rise of the underclass and even the loss of religion. Such tedious and easily refutable nonsense serves Murray’s case ill. He refers to the alternative-Rifkin’s ‘How Europe’s vision is quietly eclipsing the American dream’ (2004), but only in a note at the back. So much for ‘extending a hand to the social democrats’!

On a more positive note, concerning the pursuit of happiness, Murray makes some really good points: that personal relationships matter, that self-respect is important, that man (sic) is a social animal who seeks the respect of others, that humans will expend effort for the general good-what is called ‘altruism’, without expectation of reward, other than feeling good about themselves. All of this would be unremarkable, banal even, but for one thing: It flies in the face of the hegemonic doctrine which underpins the ‘free’ market, most notably espoused in Public Choice theory. This assumes that man is a rational being who makes selfish choices about maximising his own satisfaction. Greater satisfaction grows from greater consumption according to this theory. Murray, whether he realises it or not, clearly disagrees with the Neoclassical economists’ model of rational economic man.

One of the great liberating effects of CI is on work and jobs: writers like James Robertson suggest that ‘ownwork’ could replace much of conventional employment, especially demeaning and unethical jobs. Murray has a different take on this. He sees jobs as a form of ‘vocation’ (his chapter title). Employment is to be retained as a core activity, with the added benefit that labour mobility becomes easier. As well as boosting the economy, this enables people to find their true calling, even if that involves moving around.

In a chapter on marriage, Murray bemoans the present fractured state of this core relationship. It’s all the fault of the welfare state, he predictably asserts (p110). His Plan money will support stable married relationships: Mothers who want to work can hire nannies; it is also easier for wives to stay at home to look after children and husbands. The platform of the Plan-money encourages the taking on of responsibility, unlike the welfare provisions which provide a safety net which encourages fecklessness. Apart from the blatant sexism in these sentiments, Murray is unsure if divorce will be more or less widespread.

Murray also anticipates communitarian benefits from his Plan. Again he demonises the welfare state for supplanting a rich web of community organisations. There once was an amazing range of community, ethnic and religious self-help groups in the US, which have been superseded by welfare provision. Under the Plan, there could be a return to widespread small-scale voluntary local provision. Here Murray seems to have missed altogether the reason for the demise of many local voluntary organisations (apart from their functions being far less needed)-that the increasing engagement of both men and women in the labour market, and the longer hours being worked makes it much more difficult to find the time to volunteer. This is a consequence of the dominance of markets, not welfare, and the belief that jobs are the only valid form of work. It is big business which sucks life out of communities, not welfare provision. There is an alternative vision of voluntary organisation which CI can enable-that jobs in the profit-making sector can be shunned, and employment in worthwhile activities, even if poorly or un-paid become feasible.

This is not a state-bureaucracy versus voluntary provision argument as Murray tries to picture it. It is a power equation: Since big business and the money-interest have the power and money, they bend the behaviour of the populace to fit their needs, and rely on the state to control the reserve armies of the excluded underclass. Liberated by CI, individuals can choose to build their lives in fulfilling ways, freed from the control of needing to find a job to earn basic money to live on. This would be a more authentic libertarian dream. Murray, who claims to be a libertarian, is unable to see that although welfare provision does inhibit some desirable behaviour, it is the power and control of business and money, which are the main causes of lack of liberty. Take government off our backs for sure (in so far as it is doing any harm), but first chain up the monster which has nearly all of us in its grip: the power of money and big business. Perhaps Murray understands this all too well, but needs to be careful not to antagonise his paymasters at the American Enterprise Institute.

Conall Boyle

* Reports on this are difficult to obtain-no-one likes to admit to a failure. Yet the reasons for its failure would still be instructive. A possible research project for someone?


Viewpoint

Let’s use natural wealth to pay for a citizen’s income

Before asking how to fund a citizen’s income, we ask, ‘What entitles citizens to an income in the first place?’ To say they should get an income merely because they need one begs the question of why they need one. After all, there was less abject poverty in primitive tribal societies than in highly productive modern societies.

Our answer is that everyone in tribal societies had access to the earth on reasonably equal terms and could therefore provide for himself/herself.

Modern society is based on some people having all the land and everyone else buying or renting from them.

Rent is highest where population and productivity are highest. Even a vacant lot, on which the title holder has done nothing to earn an income, is worth a fortune if it is surrounded by productive people. The people who pay rent are, in the aggregate, the same ones who created the value in the first place.

Moreover, as failure to tax land values allows some to pile up great estates, it crowds others on to tiny lots in cities and towns, and enables landowners in those cities and towns to extract rack rents, even from the most hideous slums.

Even icons of conservatism have acknowledged throughout history that, in lieu of an equal right of access to the land itself, each citizen has a right to a share of the rent. A modern way to introduce this sharing of land rent would be to introduce an annual levy on all sites. The levy (or Annual Land Value Tax) would be a fixed percentage of the site value but the amount paid would vary according to the financial benefit each landowner derives from their land. Endorsements for land value tax continue to this day from across the political spectrum and tie directly to the question of each citizen’s birthright.

Other taxes, such as royalties on scarce natural resources and taxes on pollution, also have good effects. However, these are really just specialized land value taxes. In Edmonton, Canada and Alaska, some of the royalties from oil production are returned to their citizens as a dividend each year. In the same way a land dividend arising from land rent could be paid to all citizens. Even London’s congestion charge, championed by Mayor Ken Livingstone, is a sort of rental payment for use of public streets. Its success in reducing congestion shows that marginal cost pricing works, i.e. if you charge for a scarce resource (in this case city centre road space) – people will use it more efficiently. Similarly, if we charge for the use of the natural resources on our planet (including land) – people will use them more efficiently.

Green taxes can (and should) supplement a general land value tax, but none of them are as directly connected to each person’s birthright as land value tax is, and none of them have the revenue potential that land value tax has.

Because a land value tax is a charge against privilege, pure and simple, powerful interests will always oppose it, but many people support it for that same reason. For what other tax proposal can you cite Thomas Carlyle, Winston Churchill, Richard Cobden, Aldous Huxley, Thomas Jefferson, John Locke, John Stuart Mill, Moses, Tom Paine, William Penn, Spinoza, Adam Smith, Tolstoy, Mark Twain, Karl Marx, seven winners of the Nobel Prize in Economics and countless others in support of your position?

A land value tax, buttressed by resource royalties, pollution charges and congestion charges, is the perfect revenue source to fund the citizens’ income.

Dan Sullivan and Dave Wetzel

 

© Citizen’s Income Trust, 2013

Footnotes

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