Monday, March 6, 2017

The Basic Income Con Job

Bernard Friot is a French sociologist and economist who has criticized proposals to guarantee all citizens a “basic income” (or “guaranteed income,” also known by other various names) regardless of their employment status, and he has suggested that something called lifelong salary could be far superior.
Bernard Friot started his career with a study of the evolution of the French social security system between 1920 and 1980. In his PhD he challenged the claim that the 1945 French social security reforms were a natural element of early 20th century mass production, a stage of capitalist development referred to as Fordism. He insisted instead that these reforms involved a socialization of wages that was distinctly anti-capitalist.
Bernard Friot leads the European Institute of Wages and a popular education association called Réseau Salariat (Network for Wage Earners), which promotes the idea of an “unconditional lifelong salary” (salaire à vie inconditionnel). He denounces basic income as “a spare tire for capitalism” because it would leave capitalism intact and many fundamental social problems unresolved.
The lifelong salary supported by Bernard Friot is, according to his analysis, the best subversive answer to the four main institutions of capitalism:

1. Lucrative property, which refers not to private property, but rather to private property from which profit is derived.
2. Credit. A state does not need to borrow to finance investment.
3. Employment market. Capitalism depends on the precariousness of employment. Workers live under constant threat of becoming unemployed, and in this state of perpetual insecurity they must compete with others and be alienated from the rest of society.
4. Arbitrary valuation of only certain forms of work. One’s work is valued only if it is done for a private corporation, and the value usually depends on the number of years spent in a particular job. Civil service jobs are valued less because they are seen to be parasitical, derived from taxes on the “real” economic activity in the private sector. Other forms of work such as parenting, community volunteering, care of the elderly and so on are not valued at all.

Although the plan to implement lifelong salary has been criticized as being utopian, Friot stresses that much of it is dejà-là (already there) in the form of the already socialized portion of salaries that goes to taxes to support the civil service and the military, and in the form of payroll deductions for pensions, unemployment insurance, health care, etc. The reforms of 1945 that introduced this new system took France half-way to full socialism. They are regarded as great progress and an integral part of the defeat of fascism in Europe.
Under the lifelong salary plan, enterprises would not pay workers directly. All expenses dedicated to salaries would be socialized; that is, paid into payroll deduction plans, and all adult citizens would receive a lifetime salary from the government. Decisions on economic management would be made by elected legislatures and committees. Workers would be able to improve their incomes and social standing by obtaining professional qualifications throughout their lifetimes.
This plan for lifelong salary does, in essence, require a planned or command economy. Friot, to his credit and unlike many anti-capitalist writers and activists, doesn’t hide the fact that he is a Marxist. Salaries, prices and decisions about investment and production would be managed by government. The plan doesn’t require the elimination of private property, or of privately owned lucrative property, but it does imply that the management of large enterprises would be highly regulated in ways that would maximize social good. How democratic and just it would actually be would depend entirely on the actions and decisions of millions of people participating in such a social transformation, and how strongly it would be opposed.

A 36-minute video report about 
lifelong salary, with English subtitles

It’s common knowledge that communism failed once before, but the reasons are still poorly understood. Scholars still debate the causes of the Soviet collapse, but it is clear that the main reason was not some inherent flaw in socialism itself. Most of the causes identified have nothing to do with ideology.
One cause may be that the Soviet Union was just too large to contain the nationalism that broke up the union of republics. Another possible cause was external opposition. Triumphalist Americans who claimed to have “won the Cold War” never stopped to wonder what socialist revolutions in Russia and elsewhere might have achieved if they hadn’t had to expend so much in defending themselves.
It could be that the Soviet Union would still exist if it had not been for specific actions taken by unprincipled leaders such as Boris Yeltsin. Yeltsin conspired in 1991, with the leaders of Belarus and Ukraine, to separate from the union, disregarding a recent referendum held in all the republics that resulted in a widespread consensus to keep the union together. Perhaps the most significant cause underlying all these others was the ever-expanding second economy—the black market that the government lost control of.
While the privatization and liberalization of the Soviet system is usually understood to be something that happened in the late 1980s during Gorbachev’s reforms, the second economy had been a problem ever since the revolution. Leaders debated what to do about it, but it was never well-controlled. By the 1970s the problem was widespread, involving both small and large-scale cheating. Thomas Kenny and Roger Keeran described the situation in chapter three of their book Socialism Betrayed: Behind the Collapse of the Soviet Union:

After 1953, illegal money-making presented a much greater problem than legal activity. Illegal activity eventually assumed an astounding array of forms, eventually penetrated all aspects of Soviet life, and was limited only by the boundaries of human ingenuity. The most common form of criminal economic activity took the form of stealing from the state, that is, from work places and public organizations. Grossman said, “The peasant steals fodder from the kolhoz [collective farm] to maintain his animals, the worker steals materials and tools with which to ply his trade ‘on the side,’ the physician steals medicines, the driver steals gasoline and the use of the official car to operate an unofficial taxi.”[1] Variations on this theme included the diversion of goods into the private market by truck drivers and the use of state resources to build a summerhouse, renovate an apartment, or repair a car. At times stealing from the state occurred in wholesale and systemic ways. This included “well-organized gangs of criminals capable of pulling off daring and large-scale feats.” It included the practices of managers reporting the loss or spoilage of goods in order to divert them to the black market. It embraced a common practice in state stores of salespeople and managers laying aside rare goods in order to secure tips from favored customers or to sell them in the black market. Consumer durable goods like automobiles for which waiting lists existed presented “considerable opportunity for graft,” as well as for “speculation,” that is, for resale at higher prices.[2]

After Gorbachev had been in power for a few years, he was known to be reluctant to use force to settle problems, so separatists and private entrepreneurs were emboldened to push the limits. The more things seemed to be heading toward breakup and market privatization, the more the government officials and the nomenklatura themselves were eager to get in on the game. When the building starts to shake, the crowd looks toward the exits. If Boris Yeltsin had not been the opportunist to step in and bring the system down, it would have been someone else soon enough. After Yeltsin took power, privatization became a feeding frenzy on state-owned property throughout the 1990s.
Thus if this problem of the secondary market was the ultimate cause of the Soviet collapse, this may be the fundamental flaw in human nature that any future socialist transformation would have to manage extremely carefully. A socialist government needs to behave like an organized religion in as much as it must always be on guard, like a nun in a Catholic high school, monitoring and curtailing the animal spirits, constantly educating and providing moral instruction. Communism threw out the superstitions of religion, but it has long been a truism that if Jesus came back today he would be called a communist. Communism took over religion’s role of being the source of moral education, the core lesson of which was that the sphere of empathy must be expanded. Individual behavior must be constrained for the sake of social harmony.
While we bear in mind that the Soviet politburo constantly debated the need for ideological training and punishment of those who were earning “illegal income,” it might be time to recognize the same need in Western societies in order to restore social equality. The general population is being devastated by the problems of capitalism: wild income disparities, unrepayable public and private debt, excess financialization of the economy, exporting of jobs to low-wage zones, erosion of tax revenue, and central bank money printing leading to speculative investment in non-productive assets. Political parties have no competent responses to these problems. Meanwhile, the robot revolution looms, and from the automation that has occurred so far, displaced workers have had no access to the profits that came from it. It has got to a point where we can no longer afford the luxury of living without socialism in a wild free market. The excesses of capitalism and the threats of automation make more socialism the inevitable choice if we want to survive. Freedoms will have to be surrendered to prevent ecological collapse. Perhaps an algorithm for managing society can be written, one that will help us avoid the human errors committed during the Soviet experiment with socialism.
The suggestion that there is a need for ideological training may seem absurd to people living under the illusion of freedom in capitalist societies. People are generally unaware of how much of their behavior and thoughts in other spheres of life are already constantly monitored and influenced by notions of what is “realistically achievable,” by political correctness and by everyday social sanction. Just consider what kind of flag went off in your mind when your eyes registered the word “Marxist” earlier in this text. In polite company, when one is among right-minded people, one may want to talk of Marxism, but one must add disclaimers, such as saying it was an influential phenomenon of history, but of course it’s a thing of the past. Or one has to add, “Of course, I’m not a Marxist, but...”
We are all under various forms of ideological control, and in any case, most people willingly submit to social norms handed down by religious or secular traditions. These norms are socialist in the sense that they aim to restrain instincts toward selfish behavior. In their sexual behavior and family commitments, for example, most people conform to already “socialist” norms not just for peace in their personal lives but also for the sake of social stability. One commits to being a good parent for personal reasons but also for broader considerations. One reason a man stays with his family is because he ponders the question: what if every kid had a deadbeat dad? Our ancestors called this a sacred covenant, but that term is not used so much these days.
This need for ideological education relates to the renewed interest in proposals for basic income, and it supports Friot’s notion that we should be suspicious of seemingly progressive ideas being promoted by capitalist interests. Popular discourse around basic income proposals has not been accompanied by much deeper thinking about the implications and consequences. No one is questioning the incongruity of basic income being promoted by a capitalist system, by people who do not acknowledge it as the introduction of socialism or a socialist solution for a severe defect in capitalism.
If basic income is not described as a socialist solution, the reason is probably because what is being proposed is not socialist at all. It is indeed being conceived of as a spare tire for capitalism. It is being thought of as assistance for those who are temporarily unable to convince anyone to give them employment. It is hoped that bureaucracies can determine a fair income level that provides an individual with the necessities of life, then needy individuals can be given that amount and subsequently this monthly stipend will solve all the varied problems they have had in obtaining good health, sound human relationships, housing, education and vocational skills. Government and everyone else can just look away because now these unfortunate souls will be empowered to solve their problems in the free market. Meanwhile, defined-benefit social programs, such as public housing and food stamps, can be dismantled because the free market is going to take care of everything. It is obvious that there is no socialism in this plan. Basic income, as it is being promoted, is a bandage for the wounds inflicted by neoliberal economics.
In many other ways, discussion of basic income proposals has failed to anticipate many of the difficult questions that would arise. I suggest a few here:

1.       Basic income has worked experimentally over short periods in small communities, but how will it work in a society of millions of strangers?
2.       Basic income proponents assume that all people want to work because work gives personal dignity and provides an outlet for creativity, but many of the jobs that need to be done are dirty, difficult, dangerous and boring, and they offer little opportunity for self-expression. Some jobs are done in comfortable surroundings, but the people who perform them often find that they are boring “bullshit jobs” that have no apparent social value.[3] The politicians and bureaucrats who propose basic income plans perhaps forget, or have never known, what it is like to perform such jobs—the kinds of jobs done by people who buy lottery tickets every week. Consider, for example, the people who do subway line maintenance between midnight and six a.m. What will it take to incentivize people to do this kind of work when they can receive a comfortable annual income for staying home, perhaps wasting their time, perhaps pursuing education and creative pursuits that are non-lucrative?
3.       Related to this point about unpleasant work is a phenomenon that is happening at the same time basic income is becoming a popular notion. Prostitution is being legalized and normalized in some countries as just another kind of work, a kind of “industry.” If there is a plan to counsel and force people to transition from basic income into employment, will people be encouraged to work in the sex industry? If not, why should prostitution be legal?
4.       Will basic income be permanent, enshrined as an inalienable right, or could it be cancelled by the election of a government with different policies. It seems like basic income wouldn’t succeed if people could not trust that it would be in place over the long term.
5.       The answer to question 2 about incentives to work is, of course, that employers will have to offer salaries significantly higher than the basic income to persuade people to do unpleasant jobs. Basic income would inflate salaries and prices, so within a short time the basic income would be more like welfare, and it would serve the same function. Inflation will make basic income become the bare subsistence income, a level of poverty so miserable that it incentivizes people to seek employment. And it is worth repeating that later, once the benefits of basic income have been eroded by inflation, many defined-benefit social programs will no longer exist. I suspect that inflation may be the undeclared goal of basic income proponents because a period of high inflation would make government and private debts, and savings accounts (your savings), relatively smaller.
6.       The point made in 5 above assumes that basic income would provide, as its name suggests, a minimally comfortable standard of living, but some proposals suggest nothing of the kind. The income levels proposed would be a floor to prevent people from falling into abject poverty, but would still inflict a level of hardship on recipients that would incentivize them to seek additional income. The idea behind these proposals is that it would be enough to “get people on their feet” so they can find work. The basic income supplement wouldn’t be lost until an individual’s total annual income (from both employment and basic income supplement) rose above a fixed level. It is hard to see how this proposal differs from various social welfare and unemployment insurance programs that already exist. It is also difficult to see how this is not a gift to employers who would be incentivized to pay less. This model would cause wage deflation rather than inflation. There would have to be higher corporate taxes and payroll deductions to finance such a plan, but no one seems to be talking about that side of the equation. Finally, his plan would also incentivize recipients to find income sources on the black market.
7.       Basic income doesn’t produce more jobs. The extra money circulating in the economy would produce more consumer demand and lead to some new employment, but it doesn’t change industrial policy, build factories or create new export industries. Where is the real plan for job creation?
8.       What restrictions would be placed on people receiving basic income? The thinking behind basic income is that there won’t be any. It will eliminate bureaucracy and the degrading means-testing that makes people prove they are qualified and deserving of assistance. With basic income, people would just be given money and told to go away and do whatever they want with it. But would it work out that way? In reality, not everyone’s needs can be met by the same level of income, so their needs would have to be evaluated. It is easy to imagine that recipients would begin to act in ways that would bother people who were still foolish enough to work for a living. For example contributors would begin to ask these next questions (9-18):
9.       Do recipients have to stay in the country? The local currency might buy much more in a foreign country with better weather and nicer beaches.
10.    Can recipients gamble with their basic income?
11.    Can recipients buy stocks with basic income?
12.    Can recipients use basic income to qualify for a mortgage, and if so, will this inflate prices in the housing market in a way that negates the original benefit of basic income?
13.    What is to be done with recipients who have, or later develop, drug and alcohol dependencies and spend their basic income on these substances?
14.    What is to be done for people who are not ready for employment because of a lack of education or training, or because of problems related to physical, mental and emotional health?
15.    What happens if someone uses up all his basic income before the next payment? He would technically be poor and in need of assistance. He would be living on the streets, and the basic income was supposed to have fixed that problem.
16.    What is to be done for a recipient who makes one or more women pregnant? Does he get the necessary premium to feed the extra mouths, or should this go to the mothers? If the extra basic income doesn’t go to the father, does this erase his parental rights and obligations?
17.    What are the other effects on family formation and family cohesion?
18.    Because it provides a floor of security, will basic income incentivize people to start new ventures and take risks that they wouldn’t otherwise, or will it have the opposite effect? If people have their basic needs guaranteed, they may have reduced ambitions. A society with a basic income might resemble Aldous Huxley’s Brave New World. Society would be much less dynamic when food becomes as easy to obtain as oxygen.
19.    Another question relates to the fatal mistake of the Soviet Union mentioned above: the emergence of the second economy and the government’s inability to suppress it. With a basic income in place, citizens would be highly motivated to retain their status as recipients of basic income while they seek ways to secretly supplement it. Thus a second economy would emerge in which people exchange goods and services, some of which are legal, illegal or in a gray zone, like prostitution, of being illicit (disfavored for one’s own body and the bodies of people we care about) but tolerated when strangers are involved. There is a corollary of this problem already in the government’s inability to collect sales tax and income tax on all transactions. When the sales tax is raised to above a certain tolerable threshold, there is an increase in the number of people willing to engage in off-book cash transactions. A plumber will ask, for example, only in face-to-face negotiation, if a customer would like a 5% discount for paying in cash. The government’s next solution for this problem is going to be to abolish cash and submit all transactions to electronic surveillance, but this policy raises obvious privacy issues that have not been subjected to any political debate.

All of these questions elucidate what Bernard Friot meant when he said basic income is merely a “spare tire for capitalism.” Basic income proposals are being presented to the public without any deep discussion or full disclosure of the motivations for promoting them. They are being presented without any honest discussion of what sorts of tensions and demands would arise from the salaried class toward the recipients of basic income. It is obvious that resentments would arise and the salaried class would demand that the freedoms of recipients must be restricted in order for them to qualify for assistance. Nothing is given for free.
Likewise, recipients would not be content for long with having their freedoms and dignity restricted, or with being marginalized as a parasitic underclass. Basic income would have to be followed by an obligation of society to create full employment, and with this change society would have to become fully socialist. Society would have to coerce people to work and turn themselves into contributors to society. Excessive recreational drug usage, for example, would not be viewed as a victimless crime because the user would be seen as removing himself from his social obligations. Society would have to take responsibility for saving the downtrodden and the addicted, infringe on their freedom to die on the street and actively do something to rehabilitate them, but the obligations would cut both ways.
However, basic income proposals are being proposed in full avoidance of this discussion of how socialist we want to become because in our ideological system socialism was supposedly fully discredited in 1991. Instead, basic income is being promoted just as a way to deal with an inconvenient problem, to streamline bureaucracy, and to efficiently deliver assistance while further eroding or replacing defined-benefit programs that are (or were) supposed to guarantee a certain quality of education, health care, housing and food. A cash payment is to be given to individuals with which they are supposed to just walk away and look for solutions to all their problems on the free market. These proposals offer nothing in the way of meaningful help for people who need to restore their lives within networks of caring fellow human beings.
As I was searching for a way to describe this situation, I heard Max Keiser describe it this way, coincidentally, on his financial news show, The Keiser Report:

There is no discussion of morality anymore. It’s accepted wisdom and fact that Wall St. commits financial terrorism, that we are entering into a Wall St.-led ecological holocaust, and that it is inevitable... so… without any moral dimension in the discussion, without any consideration of how to design society… our financiers on Wall St. and in Washington, how are they going to allow themselves to be carried away on this vector of shameless narcissism leading to premature human extinction?[4]

Max Keiser’s mention of ecological holocaust points to something that even Mr. Friot’s better idea of lifelong salary seems to not address. The ultimate cause of the present social and economic crisis is the energy crisis. All of the easy energy resources have been extracted, and we are now left with those that involve an unfavorable ratio of EROEI (Energy Returned on Energy Invested), a calculation of the energy input that is required to extract a certain amount of energy that can be put into use in the economy. The rising rate of necessary EI (energy invested) was a factor even long ago in the Soviet system during the 1970s and 1980s when planners faced the shock that all the easy resources had been tapped, and this was followed by the added shock of low oil prices that the Americans and Saudis conspired to create as a tactic for fighting the Cold War.
At that time, the Soviets were also facing the shock of what the second economy was doing to socialism. The problem was so widespread and demoralizing that it went right to the top, involving the daughter and son-in-law of General Secretary Brezhnev himself. However, unlike the present leadership of global capitalism, the Soviets were at least able to recognize it as a moral problem. Several attempts were made to punish offenders, re-establish ideological education and remind citizens of the moral purpose of the revolution. Soviet planners were also aware of the dangers of being too utopian and ignoring the constraints of human nature. They tried to undo the policy of “wage-leveling” by introducing policies that would give higher rewards to the highly educated, overtime workers and other people judged as making valuable contributions to society. (This is a poorly understood facet of Soviet history because the commonplace understanding of the leadership was that they were idiotically utopian and blind to the self-interested aspects of human nature.) The revision of wage-leveling policy would hopefully reduce incentives to participate in the second economy. The history shows, however, that they failed in this endeavor, as the second economy kept growing and completely devoured the system once Gorbachev’s reforms came along.
Presently, the ecological crisis makes the economic and social crisis of the entire planet much more acute than it was for the Soviet Union in the 1970s and 1980s. Bernard Friot proposes a system which could capture all the lucrative property of France and divert revenues from it toward lifetime salaries for all, but there seem to be no deeper questions asked about where this lucrativeness comes from. He seems to be working with an early 20th century understanding of economics that takes for granted access to favorable EROEI sources of energy.
Yet by mid-20th century French leaders had understood the fundamental problem they faced after the nation was destroyed in WWII and the colonies were in danger of being lost. Charles De Gaulle knew that France was poor in natural resources and would have to hold onto its colonies. At the very least the French would have to find a way to retain their former colonies in a new relationship called neo-colonialism, a system that assured French dominance in the new nominally independent nations. France succeeded in this and managed to retain access to oil and uranium in African and Middle Eastern nations. To this day, even after the introduction of the euro, France still controls African economies through the French-backed West African Franc and Central African Franc. However, this arrangement is not the sort of thing a good Marxist should endorse, unless the relationship could be made mutually beneficial, so a consideration of energy sources raises some difficult questions about how a lifetime salary policy would deliver a decent standard of living for all. A successful lifetime salary system would also raise questions about nationalism and citizenship, about who is qualified to benefit. A nation that provides a good life for its citizens becomes an envied magnet for outsiders, but a sudden influx of outsiders forces the government to defend its achievements from external forces that would undermine it.
One thing that Friot's plan has going for it, which could make Command Economy v2.0 more successful is the fact that computer networks make it possible to monitor needs and supplies in large, complex societies. The classic criticism of command economies was always that bureaucrats could never efficiently manage large-scale, complex economies, but this may no longer be true.
The final question is this: If I could write all of the above and raise all of these questions after thinking about these issues for a few days, why do I not notice experts saying the same things? On that note I finish with a quote from Max Keiser’s guest, Chris Martenson, in the same episode mentioned above:

They [past and present Federal Reserve chairpersons] are conducting massive social experiments. Money is not this thing you study in textbooks and is real. Really, it’s an agreement that we hold with each other, and they are violating our agreement at the core level, and she [Janet Yellen, Federal Reserve Chairperson] knows this well... I pulled up a quote from Plutarch which notes that the oldest and most fatal ailment of all republics is the gap between the rich and the poor. I wrote that because I knew they [the central banks] were about to start printing money. I knew that it was going to create a wealth gap. How did I know that? I’m just one guy sitting in a room. How did I just analyze something that escaped the attention of the whole Federal Reserve and all their researchers? It didn’t. They know they are creating this wealth gap. They are doing it specifically. They are taking money from pretty much everybody because Janet Yellen has decided that she knows better...[5]


[1] Gregory Grossman, “The Second Economy in the Soviet Union and Eastern Europe,” Berkeley-Duke Occasional Papers on the Economy of the Soviet Union, July 1990).

[2] Roger Keeran and Thomas Kennedy, Socialism Betrayed: Behind the Collapse of the Soviet Union (iUniverse, 2010), Chapter Three.

[3] David Graeber, “On the Phenomenon of Bullshit Jobs,”, August 20, 2013.

[4] Max Keiser, The Keiser Report, Episode 1040, 20:25~.

[5] Max Keiser, The Keiser Report, Episode 1040, 18:20~.

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