Monthly Archives: July 2016

Universal Basic Income is in the news

The highly misleading BBC programme, Analysis on the subject of Universal Basic income, sometimes called ‘Citizens’ Income’, will now be balanced by information from a respected economic and financial magazine, a gifted economist’s summary, and news from the countries of Finland, Canada and the Netherlands, three of several countries who are taking this idea so seriously that they wish to put it into practice

Money Week explains:

  • UBI “makes all work pay by abolishing the classic trap of all means-tested benefits.
  • Under a universal income, there are no perverse disincentives that give people an excuse to stay at home in the face of an effective marginal tax rate of 80%.
  • Given that one of the main challenges of the age appears to be in-work poverty, rather than mass unemployment, a basic income system could play a significant role – especially in an age of disruptive technologies that make working lives less and less secure.
  • Nor is there any disincentive to prudent long-term saving – no one has their benefits stopped for having too much in the bank.

For a more detailed but readable account of UBI, see this extract from “It Doesn’t Have to Be Like This: global economics: a new way forward”, by Margaret Legum, ISBN: 1901557766. Margaret was educated at Rhodes University and Cambridge. She lectured at the LSE and Rhodes.

Money Week reports that Finland is planning to offer a national basic income to all of its citizens of 800 euros ($870) a month and Time magazine adds that the final proposal for the plan won’t be released until Nov. 2016. Three years of economic downturn, has led to rising unemployment and pressures on public spending. The centre-right government took office after general elections in April this year, and is carrying out a wide-ranging program of cuts that will affect education, health and welfare provisions.

A working group has been given the task of providing a preliminary study that will lead to the actual experiment. The study will identify a model for basic income to be tested. The experiment will evaluate the effects of giving a basic income to members of different population groups, and produce an overall cost estimate.

A poll commissioned by the agency planning the proposal, the Finnish Social Insurance Institute, showed 69% supported the basic income plan.

Times magazine has published an article about the city of Utrecht’s partnership with a local university to provide residents with a “basic income” which is enough to cover living costs. People who participate in the experiment won’t have any restrictions placed on how they choose to spend the money they receive. Researchers and city officials will study the people who are offered a basic income to see whether citizens dedicate more time to volunteering, studying and other forms of self and community improvement if they don’t have to worry about earning money to survive. The findings will be compared with those of a control group who continue to earn money in the traditional way. Utrecht officials are in talks with other cities to expand the experiment to other locations as well.

The most famous experiment was carried out in the Canadian town of Dauphin, in Manitoba. Between 1974 and 1979, The Mincome program gave a stipend to the entire population, varying depending on how much money each person earned. Evelyn L. Forget, an economist at the University of Manitoba, studied this experiment and wrote a report called “The town with no poverty,” published in 2011. Although working hours dropped, as sceptics had predicted, it happened mainly among young men, who instead continued their education, and mothers who used the financial freedom to focus on childrearing.

Her conclusion? Basic income reduced Dauphin’s poverty and alleviated several other problems.

 

 

 

New generation QE could stimulate the economy, boost employment and tackle climate change

The Times reports that Howard Archer, chief economist at IHS Global Insight, predicts that quantitative easing, which has been on hold since 2012, will be revived in August, with an extension of the Funding for Lending Scheme, which provides cheap finance for major lenders in an attempt to get credit flowing.

QE – as currently administered – sees the Bank pumping money into the financial system by buying bonds from financial institutions. Adam Marshall, acting director general of the British Chambers of Commerce, said the employers’ group would support more QE in principle “given the exceptional circumstances of the Brexit vote”. However, he called for QE to be overhauled and “aimed at injecting money into corporates and small and medium-sized companies”.

Others would advocate more widely beneficial applications; a new-generation quantitative easing programme could stimulate the economy, boost employment and tackle climate change instead of – as before – simply adding more cash to bank balance sheets and inflating asset prices.

The latest policy proposal is Green Infrastructure Quantitative Easing (GIQE). Last year, economist Richard Murphy addressed the Convention of Scottish Local Authorities to present this in detail as a programme that would buy bonds issued by the Green Investment Bank to fund making every building in the UK energy efficient, and, where feasible, fitted with solar panels, which would reduce energy bills and in the process tackle fuel poverty and cut greenhouse gas emissions. In addition, it would fund sustainable energy projects and enable local authorities to pay for new houses, NHS trusts to build new hospitals and education authorities to build schools.

gnd coverThis concept of directing quantitative easing to fund the greening of the UK’s infrastructure was first included in the 2013 report ‘A National Plan for the UK’, issued by the Green New Deal Group, convened by Colin Hines.

The new economics foundation also published a substantial 2013 report ‘Strategic quantitative easing’, apparently targeted at the banking world, with an extensive analysis of the current monetary system and applications of quantitative easing and a reference to its role in increasing exports in addition to the Green Deal and housebuilding references.

MP Caroline Lucas persuasively summarised the proposal in the New Statesman:

“GIQE could contribute to strengthening the UK economy via a carefully costed, nationwide programme to train and employ a ‘carbon army’. This army would be at the frontline of the fight against cold homes by making all of the UK’s 30 million buildings energy efficient, and, where feasible, fitted with solar panels. This would, in the first instance, dramatically reduce energy bills and fuel poverty, whilst also cutting greenhouse gas emission and cutting current dependence on imported energy.

“Secondly, a GIQE programme could also help tackle the housing crisis by financing the construction of new affordable housing that’s highly energy efficient and built predominantly on brownfield sites.

“Thirdly, GIQE could help finance improved regional public transport networks to help revitalise local and regional economies. That’s more and better buses, trains and coaches, helping people to get around their communities and stay connected . . .

“It’s time that both the Government and the Opposition, rather than continuing to hand money over to the banks as they have done since the financial crisis, will seriously consider this plan to build a resilient economy, protect our shared environment and create thousands of new well paid jobs.”

 

 

 

Post Brexit: four contributions – add yours?

Instead of stealing the brightest and the best from poorer countries, spend on education, training and family support, financed by taxing the rich and closing tax havens. Address the concerns that drove the Brexit vote – mass immigration and declining job prospects . . .

Colin Hines, convenor of the Green New Deal group, writes in the Ecologist: “We need a new, cooperative union: of decentralised regional economies, with public investment in ‘green’ infrastructure driving our transition to a sustainable, low carbon future”.

He sees a failure to control EU migration as being clearly undemocratic given the polls showing the overriding public opposition to present net immigration . . .

population trend eastern europe graph

“It will continue the present stealing of the brightest and the best from poorer countries to save the UK the expense of training its own people. Over 2,000 doctors who qualified in Romania for example are working here, a country that has lost over a third of its hospital doctors over the last few years.”.

Uncontrolled immigration will also have severely adverse environmental effects in terms of increased resource use, a greater national contribution to climate change and further building on the green belt in a country that has to import nearly half of its food in a world of likely ever increasing food insecurity.

green-new-deal-1-728Hines advocates building or refurbishing public sector buildings, more efficient energy and water systems, local transport, waste minimisation and digital infrastructure.

He points out that, aside from its obvious advantages of improving social conditions and protecting the environment, it is employment-intensive, less likely to be automated and can’t be relocated abroad. The scope of such work has been detailed by the Green New Deal group.

As the Bank of England contemplates a further round of quantitative easing, Hines points out that rather than buying bonds, ‘Green QE’ could provide the impetus to fund this work by unlocking massive private co-funding from pension and insurance companies and individual savers. The secure returns that can be earned from such investments are just what such funding sources need.

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Andrew Walton – whose site tweets the Hines article – has posted in Bioregional Birmingham, also urging the green left to reconsider its stance on immigration for social and environmental reasons:

  • “It’s clear that each bioregion has an environmental carrying capacity, which can be tipped out of balance by population growth and increasing economic productivity; both of which are in part driven by uncontrolled migration.
  • “The discontent among many working class voters is not mindless bigotry but a cultural anxiety. It is driven by the alienating nature of fast paced social change, over which communities have little control. Many of those who feel alienated mistakenly see migrants themselves as the problem.”

“The West’s aggressive geopolitical posturing, which seeks to control global resources, combined with its billion dollar weapons export industry, also contributes hugely to displacement and forced migration”. 

The basic UK problem: its inability to educate and train its population

applica header

Writing from Brussels in the FT, John Morley, Senior Policy Adviser at research institute Applica, highlights the basic UK problem: “namely the country’s inability to educate and train its population to the extent needed to meet the demands of its economy. This has resulted in its reliance on imported labour at all levels — from the governor of the Bank of England down to farm labourers in the fields of Lincolnshire . .

“Rather than invest in its people, the UK government has preferred to put public money into high-cost but high-vis school and hospital buildings, using costly private finance initiative funding, with little regard for what needs to go on inside them. Until this massive structural imbalance between human and capital investment is corrected, it will be very difficult for the UK to reduce its dependence on imported labour”.

j 2 sachsAndrew Walton recommends an excellent article by the widely respected American economist Jeffrey Sachs (right) in The Strategist which looks at the issues he raises in more detail.

We end with Professor Sachs’ sterling advice, to restore a sense of fairness and opportunity for the disaffected working class and those whose livelihoods have been undermined by financial crises and the outsourcing of jobs:

“This means following the social-democratic ethos of pursuing ample social spending for health, education, training, apprenticeships, and family support, financed by taxing the rich and closing tax havens, which are gutting public revenues and exacerbating economic injustice.