Some interesting comments in this blog article concerning the concept of the citizen’s income. Any views on whether it is conceptually sound, and practically viable?

The Earthbound Report

One of the recurring ideas that crops up in alternative economics circles is the citizen’s income. In a nutshell, it’s a universal and unconditional payment made to every adult in the country, every month. This provides everyone with a ‘guaranteed minimum income’, which is an alternative name for it.

We have it in a form in the UK already, through child benefit payments. A full scale citizens income would include adults too, with different rates for different stages of life. Everyone would receive it, and it would replace child benefit, state pensions, unemployment benefits and a host of other tax credits.

Reactions to this idea generally divide in two. The first group is ‘brilliant – free money from the government’. The second comes from those who think about it a moment longer and realise that it would be funded through taxes. Then they ask why you’d want to give benefits…

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  1. Andy,

    It is a little disingenuous to argue that the left and right advocate the same thing when talking about universal income. The main difference being that the right see it as a substitute for all government activity which would include provision of healthcare and education etc. After all the market will provide these things if people have the money and individuals have the freedom to choose choice, right? This is absolute nonsense for various reasons but mostly because the market will always underprovide services with positive externalities. Now Guy Standing (who pioneered this work in developing counties when at the ILO, see “beyond the new paternalism” and other articles) would berate me for being so paternalistic here but I disagree, it’s not paternalism it’s correcting market failure. The left on the other hand see it as an addition to existing state provision which requires a significant increase taxation which the right will not accept. Quite different visions.

    The idea as advocated here is somewhere in-between whereby it simply replaces existing state benefits (IDS’s univeral credit?). This is fine until you start to think about how you would do this practically in a high costs developed society. If you are a family of four in London with no worker in the household and both adults on JSA or DSA the unit will presently be receiving £25k – £35K (net I would note) in benefits to support a fairly modest existence. If the income is to be universal then it has to be easy to administer which means it has to be sufficient to support a basic lifestyle without mean-testing. Now either you transfer £15K or so to every citizen (aprox £600bill or 25% of GDP) or else you have to have a complex system of working out how much each individual “deserves” based on need. Which starts to erode the very reason for the policy in the first place which is less state administration and takes us right back to the issues means-testing and the myriad of incentives this brings. Now one could propose regional variations and changes for number of children etc but where do you stop? It either has to be universal or not otherwise it’s not worth the bother. Also child benefit as a comparison, seriously? It’s tiny and not going to be universal after March, it a completely different scale.

    Reg negative externalities this is a completely unrelated issue. You can tax externalities regardless of having universal income (policy confusion). Likewise you can have a land tax regardless of what policy you have for benefits. Fiscal fungibility means that you have to assume that all new benefits are funded by the most inefficient form of taxation within society at the present time. If you want to make taxes more efficient then grate, but the argument for this is independent of new transfers. The two are not related as such. (You could have a land tax to fund trident, doesn not ake trident a good use of money).

    My basic view if that this works well in very unequal societies because relatively small amounts of GDP transferred as a universal benefit makes a massive difference if you are living on $2 a day! And the government in these societies usually lacks the capacity to provide public services anyway. In developed western societies you need to be transferring such a colossal some in total it starts to get rather out of hand and you end up with more problems than you started with.

    In general universal benefits and asset taxes are a good idea. It’s just not a panacea.

    From a country which could actually benefit from universal income.

    Iain, in Kabul.

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