Basic Income as a Policy Option for Australia

Troy Henderson

A thesis submitted in fulfilment of the requirements of Doctor of Philosophy

Department of Political Economy, Faculty of Arts and Social Sciences, The University of Sydney

January 25, 2021

Statement of originality

I certify that the intellectual content of this thesis is the product of my own work and that all the assistance received in preparing this thesis and sources have been acknowledged. This thesis has not been submitted for any other degree or purpose.

Troy Henderson

2 Acknowledgement of Traditional Owners

I would like to acknowledge the indigenous peoples of Australia, to recognise their continuing connection to land, water and culture, and to declare my solidarity with their unfinished struggle for justice and equality.

I acknowledge the traditional owners of the lands on which this work was done: the Gadigal people of the Eora Nation and the Gadigal, Wangal and Bediagal clans of the Dharug Nation.

I pay my respects to their elders, leaders and everyday battlers—past, present and emerging.

3 Abstract

This thesis examines Basic Income as a Policy Option for Australia and concludes that phased implementation of an affluence-tested BI scheme would benefit Australia. It considers theories and evidence, drawing on previous literature, and presents empirical material on the likely political economic effects of basic income (BI). Chapter 1 historicises four ‘moments’ in the history of BI and advances some tentative explanations for the failure to convert BI proposals into concrete policy reform. Chapter 2 develops a normative framework for this policy option through a sustained critical engagement with the literature on the ethics of BI, including the seminal contributions of Philippe Van Parijs. It argues that BI can be justified on the basis of Van Parijs’ (1997) principle of ‘real freedom for all’, together with the concept of total social productivity (TSP), and a deep form of social reciprocity. Chapter 3 applies this set of normative criteria to the specific case of Australia, highlighting the relevant income constraints and opportunity cost constraints on real freedom. Chapter 4 examines the issue of the fiscal cost of BI in advanced countries, focusing on liberal welfare capitalist states. It contends that a negative income tax (NIT) scheme can deliver the same or similar benefits as a universal basic income (UBI) scheme, at a lower fiscal cost. Chapter 5 evaluates the pros and cons of different financing mechanisms for BI, concluding that some combination of progressive taxation and public deficits offers the best way forward for Australia. Chapter 6 interrogates the relationship between BI and wellbeing, including the incidence of poverty and the extent of distributional inequality. Although based on limited evidence, it concludes that BI has the potential to enhance wellbeing. Chapter 7 examines the effects of BI on paid work, describing the evidence, evaluating the arguments, and concluding that modest BI schemes are unlikely to threaten aggregate labour supply. Chapter 8 addresses the under-theorised terrain of the interrelationship of BI, economic growth and inflation. As with the labour supply discussion, the complexity of macroeconomic relationships admits only tentative conclusions in this chapter, pointing to the tenuous foundations of claims about adverse macroeconomic consequences. Chapter 9 explores opportunities and implementation pathways for shifting social assistance in Australia towards a more universal and less conditional model. Chapter 10 canvasses a range of political strategies that might be deployed in order to achieve BI policy implementation in Australia.

4 Table of Contents

ACKNOWLEDGEMENTS ...... 6

LIST OF ABBREVIATIONS ...... 8

LIST OF FIGURES AND TABLES ...... 11

INTRODUCTION ...... 13

PART I – THE HISTORY AND ETHICS OF BASIC INCOME ...... 24

CHAPTER 1: THE HISTORY OF BASIC INCOME ...... 25

CHAPTER 2: NORMATIVE JUSTIFICATIONS OF BASIC INCOME ...... 53

CHAPTER 3: THE CASE FOR A BASIC INCOME SCHEME IN AUSTRALIA ...... 73

PART II – THE POLITICAL ECONOMY OF BASIC INCOME ...... 96

CHAPTER 4: THE FISCAL COST OF BASIC INCOME ...... 97

CHAPTER 5: FINANCING BASIC INCOME ...... 117

CHAPTER 6: BASIC INCOME AND WELLBEING ...... 151

CHAPTER 7: WORK AND BASIC INCOME ...... 169

CHAPTER 8: BASIC INCOME, ECONOMIC GROWTH AND INFLATION ...... 187

PART III – THE POLITICS OF BASIC INCOME ...... 208

CHAPTER 9: BASIC INCOME AND THE AUSTRALIAN WELFARE STATE ...... 209

CHAPTER 10: THE POLITICS OF BASIC INCOME IN AUSTRALIA ...... 230

CONCLUSION ...... 259

BIBLIOGRAPHY ...... 273

5 Acknowledgements

Where to start?

Mum and Dad. Words shrink from the labour of adequately expressing my gratitude for all you’ve done.

Tumlionel. Brahski. Glad to share genetic material with you, man. Your talents inspire. Your humour keeps me sane. Black star. Blue star. Always.

Delphine. Mon amie. Merci bien pour tout. I know you understand this marathon better than most. I look forward to being a better friend from now on.

Delphine. Cath. Maxi. Théo. What a beautiful family. Love you all.

To all who have tended the community garden of Political Economy, thank you. It’s been a privilege to learn from you. Work with you. Fend off the odd invasive species together. If I thanked you all by name, I’d blow my word count.

Jim Stanford and the CFW/TAI crew. Thanks. I learned so much from you Jimbo.

The single greatest pleasure in this journey, which began with a trip to the North American Basic Income Guarantee conference in snowy New York, has been the friendships formed—and the collaborations undertaken—with brilliant scholars working on basic income in Australia and around the world.

In particular I’d like to acknowledge Elise Klein, Ben Spies-Butcher, Ben Phillips and John Quiggin. I won’t thank the rest of you by name. Just in case you examine this thesis.

I would like to acknowledge the very professional, high-quality copyediting of this thesis by Margie Tubbs Editing Services. All services were provided in strict accordance with University Thesis Submission and Examination Procedures, 2015.

To my Associate Supervisor, Mike Beggs. For friendship and feedback. When you had so much on your own plate. Thank you. GDR time.

6 Trina. My love. Sorry. You had to witness. The last slow steps. Towards two forms of submission. I should have learned EndNote earlier. You’ve been incredible. In every way. During a very tough time. I love you. So much more than any Maine Coon called Chutney. Let’s have fun.

BAB. You’re king of the best mate castle. From Karhu to Kerouac. We’ve had some interesting times. Kiitos for always having my back. As I’ve tried to have yours. Kippis for being one of the best humans on the pale blue dot. Bring the tent next time comrade. Champion.

To my Supervisor, Frank Stilwell. Lighthouses may be redundant in practice. But not in metaphor. Thanks for guiding me to safe harbour. Even if you needed a few tugboats along the way. Your acuity, passion, wit and perseverance have always been an inspiration. Onwards. Towards the good society. Just around the next bend.

This thesis is dedicated to two of my aunts. Like many women, they have spent decades doing hard work in the unpaid sector of the care economy. They looked after family members they loved who could not look after themselves. They did this willingly, but at great personal cost. Income and opportunities foregone. Social sacrifices. Physical and mental toll. My aunts could have used a basic income. Not to provide full compensation. Just to lighten their load, especially in making provision for their own older years.

7 List of Abbreviations

ABS Australian Bureau of Statistics ACDP Australian Carbon Dividend Plan ACOSS Australian Council of Social Services ADFC Aid to Families with Dependent Children ANU Australian National University AP Age Pension APF Alaska Permanent Fund AT Affluence-Tested AuSSA Australian Survey of Social Attitudes B.I.G Basic Income Guarantee BAI Basic Annual Income BI Basic Income BIEN Basic Income Europe (later Earth) Network BIG Basic Income Grant BIRG Basic Income Research Group BITSP BI-adjusted Total Social Productivity BPU Benefit Phase-Up BSL Brotherhood of St Laurence CBI Citizens’ Basic Income CGT Capital Gains Tax CMEPSP Commission on the Measurement of Economic Performance and Social Progress EMTR Effective Marginal Tax Rate ESS European Social Survey ETI Elasticity of Taxable Income FAK Finnish Trade Unions FAP Family Assistance Plan FT Flat Tax FTB Family Tax Benefit FTBA Family Tax Benefit Part A FTT Financial Transaction Tax GAI Guaranteed Annual Income

8 GBI Guaranteed Basic Income GDP Gross Domestic Product GFC Global Financial Crisis GIP Guaranteed Income Plan GMI Guaranteed Minimum Income GPI Genuine Progress Indicator GRD Global Resources Dividend GST Goods and Services Tax HDI Human Development Index HILDA Household Income and Labour Dynamics in Australia IFI International Financial Institution IPPR Institute for Public Policy Research JG Job Guarantee JO Job Offer LIFE Living Incomes for Everyone LIG Liveable Income Guarantee LSR Labour Supply Response MMT Modern Monetary Theory MT Metric Ton NABIG North American Basic Income Guarantee NIC National Insurance Contribution NIT Negative Income Tax OBIP Ontario Basic Income Pilot OECD Organisation for Economic Co-operation and Development OTT Optimal Tax Theory PAYG Pay-As-You-Go PBO Parliamentary Budget Office (Canada) PC Productivity Commission PFD Permanent Fund Dividend PI Participation Income PIP Phased Implementation Process PIT Personal Income Tax PITA Personal Income Tax Allowance

9 PKE Post-Keynesian Economics PPP Purchasing Power Parity PRS Priorities Review Staff PSI Public Services International RBA Reserve Bank of Australia RFA Real Freedom for All (Van Parijs) SD Social Dividend SEEA System of Environmental-Economic Accounting SG Stakeholder Grant SWF Sovereign Wealth Fund TNC Transnational Corporation TSP Total Social Productivity UAP Universal Age Pension UBI Universal Basic Income UBS Universal Basic Services UCB Universal Child Benefit UNDP United Nations Development Programme UT Unremunerated Time UW Unremunerated Work UWU United Workers Union VAT Value-Added Tax WAP Working Age Population YBI Youth Basic Income

10 List of Figures and Tables

Chapter 1 Figure 1.1 Worldwide use of ‘Basic Income’ as Google Search Term, Interest Over Time Index, 2012-2020

Chapter 3 Figure 3.1 GDP Per Capita Across Regions, 1870-2016 Figure 3.2 GDP Per Capita for Selected Countries and Regions, 1990-2017 Figure 3.3 Top 1 Percent Income Share in Australia Figure 3.4 Labour Market Underutilisation in Australia, 1978-2018 Table 3.1 Value of Unpaid Work by Valuation Method for 2006 Table 3.2 Total Social Productivity and Total Social Productivity Per Capita for Australia, 2006

Chapter 4 Table 4.1 Median Housing, House and Unit Prices Australia, December, 2019 Table 4.2 Gross Cost of Stakeholder Grant to Australian Residents Aged 21, 2018 Table 4.3 Gross Cost of Selected UBI Model Schemes Table 4.4 Affluence-tested Basic Income Payment, Model I, Newstart Table 4.5 Affluence-tested Basic Income Payment, Model 2, Newstart +$75pw

Chapter 5 Figure 5.1 Tax-to-GDP Ratios for US, UK, France and Sweden, 1868-2008 Figure 5.2 Tax-to-GDP Ratios in Liberal Welfare Capitalist States, 1990 and 2017 Figure 5.3 Total Public Expenditure-to-GDP Ratios for US, UK, France and Sweden, 1880- 2011 Figure 5.4 Public Social Spending-to-GDP Ratios for Selected OECD Countries, 1880-2015 Figure 5.5 OECD Average General Government Expenditure by Function, Percentage of GDP, 2016 Figure 5.6 General Government Expenditure by Function in Australia Compared to OECD Average, Percentage of GDP, 2017 Table 5.1 Tax Structure of Liberal Welfare Capitalist States, Percent of Total Taxation, 2017 Table 5.2 The Circulation of Property and Progressive Taxation

11 Table 5.3 Financing UBI-Style Schemes through the Tax System in Four Liberal Welfare Capitalist States Table 5.4 Financing UBI-Style Schemes through the Tax System in Australia Table 5.5 Financing NIT-Style Schemes through the Tax System in Australia Table 5.6 Tax-Based Summary Table for Australian Basic Income

Chapter 6 Table 6.1 Finland Basic Income Experiment and Wellbeing, 2017-2018 Table 6.2 Ontario Basic Income Pilot and Wellbeing, 2017-2019 Table 6.3 Static Distributional Effects of Selected UK BI Schemes Table 6.4 Static Distributional Effects of Selected Australian BI Schemes Table 6.5 Key Characteristics of Four Australian BI Schemes

Chapter 7 Table 7.1 Labour Supply Response in Six BI Trials Table 7.2 Difficulties in Evaluating Labour Supply Response in BI Trials Table 7.3 Estimating Labour Supply Response for Selected BI Schemes

Chapter 8 Table 8.1 Basic Income in a Post-Keynesian Framework Table 8.2 Simulating the Macroeconomic Effects of Three US BI Schemes

Chapter 9 Table 9.1 Basic Income Design and Implementation Options Table 9.2 Basic Income Implementation and Administration Challenges Table 9.3 Opportunities for Universalising Australian Social Security

Chapter 10 Table 10.1 Public Attitudes to Welfare and Unemployment in Australia Table 10.2 Public Attitudes to Basic Income

Conclusion Table 11.1 A Basic Income Scheme for Contemporary Australia

12 INTRODUCTION

This thesis evaluates the case for Basic Income as a Policy Option for Australia. In doing so it contributes to a growing international literature focused on the desirability and feasibility of this reform in the twenty-first century. Previous scholarly analyses of basic income (BI) have been informed by different theoretical traditions which have influenced their construction as well as the normative criteria, reform goals, cultural and economic barriers, policy dilemmas, and implementation pathways considered. They have been the subject of transnational debates. The nation state-centred case study approach utilised in this thesis, both draws from and feeds back into these transnational discussions. In doing so, this thesis identifies common cross-country challenges, while also highlighting important political, economic and cultural differences that impact upon the prospects of BI.

Any serious attempt to provide a well-rounded assessment of BI in relation to a specific nation state necessitates drawing on scholarship from different academic disciplines. While this multidisciplinary approach enriches analysis, there are also necessary trade- offs between the depth and breadth of analysis that are possible. In this thesis, that trade-off was considered worth the reward because of the deep and wide-ranging concerns that motivate proponents of BI.

A Universal Social Right?

To eat one’s fill while hungry others stand by is plainly unacceptable. Instead, the force of the “demand,” in such contexts, comes from a non-negotiable principle that presence itself brings with it a distributive entitlement. Those who are here among us must eat and may therefore rightfully demand a share. Anything else would be shameful (Ferguson, 2015: 214).

Basic Income can be understood as a universal social right to an unconditional flow of income from the age of maturity until death. This social right belongs to all individuals whose existence coincides with the production and reproduction of economy and society. It has particular resonance as a claimed right within capitalist society. Capitalism is a global and evolutionary system that requires the widespread institution, diffusion and maintenance of conditions of ‘market dependence’ (Wood, 2002), most

13 evident in the prevalence of wage labour as the principal means of meeting basic needs. Consequently, the right to BI is not delimited by any narrow spatial and temporal boundaries. On the contrary, this right unabashedly transgresses both the traditional demarcations of political geography and the artificial taxonomy of separate generations.

Framed a little differently, BI can be understood as a key element in a potentially ‘emergent politics’ of the ‘rightful share’ (Ferguson, 2015: 183-184). Drawing on insights from anthropology with focus on southern Africa, Ferguson (2015: 183), characterises this form of distributive politics as ‘a kind of claim-making that involves neither a compensation for work nor an appeal for “help” but rather a sense of rightful entitlement to an income that is tied neither to labor nor to any sort of disability or incapacity’. Ferguson (2015: 184) further asserts that ‘such distributive claims do not take the form of exchanges at all (neither market nor gift) but instead something more like demand sharing—a righteous claim for a due and proper share grounded in nothing more than membership (in a national collectivity) or even simply presence’.

Whether framed as an unlegislated social right or as an expression of a rightful share awaiting claim, the key point is to differentiate BI from other forms of income based on ‘a reciprocal exchange for labor (wages) or good conduct (the premise of conditional cash transfers) nor as an unreciprocated gift (assistance, charity, a helping hand)’ (Ferguson, 2015: 178). The universal social right or the rightful share are instead affirmed on the basis of ‘membership’, ‘presence’ or ‘existence’. For Ferguson (2015: 178), the implications of instituting BI on this basis are profound: ‘At a stroke, many of the most troubling problems of social distribution vanish—stigma, humiliation, shame, the lack of self-worth associated with getting “something for nothing”’.

These potential attributes notwithstanding, it should be acknowledged that BI can never adequately compensate individuals and groups for historical acts of dispossession and their cumulative repercussions. Neither should BI be viewed as a substitute for the resuscitation of latent rights to more equitable access to an expanded social, civic and ecological commons. Rather, whether conceived as a universal social right or a rightful share, BI is one expression of the universal right to demand and receive a modicum of dignity, security and freedom. To date, the legitimacy of such a right has not been recognised and the demand has not been heard.

14 A Pragmatic-Utopian Reform

Everybody should be guaranteed a decent basic income. A rich country such as the US can well afford to keep everybody out of poverty. Some, it will be said, will seize upon the income and won’t work. So it is now with more limited welfare, as it is called. Let us accept some resort to leisure by the poor as well as by the rich (Galbraith, 2001b: 312).

Basic income can be demanded as a way to gain some measure of distance and separation from the wage relation, and that distance might in turn create the possibility of a life no longer so thoroughly and relentlessly dependent upon work for its qualities. Therefore, we might demand a basic income not so that we can have, do, or be what we already want, do, or are, but because it might allow us to consider and experiment with different kinds of lives, with wanting, doing, and being otherwise (Weeks, 2011: 145).

The metamorphosis of abstract right into concrete reform is a difficult and contingent transformation. The way an abstract right is framed and communicated as a reform possibility may enhance, or diminish, the chances of reform realisation. BI has been framed as a feature of ‘Envisioning Real Utopias’ (Wright, 2010), a ‘utopian demand’ (Weeks, 2011: 32), a ‘pragmatic-utopian reform’ (Henderson, 2017: 1), and a ‘Utopia for Realists’ (Bregman, 2016). This dual framing opens up multiple avenues for dialogical political communication with diverse audiences.

The pragmatic potential of BI can be variously expressed. From a pathway to ‘greater egalitarianism within labour markets’, to a mechanism that ‘massively eliminates poverty without creating the pathologies of means-tested anti-poverty programs’, a means of ‘socially recognizing the value of a range of decommodified care-giving activities’, and a mechanism to ‘potentially increase the collective power of organized labor’ (Wright, 2010: 218-219). These pragmatic goals encapsulate the need for both ‘redistribution and recognition’ (Fraser, 1995) in order to ameliorate stubborn forms of injustice.

The utopian quality of BI can be envisioned and articulated in similarly diverse ways. BI has the potential to reawaken the dormant ‘utopian impulse’ within radical politics, in

15 the form of a struggle for a ‘concrete’ utopia that is ‘grounded in present tendencies while also striving to leap beyond them’ (Weeks, 2011: 212). Basic income, whether framed as an expression of a legitimate universal demand for a ‘rightful share’ of social wealth (Ferguson, 2015: 165), or as a ‘utopian demand’ for unconditional income (Weeks, 2011: 149), is utopian in its rejection of the conventional ethics of distribution, and in its radical ‘anti-ascetism’ (Weeks, 2011: 146). However, the most common invocation of BI’s utopian promise centres on its potential to provide an alternative to both compulsory waged work and the stigmatising effects of conditional welfare. This ‘freedom of exit’ (Wright, 2010: 219) from paid work could expand access to ‘real freedom’ (Van Parijs, 1997: 23) and create opportunities for ‘new socialities to blossom’ (Gorz, 1999: 80).

However, it must be acknowledged, that it is precisely this utopian possibility of BI that constitutes a key obstacle to its achievement. Nonetheless, the pragmatic-utopian character of BI is its key point of differentiation from other visions of social change, from piecemeal attempts to achieve incremental reform to revolutionary rupture. The question of when to emphasise the pragmatic or utopian characteristics of BI is a matter of political strategy and tactics that will vary from one context to the next. The point is to hold both elements in a state of creative tension. The ‘utopian demand’ (Weeks, 2011: 149) for BI must be sufficiently recognisable for a broad political constituency to cohere around it, while at the same time being provocative enough to excite the political imagination and mobilise the social forces needed to achieve it. This thesis was written as intersecting crises heightened public concerns about the need for fundamental change. This in no way implies that BI will be chosen from the public policy bazaar and its implementation fast tracked. However, these circumstances have created an environment in which the logic and promise of BI may find a more receptive ear.

The Current Political Economic Conjuncture

The COVID-19 pandemic has induced one of the strangest episodes in the long history of crises that have beset capitalism since it became the dominant system of global socio- economic organisation. The radical economic shock caused by a virulent zoonotic disease (Mackenzie & Smith, 2020) has shut down, or significantly curtailed, entire sectors of economies around the world (Gopinath, 2020). The pandemic has exposed

16 the vulnerabilities inherent to an economic system increasingly dependent on interconnectedness, and the inability of capitalist markets to meet basic human needs in crisis situations. Governments have typically responded to the COVID-19 pandemic with the same type of Keynesianism of convenience (Mann, 2017) that accompanied the Global Financial Crisis. Pandemic support measures have included new or increased cash transfers (Gentilini, Almenfi, Orton, & Dale, 2020). In some cases, these policy responses have, in effect, introduced deficit-financed temporary BIs. For example, under Australia’s JobSeeker program, the payment level for the unemployment benefit was doubled, while conditionality was relaxed for a period of months (Klapdor, 2020). Despite dramatic poverty-alleviation effects of policy interventions such as JobSeeker (Phillips, Gray, & Biddle, 2020: iv), the combination of a pandemic and deep recession hardly constitute the ideal conditions for the exercise of real freedom. Furthermore, there is little to suggest that these top-down policy measures will be retained in a post- pandemic world.

Nonetheless, the period between the US subprime mortgage crash in 2007 and the current atypical economic slump has seen the legitimacy of the megatrends of globalisation, financialisation and neoliberalism severely shaken, although not usurped (Tooze, 2018). Alongside the purported negative consequences of these three megatrends are ongoing concerns about rising inequality, increasing precarity and the prospect of ecological collapse (Standing, 2020; Stilwell, 2019). The short-term political economic consequences of this concatenation of events and processes have included largely unsuccessful attempts to revivify Left social democracy, proposals for a Green New Deal, and marked political shifts towards populist nationalism in many nation states (Zamora & Olsen, 2019). While future developments are radically contingent and fundamentally uncertain, the current conjuncture at least suggests the possibility of a latent political constituency for BI as a reform well suited to the times.

Research Procedure

There is no optimal research method in the field of social science nor the discipline of political economy. Rather, the social sciences are best understood as providing a ‘toolkit’ of different approaches to epistemology, ontology, logic and ethics (Benton & Craib, 2011: 3-7). The tools selected by the researcher clearly have implications for how

17 the object of inquiry is understood, analysed, situated and communicated. The main obligation of the investigator is to make these choices explicit and intelligible to specialist and non-specialist audiences alike. A task that is complicated by the tendencies of academic disciplines to form silos and to bury important methodological choices amid alienating jargon. These tendencies led this researcher to declare an elective affinity with two basic claims proposed by Benton and Craib (2011) about the nature and objects of social scientific inquiry. The first claim is ‘that knowledge and understanding are indispensable to human emancipation, or to the betterment of human life’ (Benton & Craib, 2011: 223). This implies a rejection of a priori deductivism, logical positivism, and some manifestations of post-modern and post-structuralist thought. The second is the argument that ‘bad social science is what tries to explain away the imponderable area of creativity and internal confusion; and which closes down investigation and argument to one particular method and area. A living social science...has to think in many different ways’ (Benton & Craib, 2011: 227). This second claim is consistent with a ‘Babylonian approach’ to understanding an ‘organic system’; one that acknowledges ‘interdependencies which are complex and evolutionary’ and therefore not explicable through ‘the selection of one set of axioms as universally causal’. The Babylonian approach operates on the ‘underlying presumption’ of ‘openness’ to and the ‘need for the scientists to be aware of other lines of reasoning’ (Dow, 1996: 15). While these affinities clearly underdetermine a methodological approach, they serve as an accessible guide to the analytical approach adopted in this thesis. Specifically, BI is considered in light of its potential to enhance ‘human emancipation’ and ‘human betterment’ (Benton & Craib, 2011: 223) and, in order to explore this potential thoroughly, this thesis draws on the evidence, insights, arguments and methods of scholarship from various disciplines.

This multi-disciplinary approach is, understandably, a central feature in a sub- specialisation like basic income studies. In this thesis, the chapters on history and ethics combine analysis of the extant BI scholarship with evidence and insights drawn from economic history and political economy. The methodological approach taken in relation to political economy throughout the thesis, is explicitly pluralist (King, 2013). In particular, it draws on Marxian, Keynesian, post-Keynesian, feminist and institutional frameworks, but the analysis is not strait-jacketed by those choices. In sections where

18 other perspectives, such as optimal tax theory or functional finance are considered relevant, they have been critically incorporated into the analysis. It is also acknowledged, that these political economic perspectives are internally diverse and, in many cases, not neatly conceptually compatible with each other (Anderson, 2004). For the chapters with a macroeconomic focus, a post-Keynesian approach of ‘open-system theorising applied to an economy understood as an organic open system’ is adopted, consistent with both the Babylonian mode of enquiry (Dow, 1996: 79) and the explicit ethical and policy concerns (Benton & Craib, 2011: 223). In terms of empirical evidence, the political economic chapters rely heavily on datasets produced by national and international statistical agencies. Analysis of these data are supplemented by consideration of modelling different BI scenarios using more speculative, but increasingly sophisticated, static microsimulation tools. Given the complexity of modern tax and transfer systems, these computer simulations are a clear advance on back-of- envelope calculations of the fiscal cost and distributional effects of BI. However, like all attempts to model a complex and dynamic social system, microsimulation results should be interpreted with caution for two main reasons. First, as Nell and Errouaki (2016: 453) write: Keynesian uncertainty is real, and cannot be reduced to measurable, and therefore predictable, numbers. Uncertainty cannot be repackaged as risk. The significant implication is that there will be aspects and patterns of behavior that may be unpredictable, yet may have to be included in models of the economy.

The second, and related, reason is that humans have some degree of agency to shape their social world. Indeed, implementing basic income would itself be an example of the exercise of agency: a policy instrument aimed at the ethical end of advancing that agency still further. The interaction of indeterminacy and agency complicate matters for econometricians. However, those same factors are fundamental to the usefulness of design challenges, implementation pathways, and political opportunities explored in the last section of this thesis.

19 Thesis Structure

This thesis is organised into three main sections. Part I focuses on The History and Ethics of Basic Income (Chapters 1-3). Part II examines The Political Economy of Basic Income (Chapters 4-8). Part III addresses The Politics of Basic Income (Chapters 9-10).

The main purpose of Chapter 1 is to historicise four “moments” of enhanced interest in BI, in order to develop some tentative explanations for their failure to lead to policy implementation. The chapter begins by briefly discussing the controversial question of how BI should be defined, before proceeding to identify four principal BI models. It continues with a more detailed analysis of the Nineteenth Century Moment (1790s- 1850s), the British Moment (1918-1950s), and the North American Moment (1960s- 1980s) in BI history, emphasising both continuity and change as regards the underlying concerns and objectives of BI advocates, and articulating the major reasons for their consistent lack of success. The chapter then describes the evanescent interest in BI in Australia during the 1970s, before focusing on the far more substantial resurgence of BI advocacy, activism and experimentation during the Contemporary Moment (2007-).

Chapter 2 develops a normative framework for BI, centred on a critical engagement with the work of Philippe Van Parijs. The framework incorporates Van Parijs’ (1997) principle of ‘real freedom for all’ as the guiding criterion of distributive justice and his associated policy mechanism of implementing and maintaining the highest sustainable level of BI in order to maximin real freedom. The chapter draws on Sen (2005) and Fraser (2001) to address the issue of compensation for unequal internal endowments before outlining the concept of total social productivity (TSP) as a rejoinder to liberal egalitarian ethical objections to financing a substantial BI. Feminist analyses are deployed in developing a critique of the androcentric bias evident in the reciprocity debate within the BI literature, emphasising non-pecuniary work incentives and culturally constructed hierarchies of different forms of work. The chapter concludes on a pragmatic note, arguing that BI is more likely to be introduced in a capitalist rather than socialist country.

20 Chapter 3 concludes Part I of this thesis by applying the normative framework developed in the preceding chapter to the specific case of Australia. The relevant data on Australian Gross Domestic Product (GDP) and unremunerated work (UW) are presented, underscoring both the substantial capacity and the social need in relation to BI. The chapter then describes the main income constraints and opportunity cost constraints of access to real freedom in Australia.

Chapter 4, marking the start of Part II of this thesis, provides a pivot from history and ethics to political economy. The fiscal cost of BI in advanced countries, including Australia, is examined with a comparison of the four main models of BI: social dividend (SD); stakeholder grant (SG); universal basic income (UBI); and negative income tax (NIT). After careful consideration, the SD and SG models were excluded from further analysis in this thesis, in favour of a continued focus on proposals for UBI and NIT schemes in liberal welfare capitalist states. Specifically, the affluence-tested (AT) approach to designing a BI in Australia is introduced (B. Spies-Butcher, Phillips, & Henderson, 2020). The chapter concludes that BI schemes consistent with enhanced real freedom are within the fiscal capacities of advanced capitalist states.

Chapter 5 examines six potential financing channels for BI: distribution of the proceeds of public ownership (non-tax revenue); distribution of the proceeds of publicly owned wealth funds (non-tax revenue); direct credit creation; government deficits and government debt; reduced (other) expenditure; and taxation. It concludes that, in most advanced countries, including Australia, some combination of public deficit and tax- based financing of BI is likely to provide the best short to medium-term option.

Chapter 6 evaluates the relationship between BI and wellbeing, drawing on the empirical evidence available from BI trials and the static distributional results of microsimulations of specific BI schemes in liberal welfare capitalist states. While ostensibly encouraging for BI proponents, the findings are treated with caution given the limitations of both small-scale, short duration trials and static modelling of a dynamic system. The chapter concludes with preliminary assessment of the performance of four specific Australian BI schemes on the criterion of maximin real freedom.

21 Chapter 7 addresses the complex interrelationship of BI and work. Its first section provides a succinct statement of the major obstacles to BI presented by the nature of capitalist work, including the centrality of the wage relation, the force of the work ethic, and the cultural power of distinction between the “deserving” and “undeserving poor”. It goes on to describe the arguments and evidence that BI is required because of the effects of automation and digitisation on aggregate job availability, concluding that this should not be a primary justification for BI. Its next section analyses the evidence on the labour supply response (LSR) to BI, based on the same experimental trial evidence and microsimulation results. With the same caveats attached, the evidence suggests a modest negative LSR to modest BI schemes. This discussion is contrasted with the utopian promise of BI in providing a genuine exit option from the world of paid work.

Chapter 8 concludes Part II, with an investigation of the relationship between the key macroeconomic variables of economic growth and inflation. These factors are analysed within a post-Keynesian theoretical framework, emphasising the potential for positive effects on economic growth and the possibility of inflationary effects in particular macroeconomic circumstances. This discussion re-emphasises that these possibilities are not in any sense predictions of future outcomes, due to the complexity of modelling in a dynamic social system. The chapter concludes by canvassing the interesting possibility of using BI as a counter-cyclical macroeconomic policy lever.

Chapter 9 opens Part III of this thesis, by describing design principles, implementation pathways and challenges in relation to BI, both in general, and in the particular context of the structure of the Australian welfare state. The chapter explores five reform opportunities, including three BI schemes, that could shift Australia’s social assistance model in a more universal direction. Five implementation pathways are also considered.

Chapter 10 turns to the politics of achieving BI in Australia. It begins with an analysis of the state, capital, ideology, cultural norms, trade unions and social democratic political parties as major barriers to implementation. The next section describes the evidence regarding current levels of support for BI in advanced countries. The final section outlines a pathway towards a more effective politics of basic income in Australia.

22 The thesis Conclusion summarises the key elements of a Basic Income Scheme for Contemporary Australia, centred on the phased implementation of an affluence-tested BI scheme over a ten-year period. This is followed by a brief summation of the relevance of this thesis to BI scholarship more generally, including the identification of several avenues for future research.

23

PART I – THE HISTORY AND ETHICS OF BASIC INCOME

24 Chapter 1: The History of Basic Income

Introduction

Basic income (BI) is an historically marginal but persistent idea that has gained significant political traction in recent years. For more than two centuries, ‘a motley assortment’ of individuals from ‘widely different backgrounds’ have advocated some form of BI. Their proposals, in various national and historical contexts, have been ‘ignored or occasionally rejected, as impracticable or unjust’ (Cunliffe & Erreygers, 2004: xiii). Yet its persistence is remarkable. It has been particularly prominent in public discussion of reform policies in the period between the Global Financial Crisis (GFC) that began in 2007 and the COVID-19 pandemic in 2020. The core aim of this chapter is not to provide an exhaustive account of every episode in the intellectual and political history of BI. Rather, it attempts to historicise four ‘moments’ in BI’s history, in order to highlight their salient characteristics and to develop some tentative explanations regarding the failure of these BI moments to lead to policy implementation1. These explanations may be of use in assessing the current and future prospects of BI.

Section 1.1 defines BI and briefly describes the four main models of this policy. Section 1.2 examines BI’s Nineteenth Century Moment (1790s–1850s), focusing on the proposals of the Englishmen Thomas Paine and Thomas Spence, the Jeffersonian/Jacksonian Democrats in the US and the Belgian liberal socialists. This section includes an analysis of the apparent gap in the BI literature between the 1850s and the end of World War I. Section 1.3 analyses BI’s British Moment (1918–1950s), in which prominent Quakers, Fabian socialists, Keynesian economists and Liberal party activists advocated some form of the policy. In retrospect, these proposals can be viewed as a road not taken in a context where Britain prioritised the Beveridge Model of full employment, expanded social services and means-tested public assistance. Section 1.4 looks at the North American Moment (1960s–1980s) when, under the banner of a Guaranteed Annual Income (GAI), BI came closest to implementation. It includes a discussion of Nixon’s GAI campaign, the major experimental NIT trials in the US and

1 Besides the handful of social dividend and targeted guaranteed income programs that have been implemented for different durations and which may constitute quasi-basic incomes.

25 Canada, and the Alaska Permanent Fund Dividend scheme. Section 1.5 provides an overview of the “micro-moment”2 in Australia during the 1970s when a Guaranteed Minimum Income (GMI) was briefly entertained. The GMI debate, together with alternative NIT proposals, was mostly confined to academic, policymaker and charity group circles. Section 1.6 turns to the resurgence of public interest and policy experimentation during BI’s Contemporary Moment (2007-). It evaluates the significance of the 2016 Swiss BI referendum, the two-year Finnish BI trial in 2017– 2018, and Maricá’s Citizen’s Basic Income (CBI), among other developments.

The chapter concludes by assessing the relevance, to the Contemporary Moment, of the tentative explanations proffered for the historical failure to achieve BI implementation. It suggests that historicising key episodes in the ragged history of basic income is a useful step towards developing a critical understanding of the obstacles to achieving BI in current and future conjunctures.

1.1 Defining Basic Income

While there is no universal consensus on the meaning and objects of basic income, some commonly cited definitions are useful in highlighting its prominent features. The Basic Income Earth Network (BIEN, 2019)3 defines BI as: a periodic cash payment unconditionally delivered to all on an individual basis, without means-test or work requirement.

The BIEN General Assembly also passed an important resolution at its 2016 Congress, affirming that BI should be: stable in size and frequency and high enough to be, in combination with other social services, part of a policy strategy to eliminate material poverty and enable the social and cultural participation of every individual. We [the General Assembly] oppose the replacement of social services or entitlements, if that replacement worsens the situation of relatively disadvantaged, vulnerable, or lower-income people (BIEN, 2016).

2 Double inverted commas are used for emphasis in this thesis. 3 The peak academic and advocacy body for BI.

26 Not all BI proposals satisfy each of these criteria. Nonetheless, the BIEN definition and resolution capture the core aspiration of BI: to provide all individual members of a given community with an adequate and unconditional cash payment.

There are at least four broad models of BI. The social dividend (SD) model centres on the idea of providing all eligible4 members of a given community with a regular distribution (social dividend) from the proceeds of public ownership or the returns earned by a publicly owned investment fund. This model is based on the principle that all individuals should share in a country or region’s common wealth. However, it would require high levels of public ownership or a large and profitable fund to provide a substantial and reliable social dividend. The stakeholder grant (SG) model would see all individuals provided with a one-off lump sum payment at a particular mandated age. Proponents of this model disagree over whether or not individuals should be free to spend the grant on whatever they like. The SG would put people on a more equal financial footing early in their adult lives. However, the lump sum could be squandered, and such a grant would not provide the income security of a regular transfer payment. In its purest form, the universal basic income (UBI) model conforms most closely to the BIEN definition of basic income. It can be thought of as a universal pension, where a regular amount is paid to all members of a given community with no strings attached. UBI, compared to other BI models, would provide superior income security, enhanced personal autonomy, and the possibility of improved bargaining power for workers. However, the fiscal cost of UBI would be high (for any adequate payment) and the model would generate substantial fiscal churn. Some BI scholars, advocates and activists do not consider the negative income tax (NIT) model to be a legitimate form of the policy. NIT schemes, and their close cousins5, can be understood as seeking to establish a universal income floor. Such schemes could be progressive (redistributive) or regressive (inequality enhancing), depending on their specific policy objectives, design features and implementation processes. The NIT approach could achieve similar distributional outcomes to UBI schemes at a much lower fiscal cost with reduced fiscal churn. At the same time, NIT schemes may not be perceived as genuinely universal and

4 Not all BI proposals advocate paying BI to children, for example, and the question of residency and citizenship requirements remains unresolved. 5 This thesis takes the approach of including various Guaranteed Minimum Income (GMI) schemes under the NIT model on the basis of a common use of tapering benefits.

27 could generate administrative challenges in relation to making accurate payments as incomes fluctuate. Clarity regarding the BI model being articulated and evaluated in a particular socio-historical context is intimately connected to questions regarding a proposal’s normative and material justifications (see Chapters 2 and 3), political economic feasibility (see Chapters 4-8), implementation pathways and potential political support (see Chapters 9 and 10).

1.2 The Nineteenth Century Moment: The Dreams of Little Men (1790s–1850s)

The first wavelet of interest in BI occurred between the French Revolution of 1789 and the revolutions that swept through Europe in 1848. This period of the Dual Revolution6 precipitated radical social, economic and political change in Europe and beyond. The Europe ‘of 1789 was overwhelmingly rural’, but by 1851 in England, the leading industrial nation, ‘the urban population … just outnumbered the rural population for the first time’ (Hobsbawm, 1996a: 1-2, 11). This was an age of innovation and upheaval. A time when new concepts of justice of liberty, equality and fraternity, together with the emergence of early industrial capitalism, inspired revolution, reaction and revolt. The articulation of the concept of BI was one, albeit marginal, response to this period of convulsive and disorienting change.

While there is some debate regarding its exact provenance, the first clear exposition of BI was contained in the radical Anglo–American democrat Thomas Paine’s Agrarian Justice (Widerquist, Noguera, Vanderborght, & De Wispelaere, 2013: xix). Paine’s 1797 pamphlet, addressed to the Legislature and Executive Directory of the French Republic, called for the introduction of a universal capital grant at age 21, coupled with a universal age pension from age 50 (Paine, 1999: 10). The scheme would be funded by a 10 percent inheritance tax levied on wealth above a certain threshold and justified on the basis that a landowner ‘owes to the community a ground-rent’ as compensation for denying to all individuals their equal natural right to land (Paine, 1999: 8). Paine argued that everyone should receive the payments to ‘prevent invidious distinctions’ and that his proposal was grounded in an appeal to ‘justice, and not charity’ (Paine, 1999: 11). Paine (1999: 18) stressed the primacy of individual rights while also acknowledging

6 The political revolution in France and the Industrial Revolution in England.

28 class dimensions to poverty and inequality, stating that: ‘the accumulation of personal property is, in many instances, the effect of paying too little for the labour that produced it; the consequence of which is that the working hand perishes in old age, and the employer abounds in affluence’ (Paine, 1999: 18).

A far more obscure figure, Thomas Spence, published The Rights of Infants in 1797, ‘as a direct and strident attack on Agrarian Justice’ (King & Marangos, 2006: 65). Spence, a radical English schoolteacher and publisher from a petit-bourgeois and nonconformist background, argued that ‘all living souls’ should receive ‘the whole product of their common inheritance’ in the form of rent on landed property. This rent would cover all general parish expenses, while also providing each individual parishioner with an equal cash payment (King & Marangos, 2006: 64-68). While Paine and Spence’s pamphlets had no practical effect, they nonetheless established many of the key themes and concerns that recur throughout the BI literature, these include emphasis on the radical equality of individuals; the injustice of poverty and inequality; and the legitimacy of taxing inherited wealth, especially landed property, to fund some form of BI. Finally, as Hobsbawm argues in relation to Paine, these ‘ideas expressed the radical-democratic aspirations of small artisans and pauperised craftsmen’ (Hobsbawm, 1996b: 220-221). They exemplified a petit-bourgeois class orientation shared by future advocates of BI in the nineteenth century.

Concerns similar to those expressed in Agrarian Justice and The Rights of Infants are found in the writings of American Jeffersonian/Jacksonian democrats between the 1820s and 1840s. The Jacksonians, so-called because of their association with the presidency of Democrat Andrew Jackson between 1829 and 1837, found inspiration in Thomas Jefferson’s nineteenth-century ‘vision of a yeoman democracy based on a commercial agrarian economy’ (Blau, 2003: xi-xii) and, to a lesser degree, in the writings of Paine and Jeremy Bentham (Bowles & Gintis, 1997). The Jacksonians belonged to the historical category of thinkers and agitators ‘who sought to express the interests of the great mass of “little men” who existed between the poles of the “bourgeois” and the “proletarian”’ (Hobsbawm, 1996b: 63). They drew their support from ‘a motley aggregation of landowners and farmers, who were taxed for roads and canals they neither needed nor wanted, ‘hard money’ men who distrusted the banks and their paper money, artisans and mechanics who resented the head start that the

29 ‘protected’ industries had over their unprotected industries’ (Blau, 2003: xiv). The Jacksonians emerged during a period of rapid economic and social change in America. The US population increased sixfold between 1790 and 1850, transport networks proliferated and innovation flourished (Hobsbawm, 1996b: 169, 170, 178–179).

In this context, individual Jacksonians like Cornelius Blatchly, Thomas Skidmore and Orestes Brownson developed their own proposals for basic income (see Cunliffe & Erreygers, 2004). Like Paine, these writers asserted the individual’s natural right to an equal stake in nature’s patrimony. However, like Spence, they placed particular stress on the importance of abolishing inheritance as a means of preventing the intergenerational concentration of wealth (Cunliffe & Erreygers, 2004). Brownson, a radical New England thinker and activist, asserted man’s God-given right to share in nature’s bounty, not ‘as common property, but as an inheritance, to be possessed by each as an individual’ but also asserted that ‘a man’s natural right to property ceases when he ceases to exist’. He argued that ending intra-familial inheritance arrangements was as an essential step ‘before the true elevation and independence of the laboring classes can be effected’. While he initially advocated the redistribution of landed property itself, Brownson later revised his position to favour an equal payment in cash (Brownson, 2004: 32-36). Skidmore, whom Blau assigns to the ‘lunatic fringe’ of Jacksonian philosophy also put forward ‘an elaborate and detailed, but fantastic, scheme’ for abolishing inheritance that included a form of BI (Blau, 2003: xxv). The Jacksonians were essentially interested in providing all individuals with a roughly equal starting point, from which they were then free to make the best of their individual talents.

Belgium was the third setting in which proposals for BI were developed in the Nineteenth Century Moment. This small, advanced industrial nation experienced rapid economic change after 1830. The ‘number of steam engines … doubled between 1830 and 1838’ and coal production nearly trebled in the twenty years to 1850 (Hobsbawm, 1996b: 173). Government measures, including ‘carefully judged electoral reforms’ and the expulsion of Karl Marx, meant the ‘revolutionary fire’ of 1848 did not spread to Belgium. Nonetheless, it was a time of tumult (Hobsbawm, 2006b: 306). In this context, the Belgian liberal socialists developed ideas strikingly similar to those proposed by Paine, Spence and the Jacksonians. These largely forgotten thinkers, included Paul

30 Voituron, Joseph Charlier and Napoleon de Keyser. Charlier and De Keyser ‘shared the basic premise that basic income payments were a monetised expression of a natural right to an equal share of land’ (Erreygers & Cunliffe, 2006: 4-5). Charlier was the most prolific author on BI within Belgian liberal socialism. He was, to some degree, influenced by the utopian socialist Charles Fourier’s concept of a ‘social minimum’ that should be enjoyed by all members of society (Cunliffe & Erreygers, 2001: 463). Charlier devised his own scheme for a ‘universal minimum’ to be funded by the socialisation of rent. He later referred to this payment as a ‘territorial dividend’ and suggested it be distributed in quarterly or monthly instalments (Cunliffe and Erreygers, 2001: 469, 475, Cunliffe and Erreygers, 2004: 115). It should be noted here that British political economist and liberal philosopher, John Stuart Mill, also influenced by Fourier, advocated a form of BI his Principles of Political Economy in 1849 (Van Parijs, 2000).

Charlier drew a distinction between ‘vital needs’ that must be met on the basis of natural rights and ‘acquired needs’ that were linked to the ‘produced assets’ that individuals developed throughout their lives. He argued that a ‘universal minimum’ was needed in order for individuals to meet their ‘vital needs’ (Cunliffe & Erreygers, 2004). His proposal was radically egalitarian, in that his ‘universal minimum’ was to be paid to all individuals, including women and children (Charlier, 2004: 118). However, he also exhibited the same strain of petit-bourgeois individualism we see in Paine and the Jacksonians in his defence of private ‘personal property’ as an essential bulwark against ‘rigid communism’, which he defined as ‘the organisation of collective tyranny against the individual’ (Charlier, 2004: 105, 108). To Charlier, as with other early advocates of BI, expropriation of the landlords’ wealth was a necessary step towards justice, but the property of the “small man” was sacred. Charlier also devoted attention to the question of whether individuals would continue to work once they had BI. He argued that a ‘guaranteed minimum’ would improve work incentives, as there would be a stronger positive association between work effort and the ‘direct and personal advantages it provides’. He also believed that personal dignity would be enhanced, as an individual would ‘no longer be forced to demean himself to often shameful acts in order to snatch his existence from the urgent needs inherent to his nature’ (Charlier, 2004: 111-113).7 Charlier (Cunliffe & Erreygers, 2001: 475) continued to refine his proposals for fifty

7 The relationship between BI and work remains central to BI debates to this day (see Chapter 7).

31 years and, in his later work, declared that his scheme would end the ‘domination of capital over labour’.

Other far more powerful ideas and movements than BI proposals and Belgian liberal socialism challenged the pre-eminence of capital in the late nineteenth and early twentieth centuries. A fact highlighted by the apparent gap8 in the BI literature between the mid-nineteenth century and the end of World War I. There are at least two explanations for this ostensible lacuna. The first explanation pivots on the disjuncture between the material circumstances and ideological orientation of the early BI proponents and the trajectory of capitalist development in Europe and North America in the second half of the nineteenth century. The second, more speculative, explanation centres on the ideas and influence of American autodidact, Henry George.

The first explanation contends that as industrial capitalism gathered steam, the aspirations and worldview of the first wave of BI advocates became marginalised, if not superseded. Paine, Spence, the Jacksonians and the Belgian liberal socialists belong in Hobsbawm’s category of ‘petty-bourgeois radicals’—men who dreamed of ‘a state of small independents with equal distribution of property and some welfare activities’ (Hobsbawm, 2006b: 248). This dream increasingly clashed with the rapid industrial development that took place between the failed revolutions of 1848 and the slump that began in the 1870s. This was the era of the railways, the telegraph and steamships. It was the period in which, according to Hobsbawm (1996a: 29), ‘the world became capitalist and a significant minority of “developed” countries became industrial economies’. This economic expansion and mass emigration ‘gave governments shaken by the revolution invaluable breathing space’ to manage domestic social and political conflicts more successfully (Hobsbawm, 2006ba 31, 69).

The 1873–1896 depression was a crisis of profitability rather than productivity. It had a particularly devastating impact on agriculture, while also hitting other industries hard. This triggered a range of responses, including US agrarian populism, increased oligopoly and monopoly in industry, the expansion of cooperatives, mass emigration, imperialism, and the growth of working class political parties (Hobsbawm, 1989).

8 Charlier’s dogged efforts notwithstanding.

32 During this slump, and the subsequent economic expansion, the industrial proletariat grew as productivity improvements in farming reduced the need for agricultural labourers and the factory system displaced skilled artisans (Hobsbawm, 1989: 113- 114). In 1903, the German Social Democratic Party, the largest socialist party in Europe, won three million votes in national elections and, by 1912, it held the most seats in the German parliament (Berman, 2006: 55, 59). Large socialist parties also developed in France and Italy (Berman, 2006). This organisational development occurred in parallel with a growing class consciousness among people who recognised ‘the gap which separated those who were, or were becoming, workers from the rest, including other branches of the socially modest “little people”’ (Hobsbawm, 1989: 125). In this age of mass production, mass migration, mass concentration of industry, and mass working class parties, the ideas of Paine, Brownson and Charlier may have appeared increasingly nostalgic, quaint and irrelevant.

The ideas and influence of Henry George constitute one possible exception, and alternative, to the tentative explanation described above. This second explanation for the gap in the BI literature suggests that the aspirations and worldview of the first wave of BI advocates can to a significant degree be found in the writings of Henry George. George, a printer, journalist, Christian and anti-socialist, occupied a similar petit- bourgeois class position, as did the early advocates of BI. He is best known for his 1879 book Progress and Poverty George (1886), in which he advocated a tax on the unimproved value of land as the key to abolishing poverty while maintaining a free enterprise economy. At the time, the book sold over two million copies in America, and George’s influence extended internationally, especially in colonial settler states like Canada, Australia and New Zealand (Blaug, 2000; Bruchey, 1972).

There is a striking similarity between the ideas and concerns of Paine, Spence, the Jacksonians and the Belgian liberal socialists and those developed by George.9 He exhibited a concern for natural rights and drew a distinction between private property developed by one’s own personal labour and private property in land. He wrote that, ‘private property in land has no warrant in justice, but stands condemned as a denial of

9 George was explicitly influenced by Ricardian rent theory and the political economy of James Mill and John Stuart Mill. As already mentioned, the latter had put forward his own proposal for BI.

33 natural rights’ (George in Blaug, 2000: 277). George argued, again in common with the early BI advocates, that it was ‘not necessary to confiscate land’ itself, but ‘only necessary to confiscate rent’ in order to achieve justice (George in Blaug, 2000: 277). George’s ideas, and their popularity, make sense in the context in which they evolved. The US experienced rapid demographic, industrial and agricultural expansion in the latter half of the nineteenth century, which generated both progress and poverty. Between 1860 and 1890, the ‘population doubled’ and the mileage of railways ‘more than quintupled’. Between 1860 and 1910, the ‘number of farms … more than tripled … from about 2 million to almost 6½ million’ (Bruchey, 1972: 116-7). George was not opposed to this progress but saw land as a ‘passive factor of production’ that generated great wealth for too few (Bruchey, 1972: 117-121). Despite the similarity between the ideas and analysis of George and the early BI proponents, he is not regarded as an advocate of the idea. That said, in The Land Question, George (1904) did concede the possibility of using revenue from land tax to fund some form of BI.

George was not forgotten like Spence, Brownson and Charlier. However, ‘Georgism’, according to Blaug, ‘was effectively killed off by the dramatic fall in rental shares in both the USA and the UK, from something like 15 per cent [of national income] in the 1870s to 6 per cent in the 1960s’ (Blaug, 2000: 283). Whether rent derived from landed and other forms of property could fund some form of BI remains an open question to this day. The period of financialisation has seen huge gains accrue to property owners (Bryan & Rafferty, 2018). Regardless of the prospects for Georgism today, its impact pales in comparison with other political and social movements during the late nineteenth and early twentieth centuries. Meanwhile, BI would only re-emerge as a serious policy concern in post-WWI Britain.

1.3 The British Moment: The Road Not Travelled (1918–1950s)

While sharing some similarities with their nineteenth-century precursors, the ideas put forward during the British Moment in BI history also exhibit some distinctive differences. The British proposals eschew a narrow focus on land taxation and nostalgia for a society of independent farmers and artisans. Instead, there is greater emphasis on macroeconomic issues, including aggregate demand and technological unemployment. Some of the British BI advocates in this period were also more prominent figures than

34 those discussed in the previous section. After a brief postwar boom, the UK economy collapsed in 1920. Then, until after the Great Depression, ‘British unemployment never … fell much below 10 percent and the unions lost half their members’ (Hobsbawm, 1994: 89). The power of labour was seriously diminished and macroeconomic conditions remained weak (Hobsbawm, 1994: 89). In this context of economic stagnation and a heightened concern about class conflict or the ‘social question’, advocates put forward a variety of proposals for BI.

Although something of an outlier among the British BI proponents of the period, the philosopher Bertrand Russell advocated a form of BI towards the end of World War I. He suggested that a ‘small income, sufficient for necessaries, should be secured to all, whether they work or not, and that a larger income…should be given to those who are willing to engage in some work which the community recognises as useful’ (Russell, 1918: 127). His latter proposal has the features of a Participation Income, a form of BI advocated by some scholars to this day.

The English Quakers, Bertram Pickard and Dennis and Mabel Milner, advocated a ‘state bonus’ through their State Bonus League. It was pitched as a form of ‘moderate communism’, an alternative to ‘complete socialistic schemes … arrived at by revolutionary methods’ (Milner & Milner, 2004: 128). This was essentially a proposal for an unconditional universal pension that they called a ‘state bonus’ funded by a 20 percent tax on all forms of income and adjusted for inflation to maintain its purchasing power (Milner & Milner, 2004: 125). The idea was debated and rejected by the Labour Party Executive Committee in 1921 (Torry, 2014: 33). Also in 1921, C. Marshall Hattersley, an obscure figure influenced by Major C.H. Douglas’ Social Credit movement, advocated what he called ‘community’s credit’. In a sense, Hattersley updated the idea of a natural right to a share in nature’s patrimony, by arguing that individuals were ‘co- heir to the Common Cultural Inheritance’ (comprising governance, social institutions and technological progress). Therefore, he argued individuals were owed a social dividend (Hattersley, 2004: 143).10 The second argument put forward by Hattersley,

10 A recent variation on this theme in Peter Barnes’ (2014) With Liberty and Dividends for All broadens the concept of ‘Common Cultural Inheritance’ to include air, money creation, intellectual property protection and the electromagnetic spectrum, with corresponding taxes (carbon tax, bank tax etc.) as a funding mechanism for social dividends.

35 one that recurs throughout twentieth-century BI literature, relates to the technological displacement of labour. He claimed that a universal form of non-wage income would partially insulate the working class against the effects of technological unemployment, which in turn would reduce opposition to change and allow for a more rapid increase in aggregate national wealth. Hattersley further argued that a universal entitlement would avoid the welfare trap and poverty trap issues habitually generated by cutting back unemployment benefits as soon as unemployed individuals took on any paid market work (Hattersley, 2004: 144-146).

The Fabian socialist economist Cole (2004) made a similar argument for a social dividend based on ‘a recognition of each citizen’s claim as a consumer to share in the common heritage of productive power’. Cole advocated a planned economy, in which a social dividend paid on the basis of citizenship would increase relative to wages based on work, until the wage-based portion of income became a marginal share of net income (Cole, 2004: 149-160). Economists James Meade and Abba Lerner ‘also floated the possibility of introducing a ‘social dividend’ during the 1930s, either as a counter- cyclical device, an egalitarian measure, or a means of distributing the profits of nationalised industries’ (Sloman, 2016: 205).

The experience of the Great Depression and World War II created the conditions for the rapid postwar expansion of the British welfare state. During 1932–33, British unemployment was 22 percent and ‘less than 60 per cent of the labour force was covered by … [inadequate] Unemployment Insurance’ (Hobsbawm, 1995: 92-3). The memory of this economic suffering, along with the success of the Soviet Union and Nazi Germany in tackling unemployment, provided the political context in which a ‘British government under Winston Churchill committed itself, in the midst of a desperate war, to a comprehensive welfare state and full employment’. Churchill lost office in 1945, paving the way for a Labour government that ‘presided over a period of unprecedented social reforms’ (Hobsbawm, 1995: 161-162, 169-170). These reforms were largely modelled on the 1942 Social Insurance and Allied Services report. The report is commonly known as the Beveridge Report after economist William Beveridge, who chaired the committee that produced it. Sloman (2016: 203) describes it as ‘radical in scope yet evolutionary in character’ and opines that ‘the report quickly came to dominate wartime reconstruction debates’. The subsequent adoption of ‘the

36 Beveridgean social insurance model’ centred on ‘a comprehensive insurance scheme for unemployment, sickness and old-age pensions alongside non-contributory family allowances’ was the principal motivation for the work of the most determined BI advocate of this era, Lady Juliet Rhys-Williams (Sloman, 2016: 204, 206).

Rhys-Williams, Secretary of the Women’s Liberal Federation, published Something to Look Forward to. A Suggestion for a New Social Contract (1943) as a direct alternative to the Beveridge Report. She argued for a weekly BI paid to individuals on the grounds that they agreed to attend a labour exchange and take up employment when offered. Women with children would be exempt from this mutual obligation and, in keeping with her liberal principles, participation in the new social contract would be voluntary. Individuals could avoid the work test if they chose to forego the BI. According to (Torry, 2014: 34), Rhys-Williams believed that the Beveridge model of targeted social assistance would result in ‘families receiving too little of any additional earnings, and there would be too little incentive to seek paid employment’. Rhys-Williams proposed a 45 percent flat tax ‘on all earnings up to the surtax threshold’, to fund a weekly BI sufficient ‘to cover basic subsistence needs’ of men, woman and children (Sloman, 2016: 206) has summarised the purported benefits of Rhys-Williams’ proposal: Tax could be deducted on a current basis, the means tests and poverty trap would disappear, the financial relationship between the citizen and the state would be greatly simplified, and much of the bureaucracy of social insurance could be abolished. Mothers and housewives would receive an independent income, low-paid occupations such as agriculture would become more viable, and the highest earners would also gain as the top rates of income tax and surtax were reduced. Last but not least, the Treasury would obtain a powerful fiscal regulator.

The legacy of government wartime intervention in the economy and the dramatic expansion of the tax base from 3.7 million people in 1937/8 to 14 million in 1944/5 opened the policy and political space for Rhys-Williams’ plan to be taken more seriously than those proposals put forward in the 1920s and 1930s. Her proposal attracted some positive media coverage, was analysed by Treasury, and received support from the Liberal Party. According to Sloman (2016: 208), John Maynard Keynes ‘found the idea “very attractive”’ without subscribing to the particular details of Rhys-Williams’ plan. Economists James Meade, Roy Harrod and Alan Peacock all viewed the proposal

37 positively, with Harrod suggesting it ‘might constitute a genuine rival to that of socialism itself’ (Harrod in Sloman, 2016: 210). Meade revisited the case for social dividends in his 1948 book Planning and the Price Mechanism. He argued that a social dividend paid to men, women and children and funded by a flat tax would enhance equality and efficiency and ‘afford a perfect instrument for the most effective and prompt control over total national expenditure in the interests of avoiding inflation and deflation’ (Meade, 1948: 44). Meade continued to develop and refine his work on BI during the next forty years.

However, Something to Look Forward to also generated criticism and outright opposition. Economist E.F. Schumacher and Treasury official Herbert Brittain, among others, pointed to the very high budgetary cost of such a universal scheme (Sloman, 2016: 208). Moreover, in the postwar period, the reforming ‘Attlee government showed little interest’ in basic income ‘since the concept … cut across both elements of Labour’s traditional egalitarian strategy … higher wages for working men and collective provision of necessities such as health, education and housing’ (Sloman, 2016: 210). Rhys-Williams unsuccessfully pitched her idea to Churchill as a ‘progressive policy for the right, as well as for the left’ in the lead-up to the 1950 general election (Rhys- Williams in Sloman, 2016: 211, 212). She made a final push for the adoption of her ideas to the Royal Commission on the Taxation of Profits and Income in 1951, but was opposed by the Commission’s prominent economists Nicholas Kaldor and John Hicks, the Board of Inland Revenue, the Trades Union Congress and the British Employers’ Confederation. The Commission’s final report dismissed Rhys-Williams proposal (Sloman: 2016, 212-213).

Sloman has identified five reasons for Rhys-Williams’ failure to shepherd her idea from policy proposal through to implementation that remain relevant to contemporary BI scholars and advocates: 1. Beveridge’s ‘preference for contributory insurance and his determination to restrict payments to cases of entitlement or destitution — except in the special case of family allowances — [was] shared by Whitehall officials, businessmen and trade union leaders.’ 2. The limitations of being an individual ‘policy entrepreneur’.

38 3. Rhys-Williams’ own ‘strongly felt hostility to socialism’ that made an alliance with the labour movement impossible. 4. Rhys-Williams’ preferred ‘coalition, uniting Conservatives, Liberals, women voters and the low paid against the unionised male breadwinners … was always an unlikely prospect’. 5. Finally, the fact that: ‘In the absence of an ethical or philosophical justification for universalism, centre-right interest in the scheme tended to be shallow and contingent on its electoral potential or its value as a tax reform’ (Sloman, 2016: 214-216).

The various BI proposals put forward during the British Moment were at times taken seriously at the highest levels, but ultimately were not implemented because their proponents failed to attract necessary levels of social and institutional support. The period highlights the limited power of individual policy entrepreneurs, the effectiveness of serious criticism in undermining support for BI schemes, and the potential for alternative proposals to garner greater support. Finally, in the context of a far more developed industrial capitalist economy, the structural barrier to severing the link between paid work and income, especially for working age males, was more pronounced in the British Moment than during the Nineteenth Century Moment. BI next aroused significant interest in North America during the 1960s and 1970s. On that continent, innovative trials were carried out and, for the first time, a form of BI was nearly implemented by a major capitalist country.

1.4 The North American Moment: Knocking at the Door (1960s–1980s)

The closest BI has come to being implemented on a national basis was in North America in the early 1970s. Under the banners of a Guaranteed Annual Income (GAI) and a Basic Annual Income (BAI), BI was the subject of high-level political campaigns and unprecedented social scientific experimentation. While the push for GAI stalled in the 1970s, the US state of Alaska did implement a universal social dividend in the early 1980s that remains in place today.

During the 1960s, intellectuals from diverse backgrounds advocated some form of BI. Milton Friedman (2013) supported a negative income tax as a means of providing

39 targeted income support to the poor, while rolling back the welfare state. Robert Theobald (1963) argued, in Steensland’s words, for ‘completely breaking the link between income and work by providing a GAI payment through a flat grant to all adults and children’ (Steensland, 2006: 1289). Theobald also saw BI as a solution to automation-driven unemployment and overconsumption (Arthur, 2016). GAI garnered support from bureaucrats, economists and the National Welfare Rights Organization during Lyndon Johnson’s “war on poverty” in the 1960s. However, Johnson ultimately backed away from the idea and it was his Republican successor, Richard Nixon, pursued a GAI on the advice of experts in the welfare, health and economic bureaucracies (Steensland, 2006: 1290-96).

In 1969, Nixon proposed a Family Assistance Plan (FAP) that included a GAI in the form of a negative income tax. Under Nixon’s GAI, for ‘a family of four, with no outside income, the basic federal payment would have been $1,600 a year’ and a ‘worker could keep the first $60 a month of outside earnings with no reduction in his benefits’, after which a 50 percent taper would be introduced. Recipients were also ‘required to accept work or training’ (Widerquist & Sheahen, 2012). There was strong initial support for Nixon’s plan in the press and public opinion polls. FAP passed the US House of Representatives in 1970 (and again in 1971) but was rejected by the Senate Finance Committee. As Passell and Ross (1973) recount the episode: ‘The decisive defeat, on a Finance committee vote of 10-6, united Oklahoma New Populist Fred Harris and liberals Eugene McCarthy, Albert Gore and Clinton Anderson with the most mossy-backed of the reactionaries.’ George McGovern, Nixon’s Democratic opponent in 1972, initially advocated a more generous ‘demogrant’ based on the ideas of economists James Tobin and Joseph Pechman, only to abandon BI altogether after a backlash from Republican and Democrat members of Congress (Steensland, 2006: 1276, 1306). Ultimately, Nixon’s Family Assistance Plan ‘proved to be the high-water mark of the guaranteed income movement in the United States’ (Widerquist & Sheahen, 2012: 9).

While Nixon’s GAI was not implemented, North America was the site of five innovative GAI experiments between 1968 and 1980 that remain of interest to BI scholars. These were the New Jersey Graduated Work Incentive Experiment (New Jersey and Pennsylvania, 1968–1972, 1216 families); the Rural Income Maintenance Experiment (Iowa and North Carolina, 1969–1973, 809 families); the Gary, Indiana Experiment

40 (1971–1974, 1799 families); the Seattle/Denver Income Maintenance Experiment (1971–1980, 4800 families); and the Manitoba Basic Annual Income Experiment, known as the Mincome (Winnipeg and Dauphin, Manitoba, 1975–1978, 1300 families) (Widerquist, 2013a). These trials ‘were the first large-scale social experiments and were consciously modelled on techniques from the natural sciences’ with ‘a randomly selected experimental population, and matched controls’ (Forget, 2011: 286). While focus was on measuring the labour supply effects of GAI, researchers also collected data ‘on a wide variety of social behaviours’ (Forget, 2011: 286).

The US trials tested nine different income guarantee levels between 50 percent and 150 percent of the poverty line, along with nine tax-back or taper rates (Widerquist, 2013a: 219). The Manitoba trials were a delayed response to the recommendations of the 1971 Croll Report on poverty. They were jointly funded by the federal and provincial governments in Canada and tested three income guarantee levels and three tax-back rates (Hum & Simpson, 1993). The results of US trials were widely discussed and debated in the 1970s and 1980s. The results of the Manitoba trials, on the other hand, were simply archived without analysis, when the project was cancelled in 1979 after the election of a conservative government. The vast quantity of data collected was not studied until the 1990s (Hum and Simpson, 1993: 79; Widerquist, 2013a: 219; Forget, 2011).

Widerquist’s review of the literature on the five trials (2013a: 220) found a reduction of working hours ranging between 0.5 percent and 9 percent for husbands, 0 percent and 27 percent for wives, and 15 percent and 30 percent for single mothers, compared with the control groups (Widerquist, 2013a: 220). Married women, according to Forget, chose to ‘take some part of the increased family income in the form of more time for household production, particularly staying home with newborns’ (Forget, 2011: 286). Robert Solow, reflecting on the trials in 1986, concluded that the results showed: ‘There is a labour supply effect, as every economist thought there would be; but it could hardly be described as large enough to jeopardise the work ethic’ (Solow, 1986: 221). Hum and Simpson (1993: 80) found average work reductions of ‘about one per cent for men, three per cent for wives, and five per cent for unmarried women’. They argue the fact that the Manitoba experiments showed smaller average work reductions than the US trials emphasised the importance of studying these experiments in their different

41 cultural, social and institutional contexts (Hum and Simpson, 1993: 80-81).11 While there was some analysis of variables other than labour supply, Munnell states that the key role played by economists in the design and orientation of the trials meant that they were ‘very narrowly focused’ and tended to ignore qualitative research methods (Munnell, 1986: 13). The US experiments, according to Heclo, were an exercise in ‘spending millions of dollars on four experiments to see if people worked less in response to income guarantees and next to nothing to find out what they did with any lessened time on the job’ (Heclo in Munnell, 1986: 14).12

There are at least five explanations for why the North American policy proposals and experimental trials did not lead to implementation of GAI. First, political opposition in both the US and Canada was one important factor. In the US, opposition from one branch of the US Congress, the Senate, was enough to block Nixon’s FAP. In Canada, the replacement of the Liberal Trudeau government with the Progressive Conservative government under Joe Clark marked the end of the Mincome experiment. Second, as Steensland (2006) argues, the GAI push in the US was driven mainly by a policy elite within the health, welfare and economic arms of the bureaucracy. These civil servants subscribed to a New Deal ethos, centred on a belief in the efficacy of enlightened public policy in remedying social ills, such as poverty. Consequently, the GAI campaign lacked any clear connection to a social base. As Steensland (2006: 1287) notes, ‘the working poor themselves did not lobby on behalf of GAI proposals, despite the fact that the plans were in their material interest’. Passell and Ross (1973) argue there were also rational reasons for liberal politicians and the National Welfare Rights Organization to ultimately oppose Nixon’s FAP because while it ‘offered epochal gains for the Southern poor’, this came ‘at the price of a change in the rules with uncertain consequences for the mothers and children on welfare in the North’.

Third, Nixon also muddied the water by appealing to familiar categories of the ‘deserving’ and ‘undeserving’ poor in campaigning for FAP. He ‘repeatedly bemoaned the country’s recent decline into “welfarism”, despite the fact that his program proposed to add 13 million government beneficiaries to the rolls’ (Steensland, 2006:

11 The relationship between BI and labour supply is examined in more detail in Chapter 7. 12 Non-labour supply effects of the trials are discussed in Chapter 6.

42 1299). The welfare reforms ultimately adopted by Congress in the 1970s served to reinforce existing categories, by providing targeted support to the old, blind and disabled through the Supplemental Security Income program on the one hand, and assistance to the working poor through the Earned Income Tax Credit on the other. These groups of “deserving” recipients were clearly demarcated from the “undeserving” and stigmatised recipients of programs such as Aid to Families with Dependent Children (AFDC) and unemployment benefits (Steensland, 2006: 1308-09).

Fourth, while debates over the aims, design and results of the GAI experiments are of continuing interest to social scientists, the political use and abuse of evidence from the trials at that time is equally important. In the early 1970s, when Nixon’s FAP was being debated by Congress, preliminary results showing only a small reduction in work effort were trumpeted by supporters and dismissed as inconclusive by opponents of the plan. By the late 1970s, when the tide had turned against GAI, the ascendant opponents of progressive welfare reforms cited the same experimental results on labour supply as damning evidence of the scheme’s unworkability. One US Senator went so far as to argue that families who participated in the trials should be prosecuted for welfare fraud (Forget, 2011: 287). The clearest example of the way in which data from the trials had a clear political impact relates to the fate of Jimmy Carter’s Program for Better Jobs and Income, which included a proposal for a GAI. The results from the Seattle-Denver trial appeared to show a 57 percent increase in the divorce rate of black experimental families and a 53 percent increase in the divorce rate of all experimental families, compared to the control group (Forget, 2011). As Forget writes, this ‘finding caused Senator Moynihan, early on one of the strongest advocates for a GAI, to withdraw his support and was largely responsible for the failure of Jimmy Carter’s welfare reform scheme’. In 1990, further studies showed this result was a statistical error, and no subsequent ‘experiment found any effect on marital stability’. However, the damage was clearly done (Forget, 2011: 286). The Manitoba trials were undermined, not by disagreements over experimental results, but by the complete failure to analyse the data collected. As political support for the project waned during deteriorating economic conditions, researchers were instructed to adopt a narrow focus on ‘administrative issues’ and to ‘archive’ the data collected (Forget, 2011: 289). There were originally four research programs set up to study the Manitoba trials, covering economic, sociological,

43 administrative and statistical streams. The sociological program which ‘looked at family formation, community cohesiveness, social attitudes, mobility’ and used ‘ethnographic methods’ was cut first, as it was considered inferior to the economic approaches (Forget, 2011: 289). The lack of qualitative evidence was a major shortcoming in both the US and Canadian trials.

Fifth, the economic context in North America should be taken into account in any assessment of the fate of the GAI campaigns and experiments during the 1970s. After 25 years of rapid economic expansion, the ‘Golden Age ended in 1973–75 with something very like a classical cyclical slump’ (Hobsbawm, 1995: 405). Industrial production and trade suffered sharp contractions and the US experienced two recessions between 1969 and 1975. The second “stagflation” recession from 1973–1975 was marked by a 3 percent fall in GDP, an unemployment rate of 9 percent and inflation running above 12 percent (Labonte & Makinen, 2002: 23, 18). While Canada did not experience a technical recession during the 1970s, inflation averaged over 10 percent throughout the decade and unemployment rose. It did suffer a shallow downturn in 1980 and a much deeper recession in 1981–82 (Yalnizyan, 2009). The decade marked the pivot point between the long boom and neoliberal eras. It is, perhaps, reasonable to conclude that a period of simultaneously rising inflation and unemployment did not create an economic environment conducive to severing the link between waged work and income, however partially, through implementing a guaranteed annual income.

While the political campaigns and experimental trials in the US and Canada did not lead to a GAI at a national level, the US state of Alaska did introduce a form of BI in the early 1980s. The Alaska Permanent Fund (APF) was set up by the state’s Republican Governor Jay Hammond in 1976, to reinvest a portion of the profits from Alaska’s oil industry. Since 1982, the Fund has paid the Permanent Fund Dividend (PFD) to every man, woman and child who meets Alaska’s residency requirements (Widerquist and Sheahen, 2012). In 2014, the Fund had US$50 billion in assets and paid out US$1.1 billion in dividends (Luckerson, 2014). The annual per capita dividend varies considerably from US$800 to US$2000 per person per year (Alaska Department of Revenue, 2020). This means, in some years, a family of four may receive around US$8,000. While, the Alaska dividend falls well short of satisfying the “adequacy” criterion of BI, its popularity was demonstrated when 84 percent of Alaskans voted

44 against a government push to redirect APF funds from dividends into general government revenue (Widerquist and Sheahen, 2012: 12). The Alaska model, with its social dividends paid to individuals on the basis of commonly owned oil resources, provides an interesting link back to the early proposals for BI with their emphasis on the individual’s natural right to a stake in nature’s patrimony.

1.5 A Guaranteed Minimum Income (GMI) for Australia (1970s)

While there were no major social experiments or high-profile campaigns for BI in Australia, a GMI did attract some attention among policymakers and welfare advocates during the 1970s. In 1974–1975, reports by the Commission of Inquiry into Poverty chaired by economist Ronald Henderson, the Priorities Review Staff (PRS) in the Commonwealth bureaucracy, the Australian Council of Social Service, and the Anglican Church in Sydney all recommended some form of GMI or Negative Income Tax (NIT) as a means to alleviate poverty (Arthur, 2016). In addition, Fitzroy in Melbourne was the site of the Brotherhood of St Laurence (BSL) Family Action Project Guaranteed Minimum Income trial. The trial lasted for three years (1972-1975) and included 60 participants (Bowman, Mallett, & Cooney-O’Donoghue, 2017: 12).

Henderson’s proposed GMI was conceived as a ‘social right’ in the form of a ‘flat-rate, non-contributory demogrant’ that would be paid to families (Tomlinson, 2012: 230). However, his scheme divided the population into categorical and non-categorical recipient groups, with the former group being paid a GMI equivalent to the poverty line, and the latter group receiving a benefit of 50 percent to 71 percent of the poverty line (Tomlinson, 2012: 230). The PRS report adopted similar categories to Henderson, but proposed an NIT rather than a demogrant. According to Tomlinson (2012: 228), ‘the dismissal of the Whitlam Government in 1975 removed the impetus for change’. In the 1980s, Australia experienced the same shift towards neoliberal economic and welfare policies as many other advanced and developing countries (Stilwell, 2000). The shift ultimately reinforced cultural categories of the “deserving” and “undeserving” poor and marked the introduction of more punitive workfare models of social assistance (Marston et al., 2014).

45 1.6 The Contemporary Moment: From Retreat to Resurgence

Debate regarding BI was mostly confined to academic circles throughout the 1980s and 1990s, particularly among philosophers and political scientists (Widerquist and Sheahen, 2012: 22). This work led to three main organisational developments. In 1983, a group of UK scholars set up the Basic Income Research Group (BIRG) that became the Citizen’s Income Trust in 1994. In 1984, the Charles Fourier Collective at the University of Louvain in Belgium published a paper called ‘L’allocation universelle’ (Basic Income) that became the platform for a major conference of scholars interested in BI in 1986. This in turn led to the founding of the Basic Income Europe Network (BIEN), which morphed into the Basic Income Earth Network in 2004. BIEN holds annual interdisciplinary congresses for BI scholars and coordinates the journal Basic Income Studies. The US Basic Income Guarantee Network was established in 1999, staging its first conference in 2002. The North American Basic Income Guarantee (NABIG), which includes Canadian scholars, now holds an annual conference (BIEN, 2020; Raventos, 2007).

BI only resurfaced in mainstream public debate after the Global Financial Crisis (GFC) and the Great Recession, as concern over rising economic inequality and insecurity, and opposition to austerity, become more prominent in global politics. During this period, BI trials have been carried out, commenced or been proposed in several countries, including Namibia, India, Canada, the Netherlands, Finland, the US, Kenya, Uganda and Scotland (McFarland, 2017). However, the recent cancellation of several innovative trials of the policy, including in Ontario following a change of government, highlights the susceptibility of these experiments to shifts in political power (Mulvale, 2018). BI has also increasingly featured as a part of the policy platform of various political parties, from Greens, to socialists, libertarians and centrists. For a full list of BI pilots and proposals see Appendix A and Appendix B in (Gentilini, Grosh, Rigolini, & Yemtsov, 2020: 237-260). The focus throughout this thesis is predominantly on BI and advanced capitalist countries, particularly the liberal welfare capitalist states (Esping-Andersen, 1990). This is solely due to their relevance to the Australian case study and in no way reflects the merits of considering BI in relation to other countries.

46 Among the more interesting and significant contemporary BI developments, are the Swiss BI referendum, the two-year Finnish BI trial, Maricá’s Citizens’ Basic Income (CBI) program in Brazil, and Andrew Yang’s BI-centred presidential campaign in the US. They illustrate four very different approaches to the politics of basic income and potential implementation pathways for this reform.

The Swiss campaign for a national BI began in 2008, when filmmaker and artist Enno Schmidt and entrepreneur Daniel Häni produced a film about BI that was an online hit among German-speaking Swiss. The film ‘helped prepare the groundwork for an official popular initiative launched in April 2012’ that called for the introduction of ‘an unconditional basic income’ that ‘must enable the whole population to live a dignified life and to participate in public life’. The initiators left the ‘funding and level’ to be determined by the legislature (Van Parijs and Vanderborght, 2017: 208). However, despite the decision not to formally ‘stipulate a precise sum’, associated websites and publications listed the very generous ‘monthly amount of 2,500 Swiss francs per adult ... and 625 Swiss francs per child’ (Van Parijs and Vanderborght, 2017: 208). BI activists and supporters had 18 months to gather over 100,000 signatures to initiate the convoluted three-year referendum process. By October 2013, they had over 126,000 signatures (Van Parijs and Vanderborght, 2017: 208). This feat was celebrated by a striking campaign stunt, with activists dumping eight million five-centime coins outside the Swiss Parliament in Bern (ABC News, 2013). In December 2015, the Swiss National Council (house of representatives) voted 146 to 14 against the BI initiative, while the Council of States (the senate) voted 40 to 1 against. With overwhelming elite opposition, 76.9 percent voted against the BI initiative in June 2016 on a 46 percent turnout (Van Parijs and Vanderborght, 2017: 208-209). However, 35 percent of voters aged from 18- 35 voted “yes” and most Swiss expect there to be another BI vote in the future (Wagner, 2017). Van Parijs and Vanderborght (2017: 209) describe the four-year campaign that ended in a landslide defeat as having ‘triggered public debate on basic income and a public awareness of the idea unequalled anywhere else in the world and at any time in history’. Figure 10.1 provides some additional evidence for this claim, by charting “basic income” as a Google search term on Google Trends’ Interest Over Time Index13 between

13 ‘Numbers represent search interest relative to the highest point on the chart for the given region and time. A value of 100 is the peak popularity for the term. A value of 50 means that the term is half as popular. A score of 0 means there was not enough data for this term’ (Google Trends, 2020).

47 2012 and 2020. The index does show a spike from a score of 27 in June 2015 to 70 in June 2016 in relation to the search term “basic income” globally, followed by a sharp crash (Google Trends, 2020). Besides this publicity boost for BI, the principal significance of the Swiss vote is that it marked the first time a grassroots political movement has explicitly campaigned for BI.

Figure 1.1 Worldwide use of ‘Basic Income’ as Google Search Term, Interest Over Time Index, 2012-2020

Source: Google Trends, 2020.

The Finnish BI trial14 commenced on 1 January 2017 and ran until the end of 2018. A random sample of 2,000 unemployed people aged 25-58 were paid a monthly BI of €560 (AUD$793) for the trial period. If participants took on paid work during the trial, they kept any additional earnings. The rest of the unemployed population (173,000 people) served as the control group. According to Kela, the Finnish social security agency that administered the trial, the aims were ‘to reduce the amount of work involved in seeking financial assistance and to free up time and resources for other activities such as working or seeking employment’ (Kela, 2019). The trial was instituted by a centre-right coalition government in which only one of the three coalition

14 For a detailed discussion of the design and implementation of the Finnish trial, see De Wispelaere, Halmetoja, and Pulkka (2019)

48 members, the Centre Party, supported BI. Consequently, it was not surprising when the government announced the policy would not be extended beyond the two-year trial period. The trial was criticised for its narrow focus on incentivising the unemployed to seek paid unemployment, as opposed to studying the effects of a genuinely universal BI. The trial was also opposed by the Central Organisation of Finnish Trade Unions (FAK) (Tiessalo, 2017). The preliminary results were released in early 2019. In terms of days in employment, analysis of the results of the first year of the trial showed that the experimental group ‘did not differ in a statistically significant manner from the control group’ (Pulkka, 2019). However, ‘descriptive analysis of the survey results indicate that the test group experienced better subjective well-being than the control group’ and ‘the results suggest that receiving basic income did not make people more passive, quashing the most fundamental moral hazard argument against basic income’ (Pulkka, 2019). The final report showed similar findings (Kela, 2020), which are detailed in Chapter 6. The Finnish trial, while enhancing the profile of BI in public debate, suffered from several of the same design, evaluation, and political limitations that plagued the North American experiments in the 1960s and 1970s.

Maricá’s Citizens’ Basic Income (CBI) program (Renda Básica de Cidadania) is one of the most innovative contemporary developments. Maricá’s CBI recipients must ‘have lived in Maricá for at least three years and belong to households earning less than three times Brazil’s minimum monthly income of R$1045 (US$205)’ ("Maricá Basic Income," n. d.) In this city of 160,000 on the outskirts of Rio di Janeiro, ‘about 42,000 of the city’s lowest-income residents—who already receive 130 reals (R$), about $25 per month, as part of the city’s expanded basic income—will now be paid R$300 per month ($60), 169 percent of the Brazilian poverty line, at least through June’ (Katz & Ferreira, 2020). Maricá’s CBI program is the consequence of a combination of local oil wealth reinvested in a public fund; creative Worker’s Party mayors, Washington Quaquá and Fabiano Horta; and the innovative use of local digital currency. Quaquá was committed to a vision of a ‘mix of collectivism, class struggle, and pragmatism’, including the introduction of a free municipal bus service, and open to the ideas of Workers’ Party economist-politicians, like Paul Singer and Eduardo Supplicy (Katz and Ferreira, 2020). Maricá’s community bank launched its digital currency, the mumbuca, in 2013. The CBI was then implemented in 2015 and paid in mumbuca. The most significant change

49 implemented was by Mayor Horta in June 2019, when the CBI was individualised. Because mumbuca can only be spent in Maricá, the program now injects around US$1 million per month into the local economy (Katz and Ferreira, 2020). Maricá’s CBI still falls well short of a full BI, but demonstrates how progressive political vision, intelligent leadership, local activism, the prudent use of resource wealth, policy innovation and responses to contingency can push a scheme in that direction.

Andrew Yang, the son of Taiwanese migrants to America, was the ultimate political outsider when he launched his campaign for the Democratic presidential nomination in 2017. The then 42-year-old lawyer and social entrepreneur centred his campaign on the ‘freedom dividend’, a UBI that would ‘provide an annual income of $12,000 for Americans aged 18-64, with the amount indexed to inflation’ (Yang, 2018: 166). Yang’s political strategy centred on non-traditional media, from appearances on comedian Joe Rogan’s hugely popular podcast to cultivating his #YangGang cadre of online supporters and activists through social media (Daniels, 2020). Yang raised US$40 million from over 400,000 donors and introduced millions of Americans to the idea of BI through nationally televised Democratic primary debates and countless media performances (Kroll, 2020). However, despite outlasting many higher profile candidates, Yang’s national polling average was 3% in February 2020 when he ended his campaign without winning a single delegate (Morin & Lalljee, 2020). ). Around that time, the Google Trends Interest over Time Index (see Figure 1.1) hit a high of 83.15

The prospects for BI in the Contemporary Moment are dependent on a wide variety of political, economic, social and cultural variables. Analysing the ebb and flow of interest in BI in specific historical circumstances may enhance the ability of social scientists, and others, to identify the likely obstacles to achieving this policy reform.

The key theme that emerges from a critical analysis of the history of BI is the consistent failure of BI proposals to attract substantial social support. Historically, the lack of support for BI from trade unions, social democratic political parties, the working class in general, and the working poor, is especially striking.16 This overriding failure to

15 Curiously, the Index reached its absolute peak of 100 in April 2020, two months after Yang dropped out of the Democratic primaries. 16 See Chapter 10 for more detail on this issue.

50 achieve policy success could be attributable to a range of factors, including the following: a) Inherent deficiencies in the concept of BI; b) the availability of potentially superior policy alternatives, such as full employment, a Job Guarantee (JG), and expansion of the existing welfare state; c) the diverse ideological positions of BI advocates that may undermine their capacity to attract mass support in political systems dominated by centre-right and centre-left political parties and coalitions; d) structural barriers in capitalist society regarding severing the link between wages and income for working age adults; e) cultural barriers to blurring the distinction between the “deserving” and “undeserving poor”; and f) the limited power of policy elites and policy entrepreneurs to effect social reform.

The final point to emphasise here is that the structure of capitalism and the nature of its historical development produce and reproduce the conditions that give rise to proposals for BI on the one hand, and erect barriers to its achievement, on the other. Recurring patterns of inequality and insecurity can make BI appear attractive. However, both economic booms and economic busts may undermine BI’s appeal: in the first instance, BI may appear unnecessary, in the second instance, BI may be framed as unreasonable given the circumstances. Cunliffe and Erreygers (2004: xxvii) neatly summarise ‘the general ambition’ of BI ‘as capitalism without the proletarian condition’. The question of whether that ambition is achievable—and BI its optimal instrument— remains to be answered.

Conclusion

Since the late eighteenth century, individuals have periodically advocated some form of BI based on legitimate concerns that their respective societies did not deliver adequate social justice and economic security to their members. Such concerns have motivated other reformers to champion a myriad of alternative policy measures as remedies for

51 the same social maladies. Many of these measures have been implemented over time. BI proposals, with some minor exceptions, have not met with equivalent policy success.

The aim of this chapter has been to posit some possible reasons for this stark history of failure. To that end, it attempted to historicise four moments in the history of BI, and to develop some tentative explanations regarding the failure to transform BI policy proposals into reform realities. The breadth of historical material canvassed in this chapter means that the analysis presented is necessarily partial. It follows that the tentative explanations advanced here should be subjected to further scrutiny by scholars in the field. However, the general approach of historicising distinct episodes in BI’s history is preferable to relying solely on ideas-centred accounts that present the various BI proposals divorced from their specific political economic contexts. This historically anchored approach is likely to yield greater insights with respect to the barriers against—and opportunities for—achieving BI implementation in the future. However, this analysis needs to be complemented by a critical examination of the normative justifications of BI, which is the focus of the next chapter.

52 Chapter 2: Normative Justifications of Basic Income

Introduction

Thinkers who occupy starkly different positions on the ideological spectrum have sought to justify some form of BI. According to Barry (1996: 272): ‘It is both a strength and a weakness of basic income that it is ideologically ambiguous.’ This chapter contends that this ideological ambiguity is more of a handicap than an asset. Right-wing libertarians like Charles Murray (2008) and Milton Friedman (2013) who frame BI as a replacement for the welfare state, have little in common with radicals like Kathi Weeks (2011) and André Gorz (1999), who see BI as one step along the road to a post- capitalist future. Progressive BI scholars should be open about the redistributive implications and emancipatory politics of an adequate and unconditional BI. In addition, they should specify which justifications of BI are valid from a progressive perspective. This chapter aims to make a contribution to this debate, via a critical evaluation of the literature on the normative justifications of BI.

Section 2.1 centres on Philippe Van Parijs’ (1997) seminal contribution to the literature. Van Parijs, as (De Wispelaere, 2016: 238) writes, endeavours to justify BI as a ‘particular institutional solution’ to ‘the enduring competition between freedom and equality’. Section 2.1 begins with a reappraisal of Philippe Van Parijs’ (1997: 2, 3, 32) real-libertarian perspective on BI and argues that it provides an elegant linking of a principle of justice (‘real-freedom-for-all’) with a policy goal (‘the real freedom of those with least real freedom is to be maximized’) and a policy mechanism (‘basic income must be pitched at the highest sustainable level’). Section 2.2 contends that Van Parijs’ treatment of the issue of compensation for unequal internal endowments within his normative framework is less successful. Here, Sen’s (2005) ‘capability approach’ and Fraser’s (2001) ‘participatory parity’ paradigm may provide better alternatives to Van Parijs’ (1997) criterion of ‘undominated diversity’. Section 2.3 examines Van Parijs’ (1997) novel ‘jobs as assets’ argument, in relation to the legitimacy and adequacy of different sources of financing for BI. This section concludes that Van Parijs’ specific argument, and the external resources approach in general, are both flawed and unnecessary. Section 2.3 introduces the concept of total social productivity (TSP) as an

53 alternative means of conceptualising capitalist production and reproduction as fundamentally social and evolutionary processes. This approach, as set out in Section 2.4, grounds a justification of BI in a commitment to a deep form of social reciprocity. This leads into a discussion of the androcentric bias evident in the reciprocity debate within the BI literature. Section 2.5 addresses the compatibility between BI and different economic systems. The chapter concludes by arguing that BI should be framed as a pragmatic-utopian reform.

2.1 Real Freedom for All: Van Parijs’ Real-Libertarian Case for Basic Income

Belgian philosopher Philippe Van Parijs is the pivotal figure in the BI literature of the last three decades. In his key work Real Freedom for All: What (if anything) can justify capitalism? (1997) [hereafter RFA], Van Parijs develops a normative justification of BI, grounded in a ‘real-libertarian’ theory of justice. His aim was ‘to spell out a conception of social justice that would articulate to our satisfaction the importance we attach to freedom, equality and efficiency’ that ‘would provide concrete guidance for progressive policy-making as we enter the new century’ (Van Parijs, 2001: 106). The scope of Van Parijs’ ambition can be seen in two aspects of RFA. Firstly, his real-libertarian theory is the product of a sustained critical engagement with the liberal egalitarian theories of justice developed by Rawls, Ackerman, Dworkin and Sen, among others. Second, he is interested in whether his vision of real-libertarian justice, with BI at its core, is more compatible with socialism or capitalism. Sections 2.1 to 2.4 of this chapter focus on the first aspect of Van Parijs’ framework, while the second aspect is briefly explored in Section 2.5.

Van Parijs begins RFA by stating his two basic premises. He writes: ‘One: Our capitalist societies are replete with unacceptable inequalities. Two: Freedom is of paramount importance’ (Van Parijs, 1997: 2). He equates social justice with freedom and states that the ‘ideal of a free society must be expressed as a society whose members are maximally free’ (Van Parijs, 1997: 24). Van Parijs (1997: 5, 22, 23) rejects as inadequate the narrow conception of freedom as ‘negative liberty’ or formal freedom from coercion that is championed by libertarians such as Buchanan and Hayek. While he accepts that ‘security and self-ownership’ are ‘necessary’ conditions of freedom, he argues they are

54 insufficient to ensure it, ‘because doing anything requires the use of external objects which security and self-ownership alone cannot guarantee’. This leads him to adopt the term ‘real freedom’, to express a notion of liberty that combines ‘having the right to do what one might want to do’ with ‘having the means for doing it’.

This is a radical and expansive conception of freedom that, while it shares with them the principle of non-discrimination between rival conceptions of the good life, goes further than many liberal theories. Real freedom does not privilege current preferences over future preferences, or even actual preferences over possible preferences. Rather, it is centred on the principle of keeping the doorway to autonomous decisions and activities permanently ajar for all individuals throughout their lives. In summary, Van Parijs’ real- libertarian theory of justice demands that security, self-ownership and leximin17 opportunity be guaranteed. To provide leximin opportunity, he argues, the real freedom of the least advantaged members of a given society should be maximinned18, subject to the security and self-ownership of all members of society being protected (Van Parijs, 1997: 21, 27).

There is a clear resemblance here between Van Parijs’ real-libertarian framework and Rawls’ (1971) ‘justice as fairness’ approach. In Rawls’ schema, liberty takes lexical priority over equality of opportunity, while Van Parijs accords a ‘soft lexicographic priority’ to security and self-ownership over leximin opportunity (Van Parijs, 1997). (Rawls, 1993: 5-6) argues that inequality is only justified if it is ‘to the greatest benefit of the least advantaged members of society’ and that access to an index of primary social goods should be maximinned. For Van Parijs, it is access to real freedom that should be maximinned (Van Parijs, 1997: 27-28). Van Parijs argues that the optimal way to achieve maximin real freedom would be to provide each individual with an unconditional BI set at the highest sustainable level (Van Parijs, 1997: 32). He describes this as a ‘radical suggestion’ that challenges both ‘libertarians and their close kin’s desperate groping for a narrow concept of freedom’ and social democrats ‘so concerned with the real freedom to consume as abundantly as one might wish that they lose sight

17 Vallentyne (1997: 335) explains the leximin principle as follows: ‘Leximinning requires not that everyone's opportunity set have the same value, but only that the least valuable set be as valuable as possible.’ 18 The real freedom condition of the least well-off should be maximised or made as high as possible.

55 of the real freedom to live as unconventionally as one might fancy’ (Van Parijs, 1997: 34).

The concept of real freedom and the place of BI within Van Parijs’ real-libertarian theory have been subjected to various critiques. Widerquist (2013b: 32-35) characterises real freedom as a ‘scalar freedom’ that allows for individuals having ‘more or less freedom’ along a continuum but without clearly demarcating the ‘categories of free and unfree’. He contrasts this with a ‘status freedom’ that clearly defines the types and level of freedom an individual must possess if he/she is to be considered free. On this basis, Widerquist introduces his concept of ‘effective control self-ownership (ECSO) freedom’ as an alternative to real freedom. ECSO freedom is predicated on the principle that all individuals require the rights and resources necessary to ‘refuse unwanted cooperation’ with others. Therefore, he argues, a BI must be set at a level that ensures interpersonal interaction (such as work) is voluntary.

Widerquist is among a large number of BI scholars, including Gorz (1999), Pateman (2004), Mulligan (2013), Wright (2006) and Weeks (2011), to stress the importance of BI providing an “exit option” from oppressive relationships. The wage relation and the ‘sexual contract’ (Pateman, 1988) are perhaps the two most significant classes of relationship that constrain individual freedom within contemporary patriarchal capitalism. Wright (2006: 80) argues that a ‘generous, unconditional basic income which would allow employees a meaningful exit option from the employment relation directly transforms the character of power within the class relations of capitalist society’. While Pateman (2004: 90) views BI as ‘a crucial part of any strategy for democratic change because … it could help break the long-standing link between income and employment and end the mutual reinforcement of the institutions of marriage, employment, and citizenship’. These perspectives suggest that BI would need to reach a specific threshold level for it to provide effective freedom to individuals.

The key implication here in relation to Van Parijs’ (1997) framework is the relationship between this threshold level of BI and his sustainability constraint. This sustainability constraint on the level of BI will never be fixed and stable, due to the shifting economic, social, cultural, ideological and political conditions that obtain in a given society at

56 different points in time. In specific contexts, this constraint may operate to ensure that only a very low universal BI is feasible and, therefore, the exit option threshold will not be reached. In such a case, while the real freedom horizons of individuals will be clearly diminished when compared with BI at the threshold level, the capacity of the least advantaged to achieve their objectives may still be enhanced, due to the poverty reduction and income-smoothing effects of even a small, regular cash payment. Therefore, at least on one reading, Van Parijs’ scalar freedom could be viewed as both more pragmatic and more utopian than Widerquist’s status freedom alternative. On the one hand, Van Parijs’ equation of maximin real freedom with the highest sustainable BI acknowledges a constraint on real freedom that will produce differential results in different spatio-temporal contexts. On the other hand, his framework opens the possibility of achieving a level of ‘real freedom for all’, radically in excess of Widerquist’s threshold condition of the right to refuse involuntary interaction.

Van Parijs’ concept of real freedom could also be characterised as an excessively individualistic concept of human emancipation, especially by those who emphasise the primacy of collective action in any process of social evolution. Here, it is worth supplementing Van Parijs’ ethical arguments with Weeks’ (2011) discussion of the nature and purpose of freedom. Weeks, drawing on currents in radical feminist thought, argues for a conception of freedom that goes ‘beyond the liberal model of an individual possession’ to freedom ‘seen as a practice, not a possession, a process rather than a goal’. Freedom, in this view, is not a ‘solipsistic practice’ centred on the isolated individual but ‘a social – and hence necessarily political – endeavor’ (Weeks, 2011: 22). Real freedom is the freedom to surf, learn Russian and hop across the Gobi Desert, but it must also be the freedom to care, to participate in civic life and to experiment with new forms of sociality.

Barry (1996), another noted critic, raises issues related to the measurement of real freedom and its relationship to BI. He argues that it is ‘generally … impossible to discover who is the worst-off in terms of real freedom in a given situation’ and that Van Parijs’ treatment of ‘income at market prices as a true measure of real freedom is a heroic solution to the problem of the incommensurability of choice sets’ (Barry, 1996: 256). These are serious criticisms for which there is at best a pragmatic response. As a

57 thought experiment, it is possible to imagine a real freedom super computer that could provide individualised bundles of goods, services in cash and in kind, paid work and free time that generate maximin real freedom outcomes superior to those achieved by a uniform BI in cash. However, such a system would obviously face major informational, political, economic and institutional barriers that make it less practically feasible than a cash BI. Money incomes constitute a flexible claim over heterogeneous sets of goods and services, including leisure. For this reason, at least in a capitalist society, it is difficult to identify any clearly superior alternative to the highest sustainable BI, if the goal is maximin real freedom.19 Van Parijs concedes that some public goods, such as law and order, defence, clean air, education and infrastructure, should be supplied via collective provision, but defends a cash income paid to individuals over an exclusively in-kind provision of BI via a bundle of goods and services (Van Parijs, 1997: 42-46).

This is an area where progressive critics of BI have put forward policy alternatives that might achieve similar or, according to some, superior social outcomes. There are numerous reports and articles advocating greater public services, full employment and a Job Guarantee (JG) as preferable to BI.20 While this thesis is not primarily concerned with a comparative study of these various proposals, it is worth mentioning Universal Basic Services (UBS) as one recent example of this type of intervention. A UK report on UBS (Social Prosperity Network, 2017: 10) claims: Universal access to Basic Services delivers a common floor to our society by guaranteeing a minimum standard of life as a practical and observable manifestation of our common purpose. A platform of basic services makes real the promise that a basic wage pretends to deliver. Basic or minimum wages aspire to deliver a basic standard of living but, as we know, they fail to do so for many (IGP, 2017: 10).

The UK proposal for UBS would include ‘a collection of 7 free public services that enable every citizen to live a larger life by ensuring access to safety, opportunity, and

19 Perhaps a case could be made that provision of social housing on a universal, or at least mass, scale could generate superior real freedom outcomes to cash payments. However, such an outcome is not guaranteed, and this form of endowment would be less flexible at the individual level than a cash BI. There is, of course, no reason not to combine greater access to social housing with a cash BI. 20 For example, see Coote and Yazici (2019), and Mitchell and Fazi (2017).

58 participation’. The services are: health care, education, democracy, legal services, shelter, food and transport and information (Social Prosperity Network, 2017: 11). The report authors concede that UBS and a ‘Basic Income Supplement’ could co-exist, but that UBS would be a cheaper pathway to progressive policy outcomes than a full BI (Social Prosperity Network, 2017: 50, 20-21).

Standing (2019) takes issue with the UBS report authors’ use of the term ‘universal’, as the free meals offered under the scheme would be strictly targeted and rely on a paternalistic state making choices for poorer people regarding what they could eat. The same problems of selection, means-testing and perverse incentives to qualify would, Standing contends, apply to the public housing component of the proposed UBS (Standing, 2019). While Standing is supportive of greater investment in public services, he rejects any claims of the superiority of UBS when compared to BI. Standing (2019) argues that BI advocates ‘want to limit the paternalistic state, whereas UBS advocates want to extend it by pre-selecting what people need and, as in the case of food, extend conditionality and targeting’. Standing (2019) concludes that, while ‘there is no contradiction between having some public quasi-universal basic services and a basic income ... having cash enhances freedom of choice, is potentially more empowering and can be more transformative’.

Accepting the logic of the argument in favour of cash, an ancillary question is whether BI should be paid as a stock, such as a one-off stakeholder grant, or a flow, in the form of a regular lifetime payment. This debate has a long history within the literature. Advocates of a stakeholder grant have defended it on the grounds that it will promote individual initiative and personal responsibility (Ackerman & Alstott, 2013). Supporters of a regular income have championed it on the basis that it guarantees economic security which, in turn, undergirds democracy (Pateman, 2004). If real freedom is defined as the freedom to do what one might want to do and having the means to do it, a regular income will likely produce superior outcomes to those generated by a stakeholder grant. However, a regular income will clearly not suit the preferences of some individuals, including some among the least advantaged, and there may be a case for permitting individuals to receive part of their BI in the form of a grant.

59

These and other criticisms notwithstanding, Van Parijs has done BI scholars a great service in RFA, and other works. He has elaborated a theoretical framework that provides an elegant linking of an egalitarian principle of justice with a practical policy mechanism. This aspect of his framework should be retained as part of any progressive justification of BI. Having acknowledged this major contribution, Van Parijs’ thesis could be further strengthened via a revision of his treatment of unequal internal endowments, the ‘jobs as assets’ argument, and the principle of reciprocity.

2.2 Compensation for Unequal Internal Endowments

Having made the case for an equal right to an unconditional Basic Income in RFA, Van Parijs turns his attention to the question of whether there are legitimate grounds for compensating some individuals for various ‘handicaps’—unequal internal endowments—that affect their capacity to ‘pursue their conception of a good life’ (Van Parijs, 1990: 344). Compensation here refers to whether some individuals should receive a higher BI (or additional transfer/service) than others, on the basis of their handicaps. He deploys an adaptation of Ackerman’s criterion of ‘undominated diversity’, in order to interrogate this issue. (Raventó s, 2007: 42) explains the criterion as follows: ‘The internal endowments of X “dominate” (can be seen as more valuable than) the internal endowments of Z if and only if every individual, given his or her conception of a good life, would prefer X’s endowment to Z’s.’ Van Parijs applies the criterion to the task of differentiating the internal endowments of the ‘normal’ and the ‘handicapped’. He argues that for ‘any “normal” person X … it is very unlikely that there will be any single person who all would regard as better endowed than X’; whereas ‘for any “handicapped” person Y … it will be easy to find people whom all would regard as better endowed’. Therefore, he argues, ‘all the “handicapped” will be entitled to compensation from some other (less) “handicapped” and from many (not necessarily) all “normal” persons’. He argues that this compensation could be paid by reducing the universal BI until ‘for each pair of comprehensive, i.e. internal cum external endowments, there is at least one person who prefers either endowment to the other’. 21

21 For a detailed discussion of his treatment of this criterion, see Van Parijs (1990) and Van Parijs (1997).

60

Van Parijs concedes that there would be ‘quite a bit of guesswork about what people’s judgements would be with full information and understanding’ but that ‘it seems plausible that a set of specific transfers to various categories of standard “handicaps”, coupled with a basic health insurance, would be the best approximation’ (Van Parijs, 1990: 346-351). However, this approach is unlikely to prove workable in any practical sense and there are preferable alternatives. Specifically, Sen’s ‘capability approach’ and Fraser’s ‘participatory parity’ framework may be better suited to the task of assessing the need for additional compensation on the grounds of unequal internal endowments and misrecognition (Fraser, 2001; Sen, 2005). The capability approach focuses on the differing ability of individuals to convert personal, social and environmental resources into specific ‘functionings’ and ‘beings’ (Robeyns, 2003: 543-44). It calls for a pragmatic, context-specific assessment of the different barriers individuals face in relation to achieving desired outcomes, and of the remedies that may reduce/remove these obstacles. (Robeyns, 2003: 547) argues that, unlike various liberal perspectives, the ‘capability approach could provide a useful framework when we want to address the injustice created by the gender division of labour’, because ‘preference formation, socialisation, subtle forms of discrimination and the impact of social and moral norms are not taken for granted or assumed away, but analysed up front’.

Similarly, Fraser emphasises the need to identify—and remove—the barriers that prevent individuals (often members of subordinated groups) from achieving the status of ‘a full member of society, capable of participating on a par with other members’ (Fraser, 2001: 24). Thus, she argues, participatory parity requires both redistribution and recognition. Redistribution must change ‘social arrangements that institutionalise deprivation, exploitation and gross disparities in wealth, income and leisure time’, while recognition must remove the ‘institutionalised patterns of cultural value [that] constitute some actors as inferior, excluded, wholly other or simply invisible, hence as less than full partners in social interaction’ (Fraser, 2001: 24, 29). Fraser (2001: 24, 29) rejects an identity politics that engenders ‘separatism and group enclaving’, in favour of a species of recognition that encourages participatory parity by not ‘burdening’ individuals and groups ‘with excessive ascribed “difference” or … failing to acknowledge their distinctiveness’. Robeyns (2003: 548-49) sees a strong overlap between the two

61 approaches but concludes that the capability approach has wider applicability, as it valorises functionings and beings that are of ‘intrinsic importance’ to individuals while not necessarily being related to their ‘participation in society’. Whatever their relative merits, both approaches make clear that there is no single criterion on which compensation for unequal internal endowments can be based.

This has obvious implications for Van Parijs’ framework, as it leaves open the question of how to measure the relative importance of a universal right to a BI set at the highest sustainable level against the requirements of enhancing the capabilities of disadvantaged individuals and of universalising participatory parity. This is not an argument against a universal BI which, as long as it results in a net transfer of economic resources from the most advantaged to the least advantaged members of a given society, should be expected to improve the capacity of many individuals with a disability—and of those suffering social exclusion—to better pursue their conception of the good life.22 However, there will still be a case for reducing the level of the universal BI, in order to increase the real freedom available to the least advantaged individuals. Clarifying the appropriate criteria for making such determinations is beyond the scope of this thesis. However, it is at least likely, in wealthy societies, that several of these goals (i.e. universal BI, expanded disability support services, universal childcare, progressive legal and educational reform) can be pursued simultaneously. The precise policy mix and distribution of resources can only be decided by the messy process of continuous democratic deliberation, complemented by ongoing analysis of the evidence regarding the relationship between specific policy measures and desired social ends.

2.3 The Legitimacy of a Substantial Basic Income

In RFA, Van Parijs investigates whether there are real-libertarian grounds for taxing external resources in order to fund a substantial Basic Income. Here, he draws on Ronald Dworkin’s (1981) ‘equality of resources’ approach to distributive justice, adding his own novel twist. Dworkin was concerned with theorising an ideal mechanism for

22 This statement presupposes that there would be significant overlap between the set of least advantaged individuals in a given society and the sets of individuals with a disability and individuals experiencing social exclusion. There would not, however, be a precise overlap between these sets.

62 equalising the external resources/endowments available to individuals in a manner that promoted ‘envy-freeness’ (i.e. individuals would not envy each other’s bundles of external resources). He was interested in articulating a scheme that would reduce the effects of ‘brute luck’ (circumstances you are born into, talents you have) on an individual’s life, while allowing for ‘option luck’ (choices you make, ambitions you have) to operate. Dworkin proposed the ideal mechanism of a clamshell auction, where each individual would be given an equal number of clamshells to bid for the available external resources in a given society. These auctions would be supplemented by various insurance schemes to deal with handicaps and other manifestations of brute luck. While arguing that his scheme may have some practical application, Dworkin conceded that, in its initial formulation, it was ‘in the main … entirely theoretical’ (Dworkin, 1981: 284- 292).

In RFA, Van Parijs (1997: 102) defines external endowments broadly as the ‘external wealth with which people are endowed’. This includes everything from ‘factories … private homes and public bridges’ to ‘computer programmes, nuclear technology … beaches, pumpkins, and parrots’. He argues that a yield-maximising tax on all gifts and bequests of these external endowments would provide a legitimate tax base for a universal BI. However, he calculates that any such BI would be ‘pathetically low to frankly negligible’ (Van Parijs, 1997: 103). At this point he introduces an innovation, by proposing that jobs be treated as assets and, therefore, as part of the stock of society’s external resources. He argues that, because most labour markets are not perfectly competitive, jobholders receive a rent that could be legitimately appropriated as a source of funding for BI. Van Parijs appears to have two concepts of rent in his treatment of jobs as assets. Firstly, the ‘rents are given by the difference between income (and other advantages) the employed derive from their job, and the (lower) income they would need to get if the markets were to clear’. Second, ‘the existence of large employment rents, as manifested by the presence of envy over job endowments, and not the fact that many people are without a job at all’ (Van Parijs, 1997: 102-3, 109- 110). He puts forward the idea of a Dworkinian auction, to establish ‘the competitive price for each [job]’ and ‘hence the employment rents associated to each type of job’ (Van Parijs, 1997: 114). Van Parijs concedes that in ‘practical terms … the idea of organising a large independent set of auctions, each matched to a particular type of job,

63 does not make much sense’ and suggests instead that a yield-maximising progressive income tax could serve as a second-best option for taxing employment rents to fund a higher BI (Van Parijs, 1997: 116, 124-5).

Van Parijs’ treatment of jobs as assets is unsatisfactory and, it is argued here, unnecessary. First, once the second-best option of using progressive income tax as a proxy for employment rents is accepted, it becomes clear that there is no precise, quantifiable relationship between the rents that would be established under the auctions that do not take place and the level of income tax that is levied at any given point in time. We have moved from a precise theoretical scheme to a more or less arbitrary practical measure. Second, there are good grounds for eschewing any putative requirement to identify specific external endowments (land, inherited wealth, carbon emissions, intellectual property, bandwidth, jobs) that can be legitimately taxed to fund BI. This is because the material wealth of a given society is the product of the overwhelmingly social character of economic relations and the evolutionary nature of economic change. On this point, Simon’s (2013) contention that social capital is ‘a major source of differences in income, between and within countries’ is persuasive. Simon defines social capital as ‘knowledge, and participation in kinship and other privileged social relations’ and estimates that ‘it is hard to conclude that social capital can produce less than about 90% of income in wealthy societies’ (Simon, 2013: 240-41). Third, all individuals are subject to the triple accident of birth: they have no choice over the time, place and class into which they emerge. Individuals with diverse internal endowments born in medieval England shared a common constraint of lower material living standards, compared to individuals with diverse internal endowments born in late twentieth century Japan. At the aggregate level, as Alperovitz argues, gains in material wealth are ‘a gift from the past, mainly from the accumulation of technological and scientific knowledge’ that an individual ‘receives just by being born’ (Alperovitz, 2016).

These arguments serve to demote the “individual” and the “static” in favour of the “social” and the “evolutionary”, in relation to our understanding of the production and reproduction of material wealth. Put simply, it is not possible to quantify, with any rigour, the precise contribution of discrete individuals to the magnitude of social wealth and, therefore, to assign to each individual (in dollar terms) their legitimate share of

64 this social wealth. On this basis, the idea of Total Social Productivity (TSP) is advanced here as an alternative means of conceptualising the relationship between social wealth and individual rights. TSP for a given society is defined as the sum of the value of Gross Domestic Product (GDP) and Unremunerated Work (UW).

This can be expressed as: TSP = GDP+UW Per capita TSP can be expressed as: TSPpc = GDPpc+UWpc

The magnitude and ratio of the two components of TSP (in aggregate and per capita terms) are of clear importance, as is how these magnitudes and ratios are measured and how they change over time. In its current formulation, TSP should be treated as a heuristic that brings us closer to a more accurate understanding of the nature of social wealth than does the external resources/endowments approach. The assertion of a universal right possessed by all individuals to share in the fruits of these processes stems from: a) their overwhelmingly social and evolutionary character, and b) the (involuntary) participation of individuals in a given society.23

In terms of intellectual lineage within the BI literature, this approach claims an affinity with the Fabian socialist economist (Cole, 2004: 235) who made the argument in 1935 for a social dividend based on ‘a recognition of each citizen’s claim as a consumer to share in the common heritage of productive power’. However, TSP goes further. The key claim here is that unremunerated work is a major component of TSP and, therefore, those who perform it have the same right to access socially produced resources (from consumer goods, to healthcare services and paid leisure), as those who perform remunerated work or receive capital income. As feminist scholars, among others, have long pointed out, women carry out a disproportionate share of unremunerated work. Therefore, to the extent that BI results in the net transfer of economic resources, in the form of cash, from (over)remunerated forms of work to (under)unremunerated forms of work, it would contribute to a fairer distribution of the benefits that currently accrue to individuals from labour and capital income. At the same time, it would lead to an increase in the real freedom of individuals who perform a disproportionate share of

23 Participation here means “existence within” rather than the performance of any specific activities.

65 unremunerated work. This approach, which foregrounds the social and evolutionary nature of material wealth and highlights the centrality of unremunerated work to social reproduction, anchors the normative justification of BI to a deep form of social reciprocity. This species of reciprocity rests on the principle that a given society’s members owe to each other the right to access maximin real freedom, and—the subsidiary claim—that BI is real freedom’s optimal instrument. On one side of this reciprocal relationship, in any given society, sits the intergenerational cumulation of social wealth that is irreducible to the actions of discrete individuals. On the other side, we find the individual member of the society in question whose equal right to access maximin real freedom stems from their very existence. This expansive, but perhaps under-specified, conception of reciprocity marks a departure from several of the approaches discussed below.

2.4 The Reciprocity Debate

The reciprocity debate is central to a normative justification of BI. At its heart, it revolves around the question of whether an individual has the right to receive BI from society, regardless of whether they make a recognised contribution to society. One thread in this debate developed through Van Parijs’ response to Rawls’ argument that ‘Malibu surfers’ who chose not to contribute to society should not be entitled to state support for their lifestyle. Rawls justified this argument by including leisure— something surfers enjoy in excess of other members of society—in his index of primary social goods. Van Parijs, by contrast, argues that, on the basis of liberal neutrality regarding different conceptions of the good life, together with an individual’s right to the ‘per capita value of society’s external resources’, Malibu surfers should be entitled to social support in the form of a basic income (Van Parijs, 2013: 18-19)24. The Rawlsian position on this question has been taken up by others, including White (1997), who argues that individuals ‘who willingly enjoy the economic benefits of social cooperation have a corresponding obligation to make a productive contribution, if they are so able, to the cooperative community which provides these benefits’ (White, 1997: 317). He defines productive contribution broadly as a ‘decent minimum of contributive activity’,

24 For a critical perspective on the, justification of BI in the case of the ‘Malibu surfer’ by Van Parijs’ and others, see Van Donselaar (2015): ‘In Company of the Funny Sunny Surfer of Malibu: A Response to Michael Howard (and Some Others).’

66 adjusted for capacities, that is about ‘doing one’s bit’, rather than ‘putting in as much as one takes out’ (White, 1997: 318-319). We see this idea reflected in other proposals, such as the Participation Income (PI) advocated by (Atkinson, 2015).

While these arguments cannot be easily dismissed, there remain strong grounds on which to reject the imposition of any form of conditionality in relation to BI. First, any conditionality in relation to the receipt of BI would introduce a layer of bureaucratic control and monitoring that would impose significant costs. On this point, Barry (1996: 245-46) argues that a PI would ‘forfeit an enormous merit of basic income: the low cost and simplicity of dispensing it’. He argues that conditionality means officials would continue making ‘intrusive inquiries into personal circumstances’ and ‘discretionary decisions’ that would not always be thoroughly impartial. Second, there is the difficulty in identifying—and administering—forms of ‘contributive activity’ that do not compete with existing forms of paid and voluntary work. Here, Gorz (1999) rejects the ‘nonsensical prospect of compulsory voluntary work’ on the basis that it would devalue the work of genuine volunteers.25 Third, the fear of young men choosing to surf rather than work captures the androcentric bias of much of the reciprocity debate.

The introduction of a feminist perspective on reciprocity points to the far larger issue already alluded to in the previous section: the ‘massive free-riding in the household’, where men ‘take advantage of the unpaid work of wives [and female partners in general] and avoid doing their fair share of the caring work’ (Pateman, 2004: 99). This is the result of the ‘arbitrary prioritisation of paid forms of work over non-remunerated forms of work’ (Mulligan, 2013: 159). Weeks (2011: 13) argues, BI could be part of a feminist project that should ‘focus not only on revaluing feminised forms of unwaged labor but also challenge the sanctification of such work that can accompany or be enabled by these efforts’; a project ‘that is a matter of securing not only better work, but also the time and money necessary to have a life outside work’ (Weeks, 2011: 13). Once again, a BI that results in a net transfer of economic resources from (over)remunerated to (under)unremunerated forms of work would, by valorising reproductive and care work that is not optional for society as a whole, lower the opportunity cost of

25 This argument is qualified in Chapters 9 and 10 which consider the possibility that some form of participation activity could be part of a BI implementation pathway and associated political strategy.

67 participating in these forms of (under)unremunerated work. Consequently, BI could be expected to increase the real freedom of individuals to combine paid work, caring for children and surfing in different ratios, according to their heterogeneous circumstances, responsibilities, preferences and passions.

The question of how many individuals would choose to stop working altogether, if an unconditional BI were introduced, cannot be answered without large-scale adoption of the policy. However, in the unpaid work performed disproportionately by women, we have clear and overwhelming evidence that pecuniary incentives and bureaucratic compulsion are not the sole determinants of work effort. This is not to ignore the potential for BI to reinforce the gendered division of labour. Orloff (2013: 150) questions whether BI would leave women doing the ‘dirty work’ of ‘caring for people, including infants in diapers, sick toddlers, the incontinent elderly, and those ailing in hospitals’. Robeyns, 2013: 157) raises concern over the potential loss of the ‘non- pecuniary advantages of paid labour’, if a BI leads more women to spend less time in paid work. These issues, as with our discussion of compensation for unequal internal endowments, serve to emphasise the point that even a generous BI should not be seen as replacing all other forms of social support. Taken together, these arguments strengthen the case for an unconditional and universal BI, complemented by existing, and expanded, social services and transfers.

2.5 The Capitalist Road to Communism?

Van Parijs has a longstanding connection to Marxian analysis, as evidenced by his involvement in the ‘September group’. This was a network ‘primarily associated with the analytical exploration of Marxian themes’, set up by G. A. Cohen, Jon Elster and John Roemer in 1978 (Birnbaum, 2013: 345). However, it was in the paper ‘A Capitalist Road to Communism’ that (Van Der Veen & Van Parijs, 1986) explored the potential of BI to achieve the emancipatory outcome encapsulated in the principle of ‘from each according to his ability, to each according to his needs’ that Marx equated with the ‘higher stage of communism’ (Marx, 1970).

68 Van der Veen and Van Parijs (1986: 4) argue that increasing the level of BI over time would result in ‘a gradual increase of the part of the social product distributed according to needs vis-a-vis the part distributed according to contribution’. They acknowledge that inequality and exploitation would still exist with BI, but suggest that if the emancipatory aspect of Marx’s thought is given primacy, then ‘we need not be bothered by the persistence of substantial inequalities, because everyone’s fundamental needs are covered anyway’. Defining ‘fundamental needs’ and setting a BI threshold adequate to meet those needs are clearly of great importance here (Van der Veen and Van Parijs, 1986: 20). (Howard, 2005: 283) is another scholar who emphasises the ‘liberatory element’ of Marx’s vision in relation to justifying BI. He contends that, with BI covering basic needs, ‘Labour that is volunteered would … count as “exploitative”, but not as “unjust”’ (Howard, 2005: 290). However, he also concedes that BI could be seen as ‘a retreat from the aspirations of Marxism’ (Howard, 2005: 283).

There is a difficulty here in deciphering exactly what Marx’s aspirations were. As (Hudis, 2012: 35) observes, ‘Marx never devoted a work to the alternative to capitalism’, and his thinking on this subject has to be ‘gleaned from a careful study of an array of diverse and difficult texts’. This difficulty notwithstanding, Marx’s radical vision of human emancipation clearly goes beyond capitalism, and even communism, to what he described as ‘a totality of human manifestations of life’ (Marx in Hudis, 2013: 74). Marx stressed the critical importance of time as ‘the measure of human life’ and ‘the space for its development’ (Marx in Hudis, 2013: 144). It is on this point of the relationship between human freedom and time that there is perhaps an overlap between the aspirations of Marxism and the potential effects of BI. An unconditional BI would enhance the capacity of individuals to command time, in the sense that they could engage in more freely chosen activity during their finite and indeterminate lifespan. For Gorz (1999: 72-78), such a shift to freely chosen ‘multi-activity’ would presage the end of wage labour and mark an ‘exit route’ from capitalism. However, it is at least as likely that BI could co-exist with both a modified system of wage labour and the self-expansion of value as the key driver of the economic system. Even so, BI, as Marx argued in relation to ‘shortening of the working day’, could still function to expand the ‘realm of freedom’ within capitalist society (Marx, 1981: 959)

69 If we accept that BI is an institutional means to the end of human emancipation, a related question is raised regarding compatibility between BI maximisation and different economic systems. In RFA, Van Parijs examines the question of whether capitalism or socialism would perform better on the criterion of ‘constrained basic income maximisation’ (Van Parijs, 1997: 187). He differentiates capitalism from socialism ‘in terms of private versus public ownership of society’s (non-human) capital, of its (material) means of production’, and investigates whether ‘the optimal variant of capitalism would perform better … than the optimal variant of socialism in terms of our criterion’ (Van Parijs, 1997: 6, 187). Van Parijs identifies optimal socialism’s key advantage as ‘popular sovereignty’, defined as ‘a political community’s ability to steer the use of its resources according to democratically determined will’ (Van Parijs, 1997: 190). However, he argues that this advantage would not be sufficient to outweigh the ‘dynamic impulse capitalism owes to the imperative to innovate or perish’ (Van Parijs, 1997: 221). In truth, the question of whether the dynamism of capitalist competition would trump the democratic authority of socialism, on the criterion of constrained BI maximisation, is impossible to answer in the abstract. Only the parallel existence of optimal capitalist and optimal socialist societies with BI would provide the evidence on which an assessment of their respective claims could be made. Given the breadth and depth of global capitalism today, there is a strong likelihood that any experiments with BI will occur first within capitalist societies.

Finally, it is argued here that the pragmatic and utopian aspects of the normative justification of BI should be held in tension. The demand for BI is utopian in that it threatens a (partial) rupture of the link between paid work and income—a rupture that goes beyond means-tested, conditional transfers. Weeks characterises this demand as ‘a provocation to freedom and … of desire’ that is radical in ‘its anti-asceticism’ (Weeks, 2011: 145-46). The demand is pragmatic in the sense that it directly addresses socioeconomic injustices, such as inequality, poverty and insecurity.. This dual pragmatic-utopian character of BI can be highlighted in another respect, as the need for income places two principal constraints on the exercise of real freedom within capitalist society. First, inadequate incomes mean individuals are unable to meet their basic needs, such as health, housing, other consumption, dignity, and participation in society. This can be described as the “income constraint” on real freedom. Implementing a BI

70 that alleviates this income constraint can be viewed as a pragmatic measure, and its effects would be susceptible to empirical measurement and analysis. Second, the close link between paid work and incomes reduces real freedom, because available jobs are not perfectly correlated with individuals’ preferences regarding how they wish to spend their finite allocation of time. In order to earn adequate income, most individuals have to forego the opportunity to engage in other activities they prefer; or they sacrifice income in order to engage in unremunerated work. This can be described as the “opportunity cost constraint” on real freedom. Implementing a BI to enhance an individual’s capacity to command time is, to a degree, utopian and its effects are only susceptible to measurement and analysis over the long term. By reducing the income constraints and opportunity cost constraints on real freedom, the pragmatic-utopian reform of BI has the potential to yield a range of economic, social, and even political benefits.

Conclusion

In the 1960s and 1970s, economists were prominent contributors to the BI literature; since the 1980s, philosophers and political scientists have led the way. This disciplinary shift has generated important contributions to the literature on the normative justifications of BI, foremost among these being the work of Philippe Van Parijs. This chapter attempted to contribute to this literature, via a critical reappraisal of Van Parijs’ real-libertarian justification of BI. It argued that his ‘real freedom for all’ principle of justice tied in with the institutional policy mechanism of the highest sustainable BI should form a key plank of any progressive case for BI. On the other hand, the chapter rejected Van Parijs’ use of undominated diversity as a single criterion for providing compensation for unequal internal endowments, and suggested some pragmatic alternatives. It also argued against Van Parijs’ treatment of jobs as assets, and the external resources approach in general, as a means of identifying legitimate funding sources for a substantial BI. It introduced the concept of Total Social Productivity as an alternative way of understanding the production and reproduction of society as a fundamentally social and evolutionary process, and argued that this approach anchors the justification of BI in a deep form of social reciprocity. In addition, the chapter emphasised the importance of incorporating feminist perspectives into the reciprocity

71 debate. These perspectives highlight the current income/status gap between (over)remunerated and (under)unremunerated forms of work. This gap, that BI has the potential to partly bridge, likely restricts access to real freedom for those who perform a disproportionate share of (under)unremunerated work. The chapter concluded by situating the case for BI in relation to both Marx’s vision of human emancipation and Van der Veen and Van Parijs’ discussion of optimal variants of socialism and capitalism. Finally, it argued that BI should be framed as a pragmatic-utopian reform, with the potential to reduce the income constraints and opportunity cost constraints on real freedom that obtain in capitalist societies.

Chapter 3 examines the case for implementing a BI scheme in Australia, through the lens of this normative framework. This case is worth considering on account of Australia’s status as an affluent country which, at least historically, had been an early adopter of some progressive social and political reforms. The “fair go” ethos remains part of Australia’s national culture, even if political economic realities increasingly reflect less egalitarian impulses and outcomes.

72 Chapter 3: The Case for a Basic Income Scheme in Australia

Introduction

The previous chapter developed a normative justification of BI, based on an equal right to maximin real freedom and an equitable stake in the cumulative proceeds—and recurring demands—of Total Social Productivity (TSP). It argued that an individual’s right to exercise this claim over social resources is grounded in both a deep form of social reciprocity and an individual’s involuntary participation in a given social order. It was suggested that an unconditional BI in cash would likely be superior to an exclusively in-kind provision of BI and, consequently, would constitute a critical element in achieving the normative end of maximin real freedom. Chapter 2 also identified income constraints and opportunity cost constraints that function as barriers to universal access to real freedom—barriers that BI has the potential to mitigate.

This chapter begins the exploration of these concerns and possibilities within the Australian context. Section 3.1 fleshes out the concept of TSP and presents the relevant data for Australia. The emphasis here is on the means to underwrite access to maximin real freedom through the provision of a BI based on the secular increase in GDP, and GDP per capita, that has occurred in industrialised countries since the late nineteenth century. This economic growth has led developed countries, including Australia, to become the wealthiest in human history, at least by conventional economic measures. Section 3.1 then explores the relationship between the means to provide BI in the form of cumulative economic growth and the need to provide additional compensation for unremunerated forms of work that are fundamental to the production and reproduction of capitalist society, and a key component of TSP. Section 3.2 identifies several income constraints on real freedom that BI has the potential to ameliorate. Specifically, it presents some evidence for Australia on wealth and income inequality, rates of poverty, labour market underutilisation and insecure work. Section 3.3 briefly addresses opportunity cost constraints on access to real freedom. The emphasis here is on the unequal distribution of unremunerated work in Australia, a phenomenon that imposes a particular burden on women. This section also includes discussion on the opportunity cost of mismatches between preferred working hours and actual working hours in Australia.

73 3.1 Total Social Productivity (GDP + UW)

Total Social Productivity (TSP) was defined in the previous chapter as the sum of the value of Gross Domestic Product (GDP) and the value of Unremunerated Work (UW). The two components of TSP are obviously fundamental characteristics of the production and reproduction of the material and social foundations of capitalist society.

Gross Domestic Product The annual flows that comprise Gross Domestic Product (GDP) accrete into stocks of material wealth in different forms, at different rates, and in varying ratios. These depend on a multitude of historical, technological, institutional, social and cultural factors. GDP can be defined as: The total market value of goods and services produced within a nation in a given period, after deducting the cost of goods and services used in the production process, but before making deductions for the depreciation of capital goods (Stilwell, 2011: xvi)

Aggregate GDP, particularly as measured over time, provides us with some information regarding a country or region’s relative economic weight. However, GDP per capita provides a better indicator of a country’s state of economic development. GDP per capita or ‘output per person’ is simply ‘GDP divided by population size’ (The Economist, 2010: 45) GDP and GDP per capita can be measured in a variety of other ways.26 The widespread measurement of GDP, among other now common economic indicators, is a product of the empirical turn in economics in the 1930s and 1940s. During the Great Depression and World War II, economists such as Clark, Kuznets, Keynes, Meade and Stone developed the system of national accounting that remains central to the reporting and analysis of the public finances and economic performance of nation states to this day (Gleeson-White, 2012: 16-19).

The concept of GDP has been subjected to many criticisms. First, national income can be either lower or higher than GDP, depending on the degree of foreign ownership of domestic assets, domestic ownership of foreign assets, and the degree of capital

26 See Roser, 2019.

74 depreciation in a given country (Atkinson, 2015: 102, Piketty, 2014: 43-44). Deaton describes GDP as ‘limited even as a measure of income’ because it ‘includes income generated [in a nation state] that belongs to foreigners; it includes incomes in the form of undistributed corporate profits … as well as surpluses run by federal, state, and local government’ (Deaton, 2013: 170-71). Second, while GDP performs quite well as a measure of the value of the quantity of market production, it has greater difficulty in capturing changes in quality. This particularly applies in relation to the accurate measurement of the value of the services sector that accounts for over two-thirds of GDP in developed countries. Other measurement challenges include estimating the imputed value of household services in relation to owner-occupiers and measuring the economic value of government provided public services, such as education and healthcare (Stiglitz, Sen, & Fitoussi, 2009: 21-24). Third, aggregate GDP and GDP per capita tell us nothing about the distribution of wealth and income in a given country. For example, a country could experience rapid growth in GDP due to global demand for a particular resource endowment, such as oil in Equatorial Guinea or phosphate in Nauru, with the economic gains being almost entirely monopolised by a ruling elite. As Deaton observes, ‘GDP is notably silent on who gets what’ (Deaton, 2013: 172). Fourth, GDP has been criticised as an indicator of social progress on several grounds. Namely, its inclusion of “social and environmental bads”, such as cleaning up oil spills or increased incarceration rates, its exclusion of the true cost of degrading ecological resources such as forests, clean air and fresh water, and its failure to account for unremunerated work (Stigliz, Sen and Fitoussi, 2009, Gleeson-White, 2012). As a result, a number of other indicators of economic, social and ecological progress have been put forward as alternatives to GDP. These include: The Human Development Index (HDI), the Genuine Progress Indicator (GPI), and the UN System of Environmental-Economic Accounting (SEEA) (Stilwell, 2011: xv, Gleeson-White, 2012: 73). These alternatives may ultimately prove superior to GDP as measures of wellbeing, but none has yet achieved the prominence and importance of GDP in economic and political debate.

GDP and GDP per capita remain useful economic indicators for several reasons. First, they are widely available, thereby providing a ready means of comparison between different countries, and between supra-national and sub-national regions. Second, they afford us some information regarding the level of wealth and income in a particular

75 country or region at a given point in time. Third, empirical analyses of changes in GDP and GDP per capita over the course of history furnish us with important and illuminating insights into the evolution of material wealth over long periods. These factors make it reasonable, though far from perfect, for GDP to be included as one of the two components of TSP. GDP is a key determinant of the highest sustainable BI for a given country or region. The argument is less about the desirability of continued economic growth and more about the reality of the cumulative economic growth that has already taken place over a long period. Put simply, a country with a GDP per capita of USD$40,000 Purchasing Power Parity (PPP) per annum has a greater capacity to fund an adequate BI than does a country with a GDP per capita of USD$400 PPP per annum. This is not to argue that the latter country should not implement some form of BI, but to emphasise that poorer countries are likely to face more pressing and more diverse development challenges.

There are two striking features in the story of GDP. First, the rapid growth in both GDP and per capita incomes is a very recent phenomenon in world history. Second, despite the current economic dynamism of some developing countries, there remains a vast gulf between rich and poor countries on the basis of this conventional economic metric. The pioneering work of economic historian Angus Maddison highlights both of these features, while also drawing attention to the temporally distinct trajectories of aggregate GDP and GDP per capita. Regarding the former features, he notes that: Over the past millennium, world population rose 22-fold. Per capita income increased 13-fold, world GDP nearly 300-fold. This contrasts sharply with the preceding millennium, when world population grew by only a sixth, and there was no advance in per capita income. From the year 1000 to 1820 the advance in per capita income was a slow crawl—the world average rose about 50 per cent. Most of the growth went to accommodate a fourfold increase in population. Since 1820, world development has been much more dynamic. Per capita income rose more than eightfold, population more than fivefold (Maddison, 2006: 19).

England, the first country to industrialise, increased its per capita GDP 29-fold between 1650 and the present day (Roser, 2019). The dominant industrial power of the twentieth century, the United States, experienced a five-fold increase in its per capita GDP between 1929 and 2010 (Deaton, 2013: 170). More recently, the economic dynamo

76 of the late twentieth and early twenty-first century, China, has experienced rapid economic growth that has underpinned the expansion of its now vast middle class (Milanovic, 2016: 19). However, even after this period of sustained economic expansion, Deaton estimates that ‘Chinese per capita income in international dollars in 2011 was somewhere between 13 and 22 percent of per capita income in the United States’ (Deaton, 2013: 228). Figure 3.1, based on data from the Maddison Project Database, illustrates both the rapid growth in GDP per capita since the late nineteenth century, and the persistence of inequality between regions (Roser, 2019). Australia is included in Maddinson’s ‘Western Offshoots’ category.

Figure 3.1 GDP Per Capita Across Regions, 1870–2016

Source: Maddison Project Database (2018) in Roser, 2019.

This rapid increase in material wealth over the last 150 years was the product of a tumultuous process of technological innovation; the spread of markets nationally and globally; the growth of new forms of industrial organisation; intense exploitation of human and ecological resources; as well as human cooperation. This coexistence of

77 exploitation and cooperation in the development of capitalist societies helps explain the forces driving Polanyi’s ‘double movement’, characterised by ‘the clash of organising principles of economic liberalism and social protection’ (Polanyi, 2001: 140). The instinct towards social protection that Polanyi identified as one arc in the irregular swing of the ‘double movement’ was dependent, for its effectiveness, on the ‘countervailing power’ (Galbraith, 1985)of institutions. These institutions, including trade unions, consumer cooperatives and progressive political parties, have at times regulated and resisted the marketisation of society and the growing power of monopoly capital. A stark illustration of this ‘clash of organising principles’ can be seen in the reaction to the dramatic intensification of work that occurred during the Industrial Revolution that engendered ‘intense industrial and political conflict’ (Cross, 1989: 14). This, in turn, led to a halving in average annual working time for industrial workers in Europe between 1840 and 1940 (Cross, 1989: 20). The dramatic increase in per capita GDP that was, in part, the product of intense exploitation of workers became part of the means to regulate work itself and, subsequently, to fund the massive expansion of public expenditure that underpinned the modern welfare state. In the contemporary period, the interest in BI can to interpreted, to some extent, as an expression of that instinct towards social protection that Polanyi described.

GDP and GDP Per Capita in Australia Australia has been among the countries experiencing the most rapid increases in GDP and GDP per capita during the last two hundred years.27 Turning to recent evidence, World Bank data shows that the size of Australia’s GDP measured in constant 2011 international dollars terms more than doubled between 1990 and 2017, with Australia ranking as the twentieth largest economy in the world in 2017 (Roser, 2019). Figure 3.2 shows the growth in Australia’s GDP per capita over the same period, compared to selected countries and regions. Australia’s GDP per capita measured in constant 2011 dollars was $44,650 in 2017, or a little under three times the global average of $15,500, and well above the OECD average of $39,600 (Roser, 2019). Figure 3.2 further underscores the second of the two features of world development previously mentioned: the continuing huge gap in material living standards between rich and poor countries. The relevant point to our analysis is that Australia is well placed in terms of

27 For a detailed discussion of historical estimates of Australia’s GDP, see McLean (2004).

78 its capacity to afford some form of BI. This is not to prejudge the issues on which later chapters of this thesis focus, but simply to say that the size of its economy and the value of its output per person conventionally defined, make Australia, prima facie, a suitable case study for this policy reform.

Figure 3.2 GDP Per Capita for Selected Countries and Regions, 1990–2017

Source: World Bank (2019) in Roser, 2019.

Unremunerated Work As previously argued, TSP needs to take account of useful work that is done but not included in GDP, because it is not directly remunerated. Clarifying the role and value of unremunerated work has been a central concern in political economic thought. For example, in Capital Volume I, Marx entreats us to leave the sunlit uplands of exchange and to descend into the shadowy nether-regions of production to see ‘not only how capital produces, but how capital is itself produced’ (Marx, 1991: 279-80). The aim of this descent, according to Weeks (2011: 6), is ‘to publicise the world of waged work, expose it as neither natural precursor nor peripheral by-product of capitalist

79 production, but rather as its central mechanism (the wage) and lifeblood (work)’. The wage relation is still at the heart of capitalist social relations, with waged work providing the principal means of access to income, basic necessities, forms of status, types of care and experiences of social interaction (Weeks, 2011: 6). Because Marx’s analysis serves to render waged work visible, thereby highlighting its centrality to capitalist production, it also politicises this ‘hidden realm’ (Weeks, 2011: 7).

Feminist scholars and activists have, in a similar endeavour, sought to publicise and politicise unremunerated work. Unremunerated work is an enormous blind spot in capitalist society’s self-image. The vast mass of human energies expended on this form of work is essential to the production and reproduction of capitalist society. This work takes place in plain sight; yet it has been rendered invisible by patriarchal values and biases that determine what is ascribed value, and how value itself is measured and rewarded (Weeks, 2011). These biases and blind spots have led not only to the failure to properly account for the value of unpaid work, disproportionately done by women, but also to the systematic undervaluing of paid work assigned as ‘feminine’ in formal labour markets.

Feminists and their allies have deployed various strategies in attempts to reduce, and sometimes overcome, these forms of gendered disadvantage. On the one hand, there are longstanding campaigns aimed at achieving ‘women’s equal access to waged work’ (Weeks, 2011: 12) and shrinking the gender pay gap between and within industries. On the other hand, there are ‘efforts to revalue unwaged forms of household-based labour, from housework to caring work’ (Weeks, 2011: 13). These latter efforts are manifest in campaigns such as the ‘wages for housework’ push in the 1970s (Weeks, 2011: 118- 126), but also in more modest attempts to incorporate unremunerated work into conventional economic accounting systems. These attempts to amend international accounting standards to reflect the value of unpaid work are ongoing. They face several methodological challenges, alongside whatever political and ideological resistance such a shift might encounter.

To begin with, deciding ‘what activities should be classified as being unpaid work is difficult and contentious’ (de Vaus, Gray, & Staunton, 2003: 5). In general, the ‘market replacement’ criterion has been adopted, which states that ‘a household activity would

80 be considered as unpaid work if an economic unit other than the household itself could have supplied the latter with an equivalent service’ (de Vaus, Gray and Stanton, 2003: 5). The Australian Bureau of Statistics (ABS) breaks unpaid work down into the sub- categories of unpaid household work (domestic work, childcare, shopping, associated travel and communication) and volunteer and community work (physical care of adults, helping/doing favours, associated travel and communication) (ABS, 2014: 1-3). The main data source for estimating the value of unpaid work are time use surveys, such as the Australian Time Use Survey conducted in 1992, 1997 and 2006, before being discontinued. The main valuation methods for unpaid work are the aforementioned ‘market replacement cost’ method, that produces ‘estimates measuring what it would cost a household to hire someone to provide the services concerned’, and the ‘opportunity cost’ method, that produces ‘estimates measuring the amount that an unpaid worker would have earned had he/she spent the same time in paid work that was spent on unpaid work’ (ABS, 2014: 5). These estimation methods can be further broken down into individual function replacement cost, housekeeper replacement cost, replacement cost hybrid, gross opportunity cost and net opportunity cost.28

These issues received prominent attention when renowned economists Joseph Stiglitz, Amartya Sen and Jean Paul Fitoussi were asked by then French President Nicholas Sarkozy to establish The Commission on the Measurement of Economic Performance and Social Progress (CMEPSP). The Commission was asked to ‘identify the limits of GDP as an indicator of economic performance and social progress’ (Stiglitz, Sen and Fitoussi, 2009: 7). In their 2009 report, Stiglitz, Sen and Fitoussi highlighted the numerous shortcomings in conventional economic accounting systems built around estimates of GDP. The authors stressed that an exclusive focus on market production provides ‘a biased picture of living standards’, because ‘some of the measured increase in market production may simply reflect a shift of the locus of production from households to the market’ (Stiglitz, Sen and Fitoussi, 2009: 35). The authors captured the extent of unpaid work by presenting data on paid work, unpaid work and leisure for six OECD countries (Stiglitz, Sen and Fitoussi, 2009: 36). In addition, Stiglitz, Sen and Fitoussi used the market cost replacement method to estimate the value of household production for three OECD countries. They concluded that: ‘Household production amounts to about

28 For further explanation of these valuation methods, see ABS, 2014: 5.

81 35% of conventionally-measured GDP in France (average 1995–2006), about 40% in Finland and 30% in the United States over the same period’ (Stiglitz, Sen and Fitoussi, 2009: 36).

Illustrative of the methodological issues discussed above, other studies have reported starkly different estimates of the value of unpaid work. For example, one Organisation for Economic Co-operation and Development (OECD) study on G7 countries found that the ‘value of unpaid household activities’ using the market replacement cost method ranged ‘from 14.7% of GDP for Canada to 25.6% for Italy’; using the opportunity cost method, the ratios ranged ‘from 43.7% for Japan to 68.6% for Germany’ (van de Ven, Zwijnenburg, & De Queljoe, 2018/4: 24). Stiglitz, Sen and Fitoussi (2009: 40) recommended that ‘more systematic work in this area should be undertaken’ in relation to the measurement of household production, beginning with ‘information on how people spend their time that is comparable both over the years and across countries’. They also suggested: ‘Comprehensive and periodic accounts of household activity as satellites to the core national accounts should complement the picture’ (Stiglitz, Sen and Fitoussi, 2009: 40).

This discussion is central to understanding TSP in three respects. First, UW is an extensive, not marginal, form of activity that can be measured in a variety of ways. Second, care must be taken in selecting comparable definitions, datasets and valuation methods, if the aim is show changes in the value of UW over time, or differences in the value of UW between countries. Third, the main way that work is recognised in capitalist society is through payment of a wage. The payment of wages is regulated by the employment contract, whether formal or informal. UW is fundamental to the production and reproduction of TSP, but it is excluded from the rewards system of capitalist labour markets. It is also undercompensated by the welfare state. Implementing a meaningful BI would be one way of recognising the role of UW in TSP, and of ensuring that those engaged in UW obtain more equitable access to maximin real freedom. Such recognition would be based on a deep form of social reciprocity among members of a given community, and not on a hierarchical contract between employer and employee. There is an unlegislated civil and political right to a share in the proceeds of the social and evolutionary process of wealth creation, based on an individual’s participation in a given social order. As it currently stands, those who perform UW are

82 unduly denied equitable access to the means (income) of benefiting from the TSP to which they contribute so much.

Unremunerated Work in Australia Several studies have provided estimates of the value of unremunerated work in Australia over the last two decades. Table 3.1 provides a range of estimates of the value of unpaid work by different valuation methods for the year 2006. The estimates vary from between 41.6 percent and 43.9 percent of GDP for variants of the market replacement cost method to between 49.7 percent and 58.7 percent of GDP for the two variants of the opportunity cost method. That latter method obviously accords unpaid work a higher value, because it accounts for the variations in jobs and associated incomes of those who perform unpaid work. More recent estimates include Hoenig and Page’s (2012) calculation that in 2009-10: ‘The imputed value of unpaid care work in Australia is estimated between $601 billion (replacement cost valuation method) and $699 billion (opportunity cost valuation method).’ In 2017, another report put the value of unpaid work at AUD$565 billion in 2016 dollars, or 33.9 percent of GDP, using the market cost replacement method of valuation. Unpaid childcare accounted for nearly AUD$410 billion of this sum, making it easily Australia’s largest single industry (PwC, 2017: 2-3). Questions regarding definitions of unpaid work and valuation methods notwithstanding, the evidence presented makes it abundantly clear that unremunerated work is a set of activities carried out on a mass scale. These are activities essential to the functioning of society, yet their value is un(der)recognised.

83 Table 3.1 Value of Unpaid Work by Valuation Method for 2006

Average Wage Value of Unpaid Work Volunteer Volunteer Total Ratio of total Household Household work and work and value value of unpaid community community of work work work unpaid to GDP(a) work

Estimation method $/hr $/hr $billion $billion $billion %

Market Replacement Cost Individual function replacement cost method Male and female 18.47 19.47 392 43 434 43.5 wage rate

Person wage rate 18.52 19.50 393 43 435 43.6 Housekeeper replacement cost method

Person wage rate 17.59 19.50 373 43 416 41.6 Hybrid replacement method Male and female 18.58 19.47 394 43 437 43.7 wage rate

Person wage rate 18.65 19.50 395 43 438 43.9

Opportunity Cost Gross opportunity cost method Male and female 24.37 24.48 517 54 570 57.1 wage rate

Person wage rate 25.07 25.07 532 55 586 58.7 Net opportunity cost method

Person wage rate 21.20 21.20 449 46 496 49.7 (a) The percentage of GDP is recorded without adding the value of unpaid work to the value of GDP in the calculation. Source: ABS estimates based on: Time Use Survey, Survey of Employee Earnings and Hours, Labour Force Survey, Australian System of National Accounts.

Source: ABS, 2014: 7.

Total Social Productivity in Australia Section 3.1 has provided a discussion of the two elements of TSP (GDP and UW) in general terms, and in relation to Australia. Australia’s GDP and GDP per capita are indicators, however imperfect, of the social process of cumulative wealth creation and of the current living standards in absolute and relative terms. Table 3.2 provides an estimate of TSP and TSP per capita (TSPpc) for Australia for the year 2016.

84

Table 3.2 Total Social Productivity and Total Social Productivity Per Capita for Australia, 2016

GDP (AUD$ million) UW (AUD$ million) TSP (AUD$ million)

1,704 555 2,259

GDP pc (AUD$ thousand) UW pc (AUD$ thousand) TSP pc (AUD$ thousand)

69.672 22.746 92.418

Source: Author’s calculations from ABS, 2020a (5206.0, Table 1); PwC, 2017; ABS, 2019a (3101.0, Table 4).

There are some obvious points to make regarding TSP in Australia, as presented in Table 3.2. First, TSP is substantially higher than GDP, in both aggregate and per capita terms. Second, even using the conservative market cost replacement method the ratio of UW to GDP is around 33 percent, pointing once again to the non-trivial nature of unpaid work. GDP per capita is, of course, not the same as various measures of average and median incomes at an individual or household level. It rather provides an indicator, in monetary terms, of the flow of value available to be allocated to various purposes at a given point in time. Most of the flow of value is distributed in the form of different types of income, including wages and salaries, profits and rents. UW per capita provides an indicator of the value of unremunerated—or under-remunerated—work29 that is not compensated in the same way as other factors of production. The ratio of UW/GDP and UWpc/GDPpc may change for various reasons. GDP could increase faster than UW, because of productivity improvements in sectors of the economy not directly related to care and household work. GDP could increase due to the increased marketisation of work that is currently unpaid. The value of UW may increase faster than GDP, due to an upwards revaluation of feminised work, in both the paid and unpaid sectors.

How might the introduction of BI affect the UW/GDP ratio and the aggregate value of TSP? As a preliminary foray into situating BI in relation to this issue, some indicative estimates can be helpful. While the effect of BI on economic growth is uncertain, a BI-

29 Family payments and paid parental leave could be considered partial BIs but these are often not individual-based transfers, and levels vary widely according to circumstances.

85 adjusted measure of Total Social Productivity (BITSP) could reduce the value of UW by reducing the quantum of unremunerated time (UT), including the share of BI paid to those performing UW. This could be expressed as:

BI-adjusted TSP equals Gross Domestic Product plus (Unremunerated Work minus the share of Basic Income paid to those performing Unremunerated work).

Or more simply as: BITSP = GDP + (UW – BIUW)

If we assign GDP a value of 100 and UW a value of 33, then TSP equals 133 with a UW/TSP ratio of 0.33. If we then assign BIUW a value of 15 and assume for convenience no change in the value of GDP, then we can calculate a value for BITSP and a new BI- adjusted ratio of UW/GDP (BIUW/GDP).

BITSP = 100 + (33–15) = 118. Then the new BIUW/GDP = 0.18.

The value of TSP and UW has fallen, not because of any reduction in work but because of a reduction in the quantum of UT.

The precise extent to which the value of UW might be reduced would depend on the level at which BI is set, how it is accounted for, and the distribution of BI income between individuals in paid and unpaid work. Estimates of the effects of different scenarios could be provided, using microsimulation models of tax and transfer systems. At this stage of the argument though, it is the principle that is being emphasised: that the effects are not those of a contractual relationship between (say) the state on the one hand, and individuals (disproportionately women) performing UW on the other. It is an expression of a social right to share more equitably in the cumulative proceeds of TSP. In the case of BI, the sharing is expressed in the form of money incomes, but it could be expressed through a range of other means, such as universal provision of social services, including childcare.

In summary, TSP provides a rough indicator of the monetary value of the activities, processes, good and services that produce and reproduce capitalist society. Clearly, it omits other critically important factors, particularly in relation to stocks of wealth as well as ecological services and resources. However, it usefully expresses some

86 information regarding the capacity (GDPpc) to support a BI and is a significant justification (UWpc) for this policy measure. BI could lower the opportunity cost of performing unremunerated work in terms of income, while retaining its character as a universal social right as opposed to a categorical benefit.

3.2 Income Constraints on Real Freedom in Australia

Wealth and Income Inequality The introduction of a BI also depends crucially on issues of distribution, as well as aggregate or average economic conditions. The nature of the distributional features— inequalities of income and wealth—therefore needs careful consideration, both in principle and in the specific case of Australia. Since the Global Financial Crisis and the Great Recession, the study of economic inequality has experienced renewed interest and attention across the social sciences. At the same time, inequality has become a permanent feature of public debate and concern during an era of increased political polarisation. Economists (Deaton, 2013; Milanovic, 2016; Piketty, 2013; Stilwell, 2019)) have attempted to measure the extent and trajectory of wealth and income inequality. Epidemiologists, sociologists and psychologists (Marmot & Allen, 2014; Wilkinson & Pickett, 2011, 2019) have examined the effects of growing inequality. Other scholars (Mason, 2016; Srnicek & Williams, 2015; Weeks, 2011) have explored various means of radically reducing, and even transcending, economic inequality.

Within the ethical framework already elaborated, the unequal distribution of wealth and incomes can be understood as an income constraint on real freedom. Wealth and incomes have important functions that are directly relevant to the degree to which real freedom can be accessed and enjoyed by different members of a given society. While high levels of wealth and income ensure basic needs are always met they also, at least in theory30, enhance an individual’s freedom to act in accordance with their particular interests, passions and proclivities, when compared to those reliant on low levels of wealth and income. In addition, a substantial stock of wealth and a regular flow of income provides security, making it easier for such individuals to exercise freedom of choice, in relation to professional risks, leisure time and family responsibilities, than is

30 Wealthy individuals may be saddled with high levels of debt which limit their freedom. However, they do have assets that can be liquidated, unlike many poor individuals.

87 the case for those who have no such wealth and income buffer. This is not to argue that all those in particular wealth and income brackets will take advantage of the opportunities that their circumstances permit, but rather to highlight an association between unequal distributions of wealth and income and unequal distributions of opportunities to both meet basic needs and diverse wants and ‘to live as unconventionally as one might fancy’ (Van Parijs, 1997: 34). Accepting the merits of the foregoing analysis, there are three relevant questions to ask regarding wealth and income inequality in Australia, in relation to the present inquiry: 1. How unequally is wealth and income distributed in Australia? 2. What is the trend in wealth and income distribution in recent decades? 3. Would a BI reduce economic inequality in Australia?

Wealth and income inequality are not easy to measure. There are challenges in relation to the quality and consistency of datasets, questions over the relative merits of different measures and indices, and spirited debate over the interpretation of results. However, we can analyse the functional, factorial, household and individual levels of wealth and income distribution.31 For the sake of brevity, only two measures of inequality will be considered here for both wealth and incomes in Australia: the Gini coefficient and the top wealth/income shares. Recent estimates for the distribution of wealth in Australia, based on the Gini coefficient, vary in a pretty narrow band between 0.60 and 0.615 (Sheil & Stilwell, 2016). ABS data shows a significant overall increase in the Gini since 2002, while the Household Income and Labour Dynamics in Australia (HILDA) dataset shows little overall change from a higher starting point. If we turn to the wealth shares of the Top 10 percent and Top 1 percent, the picture is perhaps easier to grasp. According to Sheil and Stilwel (2019): ‘For the first time in more than half a century, it is clear that the richest 10% of Australian households now own more than half the nation’s private wealth. Wealth inequality has grown significantly. Over the four years from 2012, the proportion of the nation’s wealth owned by the Top 10% increased from 48.1 to 50.2 per cent. Most of the increase went to the Top 1%, whose share of total wealth rose from 14.2 to 16.2 per cent’. This compares to Top 1 percent wealth shares

31 For a detailed discussion of these issues, see Atkinson, 2015 and Stilwell, 2019.

88 of 42.5 percent for the US, 20.5 percent for the UK, 13.3 percent in Finland and just 10.8 percent in Japan (Balestra & Tonkin, 2018: 15).

In Australia, as is normally the case in other countries, incomes are more equitably distributed than wealth. In 2012, the Gini coefficient was around 0.32 in Australia, rising from around 0.27 in 1981–1982 (Whiteford, 2017). Recent trends are to some degree contested. As Whiteford (2019: 91) observes: ‘While there is some debate about trends over the last decade, there is little doubt that over the longer run income disparities have widened.’ In terms of Top Income shares, Wilkins’ (2019) analysis shows that the Top 1 percent doubled its share of national income from around 4.5 percent in 1980 to over 9 percent in 2016. The Top 10 percent saw its share rise from 24 percent to 32 percent in the same period. Overall, Australia is a mid-ranking rich nation when it comes to income inequality (OECD, 2016).

Figure 3.3 Top 1 Percent Income Share in Australia

Source: Wilkins, 2019.

Taken together, these data present a picture of high and growing wealth inequality plus substantial—but not extreme—and growing income inequality in Australia. Those

89 towards the upper end of the distribution are taking home a higher proportion of income and holding a higher share of total wealth than was the case during the postwar economic boom. A well-designed and redistributive BI scheme could help reduce wealth and income inequality in Australia. In general, it would do so in two ways: by funding it out of high taxes on wealth, and by reducing poverty (i.e. by both lowering the ceiling and raising the floor). However, it is also possible to design a BI scheme that, while it might provide some level of income security, could also see inequality increase. These important design issues will be examined in detail in subsequent chapters.

Poverty Poverty is another important income constraint on real freedom in Australia. Poverty is clearly related to levels of inequality in a given country, but the latter does not fully explain the former. Poverty is a complex, multidimensional phenomenon, of which insufficient income is a very important, but not exclusive, cause. Nonetheless, even standard poverty line measures of income poverty can provide some useful information regarding the overall proportion of Australians living in poverty, and those groups that are disproportionately affected. The Australian Council of Social Service Poverty in Australia 2018 report provides a range of insights into rates of poverty in Australia, those groups most impacted by it, and Australia’s international standing in relation to this issue. The report’s authors found that, in 2015–16, 13.2 percent of Australians (3.05 million people) lived below the poverty line (after adjusting for housing costs), with 17.3 percent of children living in poverty. The average ‘poverty gap’32 was ‘$135 per week, indicating that many people in poverty are living well below the poverty line’ (Davidson, Saunders, Bradbury and Wong, 2018: 12). The report also notes: ‘Most people below the poverty line (53%) rely on social security as their main source of income’ and that the ‘overall poverty rate fluctuated within a band between 11.5% and 14.4% between 1999–00 and 2015–16’. Overall, Australia had the 14th highest poverty rate among 36 OECD nations in 2015–16 (Davidson, Saunders, Bradbury, & Wong, 2018: 12-13)

32 ‘This measures the average depth of poverty for those below the poverty line (the average gap between their incomes and the poverty line)’ (Davidson, Saunders, Bradbury and Wong, 2018: 12).

90 Policy changes can have a major impact on poverty rates. For example, the significant increase in the Age Pension rate from 2009 played a decisive role in the fall in poverty rates among those Australians aged 65 and over, from 32 percent in 2000 to 23 percent in 2014 (Azpitarte & Kalb, 2019: 181). This suggests that an appropriately designed BI scheme could also reduce the poverty rate in Australia. However, as with inequality, it would be possible to have a BI scheme that increased poverty rates, either because the BI was set too low or because a progressive BI pushed up median incomes. In the latter case, a BI might simultaneously reduce the poverty gap, while increasing the poverty rate. Therefore, careful design of any BI scheme and a nuanced understanding of the determinants of poverty are both of high importance.

Labour Market Underutilisation and Insecure Work The connection between BI and the nature of work also needs to be considered, both in principle and in relation to Australian conditions. While there have been periods during Australia’s history when it has been relatively low, labour market underutilisation is a persistent source of disadvantage and clearly constitutes an income constraint on real freedom. Discontinuous access to adequate income on account of insecure work is another feature of the Australian labour market that undermines the capacity of many Australians to meet their basic needs and explore their full potential. Figure 3.4 shows the decade-average unemployment, underemployment and youth unemployment rates in Australia between 1978 and 2018. It serves to emphasise that, while sometimes unemployment has been more of a problem than underemployment, and vice versa, labour market underutilisation has been a permanent feature of Australian society during the last four decades.

The growth and persistence of insecure forms of work in Australia is another trend that functions as an income constraint on real freedom. According to Stanford, Australia has the third highest level of part-time work and the highest level of casual (or temporary) work among rich countries (Stanford, 2019a: 6-7). Other forms of contracting and so- called ‘gig work’ have also become more prevalent in the Australian labour market in recent years, meaning under 50 percent of Australian employees were in full-time permanent employment in 2017 (Carney & Stanford, 2018). BI has the potential to reduce these income constraints on real freedom in various ways. First, if a BI is set at a rate higher than the current unemployment benefit, it will at the very least reduce the

91 ‘poverty gap’ experienced by unemployed persons.33 Even if the payment were left the same, a BI would increase its value in real terms, as recipients would not be required to allocate their time to various workfare schemes and bureaucratic procedures. A redistributive BI may also reduce the rate of underemployment, where it is due to inadequate income rather than a genuine desire for more paid work. Finally, a well- designed BI scheme that seamlessly integrates the tax and transfer systems could ensure greater income smoothing for those experiencing the negative consequences of insecure work.

Figure 3.4 Labour Market Underutilisation in Australia, 1978–2018

Source: Author’s calculations from ABS, 2020 (6202.0)

3.3 Opportunity Cost Constraints on Real Freedom in Australia

A stocktaking of the applicability of BI also needs to take account of opportunity cost constraints on real freedom. These refer to situations where insufficient income may

33 It should be noted that, while this point holds for Australia’s flat-rate unemployment benefit system, this would not necessarily be the case in relation to the income-contingent contributory social insurance schemes of other OECD countries.

92 not be the primary consideration in relation to a particular decision, but it is still, along with other associated benefits, what is foregone in order to carry out a particular activity, such as taking care of a child or elderly parent. Conversely, the chance to spend time with a child might be what is foregone if income and professional goals are chosen, even when the former experience is desired. The unequal distribution of unpaid work between men and women is the most important, though far from the only, opportunity cost constraint on real freedom in Australia. As Craig and Mullan (2010: 1345) write: Having children is both a deeply felt imperative for many individuals and a major contribution to the perpetuation of society. Nonetheless, children are costly in terms of money and time. They require that a great deal of time be devoted directly to their care, and they engender more housework, which adds to a family’s need for doing laundry, cleaning, and tidying up.

Being the primary carer for a child or children, as with caring for other dependents, involves costs to the carer in terms of ‘income in the short term but also … cumulative material disadvantage over the lifetime through lost access to promotion opportunities, retirement income, and health funds’ (Craig & Mullan, 2010: 1345). In Australia, as in all rich countries, these costs are not evenly borne. The 2016 census found that women did an average of around 14 hours per week of unpaid household work, compared to an average of under 5 hours per week for men (WGEA, 2018). Another recent study reported that Australian women performed 72 percent of unpaid work (PwC, 2017). Analysis of the HILDA longitudinal study of Australians shows, ‘Women still do seven hours more housework per week than men and, based on current trends, it will take another 30 years before both genders do the same amount’ (Lass, 2018: 1).

Other examples of opportunity cost constraints on real freedom include unpaid overtime, overwork, mismatched preferences between desired hours and actual hours, and the simple fact that jobs are not perfectly correlated with everyone’s preferences, passions and needs. For example, a 2018 report found that Australian workers did an average of 6.0 hours of unpaid labour per week (compared to an average of 5.1 hours in 2017 and 4.6 hours in 2016). Even part-time and casual workers desperate for more paid work performed unpaid overtime (Henderson & Swann, 2018: 5). The same study showed that around 20 percent of full-time and self-employed workers wanted to work fewer hours, while over 54 percent of part-time workers and 63 percent of casuals

93 wanted more paid hours (Henderson and Swann, 2018: 5). Finally, under a workfare model of unemployment assistance, the compliance obligations benefit recipients confront have become a major opportunity cost barrier to real freedom. As Marston et al., (2014: 69) write: ‘low rates of payment and burdensome compliance rules undermine people’s capacity to what the [ex] federal treasurer Wayne Swan would like for all Australians—to have a ‘decent shot at a decent life’.

This preliminary analysis has highlighted several opportunity cost constraints in the Australian context: the unequal distribution of paid work; the pressure to perform unpaid overtime; overwork; and mismatches between preferred and actual hours of paid work. Here is the political economic context in which a well-designed BI scheme might help lower the opportunity cost of making choices more consonant with living a full and satisfying life and, consequently, expand access to real freedom.

Conclusion

This chapter has developed the normative framework outlined in Chapter 2 and applied it to the Australian context. In doing so, it has sought to establish a prima facie case for considering the relevance of BI in the Australian context. It has done so on a variety of grounds, ranging from overall economic prosperity, to distributional inequality, and to features of both paid and unpaid work where there are potentially large gains to be made in personal and social wellbeing. Section 3.1 analysed Gross Domestic Product and Unremunerated Work, the two components of Total Social Productivity, and presented the relevant Australian data. It was argued that Australia’s wealth and state of economic development, reflected in the secular increase in its GDP over two centuries, are sufficient to make a BI scheme feasible. The high and unrecognised value of UW in Australia makes a BI a matter of distributive justice. Section 3.2 and Section 3.3 reviewed other constraints on real freedom in Australia, namely wealth and income inequality, poverty, labour market underutilisation, insecure work, unequal distribution of unpaid work, and various mismatches between desired and actual paid work outcomes. In each respect, it was argued that there are substantial socioeconomic problems extant in Australia that a BI scheme could potentially ameliorate, by making it easier to meet basic needs, while lowering the opportunity cost of making choices that align with an individual’s preferences and passions at different stages of the life course.

94

Chapter 4 turns to the next step in the analysis, moving from the justification of BI to more practical considerations. Specifically, it considers the important issue of the fiscal cost of various BI schemes.

95

PART II – THE POLITICAL ECONOMY OF BASIC INCOME

96 Chapter 4: The Fiscal Cost of Basic Income

Introduction

The previous chapter applied the normative criteria and conceptual framework outlined in Chapter 2 to the specific context of Australia. It examined the two components of Total Social Productivity (Gross Domestic Product and Unremunerated Work) that provide the means to fund a BI and part of the justification for its implementation. It also documented the extent of the income constraints and opportunity cost constraints on universal access to maximin real freedom in Australia, and it argued that a well-designed BI has the potential to reduce the severity of these two obstacles. Chapter 4 builds on that foundation, by exploring practical options for a BI scheme in Australia. Specifically, it addresses the issue of fiscal cost, one of the most commonly cited criticisms of BI. The large fiscal impact of some BI schemes has been reason enough for critics to dismiss the policy as unaffordable and therefore beyond the pale of respectable policy debate. However, the cost is highly variable, according to the form, level and conditions attached to the payment. Moreover, there is a growing international literature that uses microsimulation techniques to provide researchers with more nuanced estimates of the static cost of various BI schemes in different national and sub-national settings.

This chapter discusses some of the relevant international literature, as part of an examination of the probable cost of BI schemes for Australia. This discussion is built around the four BI Models outlined in Chapter 1. Section 4.1 focuses on the social dividend (SD) model, most commonly associated with the Alaska Permanent Fund Dividend. Section 4.2 discusses the stakeholder grant (SG) model, including an estimate of the cost of a substantial grant for all Australian residents aged 21. Section 4.3 examines the UBI model, the form of the policy which comes closest to satisfying the BIEN definition of BI introduced Chapter 1. This section discusses Australian and international examples of UBI. Section 4.4 analyses the NIT model, using Australian and international examples. Here, the affluence-tested (AT) approach to an Australian BI is introduced.

97 4.1 Social Dividend (SD) Model

There are at least two principal strands in the literature regarding prospective sources of funding for social dividends and, according to their advocates, social dividends can serve at least two major purposes. The first, and perhaps less prominent strand, centres on the need for far greater public ownership of the economy, in order to generate the fiscal resources necessary to fund a regular social dividend. Advocacy of this approach dates back to at least the 1930s in the UK, where the likes of G.D.H Cole, James Meade, Abba Lerner and Joan Robinson expressed support for this pathway to social dividends (Van Trier, 2018). Prominent economist James Meade made the case for social dividends in various works between the 1930s and the 1990s. In his 1935 pamphlet, Outline of Economic Policy for a Labour Government, Meade argued that socialisation of industry and the national debt would be essential if Labour were to implement its reformist program (Van Trier, 2018: 448). Meade believed that part of the increased revenue from this process of socialisation could be allocated to capital expenditure and part to the payment of social dividends. In his much later work, Agathopia, Meade advocated ‘the payment by the State to every citizen ... of a given income, called a Social Dividend. This income is tax-free and is paid unconditionally to every citizen whether he or she is employed or unemployed, healthy or sick, active or idle, and—at the appropriate rates—young or old’ (Meade, 1989: 30). This proposal sounds closer to the UBI model. Advocates of socialisation and social dividends have tended to view the dividends as both a means to greater distributive justice and as a macroeconomic policy tool. The latter function will be examined in greater detail in Chapter 8. Moreover, some advocates are open to providing social dividends through printing money, if the macroeconomic environment requires such stimulus (Van Trier, 2018).

The second strand within the SD literature focuses not on direct public ownership and management of industry, but rather on the institution, growth and maintenance of some publicly owned fund that is dedicated to make a regular distribution of social dividends to members of a given community. The most commonly cited example of this approach is the Alaska Permanent Fund. The distribution in this case is linked to profitability of the fund in any given year. This second strand is more likely to have a procyclical effect if the payment is automatic and tied to profitability, though this need not necessarily be

98 the case (e.g. the social dividend could be reduced or withheld during times of excessive inflation).

While the Alaska Permanent Fund Dividend is, given its longevity, afforded the greatest prominence in relation to this model of social dividends, there are a myriad of other proposals for similar schemes. Pogge (2013) advocates a global resources dividend (GRD), aimed at eradicating global poverty and funded by levying a modest tax on the exploitation of global resources. Van Parijs and Vanderborght (2013) have examined the case for a Euro-Dividend, based on a common energy tax. Standing (2017: 152) favours building up a fund through ‘a levy on rental income from private ownership and exploitation of all types of property—physical, financial and intellectual’. Barnes (2014) has put forward a more recent proposal for a social dividend, based on a co-owned wealth fund that would be built through taxes on carbon, financial transactions, intellectual property and electromagnetic spectrum use. He calculates that it could yield as much as US$4,953 per person per year (2013 USD) (Barnes, 2014: 94).

Several contemporary scholars have examined the potential of the SD models. For example, Lansley and Reed (2019)have explored a hybrid approach in the UK, that would tie social dividends to a public fund based on a combination of the proceeds of public ownership and various tax increases (specifically wealth taxes). They estimate that, with an initial endowment of £100 billion, a 4 percent annual return and £25 billion in annual deposits, it would take around 20 years to reach the £650 billion figure needed to distribute £26 billion annually in social dividends. This would equate to an annual dividend of £4,160 for singles under 65; £8,320 for couples under 65 without children; £9,360 for those over 65; and £13,520 for a couple with two children (2019: 16, 27, 29).

There are several issues in relation to the SD model that should be readily apparent. First, at a time during which the majority of states have retreated from direct ownership of productive enterprises and resources, the socialisation approach favoured by the likes of Meade would face very significant political hurdles. Second, it is clear that a public fund capable of sustainably paying out a meaningful dividend would take several decades to achieve the requisite scale. Even then, the sums discussed in many contemporary proposals are often quite modest, compared to existing forms of transfer

99 payments. An AUD$1000 to AUD$6000 annual payment is a nice “end-of-year” bonus34, but it hardly satisfies the “adequacy” criterion in relation to BI.35 How frequently the social dividends are paid out is also an important consideration, as quarterly (let alone annual) distributions are unlikely to significantly improve income security.

With these challenges front of mind, the next section examines the case for social dividends in the Australian context. During the neoliberal period, Australian governments have embraced privatisation with great enthusiasm (Cahill & Toner, 2018). As a result, most of the corporations and utilities36 that could have provided a strong revenue stream for a public wealth fund are no longer in public hands. However, the Australian nation still owns some important commercial, financial and environmental assets that could be leveraged to support such a fund. Furthermore, the Federal Government earns considerable non-taxation income. In the financial year 2019–2020, for example, the Federal Government was projected to take in non-taxation receipts worth AUD$39 billion (Kesper, Elvery, & Spraggon, 2019), or around 2 percent of GDP. To put this figure in perspective, AUD$40 billion could provide an AUD$1,600 per person social dividend to each of Australia’s roughly 25 million residents. AUD$6,400 is not a trivial amount for a family of four, but still falls well short of an adequate BI.

Turning to the share market, total dividend payments to holders of Australian shares were worth AUD$80 billion in 2017–201837 (Pash, 2018). This illustrates the fact that a more equal distribution of share ownership could, in theory, fund a more generous social dividend than federal government non-taxation receipts alone. Of course, other taxes would likely be raised to plug the resultant fiscal hole, if this approach were adopted. However, without a radical change in the appetite of the public and the political class for re-nationalisation of major commercial businesses, the socialisation approach to the SD model is unlikely to offer a way forward in Australia, at least in the medium term.

34 Particularly if the payment is to all residents, including children, as is the case in Alaska. 35 In the sense that these sums are insufficient to meet any reasonable definition of ‘basic needs’. 36 Such as the Commonwealth Bank, Qantas and Telecom/Telstra. 37 A significant proportion of dividend recipients would not have been Australian residents.

100 The prospects for creating and growing a major public wealth fund may prove more propitious than the socialisation approach. Australia, like many countries, has a sovereign wealth fund (SWF). Given its vast endowment of resources, there is a strong argument to be made that Australia should have one of the biggest SWFs in the world. However, the Australian Future Fund ranks 16th largest, with around US$107 billion in funds under management (SWFI, 2020). This sits well below the largest SWF—the US$1 trillion Government Pension Fund Global that Norway has built up on proceeds from its oil and gas industry (SWFI, 2020). The Future Fund is currently set up to cover the Federal Government’s ‘unfunded Commonwealth superannuation liabilities’ (Department of Finance, 2020), but there is no reason why it could not be used for other purposes in future decades. If Australia were to replicate the Lansley and Reed (2019) model, adjusting for population, the Future Fund would need to grow to around AUD$246 billion in order to fund social dividends at the same levels that they have proposed. The time period for the Future Fund to reach that sum would depend on a combination of compounded rates of return and the size of any discretionary contributions made to the fund. A fund of this size, according to the Lansley and Reed (2019) model, could pay an annual dividend of AUD$7,864 for a single person under 65 and AUD$25,564 for a couple with two children,38 with a range of payments for retirees and different household types. This still falls well short of what many would consider an adequate BI, but it provides some insight into what might be feasible by adopting this approach over a period of decades.

Holden and Dixon (2019) are among several scholars to put forward the idea of paying a Climate Dividend to individuals. Their Australian Carbon Dividend Plan (ACDP) would combine ‘a tax of A$50 per Metric Ton (MT) of CO₂ emissions on electricity, direct combustion, transport, fugitive emissions, and industrial processes’ with a social dividend. Their modelling shows ‘more than three-quarters of Australians better off financially, even if they did not change their current consumption or energy use’ and the ‘average Australian household is estimated to be $585 per annum better off’ with: ‘The lowest income-quintile households … $1,305 per annum better off (Holden and Dixon,

38 Author’s calculations based on exchange rates for UK£ to AUD on January 20, 2019.

101 2019: 4). Putting the political challenges of taxing carbon in Australia to one side, this scheme has some merit in addressing the climate crisis and the inequality crisis. However, it is a meagre payment that would constitute little more than an annual bonus with a green tinge.

The SD model would probably work best in a context where the state owns, or is at least a major shareholder in, most large business enterprises, including utilities. In the absence of these conditions, the public fund/social dividend combination is the most likely way forward for the SD approach in Australia. A public social wealth fund contains within in it the idea of a commonwealth, in which individuals can share more equitably in TSP through their receipt of regular social dividends. Overall, the SD model has the potential to perform quite strongly in relation to the universality criterion without, perhaps, having to surmount the kind of resistance that inevitably accompanies attempts to substantially increase different taxes. However, it seems clear from the literature reviewed that there are three main problems with the approach: 1. The time period it takes to build up the financial resources to fund any meaningful social dividend. 2. The insecurity related to fluctuating payout rates, if the size of the social dividend is tied to the profits of any particular fund. 3. Most importantly, it would appear to require enormous public wealth funds to provide individuals with an adequate BI, even if adequacy is defined in an abstemious manner.

For these reasons, the SD model will not be considered any further as a policy option for Australia in this thesis.

4.2 Stakeholder Grant (SG) Model

A stakeholder grant, stakeholder endowment, capital grant or basic capital grant is a one-off payment that recognises an individual’s right to a share or a stake in social wealth. Advocates of the SG approach emphasise its potential to equalise access to capital at an early stage in the life course and, at the same time, to better promote financial independence and responsibility throughout a given population. The children of the very wealthy have often enjoyed the benefit of access to a trust fund at maturity.

102 A stakeholder grant could be seen as democratising access to a similar lump sum of capital at an important time, or times, in an individual’s life.

Ever since Thomas Paine’s (1999) 1797 pamphlet Agrarian Justice advocated a universal one-off grant at age 21, there have been a wide variety of SG proposals. Prominent among these is Ackerman and Alstott’s scheme for a US$80,000 grant (in 1998) to all US citizens at age 21. Their two conditions for receipt of this grant are that individuals have no criminal record and have completed high school.39 The individual then has total freedom to use the grant in any way they deem fit.40 They calculated the 1998 cost of stakeholding would be $268 billion (Ackerman & Alstott, 2013). This is neither a trivial nor an unaffordable sum, when we consider that the 1998 US Federal Budget had outlays of US$1.65 trillion (CBO, 2020). Ackerman and Alstott, assuming a 5 percent real interest rate, estimated that investing the US$80,000 grant would yield ‘a monthly basic income of $400 from age 21 to age 65’ (Van Parijs and Vanderborght, 2017: 30). Van Parijs and Vanderborght, while dubious of the 5 percent real rate of return, point to the larger issue of the inadequacy of a US$400 per month payment, if the stakeholder grant were transformed into an annuity. They estimate that, for a more reasonable monthly figure of US$1000 per month for 21 to 65-year-olds, the stakeholder grant would need to be in the order of US$250,000 (Van Parijs and Vanderborght, 2017: 30).

In a 2018 Institute for Public Policy Research (IPPR) report, Roberts and Lawrence outlined a scheme for establishing a UK wealth fund that would be large enough to ‘pay all 25-year-old UK-born citizens a one-off capital dividend of £10,000 from 2030/31’ (Roberts & Lawrence, 2018: 2). Roberts and Lawrence estimate that, once the fund reached £186 billion, it would be sufficient to pay out the £10,000 capital dividends to 25-year-olds. The authors argue that ‘[p]roviding everyone with the means to invest in their future and take risks would equalise the “opportunity effect” of holding assets’ (Roberts and Lawrence, 2018: 3). They also propose that the dividend be ‘paid to citizens born outside of the UK who have held citizenship for a number of years; [but

39 These paternalistic measures would most certainly make the grants less redistributive than might otherwise be the case, given the over-representation of ethnic minorities and poor Americans in general among those who do not complete high school or who have a criminal record. 40 Ackerman and Alstott (2006) propose funding the grants with a 2 percent flat tax on wealth over a US$230,000 threshold.

103 that] this would require a larger fund, beginning payouts later, or a smaller dividend’. The authors chose age 25 on the grounds of intergenerational justice and the fact that many younger people are looking to make major, often expensive, life decisions at that time. They acknowledge that any scheme with a somewhat arbitrary starting point would be unfair towards, and likely unpopular with, those above the age threshold at the time the scheme was introduced (Roberts and Lawrence, 2018: 13). The projected aggregate cost of the scheme in 2030, its first year, would be £7.23 billion (£10,000 for all 723,000 UK-born 25-year-olds) (Roberts and Lawrence, 2018: 21). To put this figure into perspective, the UK’s projected expenditure for the 2019/2020 Budget is £840.7 billion. Obviously, the expenditure figure would be much higher by 2030 (Office for Budget Responsibility, 2020). The advantage of Roberts and Lawrence’s targeted approach is that it involves paying out a substantial sum to individuals at age 25, rather than the very small sums that would be feasible if all adults received the dividend41 (Roberts and Lawrence, 2018: 11). While there would be no restrictions on how their grant could be used, the authors suggest that the payment could be initially deposited into a tax-free bank account ‘to encourage additional savings’ (Roberts and Lawrence, 2018: 12).

In the case of Australia, the SG approach could also be considered on the same grounds of intergenerational justice. A 2018 report found financial comfort among ‘young singles and couples under 30 years of age with no kids … decreased by 11% to a record low of 5.30 out of 10’ (ME, 2018: 3). Furthermore, home ownership among 25 to 34-year-olds fell dramatically from 60 percent to 39 percent between 1988–89 and 2013–14 (AIHW, 2020). These factors, alongside issues of insecure work and higher rates of unemployment and underemployment (Carney & Stanford, 2018) lend weight to the idea that young Australians may benefit from receiving a one-off grant. The level at which any such grant should be set is, to some degree, arbitrary. Any sum that would reduce wealth and income inequality could be expected to garner support from advocates of a fairer society. However, given the central importance of housing in general, and access to housing in Australia in particular, it makes some sense to link the

41 ‘£129 to all adults in annual payments from 2030/31’ (Roberts and Lawrence, 2018: 11).

104 size of the grant to what may ultimately prove to be its primary use: as a deposit for a home mortgage.42

After a major boom in house prices, especially in its main capital cities, Australia has some of the least affordable housing in the world. There are many reasons for this, including lower interest rates, concessional tax treatment of real estate, and strong population growth. The concessional tax treatment43 would have to be reformed, if such a grant were not to become yet another subsidy to existing property owners.44 The median house price in Australia’s second largest city, Melbourne, was around AUD$780,000 in December 2019. Sydney is a clear outlier, with a median price of over AUD$973,000 for a house; while units in Sydney had a median price of AUD$746,000 (see Table 4.1 below). However, if we take Melbourne median house prices as the benchmark for a prospective grant, then AUD$150,000 would provide close to a 20 percent deposit (19.28 percent) for a home mortgage. In Sydney, AUD$150,000 would only be enough for a 20 percent deposit on a unit. However, in all other capital cities (and regional centres), a grant of AUD$150,000 would be sufficient to pay a 20 percent deposit and establish some equity in a home at or below the median price.

According to the ABS, there were an estimated 332,437 Australian residents aged 21 as of June 2018 (ABS, 2019a). The gross cost of paying 332,437 individuals AUD$150,000 each would be nearly AUD$50 billion (see summary in Table 4.2). If the grant was not taxed, then AUD$50 billion would be the additional revenue required to fund the grants. The number of individuals in each single year cohort obviously varies, and consequently the annual cost of the grant would change accordingly.

42 Of course, there is no guarantee that a grant would be spent on housing, especially as mortgage deposits only go part of the way to surmounting the barriers to home ownership in Australia. 43 In the form of negative gearing for investment properties and capital gains tax concessions for owner- occupiers. 44 Any detailed considerations of such reforms are beyond the scope of this thesis.

105 Table 4.1 Median Housing, House and Unit Prices Australia, December, 2019

Market House, Median Unit, Median AUD$150k Stakeholder Grant/House, Price (AUD$) Price (AUD$) Median Price Ratio (percent) Sydney 973,664 746,017 15.42 Melbourne 778,649 576,475 19.28 Brisbane 546,781 386,023 27.47 Adelaide 471,419 323,662 31.85 Perth 456,289 352,099 32.89 Hobart 506,395 393,399 29.64 Darwin 464,625 279,357 32.33 Canberra 691,551 439,496 21.71 National 552,196 511,111 27.17

Source: CoreLogic, January 2020.

Table 4.2 Gross Cost of Stakeholder Grant to Australian Residents Aged 21, 2018

Australian Residents Stakeholder Grant Gross Annual Cost of Aged 21, 2018 (AUD$) Fair Go Grant (AUD$) 332,427 150,000 49,856,500,000

Source: Author’s calculations based on ABS, 2019a.

To put the AUD$50 billion figure in perspective, the 2019–2020 federal budget of AUD$500 billion (equivalent to nearly 25 percent of GDP) allocated AUD$80 billion to health, AUD$70 billion for assistance to the aged, AUD$36 billion to education, and AUD$32 billion to defence (Kesper et al., 2019). Moreover, tax expenditures that disproportionately benefit the wealthy cost the budget around AUD$170 billion in revenue foregone in financial year 2017–2018 (Martin, 2018). Clearly, AUD$50 billion is a considerable sum of money to disburse to such a narrow cohort in this manner. However, it is not so large as to make it infeasible in fiscal terms. Furthermore, making the grant taxable and/or reducing the size of the grant would lessen its fiscal impact.

106 While the SG model may offer the potential to reduce unequal access to savings, credit and intra-family transfers, there are some compelling criticisms of this form of BI. First, the SD approach is unlikely to prove compatible with the goals of income security and maximin real freedom. Second, such a grant has a higher potential to be squandered than other forms of BI. Third, there is the challenge of preventing the payment becoming a subsidy to property owners. Fourth, there is a concern regarding political opposition to any SG from those cohorts that would never receive the grant. For all these reasons, the SG approach will not be considered any further as a policy option for Australia in this thesis.

4.3 UBI Model

There is much debate regarding the precise meaning of BI. If, however, we accept that BI should be a sufficient (to meet basic needs), universal and unconditional cash payment disbursed to individuals at regular intervals on a permanent basis, most proposals for BI would fail to satisfy at least one of these criteria. It has been shown that it would be difficult to meet the ‘sufficient’ criterion under the SD model. Under the SG model, the ‘universal’ and ‘regular intervals’ criteria would not be satisfied. Taking the above criteria as a guide, the optimum model of BI would look something like a permanent, universal and unconditional cash payment set at (or above) the poverty line, that was distributed to individuals on a fortnightly or weekly basis. This form of BI would still need to be supplemented by various targeted payments and services, to account for particular needs and disadvantages. Moreover, even under this optimum model, how the BI is funded would affect the extent to which it could be rightly considered a universal payment. These caveats notwithstanding, the UBI model comes closest to satisfying the core criteria enumerated above.

The following section describes some BI proposals that approximate the UBI approach for Australia, the UK and the US. Table 4.3 summarises the payment levels and gross costs for these proposals. It is important here to remember that net costs will normally be less than gross costs. As Martinelli (2020: 464) writes: ‘[G]ross fiscal cost is a misleading measure of the real cost of BI’ and ‘the net fiscal cost of a BI is likely to be a fraction of the gross cost’. Moreover, Martinelli states: ‘A focus on gross costs [also] neglects ‘churning’—when people simultaneously receive payments from and pay taxes

107 to the state—which features heavily in the case of BI.’ Nonetheless, gross cost provides important information to scholars, policymakers and citizens regarding the scale of the challenge, in relation to the choices that must be made in order to achieve revenue neutrality. There are a wide range of possible financing options, from different combinations of tax increases to cutting existing benefits, that could be employed to this end. For the purposes of the ensuing analysis, gross cost is defined as the aggregate fiscal resources required to finance a given BI scheme, while net cost refers to the additional fiscal resources required to finance a given BI scheme compared to the ex ante reform position. To further illustrate this distinction, a BI scheme that paid 20 million adults $20,000 per year has a gross fiscal cost of $400 billion annually. If the BI scheme replaces $150 billion in annual transfer payments, then the net fiscal cost is $250 billion annually.

To further illustrate this point regarding the challenges and choices entailed in considering the UBI, it is useful to focus on the detail of several proposals set out in Table 4.3. The most generous of the Australian proposals would see all adult Australians receiving a BI roughly equivalent to the single Age Pension. Such a scheme would have a gross cost close to AUD$420 billion annually. While very substantially lower, the net cost, according to Cowan, would still come to AUD$231 billion annually (Cowan, 2017: 14). For comparison’s sake, total projected expenditure on social security and welfare in the Federal Budget for 2019–2020 was around AUD$180 billion (Kesper et al., 2019). To achieve revenue neutrality under such a scheme, Australia’s relatively low tax-to- GDP ratio45 (27.3 percent in 2016) would need to be increased to around 43 percent.46 This is still below the levels obtaining in Scandinavia and some other Western European countries, such as Denmark (46.2 percent), Sweden (44 percent), France (45.5 percent), Belgium (44.1 percent) (OECD, 2019c). This fact is interesting in two senses. First, it lays bare the extent of the fiscal, political and likely cultural challenges that Australia47 would have to surmount, in order to move to a more universal system of transfer payments. Second, it demonstrates that even a generous scheme would not increase

45 By OECD standards. 46 AUD$770 billion is the sum of a 27.3 percent tax-to-GDP ratio plus the estimated AUD$231 billion net cost of Cowan’s most generous UBI scheme for Australia, which equates to an overall tax-to-GDP ratio of 42.7 percent in an AUD$1.8 trillion economy (ABS, 2019b). 47 Australia has a history of highly-targeted and relatively modest transfer payments.

108 Australia’s tax-to-GDP ratio above those of some other advanced capitalist countries. Moreover, the estimated net costs of Cowan’s less generous schemes (as described in Table 4.3) are far lower, and therefore more feasible, at AUD$103 billion and AUD$107 billion respectively48 (Cowan, 2017: 14). Estimates for the other proposals in Table 4.3 range from gross cost-to-GDP ratios of between 10 percent and 20 percent. Martinelli’s modest proposal for the UK has a gross cost of £288 billion and a net cost at £143 billion.49

Summarising the pros and cons of the UBI model and its potential application in Australia is clearly difficult, because it involves counterposing ideals and dollars. In principle, it comes closest to satisfying the key criteria that define an optimum BI. Implementing such a model would mark a radical break with existing systems of welfare provision. This applies to both the tightly means-tested and highly targeted models of welfare provision existing in countries such as Australia and to the welfare systems in a country like Sweden, where benefits are generous but tied to social insurance contributions, and where categorical payments remain a feature. Having an adequate regular payment guaranteed for life, at least for adults, would mark the end of punitive workfare in toto and dramatically reduce the importance of categorical payments. It would also dramatically expand access to real freedom. However, the key problem, or challenge, relation to the UBI approach is the degree of fiscal churn created as the price of universal coverage. Paying a BI to all adults, or even all people, in a given community may satisfy the universality criterion but at the cost of efficiency. The substantially higher tax rates that would be required to finance any truly universal and adequate BI may present an obstacle to garnering widescale support for such a reform. The question of how significant cohorts of net contributors might respond to both receiving a BI and paying considerably higher taxes to finance it is yet to be satisfactorily answered. However, tax resistance among high income earners to very high levels of personal income tax must at least be factored into any strategic political and implementation calculations related to this BI model. Consequently, alternative models that have the potential to achieve similar distributional and maximin real

48 It should be emphasised that careful consideration of the distributional effects of these schemes should be closely scrutinised in terms of their implications for inequality, poverty and real freedom. 49 After the ‘withdrawal of the Basic State Pension (BSP), Carers’ Allowance (CA), CB, CTC, ESA, IS, JSA, PC, and Working Tax Credits (WTC)’ (Martinelli, 2017: 48).

109 freedom outcomes, while avoiding some of the potential drawbacks of UBI, merit serious consideration.

Table 4.3 Gross Cost of Selected UBI Model Schemes

Model Payment Rate (per week) Gross Cost Country BI Gross Cost-to-GDP Ratio (percent) Cowan (2017) AUD$442.31, everyone 18 and AUD$418.5 Australia 23.25 over, replaces existing income billion support payments

Cowan (2017) AUD$269.23, everyone 18-65, AUD$174.2 Australia 9.68 all those benefits paid to billion working age recipients abolished Cowan (2017) AUD$192.31, everyone 18 and AUD$119.4 Australia 6.63 over, supplements paid to billion existing welfare recipients

Ingles, Phillips AUD$270 (Newstart AUD$264 Australia 13.89 and Stewart unemployment benefit) for all billion (2019) adults, plus a top-up of AUD$133.44 for all adults and AUD$105.87 for children aged 0-12 and $133.44 for older children. All those over 65 receive AUD$448.40 (the age pension) and LITO and SAPTO removed Martinelli £73.10 for men (18-64) and £288 billion United 13.91 (2017) women (18-62); £155.60 for Kingdom pensioners; and £67.01 for children 0-17 Martinelli £115.29 for working–age £427 billion United 20.63 (2017) adults (18-64 for men, 18-62 Kingdom for women); £197.79 for pensioners; and £109.20 for children 0-17 Painter and £82.50 for 0-4 first child; £283.9 United 14.79 Thoung (2015) £65.13 for additional children; billion Kingdom £56.25 for 5-15; 56.25 for 16- 24; £71.00 for 25-64; £142.70 for 65+ Reed and £71 for adults 25-64; £61 for £209.5 United 10.69 Lansley (2016) adults 16-24; £51 for billion Kingdom pensioners; and £59 for children Stern (2016) US$230.77 for all adult US US$2.7 United 14.42 citizens trillion States Yang (2018) US$230.77 for all adult US US$2.8 United 13.61 citizens trillion States Note: All GDP estimates in current prices for year closest to year of publication of corresponding BI proposal.

110 Sources: Martinelli, 2017: 38; Cowan, 2017: 13-14; Painter and Thoung, 2015; Stern, 2016; Pomerleau, 2019; Ingles, Phillips and Stewart, 2019: 388; ABS, 2019b; Office for National Statistics, 2019; BEA, 2019.

4.4 NIT Model

For some BI scholars and advocates the NIT model (including GMIs) does not qualify as BI proper. Standing (2017: 7), for example, asserts that a ‘stable and predictable basic income, paid come rain come shine’ is ‘different from a minimum income guarantee which tops up low incomes to a given level, usually requiring complex means tests’ and is ‘different from a negative income tax or tax credits, which are withdrawn as incomes rise’. (Gentilini & Grosh, 2020: 77) concur, arguing that BI and GMI ‘are at opposite poles’ in terms ‘of targeting and benefit structure’, with GMI having ‘limited coverage at the bottom of the income distribution, with benefits sharply tapered as income rises’, compared with ‘the universal flat UBI [Universal Basic Income] benefit’. They differentiate GMI and NIT by defining the latter as belonging to: ‘Programs with more extended tapering … and broader coverage than a typical GMI’ (Gentilini and Grosh, 2020: 74). The NIT, in particular, is often associated with a libertarian or neoliberal50 approach to BI, and to social security provision in general.

However, the NIT and the GMI are not by definition progressive or conservative, as key BI scholars readily acknowledge. Moreover, as flagged in the previous section, the NIT model may have certain advantages over a ‘pure’ UBI. In relation to poverty reduction, Gentilini and Grosh (2020: 77) observe that: ‘With its steep taper, if the GMI program eligibility threshold is at the poverty line, then poverty would be eradicated at the lowest budgetary cost.’ On the issue of fiscal churning, Van Parijs and Vanderborght (2017: 39) state that ‘even when marginal tax rates and net taxation of the various types of households are exactly the same, a negative-income-tax scheme involves a gross volume of taxes and expenditure that is far smaller than the corresponding basic- income scheme. This makes it look cheaper, and hence more palatable, in the illusion- prone court of public opinion.’ On distribution, Gentilini and Grosh (2020: 76) make the

50 In a technical sense, an NIT simply ‘specifies the earnings threshold below which payment is to be made and above which income tax will be paid, and also the rates at which tax will be paid above the threshold and payment will be made to the employee below the threshold’ (Torry, 2019: xviii).

111 important point that if a UBI scheme were financed ‘from a progressively personal income tax system, then the net incidence of a UBI would look more like that of the NIT. This amounts to a UBI that is “de facto targeted via taxes”’ (Gentilini and Grosh, 2020: 76).

Australian researchers have drawn similar conclusions. On the basis of microsimulations, one 1998 study concluded that the ‘most radical change’ of a BI/FT51 was ‘not likely to be feasible’ but that schemes that ‘involve the tapering out of tax credits, variable tax rates, and some selectivity in who receives tax credits make the idea of a negative income tax system look much more feasible’ (Dawkins et al., 1998: 254). Furthermore, (Quiggin, 2019: 147) argues that ‘when fully implemented’ BI, GMI and NIT schemes ‘are equivalent in terms of their effects on the ultimate distribution of income’ and ‘any universal payment financed by taxation can be replicated by a negative income tax, or by a means-tested guaranteed minimum income’. For the purposes of this thesis, these salient observations regarding the practical effects and possible advantages of the NIT model (including the GMI variant) are accepted, and these approaches considered legitimate BI options.

As was illustrated in relation to the UBI model, there is a growing body of literature that uses microsimulation techniques to model the static costs and distributional effects of different BI scenarios, including NIT schemes. One contemporary example of this method is based on the Ontario Basic Income Pilot52 that was cancelled after a change of government in the province in 2018. Canada’s Parliamentary Budget Office (2018: 5) summarised the key characteristics of the pilot: ‘Participants had to be aged 18 to 64 and living on low income, and were selected randomly. Payments are based on 75 per cent of the low-income measure. Single individuals receive up to $16,989, while couples receive up to $24,027. People with a disability receive an additional $500 per month (or $6,000 per year).’ Additionally, the Ontario pilot had a 50 percent taper rate of the benefit for each dollar of earned income up to CAD$33,796, at which point an individual would not be receiving any BI (Parliamentary Budget Office, 2018: 6). The PBO

51 Basic Income/Flat Tax. 52 Torry writes that because the Ontario payments ‘were neither “individual” nor “without means test” they “did not constitute a Basic Income” in accordance with the Basic Income Earth Network definition’ (Torry, 2019: 23).

112 calculated that the total gross annual cost of a Guaranteed Basic Income (GBI), based on the Ontario model for Canada as a whole, would come to CAD$76 billion in 2018–2019, with a net cost of CAD$43 billion annually once other transfer payments are netted out of the calculation (Parliamentary Budget Office, 2018: 8, 10). To put these relatively modest figures in perspective, they amount to between 2-3.5 percent of Canada’s CAD$2,228 billion nominal GDP in 2018, and between 14-24 percent of Federal Budget program expenses (CAD$312.2 billion) for 2018–2019 (Government of Canada, 2018)

Since a GMI was recommended by the Henderson Poverty Committee in 1975, there have been various attempts to estimate the cost, and other effects, of NIT and GMI schemes for Australia (Dawkins & Freebairn, 1997; Dawkins, Johnson, Scutella, Beer, & Harding, 1998; Ingles, Phillips, & Stewart, 2019; Scutella, 2004). Humphreys (2005) advocated a parsimonious53 30/30/30 NITM for Australia, which would comprise a 30 percent flat tax, an AUD$30,000 tax-free threshold (in 2005) and an NIT of ‘30% of the difference between his or her income and the tax-free threshold’. Those earning above AUD$30,000 would receive zero NIT payment (Humphreys, 2005: 10). Humphreys makes several assumptions regarding the cost savings associated with such a scheme,54 all of which may be questioned, before concluding that the 30/30/30 would result in net budgetary savings of AUD$15 billion annually (Humphreys, 2005: 19). More recently, Quiggin has put forward an illustrative model of a Guaranteed Basic Income (GBI), a type of GMI, that would ‘give all households a guaranteed basic income equal to 40 per cent of average income’. Quiggin estimates a net cost of ‘8 to 10 per cent of national income’ for such a scheme (Quiggin, 2017).

The ‘affluence-tested’ (AT) approach is another variation on the NIT theme. Spies- Butcher, Phillips and Henderson (2020:7) define affluence-testing as a category of means-testing where ‘income-testing is primarily used to limit access by the better off’ to transfer payments that ‘are received by a majority of the potential recipient population and enjoy broad public support’, such as ‘age pensions and family payments’. Here, the AT approach is deployed with the aim of integrating a BI proposal with the particular structures, cultures and trajectories of Australia’s welfare state, polity and

53 The model does not make any allowance for additional payments for pensioners, children and those with disabilities (Humphreys, 2005: 10). 54 See Humphreys, 2005: 19.

113 economy. Spies-Butcher et al. (2020: 8-9) propose four principles that underpin the AT approach: 1. EMTRs should only increase with income (progressivity of incentives); 2. High-income earners should receive no net benefit from moves towards universalism (fiscal efficiency); 3. No below median income earner should be left worse off (i.e. have a lower net income for any given market income) (equity); 4. The current tax scale should be largely taken as given (path dependency).

The authors use the AT approach to model two payment levels based on the pre-COVID- 19 Newstart unemployment benefit and the public campaign for an AUD$75 per week increase. Tables 4.4 and 4.5 illustrate the overall benefit structure for each payment level55. This structure incorporates the four principles enumerated above and also highlights the gradual tapering out of payments as market incomes rise.

Table 4.4 Affluence-tested Basic Income Payment, Model I, Newstart

Taxable Effective Tax Benefit Effective Benefit Received Marginal Market Income Income in Rate incl. Withdrawal Marginal at Top of Income Tax Rate Bracket Tax Offset Rate Tax Rate Bracket (AUD$) Initial payment 14,647.32 0–$10,000 10000 0 0 30 30 11,647.32 $10,001 – 8200 0 0 30 30 9,187.32 $18, 200 $18,201 – 1342 19c 0 30 30 8,784.72 $19,542 $19,543 – 1342 19c 19 16 35 8,570.00 $37,000 $37,001 – 11000 32.5c 25 10 35 7,470.00 $48,000 $48,001 – 42000 32.5c 32.5 7.5 40 4,320.00 $90,000 $90,001– 36000 37c 40 0 40 4,320.00 $126,000 $126,001– 54000 37c 37 8 45 0 $180,000 $180,001+ 45c 45 0 45 0 Source: Spies-Butcher, Phillips and Henderson, 2020: 10.

55 Before the tax changes that would be required to achieve revenue neutrality.

114 Table 4.5. Affluence-tested Basic Income Payment, Model 2, Newstart +$75pw

Effective Taxable Marginal Benefit Effective Benefit Received Tax Rate Market Income Income in Tax Withdrawal Marginal at Top of Income incl. Tax Bracket Rate Rate Tax Rate Bracket (AUD$) Offset

Initial payment 18,252.98

0–$10,000 10000 0 0 30 30 15,252.98 $10,001 – 8200 0 0 35 35 12,382.98 $18, 200 $18,201 – 1342 19c 0 35 35 11,913.28 $19,542 $19,543 – 17458 19c 19 16 35 9,120.00 $37,000 $37,001– 11000 32.5c 25 15 40 7,470.00 $48,000 $48,001 – 42000 32.5c 32.5 7.5 40 4,320.00 $90,000 $90,001– 36000 37c 40 0 40 4,320.00 $126,000 $126,001– 54000 37c 37 8 45 0 $180,000 $180,001+ 45c 45 0 45 0

Source: Spies-Butcher, Phillips and Henderson, 2020: 10.

Based on microsimulation results, the annual net fiscal cost of Model I would be AUD$103.45 billion, and AUD$126.1 billion for Model II (Spies-Butcher et al., 2020: 12). These figures equate to around 10 percent and 12.5 percent of GDP respectively, or between 20 percent and 25 percent of federal government expenditure in 2019–2020 (ABS, 2019b; Commonwealth of Australia, 2019). The AT approach to BI opens a policy pathway towards a more universal system of income provision in Australia. It retains an affinity with existing features of Australia’s welfare state, acknowledges changes in the Australian economy56, while also constraining fiscal cost. Consequently, the merits of this approach to BI will be critically evaluated throughout the remainder of this thesis.

On balance, the advantages of some variant of the NIT model in terms of efficiency and feasibility would seem to outweigh the disadvantages, such as falling short of meeting

56 That have made employment less secure, housing more expensive and inequality higher.

115 the criterion of “pure” or “formal” universality. This is especially the case if we consider the potential for an NIT scheme to achieve income security and distributional outcomes close to—or identical with—a UBI scheme. Moreover, reduced fiscal churn, lessened aggregate fiscal impact and lower required taxation may enhance the NIT model’s implementation prospects. The challenge then, once a basic model of BI is selected, is to tailor any proposal to the particular characteristics of the tax and transfer systems of a given country or region.

Conclusion

This chapter shifted focus from the normative and political economic justifications of BI to considerations of practical options for BI in Australia. The chapter focused on the specific issue of the fiscal cost of a variety of BI proposals, drawing on the burgeoning international literature that uses microsimulation techniques to estimate the static cost of various BI schemes. The chapter first considered the SD model of BI, but rejected it for further consideration on the grounds that it would likely fail to meet BI’s ‘adequacy’ criterion. Second, the chapter assessed the merits of the SG model of BI, specifically a proposal to pay all Australian residents aged 21 AUD$150,000. This model was also rejected here, on account of its failure to provide a regular flow of income that would better promote the goal of maximin real freedom throughout a given population. Third, the chapter considered the UBI model of BI, which comes closest to satisfying the various criteria that comprise BI in its optimal form. This UBI model was contrasted with the NIT model. It was argued that, while the latter model may fall short of the UBI as regards the criterion of universality, it has several significant advantages. NIT schemes, and their close cousins, offer the possibility of achieving similar distributional and income security outcomes with a far lower fiscal impact and with much less fiscal churn. Finally, the concept of affluence-testing was introduced as a means to tailor a BI scheme to the institutional characteristics of Australia’s welfare state and the evolving structure of Australian capitalism. The AT approach will be the focal point of analysis for the remainder of this thesis. Chapter 5 presents the literature on financing options for UBI model and NIT model proposals, including the AT schemes.

116 Chapter 5: Financing Basic Income

Introduction

Chapter 5 examines the feasibility of financing UBI and NIT schemes in advanced countries. This key question of financial feasibility is explored at three levels of analysis. First, in relation to advanced countries in general. Second, as it applies to five liberal capitalist welfare states discussed in Chapter 4. Third, in terms of specific BI reform proposals for Australia. Section 5.1 provides a brief history of state taxation and expenditure in advanced countries over the last 150 years. This includes presentation of the data on the comparatively lower levels of taxation and expenditure in liberal capitalist welfare states, with particular emphasis on the evolution of Australia’s fiscal system. This section identifies five general trends relevant to evaluating the two questions considered in this chapter: i) a dramatic increase in overall state taxation and expenditure; ii) pronounced differences in tax structure between countries; iii) the increasing centralisation of taxation; iv) the dramatic expansion of public social spending as a share of total state expenditure; and v) the relationship between expanded tax and transfer systems and reduced income inequality.

Section 5.2 assesses the merits of six BI financing channels, in relation to advanced countries. While acknowledging their respective potential, the section concludes by arguing that taxation is the channel most likely to shoulder the bulk of the financing burden in relation to UBI and NIT in the short to medium term. Section 5.3 provides an overview of developments in tax theory since the inception of the modern political economy. It critically evaluates the purported equity-efficiency trade-off at the heart of optimal tax theory, before exploring the link between tax theory and BI financing, through the work of Atkinson (2015) and Saez (2020). Section 5.4 describes the proposed financing mechanisms for the UBI-style and NIT-style schemes outlined in Chapter 4. These financing arrangements include an array of tax and expenditure measures, as well as some more questionable assumptions regarding the dynamic

117 effects of implementing BI. The section includes a more detailed discussion of a menu of financing options for an Australian affluence-tested BI scheme.

5.1 Financing Basic Income From Thomas Paine57 to Thomas Piketty 58, financial (in) feasibility has been a central concern of BI advocates. Early proponents argued that taxing landed property and inheritance would suffice to finance their various BI schemes. From the nineteenth century onwards, however, proposed financing mechanisms have been as diverse as proposed forms of BI.

Critics have cited the gulf between the cost of BI (see Chapter 4) and the means available to finance it as, perhaps, the key reason to reject this policy option. Recently, Martinelli has argued that: ‘BI advocates face an irreconcilable trilemma in policy design, between a) affordability/controlling cost, b) adequacy/meeting need, and c) securing the advantages of a radically simplified welfare system’ (Martinelli, 2020: 463). While the three ‘horns’ of Martinelli’s trilemma are all addressed in this chapter to some extent, the main focus is on the ‘affordability’ criterion. To this end, the respective potential of six major financing channels to meet the cost of BI schemes in advanced countries is considered below. These six channels are: 1. distribution of the proceeds of public ownership (non-tax revenue); 2. distribution of the proceeds of publicly owned wealth funds (non-tax revenue); 3. direct credit creation; 4. government deficits and government debt; 5. reduced (other) expenditure; and 6. taxation.

The limitations of public ownership as a means to finance BI were highlighted in Chapter 4 and are further illustrated in Section 5.2 of this chapter. The relatively low levels of public ownership of productive assets in most rich countries lowers the current potential to finance an adequate BI scheme from the proceeds of public ownership, without a substantial increase in other revenue sources. Non-tax revenues

57 See Agrarian Justice (Paine, 1999). 58 See ‘Elements for a Participatory Socialism in the Twenty-First Century’ in Capital and Ideology (Piketty, 2020).

118 account for less than 20 percent of total state revenue in over 50 percent of countries (Ortiz-Ospina & Roser, 2016b). This does not mean that the proceeds of public ownership can, or should, play no role in financing BI59, rather that the capacity of states to increase this revenue source may be constrained in the short to medium term.

Many historical and contemporary proposals have advocated distributing the proceeds of publicly owned wealth funds to finance BI. Here again, the time necessary to build up a public fund large enough to regularly distribute an adequate BI undermines the near- term utility of this financing mechanism in most advanced countries.60 This point is relevant to material objectives of BI (e.g. poverty alleviation and reducing inequality) but also to political considerations regarding the challenge of sustaining the requisite momentum to implement such a reform.

A third, ostensibly more radical, financing channel is direct credit creation. BI schemes financed via this channel would draw on the theoretical insights, key claims and policy implications of Functional Finance61 and/or Modern Monetary Theory62(MMT). These approaches, while not identical, emphasise the unique power of states with sovereign fiat currencies to issue credit without fear of insolvency. For such sovereign states, credit creation is limited by real resource constraints63, but not by conventional concerns with achieving balanced budgets and reducing government debt.64 While some prominent MMT economists (see Mitchell & Fazi, 2017) oppose BI vehemently, this financing mechanism merits further study. Direct credit creation could play a role in initiating a new BI scheme, or in temporarily boosting an existing BI scheme during an economic downturn. Crocker takes this approach to financing BI (Torry, 2019b). Despite its interesting potential, direct credit creation will not be considered as a principal financing mechanism in this thesis for two reasons: first, the theoretical and

59 In pure accounting terms non-tax revenue could finance BI schemes, in whole or in part, in most advanced countries. However, tax revenue would have to be increased to fund other functions of government. 60 A handful of countries, such as Norway and other oil rich states, may be exceptions to this rule. 61 For an overview of Functional Finance see Hart, N. (2011). ‘Macroeconomic Policy and Abba Lerner’s System of Functional Finance’, Economic Papers, Vol. 30, No. 2, June, pp. 208–217. 62 For an overview of Modern Monetary Theory see Wray, L.R. (2019). ‘Alternative paths to modern money theory’, Real-World Economic Review, Issue. No. 89, pp. 1-18. 63 Issuing too much credit in an economy with capacity constraints will trigger inflation. 64 In some variants of MMT, it is not necessary to issue sovereign debt at all. For example, the US Federal Reserve can simply credit the US Treasury’s account with any additional money required (Wray, 2019).

119 empirical challenges presented by the more speculative nature of this approach; and second, the related pragmatic consideration regarding space constraints.

Government deficits and government debt together constitute a fourth potential financing channel for BI schemes. Deficits occur when total government expenditure exceeds total government revenue.65 Persistent deficits contribute to higher government (sovereign) debt levels, as does discretionary borrowing for various purposes. According to the OECD, ‘Most government gross debt in OECD countries is held in debt securities (83%), followed by loans (8.6%) (OECD, 2019b: 58). Whether this debt is held by domestic public institutions and domestic nationals, or by foreign institutions and foreign nationals, is a key consideration when evaluating a given country’s vulnerability in relation to its public debt liability. Most advanced countries run government deficits and maintain substantial levels of government debt for extended periods. This contributes to aggregate demand and adds to government interest payments. The size of the deficits can vary substantially, across different time periods and in relation to different countries. For example, government deficit levels across the OECD averaged 2.2 percent of GDP in 2017, compared to 8.7 percent in 2009 at the height of the Global Financial Crisis (GFC) (OECD, 2019: 52). The same pattern of variation can be observed in relation government debt, with average gross debt66 levels for OECD countries rising from 37.3 percent to 110 percent in the decade 2007-2017 (OECD, 2019: 58). With the Covid-19 pandemic-induced economic slump, government deficits and debt have skyrocketed and will remain elevated for years to come.

Despite wide variation among countries, and being difficult to accurately predict, government deficits and debt offer similar potential to direct credit creation in terms of kickstarting, topping up, or propping up a BI scheme. To cite one example illustrative of this potential, consider the impact of Covid-19 on Australia’s deficit and debt levels. The combination of reduced revenue and increased expenditure measures saw the federal budget balance for 2019-2020 swing from a small projected surplus to an AUD$85.8 billion deficit equivalent to 4.3 percent of GDP. The projected deficit for 2020-2021 is AUD$184.5 billion or 8.7 percent of GDP. Gross debt is also projected to rise to

65 This is usually reported on an annual basis. 66 Net government debt is another common indicator that subtracts the value of government financial assets from gross public debt.

120 AUD$851.9 billion or 45 percent of GDP in 2020-2021 from AUD$684.3 billion (Murphy, 2020). On the expenditure side of the ledger, the introduction of the AUD$86 billion67 JobKeeper wage subsidy program and the doubling of the unemployment benefit— rebadged as JobSeeker—for six months at an estimated cost of AUD$14.1 billion are the major drivers of current and projected deficits (Frydenberg, 2020; Hitch, 2020; Whiteford & Bradbury, 2020)

There are unresolved debates regarding the sustainability of deficits and debt in different countries and contexts that are beyond the scope of this thesis. However, what the Australian JobKeeper and JobSeeker interventions illustrate is the clear fiscal capacity of advanced countries to rapidly implement new social policies and augment existing income support via deficit spending and the issuance of public debt. The medium to long-term sustainability of this financing mechanism, together with likely political resistance to such an approach outside of a period of crisis, is a question more difficult to answer definitively. These caveats notwithstanding, the important supplementary role that the strategic use of both the fiscal balance and government borrowing power could play in the financing mix of a particular BI scheme should not be dismissed.

Reducing government (and other) expenditure constitutes a fifth financing channel. This mechanism has potential for NIT schemes68 designed to replace most, or all, existing government social assistance programs and public services with a modest cash payment. Beyond such bareboned libertarian proposals, cutting public expenditure is unlikely to contribute significantly to financing a BI scheme. Most BI schemes that propose cutting certain categorical benefits advocate their replacement with a BI paid at a higher rate. This would generate a corresponding increase in total government expenditure. Further, by removing conditionality and individualising payments, most BI schemes would simultaneously expand program coverage and increase average benefit rates. Here again, the result is likely to mean an increase in aggregate expenditure on transfer payments. In summary, BI schemes that even come close to meeting (Martinelli,

67 The initial cost estimate was $130 billion but was revised down to a cost of AUD$70 billion over six months, plus an additional $16 billion due to a six-month extension of a redesigned scheme (see Hitch, 2020). 68 Or partial UBI schemes.

121 2020) ‘adequacy’ criterion involve netting out the cost of other transfer payments, rather than reducing social spending overall. These factors would dwarf any savings achieved through simplifying the administration of social security.

Some advanced countries have high tax-to-GDP ratios due, in large measure, to comprehensive welfare states that include generous social insurance schemes. Consequently, such countries have less fiscal space within which to operate, compared with other advanced countries with lower tax-to-GDP ratios. Therefore, financing any ‘adequate’ BI scheme would mean rearranging, rather than reducing, total government expenditure. Finally, there is the option of cutting all public expenditure to a traditional arm of government (e.g. defence or education) and redeploying these funds to finance BI. For example, abolishing defence funding in Australia would reduce annual federal government expenditure by around AUD$32 billion in 2019, while axing education funding would have restored AUD$36 billion to federal government (Kesper et al., 2019). While these sums could finance some form of NIT scheme, these particular expenditure reductions are unlikely to attract much political enthusiasm or public support.

Taxation is the sixth and final channel that could finance BI. Section 5.2 describes the dramatic expansion of government taxation and expenditure that occurred in advanced countries during the twentieth century. In the process, advanced countries demonstrated the fiscal capacity to finance a wide range of government programs, including social transfers, to an extent unimaginable in any preceding era. As will be illustrated below, there is no question that twenty-first century advanced countries, such as Australia, have the capacity to finance substantial UBI and NIT schemes through their tax systems. The challenges of translating that formal capacity into real reform is addressed in Chapters 8 and 9. The relevant issue for this chapter is to explore various combinations of increases in direct and indirect taxation, and decreases in tax expenditures, that could finance BI. In particular, this issue is addressed with reference to liberal welfare capitalist states, including Australia.

122 5.2 A Brief History of State Taxation and Expenditure

Taxation predates the development of capitalism by several millennia. However, it is only since industrial capitalism became the main form of economic organisation, and the nation state the preeminent form of political organisation, that taxation has come to dominate, dramatically increasing state revenue. In parallel, the purposes for which tax revenue is disbursed have expanded and diversified. As the size and shape of government taxation and expenditure has changed, so too has theory regarding the nature and purpose of taxation. Scholars from philosophy, law, political economy and economics, among other disciplines, have contributed to this literature. Contributions from political economy and economics to this debate are addressed in Section 5.3.

Tax has been a feature of state administration since at least the pre-modern empires of Ancient Egypt, Babylonia, China and the Incas. Taxes on land, other property and inheritance have been sources of government revenue in diverse state formations, from Ancient Greece and Imperial Rome, to medieval and mercantilist Europe, and then to imperialist nation states of the modern period. These wealth taxes comprise a relatively modest share of total taxation in advanced countries today (Ortiz-Ospina & Roser, 2016b; Samson, 2002: 22-31). Consumption taxes have a long history, compared to land and wealth taxation. Examples include the cooking oil tax in Ancient Egypt; the Phoenician customs excise; the British Empire’s tea tax on its North American colonies; and contemporary imposts such as value-added tax (VAT) and carbon tax. Indirect taxation is a major source of state revenue in advanced countries today (Ortiz-Ospina & Roser, 2016b; Samson, 2002: 22, 33-34). Income taxation has a much shorter history, with the first generally accepted example being Great Britain’s income tax introduced by Prime Minister Pitt the Younger in 1799. The British income tax, as with many other tax innovations, was implemented to finance a war.69 While Great Britain’s income tax was repealed in 181670, this form of direct taxation spread to other countries throughout the nineteenth and twentieth centuries. Today, personal and corporate income tax has become a major source of state revenue for all OECD countries (Ortiz- Ospina & Roser, 2016b; Samson, 2002: 35-40). Australia introduced a federal income

69 In this case, the Napoleonic Wars with France. 70 A new income tax was introduced in 1842 (Samson, 2002: 35).

123 tax in 1915, with marginal rates between 3 percent and 25 percent and with very narrow coverage. The tax was substantially broadened in 1942, but top marginal rates declined from 75 percent to 45 percent between 1951 and 2006 (Reinhardt & Steel, 2006: 14-15).

The spectacular increase in GDP and GDP per capita in advanced countries, described in Chapter 3, was mirrored by a similar increase in state taxation. Figure 5.1 depicts this trend for four major industrial countries for which data is available over the period 1868 to 2008. Between 1868 and the outbreak of World War I, tax-to-GDP ratios for the UK, US, France and Sweden hovered between 5 percent and 10 percent (Ortiz-Ospina & Roser, 2016b). The UK’s tax-to-GDP ratio doubled to 20 percent between 1915 and 1920. After a brief dip, it more than doubled again to 37 percent in the decade 1940- 1950. Unsurprisingly, these surges occurred during the mass mobilisations for World War I and World War II. During World War II, the US tax-to-GDP ratio nearly doubled between 1940 and 1945 to reach 27.7 percent. Despite fluctuations, the UK and US ratios remained close to their 1945 figures in 2008 (Ortiz-Ospina & Roser, 2016b). During the Long Boom, France and Sweden experienced the most sustained expansion in tax revenue among the four countries. France’s tax-to-GDP ratio increased from 28.5 percent to 44.7 percent between 1950 and 1980, while Sweden’s ratio rose from 21.3 percent to 46.4 percent over the same period. By 2007, France and Sweden’s tax-to-GDP ratios had increased to 49.3 percent and 48.3 percent respectively (Ortiz-Ospina & Roser, 2016b). Note that figures71 for France and Sweden in 2007 in Figure 5.1 are substantially higher than those recorded in the OECD’s Global Revenue Statistics Database. According to this source, France had a tax-GDP-ratio of 42.5 percent in 2007, while Sweden’s ratio was 44.9 percent (OECD, 2020a). The discrepancy points to the conceptual, technical and data-related challenges that must be tackled in order to produce accurate, consistent and comparable estimates of key economic indicators.

71 Based on Piketty (2014), http://piketty.pse.ens.fr/en/capital21c2

124

Figure 5.1 Tax-to-GDP Ratios for US, UK, France and Sweden, 1868-2008

Source: Ortiz-Ospina and Roser (2016b).

Over a much shorter timescale, the same upwards trajectory is observed for the 37 member states of the OECD. The unweighted average tax-to-GDP ratio has risen steadily from 24.9 percent in 1965 to 34.2 percent in 2017 (OECD, 2019c: 7). However, it is important to note the wide variations in ratios among the different member states, ranging from a high of 46.1 percent in France to a low of 16.1 percent in Mexico in 2018. Figure 5.2 depicts the tax-to-GDP ratios of five liberal welfare capitalist states between 1990 and 2017, compared to the OECD average. While the OECD average has increased by 2.3 percentage points, the tax-to-GDP ratios in Canada and New Zealand have declined, and those in the US, UK and Australia have recorded small increases of less than 1 percentage point. All five countries have tax-to-GDP ratios below the OECD average, with Australia recording the second lowest ratio at 28.5 percent (OECD, 2020a). However, even relatively low-taxing Australia experienced a six-fold tax-to-GDP ratio increase from 5 percent to 30 percent between 1902 and 2002, with the most dramatic rise in World War II (Reinhardt & Steel, 2006: 2).

125

Figure 5.2 Tax-to-GDP Ratios in Liberal Welfare Capitalist States, 1990 and 2017

36.2 35.1 34.2 32.9 33.3 32.8 31.9 32.1

28.1 28.5 26.8 26.0

United States Australia OECD Average United Kingdom Canada New Zealand 1990 (%) 2017 (%)

Source: OECD, 2020a

Finally, while taxation has become the largest contributor to government coffers for all OECD countries, and most countries in general, it is not the sole source of government revenue. Across the OECD, the average non-tax revenue-to-GDP ratio was 7 percent in 2017. However Norway, a major oil producer, has a ratio of 17 percent compared to just 2 percent for Chile (ICTD/UNU-WIDER, 2020). This difference has obvious implications with respect to how a country such as Norway, with a high ratio of non-tax revenue, might approach the financing of BI in a different way to most other advanced countries. Total government expenditure has broadly mirrored the dramatic increase in levels of taxation over the last 150 years, but with even more violent oscillations (Ortiz-Ospina & Roser, 2016a). Figure 5.3 shows total public expenditure-to-GDP ratios for the same four industrialised countries depicted in Figure 5.1. In 1880, total public spending ranged from a low of 3 percent in agricultural Sweden to a high of nearly 17 percent in an economically depressed France, a nation struggling with the burden of reparations for the Franco-Prussian War (Hobsbawm, 1996a; Jörberg, 1965; Ortiz-Ospina & Roser, 2016a).

126 Figure 5.3 Total Public Expenditure-to-GDP Ratios for US, UK, France and Sweden, 1880-2011

Source: Ortiz-Ospina and Roser (2016a)

The most arresting illustration of the volatility in public spending is the example of the UK. British public expenditure exploded from below 10 percent of GDP in 1914 to above 70% in 1916, at the height of World War I. Spending crashed to 27 percent by 1920, spiked above 70 percent as World War II ended in 1945, and fell again to 37 percent by 1949. Some fluctuations occurred post-World War II, but the overall trend was towards higher overall levels of public spending as a share of national income. By 2011, total public expenditure ratios among the four countries were clustered between 44 percent in the US and 58 percent in France (Ortiz-Ospina & Roser, 2016a).

The period 1993-2019 spanned the high point of neoliberal globalisation, China’s economic rise, the GFC and the Great Recession. During this period, the average public expenditure ratio in Advanced Economies72 fell from 43 percent to 39 percent, for Emerging Market and Middle-Income Economies the average ratio rose from 22 percent

72 IMF list of Advanced Economies is similar but not identical to the OECD list of nations (see IMF Fiscal Monitor, IMF, April 2020).

127 to 32 percent, while the average ratio among Low-Income Developing Countries remained around 19 percent (IMF, 2020). Across the OECD, average total government expenditure-to-GDP was 40.6 percent in 2016, just above its level before the GFC in 2007. This compares to average ratios for total government revenues of around 38 percent73. Public expenditure ratios ranged from a high of 56 percent of GDP in France to a low of 27 percent in Mexico. For the five liberal welfare capitalist states, general government expenditure in 2016 was 36.7 percent in Australia, 41.5 percent in Canada, 38.7 percent in New Zealand, 41.5 percent in the UK and 37.8 percent for the US (OECD, 2019a: 33, 261).

Besides the general increase in state taxation and expenditure ratios, four other trends stand out in terms of the evolution of fiscal systems in advanced countries. These four trends are: the differences in tax structure among countries; the broad, but not uniform, shift towards the centralisation of tax collection; the sustained increase in social spending in aggregate and proportional terms; and the relationship between expanded tax and transfer systems and reduced income inequality. These changes in the shape, size, purpose and impact of taxation and expenditure are relevant to any consideration of social reform in specific national and regional settings.

In relation to tax structure, OECD countries fall into three broad groupings. In 2017, taxes on personal and corporate income tax accounted for the highest share of fiscal revenue in 18 countries, while social security taxes74 were the largest revenue raisers in 11 countries, and consumption tax contributed the most revenue to government coffers in 7 countries (OECD, 2019c: 8). As an average share of total taxation across the OECD in 2018, income tax accounted for 33.3 percent, social security contributions for 27 percent, consumption tax for 32.5 percent, and property taxes for just 5.5 percent (OECD, 2020). Table 5.1 shows the tax structure for the five liberal welfare capitalist states compared to the OECD average. What stands out in relation to these five relatively low taxing advanced countries is the high proportion of total tax revenue derived from taxing personal income, company profits and capital gains75, a greater

73 Note that average revenue-to-GDP ratios are higher than average tax-to-GDP ratios, due to the inclusion of non-tax revenues. 74 Note that social security taxes or contributions are excluded from some measures of government taxation but included in government revenues (ICTD/UNU-WIDER, 2020). 75 The UK is an exception but has significant social security contributions.

128 reliance on property taxes than most other OECD countries, and lower than average social security contributions.76 In a major review of Australia’s tax and transfer system, Quiggin, Klein, Dunlop, Henderson, and Goodall (2020: 29) calculated the ‘approximate percentage of total tax revenue from all levels of government’ for different Commonwealth direct and indirect taxes in 2014. The review found that personal income tax was by far the largest tax revenue source (40 percent), followed by company tax (17 percent), the GST (12.5 percent) and a variety of excises (8 percent).

The variation in tax structures among countries, alongside the general trend towards higher aggregate taxation, has spawned extensive and controversial literature on optimal taxation (Abel, 2007; Commonwealth of Australia, 2010; Mirrlees, 1976; Mirrlees et al., 2011; Piketty & Saez, 2012; Røed & Strøm, 2002; Saez, 2001; Saez, Slemrod, & Giertz, 2012; Sandmo, 1976). This literature—the robustness of its findings, and the ways in which it is interpreted—has clear relevance to the design principles underpinning BI in general, and to specific UBI and NIT schemes. These issues will be addressed in greater detail in Section 5.3 below, and in Chapter 6.

Table 5.1 Tax Structure of Liberal Welfare Capitalist States, Percent of Total Taxation, 2017

Country/Area Taxes on Social security Taxes on Taxes on Taxes Other income, contributions payroll & property on taxes profits & workforce goods & capital services gains Australia 58.8 0.0 4.8 10.3 26.0 0.0 Canada 48.2 14.1 2.0 12.0 23.5 0.1 New Zealand 55.6 0.0 0.0 6.0 38.4 0.0 United Kingdom 35.7 19.2 0.3 12.5 31.9 0.0 United States 45.2 23.0 0.0 16.0 15.7 0.0 OECD Average 33.8 26.7 1.2 5.7 32.0 0.4

Source: OECD, 2020a.

As tax revenue has increased, tax collection has become increasingly, though unevenly, centralised at the national level of government. In 2017, central governments in unitary

76 Australia’s superannuation guarantee is not counted as a social contribution tax, but its compulsory nature gives it tax-like characteristics in practice.

129 OECD states collected 63.8 percent of tax revenue on average, with a range from 93.4 percent in New Zealand to 34.2 percent in France.77 For federal states, central governments’ share of total tax receipts ranged from 80.6 percent in Australia to 29.5 percent in Germany (OECD, 2019c: 12-13). To take one example of this long-running trend, US federal government revenue78 as a share of GDP increased from 3 percent to 20.8 percent in the period 1902-1992, while state and local government revenue increased from 0.8 percent to 9.3 percent and from 4 percent to 7.3 percent respectively (Ortiz-Ospina & Roser, 2016b).

The sustained increase in social spending among advanced countries is another striking aspect of fiscal history. The composition of public expenditure provides important insights into both the broad longitudinal patterns of social development and the institutions, cultures and social forces of different polities. Figure 5.4 shows public social spending79-to-GDP ratios in the period 1880-2015 for the five liberal welfare capitalist states plus, for the sake of comparison, social democratic Sweden and France. Social spending increased from close to zero in 1900 to between 17.2 percent in Canada and 31.7 percent in France by 2015 (Ortiz-Ospina & Roser, 2016a). For all five liberal welfare capitalist states, social spending accounts for more than 40 percent of total government expenditure. Figure 5.5 provides a breakdown of average general government expenditure by government function for OECD countries in 2016. Spending on education80 (13 percent), health (19 percent) and social protection (33 percent) comprise 65 percent of all government spending (OECD, 2019a: 35).

77 It should be noted that social security contributions in France comprise 52.1 percent of tax revenue. 78 Taxation is the largest but not the only source of government revenue. 79 ‘Social spending includes, among others, the following areas: health, old age, incapacity-related benefits, family, active labor market programmes, unemployment, and housing’ (Ortiz-Ospina & Roser, 2016a). 80 Education is not included in the category of public social spending in Figure 5.4 but clearly has a social purpose, among other functions.

130

Figure 5.4 Public Social Spending-to-GDP Ratios for Selected OECD Countries, 1880-2015

Source: Adapted from Ortiz-Ospina and Roser, (2016a)

Figure 5.5 OECD Average General Government Expenditure by Function, Percentage of GDP, 2016

33%

19%

13% 13%

9% 9%

4%

Other Defence & Public Economic Affairs General Public Education Health Social Protection order and safety Services

Source: Adapted from OECD, 2019a: 35.

131 Figure 5.6 provides a breakdown of general government expenditure by function in Australia, compared to the unweighted OECD average. In most areas, Australia’s expenditure as a share of GDP is at, or around, the OECD average. The only significant difference is in the area of social protection, where Australia allocates 9.7 percent of GDP compared to the 13.3 percent OECD average. This is largely explained by Australia’s highly targeted transfer system that relies mainly on flat rate benefits based on household composition with various income and assets tests (Quiggin et al., 2020).

Figure 5.6 General Government Expenditure by Function in Australia Compared to OECD Average, Percentage of GDP, 2017

13.3

9.7

7.8 7.2

5.8 5.4 5.1 4.7 4.3 3.8

2.2 2.1 2 1.8

0.9 1 0.5 0.6 0.6 0.7

General public Defence Public order and Economic affairs Environmental Housing and Health Recreation, Education Social protection services safety protection community culture and amenities religion Australia OECD average

Source: OECD, 2019b: 71

Finally, a large number of empirical studies have attempted to measure the pre-tax and post-tax distributions of income and wealth for various countries, regions and groups. While there are some disagreements regarding methods, data sources and findings, there is considerable evidence that tax and transfer systems do have a progressive redistributive effect on incomes in OECD countries. In a 2012 study of OECD countries, Joumard, Pisu, and Bloch (2012: 38) found that, compared to pre-tax incomes: ‘Inequality in income after taxes and transfers, as measured by the Gini index, was about 25% lower … in the late 2000s.’ More recently, Ortiz-Ospina and Roser (2016b) estimated that tax and transfers reduced the unweighted average income inequality by

132 ‘around one-third’ among 35 OECD countries. It is important to emphasise that there is considerable variation among OECD countries, in terms of the size, structure and progressivity of their tax and transfer systems. In addition, while it can be concluded that tax and transfers can reduce income inequality compared to pre-tax income distributions, this effect has not been sufficient to prevent rising income inequality in rich countries over the last 25 years (Milanovic, 2019).

The five trends described in this section have significant implications for evaluating the feasibility of financing BI schemes through taxation. First, both the rapid spikes and the long-period increases in aggregate taxation provide clear evidence that major fiscal expansions occur. The US and UK both had periods where tax ratios roughly doubled in the space of five to ten years; while Sweden experienced a more than six-fold increase in its tax-to-GDP ratio between 1913 and 1989 (Ortiz-Ospina & Roser, 2016b). These facts together suggest that the proposition of financing (at least some) of the UBI and NIT schemes described in Chapter 4 through the tax system lies, while not in the realm of fantasy, within the bounds of pragmatic policy debate. Second, existing differences between countries, as regards the level and structure of taxation, have implications for the immediate fiscal feasibility, political attractiveness and distributional effects of BI. The politics of raising a particular existing tax, or introducing a new impost, will differ from country to country. There is always the potential for the politics and economics of financing BI to diverge in different spatial, temporal and institutional settings. Third, the trend in most OECD countries towards centralisation of tax collection at the national level suggests that a national approach to BI is the most logical pathway to policy implementation. This has implications for the design of any BI scheme as well as for the politics of BI. Fourth, the dramatic increase in social spending demonstrates both a general need for social protection and the durability of this form of public expenditure, despite the neoliberal assaults on its legitimacy in recent decades. Such a rapid and sustained increase in social spending shows Polanyi’s (2001) protective countermovement in action, as societies have instituted systems of social protection, however flawed, throughout the tumult, violence and affluence of the twentieth century. The public age pension, in its various forms in different advanced countries, is the closest approximation of a categorical BI to have achieved policy implementation as a consequence of this expenditure trend. The widespread cultural acceptance and

133 entrenched institutional status of age pension schemes, together with public resistance to political attempts to undermine them on the grounds of their purported fiscal unsustainability, may serve as a model for BI going forward. Fifth, evidence regarding progressive taxation and transfer payments reducing post-tax levels of income inequality suggest that UBI and NIT schemes financed through taxation could contribute to reversing the trend towards increased inequality of incomes observed in advanced countries in recent decades. Such a reduction, if it were to occur, would reduce income constraints on real freedom.

5.3 Tax Theory and Basic Income

The principles, purposes and impacts of taxation have been important concerns of most schools of modern political economy. Tax theory is steeped in complex, unresolved debates, regarding the ethics of distribution and the economic efficiency and incentive effects of different levels and types of taxation. Tax theory runs the gamut from the populist simplicity of Henry George’s ‘Single Tax’ to the highly technical and controversial world of Optimal Tax Theory (OTT). The French Physiocrats, often considered the first modern branch of political economists, advocated a single land tax, reflecting their view that agriculture was the only productive sector of the economy and the sole source of increases in net output (Blaug, 1985: 28). British Classical Political Economy included extensive consideration of the principles of taxation. Adam Smith, for example, (Smith in Mirrlees et al., 2011: 22) included his four canons of taxation in the The Wealth of Nations: i) The subjects of every state ought to contribute towards the support of the government, as nearly as possible, in proportion to their respective abilities ... ii) The tax which the individual is bound to pay ought to be certain and not arbitrary ... iii) Every tax ought to be levied at the time, or in the manner, in which it is most likely to be convenient for the contributor to pay it. iv) Every tax ought to be so contrived as to take out of the pockets as little as possible, over and above that which it brings into the public treasury of the state.

134 Smith provided an empirically driven analysis of taxation in Book V, Chapter II of The Wealth of Nations. He argued that ‘capitation’ (or poll) taxes were flawed on several grounds and that indirect ‘tax upon the necessaries of life’ and ‘direct tax upon the wages of labour’ would both serve to push up wage rates (Smith, 1937: Book V, Chapter II). Blaug (1985: 59-60) summarises Smith’s views on tax incidence as: ‘all taxes fall ultimately on landlords because of their ownership of a fixed immobile resource’. Smith expressed some admiration for the Physiocrats’ land tax without committing to it, and his analysis contains explicit and implicit assumptions regarding the respective demand elasticities of labour and consumer goods (Blaug, 1985: 59-60). David Ricardo dealt with tax theory and practice at length in his Principles of Political Economy and Taxation (1817). Based on certain assumptions regarding the negative relationship between specific taxes and capital accumulation, Ricardo arrived, by a process of elimination, at a position supportive of a species of land tax (Blaug, 1985: 134-135). Ricardo considered ‘ground rent, being a return to a nonreproducible natural agent … eminently suitable for taxation’ (Blaug, 1985: 134-135). The idea was taken up by the political economist and philosopher J.S. Mill81 in 1848, then found its final significant expression in the work of the influential autodidact Henry George. Interestingly, marginalist economists Walras and Wicksteed, influenced by Ricardo’s theory in various ways, both supported ‘land nationalisation, albeit with full compensation’ (Blaug, 1985: 85)

Marx occupies a more curious position in relation to tax theory, given his advocacy of the overthrow of capitalism and with it the abolition of private property, wage labour and production for profit. Nonetheless, Marx and Engels did include several explicit tax- based demands in The Communist Manifesto, including the ‘application of all rents of land to public purposes’, ‘a heavy progressive or graduated income tax’, and the ‘abolition of all rights of inheritance’ (Marx & Engels, 1969). Further, Ireland (2019) claims that both Marx and Engels made a ‘string of prescriptive observations’ in favour of ‘progressive taxes, both on capital and income’ with ‘a strong preference for direct over indirect taxation’ and ‘restrictions on inheritance’ in various works.

Alfred Marshall broke with the earlier consensus regarding the desirability of land tax, arguing that other factors of production also earned rents. Marshall, along with other

81 Mill also rejected progressive income tax but supported a progressive inherited tax (Blaug, 1985: 214).

135 Neoclassical Economists, grappled with the application of the theory of diminishing marginal utility to income taxation and also explored the case for taxing increasing and decreasing cost industries at different rates (Blaug, 1985: 84, 336-338, 363-364). Blaug has argued that Neoclassical attempts to prove the superiority of one or other of the criteria of ‘equal absolute sacrifice’, ‘equal proportional sacrifice’ or ‘equal marginal sacrifice’ as the guiding principle of taxation was ultimately a theoretical failure. However he concedes that, over time, ‘the idea of equal marginal sacrifice gained more and more adherents simply because it justified progressive income taxation without having to specify the precise shape of the utility-of-income curve’ (Blaug, 1985: 338). Welfare Economics constitutes the final major body of orthodox economic tax theory, prior to the systematisation of Optimal Tax Theory in the 1960s and 1970s. Contributions range from Pareto’s highly individualistic and abstract theory of optimum welfare to the normative judgements and pragmatic policy implications of Pigouvian welfare economics.82

Keynes followed Pigou, and ultimately many orthodox economists, in supporting higher taxes for public works during the Great Depression (Blaug, 1985: 697). However, taxation played several roles in a Keynesian macroeconomic framework that aimed to smooth the boom and bust cycles endemic to capitalist economies. He had a clear understanding of the relationship between taxation and income distribution and its concomitant effect on consumer demand, writing: ‘If fiscal policy is used as a deliberate instrument for the more equal distribution of incomes, its effect in increasing the propensity to consume is, of course, all the greater’ (Keynes as quoted by Pressman, 1997: 30). Consequently, ‘Keynes advocated high tax rates on unearned income, capital gains, and inheritance, all forms of income that are received disproportionately by the wealthy’ (Pressman, 1997: 30).

Theorising optimal taxation depends, in the first instance, on defining key criteria, such as equity and efficiency, then assigning a weighting to each. Hypotheses regarding the relationship between taxation and incentives can then be formed, based on estimates of the size of demand and supply elasticities in relation to different scenarios, and tested against empirical evidence and mathematical modelling. Institutional path dependence

82 For a detailed overview of Welfare Economics, see Blaug (1985: 585-608).

136 (see Pierson, 1998) and learning-by-doing are two other factors (see Chapter 7) that should be taken into consideration when assessing the relationship between taxation and social reform.

There is an unsurprising overlap between the literature on optimal taxation and the literature on wealth and income inequality (see Piketty & Saez, 2012; Saez, 2001). This overlap includes the relative importance of different normative criteria, the effects of specific types of direct and indirect taxation, technical estimates of the size of various elasticities, and interpretations of relevant data. OTT was pioneered by James Mirrlees83 and Peter Diamond in the 1970s, with major subsequent contributions by other economists, including Tony Atkinson, Joseph Stiglitz, Emmanuel Saez and Thomas Piketty. Mirrlees approached the question of optimal taxation within a utilitarian and optimising normative framework, while using a mathematical method, and maintaining an interest in public policy (Blundell & Preston, 2019; Mirrlees et al., 2011). Sandmo (Sandmo, 1976: 37) described the ‘original departure point for the economic theory of optimal taxation’ as the ‘criterion of efficiency’, in which the ‘the optimal tax system is one which minimises the aggregate deadweight loss for any given tax revenue or level of public expenditure’. In basic terms, OTT uses demand and supply elasticities to model the effects of different tax and expenditure configurations. As Mirrlees et al., (2011: 29) expresses it: The size of the deadweight loss is related to the elasticities of demand and supply for the item being taxed—in other words, the extent to which demand and supply respond to changes in price. The more elastic is the demand for a product with respect to its price, the more a given tax increase will reduce demand for it. High elasticities therefore mean large deadweight losses for a given change in tax.

This framework has been extended and amended in various ways, in relation to specific forms of taxation. For example, focusing on income taxation, Saez et al. (2012: 4-5) model what they term the elasticity of taxable income (ETI) because: ‘Individuals can respond to taxation through other margins [than adjusting their hours of work] such as intensity of work, career choices, form and timing of compensation, tax avoidance, or tax evasion’. The implications of this literature in relation to labour supply,

83 Building on much earlier insights of Edgeworth, Sidgewick and Ramsey (Blundell and Preston, 2019).

137 consumption and economic growth will be explored further in Chapters 7 and 8. The relevance of OTT to this chapter includes its impact on the ways in which governments and international institutions conceptualise tax system design and its direct effect on modelling BI scenarios. We see evidence for the ongoing influence of OTT in major reviews of tax and transfer systems. For example, the UK report Tax by Design (Mirrlees et al., 2011: 494) draws extensively on this literature before recommending ‘a radical set of reforms aimed at creating a much more efficient and effective tax system’ that ‘would take the UK tax system much of the way towards being a progressive, neutral system’. Similarly, OTT has influenced major reviews of the Australian tax and transfer system, including Australia’s future tax system: Report to the Treasurer84 (Commonwealth of Australia, 2010) and A Stocktake of the Tax System and Directions for Reform: Five Years after the Henry Review (Stewart, Moore, Whiteford, & Grafton, 2015). Finally, the literature on optimal taxation is reflected in the OECD’s ‘Fundamental Principles of Taxation’ (OECD, 2014). The OECD principles of taxation are: neutrality; efficiency; certainty and simplicity; effectiveness and fairness; and flexibility. The influence of OTT is clearly evident in the explanation of neutrality which states: A neutral tax will contribute to efficiency by ensuring that optimal allocation of the means of production is achieved. A distortion, and the corresponding deadweight loss, will occur when changes in price trigger different changes in supply and demand than would occur in the absence of tax (OECD, 2014: 30)

The OTT terrain was extended from an initial primary focus on efficiency optimisation to consideration of distributional concerns (Sandmo, 1976). For (Atkinson, 1996: 25): The central problem considered in the optimum income tax literature is the choice of a tax schedule which both raises revenue for other purposes, such as the provision of public goods, and achieves the desired redistribution among different taxpayers.

In Public Economics in Action: The Basic Income/Flat Tax Proposal, Atkinson (1996) provides a direct link between OTT and BI financing. According to Atkinson, adopting this approach permits the investigator to address ‘the possible disincentive effects which are missing from much discussion of the desirability of redistribution, as typified

84 Commonly referred to as ‘The Henry Review’ after then Treasury Secretary Ken Henry.

138 by the cake-sharing analogy which is the basis for many philosophical discussions of principles of justice’ (Atkinson, 1996: 29). Further, he asserts that exploring the equity- efficiency policy trade-off in this manner ‘allows us to identify the differences between different social objectives’ (Atkinson, 1996: 29). In stylised models,85 Atkinson draws both general and (tentative) specific conclusions regarding the equity-efficiency trade- off across a range of BI/FT scenarios. These include the general insight that: ‘The level of the optimum tax rate clearly depends sensitively on the labour supply elasticity’ (Atkinson, 1996: 29-30). He also estimates the optimal tax rates for BI/FT schemes in relation to different normative criteria86 for a range of labour supply elasticities (Atkinson, 1996: 24-46). Atkinson (1996: 44) concludes that the point of modelling different BI/FT scenarios within an OTT framework is ‘not to say that the tax rate should be 30 per cent or 40 per cent, nor to derive simple policy rules, but to explore the structure of the arguments’. These pertain, in particular, to ‘the consequences of different distributional judgements’ and their relation to particular interpretations of the equity-efficiency trade-off (Atkinson, 1996: 44). To put this simply, the weighting attached to a particular criterion, such as equity, efficiency or simplicity, affects the optimal tax rate and the optimal tax structure.

In Capital and Ideology, Piketty (2020: 982) provides another, admittedly unorthodox, example of the application of some 0TT principles to articulate his vision of ‘Elements for a Participatory Socialism’. This includes a hybrid capital endowment/basic income scheme, ‘the social and ecological state’, and some industrial democracy and other measures.87 The illustrative tax schedule to finance Piketty’s program is set out in Table 5.2.88 Piketty states that the tax rates depicted in Table 5.2 ‘are intended to show the range of possibilities and stimulate debate’ (Piketty, 2020: 988). He further underscores this point by stating: ‘The figures given here are for illustrative purposes only. Setting precise parameters will require extensive discussion and broad democratic deliberation: it is not my intention to end all debate with this book’ (Piketty, 2020: 982).

85 For full details see Atkinson (1996), Chapters 1-3. 86 For example, contrasting a Rawlsian maximinning primary social goods criterion with a ‘charitable conservatism’ criterion, among others (Atkinson, 1996). 87 Drawing inspiration from both Thomas Paine and Tony Atkinson. 88 Table 17.1 in Piketty, 2020: 982.

139 Nonetheless, Piketty’s prioritisation of a strong equity criterion is clear in his steeply progressive schedule of property and income taxes.

Table 5.2 The Circulation of Property and Progressive Taxation

Progressive tax on property Progressive tax on income (funding of the capital endowment allocated (funding of basic income and social and to each young adult) ecological State) Multiple of Annual tax on Tax on Multiple of average Effective tax rate average property inheritances income (including social wealth (effective tax (effective tax contributions and rate) rate) carbon tax)

0.5 0.1% 5 0.5 10% 2 1% 20 2 40% 5 2% 50 5 50% 10 5% 60 10 60% 100 10% 70 100 70% 1000 60% 80 1000 80% 10000 90% 90 10000 90%

Source: Piketty, 2020: 98289

The property taxes in Table 5.2 could, according to his estimation, provide a capital endowment to all 25-year-olds in advanced countries of around €120,000 at a cost of 5 percent of national income (Piketty, 2020: 983-984). Piketty’s illustrative ‘minimum basic income for individuals with no other resources’ is set at ‘60 percent of average after-tax income’ and the ‘amount would decline as other income increased’ (Piketty, 2020: 1002). The estimated cost of this NIT/GMI-style scheme is 5 percent of national income for advanced countries (Piketty, 2020: 1002). Piketty departs from most OTT

89 ‘Interpretation. The proposed tax system includes a progressive tax on property (annual tax and inheritance tax) funding a capital endowment for all young adults and a progressive tax on income (including social contributions and progressive tax on carbon emissions) funding the basic income and the social and ecological State (health, education, pensions, unemployment, energy, etc.). This system favouring the circulation of property is one of the constituting elements of participatory socialism, together with a 50-50 split of voting rights among workers, representatives and shareholders in corporations. Note: in the example given here, the progressive property tax raises about 5% of national income (allowing to fund a capital endowment of about 60% of average net wealth, to be allocated to each young adult at 25 years of age) and the progressive income tax about 45% of national income (allowing to fund an annual basic income of about 60% of after-tax income, costing about 5% of national income, and the social and ecological State for about 40% of national income). Sources: see piketty.pse.ens.fr/ideology.’ (Piketty, 2020: 982).

140 literature in arguing ‘there is no real justification for indirect taxes (except when necessary to correct an externality, as in the case of the carbon tax)’ and he rejects VAT entirely. He further argues that his schedule of steeply progressive marginal income tax rates will ‘eliminate pointless high salaries … while at the same time increasing overall economic and social efficiency’ (Piketty, 2020: 1001, 1004).

Normative judgements, empirical analysis and mathematical technique have all contributed to tax theory, from Smith’s ‘four canons’ to Mirrlees’ optimal tax theory. The resultant insights, claims and debates are useful in evaluating different pathways to financing BI through the tax system, based on various criteria and assumptions. For Atkinson and Piketty, illustrative schemes are worthwhile experiments that can raise interesting questions and promote further debate. In the final analysis, however, taxation is a matter for ‘democratic deliberation’ (Piketty, 2020: 982) and the hard work of achieving ‘political consensus’ (Blaug, 1985: 338).

5.4 Financing UBI and NIT Schemes through the Tax System

This section presents specific proposals and mechanisms for financing the UBI and NIT schemes for liberal welfare capitalist states described in Chapter 4 through the tax system. It is important to stress here that, while some of the financing options presented are prescriptive, most are for illustrative purposes only. Table 5.3 details the financing proposals for UBI-style schemes for Canada, New Zealand, the UK and the US.90 Table 5.4 provides the same information in relation to Australian UBI-style proposals. The proposed financing arrangements vary widely, from menus of possible tax and expenditure changes, to assumptions regarding second order effects of BI on economic growth, through to recommendations and estimates modelled using static microsimulation techniques.

The two contemporary New Zealand proposals, and the older Canadian scheme, rely on variations of the BI/FT model already discussed in relation to Atkinson (1996). The Rankin (2017: 11) proposal would require a 12.7 percentage point increase in public

90 As described in Chapter 4, few of these proposals constitute pure UBIs, as some retain categorical elements in relation to age and disability.

141 revenue, bringing New Zealand’s government revenue-to-GDP ratio to 45.7 percent. The UK schemes canvas a range of financing options in discussion but rely on a combination of cutting tax expenditures, such as the Personal Income Tax Allowance (PITA), increasing the National Insurance Contribution (NIC) tax, and personal income tax (PIT) increases in their respective microsimulations91 (Martinelli, 2017; Reed & Lansley, 2016; Torry, 2016). Martinelli’s most generous UBI scenario (Full Scheme 2) would have a net cost £184bn. Based on a projected national budget of £772 billion in 2016- 17, financing Martinelli’s Full Scheme Two would equate to a 23.8 percent increase in government outlays to ensure revenue neutrality (Martinelli, 2017: 45; Office for Budget Responsibility, 2020). Yang and Stern’s financing proposals are less precise and rely on a series of assumptions regarding the second order effects of BI on economic growth, consumption and tax receipts. In particular, former US Democratic Presidential candidate, Andrew Yang (2018), has been criticised for including unrealistic economic growth assumptions in relation to financing his Freedom Dividend Proposal. The Tax Foundation’s Kyle Pomerleau92 has estimated that these leave a US$1.48tn hole in Yang’s UBI plan (Pomerleau, 2019).

The financing arrangements for some Australian proposals for UBI-style schemes are detailed in Table 5.4. Here again, it is important to stress that these are, for the most part, not pure UBI schemes in that they include some categorical elements in relation to age and disability. Henderson’s original 1975 proposal for a Guaranteed Income Plan (GIP) with universal and categorical rates, proposed a flat tax of 40 percent on market income with a 45 percent surtax rate applied to the top 5 percent of income units (Ingles, 1975). Schemes such as Dawkins et al. (1998) 1a and Scutella (2004) System 1 use the BI/FT model to calculate a tax rate necessary to finance schemes that would provide maximum transfer benefits to all recipients. The flat effective marginal tax rates (EMTRs) on market income are estimated at 57 percent and 55 percent respectively. Turning to more contemporary proposals, Cowan’s (2017) most generous scheme relies on a combination of taxing BI, a 40 percent GDP or a 4.2 percent annual land tax. Phillips (2018) similarly generous scheme would require either a 54 percent flat tax on market

91 Reed and Lansley’s (2016: 19-20) microsimulation leaves their UBI proposal still £8.2bn short of revenue neutrality which they discuss financing in different ways. Martinelli’s are revenue neutral. 92 Here it must be noted that Pomerleau relies on a range of other economic assumptions to reach his conclusions.

142 income or a 33 percentage point increase in marginal tax rates for all brackets,93 together with abolishing the Medicare Levy and all tax offsets. Finally, Ingles et al. (2019) present an interesting combination of a 37 percent flat tax on all market income with an effective 2 percent annual wealth tax to finance the AUD$264 billion increased spending required to achieve revenue neutrality for their Full Categorical BI (Option 4).

There are three points to highlight regarding financing these UBI-style schemes through the tax system. First, the schemes that come closest to satisfying both the ‘universality’ and ‘adequacy’ criteria of BI would require very substantial increases in taxation in order to achieve revenue neutrality. Second, these increases, even for the most generous schemes, would see increases in tax-to-GDP ratios consistent with the levels of the highest taxing advanced OECD countries. For example, financing the AUD$254bn net cost of Phillips’ (2018) proposal would require an increase in Australia’s total taxation receipts for all levels of government from AUD$528.6bn to $782.6bn for 2017-2018. This would take Australia’s total tax-to-GDP ratio from 28.6 percent to 42.3 percent (ABS, 2019c, 2020a). This would still put Australia’s tax take below the ratios of France, Denmark, Belgium, Sweden and Finland in 2018 (OECD, 2020). Third, the BI/FT and the BI/PIT94 schemes are popular choices for microsimulations. However, as many authors themselves stress, these illustrative schemes may not constitute an optimal choice, on either efficiency or equity grounds, in any real-world BI scenario.

93 Tax on the first dollar of market income would be paid at 33 percent with a top marginal rate of 78 percent (see Phillips, 2018). 94 Here BI/PIT scheme refers to proposals that rely on increases in marginal personal income tax rates across brackets, rather than a uniform flat tax.

143 Table 5.3 Financing UBI-Style Schemes through the Tax System in Four Liberal Welfare Capitalist States

Authors Gross Tax Measures Expenditure and Cost/Percent of Savings Country GDP (national currency)95 Lerner, $198.6bn/ 20.8 41.41% federal flat PIT. Netting out benefits Clark and replaced by BI. Needham (CAN} Rankin $37.2 bn96/ 14 33% flat PIT on non-UBI income. Various measures. (NZ)

TOP $48.8 bn97/ 15.5 33% flat tax on all non-UBI sources of Various measures. (NZ) income; 1% tax on value of equity in all property. Reed and £209.5 bn/ 10.7 Abolish PITA; NIC lower earnings limit All benefits left in Lansley reduced to zero; NIC levied at 12% on all payment, BI (UK) earnings; PIT increased across three bands. included in means tests for Child Benefit. Torry Not stated Abolish PITA; NIC levied at 12% on all All benefits left in (UK) earnings; PIT increased across three bands; 3 payment, BI percentage increase in tax rates across all included in means bands. tests. Martinelli £288 bn/ 13.9 Eliminate PITA, abolish upper and lower Withdrawal of most Full thresholds for national insurance benefits, BI Scheme 1 contribution (NIC) tax, increase marginal included in Housing (UK) income tax rates by 4 percentage points and Council benefit. across all bands. Martinelli £326 bn/ 15.7 Eliminate PITA, abolish upper and lower NIC Withdrawal of most Full tax, increase marginal income tax rates by 8 benefits, BI Scheme 2 percentage points across all bands. included in Housing (UK) and Council benefit. Stern $2.7tn/ 14.4 Menu of funding possibilities (see Stern, Netting out (some) (US) 2016: 212-215): cut tax expenditures; benefits replaced introduce VAT; consider financial transaction by BI. tax (FTT), resource taxes and wealth taxes. Yang $2.8tn/ 13.60 10% VAT; FTT; carbon tax $40 per metric Netting out (some) (US) tonne; remove cap on social security and benefits replaced payroll tax; reform capital gains tax. by BI. Sources: Lerner, Clark and Needham, 1999; Rankin, 2017; TOP, 2020; Torry, 2016; Reed and Lansley, 2016; Martinelli, 2017; Stern, 2016; Yang, 2018; Pomerleau, 2019.

95 Note: All GDP estimates in current prices for year closest to year of publication of corresponding BI proposal. See Statistics Canada, Gross domestic product, 2020; StatsNZ, GDP, 2020; ONS, Gross Domestic Product at market prices: Current price seasonally adjusted £m, 2020; BEA, Table 1.1.5. Gross Domestic Product, 2020. 96 Author’s estimate. 97 Author’s estimate.

144 Table 5.4 Financing UBI-Style Schemes through the Tax System in Australia

Authors Gross Cost/ Percent Tax Measures (national Expenditure of GDP (national currency) Savings (national currency)98 currency) Henderson Not stated 40 percent flat tax on market Netting out benefits GIP income; 5% surtax on top 5% replaced by BI. income units. Dawkins, Beer, Not stated 57 percent EMTR on market Netting out benefits Harding, Johnson and income and tax credits after BI replaced by BI. Scutella payment level achieved. Option 1a Dawkins, Beer, Not stated 45 percent EMTR on market Netting out benefits Harding, Johnson and income and tax credits after BI replaced by BI. Scutella level achieved. Option 1b Scutella Not stated 55% marginal tax rate. Netting out benefits System 1 replaced by BI. Cowan 1 $418.5bn/ Taxing BI, 40% GST, or annual Netting out benefits 23.3 4.2% land tax. replaced by BI. Cowan 2 $119.4bn Taxing BI, tax increases. Nil. /6.6

Cowan 3 $174.2bn/ Taxing BI, tax increases. Netting out benefits 9.7 replaced by BI. Phillips $378bn/ 33 percentage point increase Netting out benefits 20.4 in PIT marginal tax rates, or replaced by BI. 54% flat tax on all market income; abolish Medicare Levy and all tax offsets. Ingles, Phillips and Not stated. 37% flat PIT on all market Netting out benefits Stewart Net cost $264bn income; 2% annual wealth replaced by BI. Option 4 tax. Sources: Commission of inquiry into poverty in Australia, 1975; Dawkins et al., 1998; Scutella, 2004; Cowan, 2017; Phillips, 2018; Ingles, Phillips and Stewart, 2019.

98 Note: All GDP estimates are in current prices for year closest to year of publication of corresponding BI proposal. See ABS, 2019b (5206001).

145 Chapter 4 described the design and fiscal cost of several NIT-style schemes. Here the focus is solely on NIT-style schemes for Australia (see Table 5.5). The key point to reiterate here is that, unlike the UBI model, the NIT relies on a combination of tapering out BI (reducing the level of payment received) and increases in taxation as market incomes rise to finance the scheme.

Table 5.5 Financing NIT-Style Schemes through the Tax System in Australia

Authors/Model Net Cost/ Percent Tax Measures (national Expenditure of GDP ($AUD)99 currency) Savings (national currency) Dawkins, Beer, Not stated 60% EMTR on private income Netting out benefits Harding, Johnson & <$30k; 30% EMTR on private replaced by BI. Scutella income between $30-$80k; Option 3 50% EMTR on private income > $80k; tax credits tapered out between $30k-$80k. Humphreys -$15bn 30% flat tax on PIT above $30k; Replacing all 30/30/30 NIT tapered out between $0- welfare benefits $30k; abolish Medicare levy; cut with BI. Fringe Benefits Tax to 30%. Quiggin 8-10 Tax increases; phase out GBI Netting out existing GBI between 20% and 120% of transfer payments average per capita income at (8%-10% of Illustrative Model 40% per additional dollar of national income). market income. Ingles, Phillips & $100bn 22.3% flat tax on market Abolish rent Stewart income; 1.5% wealth tax; 25% assistance; Option 3 taper based on income; abolish maintain other tax free areas. welfare benefits. Spies-Butcher, 103.45bn 12% increase across all PIT Netting out cost of Phillips & Henderson brackets; gradual tapering out Newstart. Model 3 of BI. Spies-Butcher, 126.1bn 14.5% increase across all PIT Netting out cost of Phillips & Henderson brackets; gradual tapering out Newstart. Model 4 of BI. Sources: Dawkins et al., 1998; Humphreys, 2005; Cowan 2017; Quiggin, 2017; Ingles, Phillips and Stewart, 2019; Spies-Butcher, Phillips and Henderson, 2020.

Here again, the modelled/proposed financing arrangements differ markedly, both in terms of the tax increases and the rates at which BI payments are withdrawn. This varies from (Humphreys, 2005) minimalist libertarian proposal that would reduce net

99 Note: All GDP estimates in current prices for year closest to year of publication of corresponding BI proposal. See ABS Cat. 5206001, 2019.

146 government expenditure by AUD$15bn100 due to a combination of a flat tax and a low NIT benefit with a steep taper, to Ingles et al. (2019: 387) AUD$100bn Option 3 financed via a 22.3 percent flat tax, a 1.5 percent effective annual wealth tax and a 25 percent taper rate on BI payments. Quiggin’s (2017) illustrative model of a Guaranteed Basic Income (GBI) and Spies-Butcher et al., (2020) Model 4 of an affluence-tested BI present as interesting alternative approaches. Quiggin (2017) emphases the “adequacy” criterion ahead of the “universal” criterion by stating that the: ‘aim of the of the GBI is to give all households a guaranteed basic income equal to 40 percent of average income’ and excluding the top two household income quintiles from receiving any benefit by using a steep taper or phase-out rate of the GBI. Spies-Butcher et al., (2020), on the other hand, combine a much lower base rate with a more gradual taper that sees some benefit received by those earning well above average incomes. The net cost of Spies- Butcher et al., (2020) Model 3 and Model 4 are $AUD103.5 and AUD$126.1bn, respectively. For illustrative purposes, these revenue neutral models include PIT increases across all tax brackets of 12 percent for Model 3 and 14 percent for Model 4. Model 4 also uses a somewhat steeper tapering out of BI in order to control costs.

Financing Model 4 (Newstart plus $75 as the base rate) through taxation would require increasing Australia’s total government receipts from AUD$528.6bn to AUD$654.7bn for 2017-2018. This would take Australia’s tax-to-GDP ratio from 28.6 percent to 35.4 percent, just above the OECD’s unweighted average of 34.3 percent in 2018 (ABS, 2019c, 2020a; OECD, 2019c). Here we can highlight the difference between UBI-style and NIT-style schemes with the same BI base rate, in terms of their respective fiscal impact. For example, paying AUD$18k per annum to around 16 million Australians of working age in 2017-2018 would have a gross cost of AUD$288 billion. Even after netting out the existing cost of unemployment benefits and a proportion of disability support covered by BI, the net cost would be dramatically higher than for the affluence- tested model (author’s calculations based on ABS, 2019a). This example draws attention once again to the issue of the fiscal churn. This occurs where you have a high number of individuals who receive the full BI payment and who then pay back a much higher amount in taxation. The use of the taper to reduce the fiscal impact of a given

100 Humphreys relies on various assumptions regarding second order effects of this NIT scheme. See Humphreys (2005: 19) for detail.

147 policy change at least gives the appearance of a smaller government footprint in relation to tax-to-GDP ratios, even if EMTRs remain the same.

This chapter has already described the evolution of Australia’s tax and expenditure system, its tax structure, and how its tax and expenditure ratios compare to other advanced countries. It has also detailed a variety of UBI-style and NIT-style schemes for Australia and compared these with similar proposals for other liberal welfare capitalist states. In this section on financing options for specific schemes, three factors have become clear. First, acknowledging the static nature of microsimulations, even fairly generous UBI-style schemes with BI set at the Age Pension rate would see Australia’s tax-to-GDP ratio remain below those of the highest taxing OECD countries. Second, several UBI-style and NIT-styles schemes would see Australia’s tax-to-GDP ratios increase to just above the OECD average level. Third, the tax changes proposed in most of the schemes described are not intended as an optimal set of arrangements, but as illustrative schemes that estimate the size of tax changes required. To further illustrate this last point, Section 5.4 concludes with an examination of the ‘multiple pathways’ to finance a BI scheme with a net cost of AUD$125bn, around the figure for the affluence- tested Model 4 (Spies-Butcher et al., 2020).

Table 5.6 provides a summary of different fiscal measures that could be employed to finance, in whole or in part, the AUD$125bn BI scheme. The ANU’s PolicyMod microsimulation showed that AUD$126.1bn could be raised by increasing PIT across all brackets by 14 percent (Spies-Butcher et al., 2020). Ingles (2016) has estimated that it would be feasible to raise AUD$130bn via wealth taxation with a deeming rate of 6 percent on aggregate investments. Australia’s Top 5 Tax Expenditures (main residence exemption from Capital Gains Tax (CGT)-discount component; main residence exemption; concessional taxation of superannuation earnings; concessional taxation of employer superannuation contributions; CGT discount for individuals and trusts (costs the federal budget well over AUD$100bn in revenue foregone) (Commonwealth of Australia, 2018). According to a Grattan Institute report, increasing the rate of the goods and services tax (GST) from 10 percent to 15 percent and broadening its base could have raised around $44bn in 2015 (Daley & Wood, 2015). Introducing a carbon tax of $50 per ton could raise around $23bn annually, and constitutes just one proposal for

148 company tax reform (Holden & Dixon, 2019). Finally, an increase in the budget deficit is another option that, at least initially, could finance the scheme in its entirety.

Table 5.6 Tax-Based Summary Table for Australian Basic Income

Fiscal Revenue (2017-2018) Policy Change Additional Additional Instrument AUD$bn Revenue Raised Revenue AUD$bn Required AUD$bn Personal 212.8 14.5% increase 126.1 -1.1 Income Tax across all brackets. Company Tax 86,764 Introduce $50 per 23.3101 101.7 ton carbon tax. Goods & 64,062 Increase rate from 44102 81 Services Tax 10% to 15%; broaden base. Wealth Tax 0103 5% deeming rate 130 -3.9 on aggregate investments (imputed asset income).104 Top 5 Tax (120.4)106 Abolish Top 5 Tax 100-120107 5-25 Expenditures105 Expenditures. Fiscal Deficit -10 Increase budget 125 0 deficit by $125bn.

Sources: ABS, 2019c; Holden and Dixon, 2019; Daley and Wood, 2015; Ingles 2016; Commonwealth of Australia, 2018; 2019.

101 Note there are many other alternative changes that could be made to company taxation, from reducing corporate tax evasion and loopholes, to introducing a broad-based mining tax. 102 Note: 2014-2015 figures. 103 This is somewhat misleading, given various taxes that could be considered wealth taxes are either included in other forms of commonwealth taxation (e.g. capital gains tax included in income tax; oil and gas levies that could be seen as national wealth taxes raised close to AUD$20 bn in 2017-2018); or levies at different levels of government (e.g. stamp duty and other property taxes at state and local levels). See 5506.0 - Taxation Revenue, Australia, 2018-19 (ABS, 2019c). 104 Note this is 2016 paper. 105 Main residence exemption from CGT – discount component; main residence exemption; concessional taxation of superannuation earnings; concessional taxation of employer superannuation contributions; CGT discount for individuals and trusts. 106 This is an estimate of revenue foregone. Revenue gain estimates from abolishing the tax concessions are lower in the case of both superannuation concessions and not available for the other three major tax expenditures. Treasury urges ‘particular caution’ in the ‘treatment of revenue gain estimates’. See Tax Expenditures Statement 2017 (Commonwealth of Australia, 2018). 107 It is clear that abolishing tax expenditures will not raise exactly the amount of revenue foregone. However, it must also be noted that other major tax expenditures that could be reduced or abolished cost the Commonwealth around AUD$30bn per annum in 2017-2018 (Martin, 2018).

149 Different combinations of these fiscal options would have different implications for both efficiency and equity, however these criteria are defined, measured and weighted. The general point to make here is that, at least in technical terms, it is not difficult to see a pathway towards financing a AUD$125bn BI scheme in Australia through some combination of these fiscal measures. A pathway that emphasises ‘efficiency’ in OTT terms might lean towards a combination of lump sum wealth taxation, increased GST revenues, a carbon tax and some reduction in distortionary tax expenditures. Whereas a pathway with a strong inequality aversion might favour wealth taxation, cutting tax expenditures and increasing top marginal PIT rates.

Conclusion

This chapter has answered, in the affirmative, the question of whether or not financing BI through the tax system is a feasible option for advanced countries. Notwithstanding reasonable caveats regarding the limitations of static modelling of a dynamic system, the combination of historical evidence and microsimulations demonstrates that advanced countries, such as Australia, have the fiscal resources to finance a meaningful BI scheme. This capacity established, the question of whether advanced countries should introduce a BI remains to be answered. The effects of different UBI and NIT schemes on wellbeing is, perhaps, the decisive factor in determining the desirability of implementing BI. This is the subject of Chapter 6.

150 Chapter 6: Basic Income and Wellbeing

Introduction

This chapter addresses the relationship between BI and wellbeing from three perspectives. First, it describes the empirical evidence from small-scale pilots of the policy in several advanced countries. Second, the static distributional effects of several of the proposed schemes discussed in Chapters 4 and 5 are outlined. Third, the potential of specific Australian proposals to enhance access to real freedom is assessed. Chapter 4 made clear the substantial fiscal cost of any worthwhile BI scheme in advanced countries, including the liberal welfare capitalist states. It further argued that NIT schemes held one advantage over UBI schemes, in terms of the former’s capacity to reduce fiscal churn. Chapter 5 presented clear evidence that advanced countries, including Australia, have the requisite fiscal resources to finance a meaningful BI scheme. However, the mere fact of being able to finance BI in general tells us little regarding the effects of a particular scheme on wellbeing.

There is no single definition of wellbeing, nor a uniform position on the relative importance of different indicators that might be reasonably included under this umbrella term. Having access to a secure, adequate income is only one facet of wellbeing, but it is correlated with other characteristics of this multidimensional subjective and social phenomenon. These characteristics include: financial comfort; good mental and physical health; opportunity to participate in family, social and civic life; and the chance to pursue personal interests.108 The interrelationship between access to some form of BI and other wellbeing indicators is fundamental to evaluating this reform’s potential to promote ‘justice and humanity’ on the one hand, and to serve as an ‘instrument of freedom’ on the other (Paine, 1999; Van Parijs & Vanderborght, 2017). The fact that there is no example of a country, or subnational region, implementing an adequate BI on an ongoing basis makes assessing the relationship between BI and wellbeing all the more difficult.

108 For a critique of ‘happiness economics’, see Skidelsky and Skidelsky (2012): Chapter 4; for a detailed analysis of wellbeing, see Wilkinson and Pickett (2011); Wilkinson and Pickett (2019).

151 Section 6.1 describes the very limited empirical evidence regarding the effects of BI on wellbeing, based on trials109 conducted in North America and Finland between the 1960s and 2020. Section 6.2 presents the static distributional effects of several of the UBI and NIT scenarios described in previous chapters. Section 6.3 returns to the ethics of BI. Here, three Australian BI schemes are assessed in relation to Van Parijs’ (1997) principle of distributive justice: real freedom for all. It includes a discussion on the likely implications of these schemes, in relation to income constraints and opportunity cost constraints on real freedom.

6.1 The Empirical Evidence on Basic Income and Wellbeing

The most directly relevant empirical evidence regarding the relationship between BI and wellbeing is the data collected and analysed as part of several small-scale trials.110 The trials relevant to this discussion were carried out in North America in the 1960s and 1970s, and Finland and Canada between 2017 and 2019.111 The design, objectives and duration of these trials were described in Chapter 1, and are further discussed in relation to labour supply, implementation and politics in subsequent chapters. The North American NIT-style experiments in the US and Canada in the 1960s and 1970s were innovative in design and, at least initially, ambitious in scope. The trials encountered various political, economic and cultural hurdles that ultimately proved insurmountable. However, vast amounts of data were collected and analysed.112

The four US trials¾ NJ (New Jersey and Pennsylvania); RIME (Iowa and North Carolina); SIME/DIME (Seattle and Denver); Indiana (Gary)¾ had very different experimental groups, and tested a wide variety of payment levels and taper rates. While holding over the discussion of the labour supply response to Chapter 7, the results in terms of wellbeing were broadly positive. Hollister (in Levine et al., 2005:100) summarises these results as follows:

109 Also called ‘pilots’ and ‘experiments’ in the literature. 110 For a full list of BI-style policy interventions and experiments, see Appendix A: UBI-Related Pilots (Gentilini, Almenfi, et al., 2020). 111 Other trials are not discussed on the grounds that the countries/regions are too dissimilar to Australia (Kenya, Namibia, India, Iran, Uganda, Brazil), the trials have not been completed and/or evaluated (Stockton, California, other US cities) or the BI was too low to be considered adequate (Macau). 112 Often decades later.

152 The rural experiment in North Carolina and Iowa collected data on educational attainment. In North Carolina there were significant positive influences in grades 2–8 in attendance rates and teacher rating, and on test scores. The literature on education shows that it is nearly impossible to raise test scores through direct intervention. Yet, BIG [Basic Income Guarantee] had large positive effects on the test scores of children in the worst-off families in the rural South. The New Jersey experiment didn’t collect data on test scores, but there was a very significant effect on school continuation; that is, BIG was an effective antidropout program. Again, if you look at programs that are trying to reduce dropouts directly, it’s a pretty dismal scene. In Gary, there were positive test score effects for males in grades 4–6. In Seattle–Denver, there was a positive effect on adults going on in continuing education.

Some of the experiments collected data on low birth weight, nutrition, and other quality-of-life variables. Low birth weight is associated with very serious deficits later on in life, and programs that try to reduce the incidence of low birth weight have been largely ineffective; but the Gary experiment found that NIT reduced low birth rates in the most at-risk categories. The rural experiment showed significant effects in various categories of nutritional adequacy. Homeownership showed significant effects in New Jersey, in the rural experiment, and in the first year of the Gary experiment.

Hanushek’s (1986) review of the literature on the non-labour supply effects of the US NIT trials focused on: ‘identifying common findings that might be generalized’. Hanushek (1986: 108) makes the key observation, applicable to BI trials in general, that ‘we generally feel more confident about understanding behavioral responses to differences in permanent income than responses to transitory change’. Further, he cites evidence for a lag in behavioural change in experimental settings or in circumstances where uncertainty exists regarding the duration of a policy change. Hanushek reiterates the findings summarised by Hollister, adding both detail and caveats. Evidence from the Gary, Indiana trial did show an increase of 11 percentage points in home ownership among experiment families over three years, of which ‘4 to 6 percentage points [appeared] to be a treatment effect’. On human capital development, Hanushek observed, ‘young people in experimental groups tended to increase schooling by about

153 the same amount that they decrease labor supply, leaving leisure essentially the same’. Further, there was ‘mixed evidence’ in relation to school performance, with measurable improvements concentrated in lower grades, and positively correlated with length of time in the NIT program (Hanushek, 1986: 110-116)

Bradbury (1986: 125) further corroborates these findings regarding the effects, and limitations, of the US NIT trials, concluding that: Overall, these results suggest that the lives of recipients were not dramatically altered by the payments offered for a limited time period in the income maintenance experiments. Consumption rose modestly, as would be expected with a modest rise in income. Most other indicators of well-being showed little if any change. In terms of long-term consequences, the improvements in education (noted in the Hanushek paper) and the improvements in birth weight and nutrition among those with the worst initial deficits are probably the most promising. In these areas there is no normative confusion about what constitutes an improvement.

As emphasised in Chapter 1, the Canadian trials in this era provide an interesting counterpoint to the US experiments, due to the inclusion of a saturation site in the province of Manitoba. The agreement between the federal and provincial governments to co-fund the Basic Income Experiment Project included experimental sites in Manitoba’s capital (Winnipeg) and the whole town of Dauphin, including its surrounding rural municipality (total population around 12,000) (Calnitsky, 2016; Forget, 2011). The Manitoba Mincome experiment, as it became known, ran from 1974 to 1978113 on an opt-in basis. All Dauphin families were offered a Guaranteed Annual Income (GAI) set at 60 percent of the low-income cut-off (around 49 percent of median household income in 1976), which varied according to family size. The GAI had a 50 percent taper rate from the first dollar of market income. Forget argues that the design of the scheme had particular benefits in the saturation site ‘for people who did not qualify for welfare under traditional schemes’ and in terms of providing income security in a rural community with significant levels of seasonal work (Forget, 2011: 289; Calnitsky, 2016: 31).

113 There was only two years of data collection (Forget, 2011).

154 While Forget (2011) found no significant effect on average or median household income levels, the income security provided by the GAI appears to be positively correlated with other wellbeing variables, particularly in terms of education and health outcomes. Dauphin students were more likely to continue to year 12 than other urban and rural students during the trial period, but much less likely to do so before (and after) the experiment, in comparison to urban students114. Hospitalisation rates in Dauphin were 8.5 percent higher than the comparison group before the trial, but fell to approximately the same rate over the course of the experiment. This pattern held for ‘accidents and injuries’ and ‘mental health diagnoses’. Another interesting finding, according to Forget, was that girls born between 1967-1974 ‘who lived in Dauphin during the Mincome period were significantly less likely than the comparison group to give birth before age 25’ (Forget, 2011: 290-301). Calnitsky and Gonalons-Pons also found ‘that relative to other Manitoba towns, rates of property crime and violent crime in Dauphin declined during the Mincome period, and afterward returned to their prior upward trend’ (Calnitsky, 2016: 28).

Forget (2011) suggests these outcomes may be partially attributed to ‘social multiplier’ or ‘social interaction’ effects generated in the saturation site experimental setting. Calnitsky’s (2016) analysis of survey data collected during the experiment points to a similar destigmatising effect of the Dauphin trial. While only 18-20 percent of Dauphin residents ‘received benefits at some point throughout the program’, Calnitsky’s evaluation of the survey data and other evidence suggests that the Mincome was not perceived as welfare in a regular sense (Calnitsky, 2016: 32). Calnitsky draws these conclusions based on how the Mincome in Dauphin was designed, implemented and communicated to (potential) participants. His research underscores the importance of differentiating these variables from the quantum of the cash payment itself. Calnitsky (2016: 32) describes a personalised and relatively straightforward process that provides an arresting contradistinction to other categorical welfare benefits: Mincome staff knocked on the door of every home in Dauphin to introduce the experiment with an initial interview. After the interview, prospective participants would mail an application form and income statement to the Mincome office. The

114 There were no significant differences between Dauphin and rural students in relation to this variable after the experiment concluded (Forget, 2011).

155 entire procedure could be completed through the mail. Income was reported by mail each month, and on that basis, checks were sent to homes … Welfare, by contrast, was characterized by highly visible and special treatment. It involved frequent contact with staff who held considerable discretionary power, conducted searching investigations of recipients’ resources, and sometimes made unexpected home visits. Welfare recipients normally collected payments in person … In all, the Mincome was less visible, was more automatic, involved less individual discretion, and could benefit diverse social groups.

Calnitsky (2016: 35-6) compared responses by Dauphin participants to a ‘community experience’ survey by Dauphin participants in 1976 to a sample of surveys completed by Manitoba welfare recipients and non-recipients from small Manitoba towns. Money was the principal reason (44 percent) cited for joining the experiment, but disaggregating this response showed that this category meant many different things, from an insurance policy in the case of illness, to loss of employment, to facilitating care responsibilities, and improving family educational outcomes (Calnitsky, 2016: 37-38).

While money, as a means to these ends, provided the main motivation for participating in the experiment, the design, administration and marketing of the Mincome led participants and non-participants to view it very differently to traditional welfare programs. The Mincome was pitched as an experiment in social policy that was for the good of the nation. Only 6 percent of Mincome participants ‘reported a willingness to join welfare’, while ‘non-participating rural Manitobans were also far more likely to consider joining Mincome (42 percent) than welfare (5 percent)’ (Calnitsky, 2016: 42). The destigmatising nature of the Mincome trial in Dauphin was correlated with several other factors that can be interpreted as indicators of an improvement in wellbeing. For example, 92 percent of Mincome participants reported ‘never feeling embarrassed or uncomfortable when they were with people not on the same program’ compared to 65 percent of welfare recipients. Mincome participants (8 percent) were less likely to experience ‘one or more credit-related difficulty’ than both welfare recipients (18 percent) and community non-participants (12 percent) (Calnitsky, 2016: 48, 50). Finally, Mincome participants performed better than welfare recipients on indicators that would suggest greater community participation. For example, ‘Mincome participants and nonparticipating community members were less likely than welfare

156 participants to report spending no time with friends, neighbors, relatives, or workmates’ and ‘were also more likely to spend time at other people’s homes than welfare recipients’. As Calnitsky observes, ‘Mincome participants’ reported ‘time-use patterns’ similar to non-participant Dauphin residents, ‘a group with higher average socioeconomic status’ (Calnitsky, 2016: 48).

Basic Income trials in advanced countries disappeared from the public policy landscape between the 1970s and the second decade of the twenty-first century. The neoliberal period was a time of increasingly punitive workfare models of social security that, for the most part, reinforced both the divisions between categories of welfare recipients and the distinction between deserving and undeserving beneficiaries. Since the GFC and the Great Recession, BI trials have been more talked about than implemented, but the Finland (2017-2018) and the prematurely aborted Ontario, Canada (2017-2019) BI trials do mark a return to real-world experimentation. The results of the Finnish trial can be summarised briefly. The principal point to bear in mind is that, while the trial was run over a two-year period, the centre-right coalition government introduced an activation requirement for unemployed persons during the second year of the trial, making the data from the second year not comparable with that from the first. Table 6.1 presents the results of the Finnish trial in relation to three indicators of wellbeing, based on a survey conducted at the end of 2018. It shows a modest positive impact of BI on the experimental group compared to the control group, in relation to financial comfort, self-reported mental health and life satisfaction.

Table 6.1 Finland Basic Income Experiment and Wellbeing, 2017-2018 Self-perceived financial Self-perceived depression, Satisfaction with life situation at current % of respondents on scale of 0-10, household income, % of average respondents BI Recipients Living 13 Yes 22 7.3 comfortably Doing OK 47 No 76 Difficulty making 28 Not sure 2 ends meet Barely getting by 12 Control Group Living 8 Yes 32 6.8 comfortably Doing OK 44 No 65 Difficulty making 32 Not sure 3 ends meet Barely getting by 15 Source: Kela, 2020.

157 The Ontario Basic Income Pilot (OBIP) commenced at the end of 2017, expanded in the first half of 2018, and was unceremoniously cancelled with the election of a new conservative government in mid-2018. As Mendelson (2019: 1) writes: ‘Soon after its election, the new government cancelled the OBIP (benefits continued to be paid until March 2019 but research was ended immediately).’ Like the earlier pilots in the US and Canada, OBIP was an NIT-style program that aimed to provide a Guaranteed Basic Income (GBI) based on household income and composition at three test sites. Mendelson (2019) identifies the lack of a saturation site, flaws in the enrolment process, and complications in the reconciliation of BI payments and reported taxable incomes as major limitations of OBIP. Despite these design issues and the premature winding up of OBIP, once again the available empirical evidence points to some positive wellbeing outcomes for participants. According to the Ferdosi, McDowell, Lewchuk, and Ross (2020: 4) analysis: Everyone who received basic income reported benefitting in some way: • Many recipients reported improvements in their physical and mental health, labour market participation, food security, housing stability, financial status and social relationships. • Basic income also had a noticeable impact on the use of health services, with many of the survey respondents indicating less frequent visits to health practitioners and hospital emergency rooms. • For a significant number of participants, basic income purportedly proved to be transformational, fundamentally reshaping their living standards as well as their sense of self-worth and hope for a better future. • The majority of those employed before the pilot reported working while they were receiving basic income. Many reported moving to higher paying and more secure jobs. • Those working before the pilot reported even greater improvements on some measures of well-being than those who were not working before.

The results most directly related to wellbeing are summarised in Table 6.2. The labour market effects are discussed in Chapter 7. The findings here are based on self-reported

158 surveys115 of OBIP participants (Ferdosi et al., 202O). There are obvious questions that can be raised regarding the usefulness of self-reported surveys for evaluative purposes. However, the very high levels of self-reported improvement in relation to a diversity of wellbeing indicators are at least worth noting and do nothing to discourage the intuition that BI could function as a means to enhance wellbeing over time.

Table 6.2 Ontario Basic Income Pilot and Wellbeing, 2017-2019

Change in Change in mental Change in Change in Change in general health health status frequency of stress frequency of frequency of status compared compared to or anxiety at home feeling depressed feeling angry to before before receiving compared to compared to compared to receiving basic basic income (%) before receiving before receiving before receiving income (%) basic income (%) basic income (%) basic income (%) Some- Much Some- Much Somewhat or Somewhat or Somewhat or what better what better much less often much less often much less often better better 41.6 37.8 29.7 53.1 86.1 83.4 78.4 Change in Change in quality Change in ability to Change in quality Did you start an outlook on life of living repay debt of relations with educational or compared to accommodations compared to family compared training program before receiving compared to before receiving to before while receiving basic income before receiving basic income (%) receiving basic basic income? (%) (%) basic income (%) income (%) Somewhat or About Some- About Some- About Some- No Yes much more the same what the what or the what or positive or same much same much much more better better easily 86.2 47.7 46.0 28.5 59.7 32.8 65.7 73.8 26.2

Source: Ferdosi, McDowell, Lewchuk and Ross, 2020: 6-14.

The design, implementation and evaluation of social science experiments is notoriously difficult and beset by numerous technical, administrative, cultural and political challenges. These caveats acknowledged, the empirical evidence collected and analysed from these seven small-scale BI trials suggests a modest positive relationship between the receipt of some form of BI and significant indicators of wellbeing. When we further consider the short and uncertain duration of these experiments, together with the relatively low BI payment levels, these findings are perhaps more encouraging still.

115 The various survey questions were answered by between 150 and 200 participants (see Ferdosi et al., 2020 for full breakdown).

159 However, even the best-designed BI trial is a radically different proposition to a fully implemented BI scheme at a national, or even regional, level. In the absence of such schemes, the primary source of evidence regarding the interrelationship of BI on wellbeing, besides that drawn from the trials, is the estimates of the static distributional effects of particular BI schemes based on microsimulations.

6.2 The Static Distributional Effects of Basic Income Schemes

Computer-based microsimulations that can model the static effects of particular policy changes in relation to a very large number of variables provide policy scholars and practitioners with a valuable tool. In relation to BI, they constitute a decisive step forward from back-of-the-envelope calculations and oversimplified stylised schemes. These techniques do have some serious limitations, as they are mostly designed to estimate the impact of a hypothetical policy change or ‘day after’ implementation and do not take dynamic behavioural effects or time into account. Nonetheless, they are useful in highlighting differences between BI proposals in relation to probable effects on wellbeing, and for creating a feedback loop that informs an iterative process of BI scheme design.

This section focuses on the microsimulation literature on static distributional outcomes of several UBI and NIT BI schemes described in previous chapters. The first point to make, while obvious, is that microsimulations of specific BI schemes can generate results suggesting that the schemes in question would be very regressive or very progressive in terms of distributional outcomes. The key variables include the level of the proposed BI payment; whether it is phased out; the rate at which it may be phased out; its interaction with other elements of the welfare state, including the transfer system; and how it is financed. The literature includes several examples of BI scenarios that the modelling suggests would generate regressive distributional outcomes, would have a negligible effect on distribution, or would achieve progressive redistributive outcomes that could be achieved at a lower cost through more a more targeted approach. For example, the OECD (2017b) modelled the fiscal impact and distributional effects of replacing ‘most cash benefits for working age households’ with a flat-rate BI set at ‘levels of guaranteed minimum-income benefits (GMI) in the existing social protection system as an initial target value for a BI in Finland, France, Italy and the UK

160 (OECD, 2017b: 3-4). The authors model two different scenarios (adjusting BI rate; adjusting tax rates) to achieve revenue neutrality, and find a high proportion of winners and losers across income deciles, with significant variation between the four countries. The authors conclude: converting all or most existing income supports into a flat-rate, “no questions asked” at modest levels would require substantial additional tax revenues. Even then, a BI may result in losses for substantial parts of the population, and would not significantly reduce poverty from existing levels (OECD, 2017a).

Other scholars, using microsimulation techniques and other statistical analyses, have reached similar, or more negative, conclusions regarding the effectiveness of BI as a tool for reducing inequality and poverty. In relation to Finland, Pareliussen et al. conclude ‘a universal basic income at a level that does not imply crippling income taxation, fails to protect vulnerable individuals as well as the current system’ and that the ‘basic income scenario’ they model ‘also increases poverty substantially’ (Pareliussen, Hwang, & Viitamäk, 2018: 6). Hoynes and Rothstein (2019) and Kearney and Mogstad Kearney and Mogstad (2019) arrive at similar conclusions regarding the regressive distributional outcomes of BI scenarios based on flat rate payments that replace targeted benefit programs. These findings are unsurprising given the BI scenarios examined. However, they constitute an important reminder that the attractiveness of a uniform and universal BI, in terms of simplicity, can be undermined and offset by negative distributional consequences. They underscore the difficulties involved in designing a BI scheme that can likely satisfy the criteria of affordability, adequacy and simplicity that comprise Martinelli’s (2020) BI policy trilemma.

Table 6.3 presents the available static distributional data from microsimulations of selected BI schemes for the UK116. Table 6.4 presents the same data for microsimulations of Australian BI schemes. There are at least three important points to emphasise here in relation to the UK microsimulations. First, as discussed in previous chapters, none of these schemes are pure UBI models, as they all retain some categorical elements. Second, schemes with pronounced differences in terms of their design can

116 Static distributional data for the Canadian, New Zealand and US schemes discussed in Chapter 4 and Chapter 5 was not available.

161 achieve equally significant reductions in static estimates of inequality and poverty. Third, average reductions in aggregate and intra-decile inequality can coexist with significant numbers of net losers, even within low income groups. For example, Reed and Lansley’s (2016: 16) Modified Scheme 2 shows average net income gains of between 30 percent (decile 1) and 5 percent (decile 6) for deciles 1-6, with only deciles 9 and 10 experiencing average net income reductions. However, Martinelli’s (2017: 46) Full Scheme 2, despite being strongly redistributive overall, finds that ‘a significant minority (8%) of households in quintiles 1 to 3 would stand to lose over 10% of their base income’.

Table 6.3 Static Distributional Effects of Selected UK BI Schemes

Authors/Model/Scheme Change in Change in Winners and Losers Gini Poverty Rate (%) Coefficient (%) Adult Child Reed and Lansley/UBI/ -10.3 -13.7 -44.5 ‘Some 60% of those in the poorest fifth Modified Scheme 2 gain more than 20%’; ‘It has very few losers among the poorest third, while the redistribution inherent to the scheme is paid for by those in the top fifth.’ Reed and Lansley, 2016: 17. Torry/UBI/Scheme β -8.6 -18.1 -35.8 ‘the scheme would not impose significant losses on low income households; and that no households would suffer unmanageable losses’. Torry, 2016: 6. Martinelli/UBI/Full 4.0 7.2 1 ‘42% of households would see their Scheme 1 disposable incomes decrease’; distributional consequences of Full Scheme 1 are progressive on aggregate – with the bottom four income quintiles gaining on average and only the upper quintile losing out – nevertheless ‘large numbers of poor and middle-income households would be significantly worse off’. Martinelli, 2017: 46. Martinelli/UBI/Full -5.5 -14.9 -14.4 ‘44% of households would experience Scheme 2 income losses under this scheme’; ‘while the distributional consequences of the scheme are highly progressive on average, there are still unacceptably high proportions of households losing out among the lower income deciles.’ Martinelli, 2017: 46.

Sources: Reed and Lansley, 2016; Torry, 2016; Martinelli, 2017.

162 Table 6.4 Static Distributional Effects of Selected Australian BI Schemes

Authors/Model/Scheme Change in Gini Change in Winners and Losers Coefficient (%) Poverty (net disposable income) Rate (%) Dawkins, Beer, Harding, n/a n/a Deciles 1-8 net winners, with largest Johnson and absolute gain for deciles 1 and 2; deciles 8- Scutella/UBI/Option 1a 10 net losers. (Dawkins et al., 1998: 247). Dawkins, Beer, Harding, n/a n/a Deciles 1-7 net winners, with largest Johnson and absolute gain for deciles 1, 2, 4 and 5; Scutella/NIT/Option 3 deciles 9 and 10 net losers. (Dawkins et al., 1998: 249). Scutella/UBI/System 1 -10.6 n/a Deciles 1-8 net winners with gains (0.30 to 0.27) concentrated in deciles 5-7; net losers in deciles 9-10. (Scutella, 2004: 11). Phillips/UBI/Universal -23.8 n/a ‘low income households would be Pension (0.34 to 0.27) significantly better off with an average increase in disposable income of more than $12,000 each year. The highest income group would be much worse off at nearly $34,000 a year’ (Phillips, 2018: 4). Ingles, Phillips and n/a n/a ‘Option 4 is highly progressive for couple Stewart/UBI/Option 4 families with children, who are much better off in terms of both equivalised disposable income and comprehensive income benchmarks. Other households, including single parents, are somewhat worse off. When measured against the comprehensive benchmark, this is by far the most progressive BI option that we modelled’ (Ingles et al., 2019: 23). Spies-Butcher, Phillips & -16.95 -20.91 Quintiles 1-4 net winners with large gains Henderson/NIT/Model 3 (0.34-0.29) (11-8.7) for bottom quintile; significant losses for top quintile. (Spies-Butcher et al., 2020). Spies-Butcher, Phillips & -22.5 -17.27 Quintiles 1-3 net winners, with higher Henderson/NIT/Model 4 (0.34-0.27) (11-9.1) gains in middle quintiles than Model 3; losses for quintiles 4 and 5 but concentrated in top quintile (Spies-Butcher et al., 2020).

Sources: Dawkins et al., 1998; Scutella, 2004; Phillips 2018; Ingles, Phillips and Stewart, 2019; Spies-Butcher, Phillips and Henderson, 2020.

There is a clear challenge pertaining to the design of BI schemes that minimise the proportion of net losers among low income groups and households. This is one of the fundamental difficulties in moving from highly targeted and categorical social assistance systems to a more universal approach. These important caveats notwithstanding, BI schemes that might reduce income inequality by between 10 and

163 20 percent, and poverty rates by similar amounts, offer encouragement regarding their potential to improve wellbeing outcomes and enhance maximin real freedom. Furthermore, microsimulations are unable to capture the effects of an ‘unconditional’ or ‘automatic’ payment on recipients’ wellbeing, beyond the effects of increased disposable income. The final section of this chapter evaluates four contemporary Australian BI proposals in relation to these criteria.

6.3 The Roads to Real Freedom?

Van Parijs’ (1997: 5, 22, 23) ‘real freedom for all’ is a criterion of distributive justice that means ‘having the right to do what one might want to do’ and ‘having the means for doing it’. He identifies ‘constrained basic income maximisation’ as the optimal means to achieve maximin access to real freedom (Van Parijs, 1997: 187). Chapter 2 discussed the difficulties of combining this approach to justice with adequate compensation for unequal internal endowments, an issue that has resurfaced in relation to the schemes analysed in this chapter. However, many of the specific schemes described and analysed in the last three chapters have the potential to reduce the income constraints and opportunity cost constraints on real freedom. By reducing inequality and poverty, these BI schemes could increase both the means and time available to individuals to meet their needs, satisfy their obligations and better pursue their passions. This section examines four Australian schemes in relation to this ethical framework.

The key features of the four BI schemes are summarised in Table 6.5. While none constitutes a pure UBI, Phillips’ Universal Pension comes closest (Scheme I in this section), with all adults being paid at either the single or couples Age Pension rate of (AUD$23,000117 or AUD$17,400), while children under 16 receive AUD$5,500118 (Phillips, 2018: 3). Even with this relatively generous scheme, the Australian convention of paying couples a lower individual rate than singles due to household economies of scale is retained. Ingles, Phillips and Stewarts’ (2019: 22-23) Option 4: Full Categorical BI (Scheme II in this section) offers a higher rate of AUD$30,256 to age pensioners, a lower rate of AUD$20,986 for adults 18-64, and the same AUD$5,500 payment for

117 The payment listed in relation to these four schemes are annual sums. 118 While schemes that include payment to children are often intended as additional payment to their parents, it would be interesting to explore the potential effects of paying these sums into a government savings account that could be accessed at some legislated age of maturity.

164 children age 0-12. Spies-Butcher, Phillips and Henderson’s (2020) affluence-tested Model 3 (Scheme III in this section) has a baseline payment of AUD$14,647 paid to all adults with zero income not already in receipt of a higher payment119, with the BI tapered out as market incomes rise. Spies-Butcher, Phillips and Henderson’s (2020) affluence-tested Model 4 (Scheme IV in this section) is the same as Model 3, but with a higher baseline payment of $18,523. For the schemes where the data is reported (Schemes I, III and IV), income inequality at the aggregate level is reduced by between 17 percent and 24 percent as measured by the Gini coefficient. While only Schemes III and IV report the effect on poverty rates120, it is logical to assume that Schemes I and II, with their higher baseline payment and UBI structure, would perform better in relation to poverty reduction. This would be unremarkable, given the unemployment benefit (formerly called Newstart) on which Scheme IV is modelled sat well below the poverty line, while the maximum Age Pension benefit put most recipients above the poverty line (Melbourne Institute, 2018). The federal government’s response to the Covid-19 pandemic has provided another opportunity to illustrate this point. Phillips, Gray and Biddle (2020: iv) estimate that the federal government’s introduction of the JobSeeker payment (essentially doubling the Newstart unemployment benefit) reduced the poverty rate within this cohort of recipients from 67 percent to 7 percent.

On the basis of the analysis thus far, Schemes I and 2 would appear likely to perform better than Schemes III and IV on the criterion of maximin real freedom, despite all four schemes having significant redistributive effects. This conclusion, while perhaps correct, should be questioned on at least two grounds. First, the much higher net fiscal cost of Schemes I (AUD$253bn) and II (AUD$264bn) compared to Schemes III (AUD$103bn) and IV (AUD$126bn) may afford the latter a political advantage, as regards the likelihood of garnering the requisite support for policy implementation. This advantage, while not quantifiable, is important because only a scheme that is

119 Such as the Age Pension or Disability Support Pension. 120 Scheme IV has a higher payment level than Scheme III but the former reduces the poverty rate to a lesser degree than the latter (see Table 6.5). Spies-Butcher et al. (2020: 13-14) explain this result as follows: ‘This is explained by the method of calculating poverty as a proportion of median income. The structure of our BI payment has relatively larger impacts around the middle of the distribution, lifting the median income and thus increasing the relative poverty line. We suggest it is more reasonable to interpret these changes as indicating that the current poverty rate may underestimate need (based on a deflated median income), but also that caution should be exercised in comparing poverty rates across time and place.’

165 implemented can achieve real-world improvement in maximin real freedom. This fact, while obvious, is central to the discussion of implementation and politics in Chapters 8 and 9.

The second factor relates to design differences between the UBI-style and NIT-style schemes as regards fiscal churn. The use of the taper rates to partly ‘finance’ Schemes III and IV means they can achieve similar distributive outcomes with lower marginal tax rates on market income in the case of Scheme I; and a lower effective tax rate in the case of Scheme II. Therefore, the reduction in fiscal churn is not just a matter of administrative efficiency. Individuals confronting marginal tax rates of 33 percent or 37 percent on the first dollar of market income, as in Schemes I and II, may exhibit greater tax resistance and political resentment than those individuals experiencing a benefit reduction, as in Schemes III and IV—even where the change in disposable income is the same or greater. The explosive growth in tax expenditures, such as those related to superannuation, serves to reinforce this point regarding different responses and attitudes towards tax, on the one hand, and concessions/benefits on the other (Grudnoff, 2020). While Schemes I, III and IV exclusively model changes in income tax rates for illustrative purposes only, introducing a significant annual wealth tax, as in Scheme III, could also encounter substantial resistance. Here again, if the design features of the affluence-tested schemes make them more feasible, this could be considered a positive in relation to maximin real freedom, if both politics and time are treated as real variables. The counterargument to this relates to the failure of Scheme III in particular, but also Scheme IV, to satisfy Martinelli’s (2020) ‘adequacy’ criterion. However even Scheme III, due to its individualised payment structure and unconditional character, moves the Australian transfer system closer to the ‘adequacy’ goal. As with the ‘affordability’ criterion discussed in the previous chapter, Martinelli’s (2020) ‘policy trilemma’ is only insoluble if we envisage the implementation of a BI scheme as an abstract and abrupt reform, as opposed to a real-world iterative process.

166 Table 6.5 Key Characteristics of Four Australian BI Schemes

Scheme Payment Change in Change Average Change in Net Cost Tax Rate Rate AUD$ Gini in Disposable Income AUD$bn Required Coefficient Poverty by Quintile (%) Rate (%) (AUD$/%) I 23,000 for -23.8 NA 1 12,357 253 33 single 2 6,389 percentage adults; 3 8,316 point 17,400 for 4 687 increase couples; 5 -33,937 marginal 5,500 for income tax children Note: rates across under 16. % all brackets change from first not dollar of stated. market income. II 30,256 to NA NA 1 8,019 264 37 flat age (18.5) percent from pensioners; 2 7,022 first dollar of 20,986 for (8.9) market adults; 5,500 3 5,953 income; 2 for children (5.5) percent age 0-12. 4 1,806 annual (1.2) wealth tax. 5 -22,063 (-7.7) III 14,647 for -16.95 -20.91 1 7,750 103 12 all adults (30.3) percentage with zero 2 4,370 point income; (8.9) increase those on 3 3,928 across all higher (5.2) marginal benefits stay 4 213 income tax on them; (0.2) brackets. Tax benefits 5 -16,665 free tapered out. (-8.9) threshold retained. IV 18,523 for -22.5 -17.27 1 10,685 126 14.5 all adults (41.80) percentage with zero 2 6,148 point income; (12.5) increase those on 3 4,818 across all higher (6.3) marginal benefits stay 4 -609 income tax on them; (-0.6) brackets. Tax benefits 5 -21,580 free tapered out. (-11.6) threshold retained. Source: Phillips, 2018; Ingles, Phillips, Stewart, 2019; Spies-Butcher, Phillips, and Henderson, 2020.

167 Conclusion

This chapter has analysed the relationship between BI and wellbeing in three distinctive ways. First, it described the empirical evidence from small-scale BI trials conducted in advanced capitalist countries. This evidence points to small but significant correlation between these experiments and several indicators of wellbeing. Next, the chapter examined the static distributional effects of selected BI schemes for the UK and Australia, based on microsimulations. This analysis demonstrated the possible effects in terms of income inequality and poverty reduction, and the challenges of designing schemes that minimise the proportions of post-reform losers among low income groups. Finally, the chapter assessed the respective merits of four different Australian BI schemes, in relation to the criterion of maximin real freedom. It concluded that the more generous UBI-style schemes may be more likely to enhance real freedom outcomes, but only if we abstract from both politics and time. The two affluence-tested models could prove more feasible options in the short to medium term, thereby having the potential to ‘bring forward’ greater access to real freedom. While such an outcome cannot be confidently predicted, this is not a trivial or purely speculative observation. As someone once said, ‘In the long run we’re all dead’.121 So in the field of social reform, time matters.

The next chapter transitions from the effects of BI on wellbeing to the hotly contested and rugged terrain of the relationship between BI and work.

121 ‘In the long run we are all dead. Economists set themselves too easy, too useless a task if in tempestuous seasons they can only tell us that when the storm is long past the ocean is flat again.’ John Maynard Keynes, Tract on Monetary Reform (1924).

168 Chapter 7: Work and Basic Income

Introduction

The relationship between work and basic income lies at the heart of a pragmatic- utopian justification of this reform. Freedom from compulsory wage labour is BI’s utopian promise. Fear of working-age people dropping out of the labour market en masse is, alongside its fiscal cost, the principal ground on which to reject this policy change. The freedom-augmenting effect of BI has to be considered alongside its potential labour supply response (LSR) outcomes. Any trade-off between the two will be affected by a multitude of factors. These include: the level at which a BI is set; the interaction between BI and the broader taxation system; the size and consequences of any related work (dis)incentive effects; macroeconomic and regulatory policy settings, as regards employment; and cultural attitudes towards the introduction and maintenance of any BI scheme.

Section 7.1 briefly describes the character of work in a capitalist society. It includes a discussion of two structural obstacles to implementing BI: unemployment and precarious work. Section 7.2 evaluates the argument that BI has become a necessity, due to the current wave of automation and digitisation that threatens to reduce the aggregate availability of jobs across large swathes of the global economy. It concludes that this argument should not be a primary justification of BI. Section 7.3 evaluates the significance of the empirical evidence on the labour supply response observed in relation to BI trials122. It highlights the impossibility of drawing any firm conclusions based on these findings, in relation to the LSR associated with any national and permanent scheme. Section 7.4 describes some of the relevant econometric literature on LSR and BI, in relation to one UK and one Australian scheme. It concludes that, while the dynamic effects of any real-world BI scheme may be impossible to accurately capture using econometric techniques, it may be worth structuring BI payments and associated taxation changes and taper rates in such a way as to create relatively smooth and progressive EMTRs. This is discussed in relation to the affluence-tested BI schemes already described in relation to Australia (B. Spies-Butcher et al., 2020). Section 7.5

122 The same trials discussed in Chapter 6 in relation to wellbeing.

169 returns to the question, initially broached in Chapter 2, of whether BI can provide a genuine “exit option” from paid work. It evaluates the potential impacts of such an effect, in light of the foregoing discussion of LSR in a BI world. The key question is whether an exit option might lead to a tighter labour market, exerting upwards pressure on wages and conditions, or merely function as a subsidy to low wage employment while increasing the tax burden on a shrinking proportion of employed workers.

7.1 Work in a Capitalist Society

The nature of capitalist work and the structural function of wage labour, unemployment and precarious work within capitalism, represent major barriers to the implementation of BI. Capitalism subordinates labour to capital, use value to exchange value, and heterogeneous human needs and wants to the overriding priority of capital accumulation (Antunes, 2013). Within a Marxian framework, the ‘purchase and sale of labour power’ is the key contractual relationship that differentiates capitalism from other economic systems (Braverman, 1998: 35). Workers are formally free to sell their labour power to any particular employer, but effectively forced to sell their labour power to employers in general, in order to meet their basic needs. Howard and King define this relationship as a ‘contract for obedience’ centred on ‘hierarchy, with unidirectional commands from employer to employees’ (Howard & King, 2008: 45-46). This structural inequality allows capitalists to convert labour power into concrete labour and commodities, in the process creating the surplus value that forms the basis of capitalist profit.

Throughout capitalism’s history, measures that seek to place workers and employers on a more equal footing have been fiercely resisted by employers. Examples include collective bargaining, minimum wages, reduced working days and workweeks, paid holidays, unemployment benefits, occupational health and safety measures. As previously stated, BI set at a sufficient level threatens to partially sever the link between wage work and income for all working-age individuals. To the extent that BI can provide a genuine exit option from wage work, it could play a role in the equalisation of power relations between workers and employers (Wright, 2010). It is therefore to be expected

170 that proposals for a progressive BI will encounter stiff resistance from most capitalists and their political, intellectual and media allies.

The economic fact of persistent unemployment works to reinforce the primacy of the capitalist employment contract in relation to access to means of subsistence, and to reinforce the centrality of wage work to human life. As Pollin writes, Marx argued that ‘unemployment was functional to capitalism’ in that the ‘reserve army of unemployed’ served as ‘the instrument capitalists use to prevent significant wage increases and thereby maintain profitability’ (Pollin, 1998: 4). Kalecki (1943), contra Marx, claimed that capitalists could achieve higher aggregate profits under conditions of full employment but that employers would not accept any liquidation of the reserve army due to the consequent diminution of their power over workers.

The ongoing salience of unemployment as a structural feature of capitalism and a check on the power of workers is borne out by empirical evidence showing an upwards drift in average unemployment rates for almost all advanced countries since the 1960s, accompanied by the rising wealth and income inequality documented in Chapter 3 (Nickell, Nunziata, & Ochel, 2005; Piketty, 2013). (Burgess & Campbell, 1998: 9) contend that the post-World War II ‘employment regime has slowly crumbled’ in OECD countries, with a shift away from the male breadwinner model of full employment to a less gendered but more precarious and fragmented labour market structure. Precarious, contingent or non-standard paid work occupies a halfway house between the security of permanent employment and the pariah status of being unemployed. These forms of work provide labour power to capitalists on favourable terms. The aggregate growth in precarious employment, and the negative qualitative changes precarity engenders for many workers, have become primary justifications for BI in the eyes of some of its most prominent advocates (Standing, 2011, 2014, 2017).

The centrality of the capitalist employment contract is not the only work-related barrier to implementing BI in a capitalist context. Circumventing the cultural force of the ‘work ethic’ and the corresponding stigmatisation of those who do not perform socially recognised forms of work presents as another major obstacle. As Weeks (2011: 44) astutely observes, capitalism requires a work ethic as ‘wage incentives do not necessarily function as a stimulus to work longer hours at a more demanding pace’.

171 The elevated status of work is counterposed to the denigrated status of the unemployed, who are defined as ‘incompetents and scroungers’ (Gorz, 1999: 81-2). This distinction between the deserving and undeserving poor was, as described in Chapter 1, an important factor in the lack of broad-based public support for Nixon’s Guaranteed Annual Income as part of his Family Assistance Plan. This cultural power of the work ethic and the durability of the distinction between the deserving and undeserving poor must be greatly diminished, if not dissolved, in order for BI to achieve the requisite social backing to become a policy reality. This reinforces the point that BI must be widely understood as instituting a universal social right, and not as another form of charity for a stigmatised subgroup of the population.

Many would contend, with good reason, that the wage relation centred on an unequal capitalist employment contract, the structural function of unemployment and the cultural construction of work comprise the major obstacles to the introduction of BI. Others point to the scale, pace and character of technological change in the current period as the principal reason why an urgent need for BI exists.

7.2 The Technological Imperative for Basic Income

That technological change creates and destroys jobs is a basic feature of the dynamics of capitalist development. The ratio of job creation to job destruction, in its aggregate, spatial and temporal dimensions, has clear implications for the material living standards and life opportunities of waged workers and their dependents. There are longstanding debates in political economy, orthodox economics and history regarding the question of whether technology-driven job creation or job destruction will prove the more powerful factor in the long run. The jury is still out.

Scholars immersed in very different theoretical traditions have sometimes arrived at the same conclusions, regarding the velocity and magnitude of the technological displacement of labour and a corresponding precipitous fall in the aggregate availability of jobs. To date, the dire predictions that often accompany these recurring bouts of automation anxiety have not been borne out by the empirical evidence. With notable exceptions123, unemployment in advanced capitalist countries has tended to oscillate in

123 The Great Depression of the 1930s; Europe’s southern periphery during the Great Recession.

172 a band between 1 percent and 15 percent since the start of the twentieth century. The current focus in this debate centres on the effects of automation (driven by robotics and artificial intelligence) and digitisation (driven by big data and artificial intelligence) on employment. The argument rests on the central claim that current processes of technological change are both qualitatively and quantitatively different to previous spurts of innovation. Consequently, they have the potential to displace labour across a wide variety of occupations, leading to large-scale job losses.

There is a burgeoning literature124 on this topic (Brynjolfsson & McAfee, 2014; Durrant- Whyte, McCalman, O’Callagan, Reid, & Seinberg, 2015; Frey & Osborne, 2013; Reich, 2016; Susskind, 2020). The arguments and analysis developed in this literature have also been rebutted (Autor, 2015; Gordon, 2016; Loundes, 1997). While the “this time it’s different” argument regarding the current wave of technological change cannot be dismissed entirely, past experience combined with the difficulty of accurately predicting future economic outcomes supports a cautious approach. Much of the heat in this debate has been generated by Frey and Osborne’s claim that ‘about 47 percent of total US employment is at risk’ due to computerisation, and the predictably sensationalist media coverage that followed (Frey and Osborne, 2013: 1). However, the authors make clear that their methodology aims to provide estimates of susceptibility to technological displacement for different occupational categories, rather than predictions of actual outcomes. As Frey and Osborne (2013: 36) put it: ‘we make no attempt to forecast future changes in the occupational composition of the labour market’. An Australian study using a similar methodology found ‘that 40 per cent of jobs in Australia have a high probability of being susceptible to computerisation and automation in the next 10 to 15 years’ (Durrant-Whyte et al., 2015: 58).

The relevance of this debate to the case for BI is threefold. First, processes of automation and digitisation have been cited as an important, sometimes primary, justification of some form of BI. These “robots are coming” BI proponents run the gamut from politicians, venture capitalists and futurists, to economists, trade unionists and radical Leftists (Barnes, 2014; Ford, 2015; Mason, 2016; Reich, 2016; Srnicek & Williams, 2015; Stern, 2016; Susskind, 2020; Yang, 2018). These BI advocates all differ

124 For a balanced review of the literature, see Hegewisch, Childers, and Hartmann (2020).

173 as regards their analysis and orientation towards capitalism, and the role accorded to BI within their respective visions. However, alongside the likes of billionaires Mark Zuckerberg and Elon Musk, such prominent advocates are the most likely conduits through which different constituencies first become familiar with BI. This brings to light the second concern regarding this justification of BI. If claims regarding the impact of automation and digitisation on net job opportunities and average job quality prove overblown, BI may be tainted by association and reform in this direction consequently stalled. The final issue raised by tying the case for BI to the technological displacement of labour is more pragmatic in nature. Even a generous annual BI, say AUD$25,000 in the Australian context, cannot come close to bridging the income gap for a truck driver on a mining site whose AUD$100,000 per annum job is automated out of existence.

For these reasons, BI should only be considered a form of partial social insurance in relation to loss of employment, including for those displaced by technological change. Digitisation and automation create benefits and impose costs, but these are unequally shared at present. Ensuring a more equitable distribution of the benefits of these processes would require reform in many areas, including corporate ownership structures, taxation and lowering barriers to access, both within and between countries.

7.3 Empirical Evidence on Basic Income and Labour Supply

While the technological imperative argument for BI rests on there being insufficient opportunities for paid employment, a longstanding criticism of this reform is that a high proportion of the working-age population would choose to exit the paid labour force if an alternative form of income were available. This, the critics opine, would render BI both infeasible and fundamentally unjust. The diminishing proportion of a given population who choose paid work over BI would bear an increased tax burden, while aggregate output and productivity are reduced. In the absence of any contemporary or historical examples of fully implemented and ongoing BI schemes, there are only a couple of approaches to evaluating the labour supply response (LSR) to the implementation of BI. The first and most obvious point to make is that it would be reasonable to expect some positive association between the level of BI and the incentive to exit the paid labour force or to reduce hours engaged in paid work. For example, a BI set at 150 percent of the poverty line should see more individuals exit paid employment

174 or reduce working hours than a BI set at 50 percent of the poverty line, adjusted for macroeconomic circumstances and BI scheme design.

Another approach is to examine the available empirical evidence regarding the LSR observed in the same BI trials in North America and Finland, discussed in Chapter 6. Table 7.1 summarises the labour supply responses for the four US NIT trials, the Manitoba Mincome and the Finnish Basic Income Experiment. Focusing first on the four US trials, Burtless found an average work reduction of 7% for men and 17% for women, with the most generous scheme producing the biggest work reduction effect (Burtless, 1986). Levine et al. (2005) reported a 13% average fall in family work effort, with ‘one- third of the response coming from the primary earner, one-third from the secondary earner and the final third coming from additional earners in the family’ (Forget, 2011: 5). This translated into a relatively small reduction in average working hours for primary earners (typically male full-time workers), and larger reductions for wives and adult children.

These findings can be interpreted in all manner of ways, ranging from encouraging, to a cause for alarm, to meaningless in the context of evaluating the impacts of a BI scheme implemented at scale on a permanent basis. For example, in a 1986 interdisciplinary symposium reviewing the effects and implications of the NIT trials, Nobel Prize-winning economist (Solow, 1986: 221) concluded: There is a labor supply effect, as every economist thought there would be; but it could hardly be described as large enough to jeopardize the work ethic. Besides, the inducement to withdraw from the labor force seemed to be stronger among women than among men; it might easily have weakened over time as women generally have become increasingly involved in the world of work.

However, Burtless interpreted the same results as constituting ‘moderate to large proportional reductions in work effort’, a conclusion qualified by two important caveats that pull in different directions. (Burtless, 1986: 30-31) writes: The work effort reductions were overstated due to misreporting bias but understated because of the limited duration of the experiments particularly in the case of high-guarantee, low-tax-rate plans. On balance, the experiments probably underestimated the permanent response to a negative income tax program with a

175 generous guarantee (equal, for example, to the poverty line) and a relatively low tax rate (equal to or below 50 percent).

Analysis of the Mincome trials showed smaller average paid working hour reductions than was the case for most of the US trials conducted during this period. It is impossible to say with certainty what factor or factors account for this outcome, but it at least points to the importance of studying different experimental designs in different social contexts in relation to key variables such as labour supply. Measuring the labour supply responses among treatment groups in different experimental settings is inherently difficult. This task is further complicated by a panoply of issues pertaining to the design, implementation, analysis, duration and political economic circumstances of the respective schemes. These issues are summarised in Table 7.2.

The Finnish experiment showed basically no difference between treatment and control groups in 2017, while BI recipients worked an average of 5 days more per year (+6.8 percent) than the control group in the second year of the trial. The aborted OBIP trial (2017-2019) in Canada has not been fully scrutinised, but (Ferdosi et al., 2020: 29) found ‘there was a slight reduction in the number employed during the pilot compared to the number employed prior to the pilot’.125

125 This finding is based on a survey of around 200 participants, which reported a net increase of 22 in the number of unemployed persons.

176 Table 7.1 Labour Supply Response in Six BI Trials

Trial/Location/ Payment Taper Labour Labour Labour Labour Data Collection Rate (Ratio Rate (%) Supply Supply Supply Supply Period/ of relative Response127, Response, Response, Response, Sample Size126 poverty line Total Husbands Wives Single or annual (% change) (% (% change) Female figure in change)128 Head national (% change) currency) 4 US NIT Trials See below. See below. n/a -0.5 to -9 -27 to 0 -15 to -30 1968-1980 NJ (New Jersey 0.5 30% n/a For details, and see Pennsylvania) 0.75 50% Widerquist 1968-1972 1.00 70% (2019: 61- 1,216 (983) 65.) 1.25 RIME (Iowa 0.5 30% n/a As above. and North Carolina) 0.75 50% 1970-1972 1.00 70% 809 (729) SIME/DIME 0.75 50% n/a As above. (Seattle and Denver) 1970- 1.26 70% - 1976 (2.5% x Y)129 (some to 1980) 4,800 1.48 70% - (2.5% x Y) 80% - (2.5% x Y) Gary (Indiana) 0.75 40% n/a As above. 1971-1974 1,799 (967) 1.0 60%

Mincome 3,800 35% n/a -1 -3 -17 (Winnipeg and Dauphin, 4,800 50% Manitoba) 5,800 75% 1975-1978 1,300 Basic Income 6,720 n/a 2017 +0.6 n/a n/a n/a Experiment 2017-2018 Nov +6.8 (Finland) 2017- 2,000 Oct 2018 Sources: Widerquist, 2005; Kangas, et al., 2019; Kela 2020.

126 Sample size in brackets provides sample size at end of experiment accounting for attrition. 127 Relative to control group. 128 US NIT Trials and Mincome refers to change in hours worked; Finland refers to change in days worked. 129 Y = income. The SIME/DIME experiments tested two non-linear taper rates.

177 Table 7.2 Difficulties in Evaluating Labour Supply Response in BI Trials

Sampling With the exception of the Mincome130 the experimental groups comprised only low- income individuals and households, providing a more limited view of LSR than a representative sample. Randomised As mentioned above, random samples in the experimental group were difficult to Control Trials create. Further, in Calnitsky (2019: 25) ‘the real world of work is poorly captured by randomized control trials’ due to their failure to capture key social dynamics. Recruitment The Finnish experiment had compulsory participation for the 2,000 experimental and Attrition subjects; OBIP only recruited around 1,000 of its 2,000 participant target before cancellation. While attrition in the US NIT trials ‘is likely to lead to bias towards exaggerating the value of the work-disincentive effects because those who worked the least had the most to gain by remaining in the experiment’ (Widerquist, 2005: 58). Design The testing of so many different payment levels and taper rates in the US NIT trials ‘reduced the numbers of subjects receiving each type of treatment, and therefore reduced the statistical reliability of the results for each’ (Widerquist, 2005: 55). Besides the Mincome, the other experiments lacked a saturation site. OBIP ‘Enrollees were given the option of reporting an in-year income decline, but were apparently not obligated to report in-year income increases’ (Mendelson, 2019: 18). Evidence Much of the analysis of the LSR evidence in these experiments was based on survey Source responses, rather than administrative, employment or taxation data. Among other issues, Ashenfelter (1986: 54) argues this ‘sets up an incentive for workers [in the treatment group] to underreport their incomes’ and working hours to maximise benefits received. Variables Inability to model changes in labour demand.131 As Widerquist (2005: 58) writes: ‘If unemployed workers replace the work reductions for NIT recipients, the effect of an NIT on total labor hours, output, and the efficiency cost of an NIT will be mitigated, but the effect on the labor hours of recipients and on the tax cost will not be mitigated’. Comparability The great variation in terms of the temporal, demographic, economic, design, implementation and evaluation characteristics of the seven experiments calls into question the usefulness of inter-scheme comparison of LSR. Time The LSR is likely to have been biased by the fact that recipients were aware that the experiment was time limited. This has been interpreted as creating a short-term ‘sale on leisure’ (Burtless, 1986: 30). As Widerquist (2005:57) writes: ‘The experiments measured the short-run response to a temporary change in policy, but we really want to know the long-run response to a permanent change in policy. This problem could mean that the experiments either overestimated or underestimated the work disincentive effect.’ Politics The same experimental results were interpreted in diametrically opposed ways by supporters and detractors of the policy. Changes in government led to cancellation of the Mincome and OBIP trials. Political considerations circumscribed the design, implementation and evaluation of the US NIT trials and the Finnish BI experiment. Sources: Calnitsky, 2019; Widerquist, 2005; Mendelson, 2019; Ashenfelter, 1986; Burtless, 1986.

130 The Mincome was open to all residents in Dauphin and surrounding rural municipality but obviously most higher income earners had little incentive to join a program that would dramatically reduce their incomes. 131 Calnitsky (2018b: 494) does cite some evidence relating to labour demand in the Mincome experiment. His analysis found ‘wage rates offered on advertised job vacancies and actual wages on new hires grew in Dauphin. In contrast, control firms report no wage growth on advertised job vacancies and slower wage growth on new hires’.

178 Hum & Simpson (1993: S287) provide a pithy assessment of the economic effects that is relevant to all seven trials discussed: If we were asked to summarize ‘in 25 words or less’ what has been learned from the experiments about the economic effects of a GAI plan we would respond: ‘Few adverse effects have been found to date. Those adverse effects found, such as work response, are smaller than would have been expected without experimentation.’

The results and interpretation of the LSR data was no doubt more important around the time the experiments were conducted, because of their connection with the possible implementation of a full-scale scheme. This was particularly the case in relation to the results of the early US trials and Nixon’s FAP as discussed in Chapter 1 (Coyle & Wildavsky, 1986)

7.4 Modelling Labour Supply Response to Basic Income

The inadvisability of drawing any general conclusions from these BI trial results, regarding changes in labour supply and demand at the aggregate level, has led researchers in different directions. For some, the evidence suggests the utility of BI trials in this respect should be altogether dismissed. Others have chosen to look to econometric techniques to estimate LSRs in different scenarios. Martinelli (2017: 51) neatly expresses the nature of the challenge in writing: Basic income has highly ambiguous labour market effects, in terms of overall levels of participation, wage levels and working conditions. This helps to explain why, for some advocates, UBI has the potential to increase labour market participation while, for critics, it is more likely to lead to labour market withdrawal.

Attempting to measure the LSR to the introduction of BI in different spatio-temporal contexts relies on estimates of the strength of the income effect132 and substitution effect133 for different cohorts. This is no easy task, especially considering the disjuncture between a smooth, optimising framework of marginal adjustments to incentives and the real-world messiness of regulation, norms and non-pecuniary incentives that structure

132 ‘We assume for simplicity that individuals face a trade-off between income (which equates to consumption) on the one hand and leisure on the other’ (Martinelli, 2017: 51). 133 ‘The substitution effect relates to how much leisure the individual must sacrifice for more income; in other words, their effective wage rate’ (Martinelli, 2017: 51).

179 and govern the realm of paid work. The literature shows there are marked differences in income and substitution effects for different household types, genders and employment categories (Browne & Immervoll, 2017; Hum & Simpson, 1993; Martinelli, 2017).

Table 7.3 summarises the LSR results based on microsimulations for one generous UK BI scheme (Martinelli Full Scheme 2) and one generous Australian BI scheme (Scutella System 1), both discussed in previous chapters (Martinelli, 2017; Scutella, 2004).

Table 7.3 Estimating Labour Supply Response for Selected BI Schemes

Model Estimated Change in Work Incentives* Full Scheme Total Q1** Q2 Q3 Q4 Q5 No Min. 1 II Benefit Benefit*** UK PTR PTR PTR PTR PTR PTR PTR PTR (Martinelli, Change Change Change Change Change Change Change Change 2017) (%) (%) (%) (%) (%) (%) (%) (%) 6 -8 2 6 1 12 7 4 Stronger Work Incentives Intra-Category (%) 34 61 46 38 22 10 29 63 Weaker Work Incentives Intra-Category (%) 66 39 54 62 78 90 71 37 Estimated Change in Workforce Participation (%) System 1 Couples Singles Sole Parents AUS Women Men Women Men (Scutella, 2004) -5.0 -0.1 -1.3 -2.7 -4.2 *For Full Scheme II, this is measured as percentage change in PTRs for each category, with a positive number indicating reduced work incentives and vice versa. It also shows intra-category proportions with positive and negative incentives. For System 1, this is measured as estimated percentage change in labour force participation based on assumed labour supply elasticities. **Q = income quintile. Quintile 1 has lowest average incomes. *** At least one of ESA, IS, JSA, PC, CTB and HB in payment (Martinelli, 2017). Sources: Martinelli, 2017; Scuttella, 2004.

Martinelli (2017: 51) uses three additional measures to estimate the work disincentive effects of his UBI Full Schemes, Schemes I and II, analysed in Chapter 6. These are: the

180 participation tax rate (PTR), marginal effective tax rate (METR) and replacement rate (RR). 134

As Martinelli (2017: 52) writes: ‘Higher values of these indicators imply weaker financial incentives to work as determined by the substitution effect, with very high values leading to unemployment and poverty traps.’ The results of the microsimulation show a 6 percent average decrease in work incentives for the more generous Full Scheme II. However, as usual, these averages obscure large inter-quintile and intra- quintile differences in work incentives. For example, 66 percent of people in Full Scheme II would face weaker work incentives according to the microsimulation, with only the poorest quintile and those receiving some means-tested benefit having a high proportion experiencing positive work incentives under the scheme (see Table 7.3) (Martinelli, 2017: 61-62). Martinelli (2017: 63) concludes that: Ultimately, a full understanding of the issues discussed here is probably beyond the scope of the microsimulation approach. There are too many complex factors at play to accurately model how individuals would respond to a basic income in reality.

Scutella (2004: 17) also acknowledges the importance of ‘allow[ing] for heterogeneity of preferences across the population’ in relation to the LSR, as income and substitution effects are not uniform across and within different groups. Scutella, like Martinelli, finds considerable variation in the strength of the LSR, as well as a generally negative effect on work incentives across the board. Scutella’s System 1 shows falls in estimated labour force participation across all income deciles of between 1 percent and 6 percent on average, with very significant intra-category variations when the analysis is decomposed into household, educational and occupational categories (Scutella, 2004: 18).

Scutella (2004: 28) concludes her analysis by stating: A system with relatively generous basic income levels and a high marginal tax rate is found to be socially optimal if there is a high aversion to inequality, even after

134 ‘The PTR measures the proportion of gross earnings lost through tax and/or benefit withdrawal … The METR measures the proportion of each additional unit of earned income lost to tax and/or benefit withdrawal … The RR measures the ratio of ‘out-of-work’ income to ‘in-work’ income (i.e. how generous out-of-work benefits are in comparison to net earnings)’ (Martinelli, 2017: 51-52).

181 reductions in labour supply are taken into consideration. With a lower aversion to inequality and less tolerance for distortions raised through the tax system, a system with lower basic income levels and a lower marginal tax rate would be optimal. Neither of these extremes is likely to be a socially acceptable alternative to the current system.

There are clear difficulties in estimating LSRs in different BI scenarios and there are divergent views regarding the overall usefulness of modelling LSRs in general (Fleetwood, 2014; McClelland & Mok, 2012; Røed & Strøm, 2002). These issues complicate debate regarding the possible outcomes of the interaction between BI and paid work. To the extent that some attempt to evaluate the effect of BI on paid work incentives prior to implementation is considered important, specific schemes should be designed so as not to exacerbate possible disincentive effects.

To illustrate this point, a general BI design approach that attempts to smooth EMTRs in a given tax and transfer system while retaining a progressive tax schedule could be expected, ceteris paribus, to generate lower paid work disincentives than an approach designed according to the obverse principles. For example, a BI with an 80 percent EMTR on the first dollar of market income should create a larger negative LSR, on average, than an equivalent BI with an EMTR of 40 percent.

These considerations are also expressed in the design principles underpinning the two affluence-tested models of BI for Australia, discussed in previous chapters. The first principle states: ‘i) Effective marginal tax rates should only increase with income (progressivity of incentives)’ (B. Spies-Butcher et al., 2020). Such an approach should reduce the incidence of poverty traps compared to Australia’s current categorical transfer system; but the quantum of BI, among other economic and cultural factors, will still have an effect on the LSR in aggregate, and among specific cohorts. The design principle is therefore a mitigation measure only.

7.5 Basic Income and the Exit Option in a Real Freedom Framework

The foregoing discussion has clarified the difficulty of predicting, with any real confidence, the LSR to the introduction and maintenance of a BI scheme. The preceding

182 sections have also focused, in the main, on evaluating the argument that the negative paid work incentives generated by BI would render any such scheme unviable. The other side to this debate emphasises the potential for positive economic, social and cultural dividends to flow as a result of the institution of an ongoing BI scheme.

Chapter 2 introduced the idea that BI could provide an “exit option” from paid work. For many BI scholars, the exit option is a key attribute of BI with the potential to deliver manifold positive outcomes (Calnitsky, 2018a; Gorz, 1999; Standing, 2017; Van Parijs & Vanderborght, 2017; Weeks, 2011; Widerquist, 2013b; Wright, 2010). For example, it could strengthen bargaining power for workers, leading to a corresponding improvement in pay and conditions and tighter labour markets. The exit option can also be interpreted as an “entry opportunity”, in terms of the capacity of a continuous and unconditional flow of income to underwrite the pursuit of a vast array of human needs, desires and aspirations. Chapter 2 also evaluated the potential for BI to provide partial compensation for unremunerated work and to lower the opportunity cost of participation is this vital and undervalued form of human activity.

However, the exit option is downplayed or rejected by some BI policy scholars. Birnbaum and De Wispelaere (2020: 1) caution that the exit strategy may prove a ‘hollow threat’ that amounts to an ‘exit trap’, due to the operations of contemporary labour markets. They write (2020: 3): Without denying the value of basic income in relation to many other objectives, this article takes issue with the specific claim that supporting the ‘power to say no’ through a basic income would play a key role in empowering precarious workers and transforming the organization of employment. Our thesis is that exit-based worker empowerment through basic income is at best insufficient for, and in some configurations plainly counterproductive to, improving the bargaining position of precarious workers.

Birnbaum and De Wispelaere (2020) make a series of pertinent observations that juxtapose the notions of exit and voice and examine their interrelationship, while also drawing attention to differences between the strategic use of “exit as threat” and the more pragmatic and personal ends that an exit option could effectuate.

183 Birnbaum and De Wispelaere (2020: 6) set down three conditions that must be satisfied in order for workers to carry out an exit strategy. They argue that workers must have the: ‘legal freedom to sever the employment relation’; ‘a feasible alternative to their current employment’; and access to an ‘additional income support to bridge a gap between leaving one job and moving onto the next’. The authors acknowledge that, at face value, BI appears to fulfil the third condition in an automatic, ‘non-intrusive and non-bureaucratic’ manner (Birnbaum and De Wispelaere, 2020: 7).

However, Birnbaum and De Wispelaere (2020: 8-10) go on to enumerate a range of factors than militate against the case for considering BI a cornerstone of any credible exit strategy in relation to paid employment. These can be summarised as follows: • BI needs to be sufficiently high to make an exit option feasible for a significant proportion of workers; • BI paid at such a level is likely to prove infeasible in fiscal and political terms; • Even precarious workers face significant opportunity costs (such as access to certain benefits in some jurisdictions) in exiting the labour market; • Skill loss may affect future employment prospects; • Loss of social and community ties; • Loss of other non-pecuniary work-related benefits (e.g. social esteem).

The authors then extend their analysis, from the claim that BI is likely to comprise a ‘hollow threat’ of exit to the contention that BI may constitute an ‘exit trap’. First, they reiterate their claim regarding the improbability of implementing BI that could make an exit threat credible in current political economic circumstances. Second, they argue that there is a disjuncture between precarious work offered on a binary ‘take it or leave it’ basis and the gradual phasing in of a BI scheme. This disjuncture, they argue, could lead to BI operating more as a wage subsidy for ever more precarious jobs and an overall erosion of labour market conditions. Third, they make an important point regarding the tension between the enhanced individual freedom regularly posited as a positive attribute of BI and the collective organisation historically central to improvements in working conditions and living standards. Fourth, the authors argue that, in a context in which capital has access to a vast global labour market, the alternative employment

184 option that makes the threat of exit credible may, in many circumstances, simply not exist (Birnbaum and De Wispelaere, 2020: 10: 14).

Birnbaum and De Wispelaere (2020: 16-17) conclude: In our view, overt reliance on basic income, as suggested by strong exit advocates such as Karl Widerquist (2013), could end up trapping workers into precarious existence and, in some cases, even make them worse off than before. Instead, we suggest the long-term objectives linked to exit-based empowerment are best served by a broader strategy, placing greater emphasis on how specific forms of exit interact with voice mechanisms and collective bargaining power. The precise role a basic income can play in these more complex scenarios remains to be investigated in much more detail.

Henderson and Quiggin (2019: 501) adopt such a multi-pronged approach to exploring the possibility of according ‘everyone a meaningful choice between paid employment and other activities, including unpaid contributions to society and the creative use of leisure’. The authors argue that: To make such a choice a reality, it is necessary to combine: • Basic Income, with • Minimum wages at a realistic level, and • A commitment to full employment: that is, the availability of jobs for all those willing and able to work (Henderson & Quiggin, 2019: 501).

In practical terms, Henderson and Quiggin (2019) advocate a combination of two contemporary proposals that are often counterposed: a Job Guarantee (JG) and a BI. The authors follow (FitzRoy & Jin, 2018: 5) in suggesting that a ‘modest Basic Income combined with a JO [Job Offer] is more likely to be achievable than a generous Basic Income’ and ‘even a modest Basic Income would increase worker bargaining power’. The interaction of an unconditional BI that establishes a universal income floor with an optional but guaranteed public JO paid at a higher rate should, ceteris paribus, ‘lead to an increased capacity to reject poor wages and conditions, creating tighter labour markets and, consequently, higher wages (especially in low wage work)’ (Henderson & Quiggin, 2019: 503).

185 The exit option debate can be conducted at various levels of analysis. From the individual and the family, to the local community, class struggle, the nation state, and global capitalism. The macroeconomic implications of the exit option are explored in the next chapter. The political potential of the exit option is revisited in Chapter 10. To conclude, it is important to stress that a permanent BI sufficient to turn a ‘hollow threat’ (Birnbaum and De Wispelaere, 2020) into a real one can only be achieved through sustained collective action aimed at this end. With the odd Owenite exception, enhanced workers’ bargaining power and improved working conditions have not been the result of employer benevolence. There is no reason to expect BI to break this mould.

Conclusion

This chapter has examined the complex but critically important terrain of the relationship between BI and work. The chapter began with a brief restatement of the major structural barriers to the implementation of BI in a capitalist society. The second section assessed the argument that BI has become a necessity, due to the job-destroying effects of automation and digitisation, and found this argument wanting. The next two sections explored some of the empirical and econometric evidence regarding work incentives and BI, highlighting the limitations of both approaches, along with their potential to inform the future design of BI schemes. The chapter concluded with an analysis of claims regarding the potential of BI to provide a meaningful exit option from paid work, and what such an option might mean in the context of contemporary capitalist reality. The next chapter examines the relationship between BI, economic growth and inflation.

186 Chapter 8: Basic Income, Economic Growth and Inflation

Introduction

The previous chapter emphasised two key points regarding the relationship between BI and work. First, it illustrated the difficulty, perhaps impossibility, of accurately predicting the size and shape of the labour supply response (LSR) to the introduction and maintenance of a given BI scheme. Second, it reiterated the point that part of BI’s promise is to provide working-age people with an unconditional alternative income beyond the wage relation. This chapter switches attention to the macroeconomic effects of introducing a BI. There is an element of continuity in that the labour supply response bears on macroeconomic outcomes, such as economic growth and inflation. It is acknowledged that other important macroeconomic variables, such as the exchange rate, are not considered. This decision is both a pragmatic choice regarding space constraints and a judgement regarding the likelihood that any effect of BI on these omitted variables will come via BI’s effects on the variables which are analysed. Impacts on national income, economic growth and inflation are the basic economic concerns that, among other indicators, should form part of an evolving macroeconomic analysis of BI. The general epistemological and analytical approach135 towards theorising the macroeconomy follows a ‘Babylonian … Mode of Thought’, that treats the economy as an ‘open system’ and contends that economic analysis is best pursued using ‘organicist’ methods and perspectives. This approach accepts that all theories are partial and subject to continuous testing and, where necessary, revision in light of changed empirical evidence or the revelation of logical and analytical flaws (Dow, 1996: 10-16).

This epistemology and mode of analysis is broadly consistent with heterodox or post- Keynesian economic theory and analysis. Keynesian and post-Keynesian economics (PKE) are the principal frameworks for situating BI within a macroeconomic context in this chapter. The macroeconomics of BI has been the most under-theorised aspect of this policy reform. This is not without good cause. It may be reasonably argued that attempting to predict the impacts of BI on variables such as national income, economic growth and inflation is even more a fool’s errand than estimating the labour supply response. Even the most advanced macroeconomic econometric models exhibit severe

135 See the thesis Introduction.

187 limitations, in terms of their capacity to reliably predict change in one or more parameters within a complex and dynamic system (Cusbert & Kendall, 2018). Econometric analyses depend on historical data for their quantitative estimation of relationships between key variables, but historical analysis cannot be a perfect guide to future economic development paths. Articulating and estimating likely outcomes of particular policy changes is possible but, to paraphrase a popular truism, economic prediction is hard, especially regarding the future.

The second challenge, already canvassed in Chapter 7 in relation to work, relates to the interpretation of even the most tentative inferences regarding the effects of BI on economic growth and inflation. For example, analysis that concludes that economic growth may be somewhat lower and inflation somewhat higher in a given BI scenario can be interpreted as either positive or negative. To further illustrate this point, a finding that BI would boost consumption and economic growth might be viewed favourably in conventional economic terms, while being condemned on ecological grounds as reinforcing wasteful consumerism. Taking a pragmatic approach, the key considerations regarding these theoretical, technical and interpretive challenges are the size and the velocity of any posited effect. The difficulties inherent in estimating these magnitudes and rates of change may call the usefulness of the whole enterprise into question. However, from the perspective of providing a comprehensive analysis of BI as a policy option, it would be a major oversight to duck these macroeconomic issues altogether. For the researcher, feeling your way forward in a darkened room is more likely to yield useful information and interesting questions than standing still with your eyes closed.

Section 8.1 examines the relationship between BI and economic growth. Given the complete absence of any national, or even regional, BI scheme, this relationship must be assessed on the basis on economic theory and evidence regarding the drivers of economic growth in a capitalist economy. This section draws mainly on the insights of PKE, to posit some very tentative conclusions regarding the potential growth effects of BI schemes. Section 8.2 focuses on the possible effects of implementing a BI scheme on inflation. The section starts by asserting that the causes and consequences of inflation are among the most heavily contested, and poorly understood, characteristics of capitalist economies. It draws on Lavoie’s ‘conflicting-claims’ theory of inflation (Lavoie,

188 2014) to infer that BI could have inflationary effects, if access to non-market income among the working-age population shifts bargaining power decisively in labour’s favour and the economy is running at close to full capacity. It goes on to evaluate Minsky’s claims regarding the likely inflationary bias of a NIT scheme (Minsky, 1969), before concluding with a discussion on the relevance of a permanent incomes policy in relation to BI. Section 8.3 examines the potential of BI to function as a counter-cyclical macroeconomic policy tool. This potential was recognised by Juliet Rhys-Williams and James Meade as early as the 1940s (Van Trier, 2018). The institutional form and operation of such a policy turn is briefly canvassed. Section 8.4 applies insights drawn from the foregoing analysis to the specific case of Australia. It includes a brief discussion on economic growth, inflation and labour force participation, that emphasises the fact that there is no simple linear relationship between these variables and aggregate social spending, which is the closest extant BI proxy.

8.1 Economic Growth and Basic Income

Economic growth has been theorised, analysed and measured in radically different ways, both across and within different schools of political economy. Scholars working within Classical, Marxian, Neoclassical, Schumpeterian, Keynesian, post-Keynesian, Ecological, Feminist, Regulationist and Social Structures of Accumulation traditions have all made important contributions to our understanding of the nature and causes of economic growth136. While a proper evaluation of this vast literature is beyond the scope of this thesis, several points need to be made in relation to the theoretical approach adopted in this section. First, the neoclassical aggregate production function, in general, and the Cobb-Douglas production137 function, in particular, are rejected for reasons elaborated by (Shaikh, 1974), among others, including the heterogeneity of capital and the role agency in shaping distributional outcomes and economic change.

Second, the relationship between economic growth and BI is principally investigated within a PKE138 macroeconomic framework, because it is the most applicable in this context. This PKE framework does not discount the other important contributions to theorising economic growth and capital accumulation. Supplementary insights can be

136 Or capital accumulation. 137 See Hoover (2012) for a discussion on neoclassical macroeconomic growth theory. 138 Acknowledging the existence of intra-school differences (Davidson, 1994; Harcourt, 2006)

189 drawn from Schumpeterian competition and the role of the entrepreneurial innovator (Schumpeter, 1983, 2010), the differential effects of long waves of technological change (Gordon, 2016), theories of overaccumulation (Brenner, 2006), accumulation by dispossession (Harvey, 2004) variations on the limits of growth theory (Hickel & Kallis, 2020), and the iceberg economy (Mies & Bennholdt-Thomsen, 2000).

The primary reason for selecting PKE as the macroeconomic framework of choice is its clear, though not perfect, alignment with the policy objectives, economic impacts and potential macroeconomic uses of BI. Shaikh (2016: 587)139 provides a pithy summary of PKE’s key characteristics: The post-Keynesian tradition encompasses Keynesian and Kaleckian wings. They share five central beliefs: that aggregate demand drives output, that money is endogenously created through the banking system, that both persistent excess capacity and unemployment are the normal outcomes of market processes, and that the state can achieve (effective) full employment with tolerable levels of inflation. Beyond this the post-Keynesian tradition is quite diverse ...

Turning to economic growth, PKE theory is structured around some (mostly) shared central tenets. First, economic growth is determined by the level of aggregate demand. Second, aggregate demand140 is driven by the level of investment. Third, as Shaikh (2016: 588) paraphrases Paul Davidson, the level of investment is the ‘paradigmatic autonomous variable because it can always be funded at any level justified by expected net returns.’ Put another way, investment must be ‘essentially independent from savings’ (Lavoie in Shaikh, 2016: 588). Fourth, the Keynesian “paradox of thrift” or the Kaleckian “paradox of costs” imply that saving is a function of incomes and that increased saving levels can depress aggregate demand and reduce economic output (Shaikh, 2016: 594). Fifth, the differentiation between profit-led and wage-led effects on economic growth. As Shaikh writes (2016: 591), ‘if growth moves in the same direction as the profit share, it is considered profit-led, whereas if it moves in the same direction as the wage share ... it is wage-led’. For Kalecki, a fall in the wage share ‘has an adverse effect on demand formation that more than outweighs any accompanying positive

139 Note that Shaikh (2016) rejects several post-Keynesian positions. 140 Note that aggregate demand and effective demand are used interchangeably here to mean total macroeconomic demand, acknowledging that these terms are not always treated as synonyms.

190 effect, such as a boost to investment spending caused by a rise in the profit share’ (Setterfield, 2016: 227) Sixth, PKE is distinctive because of the integration of short-run and long-run economic analysis. As (Harcourt & Kriesler, 2015: 29) articulate the point: ‘All economic action occurs in the short run in response to the impacts of both short- period and long-period factors on decision-making’. Seventh, the object of boosting aggregate demand in policy terms can be summarised as the achievement and maintenance of full employment with reasonable levels of price stability (Dow, 1996; Harcourt and Kriesler, 2015). Dow (1996) and Harcourt and Kriesler (2015) provide two examples of a post-Keynesian policy package that usefully illustrates many of the theoretical and normative concerns and insights common to this approach to economic analysis.

Dow’s (1996: 210) PKE policy package comprises the following elements: The overall Post Keynesian policy package for dealing with unemployment and inflation, then, is fiscal expansion to increase effective demand and generate more private-sector optimism, incomes policy to defuse the anxieties attached to wage bargaining, intervention in investment planning to direct activity in such a way that consumption output groups concomitantly with investment output, so as not to give rise to inflationary pressures, and competition policy to limit the market power which allows anticipatory self-finance by increased mark-up on product prices.

Harcourt and Kriesler’s (2015: 37) variant includes: Full employment is an overriding aim; it is to be associated with relatively equitable distributions of income and wealth and environmentally sustainable rates and forms of growth.

To achieve full employment we must take fully into account the different economic, political and social factors associated with recovery after a deep slump, when all classes – wage-earners, profit recipients and the government – may be expected to favour achieving full employment. This is different from sustaining full employment when economic, social and political power will cumulatively pass from capital to labour. In the latter conditions, the sack ceases to be effective, and inflationary forces tend to build up. We dub this the Kalecki dilemma, as it was first set out by

191 Kalecki in his famous 1943 article, ‘Political Aspects of Full Employment’. To tackle the dilemma requires permanent incomes policies, such as those associated with the proposals of Kaldor, Russell and Salter, which take into account the historical and sociological characteristics of each national economy.

Table 8.1 draws on Dow (1996), Harcourt and Kriesler (2015) and Shaikh (2016) to situate BI in relation to core PKE principles and policies. Those aspects most clearly related to inflation are further scrutinised in Section 8.2, while the potential utility of BI as a macroeconomic policy tool reserved for Section 8.3.

Table 8.1 Basic Income in a Post-Keynesian Framework PKE Principle PKE Policy Example Implications for BI Increase effective demand Fiscal expansion (can take many Meaningful and redistributive BI forms). should boost effective demand. Investment (autonomous Policies that encourage private BI is a form of public variable) drives effective demand investment with preparedness to discretionary investment in social increase discretionary transfers. Other forms of private government investment when and public investment remain necessary. important drivers of effective demand. Paradox of thrift Redistribute work/incomes Redistributive BI should increase towards those with higher the household marginal propensity to consume. consumption/household savings ratio. Profit-led growth versus wages- No uniform normative position. BI is not a wage or a profit (once led growth More theoretical and empirical we exclude dividend model) in a question. conventional sense. It is possible to envisage BI schemes accompanied by wages-led or profit-led growth. Achievement and maintenance of Increase investment until A BI-adjusted variant of full full employment sufficient effective demand to employment would become the ensure employment for all those overriding objective. wanting paid jobs. Implement BI could become part of the large fiscal and monetary macroeconomic policy toolkit. stimulus during economic slumps. Incomes policy especially important during (potentially) inflationary booms. Moderate inflationary pressures Permanent incomes policy. BI could be seen as opposite to permanent incomes policy in PKE sense but has some potential to fulfil similar role. Money incomes move in line with Some combination of collective BI can be indexed and productivity improvement and bargaining, institutional wage periodically adjusted. Collective inflation setting, and benefit indexing. bargaining and institutional wage setting can be maintained. Competition policy to regulate Some combination of This factor is important in price mark-ups conventional competition policy relation to the real value of a with selective price regulation. given BI, particularly in relation to housing. Sources: Author’s own analysis; Dow, 1996; Harcourt and Kriesler, 2015; Shaikh, 2016.

192 The introduction of a meaningful BI scheme141 in an advanced capitalist country should boost aggregate demand, if it is financed via some combination of progressive taxation, non-taxation government receipts and public debt, and effects a shift in the income distribution towards those with a higher marginal propensity to consume. This implies (1) increased consumer demand and (2) a related increase in the aggregate size of the economic multiplier. Both effects are likely to be substantial, because household final demand comprises around 60 percent of GDP on average across the OECD. Australia sits a little below the average at 55.6 percent (OECD, 2020b). This scenario assumes that BI is introduced in an economy that is not running at full capacity.

Chapter 7 has already demonstrated the difficulty of estimating the size of any labour supply response (LSR) to a BI scheme at the aggregate level. In a macroeconomic policy context geared towards the goal of full employment, we could reasonably expect any negative LSR to be smaller than in an alternative policy context142. However, the size of any negative LSR response with PKE macroeconomic policy settings may also be larger with a BI in place than would be the case without the unconditional BI option.

There have been relatively few attempts to theorise these interrelationships and estimate their overall macroeconomic effects. Notable exceptions include the Keynesian economists James Meade and James Tobin, the Marxist/heterodox economist Samuel Bowles, and the more recent example of scholars working at the Levy Institute, a centre for heterodox economics, and the Roosevelt Institute, a progressive think tank.

For 60 years143, Meade advocated some form of BI. In his imaginary ‘good-enough’ world of Agathopia, every individual would have access to an independent BI which would produce both an ‘equalizing effect on the distribution of income’ and would ‘greatly ease that acceptance of flexibility in rates of pay ... necessary for the attainment and maintenance of full employment’ (Meade, 2013: 200). Meade articulated three pathways to BI: distributed ownership of productive enterprises; replacing categorical benefits with BI financed via taxation; and a social dividend based on state ownership of productive enterprises. The Agathopians combine all three approaches, together with

141 Whether a UBI or NIT model. 142 For example, in an austerity-oriented macroeconomic policy context. 143 See Chapter 1.

193 environmental taxation, to finance a ‘minimum Guaranteed Income’ with an NIT-style taper on market income (Meade, 2013).

Tobin (1966 as cited in Tobin, 2013) viewed ‘structural’ approaches focused on improving ‘the capacities of the poorest fifth of the population to earn decent incomes’ and ‘distributive’ strategies centred on an ‘income guarantee’ as complementary pathways to poverty eradication in the US. Tobin argued that ‘the graduation of the “negative income tax” [income guarantee] to the family’s income would, like that of the positive tax, give the family an incentive to earn more on its own’. He also argued that, ‘from an overall economic point of view’, this form of ‘redistribution of income and consumption’ has ‘no cost to the nation’, but that a NIT-style design may reduce political opposition from higher income earners to the program (Tobin, 2013: 195- 199)

Bowles (1992), on the other hand, argues that redistribution within capitalist welfare states is fundamentally constrained by ‘the international mobility of capital and the alienation of labour’. While acknowledging that tension between income security, work incentives and private profits is ‘obviously not insurmountable’, he argues that it is nonetheless difficult to reconcile and manage (Bowles, 1992: 557-558). He was also sceptical of claims regarding wage-led growth in open economies tied to global markets (Bowles, 1992: 557-559).

Bowles’ analysis of the compatibility of some level of a Basic Income Grant (BIG) with capitalist profitability includes a focus on both labour supply and work effort or, to put it in Marxian terms, labour power and concrete labour (Bowles, 1992: 559). He makes various simplifying assumptions in his equations (see Bowles, 1992: 561-566), before reaching several substantive conclusions.

First, he assumes that increases in non-waged transfer incomes will increase the level of the reservation wage for workers (Bowles, 1992: 566). This is consistent with the empirical findings of Calnitsky (2018b), in relation to the 1970s Mincome trial in Dauphin. Further, Bowles (1992: 567) contends that the higher equilibrium wage will result in ‘an increase in the unit labor cost which ceteris paribus results in a decline in the profit share and the profit rate’.

194 Bowles evaluates the case for a BIG based on a very particular definition of feasibility. He suggests that only a BIG ‘which does not lower the after-tax profit share of output, or what is the same thing in this model, does not lower the ratio of labor effort to the wage’ would satisfy his feasibility criterion. Bowles justifies this approach based on the ‘well documented responsiveness of private investment to the after-tax profit, and the key role played by private investment in the health of a capitalist economy’ (Bowles, 1992: 568). Bowles (1992: 568) then attaches a series of caveats to this framework, including the important acknowledgement that a BIG could be ‘financed in such a way’ as to boost aggregate demand, capacity utilisation and the profit rate, while reducing the profit share. After a further series of simplifying assumptions, Bowles concludes that a universal BIG worth ‘2% of the pre-grant wage rate’ that replaces existing cash transfers would satisfy his original definition of feasibility boosting work effort and the profit share (Bowles, 1992: 570).

Bowles then moves from this self-described ‘miniscule’ feasible grant to estimate the maximum BIG concordant with his feasibility criterion. Bowles (1992: 570-571) writes: One way to answer this question is to determine the size of the tax to be paid by businesses which would just offset the increase in the profit share associated with the elimination of income-replacing transfers. The revenues collected from this tax would then represent the maximum addition to the grant identified above consistent with feasibility.

For the US, based on income and labour force participation data, Bowles calculates ‘a maximum feasible grant of US$4,208’ for all adults, equivalent to 71 percent of the poverty line for single adults. Lowering the adult BIG to US$3,583 and providing a 0.5 BIG per child would put a couple with two children at 92 percent of the poverty line. Depending on the effect of a BIG on the LSR, the grant could be expected to substantially reduce non-property income inequality, as with the schemes canvassed in Chapter 6 (Bowles, 1992: 572-573, 575).

Turning to macroeconomic implications, as Bowles’ hypothetical scheme is financed by increased taxation on labour, he concludes that it ‘seems likely that a reduction in labor force participation would therefore result, though I will not speculate on the magnitude of this effect’. On the other hand, a countervailing effect of the maximum BIG would be

195 increased demand for goods and services. Furthermore, if labour supply tightened and unemployment fell due to the introduction of the BIG, the profit share would fall, in turn reducing the size of the maximum grant based on Bowles’ definition of feasibility (Bowles, 1992: 573-574). In the final analysis, Bowles does not see BIG providing ‘income security’ in a ‘society characterized by a strong incentive incompatibility between workers and employers and by a profit-driven private investment process’. However, he remains tentatively supportive, because a BIG scheme that reduces income inequality, improves intra-familial income distribution and increases access to ‘free time’ with ‘no loss in per capita incomes’ should perhaps be implemented anyway (Bowles, 1992: 576-577).

A more recent attempt to estimate the macroeconomic effects of introducing a BI in the US was conducted by Nikiforos, Steinbaum, and Zezza (2017) using the Levy Institute’s macroeconomic Levy Model. The authors model three rates of BI (US$1,000 per month, $US500 per month, and US$250 child benefit) using two alternative financing mechanisms (public debt and taxation). Critically, the Levy Model incorporates three assumptions, the first of which may be deemed more readily acceptable than the other two. The assumptions are: (1) ‘the economy is not currently operating near potential output’; (2) ‘unconditional cash transfers do not reduce household labor supply’; and (3) ‘increasing government revenue by increasing taxes levied on households does not change household behavior’ (Nikiforos et al., 2017: 3).144 Further, the simulations assume the BI programs are: ‘gradually implemented over a period of four years, starting in the first quarter of 2017’ and the total ‘projection period of the simulations is eight years ... which gives enough time for potential lagged effects’ (Nikiforos et al., 2017: 11).

The authors argue that a macroeconomic analysis of BI is critical to any evaluation of the policy, ‘because what would appear to be a zero-sum transfer in static terms ... turns out to be a positive sum in the macro simulation due to the increase in aggregate demand and therefore in the size of the economy’ (Nikiforos et al., 2017: 5). The outcomes of the simulations are compared to a baseline scenario in relation to key

144 For a detailed explanation of the model and the methods used to calculate the impact of distributional changes in the tax-financed simulation, see Nikiforos et al., 2017.

196 macroeconomic indicators over the eight-year period. Here we focus only on results of the simulations for: the US$1,000 per month BI for the deficit-financed Scenario 3; the deficit-financed and adjusted for distribution Scenario 9; and the tax-financed and adjusted for distribution Scenario 12. Table 8.2 summarises the main results, in terms of the percentage differences between the BI scenarios and the baseline scenario over eight years.

Table 8.2 Simulating the Macroeconomic Effects of Three US BI Scenarios

Real GDP Price Level Nominal Government Employment Labour Force (%) (%) Wages (%) Deficit (%) Rate (%) (persons, mns) Scenario 3 12.56 3.68 5.16 9.33 2.04 4,499

Scenario 9 13.10 3.77 5.23 9.11 2.11 4,703

Scenario 12 2.62 0.56 0.51 -1.39 0.31 1,110

Source: Nikiforos, Steinbaum and Zezza, 2017: 12.145

All three scenarios outperform the baseline scenario, in relation to economic growth and employment. This effect is very pronounced in the deficit-financed scenarios. The same deficit-financed Scenarios 3 and 9 show modest real wage increases, compared to a small real wage decline in the tax-financed Scenario 12. Unsurprisingly, government deficits are much higher for the deficit-financed BI schemes, when compared to both the baseline and tax-financed versions. Nikiforos et al. (2017) argue that such deficit increases would be sustainable, due to the positive economic growth effects of these schemes.

Given the aforementioned difficulties, and the less-than-stellar predictive record of macroeconomic modelling, the results of these simulations can only be regarded with

145 Explanatory note: ‘The numbers on Real GDP, Prices, and Nominal Wages express the percentage difference of each variable from its value in the baseline scenario. The numbers on Government Deficit express the difference in government deficit as a percentage of GDP and the employment rate from their value in the baseline scenario. Labor force is in millions of workers. Unemployment rate (U3) is by definition one (or 100%) minus the employment rate, so the difference of the unemployment rate compared to the baseline scenario is simply the negative of the figures reported in the employment rate row.’ Nikiforos, Steinbaum and Zezza, 2017: 12.

197 an admixture of curiosity and caution. Perhaps the only inference that could be tentatively drawn from these results is that a real-world BI scheme that is, at least, partly deficit-financed may produce better economic growth outcomes than an otherwise identical scheme financed solely via taxation. There are obvious parallels with the debates regarding the labour supply response to BI and the relationship between economic growth and BI. What matters most is the magnitude, direction and velocity of any associated changes. If, for example, the introduction of a BI scheme precipitated a 20 percent reduction in aggregate labour supply or a 10 percent contraction in GDP over 12 months, it would clearly undermine the economic and political viability of the scheme. However, all the evidence presented in Chapters 3 to 8 suggests that such a dramatic response to a modest but meaningful BI scheme is unlikely.

8.2 Inflation and Basic Income

Debates concerning the causes and consequences of inflation are at least as contested as those pertaining to economic growth. In fact, the nature of the relationship between inflation, employment and other macroeconomic variables remains unresolved in political economic theory and public policy practice. The ‘tension between price stability and other goals’, such as full employment, has been theorised and managed in different ways in different periods and contexts (Beggs, 2015: 17). To cite one prominent example, controlling inflation changed from being regarded as a ‘subsidiary goal’ during the Long Boom to ‘increasingly dominate policy strategy’ throughout the neoliberal period (Beggs, 2015: 17)146. It is noteworthy that this shift in the macroeconomic policy hierarchy occurred during a period in which policymakers exhibited no interest in BI.

Although, as with the preceding discussion of economic growth, a comprehensive account of theories of inflation and concomitant debates on public policy are beyond the scope of this thesis, useful insights can be drawn here from Keynesian and post- Keynesian theories of inflation. Tobin (1989: 301) defines inflation simply as: ‘generally

146 It should be noted here that much of the analysis in this and preceding chapters has been abstracted from the role of the state in general and the Australian state in particular. These fundamentally important concerns will be addressed in Chapters 9 and 10. Beggs (2015) focuses on Australian macroeconomic policy, but the analysis offered has broader relevance to advanced capitalist countries.

198 rising money prices of goods and services’. He goes on to differentiate three types of inflation: ‘excess-demand inflation’, the ‘wage-price spiral’ and inflation caused by ‘shortages and price increases in important commodities’ (Tobin, 1989: 320). The third type of inflation could be described as more contingent or political147, while types one and two might be characterised as structural. In his discussion of the drivers of inflation, Tobin (1989: 318) discusses, ‘the disquieting possibility’ that ‘inflation is the symptom of deep-rooted social and economic contradiction and conflict, between major economic groups persistently claiming pieces of pie that together exceed the whole pie’.

This view is partially reflected in the post-Keynesian conflicting-claims148 theory of inflation, which posits that ‘inflation can arise from a conflict between the target markups of firms and the target real wages of workers’ (Shaikh, 2016: 589). Lavoie (2014: 572, 573) summarises his interpretation of this post-Keynesian position as follows: The focus of the Kaleckian model of inflation developed in this chapter has been a cost-push theory of inflation, based on the conflicting-claims of workers and firms. The theory is also known as a real-wage resistance theory of inflation, or as a theory based on aspiration gaps. Its main elements ... [include] ... that price inflation depends on current wage inflation, while current wage inflation depends on past price inflation, as well as the aspiration gaps of both groups of agents.

In the post-Keynesian view of inflation, price inflation is explained mainly by historical and cultural features, tied to the size and the strength of the aspiration gap, which itself may have been affected by the past evolution of aggregate demand.

The implications for this theory of inflation vis-a-vis BI are several. First, if BI strengthens labour’s collective bargaining power, as discussed in Chapter 7, workers should, in theory, be better placed to reduce the ‘aspiration gap’ between their targeted and realised real wage outcomes. Second, if there is no mechanism for constraining the realisation of target mark-ups on prices set by oligopolistic firms, any BI-augmented

147 For example, a contemporary analogy of the 1970s OPEC oil shocks might be a dramatic spike in the cost of fibre optic cable. 148 For a detailed exposition of this theory of inflation, including its application to an open economy, see Lavoie, 2014: 541-573.

199 power shift towards workers may set in train an inflationary process that nullifies any real-wage gains. Third, the prevailing inflationary environment should be taken into account in considering the timing of introducing a BI scheme. The logic of the conflicting-claims theory leads to the conclusion that introducing a BI scheme in a low inflation environment would moderate any associated inflationary risk.

The views of two other prominent post-Keynesian economists, Hyman Minsky and Nicholas Kaldor, are worthy of consideration in relation to BI. Davidson assigns them to different post-Keynesian camps, both opposed to BI (Shaikh, 2016: 588; Minsky, 1969). Minsky made an explicit case against the NIT on several grounds. Minsky’s (1969: 4, 5) core contention is worth quoting at some length: It will be shown that a negative income tax is expansionary149 or inflationary, even if budgets are balanced. Monetary and fiscal constraint can offset this inflationary pressure, but at a cost in the measured gross national product and rate of growth.

If the negative income tax induces inflation, there will be an upward shift in tax code incomes. Families which initially were net beneficiaries would cross the break even line in dollar terms and experience a decline in their real income. Simultaneously, the rise in prices will erode the real value of the benefits to the poor. The end result will be an equilibrium which delivers less in real terms than promised to the poor while biting more deeply than anticipated into the real income of the not poor but not very well off population.150

Minsky’s assertion that ‘system wide as well as direct effects must be considered in evaluating public policy instruments’ is well made. However, writing before the 1970s stagflation recession, Minsky’s (1969: 5) claim that ‘any significant improvement in the welfare system’ has ‘expansionary and inflationary effects’ is less compelling when viewed from a twenty-first century perspective, dominated by low rates of inflation and high levels of social spending in advanced countries.

149 Use of this term as a negative is somewhat confusing in Keynesian or post-Keynesian terms. 150 The entire analysis in this second paragraph seems to assume that no adjustments could be made in relation to the tax code, the NIT taper rate, or the benefit level in response to even a modest inflationary impact.

200 Minsky goes on to elaborate a highly stylised NIT scheme, incorporating various contestable assumptions, before reaching his substantive conclusions. First, the NIT would induce a ‘tendency’ for ‘a large group of families clustered below and around the median’ income to ‘substitute leisure for income as a result of the lower net return from work’. Minsky contends this effect would be particularly pronounced among secondary income earners, usually women (Minsky, 1969: 7-8). Second, a ‘meaningful negative income tax will raise the present value of the welfare system for the poor and the near poor’ and boost their consumption. Third, many households will reduce their ‘precautionary holdings of cash’, due to the income security and insurance function of the NIT. Fourth, this change in the composition of household financial balance sheets will increase ‘aggregate money demand’ irrespective of ‘any expansion in the money supply’ (Minsky, 1969: 9). Fifth, Minsky argues that investment demand will be increased via two channels: falling demand for ‘money balances’ lowering interest rates; and the ‘substitution of labor for capital’ in response to reduced labour supply. Sixth, he contends that these positive effects on investment will be outweighed by negative effects on investment, due to ‘change in the expectational climate that may follow upon improvements in welfare’ (Minsky, 1969: 10). Seventh, he concludes that the ‘labor supply and consumption function shifts, together with the facilitating effects upon the demand for money, will induce an inflationary expansion’. Finally, while Minsky offers no quantitative estimates of these effects, he acknowledges it is ‘quite likely that some of these effects will be small’. However, he stresses, ‘they all operate in the same expansionary-inflationary direction, and it is the combined and cumulative effect that is at issue’ (Minsky, 1969: 10).

Minsky’s investigation of the relationship between a NIT scheme and inflation can be legitimately criticised on numerous grounds—from the large number of simplifying assumptions deployed in his equations and analysis, to the design of his illustrative NIT, to the empirical evidence that developed welfare states with high levels of social transfers have proved durable throughout periods of both high, moderate and low inflation. In addition, computer microsimulations of the static distributional effects of BI schemes in relation to specific, and increasingly complex, tax and transfer systems, constitute an advance on mathematical calculations and logical inferences regarding the distributional effects of stylised BI schemes. Ultimately, providing accurate estimates of

201 the effects of these complex interactions is probably beyond the capacity of any presently available method. At best, we may conclude that Minsky presents an illustrative scheme that usefully emphasises the importance of ‘system wide’ analysis, as well as the potential for a policy instrument (NIT) to fail to achieve a stated policy objective (poverty eradication), due to the ‘unintended and undesirable side effects’ of the interaction of different variables in a complex and dynamic system (Minsky, 1969: 17-18).

The theory of Kaldor is the final case of a post-Keynesian approach to both inflation and BI examined in this chapter. Kaldor, as mentioned in Chapter 1, was one of the economists who rejected Juliet Rhys-Williams’ BI proposal presented to the UK’s Royal Commission on the Taxation of Profits and Income in 1951. The main point of interest here is that Kaldor, like many Keynesian and post-Keynesian economists, considered permanent incomes policy as fundamental to managing inflationary pressures. This policy should not, however, be confused with the permanent income provided by a BI scheme. In 1942, Kaldor set out essentially a conflicted-claims or wage-price spiral theory of inflation (King, 2016). The ‘great danger’ of inflation, given extant bargaining arrangements under conditions of full employment, led Kaldor to conclude: A policy of full employment will require, therefore, that the present system of wage- bargaining by trade unions and employers’ federations in individual industries should be replaced by a system of wage determination on a national basis (Kaldor in King, 2016: 125).

Kaldor expressed his consistent support for an incomes policy in different ways, fora and contexts. Despite this, his position could be summarised as a corporatist approach to achieving a level of wage restraint, consonant with a ‘distribution of the national income that is considered fair and which is consistent with the maintenance of economic growth, reasonably full employment and monetary stability’ (Kaldor in King, 2016: 126-127). Writing on what he deemed the perils of wage inflation in the US in 1958, Kaldor stated that a: ‘national policy of restraint on the growth of personal incomes … must embrace all classes of the country’ (Kaldor in King, 2016: 125). He was, at the same time, scathing in his critique of monetarism and Thatcherism as mechanisms for taming inflation via crushing unions and plunging economies into recession (King, 2016: 126).

202 Incomes policies of varying degrees of technical complexity have been proposed and supported by Keynesian, post-Keynesian and other heterodox economists, from Kaldor and Tobin, to Lerner and Vickrey. They have also been institutionalised in radically different ways with mixed results in different countries. Examples include Australia’s national system of Conciliation and Arbitration, established in the first decade of the twentieth century; Nixon’s wage and price controls in the early 1970s; and Australia’s Prices and Incomes Accord in the 1980s (Beggs, 2015; Stilwell, 1991; Tobin, 1989).

At first glance, this incomes policy approach to constraining wage-price inflation would appear to run counter to the idea of implementing a permanent BI scheme. There is at least the possibility that BI could induce and amplify inflationary effects via the different channels already discussed. However, viewed from another angle, there is also the potential for BI to be used as a counter-cyclical policy tool that could dampen inflation if required.

8.3 Basic Income as a Macroeconomic Policy Tool

Counter-cyclical macroeconomic policy has been widely accepted as a tool for mitigating the effects of an economic recession or, to a lesser degree, cooling down an economy in danger of overheating. While most readily associated with Keynesian and post-Keynesian economics, this policy principle and practice has also been embraced by many mainstream economists and policymakers. The two main levers of counter- cyclical macroeconomic policy are fiscal151 and monetary152. In advanced welfare states, the fiscal lever operates through two channels during a recession: the automatic stabilisers provided by unemployment benefits; and discretionary changes in spending and taxation.153 These policy responses tend to be ad hoc in nature, and it is not always the case that fiscal and monetary policies pull in the same direction.

151 Increasing government spending and/or reducing taxes during a recession; the inverse during an inflationary boom. 152 Reducing interest rates or implementing unconventional measures, such as quantitative easing during a recession; the inverse during an inflationary boom. 153 For a review of the effectiveness of counter-cyclical macroeconomic policy in light of the Global Financial Crisis, see Akerlof, Blanchard, Romer, and Stiglitz (2014). For an account of the negative consequences of the opposite policy approach during the Great Recession, see (Varoufakis, 2018).

203 A permanent but adjustable BI has the potential to function as a simpler and less arbitrary macroeconomic policy lever, for making quick and effective adjustments in response to economic circumstances. Seen in this way, in addition to its primary function as an instrument of real freedom, BI could develop into a valuable addition to the toolkit of policymakers. This potential has been recognised since at least the 1930s in the UK. Both Juliet Rhys-Williams and James Meade saw the macroeconomic function of BI as an important attribute, alongside its poverty alleviation effects (Van Trier, 2018).

Indeed, Meade propounded the beneficial macroeconomic role of BI from the 1930s onwards. In his 1936 book An Introduction to Economic Analysis, Meade argued that a social dividend would constitute a key feature in what Van Trier (2018: 450) describes as ‘a very complex and complicated picture of fine-tuning, primarily concerned with tackling problems of demand management and stimulating investment. In fact, as in his 1935 paper or later in Meade’s 1948 book, the “social dividend” is framed as an anti- cyclical policy device or steering mechanism.’ Keynes wrote a critical but open-minded review of Meade’s Consumers’ Credits and Unemployment (1938). His observations are worth quoting at some length (Keynes in Van Trier, 2018: 451-452): Mr. Meade has performed a useful service in bringing into the picture consumers’ credits—or rather consumers’ subsidies, for this, and not aids to instalment purchasing, is what he has in view—not as a magical specific, but as one of the possible means of levelling out fluctuations in effective demand ...

Mr. Meade’s own proposal is to make a monthly payment, which varies with the volume of ‘depression’ unemployment, to every member of the community whose income is below a certain level ...

Mr. Meade hopes to get his money back by a progressive tax on employment when times are good. He is not decisive as to whether the employers (who do not receive any part of the subsidy) should pay any part of the tax, but suggests that they should do so ...

Mr. Meade must mainly rely ... on the argument that consumers’ subsidies can be introduced without preparation and on an easily adjustable scale, on occasions

204 when, for one reason or another, an adequate increase in investment is impracticable.

In Planning and the Price Mechanism published in 1948, Meade restated his view regarding the macroeconomic function of the social dividend as ‘useful in avoiding inflation and deflation’ (Meade in Van Trier, 2018: 449). Putting this analysis into a contemporary context, we can envisage the following positive scenario. First, a substantial BI scheme is introduced. Second, the level of the BI is indexed in relation to some appropriate benchmark, and periodically reviewed by an independent statutory authority. Third, a government institution154 has the legislated power to reduce or increase the BI level on a quarterly basis, within a given range. For example, depending on the BI to GDP ratio of a given scheme, the designated government institution might be granted the right to increase/decrease the BI amount by some legislated maximum amount over a given year.

Section 8.4 Implications for an Australian Basic Income

This discussion of the macroeconomics of BI has probably produced more questions than answers. Arguably, that is in the nature of theory. If we are to progress understanding in relation to the real-world impacts of introducing a BI scheme, attention needs to be given to a specific context. In the case of Australia, real GDP growth and GDP per capita growth in recent decades can be characterised as following the familiar pattern for other advanced capital countries: a long-term cumulative increase in national output and income, punctuated by short-term ups and downs. Over the twentieth century as a whole, average annual real per capita GDP growth oscillated within a band of -2.6 percent in period 1914-1920 to 2.5 percent between 1946-1974 (McLean, 2004: 332). Between 1950 and 2017, decade averages for inflation have ranged from just under 10 percent in the 1970s to under 2.5 percent in both the 1960s and period 2010-2017 (Glassock, 2020). The averages also obscure huge temporary spikes in inflation, such as the 1951-1952 Korean War wool boom which saw consumer price inflation hit close to 20 percent (Beggs, 2015: 97).

154 This could be a Central Bank, the Treasury, or some other economic agency.

205 Chapter 3 has already described the fluctuations in average unemployment rates in Australia, and Chapter 4 documented the six-fold increase in Australia’s tax-to-GDP ratio over the twentieth century, including social spending becoming the single biggest line item in the Commonwealth Budget. The point to emphasise here is that there is no straightforward relationship between economic growth, inflation, employment and taxation over the long term. Therefore, the macroeconomic impacts of introducing a BI scheme in Australia are extremely difficult to assess. Nonetheless, this chapter has highlighted several issues that should be taken into consideration as regards the design and implementation of a BI scheme.

First, a scheme financed by some combination of different types of taxation and government deficit is more likely to boost aggregate demand, than one wholly reliant on increasing personal income tax. Second, more redistributive schemes, both in aggregate terms and as regards the degree of progressivity155, should boost consumer demand based on the higher marginal propensity to consume of low and middle income earners. Third, BI schemes should be designed to reduce, as far as possible, dramatic reductions in labour supply that could induce inflationary effects. Fourth, to lower any inflationary risk, it may be advisable to introduce a BI scheme in a macroeconomic environment characterised by low inflation and labour market underutilisation, such as currently obtains in Australia.

Finally, BI could be incorporated into the macroeconomic toolkit of Australian policymakers. For example, the BI level could be set by a statutory body such as Fair Work Australia, then periodically reviewed and/or indexed according to an appropriate benchmark. In addition, the Reserve Bank of Australia (RBA), or another institution with democratic oversight, could be granted the statutory authority to adjust the BI level on a quarterly basis within a legislated range. If the context of a BI scheme with a BI-to-GDP ratio of 7.5 percent (AUD$150 billion), then the capacity to increase/decrease the BI payment by +/- 20 percent in a given year could make a significant contribution to boosting aggregate demand or curbing inflation as

155 Aggregate redistribution refers to the total monetary sum of redistribution.

206 circumstances require. Such a policy instrument would still need to be complemented by other discretionary fiscal and monetary policy measures.

Conclusion

This chapter has entered the sparsely vegetated terrain of the macroeconomics of BI. The sheer complexity of the causes and consequences of economic growth and inflation make any prediction regarding their interrelationship with BI tentative at best, useless at worst. The conclusions have to be correspondingly tentative. Probably the most significant insights come from analysis of the relationships within the somewhat technocratic framework of post-Keynesian economics. This process raises some interesting questions, highlights the risk of perverse outcomes, and reinforces the need for a flexible, reflexive and iterative approach to implementing a given BI scheme. These implementation challenges, including the nature of the state, the particular characteristics of the Australian welfare state, and the political drivers of social change are the subject of Chapters 9 and 10.

207

PART III – THE POLITICS OF BASIC INCOME

208 Chapter 9: Basic Income and the Australian Welfare State

Introduction

There are two distinct but interrelated challenges when it comes to clearing the final hurdle to achieving BI implementation. The first task is to design a BI scheme that aligns, at least in part, with the institutional logics, structures and cultures that underpin different welfare states. The design process must be cognisant of the effects of path dependency, in the evolution of welfare state policies and practices in different contexts. The ancillary, but equally important, undertaking is to map out a pathway to implementation. The political end of this design and mapping process is to expand the pool of policy experts, policy practitioners and policy leaders, for whom the BI scheme and implementation pathway are both recognisable within the existing policy context and viewed as feasible in political economic terms. The second task for BI proponents is to identify and connect with the cohorts most likely to support implementation, and to stratify those social groups according to both the strength and nature of their support, and their respective social and political weight. The ancillary undertaking here is to identify the strategies and tactics more likely to achieve political success in a particular context, looking both to past examples of social reform trajectories and to the opportunities that may arise, due to current social, political and economic trends. This chapter addresses the design and implementation challenge. Chapter 10 takes up the second, political, question.

Section 9.1 centres on the design principles and implementation pathways that have been advocated by several prominent BI scholars. These include Standing (2017), Van Parijs and Vanderborght (2017), Torry (2019b), Calnitsky (2018a), and Forget (2017). In addition, this section highlights the various barriers that must be confronted and circumvented, if a BI scheme is going to achieve, first, the status of implementation and, second, permanent policy embeddedness. Section 9.2 turns to the Australian welfare state, situating its key characteristics and evolution within the international welfare state literature. It describes the evolution of forms of social assistance, specifically the different structures, purposes and cultural positioning of various transfer payments. This exercise emphasises the importance of detailed comparative analysis of welfare state structures and cultures in designing and framing BI reform proposals. Section 9.3

209 canvases five reform opportunities that would move the Australian transfer system in a more universal and less conditional direction. These include a universal child benefit (UCB); a universal age pension (UAP); a Liveable Income Guarantee (LIG); and the two affluence-tested BI models introduced in Chapter 4. The affluence-tested approach to BI developed by Spies-Butcher et al. (2020) is a specific example of a design process that accounts for extant institutional logics and path dependence, with the aim of building on some existing features to move policy in a different direction. The affluence-attested BI is designed and framed as a culturally recognisable reform process, and not as a utopian and ahistorical bolt from the blue. Section 9.4 concludes this chapter by evaluating five BI implementation pathways. It rejects the small-scale BI trial, acknowledges the potential of BI referenda, and exhibits scepticism regarding the “policy bomb” approach of immediate full-scale implementation. The section concludes by describing two variants of the phased implementation process (PIP) or ‘stepping stones’ approach (Spies-Butcher & Henderson, 2019).

9.1 The Challenges of Implementing Basic Income

The difficulties inherent in implementing Basic Income are most obviously represented by the complete absence of any universal, unconditional, permanent and adequate BI scheme since the history of capitalism. Some of the more plausible historical explanations for this stark absence were discussed in Chapter 1, while Chapters 4, 5 and 7 canvassed the familiar objections related to fiscal cost, financing requirements and effects on labour supply. Some BI scholars have confronted this challenge in the relevant literature and set out their respective preferred design and implementation options.

Standing (2017: 292-293) makes the important observation that ‘there is no ideal or optimum approach’ to implementing BI and that in ‘each country, it will depend in part on the structure of the economy and the structure of the old welfare system’. Standing (2017: 293) contends that a gradualist approach to introducing, increasing and integrating BI ‘probably offers the better prospect in industrialized countries’. His proposal for a ‘coherent scheme’ that is not too ‘radical or unwieldy’ would comprise a

210 modest social dividend, a counter-cyclical stabilisation grant156, and ‘a “social insurance” layer of benefits’ (Standing, 2017: 294-295). Van Parijs and Vanderborght’s (2017: 215) implementation proposal exhibits similar levels of caution and pragmatism to Standing’s approach. They canvas a ‘partial basic income ... not just as a first step but as a final destination’ (Van Parijs and Vanderborght, 2017: 211) and a participation income (PI) to diminish free-rider opposition to BI (Van Parijs and Vanderborght, 2017: 201-214). The authors also express high levels of ‘doubt that a generous basic income will ever be introduced anywhere as a result of a big triumphal revolution’ and that it ‘is more likely to enter through the back door’ (Van Parijs and Vanderborght, 2017: 210- 214). The authors conclude by articulating a modest expression of their ‘Radical Proposal for a Free Society and a Sane Economy’: The opportunities to be seized are crucially dependent on the specific problems encountered by each country’s tax-and-transfer systems, on the vagaries of the political game, and on the tenor of its public discourse. There is therefore no general answer to the question of the best back-door strategy, no answer that can claim validity for all national contexts ... however, our guess is that it will involve the cautious introduction of a strictly individual but partial basic income, keeping some parts of the existing public assistance system as conditional top-ups ... for political reasons ... our guess is that it may also have to involve, if only for window- dressing purposes, some sort of participation conditions. (Van Parijs and Vanderborght, 2017: 215).

The caution and limited ambition expressed in these two approaches is understandable, given the characteristics of BI as a reform proposal and its long history of non-existence in capitalist society over the past two hundred years. The authors’ emphasis on the need to tailor proposals and implementation strategies to the particularities of different welfare state settings is essential to future BI scheme design and advocacy. Noguera provides an interesting example of this challenge in relation to introducing BI in national settings, with pay-as-you-go (PAYG) social insurance schemes that disburse benefits roughly proportionate to contributions (Noguera, 2013). Noguera (2013)

156 Discussed in Chapter 8, in relation to BI as a macroeconomic policy tool.

211 describes a ‘feasible alternative’ that integrates elements of both approaches to social security as follows: ... once a decent minimum income floor is granted by a BI, public social insurance systems could be kept as supplementary benefits, but it would not make a lot of sense to keep them as PAYG systems; instead, they could be transformed into pension funds controlled by the state or by unions or by non-profit organizations, who would have to decide in a democratic way how to invest the resources according to social and ecological concerns. This would allow a voluntary element to be introduced in social insurance, eliminate all tax exemptions for private plans, successfully compete with them, and generate in the long term a [huge] volume of capital ...

(Torry, 2019a: 171) makes the case for a phased implementation process (PIP) approach to BI, concluding that it ‘would appear that the best way forwards for the UK would be the implementation of a Basic Income for one demographic group at a time’. He canvases a range of possible implementation options, including a scheme which: ... would start with an increase in Child Benefit. A Basic Income would then be paid to all eighteen year olds, and they would be allowed to keep it as they grew older, with each new cohort of eighteen year olds receiving the same Basic Income and being allowed to keep it (Torry, 2019a: 170).

PIP has the advantage of keeping the aggregate annual costs comparatively low in the early years of implementation, perhaps improving the chances of the program’s inception. However, PIP also has certain disadvantages, such as the challenge of maintaining reform momentum over the phase-in period, and the political blowback that may result from implementing a BI scheme with an initially small cohort of beneficiaries and a very large cohort excluded from the program.

Lansley and Reed (2019: 31) present another context-specific proposal for a UK BI scheme that includes a temporal element. They advocate a two-step process: a partial BI scheme, requiring an additional £28 billion in annual taxes introduced in one term of parliament; and a long-term strategy of increasing the BI payment rate, based on distributions from the cumulative returns to a public investment fund. In relation to implementing a generous UBI scheme, while Calnitsky (2018a: 9) does not entirely ‘rule

212 out’ the requisite ‘massive increases in social spending in some medium-term future’, he concedes ‘those spending increases are not immediately obtainable’. However, he asserts that a GAI ‘is within the bounds of what a mobilised political coalition could achieve today’, due to the much lower fiscal impact of its NIT-style structure (Calnitsky, 2018a: 9 ). He reiterates the fiscal and (probable) political advantages of lowering fiscal churn, and the administrative superiority of ‘ex ante’ income assessment and benefit disbursement under a GAI compared to ‘ex post’ annual income assessments and reconciliations under a UBI scheme (Calnitsky, 2018a: 10). Calnitsky also makes a point of critical importance to both progressive welfare state reformers in the traditional mould and proponents of BI. He points to regular, and wholly justified, calls from welfare advocates to ‘raise the rates’ of categorical payments, but a less consistent emphasis on reducing and/or removing conditionality and punitive sanctions. Calnitsky (2018a: 12) writes: My question to basic income skeptics on the Left is this: We demand increasing welfare payments, but why not ease welfare conditionality? Most every welfare activist agrees that we ought to reduce the degrading and invasive eligibility restrictions of welfare. But how far should they be reduced? Should they be invasive but not degrading? Where should the line be drawn? If you find the eligibility criteria cruel and unnecessary but dislike basic income you face an insoluble dilemma. I know of no good left argument suggesting we ought not ease these conditions, and indeed, we should ease them all the way into a guaranteed annual income, where anyone who falls below some threshold, for whatever reason, is automatically topped up. There is no socialist case to retain a highly categorical welfare state whose main function is to foster divisions between social groups. Nor is there a case to quarantine welfare recipients. Instead, we ought to fight for a welfare state that opens communication channels among groups, not one that draws bright lines between them.

Calnitsky also argues that, once in place, the ‘popularity’ of ‘an income-maintenance system with a low level of generosity [that] is available whether or not people work’ could provide a ‘path to slowly expand general government revenue to fund increases in generosity’ (Calnitsky, 2018a: 13). This combination of first establishing a guaranteed minimum income (even if inadequate), with a benefit phase-up (BPU) over time, could

213 enhance the fiscal and administrative digestibility, and the political saleability, of a BI scheme.

Forget (2017), like her compatriot Calnitsky (2018a), favours an NIT/GMI style BI157. Forget (2017) enumerates a clear set of design principles for a Basic Income Guarantee (B.I.G.) for Canada. Forget’s principles (2017: 11-13) comprise the following: i) B.I.G. should be targeted, and support should be gradually withdrawn as income increases; ii) B.I.G. should be targeted towards adults—those aged 18 through 64; iii) B.I.G. should make no one who depends on existing income support programmes worse off; iv) Costs of B.I.G. should be allocated to those with the greatest capacity to bear the burden; v) Additional supports should depend on level rather than source of income; vi) B.I.G. should not be seen as a replacement for all other social programmes.

Several of these design principles are reflected in the discussion of Australian BI schemes in Section 9.3. Forget’s (2017) principles reflect a commitment to progressive policy goals, while limiting fiscal churn, and dispelling concerns that BI would constitute a neoliberal retrenchment of the welfare state.

Table 9.1 summarises the main design and implementation options discussed above. This is intended as an illustrative, as opposed to an exhaustive, list.158

157 Here called the Basic Income Guarantee (B.I.G). 158 The authors listed as sources for Table 9.1 agree on some design and implementation options, but disagree in relation to others.

214 Table 9.1 Basic Income Design and Implementation Options

No single optimal design and implementation model. BI schemes should be designed to reflect context-specific welfare state structures and political economic circumstances. Partial BI with some participation conditions and certain categorical benefits retained. Partial BI (social dividend) and countercyclical stabilisation grant, with some categorical benefits retained. BI income floor, supplemented by returns earned through voluntary contributions to public (or worker- controlled) pension funds. NIT-style payment (B.I.G. or GAI), with some categorical payments retained. Gradual phased implementation (PIP) of BI by age cohort. Two-step implementation process. Partial BI implemented in one term of parliament. BI level increased over long term, based on returns to public investment fund. Gradual benefit phase-up (BPU), once GMI is implemented and public support enhanced. Equal focus on easing conditionality on categorical benefits as pathway to BI, alongside providing a universal income floor that increases over time. BI should be limited to working age population (WAP), in situations where age pensions are more generous and function reasonably well. BI should make no existing categorical benefit recipient worse off. BI schemes should be financed, based on the progressive principle of capacity to pay. Access to additional categorical benefits determined by level of incomes, not source of incomes, to ensure low income workers are not excluded from accessing benefits received by some welfare recipients with similar incomes. BI schemes should not be designed as wholesale replacements of all other social programs. Sources: Standing, 2017; Van Parijs and Vanderborght, 2017; Noguera, 2013; Torry 2019; Calnitsky, 2018a; Forget, 2017; Lansley and Reed, 2019.

Other authors have flagged a range of obstacles to the successful institution and ongoing administration of a BI scheme. Among them, De Wispelaere and Stirton (2017) suggest159 that most BI scholars and advocates who extol the purported benefits of BI eschew any excursion into the brambles of detailed policy implementation and administration. (De Wispelaere & Stirton, 2017: 298, 303) contend: Whether these expected social effects materialise in practice critically depends on how the model is implemented, but on this topic the basic income debate remains largely silent. Few advocates explicitly consider questions of implementation, and those that do are typically dismissive of the administrative challenges of implementing a basic income and critical (even overtly hostile) towards

159 The examples above notwithstanding.

215 bureaucracy. In this contribution we briefly examine (and rebut) several reasons that have led basic income advocates to ignore administration ...

Anticipating the ways in which administrative challenges—and their proposed solutions—may affect the prospects of instituting a basic income in a stable and durable manner is a key part of the political analysis of basic income.

This accusation of a failure to engage seriously with the policy process, the nature of bureaucracy and the challenges of public administration has been noted by several contributors to the BI debate. Some of their substantive observations are summarised in Table 9.2.

These critical interventions operate on two levels of analysis. First, they provide a useful list of blind spots, as regards the implementation and administration of BI, that have general applicability to this policy debate. Second, they underscore the importance of analysing the implementation of specific BI schemes, in relation to the relevant welfare state, public administration and broader institutional environments into which the proposed scheme may be introduced. This is a key focal point of Section 9.3.

The list of blind spots includes, for example, the need to differentiate between financial bureaucratic costs associated with a given program and personal costs (and sometimes benefits) of bureaucratic intrusion. Other practical challenges include the design and maintenance of an accurate database of BI recipients, ensuring eligible persons receive their correct payments, as well as the selection and rollout of an optimal means of BI disbursement (De Wispelaere & Stirton, 2013).

Taking public administration seriously means developing an understanding of the core characteristics of bureaucracies, in general terms and in relation to specific contexts. It further requires that BI proponents remain alert to probable and possible implications of these characteristics at every stage of the BI policy process: from design, through implementation, to ongoing program administration and improvement.

216 Table 9.2 Basic Income Implementation and Administration Challenges Author Challenge Noguera (2013) Tension between relatively low benefit rates of universal BI schemes and much higher (but variable) benefit rates provided through contributory social insurance schemes where they exist. Noguera (2013) Path dependence and political popularity of contributory schemes could make their integration with – or replacement by – BI both administratively complex and politically infeasible. De Wispelaere and Stirton Need to differentiate between different meanings of ‘using bureaucracy (2013) sparingly’ (minimising program costs or minimising intrusion into personal lives) and their very different implications. De Wispelaere and Stirton ‘To summarise, creating and maintaining a cadastre of all beneficiaries (2013) of a basic income scheme is a key challenge to UBI implementation.’ De Wispelaere and Stirton The challenges of choosing and implementing an efficient and effective (2013) means of BI disbursement (e.g. annual tax deductions, BI debt cards, tax and transfer integration). De Wispelaere and Stirton Nationality and/or residency tests, depending on scheme design. (2013) De Wispelaere and Stirton Need to differentiate between those bureaucratic programs that are (2017) intrusive and punitive and those that are not. De Wispelaere and Stirton Need to ditch the ‘transmission-belt’ model of public administration, in (2017) which policy implementation is envisaged as ‘instrumental, technical and presumptively apolitical’. Implementing BI entails ‘making hard policy choices’ that are ‘inherently political’. De Wispelaere and Stirton Cannot assume that ‘digital by default’ technical administration of BI (2017) schemes would guarantee more efficient, fairer and better160 outcomes than status quo social assistance systems.161 De Wispelaere and Stirton Need to differentiate between canonical UBI-style schemes that deliver (2017) the same regular benefit to all recipients, and more realistic schemes162 that include categorical elements and would incur associated administrative costs. De Wispelaere and Stirton Improved program coverage163 has to be demonstrated in practice, and (2017) not assumed as automatic outcome of BI. De Wispelaere and Stirton Need to differentiate between different implementation objectives of (2017) progressive (‘protection of the disadvantaged and vulnerable’) and conservative (‘largely focused on the simplification and cost reduction of existing social protection’) variants of BI. De Wispelaere and Stirton Avoid complacency regarding: ‘Administrative error, unintended side (2017) effects or outright opportunism’. De Wispelaere and Stirton Size matters in social policy. A program on the scale of a national BI (2017) scheme may generate a form of path dependence that compounds design and implementation errors.

Sources: Noguera, 2013: 346-349; De Wispelaere and Stirton, 2013: 915-932; De Wispelaere and Stirton, 2017: 298-305.

160 In terms of program coverage and recipient experience. 161 The UK’s Universal Credit program (De Wispelaere and Stirton, 2017) and Australia’s Robodebt fiasco (Carney, 2018) are two examples of ‘digital by default’ leading to inefficient and unjust outcomes. 162 Including most of those considered in this thesis. 163 Ensuring a higher proportion of participants who fall through the cracks of existing welfare systems actually receive BI (e.g. have access to bank account) (De Wispelaere and Stirton, 2017).

217 De Wispelaere and Stirton (2013; 2017) make the case for a nuanced understanding of the nature and capacities of public administration and bureaucracy. Such an approach acknowledges the necessarily political character of public administration and its capacity for inadvertent and deliberate error. It urges caution regarding any unquestioning acceptance of the ostensible efficiency and equity advantages of digital administration of public assistance programs. Finally, this approach calls for a clear- headed differentiation between forms of bureaucracy that are controlling and demeaning and those which are not.

9.2 The Australian Welfare State

The Australian welfare state has to be seen within the broader context of Australia’s political economic development, both as separate colonies then as a unified state from 1901. The ‘Australian Settlement’ (Kelly, 2008) or the ‘wage-earners welfare state’ (Castles, 1985) are two well-known characterisations of the institutional foundations of post-Federation development in Australia. According to many historians and social policy scholars, the Australian welfare state164 developed some distinctive characteristics. The development, institutionalisation and maintenance of these characteristics was facilitated, though not made inevitable, by political, economic, demographic, cultural and geopolitical factors that prevailed between the 1890s depression and the stagflation recession of the 1970s. The key pillars of this Australian model settlement initially comprised immigration restriction (the so-called ‘White Australia’ policy); tariff protection; industrial arbitration; and a very limited social assistance system, based on non-contributory flat rate transfers. Here the focus is on relevant changes in relation to industrial arbitration and employment and, in more detail, social assistance.

In relation to industrial arbitration, Justice Higgins’ 1907 decision on the Harvester case before the Commonwealth Arbitration Court established the principle of a needs-based family wage. This principle, even if it took a couple of decades for its widespread incorporation in industrial agreements, proved a powerful manifestation of the egalitarian side of Australian society Macintyre (1993: 103-104). In the policy realm of

164 Very similar developments occurred in New Zealand (Fenna, 2012; Marston, McDonald, & Bryson, 2014).

218 social assistance, New Zealand (1898) and Australia emulated Denmark’s non- contributory approach to age pensions, with the Commonwealth Parliament passing the Invalid and Old Age Pensions Act in 1907. In both antipodean countries, the age pension was targeted ‘to those most in need – an approach that remained a hallmark of Australian social policy’ (Fenna, 2012: 112). The pre-World War II incremental development of social assistance was accelerated by the introduction of child benefits (1941), widow’s pensions (1942), and sickness and unemployment benefits (1945) (Deeming, 2013: 670).

In the post-World War II economic boom of the 1950s and 1960s, full employment and rising home ownership took on increasing importance in Australia’s unwritten social contract. Between 1945/6 and 1973/4, unemployment averaged close to 2 percent (Loundes, 1997: 2). Over the period 1947 to 1976, the proportion of Australians who owned their own homes increased from 53.4 percent to 68.4 percent165 of total occupied dwellings, while the proportion of renters fell from 44 percent to 25.9 percent (Kryger, 2009). From the 1970s onwards, the main pillars of the Australian Settlement have been progressively dismantled or marginalised, and economic changes have undermined the foundations of the wage-earners welfare state model. The White Australia Policy was officially abolished in 1973 and tariff protection was slashed166 (ABS, 2020c; CIE, 2017; Jones, 2017).

The role of industrial arbitration and conciliation in determining wages and conditions has been progressively marginalised, after a series of legislative changes and political attacks. Trade union membership has plummeted, work has become more precarious, and underemployment in particular has remained stubbornly high. During this period, social security policy has exhibited a combination of policy path dependence and significant change.167 In some ways, the system remains consistent with its long-

165 The share of owners with a mortgage rose from 8 percent to 35.6 percent, while owners without a mortgage fell from 45.4 percent to 32.3 percent over the same period. 166 By 2019, close to 30 percent of Australia’s resident population was overseas born (ABS, 2020). Between 1986 and 2016, ‘the average (import-weighted) tariff rate applied in Australia has fallen from over 7 per cent to less than 1 per cent. Individual tariffs have declined from a maximum of nearly 90 per cent down to a maximum of 5 per cent’ (CIE, 2017: 4). 167 This section does not include discussion of major changes to the Australian welfare state, such as the introduction of Medicare, greatly expanded access to higher education, compulsory private superannuation, and the National Disability Insurance Scheme. It focuses on transfer payments, as they are the closest proxy to BI.

219 established structure and objectives of providing highly targeted and generally low- level non-contributory benefits to categorical beneficiaries (Whiteford, 2019). Whiteford (2019: 91-92) writes: ‘Many of the social security programs in 2018 are essentially the same as they were in 1969 or even in the 1940s, albeit under different names’. It is precisely this design continuity that originally led Esping-Andersen to designate Australia a liberal welfare capitalist state with the ‘lowest decommodification score of the eighteen countries in his analysis’ (Whiteford, 2019: 111). In 2012, Australia had ‘the highest level of spending on income-tested payments in the OECD’ (Whiteford, 2019: 111).

Since 1975, two key programs, the age pension and the unemployment benefit, have increased in real terms by 75 percent and 7 percent respectively (Whiteford, 2019: 90). Successive reforms by Coalition and Labor governments, that increased benefit levels, reduced withdrawal rates and removed the means test, meant 75 percent of the relevant cohort received the age pension by 1975 (Whiteford, 2019: 99). This is probably as close as Australia has come to a type of categorical BI. Overall, aggregate social spending on cash transfers increased from 3 percent of GDP in 1965 to a little above 7 percent by 1983, and it remained in a 6-8 percent band until 2018 (Whiteford, 2019: 96). Increased spending on family assistance accounted for 54 percent of the overall increase in spending on cash transfers between 1975-2013 (Whiteford, 2019: 98). Family payments have been reformed by various governments, including benefit levels, taper rates, means tests and indexation arrangements. The combined effect has been a fall in the percentage of children age 0-15 covered by Family Tax Benefit Part A, from 100 percent in 1987 to 61 percent in 2015 (Whiteford, 2019: 109). Despite the decline in coverage, the fortnightly payment option and the dual taper rate structure168 of Family Tax Benefit Part A (Centrelink, 2016: 1-2)could be viewed as an NIT-style partial BI, that has the potential to move social assistance cash transfers in a more universal direction, because the category (parents with a child/children) is so large and diverse.

168 ‘In most cases your Family Tax Benefit Part A payment is worked out using two income tests—the one that gives you the highest rate will be applied. The first test reduces the maximum rate of Family Tax Benefit Part A by 20 cents for each dollar above $51,027. The second test reduces the base rate of Family Tax Benefit Part A by 30 cents for each dollar above $94,316.’ (Centrelink, 2016: 3).

220 However, the story of the Australian transfer system during the neoliberal period is not just a straightforward case, dominated by program continuity with an increase in overall spending. The ways in which certain categories of welfare are administered have become more conditional and increasingly punitive. From activity testing, to work-for- the-dole programs, increased use of benefit sanctions and mandatory income management, the welfare system has asked more from many recipients, while offering them far less. Reflecting on these changes in social security since the 1990s, Marston and Zhang (2019: 142) give Australia a ‘mixed report card’. While acknowledging that benefits are ‘well targeted’, the authors emphasise both the inadequacy of payment levels and the demeaning and ineffective nature of administering certain programs. Marston and Zhang (2019: 142) write: ‘the way in which income support recipients of workforce age have been treated by the state ... is for the most part doing more harm than good under the umbrella of seemingly benign policy terms like “mutual obligation” and “activation”’. Before the temporary doubling of the payment under JobSeeker in 2020 (as a short-term measure, following the onset of the COVID-19 crisis), both the level and the administration of the Newstart unemployment allowance was emblematic of this miserly and stigmatising trend.

9.3 Basic Income Design in the Australian Context

Many progressive reformers within Esping-Andersen’s (1990) liberal welfare capitalist states have long entertained the desire for their countries to adopt a Nordic model of development and welfare. For Australia, the dream of becoming the ‘Sweden of the South’ even motivated a trade union delegation to visit Scandinavia, parts of Northern Europe and the UK in 1986; and to publish the Australia Reconstructed report the following year, as a roadmap to ‘full employment and wage solidarity, while maintaining a strong economic performance’ (Scott, 2014: 48-61). The report was soon forgotten and shelved alongside the fantasy of a Nordic ‘wide brown land’169.

While there is much to learn from Scandinavia in relation to industry, industrial relations, welfare, housing and education policy170, these countries are unlikely to serve as inspiration for implementing BI in Australia. First, we might expect the beneficiaries

169 From the poem My Country (Mackellar, 2015) 170 See Scott (2014) and Higgins and Dow (2013).

221 of the Nordic model, the most advanced expression of egalitarian social democracy, to be the least susceptible to the appeal of a BI alternative. There is some evidence171 for this, with (Roosma & van Oorschot, 2019: 198-199) finding: ‘Overall, it seems that populations in Eastern European countries are more in favour [of BI] than their counterparts in Nordic172 and Western European countries’. In oil-rich Norway in 2016, 66 percent strongly opposed BI, compared to 80 percent strongly in favour in ex- Communist Latvia. Second, because the Nordic model is so far removed from Australia’s welfare state structure and model of social security, BI scholars and advocates may be better served by looking inwards for opportunities to shift the Australian social security system in a more universal and generous direction. This section identifies five such opportunities, including the three Australian BI schemes173 deemed more likely to achieve implementation status over time. The five opportunities are summarised in Table 9.3.

Table 9.3 Opportunities for Universalising Australian Social Security Opportunity Description Annual Net Cost (AUD$bn) Opportunity 1 - Universal Abolish the income and activity tests for Family Tax Benefit 14.3 billion174 Child Benefit Part A and introduce a single rate AUD$123.27 weekly payment for all children age 0-15. Opportunity 2 - Universal Abolish the income and asset tests on Age Pension and pay all 40.9175 Age Pension eligible residents over 65 at single maximum basic rate of $430.30 per week. Opportunity 3 - Liveable Weekly payment of $472 for singles and $711 for couple to all 18 (2019)176 Income Guarantee (LIG) eligible residents age 16 and over. Introduce a Participation Activity as condition for receiving benefit. Opportunity 4 – Weekly BI payment of $282 for adults between 18 and 103.5 (2018) Model 1 (Affluence-Tested retirement. Benefit tapered out, as described in Chapter 4. BI) Opportunity 5 – Weekly BI payment of $351 for adults between 18 and 126.1 (2018) Model 2 (Affluence-Tested retirement. Benefit tapered out, as described in Chapter 4. BI) Sources: Australian Government: Services Australia 2020a, Australian Government: Services Australia, 2020b; ABS, 2019; Quiggin, Klein, Dunlop, Henderson and Goodall; Spies-Butcher, Phillips and Henderson, 2020.

171 It should be noted that there is limited longitudinal data, questions of its comparability, and criticisms of the way BI questions have been framed (Roosma and van Oorschot, 2019). 172 BI was more popular in Finland than in other Nordic countries. 173 All discussed in previous chapters. 174 Author’s calculations based on 2018 demographic data (latest available) and 2020 payment rates. This would slightly understate costs. Net cost is calculated by subtracting AUD$17.6bn on expenditure on ‘Family Tax Benefit’ (FTB) in 2018-2019 (Commonwealth of Australia, 2019) from gross cost estimate of AUD$31.9bn. This further underestimates the actual net cost, as it does not take FTB expenditure on the 15-19 age bracket into account. 175 Author’s calculations based on 2018 demographic data (latest available) and 2020 payment rates. This would slightly understate costs. Net cost is calculated by subtracting AUD$46.7bn expenditure on ‘Income Support for Seniors’ from Federal Budget 2019 from gross estimate of AUD$87.6bn. 176 Estimates based on pre-COVID-19 data and scenarios.

222 Opportunity 1 would transform Family Tax Benefit Part A177 (FTBA) into a Universal Child Benefit (UCB) for families with children age 0-15. Abolishing activity tests and income tests currently applied to FTBA would dramatically expand coverage to all of the nearly 5 million children in this cohort. Adopting the single higher rate of $AUD123 per week ($AUD6,410 per annum) would increase average payment rates under the new UCB scheme. The net cost is estimated at AUD$14.3bn or around 0.75 percent of GDP. The payment would be available to around 2.6 million couple families with dependents, and a further 670,000 one-parent families with dependents (ABS, 2020b).

This is a large, diverse and potentially powerful constituency that integrates a traditionally non-stigmatised group (couple families) with a stigmatised group (single- parent families). Additional advantages of Opportunity 1 include familiarising a large cohort of Australians with the receipt of an unconditional benefit, while reducing child poverty at a moderate fiscal cost. Disadvantages of this approach include the inadequacy of the annual sum, based on BI criteria; excluding singles and couples without children or dependants; concerns over intra-familial income distribution; and the potential for the flat-rate benefit to be considered inequitable.

Opportunity 2 would transform Australia’s existing Age Pension (AP) into a Universal Age Pension (UAP), by abolishing the assets and means tests. This change would expand coverage to all 3.9 million people in this cohort. Individualising payments at the single maximum basic payment rate would increase average payment levels across beneficiaries and boost aggregate spending under the program. This is another large and diverse cohort178 and the individualised UAP payment structure would provide a direct route to eradicating old-age poverty. On the other hand, the AUD$41 billion net annual cost is a substantial outlay (2 percent of GDP) on a categorical transfer program for a generally non-stigmatised and better treated cohort.

Opportunities 3-5 are BI schemes already described in previous chapters. The Liveable Income Guarantee (LIG) has the advantage of being a parsimonious scheme, in that it leaves most elements of the existing system in place. Means and assets tests remain, along with the same benefit withdrawal rate schedule. However, it is also a relatively

177 Australia’s main form of cash benefit assistance to families with children. 178 Though perhaps not quite so diverse as those included under Opportunity 1.

223 low-cost179 pathway to reducing poverty and income security among unemployed persons and those with marginal labour force attachment. The relaxation of conditionality is accompanied by the introduction of a ‘Participation Activity’, including care, volunteer, artistic and environmental activities. The scheme seeks to unite one non-stigmatised group (age pensioners) and one stigmatised group (unemployed persons) under the single LIG umbrella. It offers valuable insurance and a higher income floor to everyone, but no automatic boost to incomes for low and middle-income earners.

The two affluence-tested (AT) models of an Australian BI scheme come with much higher price tags and substantially more reform requirements than some of the other opportunities discussed above. It is unlikely either could be introduced in a single parliamentary term. Opportunities 4 and 5 would provide an individualised, universal and unconditional income floor for Australian residents age 18-64, albeit at a substantially lower rate than the LIG (Spies-Butcher et al., 2020). The AT models are based on four design principles that are worth restating here. They reflect the historical and contemporary logic and structure of Australia’s tax and transfer system. They are consistent with other attempts within the BI literature to make allowance for unequal internal endowments. Finally, they offer the possibility of achieving a limited shift towards ‘targeting within universalism’ in an Australian context (Korpi & Palme, 1998). The fact that microsimulations showed significant average benefits in the first three income quintiles180 is significant, as it illustrated how the scheme is designed to not exclusively benefit those with no, or very little, income. This is a potential advantage of the AT approach, in relation to sustaining political support for the BI scheme post- implementation.

The five opportunities all fall well short of a canonical model of BI. However, they serve to illustrate different ways in which a highly targeted and conditional system of social assistance, such as Australia’s, might be nudged in a more universal and less conditional direction. The five opportunities prioritise universalism in different ways, and can be considered as a menu of options upon which to build. The question of which

179 An approximately AUD$18 bn annual increase. 180 See Chapter 4.

224 opportunity to prioritise depends partly on normative orientations but, more importantly, on the suitability of a given approach to contingent and conjunctural political economic conditions.

9.4 Pathways to Implementing a Basic Income in Australia

This section concludes Chapter 9, by briefly evaluating five pathways to BI implementation in Australia. These pathways include the BI trial; the public referendum; the ‘policy bomb’; phased implementation process (PIP) (income); and phased implementation (demographic). These pathways can coexist with other more familiar means of seeking to stimulate reform, such as lobbying political parties and civil society groups; organising petitions; marches and strikes; and establishing think tanks.

Social scientific trials are a form of policy experimentation that can produce useful and interesting data. They can also provide a form of ‘scientific cover’, for policymakers already committed to introducing regressive social policies and programs. BI trials have been intended, on the one hand, to test the effects of different BI designs on key policy variables. On the other hand, they are also political devices, aimed at alleviating concerns over the purported negative consequences of giving people ‘money for nothing’. BI trials have been conducted since the 1960s and continue to be carried out in the 2020s. However, there are serious questions to be asked regarding their utility in achieving BI implementation.

Prominent BI scholars, including those who have designed and run BI trials, point to their utility but also to their limitations. For example, Forget, Marando, Surman, and Urban (2016: 22) bemoans the fact that in ‘many of the previous experiments politics interfered with science and reduced the usefulness of the projects’. Standing (2017: 277) contends that trials ‘should be a force for good’, if ‘pilots are not used as an excuse for lack of political action’. For Van Parijs and Vanderborght (2017: 144) trials are a useful way to ‘boost public awareness’ but ‘if their relevance either to the sustainability or desirability of a basic income is inappropriately framed, their net effect on real-life reform in this direction may turn out to be disastrous’. Finally, Widerquist (2018: 3) reiterates the key point that, ‘UBI has many complex economic, political, social, and

225 cultural effects that cannot be observed in any small-scale, controlled experiment’. To these limitations, we can add several additional demerits. BI trials demand that the collaborative energies of researchers, participants and public officials are sustained over a long duration. These trials have been pared back in scope, cut short, and buried by events and political economic shifts. Furthermore, by their very nature, BI trials do not create a significant political cohort that can then lobby for the continuation and expansion of a given scheme. Finally, there is simply no fiscal equivalence between a small-scale trial that might cost AUD$100-200mn over several years and an annual AUD$100 bn national BI scheme. For these reasons, trials, though of interest to BI scholars, seem an unlikely pathway to BI implementation.

The Swiss referendum in 2016 is the only example to date of a grassroots-led campaign to institute a national BI scheme. In blunt terms, the referendum181 failed to achieve its UBI objective. However, as described in Chapter 1, this result can be interpreted as encouraging: 23 percent voting in favour is a good base from which to build momentum; support and activism was highest among young people; and a majority of Swiss expect another UBI referendum to be held in the future. While the Swiss vote was partly a consequence of the distinctive character of Swiss democracy, other countries do have mechanisms for holding binding and non-binding referenda, and this pathway does afford BI advocates the opportunity to train and mobilise a cadre of BI activists who can regroup before another referendum or explore alternative strategies.

The ‘policy bomb’ approach to BI implementation could be viewed as a progressive incarnation of Klein’s ‘shock doctrine’ (2008): It refers to a situation in which a national BI scheme is implemented opportunistically and in one fell swoop. This may seem unlikely, given the scale of a national BI scheme, but history is not without examples of dramatic shifts in social policy and concomitant financial resources. The COVID-19 pandemic has provided a variety of concrete examples of entirely unexpected shifts in the scale and nature of social policy, within a period of months. While this Machiavellian pathway to BI has the advantage of speed, the likely top-down nature of its implementation could backfire, leading to a policy reversal once political economic circumstances change. Taking shortcuts to implementation may prove

181 See Chapter 1.

226 counterproductive if it means there is no supportive social base strong enough to ensure that a BI scheme, once implemented, is maintained.

The final two pathways are somewhat different variations on the theme of a phased implementation process (PIP). PIP (income) focuses on the introduction of a partial BI, perhaps at a very low initial level, then slowly increasing the base rate over time. The advantage of this approach is that an unconditional and universal transfer can be implemented with a modest outlay of fiscal resources. The potential demerits of PI (income) relate to usefulness of the initial partial BI and the extent of the time period during which the BI is phased up. A long period could mean the reform process loses momentum, while it gives BI opponents ample opportunity to organise against the continuation of a given scheme.

PIP (demographic) is the final pathway canvassed in this section. It refers to a process where a BI scheme is phased in by progressively including demographic groups, until universal coverage is achieved. This could be based on age cohorts or some other demographic characteristic. For example, it may be unreasonable to consider introducing a AUD$126bn BI scheme, such as AT Model 2 (Spies-Butcher et al., 2020), in in one Federal Budget. However, ten AUD$12-15bn tranches over ten Federal Budgets is eminently feasible. This could be done through a pincer-style movement that begins with age cohorts at both ends of the working age population (WAP), until they join up in the middle. This model of PIP (demographic) would make the policy transition more fiscally digestible, while the progressive rollout would provide feedback to policymakers and provide an ideal opportunity for ‘learning-by-doing’ (Dasgupta & Stiglitz, 1988).

In addition to the fiscal and policy process arguments, there are strong ethical grounds for considering PIP (demographic). As Spies-Butcher and Henderson (2019) have argued in their ‘stepping stones’ approach to BI, it makes sense to start with small cohorts of people approaching retirement and small cohorts making the transition from school to work or further study. Young Australians experience insecure work more acutely than other cohorts, while older Australians who lose their jobs can find it harder to secure new employment opportunities. While the ethical case is compelling, it should also be acknowledged that providing BI to two cohorts at opposite ends of the WAP

227 would mean the most expensive parts of the program are implemented first. This is because of the much lower labour force participation rates of these two groups, compared to prime working age adults.

The time period of PI (demographic) remains of great importance and the PI approach in general would create administrative challenges182. On the upside, the PI (demographic) approach would draw a progressively larger cohort into the BI scheme, and individuals would be able to access the full benefit for which they are eligible as soon as their age group is included. PI can also be framed as a (permanent) experiment183, if that is politically advantageous. For a full-scale BI scheme, some combination of a non-binding public plebiscite and PI (demographic) is probably the least treacherous path towards policy implementation in Australia.

Conclusion

This chapter has tackled the question of how best to approach the design of a BI scheme that is more likely to achieve implementation status in a particular national context. Section 9.1 examined design principles and implementation pathways discussed in the BI literature, alongside lacunae and unresolved challenges. Section 9.2 sketched the contours of the Australian welfare state, emphasising both the continuity of its basic structure in relation to transfer payments, and the shift towards a less adequate and more punitive approach to unemployment assistance and the unemployed. This shift has taken place against a background of rising inequality and precarity. Section 9.3 presented five opportunities for moving Australia’s social assistance system in a more universal and less conditional direction. Section 9.4 evaluated five separate pathways towards implementation, concluding that phased implementation (demographic) is the most likely way forward for a nationwide BI scheme in Australia. Chapter 1 characterised BI as a pragmatic-utopian reform and emphasised the need to hold both elements in tension. This chapter has focused on the mostly pragmatic concerns regarding policy design, implementation and administration. These are all critically important considerations in relation to the future of BI in different national settings. For

182 Particularly in relation to maintaining parallel income support systems for up to a decade and adjusting financing arrangements as the scheme is expanded. 183 Phased implementation of a national BI scheme would provide a wealth of opportunities for BI researchers.

228 implementation to be achieved, however, this valuable pragmatism must be complemented by the political energies and enthusiasm that only the utopian promise of BI can stir up and mobilise.

Following on from these considerations, we turn to Chapter 10—the final chapter of this thesis. It considers the political challenges and opportunities for making BI a policy reality in Australia.

229 Chapter 10: The Politics of Basic Income in Australia

Introduction

This chapter explores the challenges inherent to developing a politics of basic income in Australia that leads to policy implementation. Political opportunities and outcomes are partly contingent phenomena, which are constrained and facilitated by structural features of society, on the one hand, and the conscious actions of agents, on the other. Consequently, an effective politics of BI needs a strong but flexible spine. Section 10.1 examines the main structural barriers to achieving BI implementation. The section begins by discussing the state, capital, and the state-capital nexus. The analysis centres on Wright’s (2010: 273) identification of core structural mechanisms that support the social reproduction of capitalist society and which militate against ‘emancipatory social transformation’. This is followed by returning to the key ideological-cultural barriers to BI identified in chapters 1 and 7 - the work ethic and the distinction between the deserving and undeserving poor. The section concludes by interrogating the reasons for the traditional opposition of trade unions and social democratic political parties to BI. Section 10.2 describes the international evidence regarding public support for BI. Overwhelmingly, this evidence is drawn from polls conducted in Europe and the US, where support levels are consistently substantial, but there is large inter-country variation in the case of Europe. Furthermore, the data shows dramatic shifts in the proportion of respondents who favour BI, depending on how the policy is framed in different survey questions. The section also discusses the demographic factors and political orientations more likely to be positively correlated with support for BI. Finally, it emphasises the need for more detailed qualitative research to complement the polling data. Section 10.3 explores the potential for developing a more effective politics of BI in Australia. The section begins by circling back to the structural barriers discussed in Section 10.1, in order to highlight possible avenues of circumvention. It further highlights the potential for learning from the strategy and tactics deployed in both contemporary BI political campaigns and programs and historical Australian campaigns for social change. The section concludes by summarising the organisational forms, objectives, strategies and tactics with the potential for converting isolated pools of interest in BI in Australia into a more structured, cohesive and effective social force.

230 10.1 Structural Barriers to Implementing Basic Income

The State, Capital and the Capitalist Class There is no point in side-stepping the Janus-faced nature of the state in relation to the challenge of developing an effective politics of basic income. In functional terms, the legislative authority and bureaucratic capacity of the state is indispensable to the process of instituting and administering a BI scheme. However, the state remains a major barrier to BI implementation on several fronts. Similarly, capitalists as a class can generally be expected to oppose BI, even if it could be shown that this reform supports, or boosts, capital accumulation. This is because of the threat that BI poses to capitalists’ ‘condign’ power (Galbraith, 1985) to dictate the terms of employment relationship, and their broader class power over critical economic decisions, such as the level of investment. Kalecki’s (1943: 326) argument that capitalists’ ‘class instinct tells them that lasting full employment is unsound from their point of view and that unemployment is an integral part of the "normal" capitalist system’, is equally apposite to the case of BI. It stands to reason, therefore, that in contexts where the interests of the state and capital intersect in opposing BI, the political difficulty of circumventing this barrier is dramatically increased.

There is no single theory of the state for the sound reason that states are not identical in their institutional structures and do not act in a uniform, unified and consistent manner across different spatial and temporal contexts. Nonetheless, competing theorisations of the state have emphasised different regularities, capacities, orientations and constraints that shape the actions of the individuals and institutions that comprise states. Theories of the state can be divided into four broad categories, related to whether the state is perceived chiefly as an “oppressor”, an “obstructor”, a “facilitator” or a “stabiliser”. However, there is no neat alignment between these four categories and the political philosophies underlying different state theories. For example, libertarians (Nozick, 1974) feminists (Connell, 1990) may both privilege the oppressive nature of the state in their analyses, while strands of conservative (Burke, McMahon, O’Brien, Rakove, & Wolfe, 2003) and social democratic (Lerner, 1944) thought may stress the importance of the state as a stabilising force. The relevance of state theory to the politics of BI lies chiefly in the formers’ utility in identifying state-centred impediments to BI implementation, and the form such obstructions might take.

231 Capital and the capitalist class also resist neat definitions or uncontested theorisation. However, Marx’s distinctive characterisation remains a useful and relevant foundation for contemporary analysis. For Marx (1999), capital should not be limited to the conventional economic descriptors of ‘raw materials, instruments of labour, and means of subsistence of all kinds, which are employed in producing new raw materials, new instruments, and new means of subsistence’. Instead, he argues, capital must be understood as ‘a social relation of production’ within ‘bourgeois (or capitalist) society’ (Marx, 1999). This conceptualisation immediately embeds capital, capital accumulation and the capitalist class within a social context ‘at a definite stage of historical development’ (Marx, 1999). This contrasts sharply with both mundane characterisations of capital as simply one of three factors of production and the abstract, ahistorical and homogenising attempts to dissolve capital into one variable in a standard production function. The anchoring of capital in social relations, while essential, has to be enriched by empirical accounts of capitalist development, the conflicting interests and fluctuating fortunes of different fractions of capital, international and intra-national capitalist rivalries, and the variation among capitalists regarding their priorities and interests.

The relationship between the state and capital is similarly treacherous theoretical terrain. The state and capital can be understood as two constellations of internally variegated institutions, processes and actors. The state-capital relationship is multidimensional, bi-directional and fluid. There is considerable empirical evidence to support starkly different interpretations of the defining characteristics of this relationship. For example, one set of arguments centres on the relative power of states and capital during the recent era of neoliberal globalisation. On one side, are analyses that emphasise the capacity of capital, in the form of transnational corporations (TNCs) and global financial flows, to transcend national boundaries, and for a transnational capitalist class to detach itself from nation state-based societies (Ohmae, 1990; Sklair, 2012; Strange, 2016). On the other side, are defenders of the nation state as the main locus of political and economic power (P. Hirst & Thompson, 2002; Weiss, 1997). State intervention in recent economic crises provides interesting case studies of how state power can be deployed to great effect at times of vulnerability and weakness for capital, while simultaneously buttressing the interests of capital and the wealthy.

232 In the same vein, evidence can be found to support different positions regarding a congruence or divergence of interests with respect to the state and the capitalist class. This is true both between and within particular theoretical traditions. To cite one example, Marxist state theory has pivoted on the question of the degree to which the state should be considered autonomous in relation to the systemic priority of capital accumulation and the interests of capitalists as a class (Jessop, 1990; Miliband, 1983; Poulantzas, 1976). Miliband’s (1983: 65) conceptualisation of the relationship as a ‘partnership’ seeks to avoid both ‘class-reductionist’ and ‘state-reductionist’ tendencies and remains a useful generalisation.

This idea of a ‘constantly shifting’ partnership (Miliband, 1983: 65) shaped, but not determined, by the centripetal force of capital accumulation is in keeping with Wright’s (Wright, 2010: 278)claim that capitalism requires ‘reasonably effective mechanisms that will contain social conflicts within tolerable limits, sufficiently muting their disruptive effects so that capitalist investment and capital accumulation can take place’. Wright goes onto specify the core mechanisms that serve this conflict management purpose while the same mechanisms militate against the development of ‘pathways of social empowerment’ or ‘any project of radical social transformation’ (Wright, 2010: 273, 297).

Forms of regulatory coercion, implemented or permitted by the state, function to ‘raise costs of collective challenge’, and can include measures such as banning trade unions, or severely constraining their sphere of legal activity, while supporting employer lockouts, openly or tacitly (Wright, 2010: 280). Clear examples of this mechanism in action in recent Australian history include making strikes illegal outside of enterprise bargaining rounds, dramatically increasing personal and institutional fines for unprotected industrial action, and tying up union resources in protracted processes, such as the Royal Commission into Trade Union Governance and Corruption and campaigns against the ‘union-busting’ Ensuring Integrity Bill (McCauley, 2019; Stanford, 2019b).

The evolution of institutional rules involves a process of ‘negative selection’ that weeds out ‘practices and policies which would have especially disruptive effects on the reproduction of capitalism’ (Wright, 2010: 281). This might include steering radical energies down the narrow path of representative democracy or insulating powerful

233 economic agencies from democratic oversight or control. Australian examples encompass: the continued dominance of the two-party system at state and federal levels, despite falling levels of public support for the major political parties; the “independence” of the Reserve Bank of Australia (RBA); and the influence of the Productivity Commission (PC) on the direction and scope of federal government policy analysis and development.

Ideology and culture play equally important, and perhaps more subcutaneous, roles in neutering any resistance to the demands of social reproduction. For Wright (2010: 283), ideology and culture correspond to the ‘conscious’ and ‘non-conscious aspects of subjectivity’ that are shaped, internalised and maintained in order to reinforce support for status quo, or, at very least, encourage passive acceptance. At the same time, they function to shrink the horizons of the possible as regards reform (Wright, 2010: 283). In the Australian context, Pusey (1991) described the process by which ‘economic rationalism’ or neoliberalism supplanted ‘nation- building’ as the dominant logic of government policymaking in Canberra. He argued that economic rationalism was ‘an ideological project that was foisted on Australia’ by international financial institutions (IFIs), business lobby groups, neoliberal think tanks, and multi-national accounting firms’ (Pusey, 2017: 13). This ‘ideological project’ has had profound and lasting effects with respect to coercive regulation, institutional rules, culture, and ultimately, material interests and outcomes in Australia.

Aligning the material interests of the majority of people with the priority of capital accumulation is another mechanism for buttressing support for social reproduction. As Wright (2010: 287) puts it, ‘within a well-functioning capitalism, the material interests of almost everyone depend to a significant degree upon successful capitalist economic activity’. This boosts the social capital of capitalists and lends considerable weight to their political interests and interventions (Wright, 2010: 287). In Australia, we see this most explicitly in relation to the power of the mining sector, with resource exports comprising the country’s main contribution to global capital accumulation. This power has been deployed by domestic and foreign mining capital to veto policy measures that it considers disagreeable, such as the mining tax and the carbon tax, and to win major concessions and subsidies from the state (Cleary, 2011).

234 Wright (2010: 294) also identifies ‘Institutional rigidities and path dependency’ as potential obstacles to social transformation. These become manifest in various forms, from making workers dependent on their employers for health insurance, to the replacement of mass transit systems with highways during periods of suburbanisation, and the erection of probably insurmountable legislative barriers to increasing taxation, such as exists in California (Wright, 2010: 295-296). Australian examples are easy to identify, from the spread of private toll-roads in major cities, to the inefficiencies generated by electricity privatisation under the rubric of national competition policy, and the seemingly intractable challenge of reforming Australia’s inequitable housing system (Cahill, Edwards, & Stilwell, 2012; Cahill & Toner, 2018; West, 2020).

This discussion has emphasised how the state and capital, both as distinct categories marked by considerable inter-category and intra-category diversity and as actors with imbricated interests, can block, circumscribe, divert and disorganise attempts at major social reform. These factors have major implications for the task of developing an effective politics of BI. For example, the complexity and scale of BI may provoke opposition from the major organs of the state based on a combination of inertia, political caution and policy path dependence. Both progressive BI schemes that would augment the size and responsibility of government, and minimalist libertarian proposals aimed at shrinking the state, may be perceived as too radical a departure from the status quo. For progressive iterations of the reform, there are the additional issues relating to the net increase in fiscal outlays required and the distributional effects of financing arrangements for particular BI schemes. Here, the extent to which the interests of the state, capital and the wealthy align in opposition to BI is a crucial variable in assessing the likely strength resistance to such a reform. Finally, as Kalecki (1943: 325-326) argues, in relation to social assistance in general, capitalists and the wealthy184 may be expected to oppose BI on ideological-cultural as well as on economic grounds: ‘For here a “moral” principle of the highest importance is at stake. The fundamentals of capitalist ethics require that “You shall earn your bread in sweat”– unless you happen to have private means’.

184 There is obviously overlap between these two groups but they are not synonyms.

235 Ideology and culture The two most important ideological-cultural barriers to BI are the “work ethic” and the entrenched distinction between categories of “deserving” and “undeserving” poor. The two barriers serve to reinforce one another within the prevailing ‘productivist paradigm’ in which ‘people are measured by how much they produce, and those who produce little or nothing are judged harshest of all’ (Marston et al., 2014: 61). Both the work ethic and the moral opprobrium reserved for the undeserving poor have long histories as mechanisms for valorising contributions to capital accumulation and demonising working age individuals who “choose” welfare over paid work.

During the neoliberal period, these mechanisms have been further reinforced under the rubric of ‘workfare and labor market activation’, a policy framework now ‘deeply embedded in the architecture of public policy from North America to Australia and throughout Western Europe’ (Brodkin & Marston, 2013: 3). Marston et al. (2014: 61-62) describe the associated shift in social security discourse as comprising two key elements. First, ‘the intensification of...conservative political discourse’ on welfare ‘to the point that governments find it difficult to let the term “welfare” stand alone; it must always be accompanied by the value of work, as in “welfare to work” and “work first” policy descriptions’. Second, the further denigration of welfare as a form of “dependency” and the “infantilisation” of working age welfare recipients.

This shift is clearly visible in Australia, at the level of discourse, and in concrete policy change. The welfare to work discourse has a distinctive vocabulary, including terms like ‘mutual obligation’, ‘activation’, ‘job-ready’, ‘work shy’ and ‘lifters and leaners’ (Marston et al., 2014: 61-62; Martin, 2015). This language is also incorporated in the names of government programs targeting the unemployed, from the “Newstart Allowance” to “work-for-the-dole”, “activity testing”, “income management” and, more recently, “JobSeeker” (Brodkin & Marston, 2013; Klapdor & Giuliano, 2020; Marston et al., 2014). Perhaps, the best encapsulation of the welfare to work discourse in the Australian context, can be found in a statement made by Prime Minister and ex-marketing executive, Scott Morrison, during the 2019 election. Asked if he supported the “fair go”, shorthand for Australian society’s ostensible egalitarian ethos, Morrison replied:

236 I believe in a fair go for those who have a go, and what that means is part of the promise that we all keep as Australians is that we make a contribution and don’t seek to take one (Morrison in Murphy, 2019).

The best way to ‘have a go’ is, on this reasoning, to take up paid employment. However, the ideological and cultural force of work ethic in driving that decision is difficult to disentangle from the intrinsic benefits many people derive from paid work and the justifiable fear of the negative effects of unemployment (Borland, 2020; Langmore & Quiggin, 1994: 9-13). This is an important point in relation to interpreting evidence regarding public attitudes to work in Australia. For example, analysis of HILDA data has shown that self-reported ‘Mean Job Satisfaction by Employment Type (in Main Job)’ in Australia remained fairly stable between 2000 and 2010185, with little variation based on employment type or gender. For example, in 2010 the mean score for male permanent employees was 7.6 compared to 7.4 for casuals. For females, the mean score for permanent employees was also 7.6, and a higher 7.69 for casuals (Buddelmeyer, McVicar, & Wooden, 2013: 29). More recent survey evidence includes the findings, that ‘Over 70% of respondents agree or strongly agree that they would enjoy having a job even if they didn't need the money’ and among those ‘who work more than 40 hours a week, fewer than one in four regret the time they spend doing so’ (AuSSA, 2015; Fitzsimmons, 2019). These results can be contrasted with the literature on the costs of insecure work, overwork and work-life balance discussed in Chapter 3. However, both sources of evidence are unable to provides a clear measure of the cultural force of the work ethic in Australia. The survey evidence on public attitudes towards welfare sheds significantly more light on this issue.

Different categories of welfare are framed in radically different ways in political and social discourse. This affects how programs are administered and the ways recipients are treated, while also shaping public attitudes towards different forms of social assistance. Chapter 1 described the difficulty Nixon had, and the confusion he created, in trying to market an expansion of US social security using the existing categories of deserving and undeserving poor (Steensland, 2006). Chapter 6 emphasised the crucial

185 The vast majority of scores, on a scale of 0-10, fell within a narrow bad between 7 and 8 (See Table 2, Buddelmeyer et al., 2013: 29.

237 importance of differentiating the Manitoba Mincome in 1970s Dauphin from common conceptions of welfare in order to foster community-wide support for the experiment (Calnitsky, 2016). In the context of contemporary Australia, Marston et al. (2014: 66- 67) strike a similarly cautionary note: Targeted programs and payments with stringent means and assets tests attract the greatest level of surveillance, while more universal payments, such as Family Tax Benefit Part A, receive less scrutiny.

These contradictions are likely to remain a feature of Australia’s social security system into the future. For example, the outdated anomaly between allowances (such as Newstart for unemployed people) and pensions (such as the Age Pension) is unlikely to be changed in the near future, supported as it is by the moral discourse of deserving and undeserving poor

The caution of these authors is not without grounds (see Table 10.1). The 2003 and 2005 Australian Survey of Social Attitudes (AuSSA)186 reported high levels of public support for imposing additional conditionality on working age welfare recipients, and a strong belief that those on welfare could good a job if they tried harder. However, together the AuSSA data and more recent polling of social attitudes, present a multi- dimensional picture of Australians’ attitudes towards welfare. There is broad support for the system as a whole, and for particular programs, but unemployment benefits are unpopular and those in receipt of them are subject to social stigma. Consistent with other English-speaking countries, Schofield and Butterfield Schofield and Butterworth (2015: 11) conclude: ‘the Australian population holds largely negative views of those receiving welfare benefits’ with ‘welfare recipients...broadly characterized as lazy and not doing enough to find work.’ Considering that assistance to the unemployed was AUD$10.5bn in 2018-2019, or just over 0.5 percent of GDP, the results described in Table 10.1 are clear evidence of the ideological-cultural power of both the work ethic and the distinction between the deserving and undeserving poor in contemporary Australia (Commonwealth of Australia, 2019: 5-22).

186 Note: data from more recent iterations of this survey were not included due to lack of public or institutional access.

238

Table 10.1 Public Attitudes to Welfare and Unemployment in Australia Question Response (% of respondents) Cutting welfare benefits would damage too Agree (2003) Agree (2005) many people’s lives 66 66 People who receive welfare benefits should Agree (2003) Agree (2005) be under more obligation to find work 73 71 The government should limit the length of Agree (2003) Agree (2005) time that people can get welfare benefits even n/a 25 if they end up without an income Around here, most unemployed people could Agree (2003) Agree (2005 find a job if they really wanted to 59 63 Most people on welfare are trying to get a job Agree (2003) Agree (2005) n/a 25 Unemployment has fallen over the last couple Agree (2003) Agree (2005) of years 27 37 Agree that all families deserve payments to Agree (2005) help with cost of raising children 49 Agree that single parents deserve payments Agree (2005) to stay home to raise children 39 All taxpayers, regardless of their income, Agree (2011) Disagree (2011 should be eligible for some form of 35 57 Government payment Family payments aren’t really welfare – they Agree (2011) Disagree (2011) just provide assistance for families raising 60 32 children People on low incomes receiving welfare Agree (2011) Disagree (2011) should have to justify how they spend it 47 46 Which of the following statements is closest 2013 to your view? Australia’s current welfare system has 53 created a culture of dependency, whereby many people, and often whole families, get used to living off Government benefits; the system needs to be radically changed to get such people to take more responsibility for their lives and their families. Most people who rely on welfare benefits are 30 victims of circumstances beyond their control. The benefits they receive are far from generous, and are the least a civilised society should provide in order to help them and their families avoid living in poverty. Overall, do you think the Federal Government 2014 spends too much, not enough or about the Too Not About Don’t right amount on welfare payments – such as much enough right know age pensions, disability support pensions, 24 41 27 9 unemployment benefits, parenting payments? Sources: Wilson, 2007; Essential Research, 2011; Essential Research, 2013; Essential Research, 2014.

239 Trade Unions and Social Democratic Political Parties Trade unions and social democratic political parties traditional opposition towards BI presents as a particularly challenging barrier to implementation. The social, industrial and political power of these, often intertwined, institutions has been fundamental to the achievement of progressive reform in Australia, as in many other countries. While some cracks have started to appear in this wall of opposition, resistance or indifference to BI is still the dominant stance.

Chapter 1 described the opposition from trade union peak bodies to Juliet Rhys- Williams’ proposed BI for the UK in the 1950s, and the indifference of organised labour towards US President Nixon’s NIT in the 1970s. Chapter 6, on the other hand, evaluated the argument that BI would boost the bargaining power of labour which, logically, should attract trade union support. However, with some exceptions187, trade unions have not advocated nor campaigned for BI. The official trade union stance is neatly encapsulated in a recent report commissioned by Public Services International (PSI), the international trade union confederation for public sector workers. Among the report’s eight, entirely negative, conclusions are: There is no evidence that any version of UBI can be affordable, inclusive, sufficient and sustainable at the same time...There is no evidence that UBI will help to increase the bargaining power of workers and trade unions or solve problems of low pay and precarious work...The campaign for UBI threatens to divert political energies – as well as funds – from more important causes (Coote & Yazici, 2019: 11).

BI scholars have attempted to explain trade union opposition to BI by pointing to some combination of misunderstanding, fear, conservatism, self-interest and ideology. Van Parijs and Vanderborght (2017: 176-179) emphasise the intersecting fears that BI would: replace the welfare state; function as a wage subsidy; demote unions’ role in determining household disposable incomes; threaten unions’ role in managing social security contributions; reduce the dependence of workers on trade unions; and threaten the material interests of their core constituency of relatively well-paid permanent employees. (Cigna, 2019) takes a more structuralist approach, considering

187 See Henderson and Quiggin (2019: 496-497).

240 the level of trade union support for BI in terms of four ‘channels’: ‘socio-economic insecurity’; ‘welfare regime generosity’; ‘attachment to the work ethic and the insurance principle’; and unions’ ‘role in the industrial landscape’. This, he argues, explains low levels of trade union support for BI in northern European and Scandinavian states, compared to more neo-liberal welfare states (Cigna, 2019: 10). The evidence on the attitudes of rank-and-file trade union members is limited and, according to two studies of European, trade union membership is not statistically significant in relation to levels of BI support (Roosma & van Oorschot, 2019; Vlandas, 2020).

For social democratic politic parties either born out of, or with strong ties to, the trade union movement, the opposition to BI is not difficult to understand. Whether that relationship was grounded in the labourism of the UK, Australia and New Zealand, the corporatism of Germany, or the tripartite decision-making of a country like Sweden, social democratic parties have had sound reasons for supporting the union position on BI. Van Parijs and Vanderborght (2017: 190-191), after highlighting the rare exceptions in the UK and the Netherlands, observe: In other countries, social-democratic parties have barely discussed the idea. And those compelled to take explicit stances have sometimes showed themselves deeply divided, as was the case with the Swiss socialist party in the run-up to the 2016 referendum. More often, they have simply expressed hostility.

This hostility188 appears entrenched and it is worth noting that the two social democratic parties to have campaigned on policy platforms, including direct support for BI, or a commitment to investigate it further,189 suffered catastrophic election defeats (Beauchamp, 2019; Earle, 2017). These defeats cannot be attributed to this one factor, but they may serve to discourage other social democratic parties from supporting BI. In Australia, former Labor Party Treasurer, Chris Bowen, has stated: ‘A universal basic income would present us with a rare and unattractive policy trade-off: making us even more unequal as a society or delivering us an unsustainable tax system’ (Murphy, 2017). More recently, the Executive Director of Per Capita, a major Labor-aligned think

188 Notwithstanding the support for BI expressed by major figures like James Meade within the UK Labour Party or J.K. Galbraith and James Tobin in relation to the US Democratic Party. 189 The French Socialist Party under Hamon and the UK Labour Party under Corbyn.

241 tank made many familiar arguments for why ‘the progressive left should oppose a universal basic income’ (Dawson, 2020; Ireland, 2019).

10.2 Public Support for Basic Income

The barriers to BI implementation are substantial and diverse but the recent growth in public support for the policy affords BI advocates some encouragement that, in the right circumstances, political campaigns for BI could draw support from a broad social base. Less than a decade ago, it would have been safe to assume that anyone outside of a particular academic sub-specialisation or tiny BI activist group had not heard the terms basic income or universal basic income. Due to publicity generated by BI trials and campaigns, prevailing political economic circumstances and the rapid dissemination of ideas on social media, that assumption is no longer a safe bet. Increasingly, public attitudes towards BI in different countries are being polled. These survey data are useful in, at least, three ways. First, they provide scholars, advocates and activists with a baseline measure of public of support for BI in their respective countries or regions. Second, the polling itself can be used as a campaign tool to generate further public awareness, and, potentially, increase support. Third, detailed analysis of available polling data can play a key role in informing the design of future BI campaigns, including the identification of those groups more/less likely to be supportive, and the best way to frame BI in different contexts.

Several caveats must be attached to these positive attributes of polling data. First, the potential to skew results, one way or another, due to the considerable variation in the phrasing of BI-related questions in public opinion surveys. Van Parijs and Vanderborght (2017: 171) make the point, ‘results of all surveys must be treated with the usual prudence, owing to the effects of the specific phrasing and framing of the question’ which ‘applies in particular to surveys about the idea of an unconditional basic income, which is likely to be unfamiliar to the bulk of respondents and therefore likely to be confused with related ideas’. For example, questions that tie BI to the threat of automation may attract higher levels of support than questions that include some mention of the need to raise taxes to finance a BI scheme. Furthermore, the ‘strong positive relation between support for targeting benefits to the poor only and BI support’ observed in the European Social Survey (ESS) ‘raises questions about whether

242 respondents have really understood what a BI actually entails’ (Roosma and van Oorschot, 2019: 199). Second, when polled in isolation, BI may attract higher levels of public support than when it is polled alongside, or as an alternative to, other policy options, such as a job guarantee (JG) or more investment in public services. Third, ostensibly high levels of public support for BI in opinion surveys may overstate both the level and strength of support once the policy is more fully understood. De Wispelaere (2016) provides a powerful illustration of this point in relation to the Swiss BI referendum and Finnish attitudes to be BI in the lead-up to the two-year trial. He writes: A poll conducted in April asking 20000 Swiss citizens their voting intentions [in relation to the BI referendum] found 40% intended to vote in favour. The reality turned out quite different, with only 10% of Swiss coming up to vote and then voting yes.

This shouldn’t surprise us because political polling is a notoriously difficult enterprise, and polls around basic income are easily influenced by framing of the questions as well as real-world events. For an example of the latter, the Finnish working group coordinated by Kela found that Finnish support for basic income decreased quite radically once questions about the amount of basic income are paired with corresponding questions about the taxes needed to fund it.

Polling public attitudes towards BI go back at least as far as 1994 when a survey found 40 percent of Danish respondents expressed support for the idea (Van Parijs and Vanderborght, 2017: 172). However, in the recent years, the number of polls, and the number of countries surveyed, on this issue has dramatically increased. Despite this shift, focus has overwhelmingly centred on European and North American attitudes. Table 10.2 summarises some of these survey results, which further illustrate both the positive attributes and caveats discussed above.

243 Table 10.2 Public Attitudes to Basic Income Region/Country Question (or how BI is framed) Support Oppose (year) (%) (%) US (2011) The idea would be to provide enough money for everyone 11 82 to enjoy a modest living regardless of whether or not they choose to work. Do you favor or oppose having the federal government provide every single American with a basic income grant? Canada (2013) ...a guaranteed annual income policy for Canadians, to 46 n/a replace the current economic assistance programs? France (2015) Are you in favour of the introduction of a basic income 60 40 guaranteed to all citizens that would replace most existing benefits? Europe190 (2016) A basic income is an income unconditionally paid by the 64 24 government to every individual regardless of whether they work and irrespective of any other sources of income. It replaces other social security payments and is high enough to cover all basic needs (food, housing, etc.). If there would be a referendum on introducing basic income today, how would you vote? UK (2017) A Universal Basic Income was described to participants as: 49 26 a regular income paid in cash to every individual adult in the UK, regardless of their working status and income from other sources. UK (2017) If it meant an increase in taxes from their current 30 40 levels?191 US (2018) Do you support or not support a universal basic income 48 52 program as a way to help Americans who lose their jobs because of advances in artificial intelligence? US (2018) Would you support or oppose giving every American a 37 43 monthly check from the government of $1,000, which would be paid for by raising taxes on individuals earning more than $150,000 a year? Lithuania The government pays everyone a monthly income to cover 81 19 Italy essential living costs: It replaces many other social benefits; 59 41 United Kingdom The purpose is to guarantee everyone 51 49 France a minimum standard of living; Everyone receives the same 49 51 Germany amount regardless of whether or not they are 46 54 Sweden working; People also keep the money they earn 38 62 from work or other sources; This scheme is paid for by Norway 34 66 taxes. Overall, would you be against or in favour of having (2018) this scheme [in your country]? Korea (2020) guarantee a minimal level of livelihood 49 43 EU14 Do you agree or disagree that each citizen, including those 46 29 in work, should receive a guaranteed income from the state without work requirement? Sources: Van Parijs and Vanderborght, 2017: 172-173; Jaspers, 2016; Ipsos MORI, 2017; Reinhart, 2018; Lee, 2018: 2-3; Hyun-ju, 2020.

The headline results are of interest in several respects. For example, they highlight differences between respondents in countries asked the same question, such as is the

190 Representative sample of 10,000 across 28 countries (see Van Parijs and Vanderborght, 2017: 172). 191 Based on definition in line above.

244 case in the European Social Survey, and how these may shift over time (Lee, 2018). Furthermore, they demonstrate the importance of how BI is framed or defined in a survey question, especially if financing mechanisms are mentioned. To cite one example from surveys included in Table 10.2, there is a dramatic ostensible difference between the ESA (2018) results showing 48 percent support for BI in Germany (4th lowest) and just 38 percent in Sweden (3rd lowest), compared to the E14 survey of Europe’s 14 most populous countries that placed Germany (62 percent in favour) and Sweden (53 percent in favour) in the top two spots. Having a ‘don’t know’ option in the E14 survey may partly explain the different results, but it still serves to highlight challenges in relation to survey design and the reliability of this evidence (Bartha, Boros, Freitas, Laki, & Stringer, 2020: 68-9; Lee, 2018: 2-3)

Alongside the headline results, some of the more interesting and politically useful data is provided by the answers to supplementary questions, and in the breakdowns of support levels by demographic factors and political orientation. For example, a 2016 Europe-wide survey reported that the biggest fear related to implementing BI was that people would stop working (43 percent of respondents), while only 7 percent of respondents stated they would ‘work less’ if BI were introduced (Jaspers, 2016). The fact that younger people are significantly more likely to favour of BI than those in older age cohorts, is a finding common to several surveys ("Data for Progress," 2019; Fitzgerald, 2017; Reinhart, 2018). In relation to other demographic factors, recent US survey evidence suggests support for BI is higher among people of colour, those without a college education, and lower-income earners (Hoare, 2017; McFarland, 2018). For example, in a 2018 poll that specified both the BI amount and the financing mechanism, ‘Black respondents supported the proposal by a margin of 49 percent to 19 percent (with 33 percent expressing strong support), while Hispanic respondents supported it by a much narrower margin of 36 percent to 34 percent’ while ‘47 percent of white respondents opposed the policy (with 35 percent strongly opposing it), while 36 percent supported it’ (McFarland, 2018). Evidence on whether men or women are more likely to support BI is mixed (Hoare, 2017; McFarland, 2018; Vlandas, 2020).

Finally, there is some support for the argument that persons more likely to vote for progressive political parties exhibit stronger support for BI. For example, a 2017 US tracking poll reported 59 percent of self-identified liberals supported BI compared to 26

245 percent of conservatives. Similar results were found in other US polls (Hoare, 2017, McFarland, 2018). According to some analyses, Europe exhibits a less clear-cut pattern in relation to political affiliation with examples of countries where centrist and, less commonly, right wing respondents favoured BI more than those on the political left. While conceding that those on the right are less likely to favour BI overall, Fitzgerald argues that right-wing ‘support levels...are perhaps higher than might be expected’. He concludes that public support for BI, at least in Europe, ‘defy conventional labels’, being ‘neither right nor left, but something new’ (Fitzgerald, 2017). However, Roosma and van Oorschot’s (2019: 203) analysis of the same ESS data leads to a different conclusion: ‘...people in a worse social–economic position, people supporting egalitarian values and people leaning to the political left are more in favour of a BI.’ Roosma and van Oorschot (2019: 203) further challenge the notion that BI is a ‘neutral idea’ by drawing a distinction between the ‘different political and philosophical affiliations’ of ‘academic or social supporters of the BI’ and support ‘among the general public’ where ‘the idea of BI is carried mostly by the political left’. Vlandas’ (2020: 16) analysis of the ESS data further supports this conclusion, finding, ‘Respondents who identify as right wing are more opposed to the scheme and the effect is substantial: the predicted probability of support is below 41% for the most right-wing respondent compared to above 61% among the most left wing’.

Tracking polls of public attitudes to BI provide useful information that, interpreted with the requisite caution, can assist advocates and activists in developing an effective politics of BI in different national, cultural and political economic contexts. Variation in the framing of BI in opinion poll questions can be illuminating in some respects, and frustrating in others.192 This polling data, as Roosma and van Oorschot (2019: 204) argue, needs to be complemented by ‘more (especially qualitative) studies to ask people about their particular understandings of BI, which elements of the idea they support and reject, and their argumentations to be in favour or against it.’ This type of detailed qualitative research is indispensable to developing an effective politics of BI in specifical national and sub-national contexts.

192 Such as the comparability of results between countries.

246 10.3 Towards an Effective Politics of Basic Income in Australia

Political campaigns for BI are a relatively new phenomenon. Chapter 1 demonstrated how BI has been historically associated with individual intellectuals, policy entrepreneurs and progressive reformers inside government agencies. Grassroots campaigns have been few and mass movements non-existent. Forget provides a succinct statement of the nature of the political challenge confronting contemporary BI advocates and activists: Scientific evidence for the efficacy of Basic Income continues to grow but profound social change requires more than science. Until we understand the politics of social transformation, Basic Income will remain just another politically contentious idea (Forget in Caputo & Liu, 2020: 10)

Overcoming the state-capital, ideological-cultural and trade union-social democratic barriers to implementing BI is a formidable political task. In his exploration of this challenge in relation to ‘social emancipation’, Wright (2010: 303, 305) usefully differentiates ‘ruptural, interstitial and symbiotic...logics of transformation’ that ‘correspond broadly to the revolutionary socialist, anarchist, and social democratic traditions of anti-capitalism’. After careful consideration of their respective merits and limitations, he opines: ‘Any plausible long-term strategy of transformation needs to draw elements from all three’ (Wright, 2010: 370). Wright concludes his analysis by admitting to a ‘lack of confidence about the limits of possibility’, while making the case for an iterative ‘experimental process in which we continually test and retest the limits of possibility and try...to create new institutions which will expand those limits themselves’ (Wright, 2010: 373). In the context of twenty-first century Australia, all three logics of transformation may contribute to developing an effective politics of basic income. Ruptural strategies that frame BI as a ‘utopian demand’ (Weeks, 2011) or an ‘exit route’ (Gorz, 1999) could open up the social and political space for both interstitial efforts ‘to build new forms of social empowerment in the niches and margins of capitalist society’ and more pragmatic symbiotic strategies (Wright, 2010: 303).

With regard to the state and capital, and their interrelationship, as barriers to BI implementation, a ruptural strategy would emphasise direct confrontation, an interstitial approach would attempt to sideline or ignore these obstacles, while

247 symbiotic strategies would centre on using the state to broker socially favourable compromise with capitalists (Wright, 2010: 304). The logic of symbiotic transformation means the state and capital are not treated as monolithic entities, and there is scope for social compromise between the ‘associational power of the working class and the material interests of capitalists’ to generate positive sum outcomes (Wright, 2010: 338- 339). The stability and duration of such compromises will always be indeterminate in capitalist society. However, the historical achievements of ‘social democratic principles and policies’ (Berman, 2006: 188) are far from trivial. These achievements include: periods of full employment and large reductions in inequality and poverty, to the radical expansion of the welfare state, innovative industrial relations and industry policy, and a commitment, however imperfect, to collective organisation (Langmore and Quggin, 1994; Berman, 2006; Higgins and Dow, 2013; Scott, 2014).

Australia does have a radical history, from the once powerful Communist Party of Australia, to industrial militancy, countless successful and unsuccessful protest movements, and examples of counter-cultural experiments. These important traditions, and attendant cultural stereotypes of Australian egalitarianism, larrikinism and anti- authoritarianism, should not be dismissed, as they have been fundamental to achieving progressive change and shifting cultural attitudes. These range from the long, unfinished, struggle for equal rights for women, Indigenous, and LGBTQIA Australians, to inspiring environmental and heritage campaigns, and industrial agitation to reduce working hours and improve working conditions (Burgmann & Burgmann., 2017; Donaldson, 1996; Hamilton, 2016; Irving, Irving, & Cahill, 2010; Macintyre, 1998; Sparrow & Sparrow, 2001)

However, the “great Australian pragmatism” may better characterise the dominant tendency in Australia’s social, political and economic history. The historian John Hirst (2004: 114) has described the ‘puzzle’ of Australian society in the following terms: ‘The Australian people despise politicians, but the politicians can extract an amazing degree of obedience from the people, while the people themselves believe they are anti- authority’. He points to the examples of Australians’ ready acceptance of compulsory voting, seatbelts, bike helmets, breath tests and smoking regulations (Hirst, 2004: 113).

248 For Hirst, some combination of cultural egalitarianism193 and a solid record of concrete policy achievements by government helps explain why, ‘Australians are suspicious of persons in authority, but towards impersonal authority they are very obedient’ (Hirst, 2004: 124). The sociologist Michael Pusey (2003) has characterised Australians as a, ‘secular, pragmatic, and often anti-intellectual people who for the most part eschew heady metaphysical notions of national identity’ and who prefer ‘to define our collective aspirations for our future in a rather more down to earth way as economic development from which all would share. This assessment is both reflected in – and enriched by – more recent qualitative social research by Rebecca Huntley (2017) which found consistent evidence of a type of a moderately progressive pragmatism that was widely shared across the nation. At face value, these factors suggest that a politics of BI centred on a symbiotic logic of transformation, supplemented by ruptural political activism, and interstitial experimentation, has, at least, some potential to challenge, disorganise and diminish state-capital opposition to basic income.

Turning to ideological-cultural barriers to BI in Australia, the three main challenges are neoliberal hegemony over public policy, the work ethic, and the distinction between the deserving and undeserving poor. Neoliberal hegemony over public policy has been shaken by economic crises, rising economic inequality and insecurity, and the gulf between neoliberal rhetoric and actual policy outcomes (Cahill et al., 2012). However, a neoliberal policy reflex remains in place, from public sector austerity to outsourcing and privatisation (Cahill & Toner, 2018; Henderson & Stanford, 2020). Here, a political strategy for BI should include support for a boost in direct public sector employment194; expansion of universal social services195; challenging the power imbalance between economic departments and agencies of government196 and other parts of the public sector; and opening up regular communication channels between public servants and BI scholars and advocates. Such an approach should assist in allaying fears that BI is about

193 As Hirst (2004) admits, this does not mean that Australian society is becoming more equal in material terms. 194 Public sector employment in Australia was 18.4 percent in 2013, below the OECD average, and far below Sweden, Norway and Denmark’s proportions of between 28-35 percent (OECD, 2015). 195 It is worth re-emphasising that publicly funded and provided childcare, age care, healthcare and education, alongside more social housing, would reduce any inflationary risk associated with BI and increase its real purchasing power. 196 Prime Minister and Cabinet, Treasury, Finance, the RBA, the Productivity Commission.

249 “shrinking the state” or “replacing the welfare state”, while opening up opportunities for genuine dialogue and an exchange of expertise.

The work ethic can be challenged directly and/or indirectly. A frontal attack might centre on a campaign aimed at the ‘elimination of work and its replacement by personal activity’ in society structured around freely ‘chosen working time’ and uncoerced forms of ‘multi-activity’ facilitated by BI (Gorz, 1999: 93, 65, 80). A less radical strategy might be to challenge the role of the work ethic in reinforcing the esteemed place occupied by paid work in the hierarchies of both work and human identity. This strategy of demotion rather than demolitions, means justifying BI, in part, on redefining work to include many forms unremunerated labour, as argued in Chapters 2 and 3. This strategy, while important to the object of de-sacralising the work ethic in the public imagination, is certain to encounter strong resistance and require the commitment of substantial intellectual and political energies over an extended period. Another, less ambitious, approach would be to make BI conditional on the performance of some type of “participation activity”. This obviously violates the “unconditionality” criterion of BI, and there are strong ethical, efficiency and political grounds for opposing such a requirement (see Chapter 2). However, from a pragmatic political perspective, the imposition of “light conditionality” may be worth considering as a means of neutralising the “money for nothing” objection to BI. As Van Parijs and Vanderborght (2017: 215) conclude, after careful consideration of the counterarguments, ‘for political reasons’ the implementation of BI ‘may...have to involve, if only for window-dressing purposes, some sort of participation condition’.

This is particularly pertinent to Australia, where the work ethic is partly expressed in social attitudes that exhibit high levels of distrust towards the unemployed and a strong belief that those without a job could get one if they really tried which, therefore, justifies conditionality (see Table 10.1). Any such participation activity would need to be broadly defined to ensure maximal access to income support, while also being sufficiently specific to minimise the danger of it morphing into another work-for-the-dole scheme. The Liveable Income Guarantee (LIG) discussed in previous chapters is one example of this approach in the Australian context (Quiggin et al., 2020). Under the banner of participation activities or ‘social contributions’, the LIG includes: care work, volunteering, community projects, starting a small business, ecological care, artistic

250 work, or full-time study. LIG recipients would be required to submit an annual participation declaration that would be assessed on the same basis as tax declarations (Quiggin et al., 2020: 6, 11). Such a system would be open to some level of rorting, but so too is the current tax system. Overall, while the LIG proposal requires additional refinement197, it has the potential to improve living standards, enhance community cohesion, and expand access to real freedom. Conditionality, of any sort, is enough for some BI proponents to dismiss a particular proposal entirely. However, the ‘stepping stones’ approach to BI (De Wispelaere, 2016; Spies-Butcher and Henderson; 2019) forces BI scholars and supporters to take the challenges of implementation and politics seriously, and to remain open to the strategic and contingent advantages of imperfect BI proposals. As Van Parijs and Vanderborght (2017: 213) conclude their assessment of participation conditions, ‘Purism is the best recipe for getting nowhere’.

The distinction between the deserving and undeserving poor shows up powerfully in Australian social surveys and opinion polls. Moral opprobrium is mostly reserved for the unemployed and single parents. However, there is much stronger support for family benefits, the age pension, and, most importantly, the welfare system as a whole (see Table 10.1). While unemployed persons are generally blamed for their predicament, major surveys still show majority opinion opposed to cutting people off welfare benefits after a set period of time (Wilson, 2007). A 2014 poll found 41 percent of respondents believed government welfare spending was inadequate, a further 27 percent thought it adequate, and only 24 percent considered the welfare budget too high (Essential Research, 2014). Another finding relevant to this debate comes from the European survey data. In their analysis of ESS data, Roosma and van Oorschot’s (2019: 199) found that: ‘a strong positive relation between support for targeting benefits to the poor only and BI support’. The authors ponder whether this points to survey respondents misunderstanding BI or, perhaps, just a more general support for reducing poverty through either targeted welfare or BI (Roosma and van Oorschot’s (2019: 202). Another possibility is that the “universal” nature of BI is interpreted as “something for everyone” rather than “money for nothing”, or as Calnitsky (2016) observed in relation to the Dauphin experiment, ‘more normal than welfare’.

197 Particularly in relation implementation issues.

251 This “something for everyone” possibility, combined with higher levels of support for more universal welfare programs in Australia, suggest that BI should be framed, communicated, and designed as a universal scheme. Perhaps the best analogy is to insurance, in this case a form a universal income insurance that provides a shared income floor, and guaranteed income flow, for when misadventure inevitably strikes. This is an example of ‘targeting within universalism’ (Korpi & Palme, 1998) but with an Australian ‘affluence-tested’ (Ben Spies-Butcher, 2020: 9) twist. The universal income floor then becomes part of a rejuvenated “fair go” for all Australians, not “special treatment” for a stigmatised group of “dole bludgers” and “underserving” malingers. At the same time, affluence-testing uses the tapering of benefit rates to exclude high income earners from receipt of BI, thereby controlling fiscal outlays and reducing fiscal churn. The wealthiest person in Australia would still have the same formal right to the universal income floor as the poorest; and the same effective right to access BI in the event of changed financial circumstances.

Diminishing trade union opposition to BI in Australia is more likely to be achieved if approached in a spirit of cooperative dialogue. Most importantly, any strategy has to be sensitive to the extremely challenging political, financial and industrial relations environment in which Australian trade unions currently operate. Between 1976 and 2016, Australian unions shed one million members, and union density fell from 51 percent to 14 percent (Gilfillan & McGann, 2018: 1). Globalisation, structural economic change, growth of insecure work, neoliberal industrial relations changes, and sustained political attacks on trade union legitimacy have all contributed to this catastrophic decline (Gilfillan & McGann, 2018: 3; Stanford, 2019b). Manufacturing, once the fulcrum for winning improvement in working conditions across the economy, has seen union density crash from 40.8 percent in 1994 to 13.3 percent in 2016, while manufacturing’s share of total employment fell to just 8 percent by 2014. Around 6 percent of casual workers and 6 percent of workers aged 15-24 were trade union members in 2016 (Gilfillan & McGann, 2018: 4; Stanford, 2016: 7). In this context, a strategy that frames BI as a mechanism for automatically enhancing workers’ bargaining power is unlikely to garner success. Trade union officials, organisers and delegates are far better placed to understand the difficulties of collective organisation to win, even incremental, gains than BI advocates and activists. Trade unionists know that BI is not manna from heaven

252 that will spontaneously create a “universal strike fund”. Like all substantive industrial rights, it would have to be won through struggle.

An alternative strategy would be to pitch BI to trade unions as part of a package of reforms aimed at redefining the social contract in Australia, with trade unions taking a lead role in any associated political and social campaign. Henderson and Quiggin (2019) provide an example of this approach, combining a commitment to full employment, the minimum wage and collective bargaining with the introduction of a BI and an optional Job Guarantee198 or ‘Job Offer’ (see FitzRoy and Jin, 2018:5). Recently, the United Workers Union (UWU), a large Australian union representing many low paid workers in insecure jobs, launched a campaign along these lines in response to the Covid-19 pandemic. The UWU’s key economic demands included: ‘A Jobs Guarantee... upheld by all employers and backed by a 100% Federal Government wage subsidy’; ‘an Income Guarantee payment of $740.80 per week (minimum wage)’; and a ‘moratorium on rent and mortgage payments’ (Kennedy, 2020: 1-2). The UWU also endorses the Living Incomes for Everyone (LIFE) campaign, a coalition of over 70199 anti-poverty, union, NGO, religious, student, environment and other civil society groups, advocating for a similar package200, including a form of BI set at AUD$550 per week. Altogether, 21 state and federal union branches, labour councils and peak bodies had endorsed the LIFE campaign by October 2020, including the powerful Victorian Trades Hall Council (Everyone, 2020). Such initiatives, at the very least, open up the opportunity for dialogue between BI supporters and the trade union movement in Australia.

There are several points to emphasise regarding the challenge of reducing social democratic opposition to BI in Australia. First, reducing the extent of trade union opposition to BI, let alone the shift of some unions to a pro-BI position, would give elected members of the Australian Labor Party (ALP), and the party’s rank and file, some pause for thought in terms of blanket opposition to the policy. Second, analysis of international polling data suggests that the traditional political constituencies of social democratic parties are the most likely to support BI, and that these support levels are substantial (McFarland, 2018; Roosma and van Oorschot, 2019; Vlandas, 2020). This

198 Paid at a higher rate than the BI. 199 For a full list of endorsements see https://www.livingincomes.org.au/endorsed-by/ 200 For a full list of demands see https://www.livingincomes.org.au/

253 emphasises the need for tracking polls and focus group research regarding public attitudes towards BI in Australia. Finally, public support for social democratic principles and policies is expressed, at the electoral level, in support for the ALP and, the country’s third biggest political party, the Australian Greens. In 2018, Greens National Leader, Senator Richard di Natale, called for the introduction of a BI during a National Press Club Address that attracted substantial media attention and debate (Luccioni, 2020: 166). In 2019, the NSW Greens released a policy proposal for a three-year trial of BI in South Nowra201 (The Greens, 2019). In 2020, NSW Greens parliamentarian, Abigail Boyd, called for a Universal Wellbeing Payment202 for the state’s residents of AUD$550 per week (Boyd, 2020). While the ALP and the Greens are often at loggerheads over policy issues, and compete fiercely for inner seats during elections, the ALP often relies on Greens support to get legislation through state/territory and federal parliaments. This symbiotic aspect of their relationship may prove the major significance of the Greens officially adopting a pro-BI position, over the medium term.

Pursuing opportunities to overcome, or at least moderate, state-capital, ideological- cultural and trade union-social democratic opposition to BI are fundamental to developing an effective politics of basic income in Australia. However, this focus needs to be complemented by a broader evaluation of the campaign strategies and tactics, and organisational forms, most likely to cohere, augment and mobilise support for BI in Australia. Insights can be drawn from international BI campaigns and programs, and Australian campaigns for social reform. While Chapter 9 argued that BI trials are not an optimal strategy for achieving BI implementation, Chapter 1 described four examples of BI campaigns and programs that may be useful in relation to building a basic income movement in Australia.

The Swiss BI referendum of 2016 and Andrew Yang’s campaign for the Democratic Presidential nomination are both examples of “useful failures”. The Swiss campaign demonstrated what could be achieved by artists and activists using online platforms, grassroots campaigning, creative political stunts, and the institutional opportunities created by the unique structure of Swiss democracy (Van Parijs and Vanderborght,

201 The proposal attracted little attention and was not implemented. 202 For full details see https://universalwellbeingpayment.com.au/

254 2017: 208-209). The closest analogues in recent Australian history are the failed Republic referendum in 1999 (Duffy, 2020)and the highly controversial, but successful, same-sex marriage plebiscite in 2017 (Beaumont, 2017). Andrew Yang demonstrated how a political outsider could use the US primary system, non-mainstream media, and the simple idea of the Freedom Dividend, to generate enough #YangGang supporters and donations to ensure BI became a topic of mainstream political debate (Daniels, 2020; Morin & Lalljee, 2020). Clive Palmer and Nick Xenophon’s political careers203, though somewhat more successful, are reasonable Australian analogues204. Only 23 percent of those who voted in the Swiss referendum supported BI; and Yang failed to win a single delegate and attracted only around 3 percent average national support. However, both “useful failures” demonstrate how actors, individual and collective, can combine the exploitation of certain institutional characteristics of their polities with innovative campaign techniques, to introduce the concept of BI to millions of people, while forcing members of the political class to take a position in relation to something they had previously ignored.

The Gyeonggi Province Youth Basic Income (YBI) and Maricá’s Citizens’ Basic Income (CBI) program are both examples of the ‘stepping stones’ approach to BI implementation. Providing a modest unconditional grant to all 24 year-olds in Korea’s largest province or a partial BI to 25 percent of the population of a small Brazilian city falls well short of implementing a full BI on a national scale. However, several shared features of these policy interventions make them worth studying for those interested in the different political pathways towards BI implementation. First, the YBI and CBI are “programs”, not time-limited “trials”, and both have been scaled up over time. Second, the two programs made innovative use of local digital currencies that can only be spent in local businesses. Third, these local and regional initiatives have, especially during the Covid-19 pandemic, have been essential to making BI part of political debate and public discussion on the national stage (BIRG, 2019; Hyun-ju, 2020b; Katz & Ferreira, 2020)). It is not difficult to imagine an Australian state, territory, or even city, government implementing some similar scheme using revenue from mining royalties, property taxes

203 Especially in his “no pokies” single issue period. 204 Here is must be conceded that structural features of Australia’s electoral system, and internal party rules of the major parties, make insurgent campaigns more difficult than in other countries.

255 or a carbon tax. Another possibility might be some form of collaboration between municipal authorities in a regional centre and a community bank to implement a partial BI issued in local digital currency that can only be spent within that town/city/region. For example, the City of Bendigo in Victoria and the City of Whyalla in South Australia could work with the Bendigo and Adelaide Bank to implement such a scheme.

Australian BI advocates and activists also have the opportunity to learn from the strategies, tactics and processes that underpinned campaigns for social progress in Australia. Perhaps, the Australian case study most relevant to developing an effective politics of basic income, is the long struggle for public healthcare provision. Both BI and public healthcare are expressions of a universal right to a public good that require substantial commitments of fiscal resources. The push for public healthcare began in earnest with community organising and advocacy, often led by women’s health groups, in the 1960s and 1970s. Policy entrepreneurship205 combined with political leadership led to the introduction of Medibank by the Whitlam government in 1974, despite fierce opposition from political conservatives, doctors, and the Australian Medical Association (AMA). The Coalition government led by Fraser government first undermined, then abolished Medibank in 1981 (Boxall, 2019: 259-260). Before the abolition, the union movement, despite a lukewarm support from the ACTU under the leadership of Bob Hawke, called a 24-hour national strike in favour of restoring Medibank in July 1976 (New York Times, 1976). While the strike was unsuccessful in the short-term, the rebadged Medicare became the key plank of the “social wage” element of the ACTU’s Accord with the ALP (Ireland, 2019). After the ALP government led by Hawke was elected in 1983, Medicare was introduced in 1984, despite unfavourable economic circumstances, and it has become one of the most popular government programs in Australian history (Boxall, 2019: 259-260; Wade, 2014)

Conclusion

This chapter has focused on challenges and opportunities in relation to developing an effective politics of basic income in Australia. Section 10.1 analysed the key state- capital, ideological-cultural and trade union-social democratic barriers to BI

205 See Menadue (2018) on the role played by John Deeble and Dick Scotton from the Melbourne Institute of Applied Economic Research in the design principles of Medibank.

256 implementation. It emphasised the coercive, regulatory and ideological capacity of states to discourage those forms of political and social action and reform that threaten to disturb the social reproduction of capitalist society. While the effect of BI on capital accumulation is uncertain, it was argued that the interests of the state, capital and the wealthy are likely to align in opposing progressive BI schemes. Institutional inertia, policy path dependence and neoliberal hegemony were cited as additional grounds for state opposition to BI. The discussion moved on to describe the considerable ideological-cultural force of the work ethic, and the distinction between the deserving and undeserving poor, as obstacles to BI implementation in Australia. The section concluded by evaluating the reasons for trade union and social democratic political party opposition, or indifference, to BI in Australia, as elsewhere. Section 10.2 presented the extant survey evidence on public attitudes towards BI, pointing to substantial levels of public support in Europe and North America, with significant cross- country variation, and marked changes in support levels depending on how survey questions frame BI. The section highlighted the fact that younger, more left-leaning and lower income individuals were more likely to favour BI that other cohorts. Section 10.3 concluded the chapter by exploring opportunities for circumventing the major structural barriers to developing an effective politics of BI in Australia. It articulated a case for adopting a predominately symbiotic strategy, supplemented by ruptural political activism and interstitial experimentation. The strategy centres on treating the state and capital as heterogenous constellations of institutions susceptible to some measure of progressive social change in certain circumstances. This overarching strategy, it was argued, should be complemented by opening up avenues for dialogue between BI scholars and advocates and key actors in the public sector, trade union movement and social democratic parties in Australia. In the context of these dialogues, BI should be framed as a form of universal social insurance that builds on the achievements of the welfare state and reinvigorates a progressive social contract in Australia. Some combination of tracking polls of public attitudes to BI in Australia and more fine-grained qualitative research is essential to advancing this strategy. Finally, the section emphasised the importance of learning from international examples of “useful failures” and “stepping stones” towards BI, as well as from Australia’s own rich history of social reform, such as the campaign to institute Medicare.

257 The Conclusion to this thesis contends that a progressive BI scheme is an economically and politically feasible policy option for contemporary Australia. It restates the ethical principles, policy objectives, and design principles underpinning this policy reform and outlines a preferred implementation pathway.

258 CONCLUSION

Introduction

During America’s Gilded Age, Thorstein Veblen (1899) published The Theory of the Leisure Class, ‘a devastating put down of the rich’ that ‘brilliantly and truthfully illuminate[d] the effect of wealth on behavior’ (Galbraith, 2001a: 212-213). Twenty years later, as the Great War smouldered and the Spanish flu raged, Veblen (Veblen, 1919: 160-161) described a growing ‘division’ in society, ‘not between those who have something and those who have nothing...but between those who own wealth enough to make it count, and those who do not.’ He entertained the possibility of a reckoning between the ‘vested interests and kept classes’, reliant on their ‘free income’ from speculative and predatory business activity, and the ‘variegated mass the makes up the common lot’ (Veblen, 1919: 176). Veblen saw, in ‘these untidy creatures of the New Order’ the potential, not for a ‘satisfactorily constructive plan’, but rather some ‘simpler and cruder’ means of adjustment. A century hence, in the midst of another pandemic, Veblen’s ‘division’ has re-emerged on a global scale. US President Trump, a reality TV star, property speculator, and avid golfer, is a Veblenesque archetype of the ‘vested interests’ and the ‘leisure class’, and he is not alone among world leaders. Veblen (1919: 110, 160) understood that the unequal distribution of socially produced wealth meant unequal capacities to ‘control the conditions of life’. Today, far too many people live lives hemmed in by economic inequality and insecurity, pockmarked by experiences of unemployment and stigmatisation. BI may be regarded as one means by which the ‘variegated mass’ can regain a measure of control, autonomy and dignity.

Thesis Summary

This thesis has investigated Basic Income as a Policy Option for Australia from historical, ethical, political economic, public policy, and political perspectives. This approach necessarily entailed drawing on relevant scholarship from across the social sciences and the humanities. While, the opportunity cost of considerable breadth is some degree of depth, a multidisciplinary analysis was considered essential to providing a rounded evaluation of the desirability and feasibility of this public policy reform in Australia. The thesis began by conceptualising basic income as a universal

259 social right to a ‘rightful share’ (Ferguson, 2015) and as a pragmatic-utopian reform (Henderson, 2017). Chapter 1 situated four “moments” in the history of basic income in their respective material-political contexts, with the dual-aim of explaining, and learning from, repeated failure, and occasional success. Chapter 2 developed a normative framework for basic income centred on the ethical principle of maximin real freedom for all (Van Parijs, 1997), and justified it on the grounds that wealth is socially produced, income is a basic need in capitalist society, and insufficient income is a barrier to exercising real freedom. Chapter 3 applied this normative framework to contemporary Australia, emphasising the country’s substantial aggregate wealth, the high and unrecognised value of unremunerated work, and the income constraints and opportunity cost constraints on real freedom.

Chapters 4-8 focused on the political economy of basic income in advanced capitalist countries, with particular emphasis on liberal welfare capitalist states, including Australia (Esping-Andersen, 1990). Chapter 4 analysed the issue of fiscal cost, perhaps the commonest objection to implementing basic income. Cost estimates were provided for social dividend, stakeholder grant, universal basic income and negative income tax schemes. After careful evaluation, the chapter argued that UBI and NIT models were preferable vehicles for enhancing maximin real freedom within a reasonable timeframe. Chapter 5 assessed the respective merits of six different financing channels for basic income in advanced capitalist countries. The chapter concluded that financing UBI and NIT schemes through some combination of increased taxation, reduced tax expenditures and deficit financing was fiscally feasible in advanced capitalist countries, providing specific Australian examples. Chapter 6 explored the relationship between basic income and wellbeing, drawing on both the extant empirical evidence and the results of static microsimulations. The conclusions, while tentative, pointed towards a positive association between basic income and several wellbeing indicators. Chapter 7 entered the vexed debate of how basic income might affect participation in paid work, and to what extent a reduction in labour force participation should be considered problematic. Here, empirical evidence and microsimulations suggested a modest, though variable, negative labour supply response to the introduction of a modest basic income scheme. Chapter 8 contributed to the under-theorised terrain of the macroeconomics of basic income by exploring the interrelationship of basic income,

260 income growth and inflation within a post-Keynesian theoretical framework. While definitive conclusions are not possible, this preliminary analysis pointed to the possibility of a basic income scheme boosting aggregate demand, and pushing up inflation, in particular macroeconomic circumstances. The chapter also highlighted the potential for BI to be used as a counter-cyclical fiscal policy tool.

The last two chapters examined the politics of basic income. Chapter 9 tackled the challenges of policy design and implementation of BI schemes in relation to the Australian welfare state. It identified five reform opportunities, including three basic income schemes, that would move Australia’s system of transfer payments in a more universal direction. The chapter evaluated five implementation pathways, arguing for a process of phased implementation. Finally, Chapter 10 addressed the politics of basic income in Australia. It highlighted the principal barriers to policy implementation and articulated some avenues for development a more effective politics of basic income in Australia.

A Basic Income Scheme for Contemporary Australia

The analysis of Basic Income as a Policy Option for Australia in this thesis addresses a long history of neglect. BI has barely registered as a feature of Australia’s intellectual, social and political economic history. Until the current period, the 1970s provided the only exception to this generalisation. The First Report of the Commission of Inquiry into Poverty (1975: 70), chaired by economist Ronald Henderson, recommended a Guaranteed Minimum Income in as measure to eradicate poverty, improve income security, and simplify the administration of social security. Similar proposals were advocated or explored by major charity groups, government agencies, and the Unemployed Workers Movement (Tomlinson, 2012; Towsey, Jermalinski, Adams, & Sharp, 1979). Between 1972-1975, a micro-trial of GMI was carried out by the Brotherhood of St Laurence (Bowman et al., 2017: 14). Following this glimmer of interest, between the dismissal of the Whitlam federal government in 1975 and the Swiss basic income referendum in 2016, basic income was almost entirely absent from public debate. However, the problems identified by Henderson in 1975 have not disappeared in Australia, despite an unprecedented period of economic expansion. Growing economic inequality, precarious work, income insecurity, and economic crises

261 have created political economic circumstances conducive to the reconsideration of basic income as policy option.

The normative framework for basic income developed in this thesis is not specific to Australia. The combination of the ethical principle of ‘real freedom for all’, with the policy goal of maximin real freedom, and the policy instrument of the ‘highest sustainable basic income’ has universal relevance (Van Parijs, 1997: 21-32; 2000). Likewise, the concepts of total social productivity, income constraints and opportunity cost constraints on real freedom can applied to different national and regional contexts. The elements that comprise this framework have, however, been interpreted through an Australian lens in this thesis. In 2017, Australia had the twentieth largest economy in the world, with per capita GDP close to three times the global average (Roser, 2019). At the same time, one estimate put the value of unremunerated work in Australia at 34 percent of GDP in 2016 (PwC, 2017: 2-3). These data, it was argued, support the argument that Australia has both substantial capacity and substantial unmet need, in relation to basic income. Rising wealth and income inequality, high levels of insecure work, and persistent pockets of poverty all function as income constraints on real freedom in Australia. Opportunity cost constraints, including the unequal distribution of unpaid work and mismatches between desired and preferred working hours, function as additional barriers to real freedom. Taken together, these factors comprised a prima facie case for considering basic income as a policy option for Australia based on the normative framework set out in Chapter 2.

The fiscal cost of basic income depends on the quantum of the payment and the structure of the scheme. The thesis argued that, while feasible, it would take too long to build up a sufficiently large public investment fund in Australia to pay out a regular social dividend that came close to satisfying the adequacy criterion of a basic income. Similarly, a once-off stakeholder grant paid to all Australians at some specified age falls well within Australia’s fiscal capacity, but it would not provide the regular income flow necessary to maximin real freedom. Chapter 4 presented cost estimates for several universal basic income and negative income tax schemes for Australia, drawn mostly from the static microsimulation literature. Even the most generous UBI schemes that would pay all adult Australians at the single Age Pension rate would not exceed the

262 established upper fiscal boundary for advanced capitalist countries.206 Such UBI schemes could satisfy the formal universality and unconditionality criteria of basic income, while all but eliminating income poverty in Australia and greatly enhancing real freedom.

By contrast, NIT schemes would provide a universal income floor as opposed to a universal payment, potentially achieving similar distributional outcomes, while dramatically reducing fiscal churn and headline fiscal cost. Three examples of Australian NIT schemes were presented, emphasising two different ethical and policy logics. The Liveable Income Guarantee (LIG) would increase the baseline social assistance payment to the level of the Age Pension, at an estimated207 additional annual cost of around $AUD20bn. However, the LIG would retain the single/couple distinction for payment rates pensioners, as well as current means/assets tests and existing taper rates for benefits. The LIG would also require recipients undertake a broadly defined ‘participation activity’ and submit an annual ‘participation declaration’ (Quiggin et al., 2020). Implementing the LIG would reduce working age poverty, create a higher universal income floor for those without market incomes and relax conditionality, at a very modest fiscal cost. Even a doubling of the cost of this program would only constitute 2 percent of Australia GDP or around 8 percent of federal government expenditure. However, the LIG also falls well short of a genuinely universal and unconditional BI. The two ‘affluence-tested’ BI schemes described in Chapter 4 are substantially more expensive than the LIG, at an additional annual fiscal cost $AUD103bn and $126bn208, respectively. Both schemes also provide a lower baseline payment that the single Age Pension rate that would be available to many recipients under the LIG, but keep higher payment rates for recipients of more generous schemes, such as the Disability Support Pension and Age Pension in place. However, the structure of the affluence-tested schemes would ensure that a significant proportion of low and middle income-earners receive at least some benefit, making it a more universal and less conditional approach to BI. The additional fiscal cost of these two schemes would

206 Acknowledging these are cost estimates based on static microsimulations. 207 Based on authors’ calculations, not on microsimulation. 208 Based on static microsimulation using ANU PolicyMod model of Australia’s tax and transfer scheme.

263 still leave Australia with a tax-to-GDP ratio significantly below higher taxing OECD countries (Spies-Butcher et al., 2020).

This thesis argued that, based on analysis of the evidence presented, UBI and NIT schemes are fiscally feasible policy options for contemporary Australia, with the three NIT schemes discussed above constituting the most promising vehicles for short- to medium-term implementation of BI. However, this conclusion left open the question of precisely how particular BI schemes should be financed. While, there is pleasing intellectual symmetry in tying the introduction of a BI scheme to one specific financing mechanism, considerations regarding economic incentives, time constraints, and political feasibility suggest a combination drawn from a menu of financing options would constitute a preferable alternative. In the Australian case, it was argued that a financing mix comprising: higher progressive direct taxation (personal income tax, company tax, wealth tax); Pigouvian taxation (carbon tax); increased regressive indirect taxation (GST); reduced tax expenditures (capital gains, superannuation), and deficit financing could comfortably cover the net additional fiscal cost of the AUD$126bn affluence-tested BI scheme.

Only indirect inferences regarding the relationship between basic income and wellbeing in Australia could be drawn from the limited available empirical evidence. However, there is little to reason to dispute the argument that modest positive effects on wellbeing observed during BI trials in advanced capitalist countries would be likely to be observed in the Australian context too. For the two affluence-tested models, the microsimulations showed significant falls in the Gini coefficient, despite the relatively low baseline payment and the sub-optimal financing mechanism of simply applying the same proportional increase across all personal income tax brackets to achieve revenue neutrality. A more progressive and variegated financing mix would be expected to further reduce income inequality. Counter-intuitively, the more generous affluence- tested scheme showed a modest increase in the P50 poverty rate due to the scheme’s effect of boosting the median income. Poverty gap measures, not included in the modelling, would have provided useful additional wellbeing indicators for the two schemes. Both schemes showed substantial income gains for the bottom three income quintiles, and similar trends across these quintiles when analysed by different household type.

264 The interrelationship of paid work and basic income is where the ‘rubber meets the road’ in terms of understanding basic income as a pragmatic-utopian reform. It is here that the possibility of a significant proportion of working age adults exiting the paid labour force if BI is introduced needs to be considered. Here again, indirect inferences may be drawn from the relevant empirical evidence. Yet more direct, though extremely tentative, conclusions can be formed on the basis of modelling Australian BI schemes to assess the likely negative labour supply response to the introduction of a BI scheme in Australia. However, for reasons detailed below, attempts to predict the exact size of such an effect, let alone its implications for economic, social and real freedom outcomes in Australia, are not helpful in practice. While some level of uncertainty must simply be accepted as regards the effects of BI on paid work in Australia, the design of particular BI schemes can serve to amplify, or moderate, any negative labour supply response. For this reason, the affluence-tested schemes are structured on the basis that ‘EMTRs should only increase with income’ to ensure ‘progressivity of incentives’ in relation to taking up additional paid work (Spies-Butcher et al., 2020: 8).

The same possibilities and caveats are relevant to consideration of the impacts of introducing of BI on economic growth and inflation in Australia. A redistributive BI scheme that targets payments towards lower and middle parts of the income distribution is, ceteris paribus, more likely to support aggregate demand than a neutral or regressive scheme. Both affluence-tested models are designed with this consideration taken into account. The implications for inflation of implementing BI in Australia are not possible to accurately predict. However, scheme design elements, including complementary policy reform, could at least moderate any potential inflationary bias or actual significant inflationary effect.

The incentive structure of the affluence-tested schemes should reduce the incidence of poverty traps that disincentivise the marginal substitution of social transfer income for income from paid work. In the Australian context, universal public childcare, greater provision of social housing and rent control, could in combination with a strengthened commitment to public healthcare and education, increase the real purchasing power of BI, while reducing the number of channels through which inflation could be expressed. Finally, in macroeconomic terms, a substantial BI scheme could function as a powerful counter-cyclical policy tool in Australia. If, for example, a government department or

265 quasi-independent government agency were to be granted the statutory authority to increase/decrease by 10 or 20 percent maximum per annum, the effect of automatic stabilisers could be enhanced according to macroeconomic circumstances.

The implementation of a BI scheme in contemporary Australia involves complex design, administration and political challenges. A scheme designed to build selectively on extant institutional frameworks, policy logics and social assistance programs of the Australian welfare state is more likely to achieve policy success than tabula rasa ideal-type schemes that abstract entirely from Australian institutional conditions. There are many policy pathways worth exploration in attempts to shift Australia’s social transfer system towards greater universalism and less conditionality. However, the AUD$126bn Model 2 (affluence-tested BI) scheme offers the greatest scope for reform in this direction, consistent with key aspects of Australia’s institutions and culture. This scheme combines the provision of a universal unconditional income floor for working age adults with a tapering of BI payment rates designed to control fiscal cost, maintain paid work incentives and provide some income benefit to lower and middle income earners.

The scheme could be introduced through a process of phased implementation over a ten-year period, starting with small age cohorts at either end of the working age population until the rollout is complete. Over time, as part of a statutory annual review process and further legislative reform, the base payment for BI could be brought into alignment with the higher Age Pension and Disability Support Pension payments. To then create a unified BI scheme for each Australian, age 18 until death, the Age Pension and Disability Support Pension would need to be individualised, with both programs administered according to the same affluence-tested principles underpinning Model 2. Finally, integration of the tax-and-transfer system under auspices of the Australian Tax Office would enhance program efficiency and allow Centrelink staff to focus on the finding employment opportunities for those who want them.

Table 11.1 below provides a summary of the features of this case for an economically and politically feasible basic income scheme for Australia today.

266 Table 11.1 A Basic Income Scheme for Contemporary Australia

Basic Income Variable Description Ethical Principle Real Freedom for all (Van Parijs, 1997). Policy Objective Maximin real freedom (Van Parijs, 1997). Policy Mechanism The highest sustainable basic income (Van Parijs, 1997). Ethical Justification Australians have a universal social right to a ‘rightful share’ (Ferguson, 2015) of Australia’s socially produced wealth. Basic income as one expression of that right that services the policy objective of maxmin real freedom (Van Parijs, 1997). Income Constraints Wealth and income inequality, insecure work, unemployment and inadequate on Real Rreedom social assistance payments are all constraints on real freedom in Australia. Opportunity Cost The unequal distribution unpaid work and the mismatch between desired Constraints hours and preferred hours for many paid workers are constraints on real freedom. Basic Income Model Negative Income Tax Basic Income Scheme Model II (affluence-tested BI) (Spies Butcher et al., 2020. Fiscal Cost (annual) $AUD126bn BI Payment base rate $AUD351 per adult age 18-64 (those on higher payments remain on them). (weekly) Financing Some combination of higher progressive direct taxation; Pigouvian taxation; increased regressive indirect taxation; reduced tax expenditures; and deficit financing Design Target most of aggregate benefit to those with higher marginal propensity to consume; use tapering of BI to control fiscal cost and reduce fiscal churn in country with traditions or relatively low taxation and highly-targeted social transfers; structure payment to incentivise paid work. Implementation Phased implementation over 10 years (start with small age cohorts at opposite ends of working age population). Politics Clear vision and program for BI; symbiotic strategy in relation to traditional opponents of BI; flexible tactics; learning from failures/successes. Basic Income Rate Basic Income Commission sets BI rate at annual review. Setting Macroeconomic RBA or other agency can increase/decrease BI +/- 10 percent or 20 percent Policy Tool over a year as countercyclical macroeconomic policy tool. Complementary Universal public childcare and housing policy reform most important. Reform Administration Basic Income Commission sets baseline payment on annual basis and program is administered by the Australian Tax Office.

Source: Author’s compilation.

Political opposition to such a large-scale progressive reform would be substantial in force and diverse in form. However, this has always been the case when substantial social reforms are on the policy reform agenda. The universal franchise, the minimum wage, the age pension and public healthcare were all achieved in Australia despite ferocious opposition, and all remain in place to this day.

Drawing on the lessons of this experience, developing an effective politics of basic income in Australia requires:

267 i) A vision and program that resonate with a broad political constituency, including the millions of migrants from diverse backgrounds who have arrived in Australia over the past 60 years. ii) A mainly symbiotic strategy for engaging traditional opponents of BI. iii) Improved social and political research and communication. iv) The selective borrowing of tactics from international BI campaigns and programs. v) A preparedness to sacrifice purism for progress. vi) A willingness to exploit opportunities created by certain political economic contingencies. vii) The hard slog of organised struggle.

General Insights and Avenues for Future Research

All analytical work requires choices regarding focus, method and concepts that structure the inquiry. The choices made in relation to this thesis, while not unique, have a more general applicability to the basic income literature, and point towards dirt tracks in the extant scholarship that could be cleared, graded and sealed. Historicising particular “moments” or episodes in BI history is regarded as a more useful approach to explaining successes and failures than simply reciting the roll calls of prominent BI supporters, as Sloman (2016), Steensland (2016), Forget (2011) and Calnitsky (2016) have demonstrated. Economic historians and political economists can make a major contribution in this respect. For examples, the tentative explanations offered in this thesis for the apparent gap in the BI literature between 1850 and 1920 needs to be subjected to further scrutiny.

The emphasis placed on the social and evolutionary nature of wealth in this thesis dispenses with any need to justify a basic income on the basis of legitimate taxation of external assets. Ferguson (2015) takes the argument further by arguing that ‘presence’ within a particular social order, in the case capitalism, is sufficient justification for an individual to claim their ‘rightful share’ of social wealth. Here, basic income becomes an expression of this universal right to a ‘rightful share’, one that meets a basic material need for income while expanding the frontiers of maximin real freedom (Van Parijs,

268 1997). It is an unapologetic assertion of a universal right as opposed to grovelling for charity scraps from the table.

The thesis has paid particular attention to BI’s fiscal cost because this is probably the single most commonly cited objection to any worthwhile basic income scheme. It has emphasised the importance of BI scholars and advocates not seeking to duck nor minimise this issue but rather to confront it head on. There is no way to “sneak” a BI scheme equivalent to 10, 15 or 20 percent of national income unnoticed through the back door. Making use of the available microsimulation techniques (Martinelli, 2017; Phillips, 2018) to estimate the static fiscal impact of different BI schemes constitutes a significant advance on back-of-the-envelope calculations and should become standard practice in future research. As these models of different tax and transfer systems become increasingly sophisticated, they can provide more useful estimates of the static distributional effects of BI by modelling a range of composite financing mechanisms.

The focus on the macroeconomics of basic income is also a distinctive feature of this thesis, contrasting with its near total absence from the existing literature. This previous neglect is, to some degree, understandable. The lack of historical data based on macro- level BI programs and the impossibility of collating ‘sample data from the future’ (Davidson, 2007: 31) make even probabilistic predictions regarding the effects of BI on economic growth and inflation unreliable at best. Once radical uncertainty is introduced into the analytical picture, the task becomes all the more thankless. At this stage, the best that ex ante macroeconomic analysis of BI can offer is to explore different scenarios and raise interesting questions that may inform a BI scheme design. This situation would be dramatically altered if and when a national BI scheme is implemented and maintained over a period of years.

Uncertainty regarding the macroeconomic effects of basic income can be juxtaposed against the real-world empirical evidence from BI trials around the world. Analyses of the effects of BI on labour supply, wellbeing, and social stigma (see Forget, 2011; Widerquist, 2013a; Calnitsky, 2016; Standing, 2017; Kela, 2020) have provided valuable contributions to the BI literature. However, in relation to policy experimentation that leads to implementation, BI trials have proved to be an abject failure. Consequently, this thesis has argued that BI scholars, policymakers, advocates and activists could more

269 profitably direct their energies and attention to ‘stepping-stones’ (Spies-Butcher and Henderson, 2019) and phased implementation approaches to BI. Ultimately, without several examples of permanent, national, progressively scaled-up BI schemes, it is impossible to prove the purported positive attributes of BI or to categorically refute key criticisms. In addition, the incremental phase-in of a permanent program creates a dramatically larger cohort with a direct material and, potentially, political interest in BI than does a small-scale short-duration trial. Compared to a trial, phased implementation of a permanent BI scheme is more a social than technocratic process; it centres on the the affective experience of participation, as opposed to putatively neutral observation.

This thesis has argued that, with the exception of the 2016 Swiss BI referendum, the political history of basic income has no connection to major social movements, mass political or industrial organisations, nor any significant social base. However, recent opinion research suggests there is a latent political constituency for BI that might cohere around support for a particular scheme. In order to gain a better understanding of who supports BI, why they support it, and which arguments for BI are most compelling, this survey research needs to be continued, expanded, refined and diversified. This polling data also needs to be complemented by more detailed qualitative research, including focus groups and semi-structured interviews. This is potentially rich terrain for future BI scholarship.

Finally, this thesis provides one example of how basic income may be analysed as a policy option in a particular national context. The approach is necessarily multidisciplinary as regards the sources and bodies of scholarship deemed relevant to its analysis. The aim is to situate BI as a policy option within a specific constellation of national political economic circumstances, institutional structures, ideological orientations, cultural biases and political traditions. This approach, while not the only form of BI research, has the effect of firmly rooting the analysis of an abstract universalist concept in the specific features of a particular society, economy and polity. Replicating this approach in other national contexts would contribute to the literature while providing BI advocates and activists with useful ideas, arguments and analysis.

270 Conclusion

Basic income is simple idea that is hard to put into practice. BI’s simple promise is to provide all working age adults with a genuine alternative to either submitting themselves to the wage relation or accepting the social stigma of unemployment. The powerful personnel of state and capital may howl and rage against the temerity of such an outlandish promise, but this is no cause for alarm. Marx (1991) documented the querulous laments to parliamentary inquiries of nineteenth century capitalists, forced to contemplate a bleak future without child labour. Today, child labour is rare in rich countries and increasingly uncommon in middle income countries. Retirement is a right in most nation states and the age pension has remained an intractable feature of the modern welfare state, right throughout the neoliberal era. The eight-hour day, the minimum wage, the weekend, sick leave and holiday pay, all have gained substantial ground. Indeed, as Karl Polanyi observed, capitalists have been subjected to much abuse to their dignity and injury to their interests; struck by the whiplash of society’s protective countermovement to the market’s rapid advance (Polanyi, 2001). Yet, the time, intellect and energies of the working age population are considered capital’s prime real estate and capitalists will not give up their harbour views without a lawsuit. Compulsory waged work and the sexual division of labour are the two most generalised forms of unfreedom and inequality in the modern world. BI has the potential to ameliorate both sources of abuse, but there is no guarantee of change. Capitalism has shown a remarkable capacity to metabolise crises and a chameleon-like aptitude for superficial adaptation to its environment.

Today, basic income remains a dot on the horizon; a point where sky meets sea. To bring it into clearer view, it is imperative that the ‘visionaries, activists...ass-kickers, indignados...tinkerers, opportunists and piecemeal engineers’ (Van Parijs and Vanderborght, 2017: 214-215) who support BI reembrace the ‘utopian impulse’ and the ‘utopian demand’ (Weeks, 2011). This has nothing to do with the blue-print utopias of detached social engineers: rather, the simple recognition that emotion, as much as reason, is a vital ingredient in the politics of ‘emancipatory transformation’ (Wright, 2010: 303). Basic income supporters must learn how to speak to the interests of potential fellow travellers. They must listen to each other’s dreams. And hear each

271 other’s anguish. These dialogues build trust, friendship and solidarity. Such words may smell like mothballs: without them, however, hope fades that the dot on the far horizon can be gently called ashore.

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