Category Archives: Universal Basic Income

A Poor Perspective on the UBI

Of late there has been a lot of ink spilled over the idea of a Universal Basic Income (UBI).  Democratic presidential hopeful Andrew Yang has made it the center of his campaign.  Before going too far, it should be noted that there are legitimate questions to be answered with such a revolutionary proposal and many details to be worked out.  Some plans are generous and others much less so.  And there is the very real fear that a UBI could be used as a tool of the State to track and control the population.  But as important as these issues are they are not my primary focus.  The money is irrelevant for the time being since whenever the government really wants to do something they always find the money.  As for whether it is possible, we need remember that history is full of things that were impossible up until the moment they became inevitable.

What is missing is the perspective of the Poor.  The people for whom a job is simply something they do to pay the rent, not a central part of their identity.  It has not escaped notice that most of the people writing these articles, especially those against a UBI, are Professional Class (or to use a Marxist term Bourgeoisie). They are professionals who are valued for their skills and paid accordingly.  The Rich and the Professional Classes both fear that a UBI will be a disincentive to work.  But I can say clearly that work is a disincentive to work.  People who talk about the “Nobility and Dignity” of a job have never been the “monkeys who work the cash register.”

Andrew Yang’s UBI proposal is $1,000 a month, adding up to $12,000 a year.  I have survived off this this amount (this is not an endorsement of Yang’s plan nor his candidacy). It isn’t easy and many sacrifices must be made, but if I’m going to do it, I would rather take a UBI check than rent my life away to some petty tyrant for $10 an hour. This also dovetails into the idea that even many proponents of a UBI have stated: It should not be so high that someone can live comfortably off of it.  With these simple words those comfortable Professional Class writers have stated that the Poor do not deserve the comforts of life without selling off so many of their waking hours. This is nothing more than a restatement of Arthur Young’s words from 1771: “Everyone but an idiot knows that the lower classes must be kept as poor as possible, or they will never be industrious.”

It has taken about three centuries of browbeating, brainwashing, shaming, abuse, and outright theft to get us to accept wage labor. And it has not really taken hold too deeply. When the money was good we were more willing to accept it. However since neoliberalism has become dominant, the “job creators” have kept more money to themselves. The people, especially the Poor and Working Classes, who hold full time jobs and still cannot get by are beginning to say out loud what we subconsciously have always known: No one gets ahead by working. That’s why the Rich make most of their money off of their investments. In those three centuries, we have allowed the Rich to build a Work Society where all our social relations are based around jobs and employment. This serves the Rich and their needs before anyone else, rather than society as a whole. We see it everyday when professions like corporate lawyers and hedge fund managers earn so much more money than farmers or teachers.

But for their insatiable greed for profits, the Rich are destroying the very Work Society they created. Labor is one of the bigger expenses in any business, and where owners try to cut costs whenever possible. While the Professional Classes like to downplay the impact of automation, “unskilled” workers can see its impact with every self-checkout station. But there is a bigger factor in the decay of the Work Society.  Long-term careers (and the pensions that come with them) are falling by the wayside, being replaced by the “gig economy” and temp work which does not allow for the formation of social bonds like those careers once did. As the Work Society breaks down, some of the Rich realize they must do something to prevent a lot of desperate people with a lot of time on their hands from thinking about how society could be run better.  So they came up with their stopgap: the UBI, to keep the people pacified. It is a gamble on their part to keep their privilege, and like all gambling it is not guaranteed to go their way.

We can turn this to our advantage. Once jobs and income are divorced, if we no longer need to depend on their paltry wages to survive, if they want their jobs filled, we can demand several things, including: they pay well enough to make people actually want to work for them, and treat their employees like human beings. I have known poor people who stated when a UBI is passed so many businesses will close overnight because none of the employees would show up the next day. While I doubt things will be that drastic, it illustrates why they don’t want the UBI to be too high or too comfortable so that we will continue to be industrious, as everyone but an idiot knows.

Looking beyond those short term goals, however, we all know there is so much more to life than work. Not wasting the best parts of our lives at a job will also free us to ask questions, the serious deep questions we need to be asking ourselves now. As late capitalism is destroying the planet in our constant need for production and consumption, we can ask: Can we live without consumerism and planned obsolescence? How do we live without the tyranny of the boss? We can begin to think about what exactly we were put on Earth to do with our lives. Lives that are not relegated to evenings and weekends.

Think of all the people we met over the years. There’s that guy who plays guitar in the bars a few evenings a week and on Saturdays. The woman who is a gifted painter. The armchair historian who can answer any question one may have about the Napoleonic Wars.  The little old lady (who still works to cover the gap in her Social Security) who is always crocheting cool little things on her break. We’ve all met these people, they’ve been working alongside us for years for the same crap wages we got.

Many years ago I met an artist who managed to eke out a living selling his stone sculptures. It was not luxurious, but he was happy. When the topic of jobs came up he gave me the best wisdom I ever received: “You don’t want to spend your life doing someone else’s work, do you?” A UBI is not a perfect solution, and there is still much to be worked out. But it is the first stepping stone. So when the UBI comes, I will gladly take advantage of it. And I won’t be the only one.

A Poor Perspective on the UBI

Of late there has been a lot of ink spilled over the idea of a Universal Basic Income (UBI).  Democratic presidential hopeful Andrew Yang has made it the center of his campaign.  Before going too far, it should be noted that there are legitimate questions to be answered with such a revolutionary proposal and many details to be worked out.  Some plans are generous and others much less so.  And there is the very real fear that a UBI could be used as a tool of the State to track and control the population.  But as important as these issues are they are not my primary focus.  The money is irrelevant for the time being since whenever the government really wants to do something they always find the money.  As for whether it is possible, we need remember that history is full of things that were impossible up until the moment they became inevitable.

What is missing is the perspective of the Poor.  The people for whom a job is simply something they do to pay the rent, not a central part of their identity.  It has not escaped notice that most of the people writing these articles, especially those against a UBI, are Professional Class (or to use a Marxist term Bourgeoisie). They are professionals who are valued for their skills and paid accordingly.  The Rich and the Professional Classes both fear that a UBI will be a disincentive to work.  But I can say clearly that work is a disincentive to work.  People who talk about the “Nobility and Dignity” of a job have never been the “monkeys who work the cash register.”

Andrew Yang’s UBI proposal is $1,000 a month, adding up to $12,000 a year.  I have survived off this this amount (this is not an endorsement of Yang’s plan nor his candidacy). It isn’t easy and many sacrifices must be made, but if I’m going to do it, I would rather take a UBI check than rent my life away to some petty tyrant for $10 an hour. This also dovetails into the idea that even many proponents of a UBI have stated: It should not be so high that someone can live comfortably off of it.  With these simple words those comfortable Professional Class writers have stated that the Poor do not deserve the comforts of life without selling off so many of their waking hours. This is nothing more than a restatement of Arthur Young’s words from 1771: “Everyone but an idiot knows that the lower classes must be kept as poor as possible, or they will never be industrious.”

It has taken about three centuries of browbeating, brainwashing, shaming, abuse, and outright theft to get us to accept wage labor. And it has not really taken hold too deeply. When the money was good we were more willing to accept it. However since neoliberalism has become dominant, the “job creators” have kept more money to themselves. The people, especially the Poor and Working Classes, who hold full time jobs and still cannot get by are beginning to say out loud what we subconsciously have always known: No one gets ahead by working. That’s why the Rich make most of their money off of their investments. In those three centuries, we have allowed the Rich to build a Work Society where all our social relations are based around jobs and employment. This serves the Rich and their needs before anyone else, rather than society as a whole. We see it everyday when professions like corporate lawyers and hedge fund managers earn so much more money than farmers or teachers.

But for their insatiable greed for profits, the Rich are destroying the very Work Society they created. Labor is one of the bigger expenses in any business, and where owners try to cut costs whenever possible. While the Professional Classes like to downplay the impact of automation, “unskilled” workers can see its impact with every self-checkout station. But there is a bigger factor in the decay of the Work Society.  Long-term careers (and the pensions that come with them) are falling by the wayside, being replaced by the “gig economy” and temp work which does not allow for the formation of social bonds like those careers once did. As the Work Society breaks down, some of the Rich realize they must do something to prevent a lot of desperate people with a lot of time on their hands from thinking about how society could be run better.  So they came up with their stopgap: the UBI, to keep the people pacified. It is a gamble on their part to keep their privilege, and like all gambling it is not guaranteed to go their way.

We can turn this to our advantage. Once jobs and income are divorced, if we no longer need to depend on their paltry wages to survive, if they want their jobs filled, we can demand several things, including: they pay well enough to make people actually want to work for them, and treat their employees like human beings. I have known poor people who stated when a UBI is passed so many businesses will close overnight because none of the employees would show up the next day. While I doubt things will be that drastic, it illustrates why they don’t want the UBI to be too high or too comfortable so that we will continue to be industrious, as everyone but an idiot knows.

Looking beyond those short term goals, however, we all know there is so much more to life than work. Not wasting the best parts of our lives at a job will also free us to ask questions, the serious deep questions we need to be asking ourselves now. As late capitalism is destroying the planet in our constant need for production and consumption, we can ask: Can we live without consumerism and planned obsolescence? How do we live without the tyranny of the boss? We can begin to think about what exactly we were put on Earth to do with our lives. Lives that are not relegated to evenings and weekends.

Think of all the people we met over the years. There’s that guy who plays guitar in the bars a few evenings a week and on Saturdays. The woman who is a gifted painter. The armchair historian who can answer any question one may have about the Napoleonic Wars.  The little old lady (who still works to cover the gap in her Social Security) who is always crocheting cool little things on her break. We’ve all met these people, they’ve been working alongside us for years for the same crap wages we got.

Many years ago I met an artist who managed to eke out a living selling his stone sculptures. It was not luxurious, but he was happy. When the topic of jobs came up he gave me the best wisdom I ever received: “You don’t want to spend your life doing someone else’s work, do you?” A UBI is not a perfect solution, and there is still much to be worked out. But it is the first stepping stone. So when the UBI comes, I will gladly take advantage of it. And I won’t be the only one.

New Culture, New Constitution, New Everything

North, Central, and South America were named after Amerigo Vespucci.  In “Letter to Lorenzo de’ Medici,”1 Amerigo Vespucci describes the New World.  Lorenzo de’ Medici is a member of the Medici family, a stupendously wealthy family of bankers and importers, who ruled the city of Florence, Italy for most of the 1400s.  The Medici family’s patronage of the arts promoted the Renaissance by sponsoring many of the most significant artistic achievements. They also gave financial loans to the Church.  Moreover, in 1513, another Medici, Giovanni de’ Medici, became Pope Leo X, which shows how influential and powerful this family was.2

Amerigo Vespucci referred to Lorenzo de’ Medici as “Your Excellency.”  He told Lorenzo how he and his crew in the Americas discovered “a very large village, the houses of which were built over the sea, like Venice with much ingenuity.  While we were struck with admiration at this circumstance, we determined to go see them; and as we went to their houses, they attempted to prevent our entering. They found out at last the manner in which the sword cuts, and thought it best to let us enter.”  The document also mentions that after entering, Amerigo Vespucci and his crew took a great quantity of cotton and dye-wood and returned to the ships.3 Apparently their religious motto of “do unto others, as you would have them do unto you” does not apply when the others are considered to be subhuman savages.

Niccolo Machiavelli was famous for writing the book The Prince which gave advice to political leaders of Florence that they must be ruthless, expedient, strong, and clever.  He also said, “It’s better for a ruler to be feared than loved.” The Prince is a treatise explaining how to gain and hold absolute political power.  Machiavelli dedicated The Prince to Giuliano de’ Medici, another member of the Medici family.4

If we examine the Middle Ages, as a contrast to the Renaissance period, the perfect ruler was Louis IX of France who was so virtuous that he was made a saint.  But with the Renaissance, men like Cosimo de’ Medici and Cezare Borgia took power boldly. It was considered a realistic politics that often meant a brutal disregard for ethics.4

In A People’s History of the United States, Howard Zinn on page 1 mentions that Columbus wrote “They have no iron. Their spears are made of cane…They would make fine servants.”  On page 2 of the People’s History, it mentions that Columbus wrote, “As soon as I arrived in the Indies on the first Island which I found, I took some of the natives by force in order that they might learn and might give me information of whatever there is in these parts.”5

The Medici family, Machiavelli, and Columbus represent the foundation and mentality upon which our nation and culture were built. You could also say that our oligarchical founding fathers imbued this same commercial spirit of capitalistic enterprise.  The Portuguese explorer Bartholomeu Dias explained the purposes that drove men to sail their ships across uncharted oceans: “To serve God and the King, to give light to those who are in darkness, and to grow rich, as all men desire to do.”6

Even today many people have the false hope that becoming rich is what will make them happy and fulfilled.  It is hard to fathom that the world’s billionaires do not seem troubled by the fact that half the world lives on less than $5.50 per day, according to the  World Bank. Many people aspiring to be millionaires and billionaires themselves see no justification in taxing the super rich at a higher rate.  Considering the needs of the planet and the rest of the world, I think the ratio of rich to poor annual incomes should be about 10:1, which means that any income above $120,000 would be taxed at 100 percent, based on the lowest wage being $15 per hour, about $30,000 a year. Moreover, everyone above the age of 18 could be guaranteed a basic annual income of $12,000 per year.  Reducing military spending by 90 percent would allow us to use tax revenues in a more humanistic way. After other nations reciprocate, we can reduce it even more.  I believe the other nations would reciprocate. It is the United States that is promoting outrageous military spending!

Instead of creating a survival-of-the-fittest, dog-eat-dog society, we can create a civilization that fosters cooperation and altruism.  If someone has the entrepreneurial skill of making a lot of money, that skill and motivation could be redirected and channeled into making the local community and the world a better place.  In a materialistic culture, the more we give, the less we have; it is a win-lose relationship. However, in an altruistic culture, the more we give the more we have; it is a win-win relationship.  Children learn what they live. We can teach different values to our children.

Today, as some of us complain about the never ending wars, a cursory study of history reveals that there have been many, many territorial and religious wars for very selfish and foolish reasons. Throughout history, in every age, there has been a small ruling class that has exploited the masses through the forces of hierarchy and domination.

Some would argue that the wars and hierarchical control are both just expressions of human nature, but you can also argue that humans just took a major wrong turn in the history of our so-called “civilization.”  We could have built a culture based on cooperation and sharing rather than competition and greed. We could have built our culture from the bottom-up, rather than from the top-down.  Even non-Western cultures and some primitive cultures have had their share of social problems, but now we know so much more.  We should be able to learn from history.

In hindsight, we must realize that we can still work to reverse the 9 social sins that have developed in the West, and especially in the United States: imperialism, nationalism, racism, corporate capitalism, anti-environmentalism, speciesism, materialism, patriarchalism, and the discrimination against the LGBTQ community.  Some of us are sickened by the never-ending wars of our national leaders who wreak havoc on the world — though few average Americans seem to be aware of it or troubled by it. Moreover, some of us no longer feel comfortable saying the “Pledge of Allegiance,” even though we deeply care about the other people who share this land.

To create a new culture, we have to have a democratic constitutional convention to create a new constitution.  But how do we select the delegates for this constitutional convention? Our current federal and state legislators or their chosen representatives should not be the delegates.  That is the main reason most people are fearful of a constitutional convention: they do not trust our current leaders. But a more democratic, bottom-up approach to having a constitutional convention would be to have the delegates come from the largest national political parties, as determined by proportional representation. This method would not create a new government that inherently favors the left or the right.  However, in time, if either the left or the right attracts more people into their fold through persuasion and argument once the playing field has been completely leveled, so be it.

A new culture and a new constitution created through a maximum level of democracy will not create an ideal society at first, considering all the pejorative influences of the last 5,000 years, but in time our society can gradually get better.  Moreover, we can become collectively wiser if we create a constitution that makes it much easier to create new laws, new amendments, and new future constitutions in a democratic and fair way.

Through the scientific studies of consciousness and meditation and the mounting evidence about Near Death Experiences and the New Physics which bridges science and spirituality, and through new research into ayahuasca as a form of therapy for problems such as Post Traumatic Stress Disorder (PTSD), which used to be called “shell shock” — all of the above can help us realize that we are one — we are interrelated ecologically and spiritually — one earth, one world, one humanity. We are all connected to the Source Energy at the deepest level of our being, which may be the same Source Energy that created the universe.

When we realize that an intellectual understanding of history and a psychological understanding of ourselves are far more fulfilling than a materialistic lifestyle; when we realize that the earth has an ecological carrying capacity that we must honor; when we realize that world peace is hampered to the degree there is a disparity between the rich and the poor; when we realize all of these things simultaneously — then the social sins of nationalism, imperialism, racism, and patriarchalism will no longer be the dominant themes of our culture.  Moreover, with a focus on internationalism, we will see the need for a democratic world government  built from the bottom-up,  not from the top-down through fascist oligarchs, also referred to as the one percent.  If we can create a constitutional convention in a democratic way, it can ultimately promote a new way of looking at the world and our human potential; it can merge science and spirituality; it can promote more loving-kindness, cooperation, sharing, honesty, and transparency in our personal, social, and international relationships.

Archetypically, the seven largest national political parties are the Republican, Democratic, Constitution Party, Libertarian, Green, Democratic Socialist, and Revolutionary Socialist.  Now imagine if these political parties were represented at a constitutional convention based on proportional representation. What would be even more democratic would be to have the national political parties that have garnered at least one percent of the national vote be represented at a constitutional convention.

At this link, I show how it can be done:  “The Most Democratic Way to Have a Constitutional Convention.”  I also share “15 Proposals that Could Make Our Nation and the World a Better Place.”  Not everyone will  support the proposals that you or I will recommend, but we have to realize that once we broaden the political spectrum and drastically reduce the influence of money in politics, citizens will have an opportunity to become better educated.  Creating a new constitution in a fair and democratic way may not create an ideal society — at least not immediately — but it will be a society that is much better than what we now have.

• First published at

  1. Sherman, Dennis and Salisbury, Joyce. West in the World: A History of Western Civilization, fourth edition, (2011), p. 388.
  2. Muntone, Stephanie. European History DeMystified, (2012), pp. 7-8.
  3. Sherman, Dennis and Salisbury, Joyce. West in the World: A History of Western Civilization, fourth edition, p. 388.
  4. Ibid. p. 323.
  5. Zinn, Howard. A People’s History of the United States: 1492-Present, (2003), pp. 1-2.
  6. Sherman, Dennis and Salisbury, Joyce. West in the World: A History of Western Civilization, fourth edition, (2011), p. 381.

Universal Basic Income Is Easier Than It Looks

Calls for a Universal Basic Income have been increasing, most recently as part of the Green New Deal introduced by Rep. Alexandria Ocasio-Cortez (D-NY) and supported in the last month by at least 40 members of Congress. A Universal Basic Income (UBI) is a monthly payment to all adults with no strings attached, similar to Social Security. Critics say the Green New Deal asks too much of the rich and upper-middle-class taxpayers who will have to pay for it, but taxing the rich is not what the resolution proposes. It says funding would primarily come from the federal government, “using a combination of the Federal Reserve, a new public bank or system of regional and specialized public banks,” and other vehicles.

The Federal Reserve alone could do the job. It could buy “Green” federal bonds with money created on its balance sheet, just as the Fed funded the purchase of $3.7 trillion in bonds in its “quantitative easing” program to save the banks. The Treasury could also do it. The Treasury has the constitutional power to issue coins in any denomination, even trillion dollar coins. What prevents legislators from pursuing those options is the fear of hyperinflation from excess “demand” (spendable income) driving prices up. But, in fact, the consumer economy is chronically short of spendable income, due to the way money enters the consumer economy. We actually need regular injections of money to avoid a “balance sheet recession” and allow for growth, and a UBI is one way to do it.

The pros and cons of a UBI are hotly debated and have been discussed elsewhere. The point here is to show that it could actually be funded year after year without driving up taxes or prices. New money is continually being added to the money supply, but it is added as debt created privately by banks. (How banks rather than the government create most of the money supply today is explained on the Bank of England website here.) A UBI would replace money-created-as-debt with debt-free money – a “debt jubilee” for consumers – while leaving the money supply for the most part unchanged; and to the extent that new money was added, it could help create the demand needed to fill the gap between actual and potential productivity.

The Debt Overhang Crippling Economies

The “bank money” composing most of the money in circulation is created only when someone borrows, and today businesses and consumers are burdened with debts that are higher than ever before. In 2018, credit card debt alone exceeded $1 trillion, student debt exceeded $1.5 trillion, auto loan debt exceeded $1.1 trillion, and non-financial corporate debt hit $5.7 trillion. When businesses and individuals pay down old loans rather than taking out new loans, the money supply shrinks, causing a “balance sheet recession.” In that situation, the central bank, rather than removing money from the economy (as the Fed is doing now), needs to add money to fill the gap between debt and the spendable income available to repay it.

Debt always grows faster than the money available to repay it. One problem is the interest, which is not created along with the principal, so more money is always owed back than was created in the original loan. Beyond that, some of the money created as debt is held off the consumer market by “savers” and investors who place it elsewhere, making it unavailable to companies selling their wares and the wage-earners they employ. The result is a debt bubble that continues to grow until it is not sustainable and the system collapses, in the familiar death spiral euphemistically called the “business cycle.” As economist Michael Hudson shows in his 2018 book And Forgive Them Their Debts, this inevitable debt overhang was corrected historically with periodic “debt jubilees” – debt forgiveness – something he argues we need to do again today.

For governments, a debt jubilee could be effected by allowing the central bank to buy government securities and hold them on its books. For individuals, one way to do it fairly across the board would be with a UBI.

Why a UBI Need Not Be Inflationary

In a 2018 book called The Road to Debt Bondage: How Banks Create Unpayable Debt, political economist Derryl Hermanutz proposes a central-bank-issued UBI of one thousand dollars per month, credited directly to people’s bank accounts. Assuming this payment went to all US residents over 18, or about 241 million people, the outlay would be close to $3 trillion annually. For people with overdue debt, Hermanutz proposes that it automatically go to pay down those debts. Since money is created as loans and extinguished when they are repaid, that portion of a UBI disbursement would be extinguished along with the debt.

People who were current on their debts could choose whether or not to pay them down, but many would also no doubt go for that option. Hermanutz estimates that roughly half of a UBI payout could be extinguished in this way through mandatory and voluntary loan repayments. That money would not increase the money supply or demand. It would just allow debtors to spend on necessities with debt-free money rather than hocking their futures with unrepayable debt.

He estimates that another third of a UBI disbursement would go to “savers” who did not need the money for expenditures. This money, too, would not be likely to drive up consumer prices, since it would go into investment and savings vehicles rather than circulating in the consumer economy. That leaves only about one-sixth of payouts, or $500 billion, that would actually be competing for goods and services; and that sum could easily be absorbed by the “output gap” between actual and forecasted productivity.

According to a July 2017 paper from the Roosevelt Institute called “What Recovery? The Case for Continued Expansionary Policy at the Fed”:

GDP remains well below both the long-run trend and the level predicted by forecasters a decade ago. In 2016, real per capita GDP was 10% below the Congressional Budget Office’s (CBO) 2006 forecast, and shows no signs of returning to the predicted level.

The report showed that the most likely explanation for this lackluster growth was inadequate demand. Wages have remained stagnant; and before producers will produce, they need customers knocking on their doors.

In 2017, the US Gross Domestic Product was $19.4 trillion. If the economy is running at 10% below full capacity, $2 trillion could be injected into the economy every year without creating price inflation. It would just generate the demand needed to stimulate an additional $2 trillion in GDP. In fact, a UBI might pay for itself, just as the G.I. Bill produced a sevenfold return from increased productivity after World War II.

The Evidence of China

That new money can be injected year after year without triggering price inflation is evident from a look at China. In the last 20 years, its M2 money supply has grown from just over 10 trillion yuan to 80 trillion yuan ($11.6T), a nearly 800% increase. Yet the inflation rate of its Consumer Price Index (CPI) remains a modest 2.2%.

Why has all that excess money not driven prices up? The answer is that China’s Gross Domestic Product has grown at the same fast clip as its money supply. When supply (GDP) and demand (money) increase together, prices remain stable.

Whether or not the Chinese government would approve of a UBI, it does recognize that to stimulate productivity, the money must get out there first; and since the government owns 80% of China’s banks, it is in a position to borrow money into existence as needed. For “self-funding” loans – those that generate income (fees for rail travel and electricity, rents for real estate) – repayment extinguishes the debt along with the money it created, leaving the net money supply unchanged. When loans are not repaid, the money they created is not extinguished; but if it goes to consumers and businesses that then buy goods and services with it, demand will still stimulate the production of supply, so that supply and demand rise together and prices remain stable.

Without demand, producers will not produce and workers will not get hired, leaving them without the funds to generate supply, in a vicious cycle that leads to recession and depression. And that cycle is what our own central bank is triggering now.

The Fed Tightens the Screws

Rather than stimulating the economy with new demand, the Fed has been engaging in “quantitative tightening.” On December 19, 2018, it raised the fed funds rate for the ninth time in 3 years, despite a “brutal” stock market in which the Dow Jones Industrial Average had already lost 3,000 points in 2-½ months. The Fed is still struggling to reach even its modest 2% inflation target, and GDP growth is trending down, with estimates at only 2-2.7% for 2019. So why did it again raise rates, over the protests of commentators including the president himself?

For its barometer, the Fed looks at whether the economy has hit “full employment,” which it considers to be 4.7% unemployment, taking into account the “natural rate of unemployment” of people between jobs or voluntarily out of work. At full employment, workers are expected to demand more wages, causing prices to rise. But unemployment is now officially at 3.7% – beyond technical full employment – and neither wages nor consumer prices have shot up. There is obviously something wrong with the theory, as is evident from a look at Japan, where prices have long refused to rise despite a serious lack of workers.

The official unemployment figures are actually misleading. Including short-term discouraged workers, the rate of US unemployed or underemployed workers as of May 2018 was 7.6%, double the widely reported rate. When long-term discouraged workers are included, the real unemployment figure was 21.5%. Beyond that large untapped pool of workers, there is the seemingly endless supply of cheap labor from abroad and the expanding labor potential of robots, computers and machines. In fact, the economy’s ability to generate supply in response to demand is far from reaching full capacity today.

Our central bank is driving us into another recession based on bad economic theory. Adding money to the economy for productive, non-speculative purposes will not drive up prices so long as materials and workers (human or mechanical) are available to create the supply necessary to meet demand; and they are available now. There will always be price increases in particular markets when there are shortages, bottlenecks, monopolies or patents limiting competition, but these increases are not due to an economy awash with money. Housing, healthcare, education and gas have all gone up, but it is not because people have too much money to spend. In fact, it is those necessary expenses that are driving people into unrepayable debt, and it is this massive debt overhang that is preventing economic growth.

Without some form of debt jubilee, the debt bubble will continue to grow until it can again no longer be sustained. A UBI can help correct that problem without fear of “overheating” the economy, so long as the new money is limited to filling the gap between real and potential productivity and goes into generating jobs, building infrastructure and providing for the needs of the people, rather than being diverted into the speculative, parasitic economy that feeds off them.

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On “Bullshit Jobs”

Referring to cultural Marxism, especially the Frankfurt School, Noam Chomsky once said, “I don’t find that kind of work very illuminating… The ideas that seem useful also seem pretty simple, and I don’t understand what all the verbiage is for.” While I think there’s much of value in the so-called Western Marxist tradition—for instance, I’m partial to Georg Lukács (more so than to Adorno and others in the Frankfurt School)—I have to admit I strongly sympathize with Chomsky. But his criticism generalizes, and is even truer in other areas: since well before the mid-twentieth century, a large amount of work in the humanities has been prone to unnecessary and sometimes incomprehensible verbiage. Later this tendency came to be associated with postmodernism, for it was most pronounced in the writings of such luminaries as Derrida, Lacan, Kristeva, Deleuze, and Foucault, as well as their hordes of epigones. By the end of the twentieth century, a vast field of “Theory” had reached maturity, encompassing much of philosophy, anthropology, psychoanalysis, and literary, film, and cultural studies.

As an anthropologist, David Graeber works in this broadly conceived “interpretive” tradition (I call it that because it consists essentially of endless cultural and social “interpretations” or “theories,” often playful and highly verbose conceptual exercises). He has an advantage over many of his peers in that, while not a particularly great writer, he can at least write clearly and informally enough to be widely read. Presumably this lucidity helps account for his fame—as do, more importantly, his heterodox ideas, his ability to capture a cultural mood even in the titles of his books (Debt, The Utopia of Rules, Bullshit Jobs), and his impressive productivity. Perhaps he’s too productive: while reading his latest book, I couldn’t help thinking it would have packed a greater punch if he had shortened it by a third. It meanders and meanders, repeats and repeats, and, well, I didn’t understand what all the verbiage was for.

But that’s the intellectual game, after all. Unless they’re unusually disciplined and conscious of avoiding self-indulgence, intellectuals are prone to spewing “bullshit” without end, showing off their verbosity because that’s how the game is played. Graeber is at least more disciplined and serious than most of them, especially (most of) his fellow “theorists” in the humanities.

The full title of his book is Bullshit Jobs: A Theory. I wasn’t able to find the “theory,” unless it be that bullshit jobs do in fact exist. And Graeber marshals abundant evidence to test and confirm that theory. The most entertaining, and probably the most valuable, parts of the book are the many testimonies he presents from poor souls who spend their lives in a bullshit job, which is to say a job they think shouldn’t exist because it contributes nothing to the world. The numbers of people who believe this are incredibly high. One poll in the United Kingdom found that only 50 percent of people with full-time jobs were sure their job made a meaningful contribution to the world, while 37 percent were sure theirs didn’t. A poll in Holland put the latter number at 40 percent. Even jobs that aren’t bullshit, like nurses and professors, are being increasingly bullshitized, as paperwork, meetings, and other administrative duties crowd out more meaningful tasks like taking care of patients and teaching. (Nurses reported to Graeber that as much as 80 percent of their time is now taken up with meetings, filling out forms, and the like.) Considering these facts, as well as the existence of many second-order bullshit jobs (jobs done in support of those directly engaged in bullshit), Graeber estimates that well over half of all work being done in society could be eliminated without making any real difference.

What sorts of jobs are we talking about? Not most lower-tier jobs: not street cleaners, bus drivers, repairmen, restaurant workers, store clerks, gardeners, construction workers, etc. These people make a contribution to the world. Graeber suggests a rough five-fold classification of bullshit jobs. First are flunkies: jobs that exist “only or primarily to make someone else look or feel important.” This includes doormen, many receptionists (those who have hardly anything to do and find the job oppressively dull), some HR assistants, and the like. Second are “goons,” jobs that have an aggressive element but “exist only because other people employ them.” For instance, most lobbyists, PR specialists, telemarketers, corporate lawyers (“I contribute nothing to the world and am utterly miserable all of the time,” one said), and national armed forces, which exist only because other countries have armies. “If no one had an army, armies would not be needed.” As for PR specialists, one of them probably spoke for many when he opined that every person who works in or for the entire advertising industry simply “manufactur[es] demand and then exaggerat[es] the usefulness of the products sold to fix it.” He concluded, “If we’re at the point where in order to sell products, you have to first of all trick people into thinking they need them, then I think you’d be hard-pressed to argue that these jobs aren’t bullshit.”

Third is the category of “duct tapers,” people whose jobs exist only because of a glitch in the organization, “who are there to solve a problem that ought not to exist.” Often this includes underlings who have to fix mistakes made by incompetent superiors. Or do nothing but deal with customers irate because something went wrong. Fourth are “box tickers,” who allow an organization to be able to claim it’s doing something it actually isn’t doing. One testimony is from a guy who was Senior Quality and Performance Officer in a local council in the United Kingdom; most of what he did involved ticking boxes, “pretending things are great to senior managers, and generally ‘feeding the beast’ with meaningless numbers that give the illusion of control. None of which helps the citizens of that council in the slightest.”

The fifth category is taskmasters, people who do nothing but assign work to others, create bullshit tasks for others to do, or supervise bullshit. Middle management frequently falls under this category, as when managers oversee workers who could perform just as well, or sometimes better, without oversight. “I just got promoted to this job,” one manager says, “and I spend a lot of my time looking around and wondering what I’m supposed to be doing.” That’s a common complaint: being forced to supervise people who don’t need supervision. (Readers of Harry Braverman’s classic Labor and Monopoly Capital won’t find this complaint surprising at all.) Frequently positions with the word ‘strategic’ in their names—Strategic Dean, Vice President of Strategic Development, Strategic Officer—are bullshit. “All I could do,” one such person said, “was come up with a new strategy that was in effect a re-spin of already agreed-upon strategies.” But these people are given their own staff, which they have to try to find work for.

Graeber’s classification system is somewhat interesting, though, as he acknowledges, it leaves out a lot. One huge area of bullshit it leaves out he doesn’t mention at all: bullshit academic research. Surely the large majority of academic research makes essentially no contribution to the world, except to pad CVs and advance careers. Endless conferences, “calls for papers” sent out for yet another conference, thousands upon thousands of scholarly articles published every year most of which are read by hardly anyone (more often simply glanced over). Much of the writing isn’t only irrelevant and uninteresting, superficial and unchallenging, but even perverse: again, one thinks of postmodernist obscurantism, relativism, and idealism. In the case of postmodernism and, more generally, the idealism (and centrism) of bourgeois scholarship and journalism, the bullshit serves an obvious purpose for the establishment: it distracts from structures of class and power, obscures understanding of how society works, and does nothing to advance left-wing dissent. (I discuss these matters in depth here, and also on my website.)

Graeber devotes a couple of chapters to what it’s like to work in a bullshit job and why people so often report themselves miserable. According to bourgeois psychological theories, after all, it might seem that some of these jobs are great. You hardly have to work, you have barely any real responsibilities, you can spend hours playing computer games or surfing the web. You can (in many cases) be almost as lazy as, supposedly, you want to be just by virtue of being human. But of course humans are not, in fact, lazy by nature, creatures who have to be driven to work, as bourgeois ideologies proclaim. They want to work, but on creative and enjoyable tasks. Their fundamental desire is not to slack off but to have a meaningful life, full of purpose, creativity, exploration, and love, a life of contributions to the world. To work in an utterly pointless job, therefore, day in and day out, month after month, can be maddening, soul-killing torture. It seems that the respect and prestige these people might be accorded can make it even worse, heightening their sense of being frauds or parasites.

Many of the testimonies Graeber has compiled are both sad and hilarious. Most are too long to quote here, but I’ll quote one, from a security guard:

I worked as a museum guard for a major global security company in a museum where one exhibition room was left unused more or less permanently. My job was to guard that empty room, ensuring no museum guests touched the…well, nothing in the room, and ensure nobody set any fires. To keep my mind sharp and attention undivided, I was forbidden any form of mental stimulation, like books, phones, etc.

Since nobody was ever there, in practice I sat still and twiddled my thumbs for seven and a half hours, waiting for the fire alarm to sound. If it did, I was to calmly stand up and walk out. That was it.

One might think of this guard’s job as a literal realization of the metaphorical meaning of thousands of positions filled by tens of millions of people. The colossal waste of human potential is beyond comprehension.

The natural question, aside from how to change this terrible collective situation, is how all these worthless jobs started proliferating in the first place. Why aren’t we all working fifteen-hour weeks? If we got rid of the pointless jobs and the pointless aspects of the real jobs, the resulting work could easily be taken care of by our working fifteen- or twenty-hour weeks. In fact, back in 1930 John Maynard Keynes predicted that in a hundred years the problem of scarcity would have been solved, and the major problem of the age would be to find ways to prevent ourselves from going insane with boredom. So what happened?

This is a complicated historical question that gets to the heart of how capitalism has evolved over the last century, so it isn’t to Graeber’s discredit that he doesn’t fully answer it. He first dispatches two answers conservatives give: that the world has become so complicated we need all these jobs, and they aren’t really as pointless as they seem; and that even if there are bullshit jobs, it’s only because government regulations have led to a growing number of useless bureaucrats. These answers are on the intellectual level of most conservatism, and Graeber refutes them with ease. With one piece of evidence. He points out that between 1985 and 2005 the proportion of administrators and their staff in American universities shot up even though the number of teachers per students remained largely constant. Teaching and writing certainly haven’t become so complicated they suddenly need far more administrators and staffers—so why the bullshitization of universities? It isn’t because of the big bad government either, since the number of administrators at private institutions has increased at more than twice the rate it did at public ones. So there goes the “libertarian” notion of government wastefulness. “In fact,” Graeber comments, “the only reasonable interpretation of these numbers is precisely the opposite: public universities are ultimately answerable to the public, and hence, under constant political pressure to cut costs and not engage in wasteful expenditures.”

Graeber’s own answer is that capitalism has changed its character since the days when it somewhat approximated conditions of perfect competition. When capitalism was mainly about producing things competitively, the argument that free-market enthusiasts give against the notion that corporations would ever hire unnecessary workers to do bullshit jobs made sense: maximizing profits meant paying the least number of workers the least amount possible. To hire a large number of redundant workers would be absurd. But, as Graeber argues, the logic of the economy has changed in the last forty years, with the rise of financial capitalism and the FIRE sector (including insurance and real estate). The main object now is not to produce goods competitively but to distribute large sums of money, to distribute the proceeds from enormous amounts of debt, to create money (by giving loans) and then move it around in very complex ways while extracting fees with every transaction. “The results often leave bank employees feeling that the entire enterprise is…pointless.”

So, “when a profit-seeking enterprise is in the business of distributing a very large sum of money, the most profitable thing for it to do is to be as inefficient as possible.” It can then find pretexts to take more cuts, even acting against the interests of its clients, and using its profits to hire more people and grow bigger. There seems, indeed, to be a tendency inherent in large bureaucracies, whether corporate or political, to expand, to suck up more resources as an end in itself. Graeber gives a name to the “new” dynamic that has emerged in capitalism: managerial feudalism. It’s supposed to be analogous to the creation of hierarchies of nobles and officials in medieval Europe through a process of devolution called “sub-infeudation,” in which a king would grant land to a duke, who would use the resources from that land to support a huge retinue of courtiers and vassals, many of whom would be granted their own plots of land that could support their own retinues, and so on down to local knights and lords of the manor.

“The rise of managerial feudalism has produced a similar infatuation with hierarchy for its own sake.” Managers manage other managers, each with their own staff; various levels of managers market things to one another, especially in “creative industries” like publishing, the visual arts, and film and television. It’s particularly bad in the latter industry, where there are untold numbers of producers, sub-producers, executive producers, consultants, etc., “all in constant search for something, anything, to actually do.” But even in more traditional manufacturing industries, white-collar workers are hired seemingly for the sake of having more white-collar workers. Graeber uses the example of the Elephant Tea factory outside Marseilles, France. Years ago it was bought up by Unilever, which pretty much left its old organizational structure intact. Meanwhile the workers, on their own initiative, managed to speed up production by more than 50 percent, markedly increasing profits. So what did Unilever do? Rather than hiring more workers or buying new machinery to expand operations, it hired a bunch of white-collar bureaucrats to wander around trying to think of something to do. “They’d be walking up and down the catwalks every day,” an older worker said, “staring at us, scribbling notes while we worked. Then they’d have meetings and discuss it and write reports. But they still couldn’t figure out any real excuse for their existence.” Finally they just suggested that the company shut down the whole plant and move operations to Poland—whereupon the workers took over the factory and kicked their employers out.

Even when corporate executives are presented with ways to automate tasks that white-collar employees are doing by hand, they often resist. One testimony was from a guy who was hired by a large bank to do risk management, which meant he was able to have a panoramic view of the bank’s internal processes and suggest fixes for incoherencies, vulnerabilities, and redundancies. He concluded that, conservatively, 80 percent of the bank’s 60,000 employees were unnecessary, because their jobs either could be performed by a program or were in support of “some bullshit process” to begin with. But when he presented executives with programs that would solve inefficiencies, he always faced severe hostility. Not a single one of his recommendations was ever adopted. “Because in every case,” he said, “fixing these problems would have resulted in people losing their jobs, as those jobs served no purpose other than giving the executive they reported to a sense of power.” In case after case that Graeber reports, it was clear that the higher-ups prided themselves on their bloated staffs.

The notion of managerial feudalism is evocative, and Graeber is clearly onto something with his suggestion that “there seems to be an intrinsic connection between the financialization of the economy, the blossoming of information industries, and the proliferation of bullshit jobs.” What exactly that connection is, though, is hard to tease out. The precise mechanisms are hard to tease out. His “iron law of liberalism,” formulated in Utopia of Rules, is also apropos: “any market reform, any government initiative intended to reduce red tape and promote market forces will have the ultimate effect of increasing the total number of regulations, the total amount of paperwork, and the total number of bureaucrats the government employs.” Such reforms have been abundant in the neoliberal era, and they have certainly contributed to the explosion of bureaucracy, in both the private and public sectors.

But Graeber neglects to mention the more deep-rooted forces that have made bullshitization a steadily growing phenomenon since at least the time of Frederick Winslow Taylor. Ever since management began to take control of production away from workers, to centralize knowledge in its own ranks and reduce the worker to mere appendage of the machine—but an appendage that has to be closely monitored and supervised—whole layers of unnecessary bureaucracy have existed. Much of the bureaucracy has existed only to control and monitor the direct producers, to strip power from them and keep it in the hands of capitalists or their agents. In other words, its purpose has been largely political, not directly economic or “efficiency”-related.

At the same time, it became ever more necessary to control markets and the public mind, through political and advertising propaganda. Hence the rise of the public relations industry from around the time of World War I. And hence whole new layers of massive bureaucracy, which have continued to expand for a hundred years. Meanwhile, government bureaucracies expanded exponentially in order to improve society’s “legibility” to the state and administer it for the benefit of capital. Corporate capital and the state constantly strengthened their ties, effectively intertwining, collecting practically infinite amounts of data on the population for the usual purposes of surveillance, control, and profit-making; and the processing of such data inevitably was used to justify further growth of bureaucracies, even beyond what was strictly necessary. All this was happening long before the neoliberal era, though it attained new heights of wastefulness under the impact of “deregulation,” privatization, financialization, globalization, and the information economy.

It’s significant, too, that the proliferation of bullshit jobs is itself a form of population control, of keeping people subordinate in hierarchical structures, socialized into submission, atomized and alienated from one another. African-American men are kept under control by being locked up in prisons, while whites are funneled into pointless jobs where they can be supervised and indoctrinated. The system hasn’t been consciously designed for this purpose, but the reason it’s able to expand is that it serves the interests of power-structures.

So is there any way out of our bullshit society? Can it be reformed so that half the work being done is no longer pointless? Graeber doesn’t focus on this question, since his book is supposed to be about diagnosing the problem rather than proposing solutions, but he does suggest that Universal Basic Income would help. Unlike many reforms that social movements are proposing, UBI would likely reduce the size and intrusiveness of government, not increase it. If everyone automatically received, say, $25,000 or more a year, huge and intrusive sections of government could simply be shut down (even if social welfare programs continued or expanded). Millions of bureaucrats would lose their jobs, but they would also receive an annual income allowing them to pursue other projects that interested them.

“A full Basic Income would eliminate the compulsion to work, by offering a reasonable standard of living to all, and then either leaving it up to each individual to decide whether they wished to pursue further wealth, by doing a paying job or selling something, or whether they wished to do something else with their time.” Bosses might start treating their employees better, since it would be a less frightening prospect for them to quit, and conditions in crappy low-paying jobs would have to improve in order to attract workers. Many pointless jobs would cease to exist, since few people would want them. The social changes would be so radical and far-reaching it’s impossible to fully anticipate them.

Graeber doesn’t delve into the technicalities of UBI, but he’s right it’s a proposal worth seriously thinking about. It could be a step on the road to even more radical changes.

All in all, Bullshit Jobs is a good book that’s worth reading, despite its irritating prolixity and meandering structure. It usefully highlights and names a major social malady that afflicts tens of millions but that few people talk about, except in informal conversations among their fellow sufferers. We should all be talking about the meaningless-jobs crisis and proposing solutions that will end the rampant spiritual misery it has caused. UBI, if designed well, could be a huge step in the right direction. But ultimately, I don’t see any thoroughgoing cure except an end to capitalism itself, which is to say a (necessarily protracted) revolution that finally establishes the old socialist ideal of economic democracy. Democracy is the only real cure for all of humanity’s current ailments.

“May Day” Militancy Needed To Create The Economy We Need

The Popular Resistance School will begin on May 1 and will be an eight-week course on how movements grow, build power and succeed as well as examine the role you can play in the movement. Sign up to be part of this school so you can participate in small group discussions about how to build a powerful, transformational movement. REGISTRATION CLOSES MIDNIGHT APRIL 30.

Seventy years of attacks on the right to unionize have left the union movement representing only 10 percent of workers. The investor class has concentrated its power and uses its power in an abusive way, not only against unions but also to create economic insecurity for workers.

At the same time, workers, both union and nonunion, are mobilizing more aggressively and protesting a wide range of economic, racial and environmental issues.

On this May Day, we reflect on the history of worker power and present lessons from our past to build power for the future.

May Day Workers of the World Unite, Melbourne, Australia, in 2012. By Johan Fantenberg, Flickr.

In most of the world, May Day is a day for workers to unite, but May Day is not recognized in the United States even though it originated here. On May 1, 1886, more than 300,000 workers in 13,000 businesses across the US walked off their jobs for the first May Day in history. It began in 1884, when the Federation of Organized Trades and Labor Unions proclaimed at their convention that workers themselves would institute the 8-hour day on May 1, 1886. In 1885 they called for protests and strikes to create the 8-hour work day. May Day was part of a revolt against abusive working conditions that caused deaths of workers, poverty wages, poor working conditions and long hours.

May Day gained permanence because of the Haymarket rally which followed. On May 3, Chicago police and workers clashed at the McCormick Reaper Works during a strike where locked-out steelworkers were beaten as they picketed and two unarmed workers were killed. The next day a rally was held at Haymarket Square to protest the killing and wounding of workers by police. The rally was peaceful, attended by families with children and the mayor himself. As the crowd dispersed, police attacked. A bomb was thrown—no one to this day knows who threw it—and police fired indiscriminately into the crowd, killing several civilians and wounding forty. One officer was killed by the bomb and several more died from their own gunfire. A corrupt trial followed in August concluding with a biased jury convicting eight men, though only three of them were present at Haymarket and those three were in full view of all when the bombing occurred. Seven received a death sentence, the eighth was sentenced to 15 years, and in the end, four were hanged, one committed suicide and the remaining three were pardoned six years later. The trial shocked workers of the world and led to annual protests on May Day.

The unity of workers on May Day was feared by big business and government. That unity is shown by one of the founders of May Day, Lucy Parsons, who was of Mexican American, African American, and Native American Descent. Parsons, who was born into slavery, never ceased her work for racial, gender, and labor justice. Her partner was Albert Parsons, one of those convicted for Haymarket and hanged.

Solidarity across races and issues frightens the power structure. In 1894 President Grover Cleveland severed May Day from its roots by establishing Labor Day on the first Monday in September, after pressure to create a holiday for workers following the Pullman strike. Labor Day was recognized by unions before May Day. The US tried to further wipe May Day from the public’s memory by President Dwight Eisenhower proclaiming “Law and Order Day” on May 1, 1958.

Long Shoreman march in San Francisco on May Day 2008 in the first-ever strike action by U.S. workers against U.S. imperialist war. Source: The Internationalist

Escalation of Worker Protests Continues to Grow

Today, workers are in revolt, unions are under attack and the connections between workers’ rights and other issues are evident once again. Nicole Colson reports that activists on a range of issues, including racial and economic justice, immigrant rights, women’s rights, a new economy of worker-owners, transitioning to a clean energy economy with environmental and climate justice, and a world without war, are linking their struggles on May Day.

There has been a rising tide of worker militancy for years. The ongoing Fight for $15 protests helped raise the wages of 20 million workers and promoted their fight for a union. There are 64 million people working for less than $15 an hour. Last year there was also a massive 36-state strike involving 21,000 mobility workers.

Worker strikes continued into 2018 with teacher strikes over salaries, healthcare, pensions and school funding. Teachers rejected a union order to return to work. Even though it included a 5 percent raise, it was not until the cost of healthcare was dealt with that the teachers declared success. Teachers showed they could fight and win and taught others some lessons on striking against a hostile government. The West Virginia strike inspired others, and is followed by strikes in Oklahoma, Kentucky, Colorado, and Arizona. These strikes may expand to other states, evidence of unrest has been seen in states including New Jersey and Pennsylvania as well as Puerto Rico because courage is contagious.

Graduate students have gone on strike, as have transit and UPS workers and low-wage workers. The causes include stagnant wages, spiraling healthcare costs, and inadequate pensions. They are engaged in a fight for basic necessities. In 2016, there wasn’t a single county or state in which someone earning the federal minimum wage could afford to rent a two-bedroom apartment at market rate.

Workers are also highlighting that women’s rights are worker’s rights. Even before the #MeToo movement took off, workers protested sexual harassment in the workplace. Workers in thirty states walked off the job at McDonald’s to protest, holding signs that said “McDonald’s Hands off my Buns” and “Put Some Respect in My Check.”

Last year on May Day, a mass mobilization of more than 100,000 immigrant workers walked off their jobs. This followed a February mobilization, a Day Without Immigrants. The Cosecha Movement has a long-term plan to build toward larger strikes and boycotts. There will be many worker revolts leading up to that day.

The Poor People’s Campaign has taken on the issues of the movement for economic, racial, environmental justice and peace. Among their demands are federal and state living wage laws, a guaranteed annual income for all people, full employment, and the right to unionize. It will launch 40 days of actions beginning on Mother’s Day. Workers announced a massive wave of civil disobedience actions this spring on the 50th anniversary of the sanitation strike in Memphis, at a protest where they teamed up with the Poor People’s Campaign and the Movement for Black Lives.  Thousands of workers walked off their jobs in cities across the country.

Unrealized Worker Power Potential Can Be Achieved

The contradictions in the US economy have become severe. The wealth divide is extreme, three people have the wealth of half the population and one in five people have zero wealth or are in debt. The U.S. is ranked 35th out of 37 developed nations in poverty and inequality.  According to a UN report, 19 million people live in deep poverty including one-quarter of all youth. Thirty years of economic growth have been stagnant for most people in the US. A racial prism shows the last 50 years have made racial inequality even wider, with current policies worsening the situation.

May 5 is the 200th anniversary of the birth of economic philosopher, Karl Marx, the failure of US capitalism has become evident.  Over the last fifty years, in order for the few to exploit the many, labor laws have been put in place to weaken workers’ rights and unions.  Andrew Stewart summarizes some of the key points:

First, the National Labor Relations Act, signed by FDR, that legalized unionization. Or more precisely, it domesticated unions. When combined with the Taft-Hartley Act, the Railway Labor Act, and Norris-La Guardia Act, the union movements of America were forced into a set of confines that reduced its arsenal of tactics so significantly that they became a shell of their pre-NLRA days. And this, of course, leaves to the side the impact of the McCarthy witch hunts on the ranks of good organizers.

In addition, 28 states have passed so-called “right to work” laws that undermine the ability of workers to organize. And, the Supreme Court in the Janus case, which is likely to be ruled on this June, is likely to undermine public unions. On top of domestic laws, capitalist globalization led by US transnational corporations has undermined workers, caused de-industrialization and destroyed the environment. Trade must be remade to serve the people and planet, not profits of the few.

While this attack is happening, so is an increase in mobilizations, protests, and strikes. The total number of union members grew by 262,000 in 2017 and three-fourths of those were among workers aged 35 and under and 23% of new jobs for workers under 35 are unionized. With only 10 percent of workers in a union, there is massive room for growth at this time of economic insecurity.

Chris Hedges describes the new gig economy as the new serfdom. Uber drivers make $13.77 an hour, and in Detroit that drops to $8.77. He reports on drivers committing suicide. One man, who drove over 100 hours a week, wrote, “I will not be a slave working for chump change. I would rather be dead.” This while the former CEO of Uber, one of the founders, Travis Kalanick, has a net worth of $4.8 billion. The US has returned to pre-20th Century non-union working conditions. Hedges writes that workers now must “regain the militancy and rebuild the popular organizations that seized power from the capitalists.”

Solidarity across racial and economic divides is growing as all workers suffer from abuses of the all-powerful capitalist class. As those in power abuse their privilege, people are becoming more militant. We are seeing the blueprint for a new worker movement in the teacher strikes and Fight for $15. A movement of movements including labor, environmentalist, anti-corporate advocates, food reformers, healthcare advocates and more stopped the Trans-Pacific Partnership. This shows the potential of unified power.

In recent strikes, workers have rejected proposals urged by their union and have pushed for more. Told to go back to work, they continued to strike. The future is not unions who serve to calm labor disputes, but unions who escalate a conflict.

The future is more than re-legalizing unions and raising wages and benefits, it is building wealth in the population and creating structural changes to the economy. This requires a new economy where workers are owners, in worker cooperatives, so their labor builds power and wealth. Economic justice also requires a rewoven safety net that ensures the essentials of healthcare and housing, as well as non-corporatized public education, free college education, a federal job guarantee and a basic income for all.

The escalation of militancy should not demand the solutions of the past but demand the new economy of the future. By building community wealth through democratized institutions, we will reduce the wealth divide and the influence of economic inequality over our lives.

Newsletter: From Neoliberal Injustice To Economic Democracy

The work to transform society involves two parallel paths: resisting harmful systems and institutions and creating new systems and institutions to replace them. Our focus in this article is on positive work that people are doing to change current systems in ways that reduce the wealth divide, meet basic needs, ensure sustainability, create economic and racial justice and provide people with greater control over their lives.

When we and others organized the Occupation of Washington, DC in 2011, we subtitled the encampment ‘Stop the Machine, Create a New World’, to highlight both aspects of movement tasks — resistance and creation. One Popular Resistance project, It’s Our Economy, reports on economic democracy and new forms of ownership and economic development.

Throughout US history, resistance movements have coincided with the growth of economic democracy alternatives such as worker cooperatives, mutual aid and credit unions. John Curl writes about this parallel path in “For All the People,” which we summarized in “Cooperatives and Community Work are Part of American DNA.”

Mahatma Gandhi’s program of nonviolent resistance, satyagraha, had two components: obstructive resistance and constructive programs. Gandhi promoted Swaraj, a form of “self-rule” that would bring independence not just from the British Empire but also from the state through building community-based systems of self-sufficiency. He envisioned economic democracy at the village level. With his approach, economics is tied to ethics and justice — an economy that hurts the moral well-being of an individual or nation is immoral and business and industry should be measured not by shareholder profit but by their impact on people and community.

Today, we suffer from an Empire Economy. We can use Swaraj to break free from it. Many people are working to build a new economy and many cities are putting in place examples of economic democracy. One city attempting an overall transformation is Cooperation Jackson in Jackson, Mississippi.

Economic Democracy in response to neoliberalism

In his new book, Out of the Wreckage: A New Politics for an Age of Crisis, George Monbiot argues that a toxic ideology of greed and self–interest resulting in extreme competition and individualism rules the current economic and political culture. It is built on a misrepresentation of human nature. Evolutionary biology and psychology show that humans are actually supreme altruists and cooperators.  Monbiot argues that the economy and government can be radically reorganized from the bottom up, enabling people to take back control and overthrow the forces that have thwarted human ambitions for a more just and equal society.

In an interview with Mark Karlin, Monbiot describes how neolibealism arose over decades, beginning in the 1930s and 40s with John Maynard Keynes, Friedrich Hayek and others, and is now losing steam, as ideologies do. Monbiot says we need a new “Restoration Story.”

We are in the midst of writing that new story as people experience the injustice of the current system with economic and racial inequality, destruction of the environment and never ending wars. Indeed, we are further ahead in creating the new Restoration Story than we realize.


New research from the University of Wisconsin–Madison’s Center for Cooperatives (UWCC) has found there are 39,594 cooperatives in the United States, excluding the housing sector, and there are 7 million employer businesses that remain “potential co-op candidates.” These cooperatives account for more than $3 trillion in assets, more than $500 billion in annual revenue and sustain nearly two million jobs. This May, the Office of Management and Budget approved including coop questions in the Economic Census so that next year the US should have more accurate figures. The massive growth of cooperatives impacts many segments of the economy including banking, food, energy, transit and housing among others.

In cooperatives, workers or consumers decide directly how their business operate and work together to achieve their goals; it is a culture change from the competitive extreme capitalist view dominated by self-interest.

In Energy Democracy: Advancing Equity in Clean Energy Solutions, editors Denise Fairchild and Al Weinrub describe energy cooperatives that are creating a new model for how we organize the production and distribution of energy, which is decentralized, multi-racial and multi-class.

Lyn Benander of Co-op Power, a network of many cooperatives in New England and New York, writes that they transform not just energy but also their communities:

First, people come together across class and race to make change in their community by using their power as investors, workers, consumers, and citizens ready to take action together. Then, they work together to build community-owned enterprises with local capital and local jobs to serve local energy needs. It’s a proven strategy for making a real difference.

In Lancaster, CA, the mayor has turned the town into a solar energy capital where they produce power not just for themselves, but also to sell to other cities. They are also moving to create manufacturing jobs in electric buses, which more cities are buying, and energy storage. Research finds that rooftop solar and net-metering programs reduce electricity prices for all utility customers, not just those with solar panels. The rapid growth of rooftop solar is creating well-paying jobs at a rate that’s 17 times faster than the total U.S. economy. Rooftop solar, built on existing structures, such as homes and schools, puts energy choices in the hands of customers rather than centralized monopolies, thereby democratizing energy.

Including housing cooperatives would greatly increase the number of cooperatives. According to the National Association of Housing Cooperatives, “Housing cooperatives offer the more than one million families who live in them several benefits such as: a collective and democratic ownership structure, limited liability, lower costs and non-profit status.”  Residents of a mobile home park in Massachusetts decided to create a housing cooperative to put the residents in charge of the community when the owner planned to sell it.

Related to this are community land trusts. A section of land is owned in a trust run as a non-profit that represents the interests of local residents and businesses. Although the land is owned by the trust, buildings can be bought and sold. The trust lowers prices and can prevent gentrification.

Universal Basic Income

Another tool gaining greater traction is a universal basic income.  James King writes in People’s Policy Project that “. . . a universal basic income (UBI) – a cash payment made to every person in the country with no strings attached – is becoming increasingly popular in experimental policy circles. . . payments  [would be] large enough to guarantee a minimum standard of living to every person independent of work. In the US, that would be roughly $12,000 per person based on the poverty line.”

The wealth divide has become so extreme in the United States that nearly half of all people are living in poverty. A small UBI would provide peace of mind, financial security and the possibility of saving money and building some wealth. A report by the Roosevelt Institute, this week, found that a conservative analysis of the impact of a UBI of $1,000 per month would grow the economy by 12.56 percent after an eight-year implementation, this translates to a total growth of $2.48 trillion.

Public Finance

Another major area of economic democracy is the finance sector. At the end of 2016 there were 2,479 credit unions with assets under 20 million dollars in the United States. Members who bank in credit unions are part of a cooperative bank where the members vote for the board and participate in other decisions.

Another economic democracy approach is a public bank where a city, state or even the national government creates a bank using public dollars such as taxes and fee revenues. Public banks save millions of dollars that are usually paid in fees to Wall Street banks, and the savings can be used to fund projects such as infrastructure, transit, housing, healthcare and education, among other social needs. Public banks can also partner with community banks or credit unions to fund local projects. This could help to offset one of the negative impacts of Dodd-Frank, which has been a reduction in community banks. In testimony, the Secretary of Treasury, Stephen Munchin, said we could “end up in a world where we have four big banks in this country.”

North Dakota is the only state with a public bank, and it has the most diverse, locally-owned banking system in the country. Stacey Mitchell writes that “North Dakota has six times as many locally owned financial institutions per person as the rest of the nation. And these local banks and credit unions control a resounding 83 percent of deposits in the state, more than twice the 30 percent market share such banks have nationally.” Public banking campaigns are making progress in many parts of the country, among them are Oakland, Los Angeles, Philadelphia, Santa Fe, and other areas.

Mutual Aid

When crises occur, no matter what their cause, people can work together cooperatively and outside of slow and unresponsive state systems to meet their needs. This is happening in Athens, Greece, which has been wracked by financial crisis and austerity for years. People have formed “networks of resistance” that meet in community assemblies organized around needs of the community, such as health care and food. They started with time banks as a base for a new non-consumer society.

Similar efforts are underway in Puerto Rico following the devastation of Hurricane Maria. A group called El Llamado is coordinating more than 20 mutual aid efforts, and providing political education and support for self-organizing at the same time.

As George Monbiot describes it, this is consistent with the truth about what human beings are:

We survived despite being weaker and slower than both our potential predators and most of our prey. We did so through developing, to an extraordinary degree, a capacity for mutual aid. As it was essential to our survival, this urge to cooperate was hard-wired into our brains through natural selection.

As we face more crises, whether in lack of access to health care, education, housing, food or economic and climate disasters, let’s remember that we have the capacity to meet our needs collectively.  In fact, every day, people are putting in place a new economic democracy that allows people to participate based on economic and racial justice as well as real democracy. As these alternatives are put in place, they may become dominant in our economy, communities and politics and bring real democracy and security to our lives.

Universal Basic Income, or Basic Universal Alternative?

The Green Party of England and Wales have just concluded their autumn conference, held this year in the pleasant Yorkshire town of Harrogate. One of the meetings I particularly wanted to take part in was titled “Universal Basic Income. Its time has come”. The main speaker was Guy Standing, someone who has apparently been promoting Basic Income for about thirty years. Although this gives him cause to claim some proprietorial rights for the idea, the Greens’ version of the same thing, known to us as Citizens Income (CI), has been a cornerstone policy for about forty years.

UBI/CI proposes that everyone should receive a guaranteed regular income – whether they need it or not. I’m a relative newcomer to the idea, learning about it for the first time when I first joined the Greens about three years ago. I couldn’t believe they were serious. Having ploughed through most of the Greens’ considerable number of policies, and agreed with just about every one of them, (CI) struck me as too ridiculous for words – the sort of thing some evil conspirator might plant like a bomb, waiting for the right moment to detonate it.

But perhaps it was me; perhaps I should find out more about it.

Whilst the intentions of CI are unquestionably right and good and humane – an attempt to eradicate poverty – the proposed solution of CI is full of flaws. Nevertheless, the concept of UBI/CI appears to be gaining a lot of traction all around the world. It has been tested in India and is currently being tried out in Brazil, Finland, and parts of Scotland. There are plans to trial it in Spain and the Netherlands. So could Guy Standing, a leading academic guru for UBI, reveal to me its virtues and eliminate my doubts?

Mr Standing is an impressive speaker. Clearly very used to speaking to large audiences, he’s articulate and confident, like a good salesman. Although he must have spoken for twenty minutes or so, he didn’t say anything that answered my concerns. But what he did say actually increased my reservations, and set alarm bells ringing loudly in my ears.

Leaving aside the rather tacky plugging of his newest book, something he did over and over throughout his talk, and afterwards with nearly every response he gave to questions from the audience, what really alarmed me was his apparent delight in the support UBI is supposedly attracting from the establishment.

Supping with the devil

Mr Standing informed us that he had recently been invited to speak about UBI in Davos. He seemed to think this was a fantastic achievement. Being welcomed into the arms of the world’s most powerful oppressors of humanity and despoilers of the planet was sold to us by Mr Standing as something we should admire and respect – instead of being horrified by (which was my reaction). Then Mr Standing told us that “even Hillary Clinton” had taken an interest in UBI, and that billionaire businessmen and IT wizards in Silicon Valley had been seeking his wisdom. None of this appears to have troubled Mr Standing. Quite the contrary. He seemed proud of these things, suggesting that we should be heartened and encouraged by the implied credibility the rich and powerful are giving to UBI. He seemed to be oblivious to the obvious conflict of interests – the problem of talking about a scheme that’s supposed to eliminate human poverty with the very people who are responsible for causing it, and who choose to carefully maintain it.

Pilot error

Then he spoke about the pilot schemes for UBI that are apparently being tried in various parts of the world. These pilots have attracted quite a lot of media attention lately. I confess I haven’t looked at any of the results. Whilst I agree with the general principle of scientifically testing new ideas (without using any animals – obviously), it seems to me quite impossible to properly test something like UBI. Trying to trial UBI in a town or a city where the rest of the economy is working around it as normal would be a bit like conducting a delicate scientific experiment using soiled and defective apparatus.

We always need to be very careful about anything which has supposedly been thoroughly tested by the people who are trying to sell it. Although not always unreliable, self-interest can obviously be a major factor in these situations. Furthermore, if the pilots were being run by economists, instead of real scientists, the results are likely to be even more problematic – since mainstream economics has been wholly based on unsubstantiated and unproven theories. In short, the results of any pilot scheme concerning UBI needs to be rigorously examined. But this is not what appears to be happening.

For example, Mr Standing described a pilot in India that he’d been involved with. He couldn’t go into detail because his time was limited (and it was probably in his book), but the outline was that a few thousand people in some remote town had all received a basic income for the trial period and surprise, surprise, the local economy improved. Who would have thought it? Add some money to a working economy and sales will pick up. Incredible.

Presumably we were supposed to be impressed by this anecdote. But how significant is it really? A couple of thousand people living amidst a working economy of almost one and a half billion others. How reliable could such a test be?

The virtue of work

There was time for questions after Mr Standing’s talk. I had my hand up for most of that time, but wasn’t invited to speak. Most of the people in the room were clearly disciples of UBI, and no effort was made by the chair to discover if there was anyone present who was not. Perhaps it was taken for granted that such a person could not possibly be in the room. My questions would have reflected my considerable concern for the role of public services in a world where no one needs to work, for Mr Standing didn’t mention public services at all in his talk.

Mr Standing rightly pointed out that the giant advances in twenty-first century communications, robotics, and artificial intelligence (AI) are having huge impacts on how we work. He suggested, rightly in my view, that in the near future the economy will not need very many humans to maintain it. So what to do with billions of redundant human beings? If people cannot obtain money through work, because no one needs them to work, how are they to obtain the money they need to survive? And how are corporations to continue maximising profit? For its many longstanding disciples (and perhaps some new converts in the corporatocracy), UBI is the obvious answer.

Mr Standing referred to a wonderful new world where people will no longer have to work, because machines will be doing everything, and these people will be getting all the money they need from UBI to do… absolutely nothing. He tried to sell to us the idea that idleness is actually a good thing. Whilst I don’t wholly disagree with that, there is a very important condition: idleness should be voluntary, not something imposed by circumstances; people locked up in solitary confinement, for example, are idle, but their condition is widely regarded as a type of torture. So what about those people who don’t want to be idle, people who love their work, or people who live on their own and like to go out to work for its social benefits as much as its monetary rewards?

There’s nothing to stop people working, the prophets of UBI claim, but they would now be able to pick and choose the work they do because they would no longer be reliant on an income. But who will employ them in a world where corporations no longer need human beings? They could do voluntary work, reply the UBIers, or study, or work for themselves. Nothing is said about the future role of the public sector.

In the brave new world of UBI it seems that society will be wholly controlled by the private sector – and particularly by large corporations. After all, a world without government has been the dream of the super-rich for at least half a century, as Nancy MacLean, for example, shows in her excellent book Democracy in Chains. In this world, corporations will supply every possible product or service, and no doubt the shareholders will profit very handsomely for doing so. In this world there would be no role for the state.

Such a world is perfectly feasible. Technically, it could exist and function. But is such a world really desirable for the planet in general, and the vast majority of human beings in particular?

For me, the single biggest problem with such a model is the loss of democratic control. In a world where unelected, unaccountable corporations rule – even more than they do already – the citizen would have absolutely no control of the direction of their country. One of the main indicators of this possibility is the loss of a role for state-run public services. The fact that Mr Standing, a leading global prophet of UBI, is rubbing shoulders with corporate royalty in places like Davos shows not only that the corporate business world is clearly taking an interest in UBI, but also that a well-known guru of UBI is perfectly happy to oblige them. Corporations have long been hostile to public services, whom they see as unacceptable competition, so why might the corporate world be interested in UBI?

Given that banking giants such as JP Morgan have long been involved with supplying and controlling food stamps in the US gives us a clue, I think. They do this not because they care about feeding hungry people, but because there’s a sizeable profit for them in doing so. The US government pays them very handsomely for providing this service. The state could do the job itself – and possibly much cheaper and more efficiently – but it abdicated the responsibility, together with any accountability, to investment banks.

Someone would have to administer and control UBI, if it was to be widely adopted. Who better than an investment bank with previous form in delivering an essential social service?

What’s in a name?

Mr Standing did make one point that I hadn’t considered before, and which made me think. He mentioned at one point, almost as an aside, that he wasn’t altogether happy with the label “Universal Basic Income”. It’s possible, he said, that a better name for it could be found. I think he might be right, together with a new and improved concept.

There can be no disputing the fact that human beings no longer need to work anywhere near as much in order to maintain the economy as they used to do two hundred years ago, say. It was widely claimed at the dawn of the Industrial Revolution that everyone would benefit from the advent of machines that were replacing human beings on the land and in factories, that everyone would have far more leisure time as a result. The same thing is being said again today about the advances in IT, robotics and AI. The claims for the social benefits of machinery two hundred years ago were, of course, bogus. As far as much of society was concerned, the effect was mass oppression, starvation, and a vast concentration of wealth into the hands of the super-rich. There’s absolutely no reason to think that today’s super-rich will behave any differently to their predecessors, and no reason to think today’s new technical wizardry will improve life for the 99% any more than the Industrial Revolution did for our predecessors.

For me, a state-run public sector should be the real backbone of the new world order. Work for human beings is essential. Real idleness, such as Mr Standing appears to recommend so highly, can often be seen in the young families of the super-rich. Some of these young people understand at a very early age that they will never have to lift a finger in order to feed or house themselves, that all they need do is have fun and enjoy themselves. Most of these people are utterly useless and, if suddenly required to fend for themselves, are just about incapable of doing so. In a world where every young person is able to be idle, where finding meaningful work if you want it is almost impossible because machines do almost everything, we could have a world largely composed of ignorant, useless, incompetent human beings.

About three miles from where I live is a small engineering firm that produces high-tech components for turbines. Most of its products are entirely made by machines controlled by human beings. It was recently noticed by the managers that if a machine broke down and some part had to be hand-tooled in the old fashioned way, almost no one could do it. There were only a few grey-haired grizzly faces with decades of relevant engineering skills who would be able to do the job. So the firm has started using the oldsters to train the youngsters in their traditional engineering skills – skills that are no longer taught. Some of the oldsters have actually retired, and don’t have to work, but love the opportunity to pass on their skills. The youngsters don’t currently need those skills on a daily basis, but the firm now aims to ensure that it always has a core of properly-skilled engineers, rather than just machine-minders.

So work is important. It’s increasingly less important for its traditional purpose of providing an income, but it’s still vitally important for providing a meaningful role for human beings, as well as satisfying a common human desire to do something useful, and or skillful.

There are basically two types of work: working in the private sector, or working in the public sector. Corporations mostly control the private sector, and given that their first duty is to maximise profit, they’re not interested in anything that limits their ability to do so – like employing unnecessary human beings, or paying for the education and training of those it does employ. In other words, it’s highly unlikely that corporations would provide the important societal functions, in sufficient numbers, that is already required and which will be even more necessary in the future. Only the public sector can do this. And only the public sector should do this.

A distinction needs to be made and clearly understood between necessary work and unnecessary work. Necessary work is that which provides food and water, for example, energy and communication services, healthcare, education, law and order, public maintenance services and public transport. Unnecessary work could include luxury embellishments of essential services, as well as manufacturing unnecessary products and providing unnecessary services. The private sector, properly regulated, could and should be free to make as much profit as it can from providing unnecessary goods and services. Provision of necessary goods and services must be left to the public sector.

The single most important reason for doing this is to ensure democratic control of essential goods and services. The 99% have absolutely no control of the transnational corporations that are increasingly ruling our lives. It is effectively a form of tyranny, fascism in all but name. The 1% have been slowly re-creating a society that last existed two hundred years ago: a society that only benefits the super-rich at the expense of the super-poor.

Democracy allows the people some control of the decision-makers who rule their lives. Although democracy is a much-tarnished concept in all but a few countries (such as Switzerland), it nevertheless provides a slight framework for allowing the 99% to rule their rulers. The erosion of democracy in favour of corporate tyranny, which has been steadily increasing since the end of World War Two, is making it harder and harder for people to control their own lives.

The public sector could and should create and provide work in delivering essential goods and services. Anyone who wants to work should always be able to find good paid employment working in public service. There could always be a multitude of good employment options working for the state. The corporate business world will never be able to do that, and shouldn’t be able to even if it could – because of the fact that the people have no control of corporations, and therefore no control of the type and quality of goods and services they provide.

So I have a suggestion for the new name that Mr Standing suggested he’s looking for: Alternative Income. Instead of a Universal Basic Income, I propose we need a Basic Universal Alternative – guaranteed useful work.

At the moment we have a system where many people can access state benefits only if they are willing and able to provide a form of slave labour. That repulses me as much as it may repulse Mr Standing. People are forced into this situation because decades of “austerity” economics have ravaged public services so that good and useful work is effectively unobtainable. It’s believed by many of its disciples that the main benefit of UBI is that people would no longer be forced into this situation. It’s a good and reasonable aim, but there is a better way.

Instead of just doling out money to people whether they need it or not, surely it’s better to first provide the option of doing useful, well-paid public service? If people choose not to do that for whatever reason, then by all means make some modest payment sufficient to meet their basic needs, rather than forcing them into the arms of capitalists. Call it Alternative Income (AI) – an alternative to working. But require that people apply for it, stating why they don’t want to work; and put a limit of six months on payments, by which time claimants would have to re-apply. This should not be means-tested, nor any limit imposed on how many times AI could be claimed.

If it’s suggested that there’s no problem financing a Universal Basic Income where no one needs to work for their money, as its disciples do, then clearly there would be no problem financing a vibrant public sector which could always find useful work for people to do.

There are very few people who choose to lead totally indolent lives, and very many who naturally aspire to lead useful lives that contribute to society. If people were properly educated, to see themselves as small parts of a greater society and temporary custodians of a precious fragile planet, instead of selfish and greedy exceptional beings, the goodness and humanity that’s naturally common to most people would be further encouraged to blossom. Only the public sector could provide an endless supply of such jobs. The private sector has no interest in doing so.

UBI/CI are worthy and workable schemes, but the interest the corporate business world appears to be taking in them should scare the life out of their disciples rather than reassure them. I don’t suggest UBI/CI should be scrapped, merely amended, because there’s a much better alternative – guaranteed, useful, well-paid work in public service, with a guaranteed Alternative Income available for those who don’t want to work.

How to Fund a Universal Basic Income Without Increasing Taxes or Inflation

The policy of guaranteeing every citizen a universal basic income is gaining support around the world, as automation increasingly makes jobs obsolete. But can it be funded without raising taxes or triggering hyperinflation? In a panel I was on at the NexusEarth cryptocurrency conference in Aspen September 21st-23rd, most participants said no. This is my rebuttal.

In May 2017, a team of researchers at the University of Oxford published the results of a survey of the world’s best artificial intelligence experts, who predicted that there was a 50 percent chance of AI outperforming humans in all tasks within 45 years. All human jobs were expected to be automated in 120 years, with Asian respondents expecting these dates much sooner than North Americans. In theory, that means we could all retire and enjoy the promised age of universal leisure. But the immediate concern for most people is that they will be losing their jobs to machines.

That helps explain the recent interest in a universal basic income (UBI) – a sum of money distributed equally to everyone. A UBI has been proposed in Switzerland, trials are beginning in Finland, and there is a successful pilot ongoing in Brazil. The cities of Ontario in Canada, Oakland in California, and Utrecht in the Netherlands are planning trials; two local authorities in Scotland have announced such plans; and politicians across Europe, including UK Labour Party leader Jeremy Corbyn, have spoken in favor of the concept. Advocates in the US range from Robert Reich to Mark Zuckerberg, Martin Luther King, Thomas Paine, Charles Murray, Elon Musk, Dan Savage, Keith Ellison and Paul Samuelson.  A new economic study found that a UBI of $1000/month to all adults would add $2.5 trillion to the US economy in eight years.

Welfare can encourage laziness, because benefits go down as earned income goes up. But studies have shown that a UBI distributed equally regardless of income does not have that result. In 1968, President Richard Nixon initiated a successful trial showing that the money had little impact on the recipients’ working hours. People who did reduce the time they worked engaged in other socially valuable pursuits, and young people who were not working spent more time getting an education. Analysis of a similar Canadian trial found that employment rates among young adults did not change, high-school completion rates increased, and hospitalization rates dropped by 8.5 percent. Larger experiments in India have reached similar results.

Studies have also shown that it would actually be cheaper to distribute funds to the entire population than to run the welfare services governments engage in now. It has been calculated that if the UK’s welfare budget were split among the country’s 50 million adults, each of them would get £5,160 a year.

But that is not enough to cover basic survival needs in a modern economy. Taxes would need to be raised, additional debt incurred, or other programs slashed; and these are solutions on which governments are generally unwilling to embark. The other option is “qualitative easing,” a form of central bank quantitative easing in which the money flows directly into the real economy rather than simply into banks. In Europe, politicians are taking another look at this once-derided “helicopter money.” A UBI is being proposed as monetary policy that would stimulate productivity without increasing taxes. As Nobel prize-winning economist Joseph Stiglitz, former senior vice president of the World Bank, explains:

. . . [W]hen the government spends more and invests in the economy, that money circulates, and recirculates again and again. So not only does it create jobs once: the investment creates jobs multiple times.

The result of that is that the economy grows by a multiple of the initial spending, and public finances turn out to be stronger: as the economy grows, fiscal revenues increase, and demands for the government to pay unemployment benefits, or fund social programmes to help the poor and needy, go down. As tax revenues go up as a result of growth, and as these expenditures decrease, the government’s fiscal position strengthens.

Why “QE for the People” Need Not Be Inflationary

The objection to any sort of quantitative easing in which new money gets into the real economy is that when the money supply grows too large and consumer prices shoot up, the process cannot be reversed. If the money is spent on a national dividend, infrastructure, or the government’s budget, it will be out circulating in the economy and will not be retrievable by the central bank.

But the government does not need to rely on the central bank to pull the money back when hyperinflation hits (assuming it ever does – it has not hit after nearly nine years and $3.7 trillion in quantitative easing). As Prof. Stiglitz observes, the money issued by the government will return to it simply through an increase in fiscal revenues generated by the UBI itself.

This is due to the “velocity of money” – the number of times a dollar is traded in a year, from farmer to grocer to landlord, etc. In a good economy, the velocity of the M1 money stock (coins, dollar bills, demand deposits and checkable deposits) is about seven; and each recipient will pay taxes on this same dollar as it changes hands. According to the Heritage Foundation, total tax revenue as a percentage of GDP is now 26 percent. Thus one dollar of new GDP results in about 26 cents of increased tax revenue. Assuming each of the seven trades is for taxable GDP, $1.00 changing hands seven times can increase tax revenue by $7.00 x 26 percent = $1.82. In theory, then, the government could get more back in taxes than it paid out.

In practice, there will be a fair amount of leakage in these returns due to loopholes and deductions for costs. But any shortfall can be made up in other ways, including closing tax loopholes, taxing the $21 trillion or more hidden in offshore tax havens, or setting up a system of public banks that would collect interest that came back to the government.

A working paper published by the San Francisco Federal Reserve in 2012 found that one dollar invested in infrastructure generates at least two dollars in “GSP” (GDP for states), and “roughly four times more than average” during economic downturns. Whether that means $4 or $8 is unclear, but assume it’s only $4. Multiplying $4 by $0.26 in taxes would return the entire dollar originally spent on infrastructure to the government, year after year. For precedent, consider the G.I. Bill, which is estimated to have cost $50 billion in today’s dollars and to have returned $350 billion to the economy, a nearly seven-fold return.

What of the inflation formula typically taught in economics class? In a May 2011 Forbes article titled “Money Growth Does Not Cause Inflation!”, Prof. John Harvey demonstrated that its assumptions are invalid. The formula is “MV = Py,” meaning that when the velocity of money (V) and the quantity of goods sold (y) are constant, adding money (M) must drive up prices (P). But as Harvey pointed out, V and y are not constant. As people have more money to spend (M), more money will change hands (V), and more goods and services will get sold (y). Demand and supply will rise together, keeping prices stable.

The reverse is also true. If demand (money) is not increased, supply or GDP will not go up. New demand needs to precede new supply. The money must be out there searching for goods and services before employers will add the workers needed to create more supply. Only when demand is saturated and productivity is at full capacity will consumer prices be driven up; and they are not near those limits yet, despite some misleading official figures that omit people who have quit looking for work or are working only part-time. As of January 2017, an estimated 9.4 percent of the US population remained unemployed or underemployed. Beyond that, there is the vast expanding potential of robots, computers and innovations such as 3D printers, which can work 24 hours a day without overtime pay or medical insurance.

The specter invariably raised to block legislators and voters from injecting new money into the system is the fear of repeating the notorious hyperinflations of history – those in Weimer Germany, Zimbabwe and elsewhere. But according to Professor Michael Hudson, who has studied the question extensively, those disasters were not due to government money-printing to stimulate the economy. He writes:

Every hyperinflation in history has been caused by foreign debt service collapsing the exchange rate. The problem almost always has resulted from wartime foreign currency strains, not domestic spending. The dynamics of hyperinflation traced in such classics as Salomon Flink’s The Reichsbank and Economic Germany (1931) have been confirmed by studies of the Chilean and other Third World inflations. First the exchange rate plunges as economies pay for foreign military spending during the war, and then – in Germany’s case – reparations after the war ends. These payments led the exchange rate to fall, increasing the price in domestic currency of buying imports priced in hard currencies. This price rise for imported goods creates a price umbrella for domestic prices to follow suit. More domestic money is needed to finance economic activity at the higher price level. This German experience provides the classic example.

In a stagnant economy, a UBI can create the demand needed to clear the shelves of unsold products and drive new productivity.  Robots do not buy food, clothing, or electronic gadgets. Demand must come from consumers, and for that they need money to spend. As robots increasingly take over human jobs, the choices will be a UBI or to let half the population starve. A UBI is not “welfare” but is simply a dividend paid for living in the 21st century, when automation has freed us to enjoy some leisure and engage in more meaningful pursuits.

The Currency Paradox

How Do You Tackle a Big Idea?

It has long been believed that Capitalism is the last economic system. It has triumphed over its rivals, socialism and communism, and has now come to define modern society. Many believe that the religion of Adam Smith was the culmination of all of our economic experiments. To many, not only is Capitalism the best economic system that humanity has ever devised, it is the best that it will ever devise.

About five years ago, I decided to challenge that premise. An idea had occurred to me which ultimately germinated into a system. For two years, I let the idea gestate, examined it from every angle which I could conceive. Finally, in 2014, I was able to bring the concept to fruition. In May, 2014, I published an 14,500-word essay titled The Currency Paradox, a work of economic philosophy. But, more significantly, it presented a concept of incredible audacity…

An economic system that could viably replace Capitalism.

I published it thinking it had the potential to open up a new way of thinking about economics, that it might spur new approaches that would lead to improved economic equality. I shared it with economists of all stripes and political leanings, hoping to create a dialogue. I was interested to know what they thought about my essay and, more importantly, if and how it might influence their thinking on economic matters.

However, a strange thing happened: silence.

Though many read the essay, the small bit of criticism I received was entirely ideological. No one assailed its basic premise and the viability of the economic system presented in it went completely unchallenged. Though I knew better, it was as if my essay didn’t exist. Despite making repeated attempts, the Econ community refused to engage. Economists have refused to tackle the ideas presented in The Currency Paradox.

Some may think that it was probably because the ideas in The Currency Paradox were unworthy of debate. Maybe, but I doubt that absolutely no economist over a three-year period would not have taken the opportunity to “educate” a layman on the error of his concept. Economists are known for many things but humility isn’t one of them. However, more saliently, the concepts presented in The Currency Paradox, once only recognized and examined marginally, have gone mainstream: globalization, economic inequality, student debt, the value of work… all of these topics, which now occupy the mindshare of the Econ community, were addressed in my essay. Solutions like Universal Basic Income (UBI) and Universal Job Guarantee (UJG) have become far more popular topics of debate though the economic innovation in The Currency Paradox elegantly encompasses and surpasses both. The Econ community has become more aware of the pathologies in the Capitalist system but have refused to even examine a possible cure.

In every sense of the word, The Currency Paradox has proven to be “anti-fragile”; it is an idea that has only grown stronger as time has passed. Indeed, much of it has been confirmed through independent research; for instance, my observations regarding the changes in global economic inequality were independently substantiated by economist Branko Milanovich with his now-famous “Elephant Chart.” You’ll now get a chance to decide for yourself. The following is my essay, with only mild edits relative to the original. As with my original essay, we’ll start with my initial thoughts on Bitcoin; keep in mind that this was written in 2014, when the trajectory of it was still very much in doubt. My thinking on the technology hasn’t changed; rather, it has been confirmed. Though I’ve been proven correct regarding its viability as a common money, some people still consider it “the future.” I still think it is a way-station on the road to a better idea.

On Bitcoin

There’s been a lot of press recently about Bitcoin. What exactly is it? The simple answer is that it is a virtual currency. However, what makes it unique is that it is also an astounding innovation in computer protocols, akin to HTTP, SMTP, and other core Internet technologies. The Bitcoin protocol eliminates the need for a trusted third party when performing electronic payment transfers. Rather than entrusting (and paying) a third party to handle a payment transaction between two parties, Bitcoin allows two parties to transmit money, in the form of bitcoin, to each other near instantaneously and at very little costs.

What is exciting about Bitcoin is its speed, security, and low costs associated with payment. Its infrastructure maintains a perfect record of all transactions and has proven to be impervious to any malicious electronic attack. Proponents are excited by its potential to financially empower billions of people without access to banking resources or for whom money transfer is expensive.

While a tremendous achievement in a technological sense, Bitcoin is highly unlikely to be effective as a currency. For the most part, the important qualities of a currency are efficiency, elasticity, and its ability to store value. How does Bitcoin measure up?

For practical purposes, consider “efficiency” to mean the ease with which money is used for payment or transferred. Is Bitcoin solving a problem related to the efficiency of modern money? Not really. Granted, transferring Bitcoin is extremely fast, inexpensive, and secure, but it lacks the comprehensive infrastructure of today’s fiat money. Literally trillions of dollars are transferred between parties for payment and foreign exchange using the current system, which is mostly electronic and largely frictionless. In this respect, Bitcoin and other so-called “crypto-currencies” aren’t solving a problem. As it relates to efficiency, the fiat money system as it exists is “good enough.”

In regards to “elasticity,” fiat currencies are very flexible relative to the needs of the market; the money supply can be expanded or contracted as needed by governments or central banks. “Elastic money” allows a central authority to address excessive inflation, deflation, recession, or other distortions in a Capitalist economy [or at least try to]. Is Bitcoin more “elastic” than today’s fiat currencies? Absolutely not.

Indeed, Bitcoin suffers from many of the same problems that make gold impractical for modern use as money. Similar to gold, Bitcoin is “mined,” but through the use of algorithms; as more are created, the computational resources required to mine them increases. The net effect is that relatively few bitcoin are produced. This condition causes Bitcoin to more closely resemble commodity money, mirroring the same deficiencies. The fact that the total supply of Bitcoin is always a known absolute quantity and that new ones are slow and resource-intensive to produce encourages price volatility that actually greatly exceeds gold.

However, the most damning aspect of Bitcoin is the fact that only 21 million units will ever be produced; whatever beneficial qualities they have will paradoxically encourage them to be hoarded, artificially limiting supply. Right now, over 60% of bitcoin have never been transferred or exchanged. As the absolute limit of its supply is reached, Bitcoin transactions could potentially slow to a crawl. Demand could exceed supply so greatly that it will become obsolete; losing whatever perceived value it has as a common money as people flee to a less scarce, more flexible currency.

Some make the argument that Bitcoin is infinitely divisible, making the elasticity issue moot. However, the likelihood is that dividing bitcoin will create the problem of “infinite denominations,” producing a substantial amount of complexity in matters of accounting. Also, dividing a currency does not truly address circumstances in which actual expansion of the money supply is necessary. It is the equivalent of stating that a bucket of water can be stretched by using an eye-dropper for distribution rather than a cup. No amount of rationing from one bucket of water will solve the problem of needing another bucket of water.

Finally, currency should be a relatively good “store of value.” In other words, a particular currency should be generally accepted as having a certain level of worth in current circumstances and a relatively high chance of having a certain level of worth in future circumstances. Not only is this criteria very difficult to meet with today’s fiat currency but it is a difficult standard to practically meet with any currency. However, the “store of value” problem is circumvented in a pretty interesting way with fiat currency… its value is more or less imposed by force. Governments make the determination of what the common money will be and then use force, implied or actual, to ensure the money’s stability. This creates an interesting correlation between a country’s money and the power of its armed resources relative to its population. It’s likely not a coincidence that the world’s most powerful country militarily also has the dominant money. The bottom line is that the government of the United States of America has the legal apparatus and force of arms to ensure and reinforce the acceptance of the dollar as legal tender for resolving debt among its citizens. More importantly, U.S. dollars are the only form of money accepted by the U.S. government for taxation. The act of taxation provides strong validation for fiat currencies and ensures their value; this concept is historically referred to as “chartalism.”

Is Bitcoin an effective “store of value”? It is a largely unregulated, pseudo-commodity created completely electronically, controlled and validated by no central authority. Its value is determined entirely by the market. So it is worth something as long as people think it is worth something. The main problem with Bitcoin is that it has no real-world analog with which to reference. They have no intrinsic value of which to speak and not even the benefit of force of arms with which to impose their value. They are created from thin air and the very equipment used to create them can only be purchased with government-backed fiat currency. There is nothing to indicate that Bitcoin is an effective store of value.

Some claim that Bitcoin’s intrinsic value lays in the protocol that enables it. This is reasonable thinking if there were no possible substitutes and Bitcoin had evolved as the sole means of making payments or transferring money electronically. However, the global currency market can and likely will continue to evolve without the Bitcoin protocol. An object, system, or protocol must not only be essential but also unable to be practically substituted or duplicated for it to be credibly claimed to have high “intrinsic” value. For instance, what effective substitute can there be for indoor plumbing? Bitcoin does not meet that criteria. The global currency system already processes trillions of dollars in payments and exchanges and will likely continue to do so indefinitely without it.

Whatever its technological merits, Bitcoin fails utterly to meet the basic criteria of a currency. It is possible that other crypto-currencies will solve the problems of efficiency and elasticity, but it is highly unlikely that any crypto-currency will solve the problem of being an effective store of value. While the technology underlying crypto-currencies will surely make an indelible mark on the overall technological landscape, it is doubtful that Bitcoin or its copycats/derivatives will succeed in the long-term as currencies.

The Paradox of Fiat Currency

There are a lot of fancy definitions for money, but I prefer to think of it as the “blood” of an economy. Much like blood transports oxygen and nutrients to the cells in a human body, money flows in an economy to transport goods and services from the people who provide them to the people who need them.

However, fiat currencies themselves are only placeholders for real goods and services. Without the backing of central authorities, they have no real value. Fiat currencies are a paradox, being inherently worthless yet able to be traded for things of actual worth. This is a fundamental flaw in the Capitalist system. Let’s examine this in detail:

Does money have an exact or even near exact correlation to the amount of goods and services available at any given moment? Those who believe in the efficiency of markets will generally say “yes,” but it is highly unlikely. To illustrate: one person may be willing to pay $100 for a cow, one may be willing to pay $1,000 for it, however, does the cow itself alter in any way if someone pays more for it? Does the same cow become a better cow if someone pays more for it or a worse one if someone pays less for it?

The belief is that “markets” are self-correcting; that, in the end, fair value for that cow is established as an aggregate of what the market is willing to pay for it. But, under any conditions, market pricing is highly arbitrary. It is actually an aggregate of what many people with many different levels of understanding and/or need related to price and value are willing to pay. In many circumstances, people may pay radically different amounts for the same item or service. On top of that, items can be (and often are) priced by their supplier (businesses) to appeal only to a limited segment of the population, placing it beyond the financial means of a majority of people who may actually desire that particular item or service. Luxury items are notable examples. Quality is often stratified by means; higher quality items are reserved for those who can afford them. In this manner, quality of life itself is stratified. In the situation of the cow, it is unlikely that the person who can only pay $100 dollars for the cow has similar financial circumstances relative to the person who can pay $1,000 for it. Also, it doesn’t matter how many cows are offered for sale, the person who can only offer $100 will likely always lose to the person who can offer $1,000 for the cow. Targeted pricing by suppliers and variations in the knowledge and the means of the population creates pricing distortions in which items and services that may be very similar intrinsically have radically different values as measured in money.

A more significant problem exists when it comes to financial and speculative markets, such as commodities. To illustrate: soccer is a universal game and millions around the world play it … but what are the odds that a group of moderately-skilled players will be able to defeat a team of professionals?The pros are separated from the moderately-skilled players by a number of factors such as talent, ambition, long hours of practice, and a love or understanding of the game that gives them insights that less-skilled players do not possess. The professional soccer player has an advantage over the moderately-skilled player that is substantial in the short-term and practically insurmountable over the long-term. It is possible that some of the moderately-skilled players could achieve a high level of proficiency at the game with intense practice, but the actuality of that is highly unlikely. The reality is that, among the millions of people who play and enjoy soccer, only a relative handful has the unique combination necessary to become truly elite players. Those players will always have an advantage against lesser-skilled opposition.

The same can be said of financial markets as well. There is a relatively small group of “professional Capitalists” with the particular combinations of talent, experience, insider knowledge and circumstances to have distinct advantages over others who participate in those markets. These circumstances create distortions that are similar to professional soccer players playing against lesser players. Rather than both teams winning an equal amount of times over the long-term as statistics would generally dictate in situations with 50/50 odds, the professional team will defeat the team of lesser players the overwhelming majority of the time. Many markets are likewise skewed, with the people possessing expert skills and/or insider knowledge having an indelible advantage over those who do not.

These conditions make economics as a discipline an inexact practice. As a result of naturally occurring distortions in market dynamics, it is practically impossible to know the value of money in an economy – as an accurate measure of goods, services, and productivity – at any given time. The reason for that is because market economics guarantees that nothing can ever have an absolute, permanently-fixed value defined in money. Indeed, there are substantial advantages for professional Capitalists that such conditions exist.

This brings us to the matter of money supply.  In theory, central banks or governments can create an unlimited amount of it. Fiat currency is an artificially-created commodity which, by the very fact that it can be produced practically without limit with relatively little effort, is worthless. Yet, every unit of fiat currency can be exchanged for real goods and services. In other words, something that is inherently worthless can be exchanged for things of actual worth. Central authorities get around this by letting markets determine what currency is worth in any given circumstance but, as shown, this is a symbolic exercise. Does believing that money is worth something actually make it so? Also, what actual choice do markets really have? Fiat currencies are standards codified by laws which are then protected with implied or actual force. It is impossible to live in a modern society without having to use fiat currency, especially considering its use for taxation purposes. As a result, people who control the production and lending of money wield an incredible amount of power and have a ridiculously unfair advantage over those who do not.

From a syllogistic standpoint, the following conclusion can be drawn: without a way to precisely correlate fiat currency to actual goods and services, the fiat currency system is very similar to theft. As previously stated, fiat currency is inherently worthless, yet can be exchanged for actual goods and services the moment it is created. Those responsible for producing and lending it benefit from legal monopolies that are protected by force. On top of that, even in an economic environment in which markets set its value, the constant production of fiat currency slowly erodes its purchasing power to zero. This in itself would not be as much of an issue if the decrease in money’s purchasing power was offset by relative increases in the amount of money people earned as a result of providing their services in the form of work. However, that is not the case. Globalization and technological advancements have deprecated the overall value of work by shifting labor costs from more expensive, highly-developed labor markets to less-expensive, developing labor markets. In other words, the earned incomes of workers in highly-developed regions are stagnant or falling as a result of their being displaced by technology as well as workers in developing regions, whose incomes are commensurately rising. The net effect is the leveling of most incomes across all regions to a common lower baseline. The improvement in the standard of living for some is coming at the expense of the standard of living for others.

This can be seen in the growing glut of labor supply in highly-developed regions taking the forms of high unemployment and underemployment. Because people, for the most part, cannot opt-out of the fiat currency system, the bargaining power of most workers is severely compromised. As the overwhelming bulk of necessary work doesn’t require advanced skills, there is always a ready pool of people willing to take the lowest level of compensation offered in order to survive. Efforts to destroy, severely hamper, or suppress collective bargaining in many developed regions has also greatly contributed to stagnant or falling earned income. The net effect is a system in which workers must compete individually against not only each other, but also a massive network of corporations and institutions that control the overwhelming bulk of the planet’s wealth and resources through the fiat currency system.

This condition could be offset if people could retreat to an alternative economic system outside of the fiat currency system. But such a system does not exist in a practical manner. There is not a practical alternative economic system in the world ready to claim the billions of people currently being economically exploited or neglected by the current system.

Massive unemployment and underemployment, widespread poverty, and escalating income inequality are the clearest evidence that the fiat currency system is a sophisticated form of theft; by correlating real work to an inherently worthless commodity and then deprecating the purchasing power of that commodity over time, the fiat currency system isn’t just an extremely efficient system of theft of goods and property, but one for theft of something far, far more important … time.

The Debt-Driven Economy

In order to get into the heart of the current economic system, it’s best to start with a simple question: why does the fiat currency system exist?

Some conspiracy theorists think that its purpose is global enslavement, that a cabal of the super-wealthy and powerful has created it to control the world. If there is indeed a conspiracy controlling the financial system, then:

1) it has beaten all odds by keeping such a thing relatively secret for presumably decades to hundreds of years;

2) Even still, the odds are very much against such a group maintaining this type of secrecy indefinitely;

3) Even if everything goes more or less exactly as this cabal plans, something completely unexpected will occur that will tip the apple cart. A perfect crime may indeed be possible, but not an ongoing one that lasts hundreds of years.

A simpler explanation is that the fiat currency system exists because it is practical and, for the most part, it has worked. It has been exceedingly effective as a mechanism for the advancement of the human species.

The fiat currency system is complex in its intricacies, but simple conceptually. It is actually similar to a game of “hot potato.” Basically, when money is created, it is immediately loaned to a person or entity with the expectation that the borrower will pay it back with interest. In many instances, the money initially borrowed is loaned out again at a higher interest rate to another party. The initial loan can change hands several times or not very much at all but, ultimately, a borrower without the means or inclination to pass the debt must invest time and effort to produce the goods or services that can be exchanged for the money to repay the debt. In this manner, value is actually created. It can be stated that this is the engine on which civilization runs.

However, there are signs that the system has reached the limit of its utility. The likelihood is that debt has exceeded the total capacity for human production so much that it can no longer drive real growth; debt has simply accumulated far beyond the practical ability for it to be repaid with productive effort.

To illustrate:

Since fiat currency is created by central banks in massive quantities, it can be loaned very cheaply; this is normally accomplished when they buy assets or securities from governments or large financial institutions, often ones native to the region in which the currency is produced. In some instances, such as China, the government itself acts as the central bank. When central banks or governments purchase securities from large banks, the funds are added to the institutions’ reserves and then used as the basis for what is known as “fractional-reserve banking,” a practice in which the bank is able to lend a greater amount than what it retains in actual monetary reserves. Critics of the fractional-reserve model claim that it creates money “out of thin air” and they are, for the most part, correct. However, the problem isn’t necessarily the money created through fractional-reserve banking, but the debt obligations created by the demand for interest on the money that is loaned.

To account for potential defaults and to make profit, banks charge interest on their loans, the rates of which are generally inversely related to the amounts loaned. In other words, money is cheap to borrow in large quantities and becomes progressively more expensive to borrow as the loan amounts decrease. This condition is mostly circumstantial; banks lend money based on the assessment of risk for default. Institutions and individuals that already control massive amounts of capital are seen as better risks when lending large sums of money. The less capital that is controlled by an individual or institution, the more it is perceived as a risk for default relative to the amount to be loaned. Even those with an excellent repayment history will be limited to how much they can borrow simply based on their capital levels. The greater the perceived risk for default, the higher the amount of interest that is charged for a loan. This creates the paradoxical situation in which the entities with the least amount of resources to repay loans have greater debt obligations in relation to those resources when they borrow money.

The likelihood is that debt creation has outpaced the practical ability for it to be repaid with work. Estimates place total world debt at roughly $224 trillion USD; split evenly among the roughly 7.13 billion people on the planet, that places the estimated debt burden of everyone at about $31,417 USD. A considerable figure, but maybe not as intimidating as some would think. However, consider the following:

Using the average world salary in Purchasing Power Parity (PPP) dollars of about $18,000 annual (the equivalent in USD), it would take every individual about two years to pay off their share of the debt. However, this can only be done if nobody pays for anything else, such as food, water, shelter, or clothing. If you assume that everyone will have a relatively generous 15% left over as disposable income after paying for necessities, this leaves about $2,700 per year per person to address the debt issue. Based on that number, it would take over eleven years for each person pay off their share of the debt. For many, that still may not seem like a particularly excessive burden until you take these other factors into account:

That debt burden is for everyone: man, woman, and child, from newborns to those only seconds away from death, not exclusively working-age adults. Labor force Participation in the U.S. is roughly a third of the population; applying that proportion worldwide, the debt load for each working-age person is $94,118 USD. It would take a bit over five years for each person to pay off their share of the debt provided they paid no other expenses. Using the disposable income figure of $2,700 per year, it would take each person about thirty-five years to pay off their share of the debt.

Over two billion of the 7.13 billion people on the planet live on less than $2 PPP per day. Multiplying their daily income ($2) by the number of U.S. standard business days in a year (260) yields an annual income figure of $520. At that annual income, it would take over sixty years for the members in this group of two billion to pay off their $31,417 share of the debt while not paying any other expenses. At 15% disposable income, it would take each of them over four hundred (400) years to settle their portion of the debt.

However, this assumes a complete workforce of 7.13 billion people. If we confine the debt to a labor force participation rate of roughly 1/3 the size of the total population, it would take about one hundred eighty (180) years for each person in this group to pay off their share of the debt provided they pay for nothing else. At 15% disposable income, it would take each of them over twelve hundred (1,200) years to pay off their share of the debt.

These figures assume a static debt. However, the debt is actually growing at a rapid pace. Almost every new unit of fiat currency created carries a debt burden (there are exceptions, U.S. minted coins being a notable one). Debt creation is not standing still.

However, things aren’t all bad … global wealth is estimated to be about $241 trillion. Operating under the premise that one dollar of wealth destroys one dollar of debt, subtracting total global debt from total global wealth leaves the world with $17 trillion net wealth. Not too bad, right? But …

Using the current distribution of wealth, the top 1% of the population will control 46% of what’s left while the top 10% will control 85%. Of the $17 trillion left, the top 1% will control about $7.82 trillion or about $109,677 per “1 Percenter.” The next 9% would control about $6.6 trillion or about $10,285 per person, rounding out the top 10%. This leaves $2.55 trillion dollars for the remaining 90% of the world, a little over 6.4 billion people. That equals about $397 per person or slightly over $1 per day over the course of a year.

While this is definitely a simplification of the debt situation, it should provide a pretty accurate sense of its scale. It takes real effort in the form of man-hours to pay off debt and the scale of the debt created by the fiat currency system is staggering. The debt situation facilitates tremendous financial inequality, as those with the knowledge, skills and connections starve the fiat currency system of money by accumulating it in huge quantities through profit and capital gains and using it to control massive amounts of natural resources.

The net effect is that fiat currency has likely outlived its usefulness as a practical means for managing an economy. In other words, the fiat currency system has simply become too expensive. For instance, even with massive advancements in technology, debt and inflation have made funding large- to massive-scale efforts such as actually returning to the moon or sending a manned mission to Mars economically unfeasible. Some may think that such efforts are unimportant, but, as I will explain later, the very survival of the human species relies on our ability to fund projects of those magnitudes.

Next:  Part 2