Friday, January 20, 2017

Guaranteed Basic Income vs. Guaranteed Basic Capital

Throughout human history people have earned income in two ways. One way was selling their labor. The other way was working, or hiring someone else to work, their capital.

In past ages capital was scarce. It was also more dependent on labor as a co-factor necessary to make it productive. You might have shovels, but without men to dig more than one was not of much use to you. Then came tractors. One operator and one mechanic could dig more than one hundred men with shovels.  So what happened there was that once the capital equipment was built the owner of the capital could substitute capital for labor. They no longer needed one-hundred men with shovels, they only needed an operator and a mechanic. The catch was that a tractor with back-hoe was more capital intensive than buying 100 shovels. Two skilled workers and an increase in capital replaced 100 less skilled workers.

For the last two-hundred years or so that did not matter because our capital increases increased overall wealth so much and there were plenty of other things that those freed-up hands could do. Instead of digging that ditch to bring water to the crops, two guys on a tractor could do it while the other ninety-eight worked on an assembly line making products that either never existed before or were very difficult to make in prior generations. In other words, society as a whole got richer by the increasing capital component of production. Those who survived by selling their labor did pretty well in the advanced economies. There was still a need for labor to work capital and the resulting boom of production from labor + capital working together was so enriching to the culture that everything became less expensive (measured in constant dollars) due to productivity gains.

Despite some complaints from those at the bottom, overall if you were a hard worker and a responsible person, you could do OK for yourself, maybe even well. Sure, those who started out with a big pile of capital did even better, but there was opportunity out there for those willing to take advantage of it. Then things started changing.

The number one thing that changed was the monetary system. After 1913, and in particular once those at the top of our financial system freed themselves of the gold standard, we had a financial system divided into two classes- the connected few who had access to vast amounts of money at very little or no cost and the unconnected many who had extremely limited access to capital for which they had to pay a lot in interest. It is easy to see that when you have that division in your economy, over time those with access to vast amounts of cheap money will wind up owning everything and those without it will wind up owning nothing.

We see how this played out in the bank bailouts of 2008. If some generation of your family messes up, they lose the family land forever. If one of these multi-generational global banks messes up, the system does whatever it has to so that they keep their stuff. Those on top use the system to stay on top. Again, it is easy to see what is going to happen over time. Eventually, someone in your family line will blow it and lose your family's accumulated capital. No bail outs for people like us. When Goldman Sacs blows it, the rules get changed so that they get to keep theirs. Again, the result of this system must be that over time the big corporations and governments own everything and the rest of us own nothing.

So one thing that happened was that capital was concentrated not by production, but by being connected to the system. The result has been that instead of most people owning substantial capital, only a few did and everyone else had to exist by selling labor into a market which is increasingly shifting away from labor and into capital.

The second thing that happened was the increasing globalization of labor, not just for blue collar jobs but also white collar jobs like construction drawings. In the recent past, bids for labor were more localized so that pockets of labor could still command high prices even if the overall price for labor was low. Now the labor pool is much more globalized. Capital can go to wherever labor is priced lowest. One may view this as a good thing or a bad thing (as I do in the case where the lowest-priced labor is slave labor from a nation with a captive labor force), but the overall effect of freedom of movement for capital is to put more downward pressure on labor prices.

Now technology is reaching the point where it is filling in so many jobs that there is an excess supply of labor overall. It is not just a question of the labor having the wrong skills, there is less and less place for any labor to go. It is easy to see the day coming when the "Family Doctor", a skilled position, is replaced by a hologram connected to an app which asks you certain questions and gives a diagnosis based on your answers and test results. The same thing is happening on the low end for the few jobs that can't be outsourced, like a cashier at a fast-food restaurant. An attempt to demand higher wages results in being replaced by an automated system. I can see the day coming when workers will be faux-AI robots made by other robots!

Those at the top of the economic heap make their money by working their capital, so they are all for
this change.  Robots complain less than people anyway. For the rest of us, we are being turned into what the harsher and more Social Darwinist members of the ruling class would call "useless eaters". Even if we are healthy people willing to work at a traditional job, there may be few to none to be had at a wage that would make it worthwhile to work. Going forward, we won't just be competing with Chinese neo-slaves, we will be competing with robots.

The shooting-for-pseudo-godhood members of the ruling class have a bit less harsh plan for the rest of us once technology produces a world where mankind has accumulated so much capital that none of us will ever have to work by selling our labor again. We can all live off of worked capital. What is this plan you say? Is it dividing up the massive accumulated capital to each individual so we can all just make a living managing capital rather than selling our labor? Uhhh. No. They and their controlled institutions like the state will hold onto all the capital. After all, how can they be our new gods if the basis of their godhood is diluted by other people having it too? No, their plan is called a "Guaranteed Basic Income" or "Living Wage."

Under this plan, every person would get a fixed income from the government. If they wanted to work in order to supplement this income, and were able to find work, then that would be OK (so long as they paid taxes) but the amount of the Guaranteed Income would be enough to support a person at a low level even if they never worked. Obviously government welfare would be universalized so that welfare programs per se could be abolished.

That sounds very tempting to a lot of people living on the edge in low-paying jobs that they hate (and even those are going away). Get paid by the government for doing nothing, and there is not even any stigma because everyone is getting a check, what is not to love? Everything. It is tempting, as sin often is, but its not the answer. For one thing, it would make us into utterly dependent slaves of the state. They would control whether your family eats or not, even as they want to control your healthcare now. What chance would a population have of resisting such rulers? It would not be "money for nothing". Supplicants would be beholden to the system. And more so each generation as more and more people lost the means and drive to take care of themselves and their own affairs. Ask yourself what its done for third generation welfare families if you think its such a good idea for everyone.

But the imbalance between the value of capital vs. the value of human labor is bound to continue. Its a real issue that ought to be addressed. The localist solution, indeed the solution of any person who wants to remain free rather than be worse than a slave because at least slaves had value to their masters and were therefore not easily expendable, is to guarantee basic capital rather than basic income. After all, the reason for the imbalance in the first place is that those who live by working capital have an increasing advantage over those who live by selling their labor. So its not income that needs to be guaranteed, but capital. Instead of all capital being owned by a few giant global corporations and governments and individuals being left with next to nothing, capital should be re-distributed. Not in ways which would use government force to take from one private person and give to another, but redistributed nevertheless.

For example, the United States government owns a significant amount of land, including vast portions of western states, and buildings and real estate all over the nation. States own mineral rights on public lands, and take property for back taxes that is now being scooped up by those few with access to our financial system's magic money machine for the connected. In other cases, favored corporations get special deals, such as tax credits or relief from certain taxes to operate from a given location. Why not have every citizen partake in the access to state-affected capital which is now available only to the few? Rights to property and rights to freedom from taxes for certain capital or businesses operated from a given location can become a family inheritance. In addition, as with the Basic Income Plan, money now spent on welfare can be re-directed. It can purchase capital assets for the program. Ultimately, when capital is built up enough, that money would not be necessary.

In the Old Testament, there was such land that could be rented out but not be sold. In the fiftieth year it would revert back to the heirs of the original family. Thus one bad generation could not lose the family heritage for all time, only for their own time. All debts were also cancelled. It was called the "Jubilee". Such a system assured that capital would always stay somewhat distributed and it would be impossible for the financial sector to dominate the whole economy. In other words, it would avoid the mess we find ourselves in today.

But it would also have another advantage- even if robots replaced workers no one would have to be destitute. Every family would have capital to work. They could all make some kind of living working their capital instead of just selling their labor. And in this system people would not be beholden to the government for that monthly check. Some would work their capital themselves and become wealthy, others might lease their capital out to someone else to work and go play video games and smoke pot. They would be relatively poor. But in each case, it would be their own choice, but a generationally revocable one.

"Basic Income" is like giving a man a fish. In a world where teaching them to fish is pointless because robots can fish more tirelessly and all the fishing holes are owned by the government and global corporations. It will be a tempting option. But its soul-destroying. Its the opposite of empowerment, it will give the government total control of the citizens. A better answer is for every family to have their own fishing hole. If all else fails, they can rent the rights to fish it to someone who has a robot.

I call for a society in which some capital assets are the irrevocable possessions of families. It should not be a federal program but the unnecessary assets of the Federal Government should be transferred over time to states and counties and from there to individual families which are "family corporations" with their own procedures and rules separate from standard incorporation. These assets should be kept on a perpetual trust basis so long as a family has heirs remaining. Should a line die without issue then the assets could only be purchased by other family trusts, or awarded to new trusts on the basis of another family becoming new citizens in good standing. The rules of society should be reversed from their present biases in which the property of real persons and families is subtly stripped away over time and transferred to artificial persons known as "corporations" and government entities. Instead, the rules should be reversed so that property and capital accrues to individuals and families.

The problem of shifting value between selling labor and working capital is not going to go away. Central statists have their "solution"- a guaranteed minimum income which would leave the masses wholly at the mercy of a merciless state. They will be in a worse position than slaves while those at the top will imagine themselves gods. The localist answer makes every man a lord.