Monday, June 22, 2009

Bail out people not banks

Guy Standing, Professor of Economic Security at the University of Bath (UK) writes in Issue 3 of the Citizens Income newsletter, click here to access it, and see Viewpoint 2. He says that the current bail-out schemes, such as for ‘strategic’ industries, successful lobby groups, bankers, mortgage holders or inefficient firms, may not help the most needy citizens. He calls for an automatic regular ‘stabilization grant’ which would boost purchasing power and consumption and he says that evidence shows that such payments encourage people to take paid work. It would be payable as of right to every citizen on a monthly basis and with modern day tax and benefit systems it could be clawed back appropriately from higher earners.

There is a reference to an article in the Financial Times 4 June by Martin Sandbu and Nicholas Shaxson: click here, ‘Give the people the resource wealth’. They write that rather than political elites fighting for resources, such as oil wealth, these should be distributed directly to all citizens and then the political elites would have to bargain with the people for the tax revenues. See also ‘Viewpoint 1’ by Jeffery Smith on this idea. It is good to see a crossover between some of the essential strands of the ‘new economics’ that are already together in James Robertson’s work and in The Free Lunch – Fairness with Freedom. Professor Richard Werner (Southampton University) in his book New Paradigm in Macroeconomics goes even further than Sandbu & Shaxson in the funding source. From his viewpoint of the possibilities inherent in the democratic control of credit creation, he writes (p340) that in certain circumstances every family could 'be paid $100,000 for each child born'.

Other themes in the CI letter include: Basic Income? Basic Capital Grant? hybrid?; also Anne Millar has a financially worked out scheme, for funding from conventional income tax, for various levels of Citizen’s Income covering age groups, disability groups, lone parents, etc. This is extremely useful in that it shows that Citizen’s Income is affordable but it is always important to at least mention the possibility for wider tax reform involving using resource rents (land value, oil wealth, etc), or even non-banker credit creation in place of income tax to fund such a Citizen’s Income.

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