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Universal Basic Income Video Geoff Crocker

Universal Basic Income (UBI) Video - Geoff Crocker

Geoff Crocker Address on UBI to the Asia-Pacific Conference


Hello thank you for this invitation to address the conference on basic income in Asia-Pacific in Taiwan I'm Jeff and living in the UK and working on the economics of basic income there are traditionally I would suggest three strong reasons for basic income the first is social justice well explained by people like guys standing in his books on the precariat the second is to do with administrative efficiency ie that if you could have any welfare system at all that basic income is the most cost-effective to operate that arguments were kept up by writers like Malcolm Torrey and the third is the argument from technology the fundamental economics of basic income which is what I'll be covering in this presentation the arguments against basic income traditionally are that it seemed to be a work disincentive and secondly that it's economically unaffordable the worry that basic income would be a disincentive to work is counteracted by the argument that the current welfare systems themselves are much larger disincentive to work because typically today if someone on benefit finds a job then they lose all of their benefit and the marginal rate of tax as it were can be as high as 90% on the question of affordability it is true that a substantial basic income would cost each economy substantially but the counter-argument of that is that affordability is defined by output GDP is defined by what the economy can produce it is not defined by how much money the government has in its Exchequer and I will amplify that argument in the presentation so moving on to the arguments from technology in their book the second Machine Age Brynjolfsson and McAfee paint a picture of huge automation where we're going to see huge increases in unemployment we're going to see social exclusion low economic demand as a result recession and the sustainable levels of consumer credit to try to prop up demand leading to economic crisis and then the application of austerity policy basic income breaks this vicious circle the question is how do we fund such substantial basic income let me offer you a thought experiment of a totally automated economy in this totally automated economy a machine is plugged into the earth and without any labor it produces all the goods and services that we need in the economy how do we then destroy those goods and services they can only be distributed by the government giving out vouchers to all of the population population and exchanges their vouchers for goods and services the government takes the vouchers back in destroys them for that year and issues a new set of vouchers in the following year now in this thought experiment there are two very important implications first of all 100% of GDP becomes basic income and secondly perhaps more ethically 100% of GDP also becomes financial deficit now this of course is an extreme because it's a thought experiment but my argument from that is a more nuanced argument that is that in high-technology economies first of all an element of basic income is essential to maintain consumer demand and secondly that financial deficit to some degree is an inevitability now we also then need to add to that the heterodox view of economics in this heterodox view of economics first of all it's recognized that all economic entities of consumption of investment of consumer spend and so on are all rendered affordable by an output GDP not by the amount of money that the government has in its Exchequer secondly that money has no inherent value it doesn't derive that value from gold reserves it doesn't derive value from the sale of government debt it acquires value only from output GDP and thirdly the de sovereign state can create money without reference to gold reserves or the sale of government bonds all the creation of debt it can create money solely in reference to the same output GBP so let's look at the nature of income in the economy let's take a look at this graph this graph is very significant for the argument for basic income it's a graph of the UK economy from the year 1948 right through to 2016 I’II virtually seventy years of economic history and it maps Consumer Expenditure against consumer income and you can see very simply from that graph in 1948 a consumer income was in excess of cube consumer expenditure in other words people earned enough for their expenditure in 1995 that changed such that subsequent to 1995 in the years to the present day 2018 consumer expenditure has been in excess of consumer income and the change is long term is inexorable and this undeniable is a big structural change in the economy this demonstrates that the significant element of unearned income is needed in the modern high-technology economy this slide summarises the points about the nature of money in the economy I remember being an economics student at university 40 years ago and my lecturers say oh dear he said nobody understands money and actually I think that's still true today nobody understands money what is the nature of money well the financial orthodoxy has the following view of money ie that money has inherent value only from either gold reserves or from the sale of government bonds which create debt secondly that money is real and cannot be created or destroyed and thirdly that government budgets must balance the challenging heterodox view of money is on the contrary that money has no inherent value but only derives its value from output GDP that a sovereign state can issue money versus that output GDP without the need for creating debt and finally the financial deficit is inevitable and manageable in high-technology economies let's try to show that comparison graphically in the first part of the graph we see the monetarist theory of money where on the left-hand side it's either gold reserves or the creation of government debt that is creating value for money and that's then making investment production wage as welfare and consumption affordable or not but in the graph below we show the radical neo-keynesian a heterodox theory of money which is that it's actual activity is economic activity of investment in production producing output GDP which then creates value in money driving wages welfare consumption and the economic circle so output GDP becomes the proper test of affordability and not the amount of money that a government has in its Exchequer basic income proposals in my view should therefore a dot and neo Keynesian theory of money and basic income proposals must accept that there is inevitable deficit in high-technology economies which in turn can then fund a substantial basic income so much for the theoretical claim so now let's look at empirical fact which might test that theoretical claim this first graph shows the deficit in the UK economy over the last 23 years and as you can see at a glance for the majority of those 23 years the UK economy has operated at a deficit there's only two years in fact when it didn't run a deficit and remember this is despite the frequent attempt by Chancellor's of the Exchequer in the UK to eradicate deficit they failed to do so it's beginning to look as though it's inevitable the next graph shows a similar picture for the G7 economies and again you'll see that for all of those economies for the majority of the many recent years they have also operated at a deficit so deficit is empirical fact as well as theoretical prediction the third graph shows the level of debt that has been accumulated in each of those economies over the last many years and as you'll see from this picture in 2016 most of those economies have debts in excess of their annual GDP so for the G7 economies with the exception of Germany all the other six of the G7 economies have a national debt which is more than a hundred percent of their GDP and in the extreme case of the Japanese economy and this remember of course is an Asia-Pacific conference the Japanese economy has a national debt which is equal to two hundred thirty four percent of its GDP now when you look at facts like that it makes you think that perhaps the theoretical claim is correct that deficit is inevitable because no one seems to be able able to overcome it but secondly the debt accumulates without having any big impact on the economy the idea that this debt is somehow some mountainous burden that is going to be heaped on the shoulders of our grandchildren it's simply incorrect there is no way in which an economy is going to be able to pay back 234 percent of its GDP this has to be written off it is in fact virtually being written off anyway so it's better to face that in explicit policy terms that deficit is inevitable and can be written off without harm this is a perfectly manageable proposal and in fact an inevitable policy given the argument we made earlier for the impact of technology in the economy requiring a basic income funded by perpetual deficit so in conclusion the theory predicts that in high-technology economies we'll see a need for unearned income and therefore for basic income as an essential component demand and the theory also predicts that we will see the inevitability of financial deficit when we turn as we just have to empirical fact we see that those theoretical implications are borne out in practice the fact is that in high-technology economies basic income is an essential component of demand financial deficit is inevitable basic income at a substantial level can therefore be funded by perpetual deficit thank you for your attention and all best wishes to the conference in Taiwan.

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