>If this is your first exposure to this idea it might sound like total insanity, but the idea of a government-provided guaranteed income is in fact not particularly new. In the first World War a British engineer named C.H. Douglas noticed a discrepancy between the total value of goods being produced for the British war effort and the salaries, wages and dividends being paid out by the producers.
Have you ever seen a pile of 8 million coins? Neither had most of the residents of Bern until a group looking to raise awareness of their plan to pay a basic income to every man and woman in Switzerland dumped such a pile on the doorstep of the Swiss parliament. If their intent was to grab people's attention, they did a pretty good job.
The stunt was masterminded by Enno Schmidt, a German-born artist leading the basic income movement in Switzerland. Their aim: to compel the Swiss government to send a check for 2,500 Swiss Francs (over $2700 USD) every month to every adult in Switzerland. Sound far-fetched? Well, that pile of 8 million coins came with a petition containing 125,000 signatures, and in Switzerland that's good enough to force a national vote on the issue. In effect, the Swiss are going to be voting on whether or not they should receive a big fat paycheck from the government each month for doing nothing, no strings attached.
If this is your first exposure to this idea it might sound like total insanity, but the idea of a government-provided guaranteed income is in fact not particularly new. In the first World War a British engineer named C.H. Douglas noticed a discrepancy between the total value of goods being produced for the British war effort and the salaries, wages and dividends being paid out by the producers. Intrigued by this notion, he began a study of factories and businesses around Britain. Publishing his results in 1918, his study showed that this gap was almost universally the case. Douglas saw this from his engineers' perspective as a design flaw in the economy; more goods were being produced than people could possibly buy back with the wages they were earning. He came up with a simple idea: social credit. In basic terms, he proposed that the gap between prices and purchasing power be closed by a price rebate and dividend to be paid out to each citizen by a National Credit Office that crunches the numbers from a national balance sheet. The idea of simply providing people with money flipped traditional economic theories on its head. It was not classical socialism, which saw the democratization of the economy as worker control of industry, but a democratization of credit. Such a system would leave individuals with the freedom to direct production by voting with their dollars, some portion of which would be supplied automatically by the government.
Social credit was quickly adapted by political upstarts around the world and in 1935 the first Social Credit party was elected to the provincial government of Alberta in Canada. The Supreme Court of Canada and Privy Council in London consistently ruled against all attempts to pass social credit laws, however, and the Social Credit party in Alberta soon fell out with Douglas over strategic differences. Social Credit continued on as a political brand in Western Canada and elsewhere for decades, but the political brand bore little resemblance to Douglas' original theory and a national dividend was never implemented.
To many, the idea of money furnished by government directly to the people is still far-fetched. Social credit ideas seem like a forgotten byway of history, and the closest that many have ever experienced is the occasional one-time check like that provided by the Bush administration under the 2008 Economic Stimulus Act. But that's not to say that the idea hasn't actually been tried.
In 1974 the sleepy Manitoba town of Dauphin, home to just 10,000 people, was the scene of a radical economic experiment. Called “Mincome,” the program assured any family or individual living under the poverty line government assistance to boost their income, no questions asked and no strings attached. The experiment was conducted to find out if it was true that people would work less in an economic environment that guarantees a certain minimum level of income. Over the course of the next five years, about 1,000 families in Dauphin benefited from the scheme. Some interesting results came out of the program. Firstly, it was found that only two categories of people actually worked fewer hours under the scheme: mothers, who took more time off to raise their babies, and teenage boys, who delayed entering the workforce. Even in the case of the teenage boys, it was found that many of them used the time to continue their studies; high school graduation rates rose during the period of the study. Another surprising result: hospitalization rates fell by 8.5% during the Mincome experiment, at least partly due to reductions in hospitalizations for mental health issues. The Mincome experiment was ended in 1979, however, abandoned during the changing of provincial and federal governments in the latter half of the decade. The boxes of data collected during the grand experiment were left to collect dust in provincial records houses and were largely unexamined until recently.
So why has this history of social credit and Mincome and similar ideas been so completely erased from our collective memory? Primarily, it is because it is hard for people to wrap their head around. People have been conditioned to believe that money is something that exists in a certain finite supply and that people must toil in order to receive their fair portion of that set amount. As we know, however, this is not the way the economy actually functions. In our modern-day reality, money is a commodity that is spontaneously generated by the bankster class as debt which is owed back to themselves at interest. Understood primarily as credit (as it is in our current economy), the social and productive dimensions of money come to the fore. If it is created out of nothing and loaned into the economy, why not create it out of nothing and give it to the poor? The problem of underconsumption is solved, as there is now enough money for workers to actually purchase the items they manufacture. And the freedom of the individual to decide what they want to purchase and from whom is preserved, as is the freedom of producers to produce whatever products they want in the manner and quantity they see fit. In other words, the free market is preserved.
This is the problem with the idea of a basic income: it doesn't fit nicely into the pre-conceived categories of economic system that we are taught to work in. It's not socialism, per se. It's not the crony capitalism that we are used to in the western world, either, with giant corporations getting subsidies and handouts or “too big to fail” financial institutions getting trillions of dollars in bailouts. For us it is easier to understand a government bailout of AIG to the tune of $182 billion than it is to conceive of the government taking that same $182 billion and giving it to the people. From the 2008 Lehman Brothers collapse to today, the government has spent literally trillions of dollars bailing out banks and purchasing toxic mortgage securities (a process that continues to this day under QE3). If that money was given directly to the people, imagine what position the economy would be in today: people with cash in their pockets looking to spend on products; people with money to actually purchase the homes that they were being (illegally) foreclosed on; people with the safety and security to pursue education and retraining for higher-skilled jobs.
The funny thing is that the idea of bailing out the people instead of the banks is immediately dismissed by those on the right as some sort of communist idea. This ignores the long history of conservatives proposing similar ideas. Milton Friedman, the famed free market economist, proposed a system of negative income tax by which the poorest would be entitled to receive unused deductions on their tax returns each year. Even Ron Paul has agreed that bailing out the people would be better than bailing out the banks. As he said in the 2012 GOP debates: “If you have to give money out, you should give it to people losing their mortgages, not to the banks.”
Indeed, this is the very issue that unites so much of the anger on both the left and the right. The Tea Party movement and the Occupy movement were coming from remarkably similar positions. People are simply fed up with governments bailing out their megacorporate and bankster-connected buddies to the tune of trillions while homeowners and small business owners get turned out on the street. So why has the basic income idea never taken off amongst these groups? Is it simply the centuries-long demonization of the idea of “free money,” fed to us by the very same people who create the money out of thin air?
All interesting questions. Personally, I am not an advocate of the guaranteed income idea for the reason I am not an advocate of many so-called economic “solutions.” I don't believe that governments should be acting in the economy in any way, whether it be the regulation or monopolization of money or the creation of a central bank or the administration of a National Dividend or other guaranteed income idea. However, if you are going to have government intervention anyway, there can be no doubt that it would be infinitely preferable to have that intervention in the service of the people, not the banksters.
At any rate, we may just get to witness another Mincome-like experiment very soon if Enno Schmidt and his Basic Income friends have their way in Switzerland. I'm not holding my breath that the land of banks and bankers will go for such an idea once it reaches the stage of a national vote, but stranger things have happened. And if it does, we'll be spectators with ring-side seats to one of the most interesting economic experiments in history.