One of the main arguments against the universal basic income (UBI) program is its alleged unaffordability. However, this argument incorrectly implies that our existing financial tools and policies define what is economically affordable and what is not.
In fact, affordability is determined by the real economy, not by the financial system. The latter is a choice, as policies may be changed if there is a political will to do so. Had there been not enough food, consumer goods, houses, fuel, cars and other real economic resources, people would have genuinely needed to tighten their belts and work harder to create wealth. However this is not the case today. When the real economy is strong enough to deliver prosperity to everyone without full employment, the basic income is rightly on our agenda. It is about redesigning the financial system to unlock the dormant wealth and make it accessible to the many.
The best analogy of the UBI is the redistribution of wealth in oil rich countries. Since natural resources is a common property, sharing economic rent generated by these assets is not only fair, but is also instrumental in sustaining the free market economy. An alternative to sharing the commons is creating a monopoly for the few, who will be able to milk the national wealth, created by the nature, but not by their labour and talent.
In addition, transferring the natural wealth into the pockets of people does not prevent entrepreneurs who extract, transport and process oil to earn profits gained by these value adding activities. The economic rent is determined by the marginal profitability of the oil extractors, i.e. the more efficient the business is, the higher rent they will be able to pay to the public without compromising their business model. If a more competitive business enters the market, they will win the next auction to exploit an oil field and start earning their share of profits gained by virtue of their economic efficiency. This is radically different to a crony model, where access to the oil and the oligarchic superprofits is gained through political connections.
The above is true when you consider access to the human progress, which is a common property like the natural resources are. Technological progress is a result of the advances achieved by people since they left their caves, invented hammer and wheel, developed literacy and math and so on. Overwhelming majority of the most important inventions and technologies is in the public domain, it belongs to all people. However, ability to use these technological advances is limited to a few people who have access to financial capital. In other words, money is to the technologies, what an extraction license is to natural resources.
Therefore, like the oil rent should be distributed between the people to make the system fair and free, the financial rent should be used as a source for the universal basic income.
Businesses, which control crude oil deposits, need to run productive activities, extracting and selling oil in order to pay their rent and earn profits on top of that. On the same token, entities which hoard uninvested “raw” money, should be urged to pay financial rent back to the public. This will urge them to invest money in new ventures, create new jobs and aim to earn profits through these productive activities. Otherwise we will have a catch-22 situation, where those having access to capital and technologies are not willing to exercise their power; whilst those without money are able neither start their own venture nor even find a good job opportunities in the recessive environment. Using our analogy, it would be similar to someone controlling a huge oil deposit, who keeps it idle on the back of millions people around suffering from the fuel poverty.
Extracting the financial rent through taxing unused money is not a new idea. It is known as ‘currency demurrage’ and is mainly associated with the name of Silvio Gesell, a German entrepreneur and economist. John Maynard Keynes, in his main work “General theory of employment, money and interest” stated “I believe that the future will learn more from the spirit of Gesell than from that of Marx”. I have no doubts that the future Keynes was predicting has arrived. Currency demurrage as the tool to stimulate velocity of money and to fund the universal basic income at the same time, is probably the most important economic idea of the 21st century.