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The Basic Income - A solution for the European Union's imbalances?

by Martin Mon Oct 6th, 2008 at 03:06:14 PM EST

In this diary I want to discuss some aspects of the basic income, and how I think, it could help the EU.

The (uncondition) basic income is just that. Everybody gets amount X without any strings attached. The main advantages of an EU wide basic income are I see are

  • reduction of bureaucracy
  • automatic compensation of imbalances in Europe
  • high level of subsidiarity and transparency
  • high level of individual freedom
  • allows higher taxes on environment damaging substances, without harming poor people disproportionatly


Some Basics
The basic income is already longer discussed by various people in various countries. One of the major problems for such a basic income is, that it would have to be applied to all EU citizens inside a country, and due to the open borders, there would be a significant incentive to move to such a country, when you don't make such money in your home country.
This problem of course vanishes, if the basic income is applied on the EU level.

Another problem is not really a problem, that is financing of such a basic income. But as Götz Werner points out, we are already now all living. So everybody already now gets enough to survive, just often with unnecessary strings attached. Usually it is suggested to pay for this with an VAT, which is a reasonable suggestion, and of environmental taxes are often a form of VAT.

Reduction of Bureaucracy
Already now there are in most European countries lots of programs, to pay for those, who don't earn anything or not enough to make it. Much of such bureaucracy, which is often seen as indignifying by those who seek help, can be cancelled completely. But on the European level there is another issue.
Right now solidarity between European countries is negotiated and pursued by regional development payments, science projects, exchange programs...
This negotiations are often totally intransparent for the citizens, strange compromises are made (I think Italy got a higher milk quota in exchange for supporting the Nice-treaty). Such programs could be reduced largely - and thereby the intransparent negotiations - when the solidarity between countries in Europe would be pursued by direct payments to the citizens. While there maybe a couple of EU projects, which are doing great, a lot of such regional development payments are not very efficient - just look on the east German invesment ruins.

Automatic Compensation of Imbalances in Europe
When the Euro was introduced, a lot of economists worried about asymmetic shocks in the Euro area, which would usually lead to devalueing regional currencies. The bureaucratic EU can not at all or only very slowly compensate the lack of monetary policy answers in such a case with a fiscal answer. The basic income would have an immediate stabilising effect, as the people living in the country where the shock hits, still would get their payments, but would contribute less taxes into the pool. Maybe the EU doesn't need a basic income, but some form of stabilisation cross-country should be implemented - why not the basic income.

High Level of Subsidiarity and Transparency
As the basic income provides for things otherwise each country would have to do on its own, with a basic income poorer countries have more possibilities to define what they want to do with the help they get. I think this will lead to higher efficiency.
The greater fiscal leeway of the poorer countries stems from their possibility to tax their own people and use this money not for basic needs, as currently.
It would be clear, what the EU provides for everybody, and the amount of solidarity would be determined by a single number, the height of the basic income, instead of negotiated in opaque EU institutions.

High Level of Individual Freedom
That is actually the main reason to introduce a basic income. As it is only a basic income, most people will try to get extra income from work or other sources, but if you really have a 'mission', be it to care for your elderly and dement parents or your children, perform art, that doesn't make enough money, study, engage in free software or providing a blog, then you may go that way without regard for the need to earn your dayly bread.

Environmental Protection
If you love the environment and the freedom of humans, your choice of protecting the environment will usually be taxation of behaviour, that damages the environment. E.g. energy taxes are such a kind of tax, but as often noted, it hits disproportionaly poor people, who use a higher share of their income for energy.
If the revenue of energy taxes are added to the pool for the basic income, all people who use less than the average person, will profit in absolute terms from environmental taxes, and those who use more than the average will be punished.

Paul Krugman often tells the anecdote of an congressman, whom was told on a campaign trip, don't let the gov't interfere with social security. While people in the US don't trust their gov't, they do trust the transparent, stable, and more or less fair mechanism provided by social security. The basic income is similar transparent and out of the hands of back room politics.

Poll
What do you think
. great idea, can contribute a lot to the European idea 70%
. good, but can't replace current policy 0%
. indifferent 0%
. its too early to introduce, we have to wait until we are richer 0%
. its too early to introduce, countries in Europe have to become more equal before 10%
. bad idea, shouldn't be pursued ever 10%
. other 10%

Votes: 10
Results | Other Polls
Display:
between individual freedom and the wish for more equality in our society.

Der Amerikaner ist die Orchidee unter den Menschen
Volker Pispers
by Martin (weiser.mensch(at)googlemail.com) on Mon Oct 6th, 2008 at 03:07:13 PM EST
I've quite liked the basic income idea for a while and the EU level does solve some problems, so I like your idea a lot, but I have some questions:

  1. Does this have to be tied to Euro membership?

  2. Are such transfers as will occur inflationary for a country like (say) Slovenia?

  3. Whilst pushing a basic income out across the Schengen zone solves the "freedom of movement in the EU" problem, is there a danger it will greatly amplify problems at the borders of the Schengen zone?
by Metatone (metatone [a|t] gmail (dot) com) on Mon Oct 6th, 2008 at 03:44:05 PM EST
Does this have to be tied to Euro membership?
I don't think so. Strong fluctuations against the Euro would be bad, however. One possibility is to fix the income in Euro and pay it out in the currency the receiver likes.

Are such transfers as will occur inflationary for a country like (say) Slovenia?
Probably yes. But with free movement of goods and in not so distant future free movement of people, wouldn't the prices anyhow have a strong bias to the 'general EU price level'? Of course you have some issue with too much people unwilling to work, when you have a basic income, which is initially more than basic in the poorer parts of the EU, but I think with a moderate income taxation starting at the first cent (or whatever they have there) earned, it should have not too dramatic effects.

Whilst pushing a basic income out across the Schengen zone solves the "freedom of movement in the EU" problem, is there a danger it will greatly amplify problems at the borders of the Schengen zone?
So this would be Switzerland and Norway, right?
I think they are small enough and rich enough, to introduce only a managable immigration stream, if at all. Already now Switzerland is a tax haven, and even inside the EU there are vast differences with inheritance tax, income tax, corporate tax. The last in my view a bigger distortion than what the basic income introduces with respect to Switzerland and Norway.

Der Amerikaner ist die Orchidee unter den Menschen
Volker Pispers

by Martin (weiser.mensch(at)googlemail.com) on Mon Oct 6th, 2008 at 04:10:34 PM EST
[ Parent ]
So this would be Switzerland and Norway, right?

Switzerland joins Schengen next month - but I presume the problems are more on the eastern boundaries of Schengen anyway.

by gk (gk (gk quattro due due sette @gmail.com)) on Mon Oct 6th, 2008 at 04:21:31 PM EST
[ Parent ]
Uh... Romania, Bulgaria.

Then looking at the rest of the Balkans and in the east, Ukraine and Belarus.

by Metatone (metatone [a|t] gmail (dot) com) on Mon Oct 6th, 2008 at 04:26:55 PM EST
[ Parent ]
Romania and Bulgaria are in the EU.
So yes, the EU borders would either have to protected very hawkishly, or there would have to be kind of a visa, that allows for travel in the EU, but no access to the basic income.
It is always a bit obscene to provide strong solidarity with e.g. Romania, but not with e.g. the Ukraine. But in the end, if the EU wants to be more than a free trade zone, it will be very difficult not to have somewhere are rather sharp border, either geographically or ideationally with giving EU country citizens largely more rights than non-citizens.
The alternative is less solidarity at at all, or solidarity with the whole world, which is not practically to the degree we want to have within our own society.

Der Amerikaner ist die Orchidee unter den Menschen
Volker Pispers
by Martin (weiser.mensch(at)googlemail.com) on Mon Oct 6th, 2008 at 04:39:02 PM EST
[ Parent ]
What happens if there are major differences in the cost of living between various areas - e.g. Dublin and rural  Slovenia - A living wage in one is not necessarily a living wage in another.

Vote McCain for war without gain
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Mon Oct 6th, 2008 at 04:38:55 PM EST
One reason for not making such payments dependent on the local cost of living, is that you may otherwise be officially in one country, while really living elsewhere. If the EU wide basic income isn't enough to live in Dublin, the Irish gov't still could provide additional welfare programs for people living in Dublin, or keeping the kind framework they have now for dealing with such problems.
In the worst case, it is in Ireland as if the EU wide basic income doesn't exist (if its too low to matter in Ireland at all).
That wouldn't diminish the possibility to use it as a transparent mean of solidarity within the EU or for EU wide taxes in environmentally damaging substances.

Der Amerikaner ist die Orchidee unter den Menschen
Volker Pispers
by Martin (weiser.mensch(at)googlemail.com) on Mon Oct 6th, 2008 at 04:50:11 PM EST
[ Parent ]
Such a plan would obviously incent low or non wage earners to locate in low cost of living areas.  Such areas are usually underdeveloped relative to the whole.  Were social services and medical care provided EU wide and independent of employment this could be a boon to underdeveloped areas.  They would get new residents, many of whom would be willing to work for relatively low wages  and who could afford to do so without suffering grinding poverty.

Given the rising importance of the individual in society as consumer I naively thought such a plan, which I called a National Minimum, would soon be adopted back in the '60s.  Not one in one hundred could see any virtue in such a plan.  The biggest obstacle is the common belief that people have to be driven by the fear of starvation and privation to work.  This view sees the world as a giant concentration camp run for the benefit of those who have money.

There will be individuals who will be only too happy to live on a subsistence income and do no further formal work.  That may well be the best thing to do with such people.  Most, however, freed from wage slavery, will be eager to do what they can to better themselves and will be able to bring their innate creativity to bear in their behalf and in behalf of the entire society.

With a more egalitarian allocation of capital to worthwhile enterprises we could see a flowering of economic, artistic, social and personal growth.  I believe that such a program is the key to a sustainable and humane future, thereby enabling us to morhp our current distopia into a true utopia.

It will, of course, be violently opposed by the beneficiaries of the current hierarchical power system. But it is those beneficiaries of that system who have brought us the calamity that is now upon us.  Things are likely to get bad enough that people will seriously consider fundamentally different social organizations.  It is difficult to see how the most likely alternative, fascist distopia, is likely to better provide for the prosperity of the society as a whole than would this system.  And there appears to be an evolutionary path from here to there without massive disruption.

"It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Tue Oct 7th, 2008 at 12:54:43 AM EST
[ Parent ]
Such an initiative, for which I'm entirely in favor, would have the benefit of decentralizing the employment hierarchy, in the sense that, with bare necessities met, the smart and inventive, if impoverished, among us, would be that much freer to create solutions to what are likely to amount to increasingly urgent, community needs, as the global economy unwinds.

Here governments are throwing billions if not trillions into farcical "rescue" missions when, if the broader population had been given greater, more supple enterprise-creating opportunities, the present financial déconfiture would be affecting vastly fewer numbers. International finance could have had its chronic greed fest, leaving local economies more or less intact.

As long as nations rely uniquely on the creation of jobs in industry and services, their populations will remain prisoners of stock market manipulation and lobby-influenced political policies.  

'Basic Income' proposals are unpopular among our (s)elected leaders but the time is likely to come when they're viewed as a necessity ... that is, if the 'wads are truly dedicated to saving themselves.

by Loefing on Fri Oct 10th, 2008 at 10:30:25 AM EST
[ Parent ]
Coming from a nation which has very generous benefits for not working and very high taxes for low income earners, there is one thing I've learnt in economics that actually does apply: people respond to incentives. If you pay people a lot not to work, they won't work.

This means I think this idea is really, really bad. Not even the Greens support it around here anymore.

In my opinion a much better alternative is a high basic tax discount - for example not paying any taxes at all for the first 1000 euros earned every month. After the first 1000 the tax can be as progressive as you feel like.

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Mon Oct 6th, 2008 at 05:23:09 PM EST
people respond to incentives
What the hell? You dare... You must be an evil market fundamentalist to believe... That is incredible.
Actually as a market fundamentlist myself, I know that, even when equivalent statements have been seen as insulting by quite a number of left wing people.

However, the basic income doesn't pay people for not working, but regardless of work. There is the same problem in Germany, and it has nothing to do with income taxes. The problem is the sharp reduction of benefits, when people earn their own living. The following picture is out of a book from a job market economist. On the Y-axis gross income is plotted, on the X-axis corresponding net income for a family of two adults and 2 children, assuming there is no capital or capital income in this family and all income is generated by work or payment of the gov't.
The red line shows the situation in 2003. As you see for the net income it didn't play a significant role, if this family earned nothing, or up to 1500 Euro, for the net income.
The Hartz reforms have improved this situation, but introduced a 'cave', where it can happen, that you have even less net income, when you increase your gross income from work. The blue line is irrelevant so far, as this is the line, the author proposes with an own model.

So even currently the effective marginal tax/benefit reduction rate is close to 80% for quite a way on this graph. The basic income would work as kind of combi wage, where you can determine the marginal tax rate as you want, but 30-50% will be still largely better than the 80% we have currently. After all it matters how much is left, and with 40% tax rate 3 times as much is left as with 80% tax rate. In the end the basic income would not give the most none-working people in Germany one cent more, but those with very little incomes. It reduces the disincentive of unemployment benefits.

Not even the Greens support it around here anymore.
I'm not 100% sure if it is part of the green basic program in Germany, but they are rather open to it. High ranking greens have already promoted the idea with using it as a corresponding measure to even more increased energy and environment taxes. There is as well some support from the conservatives and some more from the commies. Combi wages, as proposed by the conservatives and liberals, would be as well lead into this direction.
The only party, which totally opposes the idea of a basic income are the social democrats. There are plenty of arguments, which essentially culminate in either in the idea, that it is very difficult to explain hard working low earners, that people who don't try to get a job should be rewarded without strings attached, or that - as they believe it is the meaning of live to work - a basic income would diminish the value of their work.

Der Amerikaner ist die Orchidee unter den Menschen
Volker Pispers

by Martin (weiser.mensch(at)googlemail.com) on Mon Oct 6th, 2008 at 07:00:00 PM EST
[ Parent ]
as in "difficult", "dirty", "dangerous"?

Is there any data to suggest that there would still be the same number of people who would be willing in these jobs even if they got a basic living income whether or not they worked?

If the number of people willing to do such jobs did drop, would simply raising the salaries and/or benefits for these jobs solve that problem?

Truth unfolds in time through a communal process.

by marco on Tue Oct 7th, 2008 at 06:46:06 AM EST
[ Parent ]
Anecdotal
"dirty":
- When my father was a child, the waste disposal service was so well paid, that it was even attractive to work there for totally overqualified people.
"dangerous":
- coal miners, dangerous good truck drivers,... could works often elsewhere
"difficult":
- that is not a problem at all. Difficulties are challenges and people like challenges

Perhaps there would be problems in Western Europe with home care of old people, which is now often done by eastern Europeans under really bad conditions - and e.g. in Poland similar jobs that are done by Poles in Germany are done by Ukrainians in Poland. OTOH low paid work becomes more attractive with a basic income, and there is the human mind.
When there are problems, solve them. I think the next big technical development will be a much increased use of roboters in everyday live. When some unnice jobs are currently done for very little money, there is little incentive to use capital to improve productivity in such branches. When you can't get cheap labour to do X, there will be an incentive to invest capital, and creativity into doing X better.

Der Amerikaner ist die Orchidee unter den Menschen
Volker Pispers

by Martin (weiser.mensch(at)googlemail.com) on Tue Oct 7th, 2008 at 09:08:30 AM EST
[ Parent ]
However, the basic income doesn't pay people for not working, but regardless of work.

Sure, but the higher the work-free wage is, the larger the difference between working and not working will be.

This means the incentives to work will be weaker.

Look, I have nothing against a generous unemployment system, but it have to be linked to forcing people to actively look for jobs.

Giving people the option to not work but still be bankrolled by the taxpayers is just wrong. Or as Gustav Möller, one of our old soc dem minister from the 30's and 40's used to say: "Every tax krona not spent efficiently is like stealing from the poor".

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Tue Oct 7th, 2008 at 11:58:09 AM EST
[ Parent ]
In an era of mass, structural unemployment, all humane welfare systems end up developing an option not to work yet be bankrolled.

Of course, you can litter those being bankrolled with "back to work" propaganda and useless, time losing "formation", but that is money being spent inefficiently.

And yes, one of the point is to weaken the incentives to work. Debt slavery, workhouses, etc... All great system to push "incentive to work". Still very, very lousy system. And diminishing the incentive to work in low-qualification jobs, which are where, most often, the boss's power is the stronger compared to the worker (see the working conditions in many such jobs, which are, literally, dangerous), is a good thing for bettering the conditions of those who actually do such jobs.

Always funny are the employers in building or restaurants, that keep complaining they can't find workers, yet keep wages low, hours long, conditions dangerous...

Un roi sans divertissement est un homme plein de misères

by linca (antonin POINT lucas AROBASE gmail.com) on Tue Oct 7th, 2008 at 12:36:45 PM EST
[ Parent ]
The key to the Scandinavian labor model is to have lots of cheap re-education for people who have become unemployed and also push them hard into getting new jobs.

No one likes to give money to hippies who don't feel like working, especially not poor single mothers working two crappy jobs and paying high taxes. I'd much rather see the poor single mother get such a big tax cut she only needs one crap job, and might then having enough time to train to become a nurse, or something.

Of course, there is always the last recourse, going to the social services. But this carries a heavy social stigma. People really don't want to do that. By implementing a basic income for everyone, taking handouts becomes normal and socially acceptable. That's a dangerous road to walk.

But maybe it's just my inner Martin Luther who's protesting. </snark>

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Tue Oct 7th, 2008 at 12:54:21 PM EST
[ Parent ]
But to the best of my knowledge it's never been demonstrated empirically that the pushing people to work part actually works...

If you're going to guarantee somebody a living income, you can't force him to work (short of doing so at gunpoint). So all the "pushing people to work" parts inevitably end up being about failing to guarantee people a living income. And AFAIK, it's never been demonstrated that pushing people into poverty (or threatening to do so) makes those people more likely to find work. It may make them willing to take crappier work or lower paid work, but that's not quite the same thing.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Tue Oct 7th, 2008 at 01:19:07 PM EST
[ Parent ]
If a poor single mother working two job has a high tax rate then that is a problem with the tax rate...

And honestly, I'm noticing, in my generation in France, that taking handouts carries less and less social stigma. Whether it is being on minimal income for a few years preparing some competitive exam, taking a long break between two jobs while getting unemployment money, people simply do it. The stigma of private sector work, where especially among qualified workers it include "managing" people, i.e. making them suffer so that they do the company's bidding, exists too.

Un roi sans divertissement est un homme plein de misères

by linca (antonin POINT lucas AROBASE gmail.com) on Tue Oct 7th, 2008 at 05:08:44 PM EST
[ Parent ]
Sure, but the higher the work-free wage is, the larger the difference between working and not working will be.
I guess you mean lower, not larger. However, that depends totally on the question of how strong additional income is taxes/how strong benefits are reduced, as Bruce pointed out more clearly than I did.

but it have to be linked to forcing people to actively look for jobs.
I don't believe in the wisdom of the gov't. It is very difficult to make a system, which puts pressure on those who don't want to work, and who are willing to exploit every possible trick, without punishing those who are honestly trying to find work.
In the end not too much will change in most western European countries, except the stigma of living a live not focusing on making money.
This can even help to make people doing the things, they are good at, instead of making people do things, somebody invents sometimes only to test the willingness to work, but without practical use.

In the 30s and 40s Gustav Möller was minister, natural resources were cheap and even stupendous work could contribute a lot to the society. Today natural resources are among the core scarcities, stupendous work is often avoidable by machinery, creative actions, that do not immediately produce revenue can be much more worth than stupendous work and the revenues may not be collectible (e.g. open source stuff).
Moreover we are rich enough today, that we can pay enough to survive, but not enough to participate in the general consumerism. Bottom up approaches - such as a market - often do better in being creative and finding well fitting solutions than a top down approachs, that workfare or similar programs will do. In the 30s and 40s coming along was already quite a lot. 750 Euro, a typical students monthly money in Germany, or 9000 Euro/a, is less than 1/3 of the GNP/capita. I doubt that in the 30s and 40s a single could live a rather untroubled live from a third of the GNP/capita.

Der Amerikaner ist die Orchidee unter den Menschen
Volker Pispers

by Martin (weiser.mensch(at)googlemail.com) on Tue Oct 7th, 2008 at 12:54:26 PM EST
[ Parent ]
... stealing from the poor?

As a side note, it is in part money that is spent effectively ... it achieves a number of ends, from reducing the disincentives to work caused by unemployment-tested income and means-tested income support, through reducing the inefficiency of European inter-regional transfer payments, to eliminating the fiscal drag from mixed Green/Revenue taxes by converting them into pure Green taxes.

But primarily, if we elect to pretend that it is funded by a neutral tax, then as a system is transfer from the high income to the low income. And since the high income are great net beneficiaries of the common social inheritence of knowledge, technology and established infrastructure, this is not taking, but simply a payment to the Commonwealth for services rendered, distributed as a universal social dividend.

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Tue Oct 7th, 2008 at 04:19:51 PM EST
[ Parent ]
... its removing the pay if they start working.

That's where you get the very high effective marginal penalty to working ... when benefits phase out as taxes phase in. And of course, in a piecemeal program, there is a strong incentive to means test, as it allows more to be "accomplished" for the individual goal ... while the negative impact on incentive to work is one more small incremental piece of what can add up to a quite hefty penalty.

But with a Social Dividend, just start the bottom bracket of the marginal income tax brackets a $1, because work income is in addition to the Social Dividend.


I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Tue Oct 7th, 2008 at 02:16:28 AM EST
[ Parent ]
This is why you should study economic history instead of economics.

In the 80ies Sweden had next to no unemployment while featuring very high levels of benefits for unemployment or illness.

In the 90ies Sweden took the low-inflation, high-unemployment route and installed an independent central bank that believes so firmly in the theorem of keeping the unemployment above the non-acceleratng inflation rate of unemployment, that it increases the rent even if it is external factors driving the inflation. And of course this was followed by cutting back on benefits for unemployment or illness. And after that followed the classical moral underclass discourse to explain that the poor has no money beacuse they are lazy.

So in conclusion: Sweden had no unemployment but high benefits, got unemployment, cut back on benefits, blamed the unemployed. And also, do not trust economics professors.

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se

by A swedish kind of death on Wed Oct 8th, 2008 at 10:29:05 AM EST
[ Parent ]
It was the insane economic policies of the 80's and the bungled credit deregulation that resulted in the crisis in the 90's.

So I wouldn't heap too much praise on the Swedish economic policies of the 80's. No praise at all really.

It's like saying that US economic policies have been great for the last ten years. Unemnployment was pretty low, everyone got to buy these nice houses, big plasma TV's and even bigger cars.

And then we got this unfortunate crash which had nothing whatsoever to do with the previous policies... </snark>

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Wed Oct 8th, 2008 at 11:26:46 AM EST
[ Parent ]
Do you mean that it was the credit deregulation of the 80ies that created the low unemployment of the era?

Possible, but irrelevant. If good benefits would cause high unemployment or low participation in the labor market, it should do so irrelevant of credit deregulations, no?

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se

by A swedish kind of death on Wed Oct 8th, 2008 at 11:35:08 AM EST
[ Parent ]
No, I'm saying the crisis was created by retarded economic policies during the 80's. Both the general economic policies and the bungled credit deregulation.

The low unemployment was artificial - we payed for that with high unemployment later during the 90's crisis.

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Wed Oct 8th, 2008 at 12:19:25 PM EST
[ Parent ]
The low unemployment was artificial - we payed for that with high unemployment later during the 90's crisis.

Now you are loosing me. It appears a step is missing in your argumentation.

So the low unemployment was artificial, but people also wanted to work - despite generous benefits - because ...?

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se

by A swedish kind of death on Wed Oct 8th, 2008 at 12:26:49 PM EST
[ Parent ]
Well, there are two different arguments here.

On one hand about incentives to work, an on the other about the Swedish crash 15 years ago, and the runup to it.

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Wed Oct 8th, 2008 at 12:30:40 PM EST
[ Parent ]
For a short description of what caused the Swedish crash, see this (in Swedish): http://www.jonung.se/files/pdf/KronfalletSomSkakadeSverige.pdf

Then we can continue the discussion about incentives and stuff. :)

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Wed Oct 8th, 2008 at 12:34:52 PM EST
[ Parent ]
Yes, and I am arguing that the pre-crash conditions - low unemployment, good benefits - invalidates your theory that those two can not be combined.

I understand that you are arguing that the pre-crash conditions caused the crashed, and well, that much is obvious. Still the 80ies combination of low unemployment, good benefits existed. So I am trying to understand how you relate those conditions to your theory.

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se

by A swedish kind of death on Wed Oct 8th, 2008 at 12:39:12 PM EST
[ Parent ]
I don't really see what you are getting at?

Peak oil is not an energy crisis. It is a liquid fuel crisis.
by Starvid on Wed Oct 8th, 2008 at 12:45:18 PM EST
[ Parent ]
If, as you claim

If you pay people a lot not to work, they won't work.

people would have stayed home and enjoyed their benefits in the 80ies.

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se

by A swedish kind of death on Wed Oct 8th, 2008 at 12:54:32 PM EST
[ Parent ]
At the time the economy was overheated and we had wage inflation IIRC, so the incentives to work were large, in spite of a very generous system that payed people not to work.

The important thing is the difference between working and not working.

And then you have the moral protestant thing. People who work detest paying for people who can work but won't. They have no trouble supporting people who can't work (sick etc) or people who are trying to find new jobs. In this way a basic state funded wage starts undermining the credibility of the ordinary welfare state in the mind of the voters.

While you have the right to be supported, you also have the duty to contribute and not be a burden, as much as you can.

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Wed Oct 8th, 2008 at 05:02:42 PM EST
[ Parent ]
... the de-regulation, I mean ... and what was the benefit versus employment situation before they kicked in?

A central bank that focuses on creating unemployment to fight inflation is a bad economic idea no matter what previous economic mess was used to get it put into place.


I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Wed Oct 8th, 2008 at 03:16:26 PM EST
[ Parent ]
Credit deregulation happened in 1985 IIRC.

Peak oil is not an energy crisis. It is a liquid fuel crisis.
by Starvid on Wed Oct 8th, 2008 at 05:03:29 PM EST
[ Parent ]
So what were unemployment rates and unemployment compensation like in 1984? Was there also a big rise in unemployment compensation in 1985?

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.
by BruceMcF (agila61 at netscape dot net) on Thu Oct 9th, 2008 at 07:14:50 AM EST
[ Parent ]
What do you do about genuinely dirt poor entrant countries such Bulgaria ? A friend of mine is a teacher there and she earns 150 euros a month. She has to meet all her costs from that. And even in Bulgaria that's barely a living wage. So what would happen if the country started paying people who were unemployed similar amounts. Plus BG doens't want to acknowledge its roma population at all, so this would force a crisis of recognition the country can't afford.

Unless the EU has a way of fixing the systemic corruption in the country of course ? And if they do, why don't they do it for Italy as well ?

keep to the Fen Causeway

by Helen (lareinagal at yahoo dot co dot uk) on Tue Oct 7th, 2008 at 09:34:58 AM EST
A factor 10-20 is really a bit much to accomplish what the basic income shall do in western Europe.

I can only hope that the adjustment in Bulgaria will be similar fast as in the balic republics, with high real growth + high inflation.

For excessive corruption, unfortunately I don't know a cure.

Der Amerikaner ist die Orchidee unter den Menschen
Volker Pispers

by Martin (weiser.mensch(at)googlemail.com) on Tue Oct 7th, 2008 at 09:56:23 AM EST
[ Parent ]
there cannot be growth in a country that is being parasitised by corruption to the extent bulgaria is suffering.

keep to the Fen Causeway
by Helen (lareinagal at yahoo dot co dot uk) on Tue Oct 7th, 2008 at 10:04:17 AM EST
[ Parent ]
Investment and exports will remain sufficiently robust to keep the rate of GDP growth well above 5% over the forecast period.
2006 and 2007 were even better.

And if this corruption would really keep Bulgaria down forever, what would you propose? Just ignoring it?

Der Amerikaner ist die Orchidee unter den Menschen
Volker Pispers

by Martin (weiser.mensch(at)googlemail.com) on Tue Oct 7th, 2008 at 10:22:46 AM EST
[ Parent ]
Just as in many other desperately corrupt countries, the rewards of that growth stays in a few well-connected hands and there is no trickle down.

No I don't recommend ignoring it, but I really don't know what can be done about it. the government is the problem, not the solution. Elections are just basically stolen. Somebody once explained to me how the mayor of a small town got elected despite the fact that almost nobody voted for him. Not only was nobody surprised, nobody got angry cos as far as they're concerned, that's how the system "works".

keep to the Fen Causeway

by Helen (lareinagal at yahoo dot co dot uk) on Tue Oct 7th, 2008 at 10:33:43 AM EST
[ Parent ]
... the teacher would now be making twice the original amount.

For corruption driven by the fact that civil servants have difficulty surviving on their salary alone ... a not uncommon situation in many Africa nations ... a social dividend would reduce that as a driving force.

Its not an anti-corruption force on its own, but an anti-corruption fight would be a shade easier to win.

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Tue Oct 7th, 2008 at 04:25:41 PM EST
[ Parent ]
See the earlier discussion in Socratic Economics VII: Guaranteed Living Income (January 8th, 2008)

A vivid image of what should exist acts as a surrogate for reality. Pursuit of the image then prevents pursuit of the reality -- John K. Galbraith
by Migeru (migeru at eurotrib dot com) on Thu Oct 9th, 2008 at 06:06:29 AM EST
Thanks, I think that was shortly before my time.

I note that I have brought up some other aspects, still, with the EU regional solidarity/transparency/no bureaucracy angle, and the environmental taxes, so no simple copy of your diary ;-)

Der Amerikaner ist die Orchidee unter den Menschen
Volker Pispers

by Martin (weiser.mensch(at)googlemail.com) on Thu Oct 9th, 2008 at 09:33:30 AM EST
[ Parent ]
No, no, I appreciate the argument that a guaranteed living wage would act as a cushion protecting the Eurozone against asymmetric shocks. It would also dampen the massive flows of migrants from Eastern Europe to Britain and back again 4 years later which have caused no small planning headaches to local authorities both here and there.

A Germany-related question: isn't a guaranteed living wage incompatible with Hartz IV? See also Tory Workfare proposals (Starvid's objections in this very thread).

A vivid image of what should exist acts as a surrogate for reality. Pursuit of the image then prevents pursuit of the reality -- John K. Galbraith

by Migeru (migeru at eurotrib dot com) on Thu Oct 9th, 2008 at 09:37:54 AM EST
[ Parent ]
isn't a guaranteed living wage incompatible with Hartz IV?
I don't understand. Of course it is incompatible with taking the money of people, who refuse a job, away, which was indeed a principle broadened, but not introduced by the Hartz IV reforms. But is there any reason, why every aspect of the Hartz reforms has to be kept?

Before there were welfare and long-term unemployment programs, totally separated. That is, when you once have worked for a couple of years, you would never face the same hardship as somebody, who never got a job, depending on the amount of money, they had earned before. This was fused into one program by the Hartz IV, in which long-term unemployed people were equally treated as people, who never had worked. This aspect of course is not in contradiction with the basic income.

Unlike in the welfare program before, where people had the possibility to ask for specific things, Hartz IV is a fixed some of money. As well the same as with the basic income.

Then there is the enforcement of people to do work. But this works only very badly. There are few jobs you can give to unmotivated people without doing damage. It produces a mentality of thinking the gov't has to provide the work place, and if it can't you do nothing. But often there simply were no work places to place unemployed people on. This has led to extremely unproductive gov't measures, that did not help at all to bring people into the regular job market. So there is no big loss, when you give that up.

Starvid suggests to cut taxes instead. Which taxes he wants to cut? Income tax is hardly paid by poor people. VAT incentives saving over consumption and is in the income ranges between poor and middle class highly progressive, when food, clothes and rent are free of it. Extra high VAT on energy and co is a feature for the environment. So which tax he wants to cut?

The other suggestion to make public services cheaper instead, is something I disagree with mostly. There are some services, that make sense to subsidize, but is there any reason to force people to take exactly these public services? There would have to be enormous gains from compound empowerment to justify such action (as there are clearly in e.g. public transport, but only little in child care or university education). By default markets work fairly well, and there should be some explanation, why one wants disturb the market. Already those services, that were suggested in the discussion, like free education, or free childcare, are not really innovative changes compared to what already exists in some of our societies, and are not necessarily what I would like, e.g. free public child care for small children is something I really hate and see as oppression by the gov't, a little explanation here, how I think such 'Scandinavian' measures would destroy important freedoms in our societies (that are not already Scandinavian or French)

Der Amerikaner ist die Orchidee unter den Menschen
Volker Pispers

by Martin (weiser.mensch(at)googlemail.com) on Thu Oct 9th, 2008 at 12:14:47 PM EST
[ Parent ]
But is there any reason, why every aspect of the Hartz reforms has to be kept?

No, I think Hartz IV is horrible. I was just trying to extract an opinion on it from you :-)

A vivid image of what should exist acts as a surrogate for reality. Pursuit of the image then prevents pursuit of the reality -- John K. Galbraith

by Migeru (migeru at eurotrib dot com) on Thu Oct 9th, 2008 at 12:49:51 PM EST
[ Parent ]
Starvid suggests to cut taxes instead. Which taxes he wants to cut? Income tax is hardly paid by poor people. VAT incentives saving over consumption and is in the income ranges between poor and middle class highly progressive, when food, clothes and rent are free of it. Extra high VAT on energy and co is a feature for the environment. So which tax he wants to cut?

Things might be different in Germany, but in Sweden low income earners (that is, poor people) pay high income taxes.

Let's say you make 2000 euros a month before taxes. That's 24,000 a year. First about 2000 euros are tax exempt. Then you pay about 32 % on the remaining sum. That's 7040 euros a year in tax, or 29.3 %. You get to keep 16,960 euros.

On top of that you have hidden income taxes, so called "social fees". They are parts of your wage taxed away even before the money shows up on your salary. They are another 38 % on top of your wage.

This means that if you make 2000 euros a month "before" taxes you are really making 2000*1,38=2760 euros a month, or 33,120 euros a year. Of this you get to keep 16,960 euros. That means you are really paying a 49 % income tax on a pretty crappy wage.

So yes, there is a lot of space to cut taxes for poor people before stuff like basic income for all need be considered.

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Thu Oct 9th, 2008 at 12:52:04 PM EST
[ Parent ]
Of course, the evil center-right government has cut taxes, so for the person above the official tax has fallen from 29.3 % to 24.3 % while the real tax has fallen from 49 % to 43.5 %. If the person is under 25 years old the an extra tax cut applies and the official and real taxes should be 16 % and 39 % respectively.

If I didn't screw up the calculations or misunderstood the tax system.

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Thu Oct 9th, 2008 at 01:12:16 PM EST
[ Parent ]
Ok social insurance taxes are quite high here, too. Income tax is definitively lower for 24,000 Euro income per year. (And actually I don't consider 2000 Euro per month as pretty crappy. A net income of ~16kEuro per year is close to the median income in Germany, and considerably more than phd students typical income.)
However, e.g. the retirement social insurance afterwards pays out according to what was paid in before. So there is some reason to keep in place some of those contributions.

Der Amerikaner ist die Orchidee unter den Menschen
Volker Pispers
by Martin (weiser.mensch(at)googlemail.com) on Thu Oct 9th, 2008 at 01:22:11 PM EST
[ Parent ]
Your average Swedish metalworker will earn about 2700 euros a month while someone unqualified (only high school dimploma) working in a hospital or taking care of the elderly would make about 2000, or even a bit less. So comparatively it's pretty crappy.

Compared to university students it's great though as we get 800 a month and are supposed to repay two thirds of that, with interest. But at Sovereign(!) rates. ;)

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Thu Oct 9th, 2008 at 01:31:16 PM EST
[ Parent ]
Huh, at least university students get a stipend of some sort.

In Spain a lot of people with higher education degrees make less than €1000. (See the Spanish wiki)

A vivid image of what should exist acts as a surrogate for reality. Pursuit of the image then prevents pursuit of the reality -- John K. Galbraith

by Migeru (migeru at eurotrib dot com) on Thu Oct 9th, 2008 at 01:35:35 PM EST
[ Parent ]
Well, normal students in Germany get only loans from the gov't, when their parents are really short of money. I spoke of phd students, who already have master degrees.

And metal workers in Germany are as well paid very well, when they are working in big companies. But most people don't work in big companies or not in well unionised sectors with mostly permanent staff, that needs specialist skills.

Der Amerikaner ist die Orchidee unter den Menschen
Volker Pispers

by Martin (weiser.mensch(at)googlemail.com) on Thu Oct 9th, 2008 at 02:00:52 PM EST
[ Parent ]
Phd students in Sweden get anything between 800 euros in some form of tax and benefits excempt stipend (humanities and slave labor insitutions - often found at medical faculties) and ~2500 euros as a proper wage (engineering phds at smaller colleges).

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se
by A swedish kind of death on Thu Oct 9th, 2008 at 05:26:01 PM EST
[ Parent ]


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