A Fine Little Book With A Limp
BOOK REVIEW Basic Income: Economic Security for All Canadians
S. Lerner, C.M.A. Clark, W.R. Needham Between the Lines, Toronto, 1999
One of the many virtues of this little book is its conciseness -- conciseness not through evasion but by zooming onto most points that really matter.
Most manufacturing and much knowledge and service work is done in developing countries or by Canadians who earn less than is required to participate fully in Canadian society -- that is, to purchase adequate food, shelter, transportation, clothing, education and the basic amenities for themselves and their children. Education and medical care, once considered basic public-sector responsibilities, rely more and more on private-sector partnerships and privatised delivery. Many other public goods and necessities, such as infrastructure maintenance, postal service and prison operation, are now supplied largely by private-sector firms that must attend to their bottom lines to survive. Downsizing continues. Our corporate and political leaders tell us there is no alternative.
A user-pay philosophy prevails and many people cannot pay. Day care and education are funded only minimally. Art and music programs for youth -- together with libraries and museums -- are seen as frills; environmental protection and remediation are not priorities; declining numbers of social workers cannot cope with increasing cases of malnutrition, substance abuse, mental illness, family breakdown, juvenile violence and other outcomes of unemployment, insecure employment, and disruption of family life. People who had once volunteered to fill such community needs are too hard-pressed themselves piecing together a living to continue volunteering for anything.
One assumption that underlay the Canadian welfare state was that there would be jobs for all who wanted to work and thus a firm financial basis for the foundation programs, Old Age Security (1927), Unemployment Insurance (1940), Family Allowance (1945), the formulation of equalisation payments (1957), the Canada Pension Plan (1964), the Canadian Assistance Plan (1966), and Medicare (1966).
By the early 1980s, when a strong recession took hold in Canada there was a notable lack of consensus about social security policy and private-sector views were more strongly urged in the press and elsewhere. ...Overall the goal seems to have been the removal of state-imposed restrictions or regulations, however socially justifiable, that seemed to be impeding the corporate and business sector. This focussed commitment is deeply embedded in all five volumes of the report of the Macdonald Commission (Royal Commission on the Economic Union and the Development Prospects for Canada -- 1985). Not accidentally, it coincided with the elevation of the Natural Rate of Unemployment to the polestar in the economics firmament.
Were it not for space limitations, I could continue for another couple of pages with such meaty quotations. But I must at least introduce the general nature of the proposed solution. For that I shall take a cue for directness from our authors in evaluating both the merits of their work and its beauty spots.
The books approach to a solution is a wise one -- ruffling as little as possible in present arrangements while approaching its goal.
A Basic Income (BI) society with its universality and security provides both an effective safety net and labour market flexibility. The other options considered by governments (traditional strong welfare state or workfare-type reforms) in the advanced capitalist countries offer one or the other, income security or labour-market flexibility, usually trading off a bit of one for a little more of the other. These options do not offer attractive alternatives, for they frequently, in essence, pit the social classes against each other, with income security benefiting those at the lower end of the ladder, while a reduced welfare state based on a minimal welfare program benefits through reduced tax rates those who are already well off. With its ability to offer both income security and labour market flexibility, BI gets beyond this trade-off, providing a means by which all Canadians will be able to benefit from the wealth being created by the new economy. (p. 42)
Our hypothetical BI system would replace the existing programs of social welfare and income assistance. It is funded and paid out at the federal level, thus relieving the provinces and territories of this obligation. As it does not account for those currently receiving disability benefits, this would remain an obligation of the provinces and territories. The federal government would continue to provide Canada Health and Social Transfer (CHST) funding at the 1999/2000 levels. This level of funding is currently earmarked for both health and public assistance. As the level will remain the same, the provinces and territories will have additional funds (money earmarked for social welfare, which [would be] replaced with the BI) that could be used for improving health care and education, or for reducing taxes.
Our hypothetical BI system would include the following annual payments. These are universal, based on citizenship or permanent residency (Canadian residency for more than five years), and are not means-tested. Every Canadian 65 and over would receive annually $7,000, regardless of their income, with adults receiving $5,000 and children $3,000.
The BI system examined here replaces the existing federal income tax system with a flat tax on all incomes except corporate profits, which are taxed at the current rate. This is only one type of taxation that a BI system could use, and is used more for the sake of simplicity than for any other reason. The employment insurance premium is also eliminated. Other existing taxes are kept in place.
With any BI system, as with any change in tax and benefits, there are winners and losers. It should be remembered that the BI flat tax is on earned income only. The BI payment is always tax-free. The books tables show relatively substantial distributional effects in favour of those on the lower rungs of the ladder, considerable ones at middle levels. The main advantages are greater security for those who really stand in need of it, at no serious cost to the affluent, who will stand to gain by increased social stability.
For further progress along these lines as people will be free to devote more energy to family concerns, community services, learning and self-development. As people begin to lead more balanced lives, perceptions will adjust to recognise the value of these activities and accord recognition appropriately for the many kinds of good work than income security permits.
Deciding how to finance a BI will be a central component of public debate about the concept. Current ideas focus on a range of possibilities: savings from collapsing most of the social service bureaucracy, a Tobin tax on currency speculation, a very small bit tax on all electronic transactions, a variety of changes to income and corporate taxes and user-pay charges on use of non-renewable resources. It is hard to imagine that the ingenious armies of economists and accountants will fail to come up with a feasible means, once the desired end result is specified.
Significantly, the authors while mentioning proposals for collapsing most of the social service bureaucracy fail to mention reversing the deregulation of the banking system which has increased the money-creating powers of our banks at the same time as it has encouraged speculative gambles with the credit so created.
The arch-stone in this development has been the abolition of the statutory reserves that banks had to leave with them as a proportion of the credit they created. That has left interest rates -- the revenue of money-lenders -- as the one blunt tool for dealing with inflation and has radically changed the distribution of the national income between those who work for a living and those who live by stocks and above all bonds. The reorientation of Canadas official views on social security traced by this brave little book coincides with this sinister development, but there is nothing in the booklet that would seem to relate the two chronologies, which in fact are one -- tied at the gut.
That brings us to what could be called the great Paradox of Consensus (see page 13). Ours is an increasingly complex society particularly as deregulation and globalisation proceed apace. That makes it ever more dependent upon information as these reforms attain speeds that leave the angels far behind. It also increases the strategic leverage of misinformation. Indeed the most important relationships are denied to exist even though they may still survive rusty with misuse in our law books. Consensus building may accordingly be easy so long as the consensus builders avoid digging to the depths where the really key information lies interred. We know that at least one of the three authors of this praiseworthy little opus is familiar with the social consequences of the capture of our central bank by the commercial banks. But the absence of any reference to this in the text must be taken as an example of the perils of too absolute a trust in consensus-building. As in bank ledgers it is the bottom line that counts.
After listing the above-quoted passage on the ways of financing a BI, the authors remark, It is hard to imagine that the ingenious armies of economists and accountants will fail to come up with a feasible means, once the desired end result is specified. Where, we must ask, have these ingenious armies of economists and accountants been hiding these last few decades? We are in the midst of a power play in which the aggressors have a clear grasp of the strategic value of information. Those who pursue the goals of this fine little study can settle for no less.
William Krehm, Editor
Economic Reform, OCTOBER 2000
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