It is an interesting time for economic thinking that supports the 99 percent (using the Occupy movement’s definition, the 99 percent are most of us people who are not Wall Street-type billionaires such as the Koch Brothers). Four such economic policies have been in the news lately: Basic Income, Public Banking, Negative Interest, and QE for the People.
Universal Basic income (UBI) has been getting a lot of attention in the U.S. due to the outsider candidacy of Andrew Yang, a businessman running for the Democratic nomination for U.S. President. One of Yang’s slogans is “Humanity First,” a reference to how automation will fundamentally alter the job market but also possibly a dig at the one-percenter economics that prioritizes corporations over people.
U.S. Senator Bernie Sanders (D-VT) is talking about a Federal Jobs Guarantee (FJG), which is a component of Modern Monetary Theory (MMT). It would wipe out unemployment all at once. Talk about a confidence booster for the “precariat” (a term for people in precarious economic situations, which sometimes can be many of us, and especially many young people and people of color).
Although there are vigorous online debates between advocates of UBI and FJG, the two policies are not mutually exclusive. The implementation of either one could actually lead to the other. It is also possible that one could be set up to resemble the other. I hesitate to generalize about FEASTA members’ approaches to UBI and FJG, but it seems many members support the UBI, especially around climate dividends, and are lukewarm toward the FJG (with its basis in MMT), but either approach is preferable to the complete lack of social safety net in the present corporate-centered austerity-obsessed economic system.
The California State Legislature passed AB857, a bill sponsored by the California Public Banking Alliance, which provides a publicly controlled alternative to private-sector banking with Wall Street. If the Governor signs the bill into law, it would give State, County, and City employees the ability to put their pensions in a public bank, and the bank could help finance the Green New Deal, affordable housing, and other societal needs that are currently underfunded.
A well-known (former?) reality TV star and frequent Twitter user, while trying to bully and politicize the U.S. Federal Reserve into lowering interest rates, surprised some observers by calling for negative interest rates. Most people understand negative interest rates as penalizing older savers and privileging younger borrowers, but there is more to it than that. It incentives spending money, not keep it in a bank that charges a fee for holding it for you. So it “stimulates” the economy, along with a hint of generational warfare. A negative interest rate is not a sustainable policy on its own, but it serves to help educate people about the money system, and the ecological benefits of interest rates closer to zero.
The interest rate is closely related to the problems of infinite growth on a finite planet and the ecological need for “de-growth.” In general, lower interest rates boost the economy, but they are also better for people’s livelihoods and the environment. A helpful anecdote to illustrate this is the story of Pacific Lumber Company in Northern California in the 1990s. It was purchased by Maxxam Corporation using junk bonds that paid high interest. In order for Maxxam to pay back the bond holders, it started liquidating (clear-cutting) the forests. The trees just did not grow as fast as the high interest on the junk bonds compounded.
A positive interest rate is also related to the growth imperative, a key aspect of our unsustainable economy system. Money is lent into existence by banks, and the banks charge interest on the loans. But the money to repay the interest is not created, so some amount of bankruptcy is baked into the system. This is the scarcity we all feel. The positive interest rate (and its mirror image, inflation) causes prices to increase every year, so everything becomes more expensive, and the threat of bankruptcy looms if your wages don’t also increase.
A zero interest rate would be compatible with a steady state economy. It is unclear if a steady state could co-exist with a positive interest rate. A negative interest rate as a growth inducing measure, when the economy is already at an unsustainable aggregate position, is also problematic. But there could be some argument for it as a short term measure to allow for debt deflation (to lower the social costs of canceling household debts such as medical and student loan debts, or an economywide debt “jubilee”). And in a sense, banks paying people to borrow could be seen as a small form of “helicopter money,” or a “negative income tax.”
QE (for the People?)
Quantitative Easing (QE) may be making a comeback as well, as the Federal Reserve considers the possibility of a recession. Traditional QE puts money into Wall Street, and allows banks to continue their practices such as giving their millionaire employees huge bonuses and propping up the stock valuations of financial institutions that lend to coal companies, further enriching the shareholder 1%. This past week, the Federal Reserve began injecting tens of billions of dollars each night into the “markets,” which “stabilizes” the banks (i.e. the 1%). Apparently money cannot be found for the Green New Deal, but $70 billion per night to the big banks? No problem.
An alternative to “QE for Wall Street” is “QE for the People.” This brings us full circle to Andrew Yang’s Freedom Dividend. The economic system is a Commons, and each person should be entitled to a piece of the wealth generated by this societal public good. QE for the People would do that.
All this talk of economic growth must carry a disclaimer, which is that it is almost always accompanied by increased carbon emissions, and therefore carries the seed of our mutual destruction. Therefore, economic activity must be decoupled from carbon emissions. The best way to do that is an economywide cap on emissions, an economywide carbon price (by upstream companies purchasing allowances equal to the fossil fuels they extract or import), and a carbon dividend returned to everyone on an equal per capita basis. Internationally, a Global Climate Trust can oversee the cap(s) and follow the science. The economic institutions such as Central Banks, the IMF, and the United Nations must come together to form a Global Climate Trust. Conversely, we the people can form it in civil society, using the model that the International Red Cross followed, people form the institution, and then countries and organizations can join.
As the current neoliberal economic model falters, people are naturally looking for alternative approaches that values the Commons and people, including democratic socialism, climate dividends and basic income. Greta and the youth climate movement can join up with Occupy and make the transformation of our economic institutions another part of the Green New Deal for our children’s future.
Featured image: sculpture of Fearless Girl on Wall Street, New York.
Mike Sandler is a FEASTA Trustee and climate change and sustainability professional with experience working for nonprofits and government. In 2001 Mike co-founded the Center for Climate Protection based in Sonoma County, California. Inspired by Peter Barnes and Richard Douthwaite, he has advocated for revenues from a price on carbon to be returned back to the public as a per capita dividend or share. He actively promotes CapGlobalCarbon and he has written on green monetary reform and basic income, some of which is archived on his author page on HuffPost.