Basic income (BI) & intentional currencies

If a Basic Income is indeed a Good Thing, then new currencies will increasingly seek to build it into their design from the outset. This article looks at the rationale for BI and at implications for currencies that incorporate BI as one of their currency issuance mechanisms. @GrahamJBarnes

The Psychological Rationale for BI

There is evidence from the field of study called ‘distributive justice’ that people’s perceptions of the groups to which they belong are affected by the type of distribution they associate with that group [1]. Generally proportional distribution (or equity) – where people consider themselves rewarded proportionally to some assessment of their contribution is associated with individualistic, competitive behaviours; and more equal rewards foster co-operative behaviours.

Thus a potential psychological rationale for a BI-compatible currency is that it can present itself as a harbinger of a fairer co-operative future society; and that in doing so it encourages co-operative participation by the currency’s users. A commitment to BI can be a primary aspect of a currency’s ‘brand’ – differentiating it from mainstream currencies, and carrying a value-message.

Studies show further that egalitarian distributions tend to increase productivity, especially in tasks requiring co-operation – and the bootstrapping-into-existence of a new currency certainly falls into that category. Indeed, one wonders whether the ‘productivity deficit’ currently the object of UK economists’ navel-gazing might be partly due to a heavily skewed wealth distribution – that the lack of capital investment usually blamed is in fact a lack of motivated human capital.

However the literature also shows that we can be somewhat ambiguous about distribution depending on how we frame particular issues at a particular time. The example of private medicine is often used to illustrate this – the same individual expressing both aversion in the cause of a fair society and favour as a right of the individual to choose. Added to this is the need dimension. Someone with multiple disabilities clearly has a greater need`of BI. So the framing of BI as a citizen’s right, a reward or a need, (or a combination) requires careful attention.

The CommonWealth Rationale for BI

A major argument of ecological economists is that the earth’s natural resources are used as if they are free to use and free of use-cost. Indeed they suggest that the use of the word ‘resource’ invariably indicates that the minerals/ oil/ land etc has already been ‘enclosed’ – effectively withdrawn from the common wealth. In this context a BI can be seen as compensation for the confiscation of natural assets from their rightful citizen-owners.

Tangible recognition of this citizen-right is rare in an increasingly neoliberal world, but one exception is in Alaska. In 1976 the state established the Alaska Permanent Fund, and has distributed a share of oil revenues to residents every year since, typically between USD 800 and USD 2000 p.a. In fact it’s not so much a ‘share’ as a dividend from funds set aside from oil revenues and invested (currently standing at USD 54 billion in May 2015). It is calculated based on a five-year rolling average income.

The Poverty Alleviation Rationale for BI

Depending on the level of BI a nation-state BI could certainly alleviate poverty. This rationale is appropriate only as a long term ambition or vision for a new currency.

The Inequality/Quality of Life Rationale

A BI can help to even out income distribution. What is perhaps more important is the effect a BI can have on equality of opportunity. BI-assisted recipients may be in a position to take up opportunities which they would otherwise be unable to benefit from. This effect is widely expected to result in improved quality of life via increased job satisfaction and more discretionary-time.

Accepting the quality of life argument implies that many existing jobs are ‘stigmatizing, dehumanizing, inadequate, ineffective and inefficient’ [2] This implied criticism runs against the prevailing political narrative that ‘jobs mean dignity’ – whatever the job. The anthropologist David Graeber has used the term ‘bullshit jobs’ [4]. Certainly the provision of any national BI would have a marginal effect on the attraction of some of the less satisfying forms of employment, and the economic effects of this are not clear. (Opinions as to the impact a less precarious ‘precariat’ would have on economic performance are likely to differ according to ideology – there being little or no real data available.)

For a new currency, the economic factor will not be relevant until the currency operates at a good scale, but the quality of opportunity potential is certainly there from day one as a new community of users develops and interacts.

Martin Luther-King nailed it when he said: “The dignity of the individual will flourish when the decisions concerning his life are in his own hands, when he has the assurance that his income is stable and certain, and when he knows that he has the means to seek self-improvement.”[9]

The Ideological Rationale for BI

The ideological argument is laid out clearly by Erik Olin Wright [5] drawing on an earlier seminal paper from Van der Veen and Van Parijs [7]. He sets out three ‘directions of travel’ for socialism to evolve the incumbent capitalist regime. He believes that it is not necessary to set out exactly the nature of the endpoint for society, but that the directions of travel can be used to evaluate potential changes. And in that context he argues that BI supports all three.

The three directions are worth summarising because they may assist in drafting intentional currency mission statements:

a) strengthening the power of labour vis-a-vis capital. BI improves the bargaining power of workers, both individually and collectively – the latter Wright characterises provocatively as a sort of perpetual strike fund.

b) decommodifying labour. If BI provides for a basic level of subsistence, the compulsion to work disappears, and the employee-employer bargain becomes potentially more value-balanced.

c) enhancing social power over economic activity. Even though BI is directed to the individual, it is prosocial in a number of ways. Most importantly it potentially frees time for social provision – for addressing needs that are not amenable to the ‘discipline of profit-maximisation or state-technocratic rationality’ [5].

Objections to national-scale BI:

Classic objections are: (a) affordability (b) encouraging laziness (c) impact on the low paid jobs market. A full rebuttal of these objections to national-scale-fiat BI is outside the scope of this article, but in the context of a new (additional) currency, the first objection is worth considering.

National-scale rebuttals of affordability tend to break down into suggestions for reprioritisng spending and reforming the tax regime. They fall into the ‘handbag economics’ trap outlined by Mary Mellor and others [3] of equating national economies with a household budget. Nations can create currency and tax transactions while households cannot; and new currencies can do the same.

Incidentally the Transaction Tax is particularly appropriate to the new currency context, where we can envisage digital currencies witholding a small percentage of each payment transaction towards scheme costs.

Finally there is an ideological capitalist objection to BI, prompted by anticipated changes in the labour versus capital power balance noted above. This is often not explicitly expressed as ideologically-rooted because that would mean recognising the class-power issue which capitalists want to reassure us is outdated. In this context, Olin Wright’s characterisation of BI as a permanent strike fund may be counter-productive, depending on the messaging that BI-advocates think most effective.[6]

Summary of Implications for Intentional Currencies

i) The incorporation of a BI can act as a powerful brand-value for Intentional Currencies. It enables them to start as they mean to go on – with a clear signal that they value their user-citizen input. While targetted at the individual it is pro-social – it frees up time for the sort of social interplay that will be helpful in developing the governance and practice of value-led currencies.

ii) The potential ambiguity of a BI as right, as a reward or in recognition of a need has to be clearly addressed. All three can be legitimate but it may be appropriate to establish clearly separate categories and currency-issuance regimes.

iii) ‘Quality of opportunity’ stories will be important collateral for new currency projects. Over concentration on the economic operation of the currency and ignoring enrichment of social capital would be missing a trick.

iv) Articulation of ideological arguments for BI are best used carefully in an Intentional Currency context. To maximise the chances of bootstrapping a currency into existence, messages need to appeal to a broad cross-section of potential users. This is not to say that everyone will be a target (see previous articles on the Preferenced Domain [10] nor that the underlying values of a currency should not be explicit. Rather that the primary response of a user to a developing currency will be experience-based.

v) Affordability is an issue but not a fundamental concern. Currency can be created and destroyed via explicit design criteria. While the classic concerns over money-printing and inflation are now recognised as gross simplification, the quantity of currency in circulation at any time does need to be managed. In this context a regular (monthly probably) injection of currency will need specific consideration. A likely response will be to make this element of currency-supply (but not necessarily all currency) subject to a carrying cost (demurrage).[8]

It is possible that nation-scale BI will at some point be implemented in fiat currencies. The Swiss have a referendum on the subject planned for 2016 (which their Federal Commission has recommended voting against). If this happens it will be a sign that our current dysfunctional economic system is heading into more progressive territory. If it does not, the implmentation of a BI-element within an Intentional Currency may give us our first practical experience of the concept. Already the Fimkrypto (FMK) cryptocurrency is providing registered Finnish citizens with 1000 FMK a month, and FMKs are apparently tradable on DGEX – a crypto currency exchange platform. And Auroracoin instituted a one-off launch credit to Icelandic citizens – what Olin Wright calls a stakeholder grant rather than a Basic Income, but also somewhat indicative of a pattern emerging.

Whether socially progressive developments like Basic Income emerge from a newly enlightened establishment via policy change or from a social-media aware radical tech-geek community creating disruptive projects remains to be seen. But one way or another dysfunctional systems have to be challenged, as FEASTA has always maintained, if we are to pass on a sustainable planet for our grandchildren.


[1]: The Psychological Rationale for Basic Income [DRAFT] Rosamund Stock

[2]: Towards a Basic Income Guarantee for All Canadians

[3]: Mary Mellor: Handbag Economics

[4]: David Graeber : On the Phenomenon of Bullshit Jobs

[5]: Basic Income as a Socialist Project : Erik Olin Wright

[6]: Wright himself makes the point:
“If I am right that a generous basic income would contribute in a meaningful way to revitalizing a socialist challenge to capitalism by partially decommodifying labor, empowering workers and enlarging the nonmarket social economy, then this may imply that basic income is even more off the agenda than we may have thought for such efforts are likely to trigger more concerted opposition from the capitalist class.”

[7]: Van der Veen, Robert and Philippe Van Parijs (1986) “A Capitalist Road to Communism,” Theory and Society 15 (5), pp. 635–655

Demurrage can be thought of as a negative interest rate. In the past this has often been applied via having to ‘stamp’ a note costing a small percentage of the note face-value every month for it to retain its exchange value. This aims to encourage spending and discourage hoarding, much as our modern ‘inflation targetting’ does. The underlying rationale here – that ‘money is like blood – it needs to circulate’ – bears further inspection. It can be seen as related to the ‘growth is good’ mantra, which clearly needs (at least) qualifying.

[9]: Where Do We Go From Here: Chaos or Community? Final chapter (1967)

[10]: Designer Currencies and the Preferenced Domain (2013)

Note: Feasta is a forum for exchanging ideas. By posting on its site Feasta agrees that the ideas expressed by authors are worthy of consideration. However, there is no one ‘Feasta line’. The views of the article do not necessarily represent the views of all Feasta members.