Basic income: a questioning of monetary creation ?

Christian Arnsperger, doctor of economics, teaches at the University of Lausanne. In an article entitled  » Revenu de base, économie soutenable et alternatives monétaires « [1], he raises the question of whether « by the way in which it is created and put into circulation, the resources needed to finance an unconditional basic income (UBI)] are not likely to conflict with the very purpose of such income« . This question is crucial, since the basic income, unlike the monetary system in place, is carrying values ​​such that it should constitute a real tool for « socio-economic change, ecological transition and transformation of consciences« . The author’s argument is that the UBI must be able to become a « profound socio-ecological transition factor », and that as such, on the one hand, the currency will have to be created differently and, on the other hand, the types of currencies in circulation will have to be diversified.

Reasoning on the basis of a given money supply, for most of them, defenders of basic income restrict the question of its financing to fiscal and budgetary issues. « The question becomes how, through public policy instruments, we can channel and route the highest possible fraction of this money supply to the « common pot » of society ». The problematic of monetary creation is thus evaded : « how are the » drawing rights « on collective wealth, ie the effective monetary signs – scriptural and fiduciary – created by which this wealth can be ordered, acquired and transferred according to the amount of money held by each actor? « 

The process of monetary creation.

It does not seem pointless to recall the contemporary process of monetary creation: « The monetary signs, for the most part, are initially created through the granting of credit, thus the creation of a debt of the commercial banks towards non-bank actors « . It is therefore a system of bank loan money, of monetary creation by credit, the foundation of which is the expected financial return, therefore the capacity to engender a future monetary surplus, of the economic projects they agree to finance.

Some economists have demonstrated that, at the heart of these monetary creation mechanisms, there is an imperative for growth. « Thus, monetary creation in our economies is organically coupled with a productivist logic and a logic of growth, which in turn require a consumerist dynamic ».

Moreover, the mechanism of compound interest, which governs the overall evolution of debts contracted with banks and transformed into money, generates a dynamic « enrichment of the wealthiest (who are net lenders) and impoverishment of the most fragile (which are net debtors), so that the wealth inequalities in our market economies have a structural tendency – at least in the absence of redistribution – to widen rather than diminish « . It follows that the neoliberal argument of  » trickle-down « , which would like prosperity of the richest to gradually descend to the « bottom » so as to improve the lot of the poorest, is thus contradicted by the functioning of monetary creation.

Finally, the obligation for the States to also be indebted to the financial system, and thus to have to pay interest and to refinance themselves regularly, rather than being able to put the money into circulation through public expenditures which are nevertheless useful. socially, implies that sovereign debt inflates often disproportionately. 

The result is clear. « The quantity of money circulating in our economies does not, in the current state of the system, depend on our sense of social justice, our desire to ensure environmental sustainability, or the care we wish to provide to each other. « .

This quantity depends on the decentralized decisions of a multitude of private banking actors, on the basis of centralized decisions, but statutorily independent of the values ​​and aspirations of the political community, of a central bank.

Monetary forms are not neutral.

Logically, we must accept the idea that the basic income and the type of money in which it is to be paid must form a « non-breaking conceptual whole« . If the only monetary form envisaged is that currently produced by the banking sector – and this is the hypothesis that goes through the last five decades of discussion about the pros and cons of a UBI that is almost unanimous – this basicincome will, by force of circumstances, be « systemically coupled with an economy in which the growth obligation engendered by this mode of monetary creation reigns. This will be the case even for citizens who choose to use basic income as a tool to exercise criticism of the system.« 

« The monetary creation mechanism currently in place has deleterious effects. Originally justified by the imperatives of national expansion and industrialization, today it clearly demonstrates its limits in the light of social justice and ecological sustainability ».

It will therefore be necessary to review the process of monetary creation.

Thus, to promote a basic income that is really conducive to social justice and ecological transition, it is necessary to question the way in which the currency with which this income is financed is created and put into circulation.

It is not a question of suppressing monetary creation by bank credit, but of adding complementary monetary creation mechanisms to it, adding to the dominant logic and mitigating the problematic effects. « Nothing would prevent states or communities from instituting a complementary monetary creation specifically dedicated to the payment of basic income. » Several possibilities seem to be offered:

(i) The quantitative easing practiced by central banks, since 2009 by the US Federal Reserve, and more recently by the ECB, corresponds to the idea of ​​ »helicopter money » according to which, in a deflationary period, the state could  » Modulate the money supply by printing notes or creating new entries in accounts, and « parachute » them into the population through one-off public spending or even simple direct payments ». However, due to the fact that commercial banks do not make this currency a use that would be in the collective interest, some economists have suggested that this « helicopter currency » be paid directly to citizens – a « QE for the people » – which, by spending it, would thus more effectively launch a revival of the economy for the benefit of all. However, quantitative easing has limitations. Indeed, it responds to a logic of cyclical regulation: « monetary creation intensifies in the deflationary phases, but is intended to be reduced in case of restart of inflation, except risking a runaway price increase. However, a structural measure such as the basic income can not be made to depend on cyclical considerations « .

(ii) In the European context, the idea is expressed of a basic income denominated in a complementary currency with only national circulation. « A direct monetization of basic income in complementary national currency could, indeed, contribute to the revival of domestic markets and make citizens less dependent on the dominant banking money creation when it comes to their basic needs which should then be satisfied only with goods and services with national complementary currency prices – and with their primary material security.« 

(iii) Finally, the desire for regional and local takeover of economic activities – short circuits, soft mobility – arises with increasing acuity. « The need and, in many cases, the desire of many citizens is to experiment with small-scale, highly rooted, bio-regional lifestyles and economic forms with radical ecological components such as ecovillages and permaculture ».

A better understanding of monetary mechanisms is absolutely necessary

These different variations of an unconditional basic income, national or local, call into question a fairly radical creation of money, in order to make the UBI a real socioecological transition tool, « rather than being only the mere appendix of a monetary economy whose very mechanisms surround and stifle such a transition. « 

The need for a revision of the monetary creation process is therefore obvious, and basic income advocates should become more aware of this by investing in a better understanding of monetary mechanisms.

Robert Cauneau, activist citizen


Notes

[1] Christian Arnsperger, « Revenu de base, économie soutenable et alternatives monétaires », L’Économie politique 2015/3 (N° 67), p. 34-49. DOI 10.3917/leco.067.0034. The many quotes come from this article.

Image : pixabay.com

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