UBI: version update for USA

Recently there has been a lot of discussion about whether it is advisable to provide a basic income for those who are unwilling to work.   Much of the criticism quickly equates the idea to socialism or communism that they argue has failed repeatedly in the past.   I wonder how this debate would have been different had UBI been proposed in the early 19th century or even the late 18th century before we had examples of socialist or communist states.

In the revolutionary rhetoric around the time of the war of independence, there was an implicit argument for a UBI in the combination of assertions that all men were created equal, and all men had unalienable rights that included the pursuit of happiness.   Such rhetoric managed to motivate a sufficient number of supports to wage a successful revolution, but there was immediately a problem in resolving the inherent contradiction between “all men” and “right to pursuit of happiness”.

Early government resolved the problem by restricting the franchise to just those people (nearly all of them men) who owned property, and sufficient property to deliver passive income to fund their pursuits of happiness.   At first, most people eligible to vote or even have the means to hold public office would be those with passive income derived from their private property or capital.

Obtaining passive income from property relied on the labors of others, either employees or slaves.   Even those who were not slaves nonetheless were burdened with daily labors to generate income.  Meanwhile, the landowners and capitalists benefited with income from these labors, freeing up most of their time to pursue their happiness.

We eventually solved the problem of slavery, but that merely combined the former slaves with the existing free population who had to commit to daily and weekly work hours in order to obtain income.   These workers were not at liberty to choose their preferred hours of days of work, the number of hours worked per week, or even the nature of work they would do.   For the most part, job duties preexisted the applicant’s acceptance of the work and stayed constant for the duration of that employment.   Applicants were free in terms of choice of what jobs to accept or whether to be unemployed, but this was not the same kind of freedom afforded to the people who owned sufficient property or capital to live on passive income.

In much of US history, for most people, there was no option other than to dedicate much of his waking hours to labors either in the employ of another or in self-employment or small business ownership.   All of these options consumed much of his waking hours, distracting him from pursuing personal pleasures.

Earlier in my life, I accepted the term pursuit in the phrase pursuit of happiness to mean employment.  My freedom to be employed allows me the income that contributes to my pursuit of happiness.   I imagine most people interpret it similarly, the pursuit is the pursuit of the income or wealth that finances what brings happiness.   It is easy to generalize this idea to “all men” (all people) in that even rich people pursue more income or more wealth.   I now see this as a rationalization for a coherent country where everyone is doing the same thing only at different scales.

In early history of the country, much of the people who led the revolution and populated the early government seats were people who had the means to afford the required free time to do so.   People who were bound by daily obligations did not have the time to do these things themselves, or if they did they did so by burdening families and friends to finance them.

It is not hard to imagine that the spirit of the early history of the government was that it was a government primarily for the benefit of those who had a guaranteed (or at least a very reliable) stream of income that did not require much of their effort or even attention.   While the larger population may have thought of themselves as part of the government, the government was primarily for and by those who could afford to pursue their happiness.   The early government’s primary mission was to not interfere with their pursuits of happiness that they already could afford without expending any further labor.   Re-imagining the early government this way, the population who enjoyed the franchise of the government were those who had a reliable stream of income that they did not have to work for.   There was a UBI from the start, where the universality applied to those who could afford the membership.

I accept that there is a big and important difference between enjoying passive income from ones own property or capital versus having the state provide income to people even those who own no property.    Instead, I’m thinking about the motivations of the government negatively constrained to allow people to pursue their happiness independently.   Implicit in such a government is a presumption of a source of passive income.

Excepting the controversy and eventual war over the question of slavery, the country has accepted that for most people the freedom to pursue happiness meant the freedom to pursue income, building wealth to finance what will eventually bring happiness.   For the most part, people appreciate the arrangement.   Many eventually (if only breifly) enjoy a period where their earlier labors afforded them holidays, vacations, or longer periods of time where their positions either directly involved their passions or had little burdens to interfere with their passions.   While it may or may not have been the original intent, the country did allow and even encourage economic mobility so that most people at least had a feasible path to have the chance at gaining the wealth they needed for their goals.   Once achieved, those goals may not actually deliver happiness, but the core virtue of the government is that they were free to pursue something they thought would bring them.   This economic mobility correspondingly displaced families that previously enjoyed that wealth, forcing the descendants to compete with the other people who sought a better future for themselves.

Over the history of the country, an economic miracle arose where the overall wealth of everyone improved though the availability of affordable consumables and durable goods that were very abundant, cheap, and high quality.   Even people with little income have access to clean water, safe and nutritionally adequate foods, comfortable shelters, long-distance travel, and immediate communications.

A lot of factors contributed to this change in overall wealth, average and median wealth.  These would not have been possible without the scientific and technological contributions.   It was the economic system that provided the motivation to pursue these innovations at the accelerating rate that we have seen and continue to see.   Consistent with the early understanding of a government of free people, capitalism delivered new or improved products.   But, a non-free government of providing incentives and prohibitions also had a major role, especially in improving quality and safety.

Few people have major objections of the non-free aspects of the current government, but I imagine that the types of restraints it imposes matched the restraints that motivated the revolution of the colonies against the crown.   We accept what we initially rejected because we see the overall benefits.

I think there is a more fundamental cause of the economic explosion of the past couple centuries following the introduction of democratic-republican governments.   The real cause was the rise of consumerism where people had the means to afford personal purchases of consumables and durable goods from a large marketplace of choices.   It is easy to imagine that this can occur in non-democratic governments.   All that is necessary is a recognition of the value of a consumer economy where people make their own choices for what to buy.

An objection to this simplification is that consumerism alone will eventually lead to over-consumption and collapse.   We see these arguments today in arguments about health impacts of bad consumer choices, about environmental issues due to resource depletion and environment pollution.   There is also the argument about the growth of consumer debt to the point of near insolvency.    These are challenges we are facing without any current solutions.  At least some of us have some optimism that we will find future solutions.   Some of the optimists see that continued consumerism will allow the solutions to emerge.

The real discovery of the American experiment may be that consumerism can solve problem.   The initial government provided freedom allowing consumerism to flourish.  Initially, this consumerism solved problems of discontent.   Freedom brought happiness by allowing people to consume freely.   The market responded by providing more consumer choices.   In particular, the markets innovated with new options of consumption introduced too quickly for any government to regulate.   Products became widely accepted before the government realized that the products were coming.

Consumerism caused new problems.   There were periods where these consequences were unpleasant.   These periods brought injury and even death from polluted air, polluted water, toxic or carcinogenic consumables, or hazardous equipment.   Earlier in our history, we observed these situations with alarm, but later we found improvements through a combination of market innovations and governmental interventions.   Even though government intervention had a role, I think the larger contributor was the freedom of the consumer to accept new products that producers deliberately introduced to satisfy directly the consumer’s newfound awareness of the earlier hazards.

Consumerism solves problems indirectly.   What really solves problems is market innovations.   In particular, it is the disruptive introduction of entirely new products or industries by entrepreneurs.   We experienced many examples where some new start-up company introduces a product that replaces an established business.   When that happens, we often realize that that established business inherently could not have introduced the innovation on their own because doing so would have undermined their business.   Also, in many cases the disrupting company delivered a product that solves the problems introduced by the older company’s products.

Consumerism provides the fertile environment for disruptive entrepreneurs to replace companies producing problem-causing products with new products that don’t cause the same problems.   Importantly, the new products will generate new problems but these will be solved later with future cycles of disruptions.

Free and universal consumerism does not only enable disruptive innovations.   What we have observed is that the future innovations are drawn from within the consumer population.   There is no separate class of innovators that inherit their innovative talents from their parents.   Instead, we find the most important innovators to come from with the population of consumers, usually unexpectedly even with the individual, such as individuals who start life failing to complete education or formal training, or people who trained for something completely unrelated to their eventual success.

The rate of positive innovation appears to be tied to the size of the population of free consumers.   A certain tiny fraction of the consumer population will emerge as the next innovators of positive change.  If this is true, there is a need to maintain or even grow the consumer population.   Allowing the consumer population to contract could result in a reduction of future acceleration and that could have catastrophic consequence.   In this formulation, the best recommendation for the future is even larger consumer populations.   Until recently, expanding the consumer market has contributed to this growth, but population growth also contributed.

If consumerism solves problems, there is a need to perpetuate consumerism into the future.  In other words, without sustaining if not growing the current mass consumerism, we may not be able to solve the very significant if not existential problems we face currently.   Current trends point to a slowing down of consumer growth, and it is possible that future consumer population and wealth may begin to decline.   We are approaching saturation in terms of consumer participation on a global scale.   We are also seeing a slowing in population growth especially in high consumer societies.

Within high consumer societies, consumerism is also at risk due to the modern technological advances that inherently demand higher skill standards, making many people ineligible for income opportunities through employment because they will be unable to acquire the necessary skills.   That inability may be an inherent limitation on their ability to learn the new skills, or it may be their calculation of cost vs benefit comes out to be not worth the effort.   The latter is especially true in the current market where currently in-demand skills become obsolete soon after a person completes the training for them, giving them insufficient time to recoup the costs for the training, let alone to realize a profit.

We are facing many challenging problems that if left unsolved may result in catastrophic consequences.   A faltering consumer base at a minimum makes it more unlikely that we’ll find workable solutions.   A serious contraction of a healthy consumer population would deny us the future disruptive innovators who can deliver the solutions we need.  I doubt that established governments or corporations will provide the innovations we will need to solve these problems.

This is why we need something to subsidize the consumer base.   We need to sustain the population of consumers so that they will be available to buy the new products that either replace the more harmful products, or that will make certain problems no longer relevant.   We especially need to sustain this population to permit the unpredictable emergence of future innovators who would deliver the new products, markets, or practices that will allow us to advance the products.

The various proposals for some form of basic income guarantees can be generalized as a direct subsidization of something that we have discovered to be very beneficial not only to humanity but the to the planet as a whole.   Consumerism is very effective at solving large scale problems.   Other option such as deliberate engineering within government of established corporations are not as effective as allowing consumers to choose new products introduced by innovators coming from within their ranks.

I admit it may not be possible to subsidize the consumers.   The money will need to come from some place.  Until now, the primary source of that money was from taxing the consumers, either their incomes or their consumption.   Also, we have plentiful evidence that people receiving welfare will lose their incentive to work, thus reducing the prevalence of innovators.   We see innovations from the current consumer population in part because those innovators would otherwise have to work for their money, they just chose to work in a way that innovates.

I think we need to find some solution.  UBI or something like it is not an option.  Instead we need to find some way to make to sustain a consumer population that includes a substantial number of people unable to earn an income from their labors.

When I first heard about discussion of UBI, I immediately thought of government employment where civil servants have very secure jobs and a stable source of income.  This was demonstrated recently with the long government shutdown that furloughed a large number of government workers and that forbid their work participation even voluntarily and yet they lost no income other than a delay in their paychecks.   They are making much more than than many proposals of a basic income, but their income is guaranteed much more so than non-government workers.   Amazingly, the general electorate sympathized with the furloughed workers and they did not object to their receive back pay for work not performed.

A UBI could be universal governmental employment.   Every citizen would become a government employee at least at the lowest tier that does not require any actual work to be performed.   That employee would receive a steady paycheck by merely staying on the the payroll and the only requirement for staying is to maintain citizenship.

This is contrary to the normal market forces that set a price of labor based on the balance of supply and demand.   Compared to the citizen options available on the globe, more people would pay to be US citizens than there are people who need to be bribed to do so.

Universal government employment does not necessarily require a minimum paycheck. There is a more direct way to address the goal of subsidizing a consumer base.   That way is to give each person an expense account that compensates for actual receipts of consumer purchases.   The expense account would have expense limits such as per diems but the expense account would cover only the costs involved.   In addition, such expense accounts would only cover expenses for rents or immediately consumable products such as ready-to-eat meals.   As with business expense accounts, these are meant to compensate for actual expenses without contributing to income or wealth growth.   The expense accounts can not be used to accumulate wealth or to accumulate durable goals that can be bartered later.

Such expense accounts would sustain a consumer market by giving them a minimum level of experience to live and to raise a family allowing for a stable base from which innovators would emerge.   Inevitably, there will be new markets that will adapt to this market, providing new consumables or services that qualify for expense account compensation.   Perhaps the likely result is a degradation of living conditions, but I think it is possible with reasonable qualifications on vendors to converge to a market providing a reasonably acceptable existence exclusively on what is allowed with a universal expense account.

The expense account approach is not like socialism because the expense account only covers current immediate expenses.   This system can be designed so there is no opportunity to use the expense account in a way to accumulate wealth or to barter credits with others.   Each person gets compensated specifically for their own receipts.

Meanwhile, such a system does not prevent or interfere with a person’s ability to earn money through other means, and use that money to accumulate property or build wealth.   The market that accommodates expense account clients does not prevent parallel markets that accommodate cash payments.   The analogy is with current business travel where certain hotels offer rooms that match the allowable per-diem expenses while the same hotels or nearby hotels also offer much more desirable rooms for more money.    Both markets can and will coexist, and our future survival may require both markets.

I go back to the beginning of the country.   The country was founded based on enlightenment ideologies that I think implicitly accepted that a citizen is one who has access to wealth that either directly provides passive income or at least can be drawn upon to finance voluntary pursuits of whatever that person enjoys.   At the time, the philosophy did not have the evidence we now have of the power of the consumer economy to improve overall human experience and to solve large scale problems.   Had they had the current evidence, they likely would have a better solution to how to meet the enlightenment ideal of all being being created equal: how to extend the equality to those who lack the resources of a passive source of income.

The early government did not have the means to implement an expense account approach, but it also had a poison pill of slavery within its structure.   When slavery reached the point of precipitating the civil war, they had other options other than accept southern slavery or to go to war.   One option considered was for the federal government to purchase all the slaves, making them free so that their future labor would be compensated as employment of any other freed person.

The option not considered was the opposite interpretation of all men being created equal: making all people property of the federal government.   Certainly no one would accept suddenly being declared a slave, but the government did not need slaves.   Instead, the government could merely say that all people (slaves or freed people) would become employees of the government, employees with no income but a basic expense account to cover basic consumption.

I don’t believe such an option would have been accepted at the time.   Even at that time, the full benefit of a consumer economy had not been demonstrated.   It would take another century to demonstrate that the consumer economy could solve problems even those problems caused by the earlier consumer economy.   But had they known what we know now, and had they the modern interest in UBI, they could have implemented it then, and maybe prevented the war.   If done right, we might now be a century more advanced.

Such a solution would be a reinvention of the entire constitutional government.   Instead of a government of the population and of the states, we would have a government of consumers and producers.   Consumers would have an expense account for basic living expenses in exchange for not allowing that compensation to be used to accumulate property or wealth.    Producers are free to earn money that they can spend freely or invest in property or wealth.   Instead of a house of representatives and a senate, we would have a house of consumers and a house of producers.   The houses have mutually exclusive constituencies and yet they inherently depend on each other.

At some point, we will need to replace our government.  We have learned a lot over the past two centuries.   We can build a government that takes advantage of post-enlightenment knowledge.   In particular, the philosophy at the founding assumed that the future solutions will come from the current population with the luxury of wealth to finance their pursuits of solution.   We now recognize that many of the most important solutions come from the consumer population who do not have that luxury.   We learned that frequently the people currently with wealth stand in the way of future solutions.

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