Telling the Truth About Debt, Austerity and Taxation

The Joy of Tax: How a Fair Tax System Can Create a Better Society

by Richard Murphy

Corgi Books (2015)

Book Review

Although the topic is economics, I personally guarantee this product to be totally painless. Murphy describes economics in ordinary comprehensible language – unlike mainstream economists who treat economics like a religion that can only be understood by high priests – and who speak and write in obscure language so you can never be sure if they’re telling the truth or not.

In The Joy of Tax, UK Tax Justice Network co-founder Richard Murphy offers a radically pioneering approach to tax and fiscal policy.  Murphy is one of the first economists to link tax policy to the 400- year-old reality that nearly all money is created by private banks out of thin air.

For political reasons, most economists try to conceal that private bank loans, i.e. debt, are the source of nearly all money in circulation. According to Murphy, the recent admission by the Bank of England (Quarterly Bulletin April 2014) about the true source of our money makes it possible to debunk a number of myths perpetuated by mainstream politicians and economists. Some examples: that investment is only possible when there are sufficient savings in the economy, that government debt is bad and that austerity, balanced budgets and government surpluses are good.

A point Murphy emphasizes repeatedly is that government also has the ability to create money out of thin air. Moreover it has regularly exercised that right to stimulate a stagnant economy. In fact, because all money is created as debt, it’s essential for government to “create” money (by spending it into the economy) whenever private banks fail to create sufficient credit. If this didn’t happen, severe economic recession results.

In Murphy’s view, the primary purpose of taxation is to reclaim the money government creates to keep it from over-inflating the economy. He claims the conservative elites who rabbit on about repaying government debt are really making the case that only private banks should have the right to create money. Aside from making them enormously rich, this makes no sense. Private banks are incapable of acting in the public interest – by law they can only act in the interest of their shareholders.

Citing Adam Smith in The Wealth of Nations, Murphy maintains a rational tax system can deliver other important goals, such as reducing inequality, recovering externalized costs (e.g.  pollution, toxic waste) imposed by corporations and promoting economically and ecologically sustainable growth.

For the current tax system to accomplish these goals, it would need to be far less regressive. At present most of the tax burden falls on middle and low income taxpayers. According to Murphy, the global economy will continue to stagnate until the wealthy shoulder their fair share of tax.

To make our current tax system fairer, Murphy proposes to introduce a number of “progressive” taxes, including a financial transaction tax, a wealth tax, a carbon/pollution tax, a land value tax to fund local government and a special tax on corporations that fail to re-invest their profits. He also proposes to do away with the current welfare bureaucracy by introducing an Unconditional Basic Income (UBI).

Although most of these tax reform proposals are specific for the UK, they would clearly produce similar benefits for the US and other post-industrial economies.

Originally published in Dissident Voice

Nixon’s Guaranteed Basic Income Proposal

Imagine my recent surprise on learning Republican president Richard Nixon, in 1968, was on the verge of enacting an unconditional income for all poor families. It would have guaranteed a family of four $1,600 a year, equivalent to roughly $10,000 in 2016. Here we have yet another historical event that’s been conveniently erased from US history books.

Nixon began by commissioning a study involving a little over 8,500 Americans in cities around the country. Researchers attempted to answer three questions: (1) Would people work significantly less with a guaranteed income? (2) Would the program cost too much? (3) Would it prove politically unfeasible?

Outcomes were surprisingly favorable. Hours of work decreased only slightly and allowed for an increase in other useful activities, such as searching for better jobs or working in the home. Among youth, almost all the reduced work hours were used for education. In New Jersey, the rate of high school graduation for participants rose thirty percent.

Polls showed that 90 percent of US newspapers were enthusiastic about unconditional income for poor families. The Chicago Sun Times called it “A Giant Leap Forward,” the Los Angeles Times “a bold new blueprint.” The National Council of Churches, the labor unions, and even the corporate sector were also all in favor.

In 1970 it seemed that the time for a basic income had well and truly arrived.

With 243 votes for and 155 against, the House of Representative approved President Nixon’s Family Assistance Plan (FAP) on April 16, 1970. Most expected the plan to pass the Senate, too, which was even more progressive than the House. Sadly the Senate killed it.

Writing in Jacobin,Rutger Bregman describes how Nixon adviser Martin Anderson cunningly scuttled Nixon’s guaranteed basic income proposal. A great admirer of libertarian philosopher Ayn Rand, Anderson widely circulated excerpts from sociologist Karl Polanyi’s 1944 book The Great Transformation. The latter describes a historical system similar to Nixon’s proposed basic income: the Speenhamland system enacted in 1795 to alleviate rural poverty in Britain.

In addition to summarizing a Royal Commission Report highlighting Speenhamland’s adverse effects  on both the poor and the community, Polyani cites prominent 19^th century economists, such as Thomas Malthus, David Ricardo and Karl Marx, who all roundly condemned the Speenhamland experiment.

It now turns out the Royal Commission Report was based on flawed methodology and essentially fabricated.

Read more about Nixon’s guaranteed income plan, the Royal Commission Report and the devastating impact of dismantling Speenhamland and replacing it with the heinous 1834 Poor Law.

 

Support Grows for Unconditional Basic Income

Money for Free

VPRO Backlight (2015)

Film Review

Money for Free is about Unconditional Basic Income (aka Universal Basic Income), a form of social security system in which all residents of a country, city or region receive an unconditional sum of money in addition to any other income they receive.

The documentary profiles Michael Bohmeyer, a German web developer who crowd funded a UBI (German residents can apply for it through his website), New York venture capitalist Albert Wenger (who helped fund Bohmeyer’s UBI),  and British economist Guy Standing. Standing has conducted UBI experiments in India and Namibia.

All three see a strong need for UBI in a globally economy that is rapidly shedding jobs and leaving millions of young people permanently unemployed.

At present Bohmeyer has raised 12,000 euros, which means eight people (chosen by lottery) receive his UBI.

Most opponents of UBI claim it will destroy people’s motivation to work. Standing’s experiments in India and Namibia show just the opposite. People who received a UBI in his pilot program increased their economic activity and eared income (as a result of improved nutrition and health).

The filmmakers also interview Alaska residents who receive a guaranteed income from a resource tax on the state’s oil industry.

France, Netherlands and Finland all have basic income pilot schemes in the pipeline. Switzerland will hold a referendum on UBI later this year.

They will also hold a referendum on whether to prohibit private banks from creating money

The Steady State Economy Movement

Enough is Enough

Rob Dietz and Dan O’Neill (2014)

Free PDF download at steadystate.org/

Book Review

Enough is Enough is the report of the world’s first Steady State Economy Conference in June 2010. The concept derives from Herman Daly’s 1977 book Steady State Economy, published five years after the Club of Rome’s infamous Limits to Growth.

The 2010 conference was organized around two basic premises: 1) that the drive for unlimited economic growth is making the planet uninhabitable and 2) that transformation to a steady state economy is essential if we’re to have any hope of preserving the human species.

Enough is Enough begins by outlining why unlimited growth is impossible on a finite planet with finite resources. It goes on to define a steady state economy as having four key features: it’s sustainable, it provides for fair distribution of resources, it provides for efficient allocation of resources (i.e. it doesn’t rely solely on the free market in situations where the market can’t allocate resources efficiently) and it provides a high quality of life for everyone.

The authors focus on four basic steps essential in the transformation from a growth-based to a steady state economy:

1. An agreement to limit resource use – renewable resources (eg forests, fisheries) are harvested no faster than they can regenerated and non-renewable resources (eg fossil fuels) are consumed no faster than the wastes they produce can be recycled. There are a number of possible policy tools for making this happen: an outright ban (similar to current fishing bans), ecological taxation (eg carbon taxes or oil extraction taxes similar to Alaska’s petroleum tax), cap and trade (sets an overall cap and auctions off permits to pollute or mine up to that cap) and cap and share (sets an overall cap and distributes free permits to pollute or mine among all citizens).

2. Population stabilization – through non-coercive population policies that balance immigration and emigration and provide incentives to reduce family size. Examples include increasing access to birth control and education and full equality for women.

3. Inequality is reduced through policies that encourage worker cooperatives, employee ownership, shareholder participation, gender balance in positions of power, a Universal Basic Income (see The Case for Unconditional Basic Income), a cap on pay differentials between workers and management and progressive taxation schemes.

4. Monetary reform – in addition to prohibiting banks from creating money out of thin air and transferring the power to create money to a public authority, there needs to be more promotion of local currencies to stimulate local economies.

5. New progress indicators – substituting something similar to the Human Progress Indicator (HPI), which measures environmental and human well being, for Gross Domestic Product (GDP), which merely measures money.

6. Commitment to full employment – we need to use automation to eliminate onerous and unemployment work, rather than eliminating jobs, as well as shortening the work week (in conjunction with a UBI) to enable more people to have jobs.

7. New attitudes towards business and production – we need to incentivize businesses to achieve “right” sized profits that are large enough to guarantee a company’s economy viability but not so large they exceed its ecological allowance.

8. Global cooperation over resource use – we need to agree all trading partners wind down growth simultaneously. Otherwise steady state economies could experience significant trade disadvantages.

9. New consumer behavior – we need to promote new values that emphasize the positive aspects of a steady state economy (community connectedness, friendship and creativity) over the competitive individualism, hedonism, status and achievement that are emphasized in a growth economy.

10. Engaging politicians and the media (which will be the hardest) – by doing more research and analysis of the steady state model, creating forums to engage the public, politicians, policy makers and academics and to working for small changes at the local community level.
Rob Dietz is the European director of the Center for the Advancement of the Steady State Economy (CASSE). More information about CASSE at http://steadystate.org/

In the video below O’Neill talks about their book.

 

The Case for Unconditional Basic Income (UBI)

Transitions for Society: Job Guarantee and Basic Income

Prosocial Progress foundation (2014)

Film Review

This 20 minute documentary attempts to address the structural unemployment that seems to have become a permanent feature of monopoly capitalism. According to the St Louis Federal Reserve, as of February 2015, only 62.8% of working age Americans have jobs – translating into a 36.2% unemployment rate. A substantial proportion of the jobless are young adults between 16 and 24. Who face more or less permanent exclusion from the economy.

The premise of the film is somewhat unusual. The filmmakers lay out the proposition that the political elite could save capitalism by enacting an unconditional basic income (UBI) for all citizens. However based on past history, they probably won’t. Instead of making the necessary reforms, they will allow human misery and social unrest to increase until the system is overthrown by popular revolt. They see a small chance one or more European countries could enact a UBI. A grassroots Swiss movement has successfully petitioned for a (binding) UBI referendum in 2016.

Martin Luther King’s Call for a UBI

Martin Luther King first called for a UBI in 1967 – in combination with a job guarantee. He maintained the US could easily afford such a program based on the massive automation-related productivity gains. He could not have predicted the financialization of the US economy that would occur in the 1970s, when Wall Street abandoned manufacturing to focus on selling financial products. Nor that this transformation would ensure that the benefits of higher productivity would accrue to the capitalist class, rather than workers.

A UBI, financed by progressive taxation, pays a fixed income to all citizens regardless of their employment or financial status. The most common argument against UBI is that it’s wrong to pay people for doing nothing. However as one interviewee points out, western governments presently pay billions in subsidies to corporations who provide no social benefit whatsoever. If we paid these subsidies to real people instead of corporations, society as a whole would gain gains by reducing the social costs of chronic unemployment and poverty.

How UBI Increases Productivity

Studies in third world countries show that guaranteeing income security causes people to increase their productivity by working more.

The most interesting section of the film describes a pilot program in Madhya Pradish India, in which all men, women and children were paid a UBI. After eighteen months, investigators found their was a clear reduction in illness (due to better nutrition and improved access to health care), a clear increase in the number of women farming their own land and a significant increase in school attendance.