Basic Income in Times of Economic Crisis

The War Social and Working Rights
By RUBÉN M. LO VUOLO, DANIEL RAVENTÓS
and PABLO YANES

The economic crisis has not ended, but the consequences for broad sectors of the population have been evident for months: more poverty, higher unemployment, inferior working conditions, salary cuts and reduction of social security benefits. The IMF and ILO report published in September specifies that 30 million people have joined the ranks of the unemployed worldwide since the start of the crisis, almost 10% of whom are from the Kingdom of Spain. This crisis is the result of a previous growth period driven by the financialisation of capital and a marked regression in the distribution of income and wealth. In the European Union of the 15, for example, the income from labour now represents 56% of national income when just a few years ago it accounted for nearly 70%. In Latin America, even after a slight improvement in the growth of some countries over the last decade, the figures for participation in the total wage bill are well below these estimates, and the Gini indexes still show this to be the most unequal region of the planet. This rapidly growing inequality consolidates a tendency described in 2006 by one of the richest men in the world, Warren Buffet, in strikingly graphic detail:

“There’s class warfare, all right, but it’s my class, the rich class, that’s making war, and we’re winning.” 

With the crisis that exploded in 2008, some rich individuals lost some money, but formal workers and informal and precarious workers, so legion in Latin America and whose numbers are growing in southern Europe, have seen their living and working conditions deteriorate even further. The financial rescue operations started by many governments have yet again favoured the wealthiest and those who are most responsible for the crisis.

In Latin America, the crisis brought an end to a growth cycle spurred on by improvement in the terms of exchange and major macroeconomic adjustments after the frustrating experience of the policies of opening up and economic liberalisation of the nineties. The economic recovery shown by some countries in the region in recent months (such as Argentina, Brazil and Uruguay) along with that of the so-called “emerging” economies (such as China and India) recreates in some the illusion of a new stage of growth and job creation and of a positive re-alignment of the global economy. However, it would be a grave mistake to let this engender confusion about the diagnosis. Beyond the different particular situations we are faced with a global crisis which, spawned in the very core of the capitalist powers, shows the thoroughgoing contradictions and non-viability of a regime of accumulation based on devaluing the work force, job instability, massive concentration of wealth, and the commodification of nature and all social relations. This regime of accumulation has led, on the global scale, to the profound incongruity of a model of global production operating without global consumption, and the incompatibility between the growth model hitherto applied and preservation of the environment and reproduction of life itself.

This is the first global overproduction crisis and the spectre of deflation is looming, along with the tendency for long-term stagnation. In the best of cases, sporadic bursts of recovery of economic growth will not be sufficient to generate employment in the quantity and quality required to guarantee the wellbeing of the majority of the population. In other words, we may be trapped in a long-lasting economic cycle dominated by hard crises and soft recoveries.

Responsibility for the crisis is clearly attributable to the capital – especially financial capital – bosses, including owners, administrators and government officials in charge of control and regulation. Yet, these selfsame guilty parties are launching a new offensive against work and social rights. Thus, in the bosom of the European Union, so-called “austerity measures” are being launched, measures that mean, in practical terms, adjusting consumption and loss of social and labour benefits for workers and the broad-based sectors.

These adjustment recipes were frequently applied in Latin America in recent decades, and their consequences have been damaging to the wellbeing of the most vulnerable population and for the stability of economic, political and social systems. Yet they are now being adopted in many European countries with the main objective of rescuing banks and patching up financial speculation mechanisms in the hope of re-launching a new cycle of growth spearheaded by finance. To paraphrase the clear depiction of the situation offered on 10 May by a British banker on 10 May at the latest meeting of the ECOFIN, the ECB and the IMF, it is easier to sell the plan saying it will save Greece, Spain and Portugal, than to confess that first of all it must save and help the banks. The budgetary austerity plans set underway to ease public deficits are, in effect, a wholesale attack on the living and working conditions of the working classes and a broadside against the Welfare State regimes that emerged after World War II. Hence, the very crisis brought about by the irresponsibility of the administrators of capital, becomes an additional pretext to justify policies that impose heavy adjustments on workers’ remuneration, affecting both direct wages derived from employment and social protection systems. The excuse of the urgent need to recover competitiveness and stimulate economic growth (or, in the European Union, the much-vaunted pretext of “saving the euro zone”) is wielded in the project of degrading the living conditions of the most vulnerable groups.

Faced with this situation, some assert that this is a temporary crisis arising from the supposed “imperfections” in financial markets and that it will be overcome with a few corrective regulatory tweaks (which are yet to appear in the required dimension). On the contrary, it is evident that this is an emergency of structural problems in the form of organisation of contemporary societies, which have been apparent for quite some time and that will foreseeably continue for a long time yet, although with short periods of recovery and economic growth. What is in crisis is the myth of permanent economic growth and quality job creation as a way of guaranteeing the economic and social integration of citizens as a whole. The current situation raises serious doubts about the ability of the regime of capitalist accumulation to offer, in any reasonable way, a horizon in which it might be materially and politically viable to expect development based on a scheme of full employment for men and women and, in consequence, that employment, or wage labour, would constitute the key, or only path of access to social rights, social mobility and the wellbeing of people.

A clear manifestation of these structural problems is that the apparent solution to the crisis is leading to a widening of the “gaps” between established rights, which citizens should enjoy in keeping with what is enshrined in constitutions and laws, and the rights they actually have. These gaps encourage hypocrisy, fear and sectarian attitudes of all kinds and are conducive to degeneration into resignation and impotence, which are then manipulable by far right groups. The democratic sovereignty of peoples is close to being definitively mocked by the interests of private groups that operate through “the market”, putting pressure on the inability of the political leadership to apply government programmes in which the public interest prevails, thereby ensuring that the rights of their constituents are effective. In the apposite words of US president Franklin D. Roosevelt, in his State of the Union address in 1935, “[…] Americans must forswear that conception of the acquisition of wealth which, through excessive profits, creates undue private power over private affairs and, to our misfortune, over public affairs as well.”

These and other elements should be reason enough to seek new organisational principles for contemporary societies. In this evermore imperative re-design of our societies, it is of paramount importance that access to social rights should cease to operate on a differentiated status to become general rights of citizenship, rights deriving from the mere fact of existing, which is to say that they should cease to be mediated, segmented, conditioned and pared-back rights, which are diminished, inter alia, by the volatile, transitory and unequal position of each person in the increasingly precarious labour market.

For all these and other reasons, we are advocates of what is known as Basic Income. This proposal, which has been championed in different geographies in recent years, already has well-organised supporters in Europe, America, Asia, Africa and Oceania. Its postulates are simple: all citizens and all people of recognised residence are entitled to a universal, unconditional monetary income integrated into a progressive taxation system. We believe that BI could be a sound basis for a structural reorganisation of public policy and are convinced that this is a good proposal in situations of economic prosperity, but even more necessary in times of economic crisis and of attacks on the living and working conditions of great sectors of the population, such as we are now witnessing. Among others, the following reasons stand out:

1) Involuntary loss of employment causes a situation of great economic and living uncertainty. Losing one's job but having a BI would make dealing with the situation less stressful. This obvious characteristic of BI is a plus in any economic situation. In a crisis, where unemployment is much more widespread and prolonged, having a BI takes on greater social importance and still more so with the growing weakness or outright non-existence of any broad and long-lasting unemployment insurance. It is worth noting that if labour relations were dominated for many years by prolonged employment and cyclical or frictional unemployment, what is transitory and unstable today is employment itself (and especially quality employment).

2) If within a framework where undermining of the organisational instruments and representation of the working class is proceeding apace, we add the negative impact of unemployment, the precariousness of work and the adjustments being made in Welfare States, the result is that there are more and more workers being left without union representation. BI could play an important role in re-creating collective interest within the working class and in the struggles of those who are trying to resist, both those with organised representation and those who are left to struggle alone. This would enable consolidation of the worker’s identity in a period of growing labour fragmentation, making possible new forms of association and representation for the increasingly divided interests of the working class. In these times of crisis one can see perfectly well that BI is not an alternative substituting for salary and neither does it weaken the defence of working class interests, but rather it is an instrument that strengthens the position of the entire workforce, both on the job itself and in the search for employment. BI would allow for unification of the working class around a universal right that would benefit a considerable number of citizens, regardless of their specific occupation, while at the same time offering greater leeway for resistance against adjustments to working conditions or to the level of employment itself. In addition, BI would become, in the case of strikes, a kind of unconditional resistance fund whose effects in offering leverage for workers are easy to gauge. The availability of BI would allow them to face the labour-related conflict in a much less insecure manner since, today, depending on the length of the strike, salaries can be reduced to unsustainable levels if, as is the case for most of the working class, no other resources are available.

3) BI would also lessen the risk for people who have undertaken self-employment ventures. In this regard, BI would be more efficient than micro-credits for stimulating the creation of micro-businesses and cooperatives, as it would mean a permanent, stable income that would not generate debt (or abusive interest). In a situation of economic crisis such as the current one, BI would also be an instrument that could facilitate self-employment tasks and even cooperative organisation of its beneficiaries, while also representing a better guarantee of being able to face, if only partially, failure of small businesses.

4) One of the most notable consequences of BI would be a substantial abatement of poverty. It could even realistically raise the possibility of its complete eradication. Not only would it make it possible to remove millions of people from situations of impoverishment, but it would also constitute an additional support to avoid relapse. For the first time, this would represent an active policy against poverty with a preventive dimension, which would thus go beyond the impotence of the conditional focused monetary transfer policies that are currently being applied in Latin America and other developing countries. Some claim that these programmes are a first step in the direction of BI. Not so. While they have a positive impact of alleviating the precarious situation of want of many families in the region, these programmes (Bolsa Familia in Brazil, Oportunidades in Mexico, Familias en Acción in Colombia, Juntos in Peru, Familias solidarias in El Salvador, Asignación Universal por Hijo, in Argentina, et cetera) are opposed to the basic principles and operating rules of BI. Instead of being universal, unconditional and integrated into a progressive taxation system, they are focused and means-tested, demanding conditions in which lack of compliance is punished with loss of the benefit, and they also represent minimal outlay in a profoundly regressive fiscal system. Hence, they reinforce the strategy of conditional, focused assistance that, for decades, has characterised social policy in the region under the patronage of international proponents of structural adjustments that are today being imported to European countries.

Not every project of monetary transfers works along the same lines as BI, because BI is not just another income transfer programme. Focused and conditional assistance programmes have a positive circumstantial impact on the income of some poor families but are ineffective when it comes to removing them from poverty, while they also reinforce client-based policies that work against the development of people’s autonomy. Neither do such programmes ensure that people will not relapse into poverty and homelessness, or prevent the formation of new impoverished groups. They do not cover all those in need and, by the time some groups are selected as beneficiaries (if, indeed, they really are), the crisis will have already unleashed its violence on all this vulnerable population causing irreparable damage. So far, the economic crisis alone has given rise to five million new poor in Mexico, half of all the new poor in Latin America, while the Oportunidades programme proposes expanding its reach by only 800,000 families over a period of two years. To this is added the steady undermining of people’s dignity and autonomy when they are constantly being called on to prove their condition of poverty so that some bureaucrat of the day will deem them “worthy” of assistance.

The economic crisis has demonstrated in the clearest possible way the need to reformulate cash transfer policies along the lines of a universal, unconditional BI. The “conditional” programmes that are now being exported even to the more developed countries are not enough to respond in time and in form to the needs of the most vulnerable groups whose income is in permanent oscillation. Such programmes select the beneficiaries, which means nurturing an expensive bureaucracy that is tasked with classifying (discriminating among) potential beneficiaries who may or may not “deserve” their assistance, and part of the job is permanently scrutinising and assessing their level and conditions of living, to the point of intruding into their private lives. This programmes generate typical “poverty trap” situations because they do not seek to help people overcome the problem but rather only aspire to manage it, thereby keeping the needy population under political control. BI not only saves on unnecessary bureaucratic costs, but delivers benefits based on rights that pertain to citizens, avoiding the kinds of intermediation that turn the needy population into a political clientele. Even ECLAC has singled out the example of the pension scheme for senior citizens in Mexico City, which is universal, non-contributive and unconditional, as one of the innovative measures in Latin America for “guaranteeing a basic level of income in a sustainable manner from the fiscal point of view, and fair from an intergenerational point of view”. It is therefore of tremendous importance that promoting BI was included as one of the objectives in the programmatic document, “Carta de la Ciudad de México” (Mexico City Charter for the Right to the City).

5) A much-debated subject regarding the crisis is the need to maintain consumption by families. In fact, in the boom years, many families were sustaining levels of consumption that were well above their means thanks to the inflated prices of financial assets and credits, especially mortgages, but also consumer credits. This debt-financed consumption by families in general has worked against the poorest groups. It not only eats up any extra income but, now, a reduced labour income must be used in part to pay off the accumulated debt. BI is unquestionably a consumption stabiliser that could be fundamental in maintaining consumption during times of crisis, especially for the more vulnerable groups and, in this manner, avoiding the widening of inequality gaps. In a world like the one today, where the accumulation of vast wealth coexists with crushing poverty, the freedom of hundreds of millions of people is severely limited by the need to find some means of survival. BI would be an institutional mechanism that could guarantee to the citizenship as a whole (including accredited residents) material existence on a basic level at the very least. It is evermore evident that in complex modern societies, if they are to be democratic and fair, one’s daily bread and dignified existence should not be rights “earned with the sweat of one's brow” but rather guaranteed as rights of citizenship so that, rather than the creative and productive capabilities of people being thus impaired, they given some space to develop.

In November 2007, within the framework of the Universal Forum of the Cultures held in the city of Monterrey (Mexico), the “Universal Declaration of Emergent Human Rights” was approved. This Declaration was in fact the continuation of the one that had already been declared in Barcelona three years previously, in September 2004, also within the framework of the Universal Forum of the Cultures. Article 1.3 enshrines:

The right to a basic income or universal citizen’s income that guarantees to every human being, independently of age, gender, sexual orientation, civil or employment status, the right to live in material conditions of dignity. To this end, a regular cash payment, financed by tax reforms and covered by the state budget, and sufficient to cover his or her basic needs, is recognised as a right of citizenship of every member-resident of the society, whatever his or her other sources of income may be.

In conclusion, if there are good reasons for upholding BI in situations of economic growth, falling unemployment and encouraging tendencies in the standard social indicators, there are even more cogent arguments in its favour in a situation of crisis and of attacks on social and labour rights. It might even be said, moreover, that the impact of this crisis will be exacerbated by the absence of a commitment to proposals such as BI in the times of economic prosperity. BI would not only be an important tool for combating poverty, closing the inequality gap and advancing towards providing the guarantee of a dignified life for all people, but it would also be a powerful instrument for social and political change that would permit a reordering of social relations in favour of freedom, autonomy, respect and recognition of men and women of all conditions. A society in which nobody lacks the basic necessities is good for everyone. It is the only society worth striving for.

Freeing men and women from the scourge of hunger and need, of fear on a daily basis, of lack of time, of insecurity over the present and uncertainty about the future, means building up citizenship, broadening the spaces for social and union organisation, strengthening the capacity for political struggle of the broad-based sectors, as well as creating better conditions for citizen participation and civil activism. BI is one of the badly-needed elements that should be taken into account as a driving force for a social transformation that guarantees the right to exist for all people and takes us closer to the longed-for objective of a freer, more equal and more fraternal society.