Citizens' Dividends

The discussion about an unconditional basic income (UBI) has been going on for more than a half century. Despite many experiments, no government is ready to introduce UBI. The majority of voters are also against it. For example, in the referendums in Switzerland and Austria, voters refused to introduce UBI!

Unconditional Income - right now!

There is a simple suggestion to break the deadlock: if it is dangerous to introduce a full-fledged UBI, let's start small, but right away. At the start, unconditional payments can be quite small. They shall be periodically increased. At a certain stage, the growth of payments may be stopped, or even reduced - depending on the circumstances.

It is logical to link the process of increasing payments with changes in society. The first payments should be enough for food. And at the same time, eliminate begging and abolish the system of distribution of free food (free goods, free canteens, etc.). A further increase in payments is aimed at eliminating homelessness.

Unconditional payments, the value of which can change, are called here “dividends of citizens” or "citizens' dividends". This expression has been used before and defined differently, but I have not found a more suitable replacement for it. Dividends of citizens, like UBI, are unconditional payments for everyone without conditions and obligations, but their value can be less or more than the base level.

Treating unconditional payments as legitimate dividends rather than handouts to meet basic needs radically raises the social status of recipients. About this in the next chapter “UBI trap”.

Citizens' dividends are financed from taxes. Wherein, the tax burden on the super-rich should be increased. This redistribution of the tax burden in itself favors economic growth and social justice. More about this in the chapter “Who will pay for justice?”.

Are unconditional payments for everyone a fair deal?

Citizens' right to unconditional payments must be justified from the point of view of justice:

First. Citizens should have the right to receive dividends from the land's natural resources and land's fertility. This is the cornerstone of many theories such as Georgism.

Second. The means of production of the national economy were created by workers of several generations. Therefore, it will be fair to share part of owners' profits to all citizens as heirs of previous generations. From this point of view, it is fair that the owners have to pay for the capital (created by the people) - in the form of a capital tax.

Third. The English engineer Major Clifford Hugh Douglas (still at the beginning of the last century) put forward the following idea. He disagreed with the classical economists who recognized only three factors of production: land, labor and capital. Douglas considered a society's "cultural heritage" to be the most important factor of production. He defined cultural heritage as the knowledge, methods and processes that have gradually accumulated within us since the dawn of civilization. Consequently, mankind does not have to constantly "reinvent" the wheel.

“We are merely the stewards of this cultural heritage, and in that sense cultural heritage is the property of all of us, without exception”. It is therefore unfair that the dividends from 'cultural heritage' accrue only to the owners of industrial and credit capital, whose efforts are minimal. Every citizen should have the right to receive a certain share of dividends as an heir of previous generations.

How fast should citizens' dividends be increased?

Unconditional payments are intended to stimulate the economy by increasing effective demand. With small payments, prices can remain stable, as production capacity is not currently 100% used and production can grow without new equipment. With a sharp increase in the monetary income of the population, a rise in prices is inevitable due to the lack of equipment. It will take time and investments to increase production and bring prices (and new wages) to new stable levels. Nobody knows how quickly citizen dividends can be increased without threatening economic stability. Let's assume that an increase of €50 every three months would be optimal. With this step, the payments increase to 200 euros in one year and to 800 euros after 4 years.

Where are the growth limits of citizen dividends?

UBI advocates fight for the freedom to work or not to work. But with the value of unconditional payments of 1500 or even 1000 euros, the employment rate will decrease. Accordingly, the production of goods also falls and the expected increase in standard of living will not be achieved. In addition, the economies of modern Western countries are very unstable. Therefore, even a 5-10 percent drop in employment can result in economic disaster.

It can be expected, that as unconditional payments are gradually increased, prosperity will first increase (due to stimulating consumption in the economy) and then begin to decrease (due to inflation and decrease in employment). No one knows what the optimal level of unconditional payments is.

Most likely, the Nordic countries, as well as Japan, can support the level of unconditional payments close to the "basic" level. This should be possible thanks to a very homogeneous population with a high work ethic.

On the contrary, in caste-divided India, it is hardly possible to introduce unconditional payments over 50 or 100 euros. The lowest and most despised caste of Dalits (untouchables) are forced to do the dirtiest work. And when these people get a guarantee that they won't starve, they stop working - because it's a shame to work, and all decent people don't work. As a result, India will go under in mud and shit...

Perhaps the optimal unconditional payments for Germany will be 600 or 800 euros. With such a low income, the motivation to work is quite high. And the absence of bureaucratic barriers should raise employment levels and real well-being.

Even with such small payments, so-called “wage slavery” is already being eliminated. The Citizens' Dividend can be viewed as an endless strike fund that strengthens workers' negotiation power in labor disputes with employers. For example, workers in “dirty jobs” can achieve higher wages than office workers.

But it is also conceivable that the real income of employees in dirty jobs will not increase, but decrease. This can happen if supply on the labor market increases by reducing bureaucratic hurdles. A guaranteed income could dramatically and unexpectedly change the job market. Other unforeseen changes are also possible. That is why it is irresponsible to introduce a basic income “overnight”.

About welfare state

In fact, the current western social security system effectively guarantees every citizen a basic income, but not completely unconditionally. But despite this, able-bodied citizens can avoid work and live on social benefits (as well as free services and charity) indefinitely. For example, in Germany the supreme court restricts job center penalties, effectively removing the legal requirement to seek employment.

In US cities there are poor districts where people have been unemployed for generations. They have an income comparable to a "basic income" and sometimes even a better standard of living than those who work. UBI supporters are confident that with such prosperity, high ambitions, a desire to learn and a desire to serve people will awaken. Nothing of the kind is observed. There is an increase in crime, drug addiction, illiteracy and political apathy, which is sometimes replaced by aggression. It is to be expected that this behavior will continue even after the introduction of UBI.

Fair criticism of this welfare system abounds, so we do not repeat it. This system suits the rich elite, as it prevents the discontent of the population. But most importantly, welfare recipients are actually excluded from politics. No, nobody forbids them to go to the polls. But most of them don't vote and don't care about politics. There is even a subculture of welfare recipients who despise those who work for "human unworthy" wages.

Some billionaires see the flaws in the current social security system and support UBI experiments and discussions. From their point of view, a complex and inefficient bureaucracy should be replaced by a simpler and more efficient one. More importantly, the UBI should limit the consumption of majority and unleash the unrestricted growth of wealth and power for “chosen few”. The other part of the wealthy see it as their duty to provide "basic conditions" for all people. This attitude is reminiscent of the position of animal rights activists who demand "humane" treatment of animals.

UBI and democracy

Does the recipient of UBI need democracy? He has no property and no political power. And he is ready to vote for any populist who promises an unrealistically high UBI. Something similar was in ancient Rome, where the rebellious people demanded "bread and circuses" and elected an emperor who promised it.

If a person owns property, there is an interest in protecting it. This implies the demand for law as a universal regulator of social relations. Legal relations are based on institutions, and not on the arbitrariness of the authorities. Therefore, there is a need to create a distributed management system (separation of powers, collegiality, the principle of consensus and compromise in decision-making).

Democracy originated in the Greek city of Athens as a gathering of free citizens (without the participation of slaves) to resolve current political issues. In the English kingdom, the first "democrats" were the feudal lords. More later, most men have got the right to vote - as a result of a long struggle.

While women were housewives, no one thought about women's suffrage. With the development of capitalism, they filled the workshops of the factories and were severely exploited. They got the right to vote as a result of fighting for their rights - and only because their work was necessary for employers and society.

Workers can participate in the political struggle and defend their interests as long as they are needed by someone. And what political impact would have, for example, a strike of unemployed or a union of pensioners? Due to technological progress, the share of labor in public production is decreasing, while the share of capital is increasing. Accordingly, the political influence of the working people tends to zero, although the share of government tax revenues is increasing.

Why do I mention democracy and voting rights? To emphasize a simple idea: to be a full-fledged member of society, whose political opinion matters, one must either be an owner of the means of production or an employee - to offer capital or labor. While the share of labor in public production is steadily declining, so is the political power of workers, not to mention the power of UBI or welfare recipients. Thus, the majority is at the mercy of a minority of owners.

And let me emphasize once again that the political power of the population of developed democracies is weakening. It is no coincidence that the well-being of the people has been declining - slowly, but declining over the last half century. And at the same time, labor productivity grew rapidly, but the wealth of the super-rich grew even faster!

A hopeless picture of gradual impoverishment and degradation emerges - for the majority of the population. Scientists have already noticed that the IQ of the population of developed countries has stopped growing in the 20th century! But drug addiction and mental disorders are on the rise…

Dividends of citizens

But there is a way out! If no everyone can be hired worker, then everyone can be owner of the means of production! We are talking about dividends of citizens - unconditional payments for all citizens - without preconditions and obligations - funded by taxes. It seems that this is the same as UBI, but there are significant differences:

Dividends beneficiary feels itself as one of the owners of production facilities and natural resources and participates in the disposal of these resources - through political activity. UBI recipients don’t care about it. Dividend recipients become politically active and financially competent citizens - they are the middle class and the backbone of democracy. On the contrary, UBI recipients are formed into dependents who do not care where the money comes from and who earns it and how.

Important - property rights do not change: bankers and capitalists remain the owners of their fortunes, but the tax burden increases, especially for the super-rich - due to progressive taxes. Citizens receive dividends from the country's production capacities through the tax system - they cannot interfere in the activities of enterprises or banks.

Also, there is no guarantee how big the dividends will be. That depends on economic activity, on tax policy and, above all, on the "Social Contract". This opens up scope for persistent political struggle. In this struggle, it is impossible to split the people and pursue a policy of "divide and rule" - dividends are equal for everyone and unite all!

No elite will voluntarily agree with the idea of citizens' dividends, as this is a direct infringement of their exclusive right to appropriate the "surplus value" from the exploitation of people, natural resources, means of production and information. The recipient of dividends is practically equal to the shareholder, although the dividends of citizens are financed by taxes. Moreover, it may turn out that the share of the poor in the "national pie" may increase, while the share of the rich - shrink!

Therefore, the introduction of citizens' dividends is only possible as a result of organized struggle of broad coalition of parties, movements and People...

Who will pay for justice?

In this chapter we discuss measures to improve the effectiveness of the economy. The aim of good tax policy and financial regulation should be to increase citizens' prosperity and achieve more social justice, but not "equalization" or "levelling."

In fact, almost everything requires additional funds - the elderly care system, the education system and the health care system. An accelerated transition to renewable energy and new military spending demand additional funds. What priority do citizens' dividends have in the list of priority expenses? I would put the fight against poverty and homelessness first. And I believe that the immediate introduction of citizens' dividends is the right thing to do.

The rich should contribute more

Most take this to be self-evident for reasons of justice. More reasonable, taxation of the rich should be increased to make the economy more efficient. Few people realize that high inequality braked the economy, and increased inequality reduces the “national pie”.

A radical programme for transforming the economy is outlined in the sections Financial system and Tax Reform. In Germany, only one party, the Left Party of the former Communists (Die Linke), has an adequate tax reform programme: "Reichtum gerecht verteilen".

Continue: People’s Capitalism