Thursday, September 01, 2016

If a guaranteed obscene income works for the wealthy, then a guaranteed basic income will work for all

74% of the income of the wealthy is rents, dividends and royalties. Once wealth reaches a certain point, its growth is unrelenting, and we could even say it's guaranteed. It's protected by government in the form of sanctioned monopolies like patents and copyrights. It's protected by laws that give every advantage to the wealthy, complete with a maintenance program called, "the revolving door".

Thomas Piketty, in his book, Capital In the 21st Century, uses centuries of data to show that capital will always outperform labor. Most of the working capital in the world is owned by the wealthy. The rest of us, well, we have to work for our money. But in creating capital, the wealthy have created a system of guaranteed income for themselves while shutting out the rest of us.

I think that this is a point often missed in debates on guaranteed income and income inequality. The wealth bestowed upon a famous actor for great work in movies is a case in point. I see names like Matt Damon, Kevin Spacey and Kevin Bacon in the movies. I've seen and read their commentary about the art of acting. I read in Stage West that Kevin Bacon did not work for 5 years before getting signed on to Mystic River, directed by Clinton Eastwood. All of them derive royalty income from their films after the work is done. So they get some downtime.

They've all earned multi-million dollar contracts for their work, too. A plausible investment scenario looks like this. A wealthy actor (or anyone else with the money) can park $10 million in a Vanguard 500 Index Admiral Shares account with a reasonable expectation of about 5% a year, or, $500,000 a year. In the last year, the rate of return was 12%, for the last 5 years, it was 14%. That is a great rate of return. Since inception, this Vanguard investment account has averaged 5%. That means, if someone of means wanted to retire and just live well, without working, he could reasonably expect $400,000 after paying 20% in federal taxes with a $10 million investment. Or he could just let it compound with interest. That's not just basic income. That's extravagant income.

Now multiply that same scenario many times over for billionaires. Does a light go on in your head? It did in mine when I first realized that this could happen and is happening right now. All the time.

There is a lot of talk in the news about basic income that you won't see in mainstream media. You have to hunt for it to find it. You can find it in groups in social media. A search for basic income in Facebook, Google+ or even in your search engine of choice will yield plenty of results.

But here's the nugget, if you read nothing else. Those returns on investment noted above, they come from the work of the people at the bottom. This is what skimming looks like. That's money that could be returned to the people in the form of wages. That is what it looks like when wages are not keeping up with productivity.

Dean Baker (I know, I talk about him a lot on this blog, but he's my favorite economist) has been prodigious in his documentation of the divergence of wages from productivity and the cause of the same. He's even marked the point in time where there started to be a divergence between wages and productivity. He's got most of it in a free book you can download called, "The End of Loser Liberalism: Making Markets Progressive". The point of his book is to show that the current conditions are not the result of a free market. They are the result of government imposed socialism, in reverse.

The neoliberals that are in power today will spout day and night about the virtues of the free market. But what they won't tell you, like Dean Baker will, is that they like to write funny rules about income distribution. They like to write rules that make income go up, not down. They write the rules that create income inequality, but they don't like publicity about it.

Who are the neoliberals? President Obama is a neoliberal. Bill and Hillary Clinton are neoliberals. Every Republican in Congress is a neoliberal. Most Democrats in Congress are neoliberals.  What is a neoliberal? The word is a term of art, a fancy word for conservative. You can read the Wikipedia page on it here.

There are more than a few economists who understand what is going on. One of them is Joe Stiglitz. He's running a campaign to rewrite the rules so that everyone can enjoy the economic gains from productivity. I think his work is laudable, but as Hillary Clinton's top economic adviser, I think it's too easy for the neoliberals to game the system. I think it's time for a very simple rule that's easy to follow.

Blow out all the welfare, social security and other transfer programs that have complicated rules with complicated bureaucracies and replace with them a basic income guaranteed. This is income guaranteed regardless of your income. I like to think of as a sort of social dividend. This basic income guaranteed has already been tried and true in small experiments around the world and the list and size of the experiments is growing continually. A great resource on news about basic income can be found in Scott Santens and his Basic Income page at Medium.

A basic income guaranteed means that no matter how the wealthy try to write the rules, they still must give to the people that do the work. No longer can the gains in productivity due to technology be separated from the labor that does the work. The wealthy already have a guaranteed income. It's time to guarantee income for the rest of us so that we can enjoy life, too.
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