The Wise King Solomon: A response to thoughts on Universal Basic Income

It is written that the good King Solomon once stated ” There is nothing new under the sun.”  Without diving into the context of this within scripture I have always found this to be a timeless statement of a universal truth.  To place it within the context of the oft cited “Fecal handbook of the world’s religions” it is the Hindu truism contained therein: this shit has happened before.

The Paradoxical Millennial has again favored us with some thought provoking material. In his post today, Money for nothing….

https://aparadoxicalmillennial.com/2017/06/13/money-for-nothing-a-few-thoughts-on-universal-basic-income/feed/

He has opened discussion on the concept of Universal Basic Income.  It is not an entirely new idea, as surely there are few that are, but it is an idea which has been steadily creeping into numerous forums.

In his opening TPM correctly cites the fact that UBI is a concept raised before now, indeed by some of the more notable minds from the field of economics. As a general concept the UBI is not entirely without merit. It is only when the questions surrounding how we are to arrive at the methods of implementation that we find ourselves at some difficulty. It is an astute observation to state that there is something there for everyone. It appeals to the equality and social justice crowd as it has a certain visceral connection with the emotional argument.  And there is also the appeal for those of a libertarian persuasion in its purely economic rationale.

I do not believe that the UBI in and of itself can bridge the divide in economic theory between right and left spectrums, but in opening the debate it exposes much of the falsehoods  which have taken root in both sides. It is when we are to place the argument upon the template of market versus big government that we begin to remove the first layers from that onion. In doing so it may well also bring tears to one’s eyes!

The left, if not in fact openly hostile to capitalism, is at the very least highly suspicious of the model and it’s titans. They admonish us with regularity that big business, corporations, the rich are not to be trusted. It is only by placing our trust in their advocacy on our behalf against these greedy forces that we may be saved from these malevolent powers. Conversely the right will always tell us that the left is not to be trusted and come to the defense of the corporate world by espousing the gospel of free trade. Let the market decide. Allowing the market to decide would surely be the right medicine, but if only this were true in practice. In all honesty we have not enjoyed a true and unfettered practice of “free trade” since some time back in the 19th century, and even then it had already begun to be tainted.

Despite what either side may say for the consumption of their respective constituencies, neither are honest in what they purportedly practice. What is simultaneously sold from each is in fact entirely contradicted by their actions. Instead of a watchdog guarding the consumer or a free pass issued to corporations there is in reality a conspiratorial policy of “We will allow you to do as you like as long as we are cut in for our share of the action, pay no attention to what we say publicly.” This is more often referred to as “crony capitalism”. It is anything but free trade.

In a system of a true free trade, pure commerce as exercised between peoples absent any other external authority placed upon it, one would find the very purest form of Social Darwinism. For those who truly embrace the practice of free trade such conditions would be the ideal. For those who only mouth the words while practicing their own self-serving version of it there can be no inclination to accept it’s true form. Their false version of free trade tips the scales to insure that they are assured a positive outcome for themselves irrespective of the vagaries of economic tides. It’s rather ironic when one gives this just a little further thought. The so-called free traders claim that they support free trade because it allows the entrepreneur to pursue their aims upon a level playing field. It is in a very real sense, were it truly as they have stated it, a form of gambling. The entrepreneur takes their disposable income and/or that of investors (also gamblers) and forms capital. This capital is then placed into the market under some enterprise which they have reason to believe has favorable odds of a positive return. There are no guarantees ; it is all subject to chance. When there is a hedge in place behind every wager it is no longer gambling. It’s a form of cheating. When government authority can collude with corporate enterprise to their benefit it is no longer free trade. It also is a form of cheating.

There are some from within this camp who further qualify their position by stating “I don’t believe in just free trade. I believe in fair trade.” This is as close as the right will ever come in finding common ground with the left and their quest for equality and social justice. They both claim to be seeking what is “fair”, albeit for different audiences. And therein lies the peril of accepting the social justice argument on behalf of UBI. Fair is an abstract, not an absolute. It is not so clear cut as, say perhaps, darkness and light or hot and cold. It is not an objective term.  If one approaches the question of a UBI under these parameters there is a problem at the very outset: who is to decide what is fair? Equality and social justice are subjective human constructs. They are myths.

We have a symbol for justice, the blindfolded lady holding up the scales. This is to signify that justice is blind, that it plays no favorites and only makes judgement based in truth. It is a good way of illustrating what justice ought to be in it’s ideal, but it is still only a symbol providing a human form to what is in the end only a futile human aspiration. We do not render justice. We may try to, but justice as determined and administered by man is not blind. It is imperfect because it derives from the imperfection of man.  I do not mean to say that we should not strive to achieve justice. We simply must humble ourselves to accept that we are not so infallible as to truly reach the goal. When we strive for perfection we may at best reach excellence, but nothing more. Nature, or as some care to characterize it “God”, is the only blind arbiter. Nature makes no judgements and can favor no side. Nature simply acts/reacts to maintain balance. These are the true “scales” of justice. This is perhaps fitting. We refer to nature as “mother”; we refer to justice as a blind lady holding a set of scales.

Nature is not conscious. Nature randomly “selects” members of any species which carry those traits that are optimal in assuring a species’ survival within any environment as may exist at the time. As conditions may change a trait or set of traits will be in the ascendant or decline to adapt to those changes. Where this translates in humanity, in Social Darwinism, is that there will always be winners and losers in the lottery of human life. We may fool ourselves into believing that we are somehow clever enough to steer or alter this course, but the truth of the matter is that it has precious little to do with what we do or don’t do.

This may come across as being hard-hearted, but it’s just good science. I can provide a stellar example for all of you. We pat ourselves on the back for having learned so much about our bodies, how they work. As a species we have made revolutionary advances in or understanding and even manipulation of genetics. We have made enormous strides in medicine, curing diseases and preserving the lives of great numbers of human beings who absent these advances may not have survived. They would otherwise have been “culled from the herd”, their contribution to the human gene pool forever erased.  These were traits which Nature had determined, for whatever purpose, were undesirable. They were not to the long term benefit of the survival of our species. While we may delude ourselves into believing that we have somehow outsmarted Mother Nature with these advances, she will in fact still have her way. Not following me? Well it works like this. When we intervened in this process, contrary to nature’s selection, we have in effect watered down our own gene pool by permitting those inferior traits to remain and grow within the pool.  We have expanded our vulnerability to what nature had determined was a weakness, an undesirable trait. We may not see the effects in our lifetimes, but rest assured in her own way Mother Nature will have the last laugh.

We may try to impose our own order on our society and in many respects we may well succeed in doing so. There are, however, limitations to this. There are too many factors that are too random, simply beyond our capacity to control. Aside from the purely genetic science human beings are possessed of other traits. Social traits. These are determined by a personality type, upbringing, cultural heritage and the overall environment. These are those things which help to define our human rather than our animal nature. Included among these many traits are those who are possessed of a drive and those who are not. Those who will succeed and those who will fail. Those who will learn from their mistakes and those who will not. There will always be givers and there will always be takers. All of the clever and enlightened social engineering for all time will never alter these basic facts of the human condition.

I fear that I do not see a way that the UBI can or will be administered without trying to ignore these facts. The stated ideal is that this income be set at a universal mark and applied equally to all, regardless of talent or skill, vigor or lethargy. I clearly understand all of the mathematical calculations making the case for this versus whatever we may be doing now. They are indeed valid points and in the purely numerical sense these provide a sound footing in support of the concept, but for one minor shortcoming. They do not take into account the quantity of human nature.

This may be somewhat clumsy by way of an illustration, but please bear with me as it is the first practical example which comes to mind. Let us say that there is a restaurant chain that employs mostly younger, unskilled workers. All new employees start at the federally mandated minimum wage, with merit increases of $.30 per hour with every 6 months of service with acceptable performance. Troy, who works full time as a cook on the night closing crew, has been with the establishment for 30 months. He has earned a positive performance review with each six month interval and has had perfect attendance, thus entitling him to five merit increases in his hourly rate. When he began working the minimum wage was set at $7.25 per hour.  With his merit increases he is now earning $8.75 per hour. In 60 days a new minimum wage will take effect, raised to $10.00 per hour. So Troy also gets a raise to the new minimum, but subsequent new hires coming on board after the increase, with no experience and no record of performance, will earn the same as he.

Now maybe for Troy it’s not about the money. Maybe he’s just dedicated to his craft. Or maybe not. Maybe Troy sees some injustice in this and says to his boss, ” Hey Boss! If I have earned $1.50 in merit increases for my services then shouldn’t I be getting $11.50 per hour? Its not fair that I earned the increases with my hard work and these other yahoos just starting make the same as me.” Now by law the employer is not obliged to accommodate Troy’s request, but the young man does have a valid point nonetheless. Oh what to do now? Hmm….

My point in this illustration is that human nature being what it is and everyone trying to determine what is “fair” this would be only the first of many challenges in finding the UBI rate that is “fair”. An example of this unconditional grant was given stating that the unemployed elderly male would be provided exactly the same grant as the young female lawyer.  Who would it be to decide what that “fair and equal” grant was to be?  I understand that the concern might easily be countered with “everyone gets the same” when the young lawyer will cry foul. “Hey! That’s not fair, he gets the same as me! I worked hard, sacrificed a lot of my youth to obtain this law degree. And I have law school to pay for! Shouldn’t I get more?” That is just one example of what I am sure would be many. I can understand the rational argument that ” It’s just a basic minimum, Miss. Everyone gets it, even you, see? It’s not even means tested.” Where one is likely to encounter problems in addressing these concerns as they arise comes from the rather improbable assumption that everyone is able to think rationally where it comes to money. I dare say that there are too many among us whose every reaction is rooted in the emotional response, even the ability of rational thought being entirely absent.

There are legitimate answers to this type of objection being raised, but there will be the ongoing battle of having to keep people convinced of these explanations. And then of course there are all of the other questions that are raised.  How is this to be funded? If, for example, the funding would come (in the interest of fairness) from a universal tax to be paid by all into the UBI treasury how is it that it does not become a redistribution of wealth? If it were mandated that all pay the same amount and then even those who didn’t really “need” the grant would receive exactly the same then there will be this objection: What Joe Schmoe the plumber paid in was a significantly higher percentage of his income than the billionaire out in the Hamptons, yet the billionaire gets exactly the same grant? No matter what we may do there will always be those people who will be convinced that even though the rich paying more will do nothing to benefit them directly it is still necessary in the interest of “fairness”. So then in response to this objection the tax rate to fund the program would be set where all citizens pay the same as a percent of their income. In that case it ends up with essentially what we have now: the rich pay more dollar wise as a percent of their income, but the poor, though paying the very same rate, realize the greater benefit from the program. That is a de facto redistribution of wealth no matter what one may call it.

If UBI is an entitlement that is to be administered through the government we can be assured that it will be so far bastardized from what was originally drawn up as to be unrecognizable. It will be played as a bargaining chip for yet more government authority under the guise of “fairness”. Make book on it. The ideal might very well be for the UBI to supplant so many other redundant government programs and on it’s face that is a fine idea. The difficulty there is that one must place their trust in government to act in the better interests of the people than those of their own socio-political class. I believe you might say “Not bloody likely!”

UBI is, however, something which may have a chance at working, once the details are all sorted out. There is one crucial element that would need to be realized first: education. We would all need to radically alter our thinking about many things that have come to be accepted as the norm. There are surely more than I may list here, but as critical matters I believe there are three. These are, assigned no specific order of importance:

  1. The funding of education, in particular higher education
  2. Taxation
  3. Private property

On the first of these I would cite the earlier example of the young female attorney, or any of the “professional” disciplines. Law school, Med school, any post grad school is an expensive proposition. We should ask ourselves why. If we mean to achieve a basic threshold of sustenance to all citizens, regardless their station in life, their training, skills, etc. we should all be clear on our understanding of why, to what ultimate social benefit. There is the fairness/justice case which seems to steer us onto the thin ice. Then there is the “more cost efficient” case, which moves us back closer to terra firma. If monetary concerns are the measure of advantage/disadvantage in determining fairness and equality in an outcome, might we not also (or instead) apply this thinking in determining the fairness/equality of opportunity? Afford all citizens an equal opportunity in education irrespective of an ability to pay. The playing field is equalled, the only remaining determinant is what one does with that opportunity. The young attorney in this instance would not have an argument that she was entitled to the greater grant for her education debt. Conversely the tool and die maker would not have the argument that he is stuck in a tradesman’s career because he did not have the money to obtain a more esteemed degree.  We need to learn to be more careful when discussing opportunity that we do not equate it with results.

On the next matter of taxation never has there been any matter of public policy more worthy of a complete demolish and rebuild.  The world over taxation is misapplied and misused. The misapplication comes in the practice of taxing property and productivity. The misuse is in the exercise of taxation to alter or influence behaviors and to wield the power to tax as a punitive tool. In either instance these are, whatever their intent in theory, in their practice a tax upon productivity. Productivity builds wealth. It builds the wealth of individuals and nations alike. To put it in nautical terms productivity is the engine; wealth is the ship.  Why in heavens would you try to power the engine of a ship while dragging anchor? It just isn’t logical, is it? Yet this is what we do when taxing income, real property and family estates. It is government wielding a confiscatory club over its people. It removes capital from the market where it is more likely to do the most good. In the private sector it is necessary to produce results or close shop. The enterprise that continually loses money is doomed. Yet in government, where failure can be reliably expected the failure is rewarded with? Just throw more money at it. Tax it, print it, doesn’t matter. The well of the public treasury never runs dry.

Suggestions that we tweak the code, go to a flat tax, add a VAT, these are all just subterfuge. They are regurgitations of the last bowl of vomit they served us. All of the existing tax codes need to be rendered null and void. In the case of the US the only sensible approach is for the individual states to establish a sales tax at a rate they deem proper. This is not a tax on productivity; rather a tax on consumption. Take away congress’ ability to borrow and SHUT DOWN the Federal Reserve. For those duties specifically enumerated for the federal government in the constitution they will make due with revenues collected and not spending budgets formulated out of some fantasy realm. Individual states collect their revenues and the Federal government is granted a percentage of each state’s collection. No more; no less.

There is a further beauty in this plan in that it would stimulate economic growth at a rate unseen in over a century. This tax structure forces the states to compete with one another for commerce. If for example the State of New York wanted to continue to fund their own brand of fool’s paradise at the taxpayer’s expense they might determine that they would require a state sales tax of, let us say, 16%. If their population would sustain this level of taxation, were pleased with what they received for price of admission then everyone is happy, right? And this would contribute more dollars as their share to the federal treasury. While next door in Pennsylvania the Statehouse says ” we dont need 16%! We can do our job at a tax rate of 9%” People and businesses will figure out rather quickly that it is to their advantage to set up shop in Pennsylvania, rather than New York. The tax rate remains the same, but their revenues climb because of the increased economic activity.  Vermont sees this and decides that maybe they could reduce their rate too. Eventually New York has to either wise up and change their ways or watch their tax base continue to wither and their services go unfunded. The Federal Government is not going to bail them out in this case because? Well the Federal Government is now dependent on the states, not the other way around.

On the third and final of these points, private property, we again need to look and listen more closely at what is said versus what is done. By taxation, regulation, probate courts and the abuses of eminent domain private property rights have been steadily eroded. With a growing percentage of the population being “unlanded” it has become quite easy for governments at every level to trample upon private property rights with impunity and go largely unnoticed. Where the cries of protest have been raised governments have managed to squelch their volume through the combined forces of intimidation and appealing to the politics of envy before those who hold no vested interest in these fights.

If private property rights were respected and property owners left unmolested by government agencies many of the concerns that a UBI is touted to solve simply would not exist.  Real property left to be developed or preserved and appreciate as a free market would allow would help to insure the elderly remaining secure in their homes and that wealth could accumulate to the benefit of subsequent generations. The grotesque and obscene estate tax laws in the US have nearly extinguished the family farm. The best way to care for your people is not to care for them. It is to empower them to care for themselves.

These are three huge questions that will arise and will have to be properly addressed if a UBI ever has a prayer of happening here. Elsewhere in the world is anyone’s guess, I suppose. I can only speak for here.

Finally there are two other observations about the benefits to be gained from the establishment of a Universal Basic Income that I wish to close with.  To state that a UBI would aid in an increase of market efficiency and reduce the size of the state hovers on the periphery of a truth. Reducing the size of the state in itself  would carry us all light years in the direction of increasing market efficiencies. There were the further observations as to the social and cultural benefits to be realized by a UBI and it’s potential need as a response to the growing trend of automation.  I do see UBI as a potential positive in fostering artistic and cultural growth as well as a hedge against economic displacement resulting from technology. In mentioning these two things together I am, however, reminded how one in fact aided in the creation of another without the addition of basic income endowment.

A little over 11,000 years ago humans embarked upon one of the most life altering technologies in our history as a species. We had functioned primarily as hunter/gatherers roaming across the vast open tracts of lands on the planet up until this time. And then agriculture was developed, a true game changer. The development of the technology of agriculture allowed for the development of the static settlement; forerunners to cities, city-states and a growing human civilization. When fewer hands were required just to keep the people fed this freed up the development of other skills and talents: art, writing, food preservation, irrigation, further experimentation and tool building, just to name a few. And each of these lead to improvements in the standards of human existence and the creation of still more new arts and sciences. All of these were the positive benefits derived from an advance in technology.  Yes, it put a lot of hunters out of work for a while, but they did find other things to do with their time. And at this point in our history we were still some ways from the development of currency. I’ll grant you it hasn’t all been peachy since, we’ve had our share of troubles, but in the overall as a species we have fared at least reasonably well since.

Universal Basic Income is an intriguing idea, one which certainly is worth further exploration, but I would offer a final caveat.  It seems that we are always trying to solve our problems by doing something different. Perhaps we should realize that a good portion of our problems are of our own making and anything else are simply things that are beyond our ability to control. We are able, however, to control what we do. Perhaps our answers lie in doing less.

 

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1 thought on “The Wise King Solomon: A response to thoughts on Universal Basic Income”

  1. Cheers for taking the time to reply at such detail; I’m glad you found the topic interesting.

    On your first point about UBI’s practicality, certainly there are massive political (and indeed, emotional) issues to sort out; it is a fairly radical idea and it would take years for people to come around to the concept. However, it is such a massive policy change that it couldn’t be done instantly anyway – I would imagine the system would probably take at least a decade to implement, if not more, especially if we want to do it right. Most of the serious proponents of UBI state that it needs to be done over a long time and gradually – slowly replacing previous systems or adapting them, perhaps starting with Negative Income Tax and moving into UBI, etc. If we just tried to introduce it tommorow it would never work.

    I notice that you emphasise equality of opportunity here – and very rightly so – but I am not sure that is really an argument against UBI. The UBI system would surely increase opportunity, especially if combined with a freer market, for the reasons I gave in my original piece – people being able to specialise more, being able to move between jobs more easily, being able to reeducate themselves, etc.

    On tax, I agree that in general, it is pretty much theft. But even Milton Freedman begrudgingly admitted that we need them to a some extent. I’m not sure that sales taxes alone are that effective though – if done badly, they can be very regressive. Again, I follow the Georgists and Libertarians in suggesting a Land Value Tax as the “least-worst”, though I would always prefer governments to try and emphasise other ways of funding their spending other than taxes if possible: sovereign wealth funds are an excellent idea, which should be more widely implemented.

    I broadly agree with your point about agriculture being the basis of most civilization over the last 10.000 years: people today I think are often “Farm-blind” and forget about the fundamental value of land and agriculture to our way of life. The same goes with the sea, actually, especially in an island nation like my own.

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