From Basic Income to Resource Based Economy
It has been a while since I saw this video for the first time and since then, I keep thinking about all the implications of such a simple solution. I have examined our banking system, our taxes, some reform proposals, local exchange trading systems (LETS – e.g. RiverHOURS or Fourth Corner Exchange) and came to a conclusion that the real problem is in income-distribution and money-flow.
Overview of the current state
The Government has big debt (40 percent GDP in The Czech Republic – not that much compared to other countries) but 78 percent of it is a domestic debt, the government owes it to banks and trusts (at least 62 percent of the debt), which is supposed to increase our savings, especially for new buildings or reconstruction and old age pensions – we are currently undergoing pension reform. This means that we are funding our own savings interest through taxes; isn’t that ridiculous?! (US public debt is 90 percent GDP but 30 percent is intra-government debt mostly from the Social Security Trust Fund and 50 percent of the rest is domestic debt. This article states that intra-government debt was even 42 percent in 2011.)
Our minister of finance thinks we need to raise taxes and lower social benefits to repay the debt, but I think we need to raise both taxes and social benefits to solve the problem! Laffer Curve will defeat us otherwise.
We already have social benefits, unemployment compensation, tax reduction and old age pensions, but all these tend to target specific situations in our lives and were manipulated by politicians to get elected and stay in service. Our legal system became a jungle through all the promises taken out of the context of the system as a whole – this reminds me of “How the Dog And the Cat Baked a Cake” by Josef Čapek: they both add to the dough what they like best and in the end the cake is not edible.
Basic Income with Tax Reform
Basic Income can flatten money redistribution, make it simple and transparent, remove many stupid laws, as well as government jobs, and clear the jungle. Some would argue that basic income will increase unemployment, but I expect an opposite result because the true cost of low wages for employers will decrease. Unemployment compensation and social benefits, together with minimum wage and tax reduction, produces inequality between working and non-working people. Basic income will remove this and allow anybody to work for very low (additional) income as they see fit – no restrictions, no benefit/compensation loss. This also targets technological unemployment.
Second, inequality is between middle-class and high-class due to required insurance ceiling which actually means regressive tax system (high wages are taxed by lower ratio than middle and low taxes). Basic income with single equal tax – Value Added Tax – produces a truly progressive tax system (it does not matter much if you use VAT or additional-income-tax, the result is the same). You may argue that required insurance (health insurance and savings for pension) is unequal, but I have to reply that health insurance should be replaced by VAT and savings for pensions by basic income and commercial savings banks. This is similar to removing the health insurance ceiling and inequality of low old-age pensions compared to original wages (in case of higher wage). Those with high wages should have the economic knowledge to use commercial banks and trusts. Those with low wages will get only basic income instead of an old-age pension. Medical treatment will be funded from the VAT – same ratio for everybody.
The Path to Resource Based Economy
Once we remove basic inequality, the cyclical debt involved of our monetary system, the consumption cycle and our economic structure, we can start raising the basic income and taxes to strengthen the progression and money-flow from the rich to the poor. In the meantime, we can regulate the price of basic commodities (especially food and energy) and start tracking the use of resources – this will probably be the hardest task because it will require gathering potentially exploitable personal data. I hope that “tracking the use of basic income” will be acceptable at the beginning and we will find the way and prove that the data cannot be misused. I hope that one day, money will become numbers in computer clouds and (almost) nobody will care about it any more, but this needs time for the people to change, become conscious and not demand too much.