The Treadmill Tendency

April 5, 2021
Oshan Jarow

A question that sounds like it deserves a really rigorous and vindicating answer, but usually gets little more than a tired shrug:

Why, as citizens of the most powerful, technologically equipped, and advanced society in history, are so many of us spending most of our waking lives working jobs we do not particularly like to sustain lives we do not particularly enjoy?

If this sounds vague, I have in mind a specific and especially pernicious phenomenon, referred to by popular news platforms and obscure Marxist scholars alike as the "treadmill effect".

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The treadmill effect is a sense of existential immobility amidst constant economic effort. The sense that one must work their entire life, work they don't particularly enjoy, just to remain in the same precarious, unfulfilling position. There is constant, tiring effort required to keep up, but there is no forward progress. Just an endless cycle of activity, of drudgery, until we die. This is popularly referred to with the metaphor of a hamster running on its wheel, growing exhausted, getting nowhere. But if it stops running, the wheel keeps turning, and it gets painfully ejected.

Our society has progressed for thousands of years. The industrial boom that set off vigorous capital accumulation has developed for over 200 years. And this is the sort of life we've achieved? Why does modern life remain, for an overwhelming mass of people, an exhausting marathon run atop a treadmill going nowhere?

An all-too-common response: "That's capitalism."

Is it? Is there something inherent to the nature of capitalist society that allows this treadmill effect to swallow our lives? Is it really just "capitalism" that makes us live this way? At first, this struck me as a shortcut to thinking. A way to avoid engaging with the actual complex realities at play, but still sound like one knows what they're talking about.

But according to some of the greatest economists who've ever lived — those who I would not accuse of not knowing what they're talking about when analyzing capitalism — there may actually be a link between the nature of capitalist society and the treadmill effect.

This idea is put most directly by the eminent Marxist scholar Moishe Postone, who first used the phrase "treadmill" to describe the natural consequence of capitalism's internal logic playing out

"[The] treadmill dynamic is the initial determination of what Marx developed as central to capitalism: capitalism necessarily must constantly accumulate to stand still ... This treadmill dynamic expresses and constitutes a new form of social domination...intrinsic to capitalism: it is the domination of people by time."

But this idea isn't restricted to Marxists. Adam Smith, Karl Marx, Henry George, John Maynard Keynes; through each of their work, a common thread can be uncovered. Each offers a slightly different perspective on the same phenomenon; on how capitalist society inherently tends towards this treadmill effect.

When I stumbled on this thread, I found it discomforting, to say the least. If the treadmill effect is inherently linked to capitalism, shouldn't some notion of post-capitalism be the obvious position?

Or, what if we've been securing our own chains by rendering no more incisive analysis than shrugging "that's capitalism"? What if we use "capitalism" as more of a rorschach ink blot upon which we project anything and everything we don't like about our lives and the world alike? Used in this way, the word "capitalism" is a roadblock, a premature end-of-the-line to our reasoning about why the world is the way it is, and whether there's anything we can do about it.

I agree with the late anthropologist David Graeber, who writes:

"There is something very wrong with what we have made ourselves. We have become a civilization based on work—not even 'productive work' but work as an end and meaning in itself. We have come to believe that men and women who do not work harder than they wish at jobs they do not particularly enjoy are bad people unworthy of love, care, or assistance from their communities. It is as if we have collectively acquiesced to our own enslavement ... This is a disastrous state of affairs. I wish it to end."

If we wish this state of affairs to end, we need to know exactly what's causing it, and how. We need to be rigorous about our language, so that we can be effective with our remedies.

What I propose, then, is to ask a simple question as rigorously as possible: is blaming capitalism for the treadmill effect an instance of bullshit?

I mean "bullshit" in the technical sense, as given by the philosopher Harry Frankfurt's wonderful essay: On Bullshit. Bullshit is not a lie, nor is it even intentional deceit. It's more like intellectual laziness. One who lies at least knows the truth they're obscuring. One who bullshits is marked by an "indifference to how things really are". Bullshit is concerned with persuasion, not truth. Bullshit "offers a description of a certain state of affairs without genuinely submitting to the constraints which the endeavor to provide an accurate representation of reality imposes."

The bullshitter, then, may believe themselves when they blame capitalism for the dystopian treadmill of modern life. They will tell you it's capitalism's fault, without having done the intellectual work required to figure out whether capitalism actually has anything to do with it. They will blame capitalism without being able to even adequately define capitalism. In so doing, they bury our prospects for doing anything productive about the situation in bullshit.

And if blaming capitalism for the treadmill effect turns out not to be bullshit, but a real dynamic at play in the deep structures of capitalist society, then unless we're content to live like caged hamsters amidst the glaring possibility of better forms of life, we should get serious about tracing exactly what's going on, so that we can dismantle the hamster-wheel and get to work on building a better situation for ourselves.

The following proceeds in five parts.

First: we locate the origins of the logic of the treadmill in the work of Karl Marx.

Second: we study the work of Moishe Postone, who branded Marx's logic under the label of the treadmill dynamic. He offers an account of how and why the treadmill effect is coded in the inherent logic of capitalism.

Third: we reexamine the treadmill effect in light of two penetrating critiques: that certain periods in history suggest capitalism can achieve the opposite of the treadmill effect; and that the treadmill's logic, at least as given by Postone, relies on using Marx's labor theory of value. So if Marx's theory is wrong, as many economists today would tell you it is, then the treadmill is left without a logical foundation.

Fourth: we examine the work of other great economists, such as Adam Smith, Henry George, and John Maynard Keynes. Their work provides alternative views on how the theory of the treadmill holds up beyond the confines of Marx's categories.

Fifth: we take account of where the treadmill effect stands after the dust kicked up by his essay settles. We assemble all the clarity we can muster regarding the reality of our situation, and what, if anything, might be done about it.

Origins of the Treadmill: Karl Marx

Marx's critique of capitalism establishes the treadmill effect in all but name. The only point in his work where he uses the phrase "treadmill" was a metaphor, invoking the "treadmill of the Roman slaves" to describe the existential condition of workers in capitalist society:

"The crudest methods (and instruments) of human labour are coming back: the treadmill of the Roman slaves, for instance, is the means of production, the means of existence, of many English workers ... The simplification of the machine, of labour is used to make a worker out of the human being still in the making, the completely immature human being, the child – whilst the worker has become a neglected child. The machine accommodates itself to the weakness of the human being in order to make the weak human being into a machine."

Note that Marx's concern in this passage, like Graeber's, is what the human becomes by virtue of subjection to the treadmill-like conditions of existence. If the treadmill is a theory that describes structural trends, its consequences are felt at the level of the individual.

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It wasn't until Volume 1 of Capital that Marx elaborated the specific dynamic - the treadmill effect in all but name - that Postone would later codify:

"The law by which a constantly increasing quantity of means of production, thanks to the advance in the productiveness of social labour, may be set in movement by a progressively diminishing expenditure of human power, this law, in a capitalist society – where the labourer does not employ the means of production, but the means of production employ the labourer – undergoes a complete inversion and is expressed thus: the higher the productiveness of labour, the greater is the pressure of the labourers on the means of employment, the more precarious, therefore, becomes their condition of existence, viz., the sale of their own labour power for the increasing of another’s wealth, or for the self-expansion of capital."

Our intuitions might tell us that rising productivity is good for all. The more productive we are, the less labor that's required to produce the same level of output. But for Marx, capitalist society "inverts" the effects of rising productivity. Rising levels of productivity do not liberate workers from the need to sell their time in exchange for wages, but increases the pressure on them to do so. Rising productivity makes the condition of the worker more precarious, not less.

How? The logic comes from Marx's labor theory of value (LTV). The LTV posits that "value" is determined by the average amount of labor time it takes to produce a particular thing. If it generally takes about 20 hours of labor time to produce a wooden table, the table holds 20 units of value.

Notice what happens as productivity rises: the value of each good decreases. If, after a technological innovation, it only takes 10 hours to produce that same table, all such tables, past, and present, now only hold 10 units of value. If a firm produced 100 tables per year at the old productivity level, the result was 2,000 units of value (100 tables x 20 labor hours embodied in each table). At the new level, if the firm does not increase production, it would produce only 1,000 units of value (100 tables x 10 labor hours embodied in each table). Value, as Postone will later pick up on, is "temporally determined". It derives from the "socially necessary labor time" required to produce any particular good.

The overall amount of value produced is vital, because profit is determined by the ratio of surplus value to total value. That is, workers need to work some amount of hours in order to earn enough wages to survive. But, on Marx's theory, workers are exploited to work more hours than are required by subsistence, and the value created in those hours is captured by the capitalist (the one who owns the means of production). Surplus value is the amount of value created by a worker in excess of the amount they must receive to sustain themselves.

So if total value produced is decreased, the ratio between surplus value and total value decreases, and so do profits. Thus, firms are driven to produce more and more, 'just to stand still'. The same firm must now produce more tables than before to achieve the same value production.

To achieve higher levels of production and maintain or increase the ratio between surplus value and total value, firms must increasingly exploit workers to labor beyond the amount required for their subsistence. The higher the level of productivity, the greater the pressure to exploit workers and exact more surplus value from their labor.

It's by this dynamic that, for Marx, rising productivity levels make the "condition of existence" for the worker more precarious.

This should begin to sketch the logical contours of what Postone would later call the treadmill: "That treadmill dynamic is the initial determination of what Marx developed as central to capitalism: capitalism necessarily must constantly accumulate to stand still."

But Postone would take this sketch and fill it out into a concrete theory of how this treadmill effect sustains "a new form of social domination...intrinsic to capitalism: it is the domination of people by time."

Postone Assembles the Treadmill

For Postone, the decisive aspect of capitalism that drives the treadmill effect is the temporal determination of value by "socially necessary labor time". If profits depend on total value production, and value depends on wage labor for the sake of profit, then capitalist society depends upon propping up the necessity for wage labor, despite whatever reductions in labor time rising productivity levels make possible.

According to the LTV, the production of value in capitalist society fundamentally depends upon preventing the reduction of the working week, even as new technologies make such reductions conceivable.

Postone:

“In a society in which material wealth is the form of social wealth, increased productivity results either in a greater amount of wealth or in the possibility of a corresponding reduction in labor time. This is not the case when value is the form of wealth."

When value is the form of wealth, as in capitalist society, then any reduction in labor time is a reduction in total value produced, which undermines profits.

From this tension, Postone draws out the "necessity represented by value", capitalism's inmost engine powering the treadmill effect. This temporal form of value requires, that is, makes necessary, the continuation of wage labor in all forms of society. As productivity rises, this necessity for the unreduced input of labor time is never transcended, but always recreated:

"Note that inasmuch as the development of productivity redetermines the social labor hour, this development reconstitutes, rather than supersedes, the form of necessity associated with that abstract temporal unit. Each new level of productivity is structurally transformed into the concrete presupposition of the social labor hour—and the amount of value produced per unit time remains constant...In Marx’s analysis, the basic structure of capitalism’s social forms is such, then, that the accumulation of historical time [the accumulation of productivity] does not, in and of itself, undermine the necessity represented by value, that is, the necessity of the present..."

Rising productivity does not undermine the "necessity represented by value", but rather:

"...it changes the concrete presupposition of that present, thereby constituting its necessity anew. Present necessity is not 'automatically' negated but paradoxically reinforced; it is impelled forward in time as a perpetual present, an apparently eternal necessity."

Thus, we do not run the treadmill. The treadmill runs us. By reconstituting necessity, impelling it "forward in time as ... an apparently eternal necessity", capitalism's need to accumulate in order to stand still "expresses and constitutes a new form of social domination...intrinsic to capitalism: it is the domination of people by time."

We're now in a better position to understand what Postone means by the domination of people by time. It is the subjection of life-time to this apparently eternal necessity. Time is not experienced as an end-in-itself, but always as a means of exchange for survival. Workers do not gain the agency to freely determine their own time, their own lives, but are perpetually held within what Marx called "the realm of necessity".

The philosopher Martin Hägglund puts this in a harsher light. The problem with value in capitalist society is not only that it prevents us from achieving the very sort of freedom it claims to provide (freedom of self-determination), but that it actively reduces the realm of freedom available to us:

"...the measure of value under capitalism (labor time) answers to the measure of value that is operative in the realm of necessity. When we labor in the realm of necessity — when we do something that is merely a means to an end — our labor time is normatively understood as a 'cost' for us ... The very calculation of value under capitalism, then, is inimical to the actualization of freedom. Indeed, the deepest contradiction of capitalism resides in its own measure of value. Capitalism employs the measure of value that is operative in the realm of necessity and treats it as though it were a measure of freedom. Capitalism is therefore bound to increase the realm of necessity and decreases the realm of freedom."

In this light, the treadmill effect does more than sustain an eternal form of necessity. The treadmill grinds away at what little freedom remains. More and more of our lives must be converted into this mentality of means-to-an-end, robbing us of the freedom to enjoy time as an end-in-itself, which is the mark of Marx's "realm of freedom".

This should all raise a number of existential red flags. What reason could we have for remaining in a system that's not only incapable of converting higher productivity levels into greater freedoms for all, but that actively converts what spaces of freedom remain into the realm of necessity governed by the profit motive?

Thus, we must now ask: what if the treadmill hypothesis is just bullshit?

Against the Treadmill

There are at least two strong critiques against blaming capitalism for the treadmill effect:

  1. If Marx's labor theory of value is wrong, or no longer applies in a digital society, then Postone's logic connecting capitalism to the treadmill falls apart. So far, the logic that connects the treadmill effect to 'capitalism' relies on Marx's labor theory of value, something that both Postone and Hägglund use in their analyses. Aside from neoclassical economists who reject the LTV on theoretical grounds, even some contemporary Marxists suggest the LTV no longer applies to a digital society.
  2. American capitalism from 1830 - 1930 displayed trends that run directly against the predictions of the treadmill effect. From 1830 - 1930, the average working week in the U.S. dropped from 75 - 37 hours. Rising productivity coincided with a declining working week. According to the treadmill effect, this shouldn't be possible in a capitalist society.

What if You're Not a Marxist?

Most conventional economists, and even some Marxists today, would tell you that Marx's labor theory of value is demonstrably broken. It's important to pair that with an equally important point: the theory of value that quietly prevails today, the marginal or subjective theory of value, is also demonstrably broken (see: adaptive preferences and/or preference falsification, or the absence of distinction between value creation and extraction). Nevertheless, Postone's logic has no basis if one doesn't accept Marx's particular theory of value.

If the treadmill effect is real, and it's intrinsically related to capitalism, then we should be able to see it from perspectives other than Marx's. If it's real, any analysis of capitalism that submits itself to "the constraints which the endeavor to provide an accurate representation of reality imposes" should see it. It's like trying on seven different sunglasses, each with their own tint, and staring at the sun. If each still functions as a clear-enough window onto the world, you'll still see the sun no matter what tint you look through.

Towards that end, we can look for the treadmill effect through the lens of three other, equally giant figures in political economy: Adam Smith, Henry George, and John Maynard Keynes.

Adam Smith: the Social Production of Scarcity

Adam Smith apparently believed in a different sort of treadmill. Rather than being driven by exploitation, or a contradiction in the value form, Smith believed capitalist society perpetuates a treadmill driven by the desire for social status and distinction. In short, vanity and desire. The quest for status drives members of society to work longer hours than survival demands because they crave "the attention of the world":

"The rich man glories in his riches...because he feels they naturally draw upon him the attention of the world. At the thought of this, his heart seems to swell & dilate itself within him."

"Natural Man" who exists in a Rousseau-ian state of nature, has few desires. She has little interest in vanity. But "bring him into society," writes Smith, "and all his own passions will immediately become the causes of new passions."

The economic anthropologist Gustav Peebles writes:

"Out of this endless competition for distinction blossoms a world of socially-produced scarcity. Individuals begin to chase after wealth despite its lack of utility to their survival. Indeed, society creates wholly artificial and unnecessary needs only to ensure that a complex symbolic apparatus of distinction exists. The scarcer the sign, the better it is at attracting much coveted flattery: [quoting Smith] 'How many people ruin themselves by laying out money on trinkets of frivolous utility? All their pockets are stuffed with little conveniencies [sic]. They contrive new pockets, unknown in the clothes of other people, in order to carry a greater number'."

Tracing Smith's logic, Peebles goes on to reveal a startling fact. Smith thought this deplorable treadmill of chasing after distinction was both morally bankrupt, and societally necessary. Without it, society would crumble:

"But all is not lost despite this bleak, hamster-wheel, assessment of the human condition. Taking a crucial next step, Smith insists that this socially-produced scarcity is, in fact, the origin of morality itself. Without scarcity, ease and tranquility would prevail, thereby stultifying humankind, since 'Hardships, dangers, injuries, misfortunes, are the only masters under whom we can learn the exercise of this virtue. But these are all masters to whom nobody willingly puts himself to school'. The abundant natural world enjoyed by the vagrant would allow the individual to abandon virtue, since there are few hardships in the abundant Garden that would allow her to develop it."

Smith held a bleak view of human nature. If we overcame scarcity and lived in conditions of abundance, we'd simply "abandon virtue" and do nothing productive. We'd watch Netflix until we die, never having left the couch. We'd found no new companies. Discover no new innovations. Pursue no further education.

"In light of this logic," Peebles suggests: "we can make a pithy distinction between Smith and Marx: Both believed in the reign of false consciousness [that binds us to the treadmill]; it is only that the former hoped to preserve it, while the latter aimed to explode it."

Both Smith and Marx believed in the existence of a treadmill effect. For Smith, it was driven by the desire for social status, while for Marx, it was driven by exploitation and the contradiction between value and wealth. Marx hoped to explode the treadmill, while Smith feared we'd be useless without it.

Although Smith didn't think society could sustain itself without it, he did think that individuals could each, in their old age, grow wise enough to step off the treadmill, one by one. This would leave the treadmill that sustains society intact, while allowing for each individual, once they've put in their time, to orient their lives towards more important matters.

Peebles:

"But even Smith argues that, in older age, people are no longer duped by this ultimately beneficent false consciousness – it is exploded on an individual rather than a society-wide level. Old age ushers in the illuminating real-world truth delivered by what he colorfully terms 'splenetic philosophy.' This little known subdiscipline of the contemplative arts allows 'Power and riches [to] appear then to be, what they are, enormous and operose machines contrived to produce a few trifling conveniencies to the body'. Having recognized this truth, the splenetic old man finds that 'the pleasures of the vain and empty distinctions of greatness disappear.... In his heart he curses ambition, and vainly regrets the ease and indolence of youth, pleasures which are fled for ever, and which he has foolishly sacrificed for what, when he has got it, can afford him no real satisfaction'."

Thus, for Smith, the treadmill is not intrinsic to the logic of capitalism. Rather, it arises from social psychology, from humans living together. The question of whether a form of society is possible that does not consign the majority of human life-time to a misguided treadmill did not interest Smith, because such a possibility would lead to a society of idleness and sloth.

But 120 years after Smith's writing, an economist named Henry George would open a new and immensely popular inquiry into whether there was something intrinsic to the processes of capitalism that perpetuated the 'treadmill of existence' for working classes. His question, in its simplest form:

"Why, in spite of increase in productive power, do wages tend to a minimum which will give but a bare living?"

Henry George

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Writing in the 1870's, Henry George was vexed by the discomforting association between progress and poverty: "The association of poverty with progress is the great enigma of our times."

Wherever material progress was at its greatest, conditions of material deprivation were at their most severe:

"Where the conditions to which material progress everywhere tends are most fully realized — that is to say, where population is densest, wealth greatest, and the machinery of production and exchange most highly developed — we find the deepest poverty, the sharpest struggle for existence, and the most of enforced idleness."

He didn't find this association only in a few industrial centers, but across the entire economic landscape of his time. This led him to suspect that progress and poverty aren't circumstantially related, but causally. That poverty and hardship aren't random correlations with centers of industrial progress, but are "engendered by progress itself":

"This fact — the great fact that poverty and all its concomitants show themselves in communities just as they develop into the conditions towards which material progress tends — proves that the social difficulties existing wherever a certain stage of progress has been reached, do not arise from local circumstances but are, in some way or another, engendered by progress itself...I mean that the tendency of what we call material progress is in nowise to improve the condition of the lowest class in the essentials of healthy, happy human life."

For George, the puzzling relationship between progress and poverty is driven by the tendency for wages to pay only what provides a bare living: "The cause which produces poverty in the midst of advancing wealth is evidently the cause which exhibits itself in the tendency, everywhere recognized, of wages to a minimum." From this tripartite relationship between progress, poverty, and wages, George derives his question given above: "Why, in spite of increase in productive power, do wages tend to a minimum which will give but a bare living?"

If this tendency were reversed, and wages rose as productive power rose, the stubborn relationship between progress and poverty would break. Rising productivity would benefit all. Instead, George's analysis of progress begins to sound much like Marx's analysis of capitalism. Both paradoxically drive workers deeper into precarity.

Thus we can say that Henry George's lens confirms the existence of a treadmill effect independent of Marx's logic. That there is something "engendered by progress itself" that drives wages down despite rising productivity. That something, as we'll explore in a later section, is the rising value, and thus rents, of privately owned land.

For George, the treadmill of progress is driven by the private ownership of land, and unless some great change is made, all progress will only exacerbate the association of poverty with progress.

John Maynard Keynes

60 years after George's Progress and Poverty, John Maynard Keynes published an infamous essay titled Economic Possibilities for our Grandchildren. In it, he predicts that within 100 years (a prediction landing on 2030), we'd be 4-8 times better off in economic terms, working maybe 15-hour workweeks, mostly just to keep ourselves busy.

New technology and accelerating capital accumulation would cause "the greatest change which has ever occurred in the material environment of life for human beings in the aggregate":

"I draw the conclusion that, assuming no important wars and no important increase in population, the economic problem may be solved, or be at least within sight of solution, within a hundred years. This means that the economic problem is not – if we look into the future – the permanent problem of the human race."

As the economic historian Robert Heilbroner puts it, solving the economic problem would mean "gradually bringing to an end the condition of material need as an effective stimulus for human behavior." This economic problem of material need is what drives the means-to-an-end way of living Martin Hägglund identified as defining the realm of necessity. To exchange the majority of one's waking hours for the resources to satisfy the economic problem constitutes the 'social domination by time' elaborated by Postone. When all time is allocated to the economic problem, existential ones fall out of reach.

But as we near 2030, our trajectory appears nowhere near 10-years-off from solving the economic problem. Precarity, as well as average work weeks, are both rising. Thus, it has become an incredibly popular genre to write essays and books about why Keynes was wrong. What did Keynes miss?

Economists criticize Keynes on a number of important points, ranging from his essay's neglect of distributional concerns to his focus on the satiation of basic needs without much concern for the infinity of relative needs (á la Adam Smith). Jean-Paul Fitoussi makes the perceptive insight that even what counts as a human being's "basic needs" are adaptive. Economic growth may spur an evolution in what we perceive as our basic needs (was internet access a category of basic need 100 years ago?). This infinite evolution of both basic and relative needs undermine Keynes' notion that the economic problem could be solved, and capital accumulation would cease to be of significant interest.

It would be useful for the narrative of this essay to make another, related critique: Keynes simply missed the existence of capitalism's treadmill effect, which guarantees no matter how much progress is made, the economic problem will be no closer to solution, and people will be forced to continue accumulating for its own sake. But this claim would be a case of bullshit.

We find ourselves asking what Keynes missed. But his later work suggests a simple answer: he didn't miss anything.

Keynes, like Marx, is too often framed as having believed that such a transition would occur naturally. That capital accumulation would automatically liberate workers and benefit all. The truth was just the opposite.

Four years after his infamous economic possibilities essay, Keynes was invited to take part in a discussion among English economists on "the outstanding conundrum of today": the problem of poverty in the midst of potential plenty. Sound familiar?

Keynes responds:

"None of this, however, will happen by itself or of its own accord. The system is not self-adjusting, and without purposive direction, it is incapable of translating our actual poverty into our potential plenty.”

Keynes breaks from the prevailing orthodoxy, which suggested the capitalist system was "self-adjusting". A self-adjusting economic system would naturally yield outcomes that transmute poverty into equitable prosperity as capital accumulates and productivity rises. The invisible hand would take care of things on its own. But the capitalist system, writes Keynes, is not self-adjusting.

For our inquiry, this is a crucial semantic point. If the system is not self-adjusting, then it does bear some degree of the treadmill effect. Capitalist society will not naturally carry us from poverty into the potential plenty made possible by capital accumulation. Workers will keep working, but no progress in their overall, existential condition will be made.

Like George and Marx, Keynes believed intentional changes had to be made in the dynamics that drive the capitalist system. Otherwise, poverty would prevail amidst our "potential plenty". These adjustments Keynes had in mind weren't minor tweaks meant to redirect a slightly misguided capitalist system. They were explicitly meant to overcome capitalism in its entirety. Keynes was a capitalist in the same sense that Marx was: capitalism is the worst system for improving the human condition, except for all the other economic systems. The 'point' of capitalism in both of their visions is to create the possibility to get beyond it - a possibility that must be seized by intentional action and policymaking.

Keynes:

"For at least another hundred years we must pretend to ourselves and to every one that fair is foul and foul is fair; for foul is useful and fair is not. Avarice and usury and precaution must be our gods for a little longer still. For only they can lead us out of the tunnel of economic necessity into daylight."

In hindsight, Keynes did not miss the presence of a treadmill effect. He believed that capitalism, left to its own, uninterrupted devices, would simply drive accumulation on towards infinity. Instead, he failed to account for just how strong the opposition against making interventions against this tendency would become. What he did not foresee was the rise of neoliberal economics that supplanted Keynesian thinking in the 1970's.

As we'll see later, Keynes believed the redistribution of income and wealth was crucial for maintaining the levels of aggregate demand that would make the abundance of capital possible. Neoliberal policies pushed in the opposite direction. From the 1980's onwards, income & wealth inequality began their well-known climb towards levels rivaled only by those right before the Great Depression.

As with Smith, Marx, and George, through the Keynesian lens we find another perspective affirming some sort of treadmill effect.

The Time We Broke the Treadmill

What, then, of the century from 1830 - 1930, where precisely the opposite of what the treadmill effect predicts took place? As capitalism developed, the average working week dropped from around 75 hours in 1800 down to around 40 in the early 1930's.

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In Marx's analysis, rising productivity necessarily leads to rising precarity for workers, with the assuredness of a natural law. For Postone, in a capitalist society where value is the form of wealth, increasing productivity cannot be realized in the form of a reduction in labor time.

But that's precisely what happened. How, then, could American capitalism have displayed a steady decline in working hours for so long?

Borrowing from Keynes, one answer is that it was a period during which popular opinion did not treat the economic system as self-adjusting. While it's true that 1830 - 1930 was a period when economic orthodoxy preached the opposite, that it was self-adjusting (it was this orthodoxy from which Keynes would break), their opinion didn't hold much sway over public opinion. Until the mid 20th century, society at large didn't care all that much what economists had to say.

As documented by the historian Benjamin Hunnicutt, the century when working hours consistently declined in America was defined by a common view of The American Dream as increasing leisure time for all. Economic progress was broadly understood as leading down the path towards lives of free time, even for workers.

Hunnicutt's academic career was devoted to answering a perplexing question: what happened? Why, after 1930, did working hours cease declining? Had the treadmill effect only temporarily faltered? Did the Great Depression reignite whatever engine had gone bust?

There is no single answer, but one informative turning point was Franklin D. Roosevelt's New Deal. In 1933, the Black-Connery bill passed the senate, which would mandate a reduction in the national working week to 30 hours. FDR initially supported the bill. Many believed a 30-hour workweek was months from being law.

"The first nationally circulated issue of Newsweek, dated April 15, 1933, had for its front cover, in bold headlines, the news that the thirty-hour workweek would soon be the law of the land. These developments elicited a flurry of speculation about a future in which the nation would have to deal with an abundance of leisure. Few other historical cal trends were as clear in 1933."

But the cultural tides soon reversed course. Perhaps due to stringent provisions in the bill, such as restricting imports from workers who worked more than 30-hour weeks, or perhaps as a response to the business interests banding together against a bill they saw as threatening their bottom-lines, FDR changes his mind. He abandoned the Black-Connery bill in favor of the National Industrial Recovery act. The idea of a reduced working week would never recover.

Hunnicutt:

"In 1935 Roosevelt helped change the direction of American history. He and his administration committed the federal government to the emerging belief that progress was perpetual economic growth and Full-Time, Full Employment — the basic tenets of the new economic gospel of consumption. According to the new vision, progress would no longer be understood as higher wages and shorter hours but as a constantly improving material standard of living with 'full-time' (newly defined as a forty-hour week) jobs for all, supported by new government programs and policies. Roosevelt committed government to do whatever it would take to create enough new work in the public and private sectors of the economy to replace the work taken by new technology. Government would also bridge the gap created by the tendency for economic demand to lag behind increases in productivity by developing countercyclical as well as long-term spending strategies. Labor's view that shorter work hours stimulated demand and helped stabilize the economy, allowing for sustainable growth, was discarded."

What can this episode of America's history tell us about the treadmill effect? The American novelist Marilynne Robinson puts it simply. In response to Henry George's question of why wages tend towards subsistence levels despite rising productive powers, she writes: "because they can, neither ethics nor laws intervening." The same may be said as for why working hours stagnated: because they can, neither ethics nor laws intervening.

The ups-and-downs of wages and working hours across the history of American capitalism suggest that whatever tendencies arise from the internal logic of capitalism, they are just that: tendencies. They are not irreversible. In the end, the determinant of wages and working hours alike are power dynamics, policy commitments, and above all, the choices we make as a society. We are not constrained by the ideological label given to our system.

If we share a broad enough commitment to realizing economic progress in the form of reducing the working week for all, there are policies that can make it so, as they have in the past. So too, with wages.

Robinson observes, in harmony with Marx, George, and Keynes, that in the absence of such policies, capitalism does tend towards subsistence-level wages. Rising productivity does not tend towards shorter working weeks. These tendencies are not iron laws - they can be modulated.

I would then revise our subject of inquiry from the treadmill "effect" to the treadmill "tendency".

The Treadmill Tendency: Capitalism, or Bullshit?

Let's return to the question of whether or not blaming capitalism for the treadmill tendency is bullshit.

Recall, a claim is bullshit if it "offers a description of a certain state of affairs without genuinely submitting to the constraints which the endeavor to provide an accurate representation of reality imposes."

From personal experience, I can affirm that many, many such accusations are total bullshit. I've heard people confidently blame capitalism for every micro-element of discontent that populates their universe, but who'd be incapable of offering any remotely sturdy definition of what capitalism is, other than some vague trope like "institutionalized greed".

But Smith, Marx, George, Keynes, and Postone knew what they were talking about. Each provides a lens that finds its own shade of the treadmill tendency operating in capitalist society. Each of their treadmills had different causes, from status-seeking, temporally determined forms of value, rising land rents, to interest rates. Each believed that, absent deliberate intervention, the capitalist system would keep us in motion while getting us nowhere, existentially speaking.

Dismantling the Treadmill

Things cannot end there. If there is a treadmill tendency, and we agree it makes for a less-than-ideal way of life, there is then the question of what to do about it. It's here that I think blaming capitalism for the treadmill tendency is at its most useless.

The labels of a system lag behind the policies that comprise it. Our economy will not evolve by changing the ideological label, and subsequently passing new policies. By focusing on labels (capitalism vs. socialism), we're focusing on the caboose, the tail-end of change rather than the frontiers where it begins. By the time we call our system "social democratic capitalism", "anarcho-syndicalist socialism", or "free-market, pure capitalism", the policies will already be in place. The game will already be decided.

So, what is to be done? We can return to each of our economists, surveying their own visions for how the treadmill tendency is to be dismantled.

Adam Smith: Grow Old

As mentioned, Smith thought dismantling the treadmill would dismantle society, and so had no vision for doing so at scale. Yes, it would drive most of us to waste our lives in a misguided pursuit of wealth and social status. But this would spur the industrious activity that sustains society. In our old age, however, Smith thought we might each individually step off the treadmill. Once we've wasted our youth, in old age we might finally have what he called a "splenetic insight", and pivot our energy towards more existentially valuable things.

So Smith's advice might be something like: grow old, fast.

Karl Marx: Reduce Working Hours

Marx believed that shortening the working-day was the basic prerequisite for the "development of human energy which is an end in itself, the true realm of freedom". But there's a looming answer any such scheme must address: how will we afford to work less?

At the height of the American labor movement in the 19th and early 20th century, calls for reducing the working week were accompanied by calls for higher wages that would makeup the difference. We would eventually work 15-hour workweeks, making as much, if not more, than we did when working 40 hours.

The outlook is bleak for wages naturally rising to fill the gap that would be left by reducing hours. Spain just announced the largest reduced work-week experiment to date. Roughly 200 companies, comprising between 3,000 - 6,000 employees, will drop to a 32-hour work-week. The government will pay the difference in lost wages. The 3-year trial will cost the Spanish government around $60 million.

This method would not scale well; governments can't just pay the difference. The US government is unlikely to foot the bill in lost wages from a nation of ~156 million workers dropping from 40 hours to 15. Just a few weeks ago, the democratic party dropped a provision that would rase the minimum wage to $15/hour from its latest stimulus bill. It will remain $7.25. How, then, can we afford to work less?

The French social philosopher André Gorz, writing in 1988, suggested Marx's vision for shortening the working week should be supported by a guaranteed income that makes up the difference in lost wages. I've written with great enthusiasm about various kinds and benefits of such a basic income, but how much of a gap could it feasibly plug? In 2017, the median personal income of a 40-hours-per-week-worker was $865 per week. Dropping to a 15-hour workweek is a 63% reduction in working hours, with a corresponding income loss of $545 per week.

To plug that gap, the basic income would have to reach a minimum of $2,180 per month for such workers. There is currently no feasible proposal for a basic income of such magnitude.

A recent proposal for a 4-day working week in the U.K. outlined a few policy measures to explore in such a project: higher wages, universal basic 'services' - such as the unconditional public provision of essential programs such as healthcare, transportation, food, and internet access - and a basic income. But the question of how to afford both universal basic services and income remains unsettled.

Henry George: Land Value Tax

Henry George had a different idea. In fact, he was convinced that his analysis revealed the only way to permanently reverse the tendency of rising productivity to increase precarity: land must be liberated from the stranglehold of private property, and held in common ownership by all citizens as a collective inheritance.

"We have traced the unequal distribution of wealth which is the curse and menace of modern civilization to the institution of private property in land. We have seen that so long as this institution exists no increase in productive power can permanently benefit the masses; but, on the contrary, must tend still further to depress their condition...nothing short of making land common property can permanently relieve poverty and check the tendency of wages to the starvation point."

George is adamant that the ownership of land is "the great fundamental fact which ultimately determines the social, the political, and consequently the intellectual and moral condition of a people." What does this mean in practice? Tax the value of land at around 95%.

George refers to this land value tax as "the single tax" that could replace all others. This single tax would strike down to the heart of capitalist development, making it a force for existential progress:

"The change I have proposed would destroy the conditions that distort impulses in themselves beneficent, and would transmute the forces which now tend to disintegrate society into forces which would tend to unite and purify it...A consideration of the effects of the change proposed then shows that it would enormously increase production; would secure justice in distribution; would benefit all classes; and would make possible an advance to a higher and nobler civilization."

In George's day, the idea gained a huge following. In the early 1900's, George's work was commonly placed on the same plane as Darwin's Origin of Species. In fact, Alfred Russel Wallace, who independently came up with the theory of evolution driven by natural selection, and whose papers on the subject were jointly published with Darwin's, stated that George's Progress and Poverty was "undoubtedly the most remarkable and important book of the present century".

Today, however, the idea is mostly forgotten. In practice, a few municipalities have implemented lesser forms, known as a "split-tax". Rather than eliminating all taxes on capital and shifting them over to land, a split-tax compromises, reducing the tax burden on capital improvements and raising the taxes on land. In municipalities employing a split-tax, such as Harrisburg City, land is taxed at 31%, the buildings upon it at 5%.

But recently, it's experiencing a new spark of interest. From economists to tech entrepreneurs, many are suggesting it may finally be time for a land value tax.

John Maynard Keynes: Redistribute Income and Wealth Until Capital is so Cheap that it Becomes Irrelevant

If the system isn't self-adjusting, how did Keynes suggest we adjust the capitalist system so as to lead us "out of the tunnel of economic necessity into daylight"? Broadly, he thought we'd exit the tunnel once we could make so much capital, so cheaply, that it'd no longer make sense for people to devote much time or energy towards pursuing it. It would sink into the background of human life, like the ubiquity of Oxygen, or pencils.

“Economic welfare and social well-being will be increased in the long run by a policy which tends to make capital goods so abundant, that the reward which can be gained from owning them falls to be modest a figure as to be no longer a serious burden on anyone. The right course is to get rid of the scarcity of capital goods - which will rid us at the same time of most of the evils of capitalism - whilst also moving in the direction of increasing the share of income falling to those whose economic welfare will gain most by their having the chance to consume more."

But "getting rid of the scarcity of capital goods" is not an actionable policy. For Keynes, this direction, above all, required stimulating demand at the lower ends of the income distribution as capital accumulated. The most direct way to do so was to raise taxes on the wealthy and redistribute them to the poor and less-wealthy:

“Since the end of the nineteenth century significant progress towards the removal of very great disparities of wealth and income has been achieved through the instrument of direct taxation…Many people would wish to see this process carried much further…For we have seen that, up to the point where full employment prevails, the growth of capital depends not at all on a low propensity to consume but is, on the contrary, held back by it: and only in conditions of full employment is a low propensity to consume conducive to the growth of capital…measures for the redistribution of incomes in a way likely to raise the propensity to consume may prove positively favorable to the growth of capital.”

Keynes believed the primary obstacles to a better form of society were the social and political forces that would "reject a more equal distribution of incomes":

"Yet there will be many social and political forces to oppose the necessary change. It is probable that we cannot make the changes wisely unless we make them gradually. We must foresee what is before us and move to greet it half-way. If capitalist society rejects a more equal distribution of incomes and the forces of banking and finance succeed in maintaining the rate of interest somewhere near the figure which ruled on the average during the nineteenth century (which was, by the way, a little lower than the rate of interest which rules today), then a chronic tendency towards the underemployment of resources must in the end sap and destroy that form of society."

Seizing Possibilities

Now, returning to the question we began with:

Why, as citizens of the most powerful, technologically equipped, and advanced society in history, are so many of us spending most of our waking lives working jobs we do not particularly like to sustain lives we do not particularly enjoy?

Rather than recourse to a vague answer - "that's capitalism" - we can be more specific: because we lack the policies to make it otherwise.

On the topic of human consciousness - which I've written elsewhere should be understood always in relation to the economic system it evolves within - The American psychologist William James wrote:

"Our normal waking consciousness...is but one special type of consciousness, whilst all about it, parted from it by the filmiest of screens, there lie potential forms of consciousness entirely different. We may go through life without suspecting their existence; but apply the requisite stimulus, and at a touch they are there in all their completeness..."

The same can be said of states of society. Our society as it presently exists is one possibility among a series of alternative possibilities. Apply the requisite policies, and we can dislodge ourselves from the current trajectory and begin evolving towards another.

capitalist-realism.jpeg

Most importantly, these possibilities are not distant. Another world is possible, now. In Postone's final essay before his death in 2018, he puts Keynes' verdict that the system is not self-adjusting in stark terms. Capitalism furnishes us with the potential for transformation, but it will not ignite that transformation for us. As the system develops, the possibility of a better world is made more vivid, but the dynamics opening that possibility tend away from realizing it.

Postone:

"Marx’s analysis is directed less toward the emergence of 'resistance,' ... than toward the possibility of transformation. It seeks to delineate the emergence of a form of life that, as a result of capitalism’s dynamic, is constituted as a historical possibility, and yet is constrained by that very dynamic from being realized. This gap between what is and what could be, allows for a future possibility that, increasingly, has become real historically. It is this gap that constitutes the basis for a historical critique of what is. It reveals the historically specific character of the fundamental social forms of capitalism – not only with reference to the past, or another society, but also with reference to a possible future."

Another world is possible; we see this more clearly everyday. As this gap grows between "what is and what could be", so can our resolve for incrementally radical transformation. If we channel this resolve into real, critical policy debates about what strategies are best suited to realize the higher possibilities that are made more visible with each passing phase of capitalist society, then we just might step off the treadmill, and get somewhere.

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The Treadmill Tendency

Oshan Jarow  -  May 9th, 2020

The purpose of this document is to facilitate sense-making on what’s become a complex, tribal, and absolutely vital subject of debate: universal basic income (UBI).

Think of this as a not-so-brief policy brief. A policy long, if you will. What policy briefs offer in brevity and distillation, they sacrifice in complexity and nuance. UBI’s surging popularity is producing an abundance of briefs, but a scarcity of longs. Briefs present fixed ideas, whereas longs reveal the flux and uncertainties beneath them.

Ironically, I only encountered UBI after receiving a degree in economics. I spent the next 5 years studying UBI, and the broader terrain of economic thinking that’s usually left off university curriculums.

Regarding UBI, I’ve occupied every position along the spectrum. I’ve been the starry-eyed supporter enthralled to its promises, and I’ve been the disillusioned skeptic, dismissing UBI as a well-intentioned, but naive lurch for utopia.

My hope is to provide an easy-to-navigate document that offers exposure to the many questions and conflicts driving the UBI debate. Hopefully, by offering the depth so many UBI puff-pieces lack, this policy long might help unsteady some of our fixed ideas, and lead us deeper into the labyrinth of considerations a UBI provokes.

Here’s a map of what’s covered below. Feel free to click & jump around to whatever interests you:

The Basics
What is UBI?
How much is "basic"?
What does UBI Cost?
Critiques Against UBI
It won't change anything
Humans would become lazy
Free riders
Who will clean the toilets?
Long-term sustainability
Price inflation
Political tyranny
Optimizing UBI
Poverty level
Split-tier payouts
High-end phaseout rates
Complement, not replacement
How to Pay for UBI
Taxes & programs
Putting taxes together
Alternatives
Negative Income Tax
Universal Basic Services
Universal Job Guarantee
Codetermination
Shorter Working Weeks
Social Wealth Fund

Next Step: Modernized Negative Income Tax

After exploring each of these areas in relative depth, I’ll conclude with a broader sentiment: economic insecurity has a dampening effect on human consciousness. The world is far more mysterious, wonderful, and stimulating than human perception can grasp, but economic insecurity further inhibits our capacities, like a horse with blinders on.

Despite being surrounded on all sides by enchantments, our lives are too often squandered in forms of suffering and anxiety that, in the 21st century, are preventable. The motivation behind UBI is one we all share: it’s time to build a better world. The motivation behind policy analysis is to ask: would UBI move us in that direction?

I recently published an in-depth exploration of the impact UBI might have on human development, consciousness, and social complexity. You can read that essay here.

What is Universal Basic Income?

UBI is an unconditional cash payment provided to all citizens, in an amount sufficient to meet their basic needs, on a (minimum) monthly basis. Most proposals include a reduced rate for minors.

Universal: Given to every individual, regardless of employment status, earnings, or demographic.

Basic: Sufficient to meet basic needs

Income: cash.

How Much is "Basic"?

The most common UBI amount - $1,000 per month - is based on the federal poverty line. The 2019 poverty line was $12,490, or $1,041 per month. Equating “basic” with the poverty line is consistent with the work of seminal economists and philosophers such as Amartya Sen and Martha Nussbaum.

Pinning the UBI amount to the poverty line requires adjusting the payout level for both inflation, and changes to how we define poverty.

How Much Would UBI Cost?

UBI has two relevant costs, gross and net. The gross cost reflects the total revenue the government must raise to fund the program. The net cost reflects the actual expense to taxpayers.  

Since funding a poverty level UBI requires progressive taxation, an upper portion of recipients will wind up paying more in new taxes than they receive from UBI. This creates a canceling out effect, where one receives $12,000 in UBI, but pays $14,000 in higher taxes. The effective cost to them is $2,000, rather than $14,000. The cost of UBI that takes these cancellations into account is the net cost.

The gross cost of a UBI equal to the poverty level in 2019 ($12,490) for all citizens above 18 would’ve been $3.2 trillion. Adding a 50% UBI for minors would increase the gross cost to $3.6 trillion.

Moving from gross to net cost is difficult to forecast, as it depends on the specific taxes used to fund it. But we can establish a range for the net cost from existing estimates. Political philosopher Karl Widerquist used a series of simplified assumptions to calculate the net cost of a $12,000 UBI for adults and $6,000 for children, totaling a gross cost of $3.42 trillion. His estimates yielded a net cost of $539 billion, or 15.7% of the gross cost.

For a similarly designed UBI, Scott Santens estimates a $900 billion annual net cost.

On the upper bound of the spectrum, economist Philip Harvey estimated the net cost of a similar - though not identical - UBI at $1.69 trillion.

Why UBI?

Elsewhere, I’ve written on the philosophy of UBI, exploring it as a means of decommodifying time and diversifying human development. But in popular discourse, there are at least six categories of motivation for UBI:

I. Immediately ending official poverty in the US
II. Reducing the imbalance of power & wealth between labor & capital
III. Boosting demand by raising purchasing power of lower income groups
IV. The threat of automation & detaching a basic amount of livelihood from labor
V. Improving markets by providing for basic needs outside of markets, making remaining exchanges more voluntary
VI. Beginning to implement the cultural conditions for 'post-scarcity'

Automation

“There is no reason why in a society which has reached the general level of wealth which ours has…that the security of a minimum income should not be guaranteed to all without endangering general freedom.”

— F.A. HAYEK

Automation is simultaneously the easiest narrative to stir up support for UBI, and the weakest one to build it upon. There is no critical consensus as to whether impending waves of automation will be any different than ones we’ve witnessed throughout history. Whether or not automation lives up to the hype, the case for UBI remains.

But there's a nuance in this argument worth pulling out. How will automation benefit society? How can we distribute and democratize the gains? How do we keep society from devolving into a class struggle between those who own the robots and those being replaced by them?

The question of who benefits from automation is firstly a question of power. If we’re concerned with power dynamics within firms, we can explore policies like codetermination, where worker representatives are given direct seats on company boards. This gives workers’ interests direct voting power in company decisions. Democratizing decision making power changes how productivity gains are implemented and realized in the first place, rather than relying on redistribution to take care of those who are left out of the gains.

But the sentiment of detaching labor from livelihood goes beyond automation. Since at least the 1800’s with Henry George’s Progress and Poverty, the stubborn tendency for wages to remain at the minimum that affords subsistence despite massive gains in capital accumulation has raised questions. As our accumulated wealth increases, why can we not guarantee a basic degree of livelihood irrespective of labor?

The case for UBI in this dynamic is best presented by a dialogue across 150 years, between George and the great novelist Marilynne Robinson. In 1879, George asked: “Why, in spite of increase in productive power, do wages tend to a minimum which will give but a bare living?” A century and a half later, Robinson ventures an answer: “because they can, neither ethics nor laws intervening.”

If livelihood is to untether itself from labor, it will not occur as a natural outcome of economies informed by neoclassical economic theory. Rising tides may lift all boats, but without explicit interventions, the distance between working class wages and subsistence levels in society will remain minimal.

UBI, whether as a response to automation, global pandemic, or whatever other shocks unsteady the economy, strives to ensure a basic dimension of survival security to all. By instituting an earnings floor in the economy that lifts the bottom up, it increases the distance between the lowest wages and the subsistence level.

Poverty

“The association of poverty with progress is the great enigma of our times...From it come the clouds that overhang the future of the most progressive and self-reliant nations.”

— HENRY GEORGE, 1879

In the 21st century, domestic poverty in the US is a choice, rather than necessity. It is an outcome of policy choices (and lack thereof), rather than an enigma of progress, as it was in George’s day. And yet it rages on.

The cost of directly ending poverty for every citizen in the United States, by simply providing them a tax subsidy equal to the amount that would raise their incomes to the poverty level, would cost less than $200 billion. That’s 29% of the defense department’s budget.

Simply giving everyone exactly the amount they need to reach the poverty line creates all sorts of work disincentive problems. But the closest functional approach to formalizing that logic comes in the form of a negative income tax (NIT).

Rather than giving people the exact difference between their income and the poverty line, NIT’s use a phaseout tax rate that slowly decreases NIT benefits as earned income increases. This helps preserve work incentives and avoid poverty traps.

Incidentally, although NIT and UBI might appear quite different on the surface, the closer you look, the more difficult it becomes to tell the difference between NIT and UBI.

Economists agree that NIT and UBI would have the same net transfer effects, meaning the overall redistribution of income is identical either way. UBI gives everyone the full poverty-level amount, and then taxes some of that payout back - known as the clawback rate - from those higher in the income distribution. In UBI’s case, the clawback rate is implicit.

NIT, by contrast, adjusts payout levels to people’s incomes, avoiding the necessity to tax it back. The clawback rate is explicit. Studies suggest implicit clawback rates have psychological advantages. But the debate over which policy is preferable, UBI or NIT, is far from settled, and will hopefully come into full bloom as we commit ourselves to the eradication of poverty.

The 21st century US exhibits a confounding juxtaposition of poverty with prosperity. What Henry George wrote in 1879 is all the more true today:

“It is as though an immense wedge were being forced, not underneath society, but through society. Those who are above the point of separation are elevated, but those who are below are crushed down.”

Policies like UBI and NIT seek to reposition the wedge of progress underneath society, so that all are lifted.

Inequality

But crucially, UBI is not merely a measure to eliminate poverty. Framing UBI as just a countermeasure for poverty sells its reformative potential short, like a grandparent who uses an iPhone for nothing but phone calls.

Prior to the 1960’s, poverty was rarely considered separate from wider inequalities between labor and capital. Poverty is only the tail-end of inequality, a white-cap on the surface of a vast and deep ocean. Narrowing the focus of social reform from inequality to poverty, as sociologist Daniel Zamora wonderfully documents, was a project closely associated with the rise of neoliberal, free-market ideology.

It’s no coincidence that the first serious NIT proposal was made by none other than Milton Friedman, whose edifice of economic ideas supported the rise of neoliberal economics that dominated the period from 1972 - 2008. Zamora writes:

"In his view, a focus on “poverty” was the only reasonable social policy within a free market system. If we followed a policy that tended to reduce inequality we would inevitably affect 'the heart of the dynamism of the market economy.' A program directed specifically against poverty, on the other hand, as argued by Friedman himself, 'while operating through the market' would 'not distort the market or impede its functioning,' as did Keynesian programs.”

But at least since Thomas Piketty’s landmark 2013 book, Capital in the 21st Century (not to mention his more recent, and more ambitious Capital and Ideology), the broader spectrum of inequality is back in the spotlight of popular discourse.

UBI critics on the progressive left are concerned that UBI, on its own, is not only insufficient to combat inequality, but might actually further entrench the forces that generate inequality in the first place.

From this angle, UBI is categorized as merely a redistributive reform, doing nothing to change the underlying dynamics that create wealth inequality, and so power inequalities, in the first place.

These criticisms are important, but partial and often misleading. UBI can be considered alongside reforms that more directly target power dynamics. However there is no reason to use an either/or framework, rather than a both/and. UBI offers a unique kind of power distribution that other reforms such as codetermination cannot.

Where codetermination democratizes power inside firms, UBI increases the bargaining power of labor from outside. This is often referred to as the power to "say no” to exploitative labor contracts. With UBI, workers have a foundation of security that allows them to more readily reject undesirable working conditions. This appeals to a broad base of economic thinking, as it’s in line with Adam Smith’s vision for “perfect liberty”.

For Smith, perfect liberty meant every worker is free to choose what job suits them best, and to change as often as they like in search of the best fit. He writes of perfect liberty as a state:

“…where every [hu]man was perfectly free both to choose what occupation [s]he thought proper, and to change it as often as [s]he thought proper. Every [hu]man’s interest would prompt him to seek the advantageous, and to shun the disadvantageous employment.”  

An adequate UBI creates an environment in which workers enjoy greater fluidity between jobs, enabling their search for the right fit. But once they accept a job, UBI’s effects on power subside. Within firms, codetermination can then take over, giving workers greater say over how their places of employment make decisions.

UBI Fixes Markets

What are the necessary conditions for freedom in a market society? Prior to enclosure movements that began claiming all land under the legal jurisdiction of private property, individuals had a choice. One could participate in 'society’, whatever that entailed. Or, if society was of no interest, you were free to find a plot of land, cultivate the earth, and survive on your own.

But ever since all available land was swept up into private ownership, this ‘exit option’ is off the table. In order to access the resources we need to survive, the only choice available to most people is participating in the market economy and earning enough income to buy what you need.

Effectively, people lost the power to say “no” at a basic level. Participation in market society is the only option, and this creates opportunities for exploitation. UBI recreates the lost exit option. By unconditionally providing people enough to meet their basic needs, UBI empowers people with the means to exit exploitation.

By giving workers the power to say no, UBI provides what political philosopher Karl Widerquist calls the physical basis for voluntary trade. From a different angle, anthropologist David Graeber frames UBI as the safe-word in a safe-word theory of social liberation. By affording people the real option of saying no, of opting out of exploitation, it increases the freedom with which we can say “yes”.

Extending UBI to everyone, the social and labor relations that hold society together would be remade. People could opt out of exploitative relationships without sacrificing their basic needs. The relations that remain, and the new ones that take shape, would be based on increasingly voluntary decisions.

Without these sufficient conditions that assure all transactions in a market economy are voluntary, the entire theoretical justification of market economies collapses. Widerquist writes:

"...when neoclassical economists theorize about the world, they assume voluntary exchange is taking place. Building on this assumption, neoclassical economics goes on to conclude a variety of important results such as that market activity is efficient, that free trade has net positive effects and that markets in which economic agents participate voluntarily make them better off...Although the legitimacy of the market economy is premised on voluntary trade, without a reasonable exit option, the trading system as a whole lacks an acceptable alternative.”

We are left with two choices. Either unconditionally provide everyone with the physical basis for voluntary trade, or abandon the appeal to voluntary trade as a justification for market economies.

UBI Stimulates Demand

Whether UBI would shrink or grow the economy depends on a dazzling web of interdependent factors, making all predictions tenuous at best. As you might expect, economists have constructed models that give all sorts of contradicting reports. Some models predict UBI stimulates growth, while others expect precisely the opposite.

But most models agree on one important element: The lower one is on the income distribution, the higher the likelihood they will spend any additional dollar they receive. Conversely, the wealthier one is, the more likely they are to save each marginal dollar they receive. This has important implications for forecasting how UBI might stimulate economic activity.

Even if UBI does not increase economic growth, and functions as a pure redistribution of income from the top towards the bottom, economic activity would likely increase. Shifting money from those at the top who are more likely to save, to those at the bottom who are more likely to spend, we can expect an increase in aggregate demand. High income inequality, writes John Maynard Keynes, “causes a separation between the power to consume and the desire to consume.”

By redistributing money to where the desire to consume is highest, overall consumption will increase.

Post-Scarcity

The 2008 financial collapse stirred our socioeconomic imaginations. Business as usual lost its appeal. But what comes next? The term post-scarcity is a phrase used to gesture towards a society where scarcity is no longer the organizing principle of human behavior. As the economic historian Robert Heilbroner writes:

“For the introduction of technology has one last effect whose ultimate implications for the metamorphosis of capitalism are perhaps greatest of all. This is the effect of technology in steadily raising the average level of well-being; thereby gradually bringing to an end the condition of material need as an effective stimulus for human behavior”

Reaching all the way back to Keynes, post-scarcity refers to a society where the marginal value of capital goods drops to near zero. Consider a pencil today. We have no problems asking each other to borrow pencils. It’s considered rude, if you have extras, not to give someone a pencil who asks. And most tellingly, if you forget to give the pencil back, it isn’t a big deal.

This is because the marginal value of pencils - a capital good - is near zero. People’s lives are hardly improved by gaining additional pencils. They’re easily accessible at low costs. Keynes imagined a society where all capital goods were as common as pencils, and therefore shared with those who need them without so much as a second thought. He writes:

"The course of affairs will simply be that there will be ever larger and larger classes and groups of people from whom problems of economic necessity have been practically removed. The critical difference will be realised when this condition has become so general that the nature of one’s duty to one’s neighbour is changed. For it will remain reasonable to be economically purposive for others after it has ceased to be reasonable for oneself.”

With material goods receding to occupy a negligible portion of our aspirations (not because we somehow become less materialistic, but because everyone has abundant access to all capital goods they could want), new stimuli for human behavior would naturally emerge. Different forms of immaterial capital (social, cultural, etc) would become the focus of our energies.

UBI, a program that gives everyone a baseline of unconditional income (access to capital), begins to implement these conditions of post-scarcity. In market economies, unconditional income (for which one needn’t trade any time, labor, or money) provides immediate access goods and services we’d otherwise need to trade our time in order to receive. The more unconditional income provided, the less of one’s life-time that must be traded to acquire the goods and services we need.

This lowers the threshold of earnings required for people to meet their basic needs and, should they choose to, devote their time to unpaid activities. Human behavior becomes unbound from the imperative to earn income. Unpaid activities become more viable life-choices.

The theory of post-scarcity has to do with marginal value and rate of return on capital. But the praxis of post-scarcity shows up in the kind of cultural logic that emerges out of a society with wide-spread decreasing returns on capital goods.

As the scholar Robert Chernomas writes: “Keynes’s concern is with achieving the logic, humanity, and culture of a society that could be built only when preoccupation with economic concerns becomes unnecessary."

UBI does not achieve post-scarcity. In fact, some critics suggest the redistributional nature of UBI precludes it from ever being able to fully realize post-scarcity. Since UBI is restricted to redistributing existing wealth, it remains dependent upon a society organized around the accumulation of financial capital. If capital accumulation withers away, no longer the central stimulus driving human behavior, the overall quantity of wealth created will also shrink, reducing the available funding pool for UBI.

These criticisms are important, but not damning. While it is theoretically conceivable that a networked economy with increasing returns could actually skim off enough of those returns to fund a post-scarcity inducing UBI, in practice, this remains beyond immediate reach.

But a UBI can still create spaces of post-scarcity within the interstices of the broader capitalist system. These interstitial post-scarcity spaces allow us to begin experimenting and exploring with new ways of organizing ourselves. These shallows of experimentation, however incomplete and piecemeal, are vital for developing our imaginative capacity to design new systems.

The Problems of UBI

The more radical a proposal, the more scrutiny it should receive. Given the magnitude of UBI, in terms of both implications and costs, it merits abundant scrutiny. I’ll cover a range of critiques, responding to them where possible, and indicating those that remain unanswered.

Here’s a navigable menu:

I. UBI won't change anything
II. Couldn't UBI collapse the economy?
III. We'll all become lazy & dependent
IV. Who will do the ugly jobs?
V. What about free riders?
VI. Won't prices increase?
VII. Won't the majority of net recipients just demand more and more UBI from the rich?

UBI Won't Change Anything (The Capitulation Critique)

Counter-intuitively, one of the sharpest polemics against UBI comes from the progressive left. In Daniel Zamora’s brilliant The Case Against a Basic Income, he writes:

“UBI isn’t an alternative to neoliberalism, but an ideological capitulation to it. In fact, the most viable forms of basic income would universalize precarious labor and extend the sphere of the market — just as the gurus of Silicon Valley hope.”

This view builds from Luke Martinelli’s assessment: an affordable UBI is inadequate, and an adequate UBI is unaffordable. If all that’s affordable is a UBI well below the poverty level, then these critics argue that nothing will fundamentally change. An inadequate UBI fails to grant workers sufficient means to reject exploitative jobs, fails to eliminate poverty, and fails to establish the physical basis for voluntary trade. Effectively, all an inadequate UBI would do is provide a cash stimulus to existing markets.

Moreover, even an adequate (poverty level) UBI could function as a capitulation to neoliberalism if it’s conceived as a full replacement, rather than supplement, to existing welfare and social programs. When Milton Friedman proposed his guaranteed income in the form of a negative income tax, this is precisely what he had in mind. Same with Charles Murray’s more recent UBI proposal.

The validity of this critique then relies on two factors: the UBI amount, and how we pay for it.

But as Zamora himself notes, funding an adequate UBI is a question of political, rather than economic feasibility. Of course we could fund an adequate UBI. The capitulation critique does not doubt this. Rather, they doubt that it’s realistic that the necessary taxes could make it through the political process.

The capitulation critique, then, does not apply to a poverty level UBI funded by progressive taxation. It merely doubts its political viability. Far from a nail in the coffin, this points to the conspicuous lack of rigor applied to existing progressive funding proposals for an adequate UBI. If we are to overcome this sense of politically impossibility, we need to put forward realistic funding models.

Won't We Just Become Lazy & Dependent (The Human Nature Critique)

If we manage to fund an adequate UBI, won’t we all just become idlers? Won’t we just waste the free time we’re afforded? Is it worth enacting the largest program in American politics simply to enable people to spend more time watching Netflix and going to the beach?

At heart, this is a question of human nature. How would humans behave if they weren’t compelled to act by the threat of starvation and homelessness? Is human nature fixed, or does it adapt to changing social circumstances?

In fact, this is one of the main divergence points between Adam Smith and Karl Marx. Both believed that society thrives by maintaining an artificial scarcity. But Smith believes maintaining artificial scarcity is the only way to incentivize humans to engage in socially productive activities:

"And it is well that nature imposes [artificial scarcity] upon us in this manner. It is this deception which rouses and keeps in continual motion the industry of mankind. It is this which first prompted them to cultivate the ground, to build houses, to found cities and commonwealth, and to invent and improve all the sciences and arts, which ennoble and embellish human life"

Marx held a more adaptive, evolutionary view of human nature. He believed that how we spend our leisure time is inextricably linked to the working conditions and modes of production present in society. He writes that “all history is nothing but a continuous transformation of human nature.”

Both John Maynard Keynes and Henry George side with Marx on this question. The transformation of material and social conditions, they believe, will lead to the transformation of human behavior. George writes, in what I suspect is a direct counter to Smith:

“But it may be said, to banish want and the fear of want, would be to destroy the stimulus to exertion; men would become simply idlers, and such a happy state of general comfort and content would be the death of progress. This is the old slaveholders’ argument, that men can be driven to labor only with the lash. Nothing is more untrue.”

Worrying that UBI would amplify our idleness, our ‘time wasting’ behaviors, is a fallacy that assumes present behaviors would continue unchanged in radically altered social conditions. It fails to account for how economic distress presently weighs upon, and influences, how workers spend their ‘time off’.

As I’ve written about elsewhere, an adequate UBI must be considered in light of its implications for human development. The kinds of humans we become by living in society would likely change.

But there is a deeper assumption that motivates the human nature critique of UBI: that we have a right to judge how others spend their time.

In terms of UBI, this assumption arises because people’s free time would be, in part, funded by redistributing the earned income of some to all. Do we owe this kind of financial support to each other?

This critique is commonly known as the free rider problem.

The Free Rider Critique

The free rider problem suggests that even if UBI wouldn’t create “universal basic idling”, it isn't fair to redistribute earnings from hard-working citizens towards those who don’t contribute value to society. By receiving tax-funded income without contributing their own labor income to the tax base that funds UBI, they’re ‘free riding’ off the earned income of others. In this view, UBI gives people “something for nothing”.

A poverty-level UBI of $12,490 is hardly a living wage for even the most ascetic of citizens; most will continue to work and earn additional income. However, it is plausible to imagine at least some percentage of the population who choose to live off their UBI alone. It’s more likely to see a proliferation of full-time workers drop to part-time. UBI could make up enough of the difference so that they can maintain relatively similar lifestyles, while generating fewer taxable wages for the overall pot.

How might this criticism change if we apply it to parents who choose to stay home and raise their children? Does the same sense of unfairness come into play when recipients use UBI to fund socially valuable activities that markets fail to compensate? Surely a devoted parent is worth more to society than an unmotivated office administrator, or insurance salesman?

What about aspiring scientists who use the newfound financial and time freedoms to focus on exploring new theories? Or artists who dedicate their time to creativity? In this sense, UBI functions to extend earnings to those engaged in socially valuable pursuits that markets fail to compensate for.

Where free riding turns problematic is the assumption that willfully unemployed UBI recipients will live in ways that do not create value for society. Receiving “something for nothing”. But this is not only assumed, it stands in direct conflict with empirical studies on how UBI affects labor force participation. Even beyond the question of whether UBI would stimulate or stifle economic activity, a larger question looms: are we comfortable letting markets be the judge of what constitutes value?

Using wages as the prime indicator of value-creation solidifies the market's role in determining social value. But much of the progressive left’s movement is about displacing earnings as sole indications of social value. There are forms of value markets systematically fail to recognize, and forms of socially valuable (usually long-term) investments that markets fail to incentivize. Not to mention the forms of negative value that markets stimulate.

In this sense, the free-rider problem might not be a problem at all, but a solution. It functions alongside the market to stimulate forms of social value that markets leave behind.

Another proposed response to the free-rider problem is to shift the narrative frame of UBI. Since progressive taxes that draw from high-earning sectors of society would fund UBI, some claim that UBI is not redistributing the rightful ‘earnings’ of others, but distributes the portion of collective wealth that’s captured by high private earnings. In this sense, UBI is more of a social dividend that formalizes the collective nature of value creation on modern economies.

Consider how this logic of social dividends applies to raising the corporate tax rate, for example. Mariana Mazzucato has demonstrated how much of the iPhone's signature technology is a result of publicly funded R&D. Although taxpayers effectively socialize the risk of this R&D, the financial returns on that investment are privatized, none of which goes back to the taxpayers who (partially) funded the investment.

Should not a small portion of the financial earnings from publicly funded innovation return to those who funded the initial research? Isn’t the public entitled to share in the financial returns on innovations our tax dollars paid for?

Similar logic is at play for many high-earning sectors of society. From Google, Apple, to Tesla, Mazzucato shows how stories of value creation systematically neglect the role of public investment. Framing UBI as a social dividend formalizes the collective nature of value creation, paying dividends on the public’s investment in innovations that spur private fortunes.

A common example is the Alaska Permanent Fund, which taxes all mineral (primarily oil) royalties a minimum of 25%. They reason that Alaskan oil belongs to all Alaskans, rather than whoever manages to dig it up first. Anyone who uses the oil must compensate all other collective owners for excluding them from using it.

The tax revenues are deposited into an investment portfolio that each Alaskan shares an equal share in, receiving annual dividends that fluctuate with the stock market. Applying this logic nationally, Matt Breunig’s proposal for a social wealth fund makes every American an equal shareholder in a collectively owned portfolio.

Framing UBI as a social dividend only makes sense if the funding mechanisms draw from areas of society where large private earnings are bolstered by neglecting public contributions. To sufficiently appease free-rider concerns, UBI advocates must demonstrate what sectors of society wind up paying for UBI under their funding proposals.

Who's Gonna Scrub the Toilets? The Division of Labor Critique

In Zamora’s polemic against UBI, he asks a cutting question: if an adequate UBI gives workers the ability to say “no” to undesirable labor, how can we be sure all the work that needs doing, would get done?

“...a ‘utopian’ [by which he means at least poverty level] UBI raises questions about how the distribution of work — that is, the division of labor — would be determined in a society where we could choose not to work...A “utopian” UBI...simply assumes that in a society liberated from the work imperative, the spontaneous aggregation of individual desires would yield a division of labor conducive to a properly functioning society; that the desires of individuals newly freed to choose what they wish to do would spontaneously yield a perfectly functional division of labor. But this expectation is assumed rather than demonstrated.”

First, it’s worth nothing that by “utopian” UBI, Zamora means a poverty level, or $1,041 monthly UBI. This is hardly enough for even the most ascetic citizens to live on alone. We should certainly expect radical changes to the labor market. But the work incentive, while perhaps marginally dampened, is far from “liberated” by such a UBI.

Liberation aside, Zamora’s point remains. What if nobody chooses to work as a janitor anymore? What if no one is willing to clean the sewers? Unless technology fulfills its promise and automates all of the work humans would rather not do, the full division of labor required to maintain society may include jobs that people, given the means, simply wouldn’t take.

This is one of the greatest fissures in UBI discourse. The ‘work imperative’ is both the glue that holds the system together, and a bleak reality that suffocates working classes. We cannot yet outsource all undesirable jobs to robots. While a work incentive remains even with a poverty level UBI, critical attention must be turned to reflecting on how to maintain the necessary division of labor.

On one hand, David Graeber believes with a UBI, bullshit jobs might simply disappear, because people wouldn’t take them. Alternatively, those unattractive jobs that still require doing for society to function may be forced to offer higher wages. The ways in which wages might respond to UBI lead us into the fascinating territory of the sustainability critique.

The Economic Sustainability Critique

We can imagine that huge amounts of people may choose to drop from full to part-time work, supplementing the gap in income with UBI. On the whole, this may lead to a decrease in taxable wages. As taxable wages decrease, so does the pool of money taxes draw from to fund the UBI.

The magnitude of this decrease depends largely on what kinds of taxes are used to fund the UBI. A system that relies heavily on income taxes would face serious issues with a decreasing taxable wage base. But if UBI were funded with land value taxes, carbon taxes, wealth taxes, consumption taxes, capital gains taxes, etc., UBI’s dependence on taxable wages would be lessened.

Still, what if UBI, by dampening the work imperative, succeeds almost too well in allowing people to engage in more unpaid activities? What if the size of the formal economy shrinks, tax revenues wither, and UBI winds up eroding the very capital flows that sustained it?

There’s a relevant concept in economics known as the Laffer curve. It says that as you increase a tax rate, you'll raise more revenue until a certain point, after which the tax rate is so high that it discourages people from engaging in the activity, and the tax revenues begin to decline.

For example, imagine a carbon tax. If a carbon tax increases the price of gasoline from $2.50/gallon, up to $2.85/gallon, most consumers won’t change their behaviors. They’ll consume just as much gasoline, yielding higher tax revenue.

But if the tax shot the price up to $10/gallon, many consumers would change their behaviors to consume less gas, yielding less tax revenue:

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We can apply the Laffer curve to UBI, asking how overall tax revenues respond to the level of UBI. Just like the Laffer curve, beginning with a UBI of 0, we’d have today’s present tax revenue. As the UBI increases to $50, $100, $200, we’d expect tax revenues to increase for two reasons.

First, because of the increased tax revenues required to fund the UBI. Second, a UBI funded by progressive taxes redistributes money from higher ends of the income distribution to the lower. The wealthy are less likely to spend each marginal dollar they receive, while lower income groups are more likely to spend any additional dollar they receive. So we can expect that UBI would stimulate economic activity, leading to more taxable revenue.

But as the UBI increases, the imperative to work decreases, and the progressive taxes required to fund the UBI grow steeper. At some point, we reach the peak of the curve, beyond which overall tax revenues begin to decrease as people stop working, and others cease chasing large fortunes that would just be reclaimed by taxes.

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In this case, we’re faced with a design project: find the optimal level of UBI that maximizes the payout without decreasing tax revenue.

But the sustainability question can go a step further. What if we find this optimal balance point that provides a sufficiently high UBI to cover people’s basic needs without eroding its own tax base or tanking the economy. How does the economy change? As we explored in the division of labor section, a high enough UBI threatens to eliminate the incentive to do undesirable work.

In a wonderfully provocative 1986 paper - The Capitalist Road to Communism - Philippe Van Parijs and Robert van der Veen explore this question. Assuming a sustainable and adequate UBI, they hypothesize a “twist” in capitalist logic, whereby wage rates for undesirable work will increase to attract workers, while wages for desirable work will decrease, since people have enough to cover their basic needs and are more free to accept more interesting work for lower pay. “Consequently,” they write:

“...the capitalist logic of profit will, much more than previously, foster technical innovation and organizational change that improve the quality of work and thereby reduce the drudgery required per unit of product.”

How will the twist in capitalist logic create incentives that reduce the “drudgery required per unity of product”? Consider the cost of human labor relative to its automatized equivalent. Presently, it’s usually cheaper to hire human workers than invest in the machinery and automation that can perform equivalent work. But already, we’re seeing roaming robots replace supermarket workers, self-driving cars replacing drivers, and tablets replacing waiters at restaurants.

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If this twist of capitalist logic drives up the wage rate for undesirable work, the cost relation will flip. It will become more expensive to hire humans at higher wages where machines can do the equivalent labor. The costs of automation will become a rational choice for capitalists when the equivalent cost of labor surpasses it.

These are uncertain speculations, to be sure. And the assumption that there exists an optimal level of UBI that covers basic needs without grinding down its own tax base is little more than an assumption. We have economic models that suggest UBI would decrease growth, while others say just the opposite.

In the face of these uncertainties, we may nevertheless rest assured that UBI would fundamentally change the economy, and in so doing, the kinds of lives we lead. We should speculate as widely as possible, and survey the many possibilities as diligently as we can.

If we can conclude anything from these concerns and speculations, perhaps it’s that moving in the direction of UBI merits prudence. While we must understand that how the economy responds to a $250 UBI cannot be extrapolated to suggest its response to a $1,000 UBI - the two are fundamentally different - we do have the option of moving towards UBI, rather than diving straight into the unknown.

The "Won't UBI Inflate Prices?" Critique

If everyone receives an extra $12,490 annually, won’t producers raise prices to absorb this extra capital? Won’t landlords raise rent, retail stores raise prices, ultimately absorbing the UBI entirely such that no meaningful changes remain?

In brief: maybe a little bit, but probably not much.

Inflation is not so simple as: people receive more money, therefore producers increase prices. Inflation only occurs when aggregate supply is unable to keep up with increasing demand. So long as people’s purchasing power increases, and supply can scale to match, there is no inflation.

Moreover, most UBI proposals do not even propose to increase the money supply. UBI funded by progressive taxes just shuffles existing money around. But even if a UBI were funded entirely by printing the requisite $3.6 trillion every year and adding it to the economy, it’s not clear how much inflation would actually occur.

While prevailing logic assumes such an action would cause so much inflation as to render the idea obviously detestable, the matter is far from obvious. For example, Ellen Brown writes that, by virtue of how money is created, “our money supply is in a chronic state of deflation.” When banks approve a loan, that money is created and assimilates into the economy. But the subsequent interest owed is not created, so money creation always furthers the deficit that divides money owed from money circulating in the economy.

This gap between debt owed and the money supply creates a buffer against inflation. Any increase in the money supply that closes this gap (i.e., UBI money used to pay existing debts) causes no inflation.

But few UBI proposals rely on deficit spending - most use progressive taxes to redistribute money downwards. In this case, the money supply does not increase, but spending patterns and purchasing power do.

The lower on the income distribution one falls, the higher their propensity to spend each additional dollar they receive. So if progressive taxes redistribute money downwards via UBI, we can expect aggregate spending in the economy to increase. So long as supply can scale up to match increased demand, no inflation occurs.

Inflation only occurs when supply hits its maximum, and increasing demand cannot be matched by increasing supply. So the degree to which the economy can increase its supply also provides a buffer that absorbs inflation.

For example, since 1982, every Alaskan citizen has received a partial UBI through taxes levied on oil revenues. Each year, citizens receive anywhere from $1,000 - $2,000. From the introduction of their partial UBI to the present, Alaska has experienced lower inflation than the rest of the nation. This, despite every citizen receiving an extra ~$1,500 annually.

Similar results were found when the Mexican government conducted experiments across a network of villages. Villages where people received direct cash transfers experienced no statistically significant changes in prices.

Results from the Alaska, or rural Mexican villages can only tell us so much about how the entire US economy would react to a UBI. A more representative study looked specifically at how a UBI funded by progressive taxation (specifically, by progressive income taxation, which is a more distortionary UBI than most proposals that use forms of taxation other than excessive income taxes) would affect housing prices in New York City. They find that a $5,000 household UBI (another departure from actual UBI proposals, that distribute benefits per individual) would increase aggregate welfare of the bottom 50% of the wealth distribution. Most notably, they find that this UBI would actually decrease housing prices.

All models should be taken skeptically, as there always exists inherent limitations in our ability to actually model UBI. Not to mention the varying assumptions required to construct models that often differ from the actual UBI proposals these models are used to evaluate. Nevertheless. Each successive experimental context related to UBI and inflation suggests the same finding: there is no obvious causality between unconditional income transfers and price inflation.

The Political Tyranny Critique

Another common concern goes like this: funding a UBI requires progressive taxes that fall mostly on the wealthy. But the wealthy constitute only a minority in society. If the majority of society are net UBI recipients, meaning they receive more in UBI than they pay in increased taxes, what’s to stop them from leveraging their majority and voting to raise the level of UBI, exploiting the rich minority?

This concern can be handled in the same way we handle voting for presidential impeachment, an event too important to leave up to mere majority rule. For the senate to impeach a president, they require a supermajority consensus. This is just a higher threshold of consensus than other measures require. Requiring a supermajority to change UBI levels can help prevent partisan exploitations and tyrannical majorities.

How to Pay for UBI

At the moment, how to pay for UBI is the most important question of the discussion. There’s plenty of theory, there are well-reasoned arguments on all sides. What we need to develop are realistic funding proposals that we can subject to scrutiny.

The relevant question isn’t can we pay for UBI, but should we pay for UBI. Of course we can. We could finance the entire program through deficit spending, just creating the money and handing it out (as banks do daily when approving loans). But that probably isn’t a good idea, because the inflationary consequences of doing so likely outweigh the benefits.

How we pay for UBI determines everything from how economic incentives change, to whether it functions as a floor or ceiling for social policy. A handful of proposals for UBI exist, but they mostly lack the attention to detail that enables a transition from politically impossible to politically viable.

No single tax is sufficient to fund UBI. Raising $3.6 trillion in revenue requires a coalition of progressive taxes. But this also presents an opportunity to meaningfully redesign and update economic incentives for the 21st century.

Here, I’ll gather a list of relevant taxes and strategies, together with revenue projections. There is no agreement on how much a wealth tax, for example, would raise. So I’ll include the range of revenue projections, from conservative skepticism to passionate optimism.

Progressive marginal income tax rates

Projected annual revenue: $18.9 billion - $70 billion.

Example: Adding an eighth tax bracket for incomes above $10 million taxed at 70% is projected to raise anywhere from $18.9 billion, if no other tax changes are made, up to $70 billion if a broader progressive taxation system is in place.

Background: According to research by Emmanuel Saez and Gabriel Zucman, 2018 marked the first time the wealthiest members of society paid a lower effective tax rate than the poorest:

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The conversation on how to implement a more progressive tax system is now booming. One facet of the broader project of progressive taxation is marginal income tax rates. Marginal income tax rates in America on the highest income groups used to exceed 90% (with effective rates closer to 60%), while today, the highest bracket faces a tax rate of 37% (with far lower effective rates). All incomes above $400,000 are treated to this same rate.

Research by Zucman, Saez, and Stantcheva (2014) attempts to derive the optimal top rate of taxation to maximize revenue, in relation to the Laffer curve for income taxes. They find that a rate of 83% on the highest incomes maximises revenue.

But recent progressive proposals to simply add an 8th bracket on incomes above $10 million leave the space between $400,000 and $10 million unchanged. We need more nuance in how we tax incomes.

A first-principles approach might draw from the idea of a monotonically increasing tax rate that does away with brackets altogether. Every additional dollar earned is subjected to a slightly higher tax rate, achieving a truly progressive tax on income that adheres to Adam Smith’s original guideline:

“The subjects of every state ought to contribute towards the support of the government, as nearly as possible, in proportion to their respective abilities; that is, in proportion to the revenue which they respectively enjoy under the protection of the state.”

But to avoid such predictable responses to higher income tax rates as capital flight and fiscal manipulation (realizing earnings as capital gains rather than personal income to avoid higher tax rates), any progressive income tax must be part of a broader program of tax reform.

Raising and reforming capital gains taxes

Projected revenues: $6 billion - $170 billion.

Examples: Shifting to a carryover tax basis is projected to raise $10.4 billion annually, and taxing capital gains of the top 1% on an accrual basis could yield $170 billion. These projections are for changing methodology, rather than raising rates.

Revenue projections for raising capital gains rates are complex, because outcomes depend on the broader system of taxation. As such, models that predict a $6 billion annual raise in revenue by raising capital gains taxes from 20% to 24.2% are tenuous.

Background: Capital gains are the second most prevalent mode of realizing income, functioning in tandem with labor income taxes. This is why considering capital gains and income taxes alongside each other is so important: at upper levels of the income distribution, gains are often transferable between these two categories.

Wealth tax

Projected revenues: $118 billion - $375 billion.

Example: A 2% tax on wealth above $50 million, cranking up to 3% on wealth above $1 billion, is projected to raise $275 billion, annually.

Background: Many European countries tried wealth taxes, most proved ineffective. Recent economists advocating for a wealth tax acknowledge that we must learn from these failures to design an effective wealth tax.

European wealth taxes failed for a variety of reasons. Foremost among them was the low bar of wealth subjected to the tax. European wealth tax rates kicked in around $1 million, whereas US proposals kick in at either $34 or $50 million. This alone eliminates most liquidity issues that plagued european wealth taxes.

Additionally, it’s quite easy to switch residency within EU countries, moving wealth into those with weaker tax regulations and lower rates. This kind of residency evasion is much less likely in the US, where changing one’s country of residence has a higher bar.

Carbon tax/cap-and-trade dividend

Projected revenues: $100 billion - $210 billion.

Examples: A tax of $25 per metric ton on most greenhouse gas emissions in the US could raise slightly over $100 billion annually, while a tax of $49 per metric ton of carbon dioxide could raise closer to $210 billion annually.

Background: There are two important elements to the debate over carbon tax. First, a successful carbon tax would yield diminishing revenues, moving towards zero. Second, there’s a design question: a carbon tax sets a price on carbon and lets emissions calibrate organically, while a cap-and-trade approach sets an emissions level and lets prices calibrate organically.

Each strategy has particular strengths and weaknesses that may complement each other well in a mixed approach.

Raising and reforming corporate taxes

Projected revenues: $9.6 billion - $200+ billion

Example: Reforming how the corporate tax is levied often offers more potential revenue than raising the rate. Still, the 2017 tax cuts reduced the corporate rate from 35% to 21%, leading to a $135 billion decline in corporate income tax revenue.

The congressional budget office (CBO) estimated the revenues for a mere 1% increase in the corporate tax rate, finding a $9.6 billion annual increase.

Background: 379 of the Fortune 500 companies paid an effective federal tax rate of 11.3% on their 2018 income, 9.7% less than the actual corporate tax rate of 21%. 91 of those corporations - including Amazon, Chevron, IBM - paid $0 in taxes on their 2018 income.

Discussions about the corporate tax rate often focus on the stated tax rate, rather than the effective tax rate paid. These situations are made possible by various deductions, allowances, and loopholes. Corporate taxation reform should begin with a reevaluation of how the tax is applied.

Land value tax

Projected revenues: $100 billion - $750 billion.

Example: LVT projections are scant. Some of the most recent academic work for full-scale national projections dates back to 1985. The author estimated that a full LVT could raise 28% of national income, yielding $658 billion in 1981 (28% of national income in 2018 would yield $5.8 trillion).

More recent and sober estimates range from smaller, targeted LVT rates that yield closer to $100 - $200 billion in annual revenue, up to a 5% LVT that raises $750 billion.

Background: A land value tax (LVT) was Henry George’s big idea. He sought to socialize land (place it all under collective, rather than private, ownership) and replace all government taxation with a tax on land values. While the notion of replacing all taxes today with a land value tax is far-fetched, smaller-scale land-value taxes are theoretically possible. Indeed, small scale LVT’s are used around the world.

LVT’s are attractive in theory, but treacherous in practice. Implementing a LVT at a national scale would present a series of administrative challenges. These are far from insurmountable, but require magnitudes of attention and innovation to transform the conversation from fantasy to reality.

Value added tax

Projected revenues: $600 billion - $1.3 trillion.

Examples: CBO estimates for a 5% VAT tax range from $190 billion to $290 billion annually, depending on details. Committees have expanded these findings to estimate that a 10% VAT tax would raise approximately $600 billion per year. Estimates on broader-base 10% VAT tax expect revenues of $1.3 trillion per year.

Background: A VAT is used in most of the developed world. 166 of 193 countries with UN membership have one in place. While varieties of VAT proposals are gaining momentum, progressive economists caution that the burden of taxation is ultimately regressive.

VAT’s were conceived in the post-war 20th century, when industries that define 21st century economies were relatively small - finance, insurance, education, and healthcare. Today, these high powered industries would either be beyond the reach of the VAT, or able to pass on the cost burden to consumers.

National income tax

Projected revenue: $1.2 trillion.

Example: A national income tax was proposed by Emmanuel Saez & Gabriel Zucman in 2019 as a progressive alternative to the VAT. The tax applies to all income - capital and labor - at a single flat rate with no deductions or exemptions. They estimate a 6% national income tax could raise $1.2 trillion annually.

Background: In their 2019 book, Zucman & Saez propose a new tax innovation to ‘leapfrog’ the VAT:

“The United States can leapfrog the VAT. It can pave the way in the creation of the fiscal institutions of the twenty-first century—as it did during the twentieth century. How? By creating a national income tax.”

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Its virtue, by including both capital and labor with no exemptions, is the comprehensiveness of national income subject to the tax. This makes it possible to raise high revenues with low rates. The reason such a tax has never been implemented is largely because it incentivizes capital flight - wealthy entities basing their assets in other countries to avoid higher rates.

Accordingly, this kind of tax is only realistic in partnership with reformed taxation of multinational companies and tax havens.

Financial transaction tax

Projected revenues: $60 billion - $75 billion.

Example: A 0.34% broad-based FTT could raise a maximum of 0.4% of GDP, or $75 billion.

Background: A FTT, beyond raising revenue, has a significant corrective effect on the unbridled incentives of the finance industry. By discouraging high-frequency, short-term trading, a FTT discourages the short-termism that has plagued the economy since deregulation loosened capital controls in the 1970’s.

Folding redundant welfare programs

Projected revenues: $200 billion - $771 billion.

Example: While total welfare expenditures hover near $771 billion, Wiederspan, Rhodes, & Shaefer (2015) isolate means-tested programs that a UBI or NIT would make redundant. They project savings of $207 billion.

Background: As I’ve mentioned, the progressivity of UBI depends on whether it supplements, or replaces existing social programs. The full spectrum of which welfare programs should supplement UBI and which should fold their revenues into funding merits widespread critical discussion. But with a total welfare budget of $771.4 billion in 2019, a notable portion of funding can be derived from existing welfare expenditures without threatening progressivity.

It should also be noted that even if most welfare programs are left in place, their costs would greatly shrink in response to a UBI that elevates most citizens beyond their eligibility requirements.

Reducing defense department budget

Projected revenues: $59 billion.

Example: Reducing the defense department’s budget by 10%, phased in over a 10-year period, would save $59 billion annually.

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Social security reform

Projected revenues: $200 billion - $500 billion.

Examples: By replacing one of every three dollars of social security received with UBI, recipients could increase their overall receipts while saving $324.2 billion.

Alternatively, rather than reducing payouts for those who’ve already paid in, after passing UBI we could justify reducing the 6.2% tax rate on employees that pays into social security, since SS payouts wouldn’t need to remain as high after being complemented by UBI.

Finally, raising the cap on social security payments up to $250,000 would raise an extra $80 billion, while subjecting earnings greater than $250,000 to a 12.4% payroll tax could raise $122 billion, annually.

...

Total annual revenue range: $2.6 trillion - $5.6 trillion

Putting Taxes Together

I am under no delusions that we could sensibly enact all these reforms and raise $5.6 trillion. These taxes cannot all be implemented at their upper projections, and implementing some would eliminate the possibility of implementing others.

The complexity and nuance at stake in accounting for how taxes interact with one another is why we need an influx of proposals from experts of all stripes. But they can be pieced together into cohesive, broad-spectrum proposals.

One example comes from Zucman & Saez’s 2019 book. They propose a tax plan that combines: a wealth tax, corporate tax, higher marginal income tax rates, higher taxation of capital gains, and a national income tax (6% flat tax on all income, labor and capital, no deductions). They predict this combination would yield $1.8 trillion in annual revenue:

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This leaves on the table: financial transaction taxes, carbon taxes, any redundant welfare programs, social security reform, expected gains from economic growth, and deficit spending, to name a few.

It’s also worth noting that the point of a UBI funded by progressive taxes is to reduce the tax burden on most people. The taxes used in Saez & Zucman’s proposal, for example, only raise taxes on society’s wealthiest sectors. But for full UBI proposals, taxes will inevitably be raised on some portion of the middle class. It’s important to delineate exactly whose taxes will be raised, and where the breakeven point occurs along the income distribution.

I won’t attempt to suggest a better constellation of taxes - I’m not the guy you want doing that. But it’s demonstrably possible to put together a functional proposal, and we need more of them.

Optimizing UBI

The particular form UBI might take is shrouded in ambiguity. In light of our tour through the relevant considerations, I’d like to propose a few elements worth considering if, following wide-spread democratic discourse and critical reflection, we wind up pursuing some form of UBI.

I. Poverty Level UBI

For UBI to achieve decommodification, rather than serve as a subsidy for capitalists, it must provide, at minimum, the physical basis for voluntary trade. Building off the work of Martha Nussbaum, Amartya Sen, and Karl Widerquist, we can equate this level with the poverty line, yielding a 2019 UBI level of $12,490, or $1,041 per month.

II. Split-Tier Payouts

The poverty-level UBI must be guaranteed, which requires reliable and stable sources of funding (modest LVT, national income tax on both labor and capital, financial transaction taxes, reallocating existing revenues, etc).

But what to do with revenues from taxes with more volatile revenues? Wealth and carbon taxes, for example, will change behaviors and lead to fluctuating, and likely decreasing, revenues over time. These are taxes implemented not primarily to raise money, but to alter economic incentives. In this same category of taxes with fluctuating revenues we can include taxes on natural resources (like Alaska’s Permanent Fund), data dividends, and rental revenues on collectively owned assets like broadband spectrum rights, land, or a social wealth fund.

These can all be treated as revenue-neutral taxes, where revenues are equally divided amongst citizens in the form of a social dividend. The social dividend could form an additional, fluctuating layer of benefits atop the guaranteed poverty level that is free to evolve, grow, and shrink alongside capital flows without threatening the basic income.

In fact, an interesting dynamic emerges when there exists a social dividend that can facilitate revenue neutral taxes. Each dollar spent by the government must justify why it is better off going into government expenditures rather than the social dividend pot. All government spending then ‘trades against’ per capita distribution, creating an incentive alignment that optimizes both, while promoting citizen oversight of government spending.

This is what I call a split-tier UBI. The bottom layer must be adequate to provide the physical basis for voluntary trade by meeting the poverty line, while a fluctuating social dividend may layer atop the base to provide a commonly owned stake in certain capital flows.

III. High End Phaseout Rates

One of the most common critiques of UBI goes something like: “Why would we pay Mark Zuckerberg $1,049 a month?!” In practice, his UBI acts as a minor tax credit on his much larger tax payment. He pays far more than he receives.

While UBI advocates use this logic to dismiss the critique, the question can be pressed. If a billionaire doesn’t receive any UBI payment after taxes are accounted for, why pay it at all? Why provide a tax credit on larger tax payments (the reason given is usually to avoid the administrative imposition of means-testing). Taking this logic to its conclusion winds up replacing UBI with NIT: only those who need the money most should receive it.

However, a basic income with high-end phaseout rates is different, falling somewhere between NIT and UBI. Columbia’s Poverty Center released a 2020 report analyzing a basic - but not universal - income program with a phaseout rate that kicks in at $150,000 and phases benefits out by $200,000.

We saw this same logic applied to the $1,200 stimulus checks provided by the US government during the Covid-19 pandemic. Individuals earning up to $75,000 received the full amount. Beyond that, the payment began phasing out, reaching zero for those who earned $99,000 or higher.

Using high-end phaseout rates effectively makes the cost burden more progressive by eliminating the payments that function as tax credits for individuals above the breakeven point.

It remains an open (and highly pertinent!) research question whether these savings would offset the additional costs of means-testing.

Since any guaranteed income proposal must be funded by progressive taxes, there will always be some who receive, and some who pay. The tradeoffs should be explored: what do we lose by violating universality with high-end phaseout rates? Whether the differences would justify abandoning the principle of universality merits significant discussion, but it’s worth considering.

IV. Broader reform

Crucial to the efficacy of UBI is that it’s understood as a floor, rather than ceiling to social policy. Narrative framing is important, but the real decisive factor in this balance is how the UBI is paid for. UBI proposals must be clear about which programs would fold in order to fund it, which would remain alongside, and the broader projects UBI can facilitate.

Alternatives

Some of the strongest critiques of UBI come in the form of alternative proposals that accomplish similar reforms through more modest methods.

Raising the gross budget required for UBI - $3.6 trillion - we could fully fund universal healthcare, a poverty-eradicating negative income tax, and have over $1 trillion leftover. Alternatively, if we implemented reforms like universal healthcare, affordable housing, and mass transit programs that reduce the need for personal vehicles, we could reduce the required individual monthly spending on basic needs by an amount equivalent, if not greater, than a poverty level UBI.

With this all in mind, let’s survey some of the leading proposed alternatives to UBI.

Negative Income Tax

I’ve mentioned NIT throughout the essay, and will return to it in the conclusion. Here, I’ll briefly describe how it works.

NIT is composed of two variables: an income floor, and a phaseout tax rate. The income floor sets the amount an individual with $0 of annual income receives from the program. The phaseout rate determines how much of the NIT is phased out for each dollar of earned income. Together, the phaseout tax rate and the income floor create a third element: the breakeven point. This is the earnings level at which NIT benefits reach $0.

Anyone who earns less than the breakeven point receives a proportion of the difference between their earnings and the breakeven point. That proportion is determined by the phaseout rate.

For example, consider a NIT with an income floor of $13,000, and a phaseout rate of 33%. This sets the breakeven point at $39,393. Anyone who earns below $39,393 receives 33% of the difference between their earned income and the breakeven point.

This means if I earn $0 annually, I receive 33% of $39,393, or $13,000. As my income increases, my NIT benefit slowly phases out, reaching zero when my income surpasses $39,393.

Depending on where the income floor and phaseout tax rate are set, annual cost estimates for NIT range from $179 billion, all the way up to $1.09 trillion. Here’s a list of a proposals, from one of the best recent papers on NIT, with income thresholds at 75%, 100%, and 133% of the poverty line, with phaseout rates that maintain benefits until earnings exceed 150%, 266%, and 403% of the poverty line:

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Recall the differences between UBI and NIT. Since NIT payouts must constantly adjust themselves to fluctuations in income, a system of income reporting and administration is required to maintain the program.

If NIT payments are to be distributed monthly, as UBI proposals are, this requires a monthly system of income reporting, rather than the yearly we’re currently accustomed to. This is why UBI proponents prefer giving everyone the same amount and using progressive taxes to adjust the distribution. It greatly reduces the bureaucracy and opportunities for error and exploitation in the program, while achieving a similar net transfer effect.

Personally, I see this as one of the most potent areas for digital innovation. A monthly NIT would be difficult with the present state of income reporting and governmental capacities. But modernized digital programs could significantly reduce the frictions, perhaps even automating the process entirely.

Universal Basic Services

Universal basic services (UBS) refers to a comprehensive provisioning of public goods and services, including various combinations of healthcare, housing, transportation, internet services, food, and so on.

Crucially, UBS proposals are inconsistent on whether or not UBI is part of the package. A UBS that includes income - and therefore a UBI - as one of the unconditionally provided features is hardly different from most progressive proposals for UBI. This UBS just formalizes the insistence that UBI alone is insufficient, and must be complemented by a broader program of reform.

But some prominent proposals for UBS advocate for services instead of income, providing the physical means for voluntary trade in kind, rather than in cash. These UBS proposals arose out of the UBI movement, sharing their intent while believing direct provision of services is a better use of available funds than direct cash transfers.

But while UBI has a long history of scholarship, theory, and discourse, UBS proposals are scant. For example, the Institute for Global Prosperity (IGP) is perhaps the leading advocacy group for UBS. In 2017, they released a full proposal under the heading of UBS that proposed anything but. They estimated it would cost $53 billion annually to provide housing, food, transport, and basic communications services (cell phone and internet access) to all UK citizens.

2017 UBS proposal
2017 UBS proposal

Of these four elements, two - food and housing - were means-tested (decidedly not universal), and universal transportation amounted to little more than free bus rides. Means-testing is a significant break from the philosophy of most UBI advocacy. Their subsequent 2019 report recoiled, offering no cost estimate and striking both food and housing from the proposal, including childcare and adult social care instead.

Guy Standing, a leading advocate for basic income, concludes his comparison of UBI and UBS by pleading with UBS advocates to “stop juxtaposing the idea of more and better public services with giving people basic income security.” The either/or dichotomy is misleading, because “they address different needs and stem from different rationales.”

Perhaps the greatest difference between UBI and UBS is optionality. With UBS, what services one needs are determined by a centralized group. What constitutes sufficient food, housing, communication, are all determined, and monitored, by the government. This way of thinking is an extension of 20th century social democratic reforms to expand welfare states.

By providing the cash equivalent for basic needs, UBI increases people’s optionality in how best to spend the money, and what on. Doing so also maintains the incentive for innovation in these industries.

If these two approaches are brought together, how can we determine what areas of life should be directly provided, and which should be provided as cash equivalents? Why do progressives prefer universal healthcare to just giving people enough money to buy private health insurance?

Here’s a basic heuristic for making sense of this: in markets with significant market failures (like healthcare, or prisons), direct provision of services may be preferable. In well functioning markets, cash equivalents afford greater optionality and maintain the conditions for innovation.

Universal Job Guarantee

Another increasingly popular alternative to UBI is a federal jobs guarantee (FJG). A FJG would provide a ‘public option’ for employment to all those who want it, paying a livable wage plus benefits.

Cost estimates range from $46 billion, up to $550 billion, to $750 billion, giving an idea of the diversity of proposals that go under the head of a FJG.

To compare, we might contrast a FJG with the previously listed motivations for UBI. The question of detaching livelihood from labor is the single largest point of divergent between these two approaches. A FJG does not decouple, but reinforces, the connection between labor and livelihood.

Proponents do suggest that a FJG could effectively eliminate poverty to all those able and willing to work. This amounts to a conditional elimination of poverty, and so a necessarily partial result. In terms of inequality, a FJG does have indirect effects on working conditions. The federal jobs program could put pressure on the private sector, forcing private jobs to at least match public benefits. Why take a $12.50/hr job in retail when you could get a $15/hr government job with benefits? In this fashion, a FJG could create an implicit minimum wage through competition, rather than federal mandates.

Compared with the status quo, both a FJG and UBI offer a likely improvement. But for all they share, their differences are sharp. Consider the worst-case scenario for each.

With a UBI, one of the public’s greatest concerns is a recipient may move into their parents basement and do nothing but watch television, drink beer, smoke weed, and eat chips all day. The UBI, taxed from the earned income of others, would support this lifestyle.

By contrast, if basic livelihood is afforded through a FJG, imagine the spiritual plight of a worker consigned to meaningless, pointless labor merely in order to satisfy the work requirement for receiving a living wage. If the government is unable to provide quality work for all participants in the program, the outcome is dystopian.

The question of the best means to provide everyone with their basic needs may come down to the question of human nature: do we empower people to decide for themselves how their time is best spent, or utilize labor requirements to make sure no one receives taxed benefits without contributing to society in a way that labor markets deem valuable?

Put differently: who do we ultimately give the power to determine the best use of their lives, people, or the government?

Codetermination

Codetermination, while not a direct alternative to UBI, should be included in these discussions. Much UBI advocacy centers around power. The “power” to say no, and so on. Earlier, we mentioned how UBI gives workers power outside firms, while codetermination decentralizes power within firms. Though a national mandate to place worker representatives on company boards sounds politically far-fetched, Germany has had just such a system in place since 1976.

By giving workers voting rights in company decisions, codetermination places a check on the forces of short-termism plaguing the American corporate landscape since the 1970’s. And at no cost.

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Empirical evaluations of German codetermination are yet to reach consensus, but find generally encouraging results. Across the spectrum of studies, most (but not all) find positive gains in productivity, a decrease in share buybacks, improved working conditions, and less unequal distribution of rents. Less positive findings include slight declines in profitability rates and stock prices.

The German board structure differs from that of the US. Germany has two boards, supervisory and executive, while the US corporate model only has one. Nevertheless, plans exist that adapt the German model to the US structure, notably reducing the required representation from 50% of the German supervisory board to 40% on US boards.

Shorter Working Weeks

At least since Marx, reducing working hours without reducing pay has been the heart of labor-driven reform. “The true realm of freedom,” he writes, “can blossom forth only with this realm of necessity as its basis. The shortening of the working-day is its basic perquisite.” The labor movement made this sentiment a reality through their fights to create the weekend, and 40-hour working weeks.

While average working hours have steadily decreased ever since, the rate began leveling off in the 1980’s:

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Around the same time, wage growth also began leveling off, while productivity continued its climb:

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Add to this the familiar graphs showing how income shares of the top 1%, corporate executive compensation, and stock buybacks have all rapidly increased since around this same time in the 80’s, and the case for shorter work weeks gains momentum.

Shortening the working week without decreasing pay lets workers share in the gains they’ve missed out on the past 50 years. In practice, this might be achieved in at least two ways. One possibility, likely through codetermination, is individual firms voting to decrease the workweek, perhaps by eliminating Fridays. Workers could still receive payment through some form of paid leave for Friday’s lost wages. This was the strategy used by Microsoft Japan when they tested 4-day work weeks, yielding promising results, both morally and economically.

Another, more decisive path is through federal legislation. Congress could amend the Fair Labor Standards act, and the President could sign into law a reduction of the workweek from 40 hours to 32 (by reducing the threshold where overtime pay begins from the former to the latter).

Social Wealth Fund

A social wealth fund is a collectively owned investment portfolio. Every American receives one share of ownership, and so receives a universal basic dividend (UBD). As the portfolio value increases, so does the dividend payment.

The fund can grow by accumulating assets (stocks, bonds, real estate), levying taxes on land, capital, or natural resources (as Alaska’s Permanent Fund does), or monetary seigniorage (where the Federal Reserve creates money to purchase assets).

A proposal was put forward by the People’s Policy Project. In their projection, the UBD is set at 4% of the five-year moving average of the fund’s market value. Assuming a $10 trillion average - in line with the proposals projections - the UBD would yield between $1,000 - $2,000 annually per person, depending on specifics.

As such, social wealth funds, while excellent strategies to democratize investment in the economy’s capital stock, cannot yet provide enough income to meaningfully displace UBI or similar proposals.

Next Steps: Modernized Negative Income Tax

But for all the promise of UBI, there is no denying the political barriers to enacting a program that requires upwards of $3 trillion in funding. Without engaging with the realities of our political climate, this may all amount to nothing more than howling in the wind. Some consider advocating for a direct leap from where we are today into a fully funded UBI a hopeless endeavor, a “nonrealist political philosophy” that’s “disjoined from real politics.”

Accordingly, we may consider a modernized negative income tax as a strategy sharing the sentiments behind UBI, while remaining well within the boundaries of economic and political viability.

By “modernized NIT”, I mean an unconditional NIT paid out to all individuals below an income threshold set above the poverty line, with a low phaseout rate, funded by progressive taxation, using the latest digital technologies to minimize bureaucracy, that complements rather than replaces existing and future social programs, made available at a minimum of monthly installments.

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For example, Wiederspan, Rhodes, & Shaefer (2015) estimate the cost for a NIT with an income floor set 33% above the poverty line, a phaseout tax rate of 33%, and thus a breakeven point at 403% of the poverty line at $635 billion, annually.

Using 2019 numbers, this translates into an income threshold of $16,611, providing benefits until citizens earn above $50,335. Every additional dollar one earns from $0 up to the $50,334th dollar, one loses $0.33 of NIT benefits. Their cost of $635 is given in 2007 dollars. Adjusting to 2020 dollars yields a cost of $791 billion.

A significant portion of the cost could be covered by folding existing means-tested programs that NIT makes redundant. These might include the earned income tax credit ($59 billion), supplemental security income ($58 billion), temporary assistance for needy families ($16.7 billion), and the supplemental nutrition assistance program ($64 billion). Together, reallocating these revenues into funding the modernized NIT covers $198 billion, annually.

On the subject of reforming existing federal expenditures, we might revisit the $540 billion spent (in 2013 dollars) on tax programs (tax credits, deductions, exclusions, exemptions, deferrals, and reduced rates) that overwhelmingly benefit the highest tiers of the wealth distribution. At the least, this could mean eliminating the home mortgage interest deduction and the real estate tax deduction, freeing up at least $89 billion annually.

We could fund the remaining $504 billion by any number of progressive tax combinations. Perhaps the simplest method would be to update the income tax conventionally used to fund NIT, making it more progressive by applying it to capital as well as labor. We could do so by phasing in a version of the national income tax proposed by economists Gabriel Zucman and Emmanuel Saez (2019).

They estimate a 6% flat rate nation income tax applied to both capital and labor income with no deductions would raise $1.2 trillion, annually. We could phase in this income tax, beginning at the breakeven point where NIT benefits subside (in this example, $50,335). Using the 2018 income distribution, this tax would apply to over 60.1% of households and still the majority of income earned in the economy. A top rate of 3-4% would likely be sufficient to fund the entire remainder of the modernized NIT.

Alternatively, a combination of a financial transaction tax, carbon tax, wealth tax, and raising the effective corporate tax rate could comfortably fund the remaining $437 billion, with minor deficit spending available for discrepancies.

Conclusions

Basic income (BI) - whether UBI, modernized NIT, or non-universal basic income with a high-level phaseout rate -  is one of the most important cultural conversations of the early 21st century. Considered alongside something like codetermination, we could structurally redesign socioeconomic dynamics to birth a new system from within the old.

There are things we know about the human condition that are yet to be made part of our social systems. We may not know how much happiness money can buy, but poverty certainly buys misery. Misery and poverty create their own gravitational culture that traps people inside. Through the pull of these invisible forces, poverty begets more poverty.

BI could eviscerate the deflationary, inward-pulling culture of poverty. But as I have argued elsewhere, BI is about more than poverty. It’s about redesigning the socioeconomic forces that guide human development.

Unconditional income is an opportunity to decommodify our lives. The more money we unconditionally receive, the more accessible it becomes to shift ourselves towards the projects, actions, and behaviors - ways of living - that we accumulate money for. These ways of living are qualitatively different, in that they are for themselves, rather than for money.  

As anxieties over income that pervade most of our ways of living recede, our social institutions would reconstitute themselves. How might education evolve if most students weren’t preoccupied with securing a high-paying job? How might work evolve if we were more interested in the products of our labor than the paychecks we receive?

The speculations at hand are intoxicating. But as with all intoxication, the process of integration requires thoughtful diligence. The work of translating basic income from wishful vapors into a real policy option requires evaluative rigor.

Towards that end, I hope I’ve done less to convince you of my own opinions, than provoked you to develop your own.

UBI Reading List

Here’s a selection of some of the more interesting reads I’ve collected about basic income. Both positive and negative perspectives are mixed in.

Essays

Papers

Books

I’d like to thank Evan Kasakove for providing feedback and helping edit this piece.