Towards a progressive European basic income?
An EU-wide scheme could address progressives’ concerns about proposals for universal basic income.
As the Conference on the Future of Europe progresses, its interim reports indicate that the proposal for a more social Europe most frequently suggested by citizens is a European universal basic income (UBI). This poses a dilemma for progressives who promised to seriously consider the proposals from the conference but have valid concerns about such a scheme.
They could flatly reject UBI but this would risk alienating citizens and feeding into scepticism about how seriously the European Union takes civic participation. Irrespective of whether progressives are in favour of UBI, by offering constructive visions they can stay on top of the debate.
For the Foundation for European Progressive Studies, we conducted an analysis of UBI debates and reflected on the arguments for and against from a progressive political standpoint. We found some striking patterns.
First, support for and opposition to UBI can be found within various political movements, irrespective of ideological background. Secondly, the arguments are much more complex than often assumed, given UBI is typically framed as a simple solution. Thirdly, the (limited) evidence suggests many likely positive effects of UBI, although it is by no means a silver bullet. Fourthly, some important arguments against UBI are predominantly concerns about policy design—careless implementation could have significant detrimental social effects.
As UBI remains salient, it is all the more important then to develop a differentiated view of where and how it bears potential for progressive goals:
- it must be supplementary, complementing rather than replacing the welfare state;
- it must be redistributive, so that it acts as a net benefit for the less wealthy;
- it must render individuals independent of market forces, and
- it must foster European solidarity by giving the EU a tangible social dimension.
If European progressives choose to embrace UBI, it should be at EU level, administered by the union and paid directly to every adult EU denizen each month. Minors’ caregivers should receive a reduced payout, with the remaining amount accruing to a European sovereign-wealth fund. Part of this accumulated residue would be paid out to individuals as a lump sum of starting capital once they reached maturity, with part retained in the sovereign-wealth fund to help fund the scheme over the long run.
To discourage the wealthy from actually claiming UBI if they do not need it, starting at the national median income automatic payouts would be tapered at a linear rate with increasing income. In principle, everyone could still claim their UBI regardless, but unclaimed funds would be channelled into the sovereign-wealth fund. Such a universal right to income would be more in line with progressive ideals than a universal income paid out automatically without exceptions.
Universal entitlement however sets this scheme apart from traditional means-tested approaches. It is key to overcoming issues such as discriminatory practices while avoiding problematic incentives due to cut-off points.
Protection against poverty
In the long run, a progressive UBI would need to protect citizens against poverty at 60 per cent of the respective national median income or 50 per cent of the mean income—whichever were higher. To keep the scheme feasible while incentivising upwards convergence and ensuring sufficiency, no national UBI should fall below 20 per cent of EU-wide median income or exceed 60 per cent of it. Responding to persisting concerns, progressives might embrace further differentiation at the local level.
While the existing empirical research indicates that phenomena such as moral hazard associated with a UBI are smaller in magnitude than is often suspected, there are valid concerns about what one can extrapolate from it. One way of engaging with citizens’ proposals while taking the risks seriously would be to introduce the scheme at very low levels, raised slowly as increasing funds became available.
This would also allow policy-makers to react swiftly with complementary schemes and regulations if employers were to abuse the scheme by wage-dumping. As such risks exist in any event and are being addressed through policy measures, it seems unlikely that a UBI could work without such policies or that the latter would stop working if a UBI were implemented.
By implication, a progressive UBI would only be part of an encompassing mix of social policies and regulations, avoiding the overall system being reductively focused on monetary tools. Established welfare systems must remain in place from a progressive perspective, as UBI can never be a panacea but bears potential as a complement to means-tested schemes which closes otherwise unavoidable gaps.
Even initially low levels of UBI would be a non-stigmatising social improvement, especially for low-income individuals. The only social policies which could be voluntarily replaced as a result would be monetary transfers whose value was by then fully covered by the EU UBI.
For funding, we propose stepwise utilisation of various revenue sources. These would include designated EU resources, such as a financial-transactions tax, a carbon-dioxide tax, a green border tax, extended emissions trading, a sovereign-wealth fund, a digital-services tax, an EU-level value-added tax and a ‘robot tax’, as well as taxes on luxury goods, high incomes, inheritances, wealth and land value. In addition, national corporate-tax contributions could be partly hypothecated.
Could such funds not be used otherwise more effectively? Means-tested schemes are ostensibly more targeted than UBI but they suffer from stigmatisation and low uptake, as well as mistreatment and discrimination by case workers of the most vulnerable. And a UBI might be conceptually more appealing for progressives at EU level, since it would visibly strengthen the social acquis without directly competing with national welfare policies.
Further issues, such as legal limitations in the EU treaties and political scepticism towards a UBI, must be taken seriously. In light of the Conference on the Future of Europe, however, progressives should engage with the debate in an appropriately nuanced way, by discussing more openly the conditions a European UBI would need to fulfil to be considered desirable.
- Authors: Dominic Afscharian, Viktoriia Muliavka, Marius S Ostrowski , Lukáš Siegel
- Original post: https://socialeurope.eu/towards-a-progressive-european-basic-income
Why We Need Modern Monetary Theory (MMT) and Why It Needs Universal Basic Income (UBI)
Going from “can we pay for it?” to “can we resource it?” is the mindset shift needed for a human-centered resource-based economy built with a mindset of abundance on a foundation of human rights.
In the beginning, man said, Let there be money: and there was money. Centuries later, on March 27, 2020, the United States passed into law the Coronavirus Aid, Relief, and Economic Security Act and with the stroke of a pen, over $2 trillion was spent without first taxing or borrowing from anyone. It included $1,200 stimulus checks for adults and $500 for kids. Another $900 billion was spent without first taxing or borrowing from anyone nine months later as the Consolidated Appropriations Act. It included $600 stimulus checks per adult and kid. Another $1.9 trillion was spent without first taxing or borrowing from anyone another three months later when a third stimulus check went out thanks to the American Rescue Plan Act, this one for $1,400 per adult and kid. It was followed in July by the first of six monthly payments of $250 to $300 more per kid. All told, within one year, $1 trillion in cash was sent directly to the bank accounts and mailboxes of about 85% of Americans, no strings attached.
We didn’t “pay for” any of this. We just did it. None of it was made possible by taxing or borrowing from anyone first, and that’s the big lesson I believe everyone needs to take away from the COVID-19 pandemic besides the effectiveness of direct cash payments and dangers of politicizing science and public health. Americans needed money, so it was created out of nothing. The thing is, that’s not new. It’s how money works in any country that issues its own currency.
Here’s the now less secret truth: the US government is not funded by taxes. It creates its own currency out of nothing. It spends it into existence. Taxes then remove money from the money supply to maintain its value (among other things). For the cryptocurrency enthusiasts out there, the US dollar utilizes a mint and burn model. The eater address is the IRS.
In other words, yes there is in fact a “magical money tree.” All money is a human invention and there is in fact no limit to the amount of money that can be created. There is however a limit at any point in time to the goods and services that can be exchanged for money at that point in time, and that real and always changing limit depends entirely on the amount of natural resources, human labor, machine labor, knowledge, skills, time, energy, etc. that is available to meet demand with supply at that point in time. That’s what really matters – what money is meant to measure – not money itself. Money is only a human construct created to very roughly measure the stuff it’s traded for, and taxation is important for a multitude of reasons, but making spending possible by a currency issuing government just isn’t one of them. This is the heart of what’s come to be known as Modern Monetary Theory (or MMT).
Conventional thinking says that the US government first needs to obtain money from taxes or borrowing in order to spend it. MMT says that the government first spends money, then it taxes or borrows money to remove it from circulation. That may seem like a somewhat silly difference, but I’ve come to believe it’s actually an extremely important one, and one that once adopted, is the most likely path to a better future that includes a truly Universal Basic Income — like Alaska’s annual dividend but monthly and larger — that’s the highest it can be without surpassing inflation targets.
I’ve never been against MMT as a descriptive theory, but for years I’ve just seen it as an alternative way of looking at federal spending and taxes, but having just lived through the year 2020, and having read Stephanie Kelton’s book The Deficit Myth, I’ve come to believe MMT may just be the key to achieving UBI, and perhaps even the only way.
Now to begin this MMT-UBI journey (which I admit will take some time to fully explore) let’s first imagine a very special bathtub…
The Magical Bathtub
Imagine a bathtub where our goal is to fill the tub as close to the brim as possible without spilling over onto the floor. Water flowing into the tub represents government spending and water flowing down the drain represents taxation. The tub itself represents the economy and an overflowing tub is inflation. If more money flows into the tub than down the drain, the water level rises. That’s what running a federal budget deficit looks like, because a deficit is spending more than taxing, and the government’s deficit is the private sector’s surplus. A balanced budget would be matching the rate of water flowing in with the rate draining out, which would keep the water level steady where it is. If the tub is full, that would make more sense, but if it isn’t, it makes sense to either increase the flow rate, or decrease the drain rate to fill the tub all the way.
Curious for the ending? You can read further on https://vocal.media/theSwamp/why-we-need-modern-monetary-theory-mmt-and-why-it-needs-universal-basic-income-ubi
or download the pdf: Why We Need Modern Monetary Theory (MMT) and Why It Needs Universal Basic Income (UBI) _ The Swamp (PDF)
What is happening with money?
The following program deals with a controversial subject. The theories expressed are not the only possible interpretation. Viewers are invited to make a judgement based on all available information. Everyone watching now please share this link via the sidebar to any and all of your social media channels. This is important. Simply ask your friends and family to give us 15 minutes. That’s all we ask.
That is the foundation of human control. This cult is constantly dictating when it goes up and when it goes down, but no one ever talks about it. Why? This is fundamental and I never hear any political party talk about this. I don’t hear the wokers talk about it. I don’t know any of them talk about. This cult has achieved economic dominance on an ever more extreme scale, thus dominance of the choices of freedom of the population by creating a situation in which they can lend money that doesn’t exist, called credi/t to the population and then charge interest on it. and taking as collateral wealth that does exist, land resources homes businesses. and if the population doesn’t pay back, the credit money that is a figment of the imagination created out of nothing basically, then the people issuing the credit, ie the banking system owned by the cult, gets your wealth that does exist. And through the generations this exchange of non-existent theoretical money called credit, for real wealth and resources, has sucked the wealth of the world into the hands of the few.
And through that dominance of financial control, they dictate the choices or lack of them of the population. And they dictate the choices of black people, white people, asian people, all different kinds of people and sexualities. Why are government’s borrowing money from private banking systems? And the population paying interest upon that borrowing? Why aren’t the government’s issuing their own currency interest free? And lending it to the population interest free to go about their commerce and go about their lives, creating opportunities and choices that they wouldn’t otherwise have.
Why are we allowing a privately owned, in the end by a tiny few people, banking system to issue non-existent credit money and then be able to take the wealth of the people, if they don’t pay it back. And there’s another thing on this the same people that lend the money the credit dictate if the economy goes up, or the economy goes down. Thus they can lend lots of money, and there’s a boom, and then they can crash the economy and people can’t pay back the loans that they took out. So what happens then. Those that have lent the non-existent credit and crashed the economy, can then suck up all the wealth that was put as collateral for the non-existent money.
Now what we’re going to see in relation to what i’ve just said is a frenzy of repossession of properties. Are frenzied as the cult, which owns the banking systemm, sucks up more of the wealth and resources of the world because of a pandemic hoax that crash the world economy. Which the ones that control the banking system were behind. Because the same people the same cult that’s behind the banking system.
If people want to focus on how we get our freedom back then private banks lending money at interest non-existent money called credit has to end or at least it has to be an add-on. We need a systemm not a communistic system, but a system where governments are able to issue the currency interest-free. Because you say to people how is money created? and they say oh the government does it well almost entirely it doesn’tm money comes into circulation by private banks lending creditm and when they lend lots of credit then there’s the opportunity for lots of economic activity and when they squeeze the credit what did they say in 2008? “A credit crunch”. when they squeeze the credit they’re taking out of circulation units of exchange, and economic activity cannot take place and so we go into a recession.
And this cult via the banking system of by this system is constantly dictating when it goes up and when it goes down. Cuz what their masters are making it go up and down so they know when it’s going up and down and that an idiot could make vast amounts of money if you know when the economy and the stock market’s going up or when it’s going down. And this is how it works. Changing the banking system, taking control of our economic lives our livelihoods our choice out of the hands of private banks that would change everything on the level that we are talking about.
But no one ever talks about it politically why? Because britain is a one-party state, we have a one-party state labour party. A one-party state conservative party, in america you have a one-party state republican party, a one-party state democratic party, and these one-party groupings all these major political parties are ultimately controlled by the same network that controls: the banking system. And because of that the politicians controlled by those people are not going to challenge the banking system controlled by those same people.
What this whole marxism tyranny wants to sell is that everyone should be equal. But what does that mean? Everyone should be equal. I would like to play in goal for Manchester United. i’m 68 and I have an arthritic hand, ain’t gonna happen. So what i’m gonna do is something that I can do. And i’m not going to complain that i’m limited and i’m not going to say that i’m disabled and that it’s the system that means I can’t play for Manchester United. I look at the situation i’m in and I achieve or seek to achieve on the basis of who I am. I’m a unique individual, so I will achieve in a unique way.
This idea that everyone must be the same it’s a race to the bottom. What we need is equality of opportunity, so that someone’s race or background is not a block on their ability to achieve what they want to achieve as long as they have the ability to do it, we all have different abilities and different gifts. But what we don’t want surely is equality of outcome. because that’s a race to the bottom. Give people opportunity and then what they do with that opportunity is entirely up to them. They might say no i don’t want to take the opportunity I want to go walking India. All right fine well you know enjoy. But just because you go walking in India and this person achieves something with their opportunity, doesn’t mean that they’re privileged. It means they they just took the opportunity and direction of life that was different to yours. To create this equality of opportunity, it’s to create a massively fundamentally more fair economic system, where wealth is shared out. Doesn’t mean everyone gets the same, because you know you take motivation and incentive out of life. It’s a race to the bottom, because you know well no matter what I do it’s still the same, you know.
So incentives a very important thing. But what has happened in the system that we have is that it’s been completely hijacked financially by a tiny few people. And I said earlier that freedom is actually choice. The more choices you can make the freer you are, the fewer choices the less free you are. And what dictates the choices in the system and the world that we have today? It’s money.
Overwhelmingly, not always, far from always but it is central money. So if you’re the cult and you want to take people’s freedom away then you take their access to money away. Because you’re taking their access to choice away. It’s the private banking system issuing non-existent theoretical money called credit. That’s the whole basis of it. And if I demanded that someone take from me money that doesn’t exist or I tried to give people money that didn’t exist telling him it was real i’d get fricken arrested. But banks can make loans have credit which has never, does not, will never exist, except in theory, and they don’t get arrested they become the 1%. And that’s how they’ve done it. The number of people that are driving this is tiny I mean it’s ridiculous. At its core you’d get it in a room.
You know people say you know what we’re gonna do? Well you can look for a solution and you know where does solutions usually lead? They lead to more problems that need more solutions. You see it all the time now what’s the best way to remove a problem. To remove the frickin cause of it. You take away the cause of a problem don’t find a solution to it. Take away the cause and the problem must cease to exist because its cause has been deleted. And i’ve talked about the cause length today.
It’s human acquiescence to or authority. Authority that tells you what to believe and what to do and wants to give you consequences for not believing it and doing it. You acquiesce to that and you’re giving your freedom away. Acquiesce to that collectively humanity gives its freedom away to a tiny few people.
Stanislas Jourdan about Helicopter Money
An interview in the Hémisphère gauche with Stanislas Jourdan about helicopter money . “It is rare to have time to go deep into such a complex subject! he says on Facebook”
Hemisphere : Faced with the coronavirus crisis, the ECB has implemented a massive purchase plan (PEPP and € 600 billion increase on June 4) of € 1,350 billion – and soon more – to try to support states in the face of future spending. How do you perceive the monetary policy conducted by the ECB since the start of the Covid-19 crisis?
SJ: I see three good news and one bad one. The good news is that the ECB was able to avoid the mistakes of the previous crisis, where we had to wait until 2015 and the launch of quantitative easing before seeing the ECB rise to the crisis. This time, and despite a small initial failure on March 12, Christine Lagarde was able to convince the Board of Governors that it was necessary to intervene preventively in order not to re-activate the old fears of contagion of interest rate spreads in the crisis of the euro. The second good news is that by doing this, the ECB has rejected, at least for the moment, the temptation of some of the leaders to resort to the good old austerity cure to cover the cost of this crisis. . The ECB’s action not only helps maintain the fiscal capacity of States, but this will also support the stimulus fund fairly directly, since the debt securities issued by the Commission will logically be eligible for the PEPP. The third good news is that by doing all this the ECB has de facto freed itself from the shackles of the legacy of the euro area crisis, according to which direct intervention by the ECB would have required a assistance program via the MES, which itself enables the activation of the ECB’s OMT program. With the establishment of the PEPP, the ECB has completely freed itself from this ineffective straitjacket, the toxic conditionalities of which poison European debates. Thanks to the PEPP, which further compresses sovereign debt rates, the ESM has largely become unnecessary. since the debt securities issued by the Commission will logically be eligible for the PEPP. The third good news is that by doing all this the ECB has de facto freed itself from the shackles of the legacy of the euro area crisis, according to which direct intervention by the ECB would have required a assistance program via the MES, which itself enables the activation of the ECB’s OMT program. With the establishment of the PEPP, the ECB has completely freed itself from this ineffective straitjacket, the toxic conditionalities of which poison European debates. Thanks to the PEPP, which further compresses sovereign debt rates, the ESM has largely become unnecessary. since the debt securities issued by the Commission will logically be eligible for the PEPP. The third good news is that by doing all this, the ECB has de facto freed itself from the shackles of the legacy of the euro area crisis, according to which direct intervention by the ECB would have required a assistance program via the MES, which itself enables the activation of the ECB’s OMT program. With the establishment of the PEPP, the ECB has completely freed itself from this ineffective straitjacket, the toxic conditionalities of which poison European debates. Thanks to the PEPP, which further compresses sovereign debt rates, the ESM has largely become unnecessary. according to which direct intervention by the ECB would have required an assistance program via the ESM, itself allowing the activation of the ECB’s OMT program. With the establishment of the PEPP, the ECB has completely freed itself from this ineffective straitjacket, the toxic conditionalities of which poison European debates. Thanks to the PEPP, which further compresses sovereign debt rates, the ESM has largely become unnecessary. according to which direct intervention by the ECB would have required an assistance program via the ESM, itself allowing the activation of the ECB’s OMT program. With the establishment of the PEPP, the ECB has completely freed itself from this ineffective straitjacket, the toxic conditionalities of which poison European debates. Thanks to the PEPP, which further compresses sovereign debt rates, the ESM has largely become unnecessary.
The bad news is that fundamentally, the PEPP program does not really bring anything new in terms of method, since it is still debt purchases as the ECB has been doing since 2015, with the very limited effects on the real economy that we know (inflation has been anchored around 1% for six consecutive years!). Admittedly, monetary policy support translates into extremely low interest rates, but this does not in itself guarantee that economic agents will take advantage of this to take on more debt and thus revive demand. The effect is therefore very indirect, and in this there is no innovation on the part of the ECB in this regard.
Hemisphere: In this context, why do you think the ECB’s monetary policy should be supplemented?
SJ : Of course, the ECB is always doing more in terms of injections of money, but basically it is always the same old intellectual software that predominates its action: the idea that the only way for the ECB to conduct its policy in the real economy is to influence the interest rates in the markets and by “anchoring” the expectations of investors on the rate of inflation in the medium term.
The transmission of the ECB’s monetary policy into the real economy is too dependent on the action of banks (and businesses and households willing to borrow!).
To compensate for the inanity of the markets to act as a transmission belt for monetary policy, the ECB is now calling for a relay of fiscal policy. While it was alarmed about the sustainability of public debts, this rhetorical turnaround by the ECB seems quite spectacular, but in reality, this does not hide the very powerlessness of the tools of monetary policy.
Despite all the good intentions, the budgetary response to the Covdi19 crisis is doomed to disappoint, as countries in difficulty are forced not to spend enough to maintain their credibility. At European level, the European recovery fund is unfortunately doomed to be insufficient, given the state of negotiating forces at European Council level.
In this context, the ECB will nevertheless have to find a way to accomplish this without a mandate, while its current tools have shown their limits. This is where the helicopter currency comes in. The ability of the ECB to inject liquidity directly into the economy, without depending on financial intermediaries or on hypothetical budgetary action is a sinequanone condition for allowing the ECB to achieve its inflation target independently.
Hemisphere: Can you detail your helicopter currency proposal?
SJ : Our proposal is intentionally not as precise as some of the other promoters of the idea, because with Positive Money Europe (the NGO that I lead), we see our role above all as a facilitator of the implementation of the concept, with the aim of ensuring that the ECB is ready to activate this tool as quickly as possible. Our priority is therefore to bring about (or clarify) a political consensus around the concept of a direct payment from the ECB to citizens, so that the ECB has the political legitimacy to take action. Our preferences in terms of applications go only in the direction of ensuring the technical, legal and political feasibility of the operation.
However, in our last paper in April 2020 on this subject, we put forward the proposal for a payment of 1000-2000 euros at one time, to all residents of the euro zone. This amount is above all illustrative: it corresponds to around 1% of the euro zone’s GDP. Of course, the ECB should undertake to renew the payment as soon as it observes too low inflation and a risk of deflation, according to a rule to be defined in advance to anchor market expectations.
Payment could be made through commercial banks in coordination with Member States. There is also the idea of a central bank electronic money, which would probably be a simpler technical option in the long run.
In all cases, the technical implementation must not delay the implementation. This is why we discussed the idea that payment could be made tomorrow for those who need it the most; by forcing the banks to grant an unconditional bank overdraft at no cost to households, which would then be offset by the actual payment of helicopter money.
The most difficult question in my opinion is that of the parameters of the beneficiaries: who should receive the money? Everyone, without distinctions? Only the poorest? What about the amount, should it be the same for single people or parents with children? And should it be equal in all euro area countries? In theory, it would be simpler and more legitimate to distribute the currency in a perfectly universal way, but in practice targeting to less affluent households (and therefore more likely to spend the money) would be more economically efficient.
These questions are very political, and it is to avoid getting wet in this kind of arbitration that central bankers usually say that helicopter money is a “fiscal measure”. As Benoit Coeuré recently indicated, the introduction of helicopter money “presupposes writing a check to each household according to criteria that are a matter of political choices. “
But unlike Coeuré, I think there is a fairly simple solution to this problem. Basically, it is the European Parliament (to which the ECB reports) that could define the eligibility criteria as part of a motion for a resolution. This would greatly help the ECB, which could use these recommendations to anchor the democratic legitimacy of helicopter currency. It is to resolve this dilemma that Positive Money Europe has been advocating since 2015 with the European Parliament so that it takes a position on this subject.
Hemisphere: Will it achieve the objectives of the mandate?
SJ : It is in any case the primary goal! We cannot give the ECB total independence and a narrow objective at the same time, without equipping the ECB with all the tools to accomplish this task. Without the possibility of resorting to helicopter money, the central bank is then dependent on the markets, or on the States to carry out fiscal stimulus. If we put the helicopter currency aside, there won’t be many tools left.
Having said that, I would not be surprised if the inflationary effect of a helicopter payment should disappoint expectations downwards, because of the structural phenomena of the current underinflation, in particular because of technological deflation, of the loss. the bargaining power of unions and globalization. These phenomena have been underestimated in the past. But that would not be a reason not to do it, but rather point to the difficulty of finding the right dosage.
As such, the advantage of helicopter money is that the transmission mechanism to the economy is much more direct, transparent and immediate. While a change in key interest rates may take several months to affect the real economy, the helicopter money payment would docks immediately, and its impact easier to anticipate and understand for consumers. Afterwards, its effects would also be easier to measure, and therefore to adjust if necessary. The monetary policy mix would be easier than with the current policy.
Hemisphere: How do you deal with the problem of the absence of assets in the balance sheet of the ECB?
Indeed, there is this fear that a possible bankruptcy of the ECB could lead to a loss of confidence in the ECB, which would lead to hyperinflation. But this is a very theoretical problem!
In practice, we know that central banks can quite operate with an unbalanced balance sheet, in negative capital. On the other hand, it seems to me that the idea that the quality of the central bank’s balance sheet determines consumer confidence in the currency is an untested hypothesis, and one that I personally think is highly improbable. The idea that we should bail out the ECB which itself creates the currency seems nonsense to me.
However, to satisfy the somewhat obtuse accountants of the ECB, several solutions are possible to avoid recording a deadweight loss on the ECB’s balance sheet. The most promising seems to me to record in assets a perpetual debt at zero rate, which will never be repaid.
Opponents will not fail to point out that according to its statutes, the ECB can only create money in return for “adequate collateral”. On this point, it is useful to recall that the notion of adequacy “is very vague. In practice, this notion relates to the financial conditions of the economy. The ECB has demonstrated this very clearly since 2008 by constantly relaxing the rules. asset quality requirements in its collateral framework Undoubtedly, the establishment of helicopter currency is also justified by an unprecedented deterioration in economic conditions.
Hemisphere: How does your proposal fit in with the European legal framework?
SJ : It is true that there is a legal vacuum in the sense that this scenario was not provided for in the Treaties. But unless we consider citizens as subjects of the state, it is clear that the payment of money to individuals does not constitute a form of monetary financing of governments as defined in article 123 of the TFEU. On the contrary, the interest of the measure is precisely to bypass state budgets so as not to create a situation of “fiscal dominance” which would harm the objective of price stability, which would be contrary to the spirit of the Treaties. .
In any case, it is remarkable that the ECB has never ruled out the possibility of helicopter money, despite the multiplication of requests and legal uncertainty. For example, in a letter to MEP Jonas Fernandez, Mario Draghi wrote that the only legal constraint would be a “perception” of confusion between monetary and fiscal policy.
Hemisphere: How does your proposal fit into the political game at the Board of Governors? NB. Your proposal risks being blocked by many so-called Orthodox countries – from a monetary policy point of view – led by Germany, which is opposed to any policy that risks creating too high inflation. The ghost of the 1920s is still very present here. Do you think you can be audible and break down ideological barriers?
SJ : Beyond the technical problems, there are two major obstacles. First, there is the objection to HD’s resemblance to fiscal policy, which actually raises the question of the central bank’s legitimacy to make explicit wealth transfers. As I have already mentioned, we believe that political validation by the European Parliament would solve this problem.
Second, it is the objection of the “slippery slope” towards fiscal dominance and the risk of the erosion of central bank independence, which would lead irreparably to hyperinflation. Opponents of helicopter money assume that once Pandora’s box is opened, there will be no limit to popular and political pressure to force the central bank to turn the billboard further. This vision seems to me caricature and sadly defeatist vis-à-vis the democratic institutions and the existing safeguards.
In the end, it all depends on how such an operation is set up, but unfortunately finding the right balance would require a more subtle debate on this subject than the one we have at the moment.
The supporters of monetary orthodoxy miscalculate. They prefer to postpone radical ideas such as helicopter money indefinitely in order to avoid breaking taboo subjects, but in the same way they are fueling populism against an independent central bank which is forced to go ever further in rates negative and asset buybacks without achieving its inflation target. This will lead the ECB to hold very large private and public debt portfolios for decades to come, whereas by resorting to helicopter money now, a rise in rates and a gradual exit from quantitative easing would be possible sooner. .
Hemisphere: How does your proposal fit in with fiscal policy? Do you fear a return to austerity-panic like after the 2008 crisis?
The risk of a return to austerity is real, because as the current tensions between the Netherlands and southern Europe reveal, a whole section of the European political elite has not grasped that the politics of low rate is the consequence of a permanent regime of under-inflation linked to a flagrant lack of demand. In reality, the low interest rate policy represents an opportunity to finance low cost public spending and investment in the low carbon transition. But after several decades of public propaganda on the risk of a crisis in public accounts, it is not abnormal that a large part of the population and politicians have not yet understood this. It is to avoid this danger that the ECB must be able to implement helicopter money.
Hemisphere: How does your proposal fit into the environmental transition?
SJ : In parallel with our helicopter currency campaign, Positive Money Europe has been campaigning since 2015 for the ECB to tackle climate change. In 2019, we won our case after Christine Lagarde announced the launch of a process to revise the ECB’s strategic framework, including on climate issues. As part of this review, which will run until June 2021, we are proposing to take environmental factors into account in all of the ECB’s tools such as quantitative easing or TLTROs.
But in my opinion this debate is relatively distinct from that on helicopter money, the almost sole objective of which is to ensure a level of demand that makes it possible to reach the inflation target. If the objective is to direct consumption towards certain greener services, then a carbon price policy would be much more effective in influencing consumption habits.
Hemisphere : What place for the participation of European citizens in your proposal?
SJ : The subject of helicopter money remains taboo in central banking circles, but also at the political level. With Positive Money Europe, we are trying to overcome this obstacle by mobilizing European citizens to put pressure. It is important for us to be able to show that we are the voice of a growing number of citizens who understand these financial and technical issues, because they concern us all.
Central banks are not used to communicating to the general public, but things are changing because they realize that their legitimacy has been weakened by the crisis and that they need to explain their policies to citizens. For example, the ECB has launched a public consultation on its website. These communication initiatives are an opportunity for citizens to impose helicopter currency in the debate. Citizen participation is essential to reach the general public and raise awareness among politicians, but also because central banks are not used to communicating with the general public.
Stanislas Jourdan is the European Director of Positive Money, an association in charge of supporting research and promoting a conception of money capable of making the financial system more equitable, sustainable and democratic. After the Quantitative easing for the people project, the association notably promoted a form of helicopter currency based on a payment of 1000 euros to each European citizen (cf. references).
The world petitions’ for money
All over the world petitions are shared to ask for money. From temporal allowance during the Covid-crises to permanent Unconditional Basic Income.
You can browse the petitions here: https://ubi-europe.net/ubi/petitions-for-any-type-of-basicincome-or-helicoptermoney/
For the European Citizens, a new Citizens’Initiative wil start on the 25th of september 2020. During one year European citizens can sign to persuade the EC to support countries with the implementation of an Unconditional Basic Income. The goal is 1 million signatures.
Go to this landing page first: https://eci-ubi.eu/
Basic Income and Helicopter Money
These are special times. The Netherlands is slowly locked by the corona virus. According to Alexander de Roo, we must now take concrete steps towards the introduction of helicopter money and basic income.
These are special times. The Netherlands is slowly locked by the corona virus. This also applies to large parts of the world. This has effects on public health and society. As a result, the economy is suffering a major setback. All over the world, governments are forced to pump extra money into society to keep the economy going, and fortunately they do.
It has been argued for 50 years that the most effective way to do that is helicopter money. The Nobel Prize winner for the Economy Milton Friedman coined this term. Every individual aged 18+ receives living money from the government.
Some small Asian city-states such as Hong Kong, Singapore and Macau have now actually used the targeted helicopter money for the first time. Helicopter money is very effective. In Korea – a country with at least 50 million inhabitants – it is already being discussed to do this.
In the Netherlands, on February 15, 200 members and supporters of various political parties came to a meeting of the Basic Income Association in Amsterdam. The Financieel Dagblad wrote that matters such as the allowance affair in the Netherlands are crying out for a simple and confidence-inspiring basic income answer ”. Click here to read this article.
Dutch party politics are also starting to move more and more. Within GroenLinks the working group for basic income has now been recognized and at the postponed party congress broadly supported motions are still on the agenda for basic income and unpaid labor. At the PvdA conference on March 7, a protruding room discussed basic job and basic income. The basic job seems more popular than the basic income within the PvdA, but it turned out that there is also a growing number of advocates for basic income.
D66 is working on the elaboration of their congressional motions. They asked for the Social Cultural Planning Agency to look at basic income and to let the Central Planning Bureau (CPB) calculate basic income.
At the meeting of February 15, VVD member Robin Fransman argued that basic income is inevitable today. It contributes to solutions that are now really needed.
Prof. Dr. Ir. Wouter Keller (former CBS employee) recently passed on a variant of negative income tax (another term for almost the same idea) to the CPB. This produced positive results. The bottom 60% of the Netherlands is improving and sometimes as much as 7% and the top 40% is only 2 to 3%.
Finland, Barcelona, regular assistance
This spring, the results of the trials with basic income in Finland and Barcelona and the experiments with non-regular assistance in ten Dutch municipalities will be announced. These data also provide insight into the relevance of basic income today.
With this new material, we continue our discussions with all kinds of political parties about basic income, so that they can take it into account when considering the election program for 2021. A majority of Dutch citizens are positive about basic income. Experiments have been done.
Just now take concrete steps towards the introduction of helicopter money and basic income.
Alexander de Roo, March 2020
Image by Cock-Robin from Pixabay
Basisinkomen en Helicoptergeld
Het zijn bijzondere tijden. Nederland gaat langzaam op slot door het corona virus. Volgens Alexander de Roo moeten we juist nu doorpakken met concrete stappen richting invoering van helicoptergeld en basisinkomen. Continue reading “Basisinkomen en Helicoptergeld”
For a Central Bank serving the citizen
7500 euros: this is the amount that every citizen of the euro area would have received if the European Central Bank (ECB) had distributed directly to the population the 2.6 trillion euros it has preferred to inject into the financial markets since Four years.
This shocking figure, revealed by the NGO Positive Money Europe, poses a simple and radical question: would not monetary policy be more effective if the newly created money was directly paid to European households? Continue reading “For a Central Bank serving the citizen”
Helicopter money is the new “whatever it takes”
Exactly seven years ago, the President of the European Central Bank, Mario Draghi, pledged the ECB would do “whatever it takes” to preserve the euro. Those few words will be remembered as a decisive step towards the end of the Eurozone crisis, as it paved the way for the launch of quantitative easing (QE).
But QE only managed to push the problem further down the road, and the ECB is once again worried about an economic slowdown. This month, the ECB has announced that it will consider more policy support to the Eurozone economy, including relaunching QE.
Some voices are saying the ECB should start buying equity stocks  as part of quantitative easing. This is what Blackrock (the world’s largest asset manager) suggested last week. Everyone can guess who would benefit most from this.
We, on the contrary, argue that 7 years after Draghi’s heroic “whatever it takes” speech, more of the same policies will not be good enough anymore. The European Central Bank needs to find new ways that will benefit all citizens, not just the banks, asset managers and the financial and corporate elite.
The ECB should clearly commit to deploying “helicopter money” – direct transfers of newly created money to EU citizens – if it needed to. Read why helicopter money is the new “whatever it takes” here.
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