Somewhere in March 2015, the European Central Bank (ECB) launched its long-awaited programme of quantitative easing (or QE), adding lots of public debt to the private kind it has already been buying. Its monthly purchases will rise from around €13 billion ($14 billion) to €60 billion until at least September 2016. The ECB is just the latest central bank to jump on board the QE bandwagon. Most rich-economy central bankers began printing money to buy assets during the Great Recession, and a few, like the Bank of Japan, are still at it. But what exactly is quantitative easing, and how is it supposed to work? You can read more about it here : http://www.economist.com/blogs/economist-explains/2015/03/economist-explains-5
Yet, QE is having a limited impact on currency area’s real economy.
« The evidence suggests that conventional QE is an unreliable tool for boosting GDP or employment. Bank of England research shows that it benefits the well-off, who gain from increasing asset prices, much more than the poorest,”
Rather than being injected into the financial markets, the new money created by eurozone central banks could be used to finance government spending (such as investing in much needed infrastructure projects);alternatively each eurozone citizen could be given €175 per month, for 19 months, which they could use to pay down existing debts or spend as they please. By directly boosting spending and employment, either approach would be far more effective than the ECB’s plans for conventional QE.
The idea of having central banks to distribute cash to citizens has often been called “quantitative easing for the people” – a term coined by Steve Keen, an Australian economist.
“Monthly payments could be provided to every man, woman and child in, say, four areas on a pilot basis, with the sole condition that they would only continue to receive them if they were residing in those areas. People would still be free to move. However, it would help them to be able to stay. Such payments could be made for a period of 12 or 24 months.”
At the end of November, a coalition of eurozone campaigners, civil society organizations and economists launched the campaign Quantitative Easing for People, calling for the European Central Bank (ECB) to radically change its approach to the current Quantitative Easing (QE) program. At the time of writing, 75 economists have endorsed the campaign.
Follow the campaign on Facebook : https://www.facebook.com/QuantitativeEasingForThePeople
Indeed, there is a structural and flexible instrument needed for the ECB to upturn the economy if necessary. A mini version of the basic income, an idea that is emerging again and again, is one such instrument.
On April 9, 2015, Willem Sas and Kevin Spiritus wrote an opinion in the Belgian economic journal De Tijd:
“The European Central Bank can stimulate the economy with a limitedmonetary Basic Income.”
Who remembers the pre-crisis times? When the benefits of the Euro as the only European currency, were still so evident? But our memory is increasingly blurring. Especially with wages remaining stagnant, inequality continuing to rise and interest rates being dropped to almost their lowest possible level. Is there no way out?
One frequently suggested solution is that of Quantitative Easing. The proverbial money printing press….Unfortunately, QE will not necessarily lead to more investment in the European Union.
If a government can not – or does not want to – invest, if the funding does not reach the real economy and its small companies or new start-ups, and if no-one wants to enter into loans, QE will be a measure for nothing.
Moreover, the approach can lead to even more debt: it stimulates the economy through lending, which again may inflate asset bubbles that caused the previous crisis.
The massive purchase of bonds and stocks finally means that the prices of those assets will rise, and that mainly wealthier investors get better from it.
No guarantee of success so, risky and harmful to inequality. QE does not seem the best idea for Europe.
So there are economists who come up with a more efficient alternative: “helicopter money”.
By directly boosting spending and employment, either approach would be far more effective than the ECB’s plans for conventional QE. (see above)
But what about the disadvantages?
Helicopter Money can only be a temporary measure only to be applied only in exceptional circumstances.
In addition, if it appears that the ECB has exaggerated and inflation threatens to derail, it is difficult to get the extra created money back of the economy.
What we therefore need is a structural and flexible instrument which ables the ECB to boost the economy if necessary.
A variant of the helicopter money, a monetary Basic Income provides a possible answer to QE for the people.
In that case, the ECB would give a sum of money each month to every citizen, calculated as a percentage of average income (and thus different from country to country).
Suppose (to keep it simple) that it would be 400 € per month in the Euro zone. Important is that the individual European member states finance this 400 € – for example by lowering the benefits and tax-free allowances – and return it to the ECB. This brings us to a neutral position: a pocket-pocket operation without stimulus.
Only in times of crisis this will change: the ECB increases the monthly amount to roughly 600 € , until economy recovers.
National member states still continue to pay back 400 €, while the ECB presses in fact only 200 € per month and per citizen, which is then fairly quickly spent.
Once the economy rebounds and the growth and inflation figures increase, the monetary basic income can return to the neutral level of 400 €.
If the ECB was too generous, it may even drop temporarily this Basic income to 300 €, until inflation is stabilized and the temporary excess of money can be removed from the economy.
As a monetary policy instrument to tackle the crisis, such a basic income is not just a luxury. There is even better: this structural monetary Basic Income (or citizen Income) simply is what it does appear: a mini version of the kind of basic income, which is increasingly surfacing in the public debate.
Proponents argue that a structural basic income provides an answer to the automation, the growing inequality and the stress of everyday life. And people would be more creative and become easier independent entrepreneurs. But, are we certain about it, and so that is the main drawback of basic income.
How many people will actually retrain or go back to studies or schooling? And what will be the impact on labor supply? There exist economic models to simulate small reform, but as for a major reform like basic income, we still are in the dark.
So, as long as we can not assess the consequences, the introduction of a substantially basic income is more difficult to defend. And because the benefits really start playing in substantial amounts, it is even as more difficult to implement basic income in stages.
Well, our proposal for a limited monetary Basic Income, offers an opportunity to be taken in consideration here.
Certainly, this low amount can not provide or guarantee a human existence in dignity. But the proposal allows economists to investigate better the consequences of a major income shock. If the ECB increases the monthly amount in times of crisis, the result of it offers a lot of useful information. And once tested positive, we can gradually increase the basic amount to finally come to a full Basic or Citizen Income.
Greater guarantee of success… lower risk… and more equal opportunities …. it is certainly a better idea than QE.(Willem Sas and Kevin Spiritus doctorate in Public Economics at the Centre for Economic Studies at the KULeuven)
So, although the concept of “quantitative easing for the people” and the basic income have common features in the sense that they consist in distributing cash transfers to all individuals no strings attached, a quantitative easing is usually not understood as a permanent scheme, rather a short term measure aiming at stimulating demand.
And what about the Eurodividend?
In an interview given after the conference on the “Unconditional Basic Income” (UBI) organised in the European Economic and Social Committee, Phillippe Van Parijs argued that the EU should put in place such a basic income for all of its citizens, to help it escape the crisis, and to show that it is a community that “cares” for all its members.
Philippe Van Parijs is a Belgian philosopher and professor at the Université Catholique de Louvain (UCL). He talked to EurActiv’s Tanja Milevska.
We need to think about what could be done at the level of the EU. It won’t be a sort of mega-welfare state covering healthcare, pensions, etc. It needs to be very simple. It should be something like a floor income provided to all Europeans, and is funded with the most Europeanised of all taxes, which is VAT. The reasoning which leads to the proposal starts from the functional needs of the currency union, and then it proceeds by elimination, by looking at various schemes which you could have, and you end up with a single proposal which can come in many variants. You can modulate the amount – the €200 – according to the purchasing power in various countries.
At the same time, this sort of measure would serve other functions, which are equally important; not immediately relevant, for the eurozone but important. The first is to stabilise the population, so that you don’t have this sort of crowding of the most prosperous cities in the EU by people who are forced to move away from where their roots just out of necessity. It would be a spreading of that wealth created partly by the sheer existence of the European Union. The other argument is the pressure of each of the national welfare states. They can do less and less well what they used to do quite well, because of the pressure of the single market. So we need to do more at the level of the EU in order to enable each of the national welfare states to continue to do their job as well as possible in the globalised context. And finally, it’s very important for the EU to be perceived by the people as a caring union, not only one that lifts protection to promote productivity and benefits Europeans in a very unequal way. It must be perceived by all the Europeans, not only the movers, but also the stay-at-homes, that the EU is doing something for them. That’s an essential reason for the legitimacy of the European Union.
Would this basic income come on top of social benefits?
I wouldn’t say it’s on top, but it’s at the bottom, it’s a floor under all incomes. If someone is disabled, there will be a conditional disability benefit that will come on top, and those who have such benefits shouldn’t lose out as a result. And in the case of unemployment benefits too, it would replace the lower layer of these incomes. If you have unemployment benefits of €800 per month, if you have €200 basic income, you would receive those €200 unconditionally, and on top of that you would receive €600. Not €800. It replaces the bottom part.
What political parties have shown the most interest in such a proposal so far?
If you look at the idea of a basic income in general, traditionally it has tended to be supported in Europe by two main tendencies. One is the Greens, and the other the left Liberals.
Some years ago, respectively leaders of the Liberals and Greens in the European Parliament, Verhofstadt and Daniel Cohn-Bendit wrote the book-manifesto, For Europa!, and the two portray in it their vision for the United States of Europe.
Furthermore, in his book The United States of Europe, the former Belgian prime minister Guy Verhofstadt pleads for a “European social and economic government”
The European Union – a term which the Belgian politician keeps using next to “United States of Europe” – should have an autonomous budget financed from taxes like VAT, which it should use to boost spending on research and development.
In 2004….” Prime Minister’s Party in a coalition with Duchatelet’s Basic Income Party The Flemish Liberal Party of ruling Prime Minister Guy Verhofstadt (VLD) has decided to form a electoral coalition with VIVANT, a small party whose political platform is partly devoted to a defense of an unconditional monthly basic income of EUR 540. VIVANT was started in 1997 by high-tech businessman and life-member of BIEN Roland Duchâtelet. In national (1999, 2003) and local (2000) elections, it attracted between 1 and 2% of the votes. The VLD-VIVANT cartel is running for the regional and European elections of 13 June 2004 in Flanders (Flemish-speaking) and Brussels (bilingual).
So yes, Philippe Van Parijs is right:
“If you look at the idea of a basic income in general, traditionally it has tended to be supported in Europe by two main tendencies. One is the Greens, and the other the left Liberals.”
Thirty-two Members of the European Parliament from twelve countries issued a joint statement expressing their support for the European Citizens’ Initiative (ECI) for Unconditional Basic Income. (2013-2014) This called upon the European Commission to assess the idea of reforming current national social security arrangements towards an unconditional basic income (UBI). And during this European Citizens Initiative for Basic Income, the European Greenswhere one of our best supporters…http://www.basicincome.org/news/2013/06/opinion-the-european-citizens-initiative-for-unconditional-basic-income-shall-the-expectations-be-attained/
The question is…. the European political leaders do they have the courage to look beyond the term of their well paid mandate?.….
Today more and more citizens, economists and policy makers believe a new form of social security is urgently needed ….. as social security systems in individual countries become increasingly conditional and punitive, they undermine individual dignity, form barriers to civic participation and deepen divisions in European society both across and within national borders
In the ALDE (Alliance of Liberals and Democrats for Europe) Manifesto (2014) we read: We want a Europe that respects and encourages individual choices and keeps its promise that everyone has the opportunity to improve their own life. http://www.aldeparty.eu/sites/eldr/files/news/10204/2014_alde_party_manifesto.pdf
At about the same time I wrote: Fewer and fewer people believe in Europe. So one can imagine, how difficult it is for grass-roots campaigners to explain to their public that the ECI is a ‘tool’ for more participative democracy in Europe and how even more difficult it is to motivate the same public to give their statement of support for UBI in Europe: Europe does not listen to its citizens, doesn’t know any longer its needs and hopes, so why would the EU commission develop something that’s no more no less than a utopia? These are some of the answers the ECI for UBI grassroots campaigner hears every day! http://www.basicincome.org/?s=Lambrecht+Christina
Participative democracy in Europe…. The European Union needs to be stronger, simpler and more democratic (ALDE Alliance for Liberals and Democrats for Europe)
So what are we waiting for? Are we waiting for the results of Finland’s experiment on Basic Income (starting in November 2016 and also financed by the negative income tax); are we waiting for the Swiss referendum on Basic Income in 2016; are we waiting what will be the final conclusions on the 28 pilot projects in the Netherlands?….
That’s not the Europe we want. The Europe we want is a Europe with a common project, common solidarity in a participative democracy.
Pleading for a Basic Income in the individual national member states is still a hard grass-rooters work…And we have to continue to explain that Basic Income is not left or right. It’s forward!
An Unconditional Basic Income (UBI) or Citizen’s Income is a guaranteed income, given to all in addition to any other income they might receive. By advancing equality and economic participation while enabling simpler welfare systems, UBI leads to a fairer and more efficient society.
The EU has the power to put in place a European Citizens Income!
Keep going on for Citizens Income!
More international Basic Income news on https://www.facebook.com/Basic.Income.Earth.Network
(1) translation by Christina Lambrecht