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Universal Basic Income or the Abolition of the Wages System

What is Universal Basic Income?

Universal Basic Income is finding support across the capitalist political spectrum. Simply put, UBI is a payment made by the state to every person, irrespective of income. UBI would be paid equally to an unemployed worker as it would to the Duke of Westminster. There are variations of UBI, some favoured by free market institutes to get rid of the “welfare” state and a “progressive” UBI favoured by social reformers to support the working class. There are also limited basic incomes aimed at the unemployed and those on benefits.

Although The Universal Basic Income (UBI) makes an appearance in Thomas More’s UTOPIA it was championed by Thomas Paine, the 18th-century radical, who in 1797 proposed paying all 21-year-olds a £15 grant funded through a tax on landowners as compensation for "loss of his or her natural inheritance, by the introduction of the system of landed property” (AGRARIAN JUSTICE, 1795).

Later, the idea was taken up by the Utopian Socialist, Thomas Spence. Spence's Plan was first published in his pamphlet: Property in Land Every One's Right in 1775. The motive for the introduction of UBI was to end poverty and hardship caused by the enclosure acts through a “social guarantee” providing income for those unable to work. Karl Marx recognised Spence as the “the deadly enemy of Private Property in Land” (THEORIES OF SURPLUS VALUE, 1863).

As a reform UBI has been advocated by Henry George to be paid for out the land tax, John Galbraith, F. A. Hayek, Milton Friedman and James Tobin, among others. And it has made its reappearance in recent years as a means to give an income to millions of workers whose jobs are apparently threatened by robotics and Artificial Intelligence.

However, a practical scheme, similar to a basic income, took place in England in 1795 when the magistrates of Speenhamland in Berkshire started a system under which farm labourers on poverty wages had their income supplemented from the poor-rates. The decision was not philanthropic but came out of the practical needs of increasing agricultural production during the French Revolutionary and Napoleonic Wars while, at the same time, appeasing discontent among farm labourers.

The system had unintended consequences. Farmers kept on paying low wages safe in the knowledge that agricultural workers would have their income topped-up by monies paid from the poor-rates. The clash of interests between farmers and propertied rate-payers saw the Speenhamland scheme eventually dropped as a more draconian Poor Law was introduced in 1834 with the Poor House used as a means of reducing the cost of looking after the destitute.

Those who support Universal Basic Income say that giving every person a substantial amount of economic resource will provide an ‘economic cushion’ to the poorest in society. In theory, so they say, those who receive UBI support will be able to re-educate themselves for employment or take low-paid work while gaining experience through voluntary internships without economic penalties facing them, such as mean-tested benefits, as they do now. In the long-run, it is claimed UBI will allow for a better educated and employable work force; an idea behind the pilot scheme recently introduced in Finland. A philanthropic gesture by the state it is not.

If a Universal Basic Income scheme was ever introduced in the UK it would be at a much lower level that its supporters currently propose. The Royal Society for the encouragement of Arts, Manufactures and Commerce (RSA), published a report backing a basic income in December 2015. It proposed a model that would cost the equivalent of 1% of GDP, and pay (based on 2012/2013 prices) £3,692 per year to people aged 25 to 65 and a pension of £7,420. Children aged up to four would receive £4,290, for an eldest child, and £3,387 for younger siblings, with the income then dropping to £2,925 per year for people aged between five and 24.

This cost of 1% of GDP would have to be borne by the capitalist class through taxation. And the interest of the capitalist class in paying for Universal Basic Income raises another telling criticism against this particular reform. Those who propose UBI do not understand the social system in which they live. They naively disregard the fact that the profit system has its own economic laws, contradictions, competing interests and profit imperative which undermine and severely curtail the enactment of reforms.

Supporters of UBI do not even know what constitutes a wage under capitalism or how and why it is paid. It was Marx who showed that the value of labour power (the commodity sold by workers to capitalists) - is determined by the expenditure of socially necessary labour time which goes into its production. In the case of workers, it is a basket of commodities required for the maintenance of workers and their families. These commodities would include food, clothing, mortgage and rent payments, transport, entertainment and so on. For skilled labour, the cost of education also has to be included. The commodities the worker has to buy must also include for their children “in order that this race of peculiar commodity-owners may perpetuate its appearance in the market” (CAPITAL, VOLUME 1, Ch.VI, p. 172).

The necessary amount of commodities a worker needs to live on is not a physical minimum. Real wages can go up with rising productivity and they can also go up or down through the playing out of the class struggle. Wages can also rise during periods of good trade but also go down when there is a high level of unemployment. Subsidies, like child benefits and tax credits, also have an impact on the level of wages. For the capitalists it is all about getting the maximum of surplus value and profit out of the working class. As Marx noted in WAGES, PRICE AND PROFIT the conflict between wages and profits:

“…is only settled by the continuous struggle between capital and labour…The matter resolves itself into a question of the respective powers of the combatants”.

The question of “the respective power of the combatants” is the key to understanding the impact of Universal Basic Income. Social reformers are completely oblivious to the cause of the class struggle over the intensity and extent of class exploitation and the movement of relative and real wages. There is also no understanding by supporters of UBI of Marx’s critique of political economy, where his scientific explanation of capitalism, set-out in Capital, remains a closed book to social reformers.

The Capitalist Left’s Support for UBI

It is predictable that the Labour Party, under Jeremy Corbyn, is coming out in favour of Universal Benefit Income. The Labour Party, after all, is a reformist not a socialist political organisation. The Labour Party has set up a working group to investigate the implementation of a universal basic income. In an interview with the INDEPENDENT (5th February 2017), John MacDonald, the shadow Chancellor, suggested that basic income scheme would feature in the next Labour Manifesto and he will soon publish a report on the idea with Guy Standing, one of his economic advisers and a founding member of Basic Income Earth Network – established in 1986 to encourage discussion on the topic of UBI around Europe.

In September 2016, at its Conference in Brighton, the TUC also voted in favour of Universal Basic Income. Again the TUC misunderstands capitalism and the class struggle. They are more interested in Keynes than Marx. If and when individual trade unions meet employers over pay and working conditions and UBI is in force, employers will take this payment into consideration when conceding or negotiating any rise in wages and salaries. Employers already play this game when taking into account social security payments paid to low income workers in employment, effectively relying on government subsidies to workers to keep wages down. According to the GUARDIAN, taxpayers, that is, ultimately the capitalist class, spend £11bn to top up low wages paid by UK companies (20th April 2017). The consequence of UBI, for trade unions and non-trade unions, may well be a large reduction in wages. And it should be remembered that the Socialist Party of Great Britain predicted the effect of another reform - family allowances - as a means of lowering wages back in the 1940’s as did some employers.

Another political party which favours UBI is the Green Party, but again its understanding of capitalism is politically incoherent and economically unsound. Like the Labour Party it ignores the reality of capitalism and the fact that the means of production and distribution are owned by a minority capitalist class to the exclusion of the rest of society. It also neglects the fact that capitalism is all about investing capital for profit. If the Green Party ever comes to power, like the Labour Party before it, the interests of the capitalist class will have to come first and reforms like UBI, if too expensive to implement, will either be watered-down or kept in cold storage.

The capitalist left wing parties, The SWP, The Socialist Party and Counterfire are more Luke-warm towards UBI but see it as a possible addition to their unrealisable “transitional demand

” programnmes. The Socialist Party, for example, in an article “Universal basic income - what do socialists (sic) say? (8th February 2017) argues that the cost of taxation in the introduction of UBI would be too great a burden for the capitalist class to bear. Instead these Trotskyist organisations urge workers to press for a “survival level” UBI as part of their tactics to gain support from non-socialist workers for their unrealisable reforms. The tactic is to feed off the anger, disappointment and frustration of workers when the reforms cannot be delivered by capitalist governments.

Such is the opportunism of the capitalist left. And it is an opportunism riven through with historical failure. The Labour Party, for example, has had a history of passing social reforms only to end up having to restrain wages or by cut state benefits.

The Capitalist Right’s Support for Universal Benefit Income

The Capitalist Right, particularly free market economists and politicians, favour UBI although there is some scepticism within the Conservative Party about its affordability and the negative impact it would have on worker discipline within the labour market.

UBI has supporters from the free market think tanks. Most prominent among them is the mis-named Adam Smith Institute (misnamed because the ASI rejects Adam Smith’s primitive theory of value and his contention that taxation is an ultimate burden on employers). Sam Bowman, the ASI’s executive director wrote in 2013: “The ideal welfare system is a basic income, replacing the existing anti-poverty programmes the government carries out.” He added that UBI would result in a less “paternalistic” government (GUARDIAN, 23rd June 2013).

According to free market adherents of UBI, like the ASI, the introduction of the reform would replace the “welfare state” and its cost to the capitalist class with a universal payment similar to the intended streamlined efficiency of universal credit. That was also the purpose of the Beveridge system in the post-war period – to simplify and make universal the hotchpotch pre-1939 schemes, and cut costs. Seventy Five years later the problems identified by Beveridge – squalor, ignorance, want, idleness, and disease are still with us.

Although there are some notable capitalists who favour the introduction of Universal Basic Income, like Richard Branson, Bill Gates and Mark Zuckerman, they are in a minority. The loss of having a pool of unemployed workers who can be used to drive down wages and conditions; and the safety net a UBI would give workers who move to take strike action are two other reasons why many capitalists are not that impressed with UBI. However, the real reason why many capitalists do not support UBI is the usual moral hazard argument. If workers have money coming in, why should they bother going to work? And this is the argument used to keep benefit levels low – below the income levels of the worst-paid workers. That was the 19th century Poor Law principle and is still at the core of all government welfare systems.

While there are free market Tory politicians who support the introduction of Universal Basic Income, the Tory government thought that the scheme was “too expensive and not effective

” In a Parliamentary debate on UBI, Conservative Minister at the Department for Work and Pensions Damian Hinds said the proposal was not workable. He said:

“Even the most modest of universal basic income systems would necessitate higher taxes. At the same time it would cause a significant decrease in the motivation to work amongst citizens with unforeseen consequences for the national economy (Independent 14th September 2016).

Worries about the cost of Universal Basic Income and “motivation to work” mean that it is doubtful if UBI will form part of the Tory government policy.

Workers Should Have Nothing To Do With Universal Basic Income

Universal Basic Income has been projected by the capitalist left as a “pro-worker” reform by abolishing poverty and the stigma receiving benefits going back to the Poor Laws. But is it? Social reforms, if they are to work at all, usually have to benefit the capitalist class in some way even though there is a protracted argument between different sections of the employing class over where the burden of taxation should fall to pay for the reforms. Reforms which increase government spending can only be paid for in three ways: by taxation on the capitalist class which then restricts their ability to invest; by borrowing which raises the national debt and subsequent interest payments on this debt; or by printing more paper money which would cause an increase in inflation and distort the market by making, for example, UK exports uncompetitive on the world market.

Those in favour of UBI assume that if the government gives everybody, working or not, a regular income this is going to have no effect on wage levels. UBI would not be an addition to wages from employment but would act as a downward counterweight on wage rates and over time real wages and salaries would fall on average to cover the amount of the "basic" income.

Suppose a worker’s wage is £20,000 a year and they are given £6000 a year in the form of universal benefit income. What would be the result? Would the worker have secured £26,000 through the generosity of the capitalist state and the capitalist class who are paying for it? If the value of the wage is still £20,000 a year to produce and reproduce the worker and their family and the employer takes into consideration the £6000 top-up from the UBI, then there will be a tendency for the £20,000 to either fall or not increase as the employer looks at the £6000 UBI as a subsidy to draw on in pay discussion with the worker. The employer would therefore be receiving a subsidy from the state for employing workers similar to the subsidy going to the agricultural labourers associated with the Speenhamland scheme.

If UBI turns out not be in the interest of the capitalist class to fund through higher taxation, if the negative drawbacks outweigh the potential benefits, then clearly it will not be introduced or will just be restricted in scope and remain vulnerable to repeal or watering down, just like any other previous capitalist reform. In fact, most social reforms proposed for Party Political Manifestoes, are largely paraded as a public relations exercise to get votes. UBI is a candidate of this type of reform. Capitalists are not philanthropists any more than their governments are. They do not hand over taxation lightly and it is taken from them by the force of law, despite off-shore tax havens and clever accountants.

The Socialist Alternative to Universal Benefit Income

What social reformers ignore is the fact that the means of production and distribution are owned and controlled by the capitalist class to the exclusion of the rest of society. Private ownership and the profit motive place severe limitations on what governments can do, and what governments cannot do is make capitalism run in the interest of the working class.

The issue, therefore, is to have production and distribution put on a socialist basis in order to directly meet the needs of all society. As Marx put it in THE CRITIQUE OF THE GOTHA PROGRAMME:

“Any distribution whatever of the means of consumption is only a consequence of the distribution of the conditions of production themselves. The latter distribution, however, is a feature of the mode of production itself. The capitalist mode of production, for example, rests on the fact that the material conditions of production are in the hands of non-workers in the form of property in capital and land, while the masses are only owners of the personal condition of production, of labour power. If the elements of production are so distributed, then the present-day distribution of the means of consumption results automatically. If the material conditions of production are the co-operative property of the workers themselves, then there likewise results a distribution of the means of consumption different from the present one”.

Instead of UBI there should be the establishment of socialism where “the material conditions of production are the co-operative property of workers themselves”.

Socialists do not support the current arrangement of poverty institutionalised by the “welfare state” any more than we support Universal Basic Income as a panacea for the economic problems facing the working class. Both the “welfare state” and UBI are just versions of the Poor Law. Workers do not have to live lives of wage slavery nor rely on state hand-outs and top-ups. There is a socialist alternative. The UBI scheme would still have people living in insecure and unpredictable circumstance but production directly for social use and free access to what is produced by society would remove this uncertainty altogether.

Socialists argue that the most practical and rational social arrangement would be a system of common ownership and democratic control of the means of production and distribution for all of society. The artificial rationing of the wages system would be replaced by direct and free access to goods and services for everyone according to their need. Without prices or money, primary, secondary, and tertiary needs, etc., like housing, transport, education, communication, clothes, food and so on would be free. People would also be free to lead active and creative lives, and take part freely in the affairs of society.

Social reformers do not learn from history. They introduce reforms on an ad hoc basis to avoid telling the working class the truth: that the capitalist system cannot be run in the interest of all society. Surely the very fact that social reforms have to be continually introduced, in attempts to eradicate or minimise poverty, shows that the problems capitalism causes are immune from political interference. The reason why politicians persist with social reform is a political one – they do not want workers to consider the alternative – socialism.

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