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Cooking the Books: Back to Basic

In a speech at Harvard University, Facebook founder Mark Zuckerberg called for everyone to be paid a basic income by the state, whether working or not (i paper, 27 May). This was one of the Green Party's promises in the recent general election. The 'Parti Socialiste' candidate in the French presidential elections, Benoît Hamon, favoured it too. As has Italian Autonomist Toni Negri.

Its various advocates offer different reasons. Zuckerberg wants to give people some free time to think up new ideas. The Green Party wants a pilot scheme to see if it would be cheaper than current income support. Hamon saw it as an answer to the fall in paying demand caused by the growing unemployment which he anticipates robotisation will bring. Negri sees it as a demand around which all critics and victims of capitalism – the employed, the unemployed, women – can unite in a way they cannot around sectional trade union demands for higher wages.

All of them envisage it being introduced within the context of the capitalist economic system of production for sale on a market with a view to profit. And that’s the rub. It is all very well proposing reforms to capitalism involving the government spending more but, since governments produce nothing, where is the money to come from? In theory the government could simply print it but that would lead to Zimbabwe or Venezuela-style inflation. It would have to come from taxes, but even taxes on wages are ultimately passed on to employers. So the money would have to come out of their profits. But profits are what make the capitalist economic system go round. Less profit means less investment. There are limits to how much a government can increase taxes without provoking an economic slowdown or downturn.

As if to answer Zuckerberg, the OECD, an intergovernmental organisation of the richest capitalist countries, published at the same time a study of the effect of introducing a basic income in four countries (Britain, France, Italy and Finland) on the assumption that taxes are not increased and that the amount of cash payments currently going to all those below retirement age were evenly divided among them.

The OECD concluded that the basic income that everyone would receive would be well below the poverty line (as the minimum to which governments at the moment guarantee to make up the income of the poor) in each of the four countries. It added: 'Any basic income at “a socially and politically meaningful level” would require additional spending on benefits and therefore higher taxes to finance this' (Times, 29 May).

If everyone below retirement age was paid only a basic income equal to their country’s poverty line, the OECD found that in Italy and Finland the government would actually pay less in total on payments to those under retirement age than it now does; which means that some of them would receive a drastic cut in their payments, in particular those who have taken early retirement. So much, then, for Negri’s suggestion that UBI is a demand that could unite all victims of capitalism.

The OECD report neglected one other drawback – that a basic income paid to those in work would amount to a wage subsidy for their employers. Wages tend to gravitate around a level that is enough to enable the workers to buy the things they need to maintain their particular working skills. If the government provided them with some of the money in the form of a basic income then the employers would no longer have to; wages would tend to sink by an amount equal to the basic income.

So, all in all, not even a desirable, let alone a practicable, reform.