How the basic income scheme could become the Left’s worst nightmare

So, let’s do a thought experiment just for the hell of it.

WARNING: This exercise is definitely not recommended for the fainthearted nor for those trapped in the social democratic delusion that the fascist state is a neutral field for competition between classes:

In my last post I asked if basic income can be employed to maintain wage slavery in face of chronic overproduction of capital. I explained, in this regard, the fact the basic income was incompatible with wage slavery has no place in the discussion, because chronic overproduction itself is already incompatible with wage slavery.

This means chronic overproduction itself should have already brought down wage slavery whether a system of basic income existed or not. Given this fact, the task is to explain why chronic overproduction did not bring down wage slavery and how  the capitalists managed to prevent this from happening.

I think the explanation for this begins with explaining how chronic overproduction of capital expresses itself. According to Marx overproduction expresses itself as an ever increasing mass of capitals that are incapable of action on their own and a surplus population of workers. The development of the forces of production has reached the level that some definite portion of existing capital and labor cannot, under any circumstances, be employed for the further production of profit; both have been rendered superfluous to the mode of production.

This labor and capital cannot be employed for purposes of production of profit, but this does not mean it cannot be employed at all. If the mode of production had been overthrown, the excess capital and labor could have been employed for the production of material wealth. But, as we all know, the mode of production was not overthrown when absolute overproduction was encountered — instead we got fascism.

Fascism was the solution to the pressing problem of how production for profit could be continued when it had encountered its limits. As far as I can tell, the solution was first proposed in theoretical form within labor theory by Henryk Grossman, who argued continuation of the mode of production would now require labor power to be forcibly devalued. Grossman proposed this solution in 1929, just as the Great Depression erupted; by 1936, Keynes argued in his General Theory that this could be accomplished by forcibly reducing the real wage, while letting nominal wages remain unchanged.

The workers, Keynes argued, focused on their nominal wages and would ignore what was being done to real wages. Even if they noticed what was happening to their real wages, they could not go out on strike every time the price of bread increased. Eventually, they would make themselves at home with the idea prices continually increased — inflation would be “normalized”. Thus, argued Keynes, the fascist state would be in a better position to reduce the real wage than any single capitalist firm could hope to accomplish through outright reducing the money wages of its own workforce.

To grasp the implications of the Keynesian System, you first have to realize that wages already have been managed by the fascist state since the 1930s. Keynesian economic policy has always been designed to forcibly devalue the real wage behind the illusion of stable or even rising nominal wages. We have just been too dumb to realize this fact.

Moreover, the Speenhamland System is portrayed by Polanyi as a subsidy for the wage worker, when it was, in reality, far more important than this in my analysis of the implications of any basic income scheme. The state subsidy paid to the worker, also effectively aided in the development of modern industry by reducing the cost of labor power for the capitalist. Thus, rather than being incompatible with wage slavery, as Polanyi argues, it can be seen as a critical early investment by the state designed to get  modern industry off the ground in the first industrial revolution — not unlike the state’s role in the early development of any other technology, e.g., the early railroad system, national defense highway system or the internet.

The state’s role in managing wages began far earlier than I had realized until I read Polanyi’s explanation of how it worked.

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So, what happens when you combine the Polanyi’s Speenhamland System with the Keynesian System?

First, the subsistence of the working class is socialized in the form of what appears to be a state basic income scheme. This basic income scheme includes all the wage workers of a country and replaces all previous forms of social spending. As Polanyi shows, it also has the effect of allowing the capitalist to slash wages at will:

“employers could reduce wages at will and laborers were safe from hunger whether they were busy or slack the employer could obtain labor at almost any wages; however little he paid, the subsidy from the rates brought the workers’ income up to scale.”

Second, with the Keynesian System, the rate itself is only a nominal rate, having nothing to do with the real income received. Thus, the real basic income rate can be forcibly devalued while the nominal rate is stable or even appears to increase. If directly subsidized, as the price of housing rises, the cost of the subsidy rises with it. If, instead, the worker is paid a set allowances for all of her subsistence, this allowance need not rise in real terms nor even nominally. This has been the case with the so-called “minimum wage” that has failed to keep pace with changes in the so-called “cost of living”.

Third, in the ideal system of this sort, basic income would be entirely paid for by taxes on the employed section working class. This would essentially amount to taking a single wage and dividing it up among several workers. There is, however, no way to simply take the income of one section of the working class and distribute it to the rest, unless, of course, the present income tax system was replaced by a sales or consumption tax. Since by and large the working class consumes all of its wages, while the capitalists consume very little of its own income, the employment of a consumption tax could be used in this fashion. Moreover, shouldn’t there be an “environmentally friendly” way to discourage consumption as our “progressive” activists demand? What better way to “discourage consumption, save the environment and create jobs” than to use a tax on consumption to fund basic income and a “jobs guarantee”? Thus we have this interesting proposal from Anders Schinkel:

“With a view to climate change, governments are increasingly beginning to be concerned about the level of energy consumption and – since most energy is still produced from oil, coal, and gas – the accompanying level of greenhouse gases emitted. Large industries are stimulated to reduce their greenhouse gas emissions. One obvious way to accomplish such a reduction is through increased energy-efficiency. Becoming greener may save companies money.

“International competition drives companies to seek ways of cutting costs, and becoming more energy-efficient is one way of doing so. However, under current tax systems, a much more profitable – and therefore much employed – way of cutting costs is to reorganize the company; i.e. to sack people. It is now a common phenomenon that even companies that make profits of millions, even billions of dollars, lay off hundreds or thousands of employees. For example: last February, Shell reported an almost 2 billion dollar profit over the last quarter of 2009, compared to a 2.8 billion dollar loss a year earlier. They also announced to sack another thousand employees.

“There is a simple way to solve both problems: to prevent job loss and protect our environment. We need to make the transition from our current system of income tax to a system of consumption tax. Very simply put: all I have to report when filling out my tax form is how much I earned and how much of that I saved; the rest is what I consumed and what I will be taxed for. It makes sense, for it is only when I consume that I burden the environment. (The only way to burden the environment without consuming is to leave my dead body in the wrong place.) Of course it is possible to combine this with indirect (i.e. collected by an intermediary) taxes on consumed goods (like VAT), that vary depending on the nature of the product – the more environmentally costly products being taxed higher than the less costly ones.”

Since, I am totally speculating on how the Speenhamland System could be combined with the Keynesian System and a national consumption tax to produce a 21st century mechanism for forcibly reducing wages, there is still one other factor to consider.

In his discussion of the Speenhamland System, Polanyi makes a critical observation that has been taken up by Left advocates of basic income:

“If laborers had been free to combine for the furtherance of their interests, the allowance system might, of course, have had a contrary effect on standard wages: for trade union action would have been greatly helped by the relief of the unemployed implied in so liberal an administration of the Poor Law.”

Which is to say, freed of the fear of starvation, the dispossessed workers might have been able to combine to assert their common interests against the ruling class.

The same argument has been advanced, for instance, by Erik Olin Wright of the University of Wisconsin – Madison:

” A generous basic income has the potential to contribute, in the long run, to strengthening the power of labor viz-a-viz capital for three reasons. First, to the extent that labor markets become tighter in a capitalist economy with a basic income, the bargaining position of individual workers will increase. Second, generally speaking labor is collectively in a better bargaining position when labor markets are tight. And third, basic income is a kind of unconditional and inexhaustible strike fund, which also would contribute to strengthening the labor movement. Even if basic income was not accompanied by more favorable laws governing the process of union organizing, therefore, it would in this way enhance the capacity of workers to struggle for unions.

And here, as indicated by Polanyi — who never seems to realize it — we see the extent to which the English ruling class grasped the implications of their so-called subsidy of wages: To prevent just this sort of activity on the part of the nascent working class, the English ruling class passed laws against workers organizing unions:

“That was presumably one of the reasons for the unjust Anti-Combination Laws of 1799-1800 which would be otherwise hardly explicable since the Berkshire magistrates and members of Parliament were both, on the whole, concerned about the economic condition of the poor, and after 1797 political unrest had subsided. Indeed, it might be argued that the paternalistic intervention of Speenhamland called forth the Anti-Combination Laws, a further intervention, but for which Speenhamland might have had the effect of raising wages instead of depressing them as it actually did. In conjunction with the Anti-Combination Laws, which were not revoked for another quarter century, Speenhamland led to the ironical result that the financially implemented “right to live” eventually ruined the people whom it was ostensibly designed to succor.

Following on Polanyi’s observation, we can expect something on the order of a modern-day version of the Anti-Combinations Laws, which restrict the free activities of the recipients of basic income — perhaps some restriction on the right to vote, or to organize — based on the argument that those who receive basic income should have no more right to lobby government than public employees. Add to this the growing effort to prevent public employees from bargaining and aggressive implementation of so-called “right to work” legislation.

Even absent these sorts of legal restrictions on the combination activity of the working class, the Boeing negotiation demonstrate the difficulty presently organized workers already face in light of unprecedented mobility of capital within the world market.

Of course, this entire exercise has been highly speculative and in no way represents a prediction of what will emerge if basic income becomes law. However, everything I have written here — basic income, Keynesian economic policy, consumption taxes, and “right to work” laws — is already either law, set to become law or has been floated in the public discourse.

As an argument for how basic income could turn out to be one of the worst “reforms” in modern history, I can do no more than offer it to what’s left of the clear thinking radical opponents of capital.