April 15, 2003

Speaking of elections...

As I've pointed out before, it's election season in Belgium. There is a new sort of party here in Belgium. I've only recently become aware of them from their bumperstickers, which seem to be proliferating in college-town-liberal Leuven. They're called Vivant and they have an ad on the front page of Metro today - a free newspaper distributed in the train stations in both French and Dutch.

Imposer le travail, c'est tuer l'emploi
Si elles produisent chez nous, les entreprises paient plus d'impôts que si elles produisent en Chine. Par rapport au salaire net, les impôts sur le travail dans les entreprise belges sont de 150%; à Taiwan par example, c'est 20%. Les entreprises délocalisent non pas pour les bas salaires, mais à cause des impôts outranciers en Belgique. Vivant veut remplacer les impôts sur le travail par d'autres impôts. Pour faire revivre les entreprises, l'emploi et le bien-être.
Libérez-vous      Vivant
Since this is such a key text for this post, I'll break my usual rule of pretending that anyone who is literate can read French and translate:
Taxing work kills employment
If they operate in here in Belgium, businesses pay higher taxes than if they operate in China. As a proportion of net salary, taxes on labour in Belgium are 150%; in Taiwan, it's only 20%. Enterprises relocate not for lower salaries but because of outrageous taxes in Belgium. Vivant wants to replace taxes on labour with other kinds of taxes. Revive business, employment and the public welfare.
Free yourself      Vivant
Now, reading this, you might understand why my first response was, great, another bunch of low-tax-miracle, night-watchman-state, libertarian wankers.

Consider what thay are saying: businesses don't mind paying wages, they just mind paying taxes. Government needs to lower taxes on labour to bring back employment. The first part, is, even to the most charitable reading, bull. Business don't like parting with any of their money, but they don't generally have a preference about who they are actually paying. They relocate to where the ratio of labour productivity to total cost of labour is highest, regardless of who the checks for their labour costs are addressed to. The total cost of my labour in Silicon Valley was about 150% of my total cost to my employer in Belgium. More of it went to me directly and less to the government, but the actual cost to employers in my labour class is substantially lower in Belgium.

The second part is more frightening. They claim, at least by all appearances, that government has to create an internationally competitive labour environment in order to sustain standards of living. Calling it "international competitiveness" gives a polite and reasonable sounding name to something that ought to be chilling. Whenever someone says "international competitiveness" what you need to understand is "the government becoming a pimp for its labour force."

It is pimping, and there is no other way to understand it. The arguments for it are identical to the reasons why a desperate woman might continue to sell her body even if she finds it degrading. The idea is profoundly simple: There are these people called investors, and they have money. We can only have money if we have something they are willing to pay money for. Some countries might have natural resources to sell, but we don't. The only things we have to sell the investors are our bodies, our labour. The problem is that lots of countries are full of people, and we have to compete with them, so we have to sell our labour cheap.

It's a simple, easy to understand argument well within the intellectual grasp of anyone who has ever had to buy or sell things. And, it's complete nonsense.

Vivant has ignored the simple fact that total cost of labour is not a function of the tax rate, it is a function of both the tax rate and salaries. Furthermore, by reducing the tax on labour and raising taxes from other sources - sales taxes, user fees, property taxes, etc. - they are raising the cost of living. In order to keep the same standard of living, wages would have to rise to compensate, eliminating any gain the employer could make. In the end either workers earn less, or employers pay out more.

Second, they have ignored the simple fact that employers aren't trying to minimise labour costs per se. They are trying to maximise the ratio of labour productivity to labour costs. Raising productivity serves just as well as lowering labour costs from the employer's point of view. Unfortunatly, increasing productivity is more complicated. It may require a highly interventionist government able to build infrastructure. Productivity increases when people have fewer sick days, which implies government involvement in public health. Productivity increases with new technologies, which contrary to popular belief come overwhelmingly from publicly funded sources.

Lastly, the idea that surplus capital can only come from some international investor class outside the reach of government is a complete crock. In a developing country, there is some justification for this sort of thinking. They have little or no capital of their own, and they need to buy things from more developed countries in order to raise their own productivity and standards of living. The only way to get those things is to attract investment by some means.

The thing is, those investors have to live somewhere, and unsurprisingly most of them prefer to live in developed countries, where the water is clean, crime is low and the schools are good. A few super-rich manage to live in tax-free statelets like Aruba or Jersey, but actually not all that many. And even those people are only rich because they own things in other countries. The truth is that rich people are only able to escape the reach of government when governments let them get away.

This perspective has been carefully engineered by a few people who seem to believe that such a vision is the inevitable destiny of capitalism, and have found willing accomplices in every pro-business Republican or Liberal party and all the people who think that wealth is created by entrepreneurs and that labour is merely something to be bought and sold. This ideology - the state not as night watchman but as pimp - is one that I find alternately horrifying and pitiful

Then, I tracked down Vivant's website, and I was shocked. Vivant's election ads completely misrepresent what kind of party they are. Vivant is a member of the Basic Income European Network, which is neatly abbreviated as BIEN, the French word for "well." They are not only carefully linguistically correct, they are leftists of the social democratic to out-and-out socialist variety. You could have knocked me over with a feather.

From the BIEN website:

Founded in 1986, the Basic Income European Network (BIEN) aims to serve as a link between individuals and groups committed to, or interested in, basic income, i.e. an income unconditionally granted to all on an individual basis, without means test or work requirement, and to foster informed discussion on this topic throughout Europe. [...]

Common to all is the belief that some sort of economic right based upon citizenship - rather than upon one's relationship to the production process or one's family status - is called for as part of the just solution to social problems in advanced societies. Basic Income, conceived as a universal and unconditional, if modest, continuous stream of income granted throughout life to all members of a political community is just the simplest and most striking element in an expanding set of social policy proposals inspired by this belief and currently debated, if not already implemented.


The idea of a basic income has a long and complicated history, some of which is summarised on the BIEN webpage. The current movement has only come to my attention through the works of Philippe van Parijs, an economist at the Universit? Catholique de Louvain (the francophone sister university of my alma mater.)

Canadians may have some familiarity with the basic concept. In Canada, it's called family allowance, and it goes to every household with dependent children. It is not a means-tested benefit, but it's also not very much money. No matter how much money you make, you get an amount that depends only on the number of children you have. Van Parijs and BIEN are advocating just giving everyone a regular check for some fixed amount, whether they need it or not.

Vivant has a very slick line in many ways. If you can read French, Dutch or German, I recommend taking a look at their manifesto. The French version - which I presume is the most likely of those languages for my readers to have - is at http://www.vivant.org:8080/Vivant/fr2/programme/manifeste.pdf, but hunting around at http://www.vivant.org will get you the other versions. For the merely anglo, there is a less compelling discussion of basic income on the BIEN homepage.

They have certainly figured out how to present their ideas to Europhilic leftish academic types like me. Starting with the first line of their manifesto - L'Europe est hant?e; hant?e par le revenu de base - recalling the first line of the Communist Manifesto, and their claim - with supporting text - that a basic income is the fulfillment of the values of the French Revolution and the Universal Declaration of Human Rights, they know how to pick their historical analogies and how to attach otherwise unrelated issues - education reform, electoral reform, international financial reform, environmental issues - to the centrepiece of their programme: the universal basic income.

Frankly, I suspect something like this is the future of social democracy and ought to be taken seriously. People in social democracies live pretty well and it doesn't take a very long downturn to make social safety nets seem worth the price. This cult of the entrepreneur and the minimal state is a hothouse flower, only able to grow when people feel secure about their incomes and futures. It is important to start talking about reclaiming the wasted productivity of Europe's armies of unemployed. It's important to talk about getting people off of an economic treadmill that seems to press people to work more and harder for ever more remote goals.

But, alas, I don't find Vivant's programme to be a very encouraging development in this direction. For each basic principle they've got right, there is some fundamental issue that they have wrong. For each time I think they may be on to something, they shoot out on a tangent that makes me deeply uncomfortable. The first is their apparent acceptance of the "international competitiveness" model of growth. They are simply ignoring what even most Americans have learned to accept: it doesn't matter if Belgium cut its payroll and income taxes to zero, the factories that once dominated Belgian employment are never, ever coming back. Belgians neither want, nor should they want, to be competitive in terms of total cost of labour with the people of Indonesia, Vietnam or India. The people who live in those countries would trade their low tax incomes for Belgian after-tax incomes in a second.

Their focus on labour taxes as a barrier to employment has lead them into advocating a shift of taxation from wages to consumption. This reflects another rather strange set of values. They wish to encourage people to save money by taxing spending, claiming that it is inherently unjust to tax people for working and contributing to society. However, they are not advocating any sort of progressive tax on consumption. They just want to raise the VAT. This shift in the tax burden has the inevitable effect of penalising people who earn less money in favour of those whose earnings exceed their expenses. For all the ink they waste talking about how wrong it is to tax labour for its productivity, the solution they offer is actually worse in terms of desireable social outcomes.

The people at Vivant appear to think that the main function of taxes is to discourage behaviour, but that is only a side effect. The main function of taxes is to enable the government to lay claim to a portion of a nation's production. A nation's production is produced by its workers. Ergo, labour is taxed not to discourage working, it is taxed because in the end there is nothing else that can be taxed.

This whole business makes me think of the Canadian Social Credit Party - people advocating massive social reforms by carefully reallocating current resources and claiming that the numbers all add up. They have given no thought to consequences that extend beyond budget statistics. Massive social reform has to meet equally massive social needs. Otherwise, piecemeal reform is not only more likely to win elections, it's more likely to succeed. Radical programmes require a huge commitment to making them work no matter what and they have to extend beyond being mere election promises.

That is what I am not seeing here, and that is why the basic income is not "haunting Europe." What I really fear is that people like this would get elected - most likely in a coalition government of some kind - and manage to promote all the fundamentally unsound parts of their programme - the replacement of income taxes with sales taxes, the assertion of the government's role pimping labour out - while failing to pass any sort of radical income reform that might have actually stood a chance of helping someone.

You see, I support the idea of a universal wage and an extensive social insurance system. I support these things because I believe the freedom to develop yourself is the only real freedom, and that work takes away from that freedom whenever it is not what I want to do. Work is necessary, and often work that you don't enjoy is necessary. Right now, I am procrastinating about writing some code that I hate on a project that I consider both below my abilities and not worth doing. I want the freedom to balance the needs that work can meet with my desire to do the things that develop myself. That is what social democracy can, in some measure, offer. I want the freedom to quit my job, go back to school and raise a baby. Vivant wants to give me €500 a month to do those things, trusting me to judge whether or not I am more productive doing uncompensated work.

The principles of basic income are really far less complicated than Vivant makes them out to be. The money they want to give everyone isn't that much. Contrary to the old Reaganomics thinking I grew up with, it takes a lot more money than that to extinguish the rewards of work, while that much money can take a lot of uncertainty out of life. And, people who don't have jobs are often highly productive people. Back in the days when there were stay-at-home moms, those moms often worked hard. In my old neighbourhood in New Jersey, the stay-at-home-moms effectively ran the municipal government through various volunteer activities.

In order for this to work, people have to be convinced that income redistribution isn't robbing hard working people to pay off lazy bums. Even if you can show that a universal income costs less than means-tested benefits, some people will seen universal wage guarantees as moral hazards if nothing else.

Revising the tax code, the Tobin plan, the environment, all the other things Vivant stands for - these things have nothing to do with basic income and even if they are worth supporting shouldn't be mixed up in what is really a simple concept. The existing notion of a progressive tax code is more than good enough to support a basic wage. As Vivant points out, Belgium already collects and redistributes enough money to make a basic wage possible without changing budget priorities in general. There are good reasons to reduce payroll taxes in Belgium in favour of a more progressive tax code, not the least reason is because unemployment is very low in the Netherlands in part because low payroll taxes encourage part-time and temporary work, but they are good reasons quite apart from Vivant's main legislative goals.

Throwing all these bits together does not make a coherent platform. The tax changes they are advocating will certainly not benefit most workers even if it does create jobs. Advocating following the Dutch example of reducing or eliminating many payroll taxes and accepting that people will have temporary and part-time work instead of solid jobs would make a far more credible and more attainable programme. That is the sort of platform from which a basic wage could be advanced. People who work - even if they are just working sometimes - elicit far more voter sympathy.

If Vivant feels the need to buy into some doctrine of right-wing economics in order to be credible leftists, they might consider buying into the idea that labour productivity and full employment are linked to labour flexibility. There is at least some truth to that idea, and if people's paid wages are going to be unstable (which is what "labour flexibility" really means: you have to be flexible about whether or not you get paid) then it behooves the state to offer them some sort of stablising income guarantee. There is a role that the basic wage could help fill.

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Posted 2003/04/15 15:29 (Tue) | TrackBack