Greece, Basic Income and the European Left

An interesting article in The Telegraph by Ambrose Evans-Pritchard appears, as far as it goes, to be in basic agreement with the modern monetary theorists’ view on Greece and the Eurozone more generally. Hat tip to NeilT in a comment at billy blog.

I am guessing — The Telegraph being a conservative paper — that there may be an anti-Europe sentiment behind it. (?) English readers may be able to set me straight on that.

Modern monetary theory (MMT) is neither pro nor anti Europe. It simply suggests that ideally there should be either (i) currency sovereignty for individual nations or, if sticking with the common currency, (ii) a fiscal authority that performs transfers between nations as necessary, analogous to the US federal government’s relationship to the states.

However, in terms of democracy, (ii) is problematic unless and until Europeans embrace a kind of United States of Europe in which the national electorates indicate their preferences over macroeconomic policy. Currently, democracy is national while currency issuance is supranational, making any transfers between nations undemocratic. For now, (i) seems preferable, because it gives each nation sovereignty over its currency and more democratically determined fiscal policy. But (ii) could conceivably work in a democratic manner if Europeans have the political will to bring about.

Aside from what may be differences in motive on the common currency question, Evans-Pritchard’s argument closely resembles the MMT perspective on Greece. Here, I won’t elaborate on that argument, but do recommend reading the article. Instead, I will stray off topic a little.

There is one long-term political consideration on which my own perspective, one that is critical of capitalism, differs from the MMT and Evans-Pritchard perspectives, both of which seem concerned with preserving capitalism. Evans-Pritchard writes:

Everything we know from labour studies is that the early twenties are crucial years, shaping lifelong career paths and earnings ten to fifteen years beyond. The worst economic crime you cannot commit is to leave 58pc of youth grinding away their days in frustration in cafés, if they can afford the coffee.

This view is expressed repeatedly in MMT research as well, and there is little doubt that it is correct. The effects on the employment prospects of the victims of long-term unemployment are severe and the functioning of capitalism and the wage labor relation are likely to be undermined for some time to come if European governments persist with the current policy approach.

Even so, from a left perspective of moving beyond capitalism, there may be a silver lining in this cloud. With more time to reflect, many youth may begin to question the purpose of their lives and come to challenge the dominant ethos.

Needless to say, that does not mean that I have any sympathy at all for the current policy approach in Europe. It should be possible to transcend capitalism without inflicting needless hardship on anybody. There is absolutely no need for it. The point is simply that one objective effect of the policy approach may be to nudge society in the direction of greater individual freedom from wage labor and capitalist social relations.

In terms of bringing about a change in ethos, I have indicated in the past that I would like to see a move to a basic income guarantee, ideally in conjunction with a job guarantee (a JIG). The basic income seems to be gaining some ground in academia and policy circles, including support from several “Nobel Prize” winning economists. It is a policy that holds some attraction on both the right and left. For example, a recent issue of the academic journal Basic Income Studies is focused on possible right-libertarian philosophical foundations of such a policy.

In my view, there would be benefits for small, innovative, socially progressive enterprises, partly because people, with basic needs met, would be free to opt for more fulfilling employment, even if at lower pay, and also because individuals and voluntary associations of individuals would be better placed to take a risk on new ventures, especially if the basic income were coupled with expansion of the commons, such as free internet, all research output open access, etc.

A basic income would also hopefully undermine the wage labor relation over time by freeing individuals from their dependence on capital for employment opportunities. It would serve as an acknowledgment that much production is already done outside the wage labor relation, such as unpaid housework, child care, caring for the elderly, volunteer and charity work, freeware development, and so on. It would also be a recognition that capital and capitalist states, though sometimes, are often not the best determiner of what is socially productive and what individuals could best be doing with their own time (see, for example, here and here).

With these considerations in mind, increasingly I find myself wondering about the long-term motives of the left in Europe. Greek and French “socialists” are now pushing through austerity and it mainly seems to be the far right – a disturbing trend — beginning to mount an opposition. Maybe the left are smarter than I give them credit for, but I understand Evans-Pritchard’s point in the following passage:

The EIB [European Investment Bank] and Commission could intervene with all kinds of investment and trade support to cushion the blow. An orderly transition is not beyond the wit of man. It would restore the basic competitiveness of the Greek economy at a stroke.

We all know the reason why this is not being done. The ideologues running monetary union cannot bring themselves to contemplate any step back in the Project, just as they would not admit yesterday in the Commission’s economic report that they have gravely misjudged the effects of fiscal tightening (the fiscal multiplier) and have therefore miscrafted their entire austerity strategy.

We are not dealing with rational people. We are dealing with a religious order, and these monks are becoming an increasing danger to Europe’s societies and democracies.

Margaret Thatcher’s advisers were tagged Sado-Monetarists in the early 1980s but they never inflicted anything remotely close to this level of suffering. The strange silence of the Left on this is baffling. Sooner or later my Fabian friends will have [to] make up their minds whether they are for the workers, or for the “bankers ramp” — as old Socialists like Peter Shore used to describe monetary union. (emphasis added)

I would be curious to read people’s thoughts on this. Is there method in the European left’s madness or have they just gone mad?

If there is method to the madness, is it in service of the ruling class and for the preservation of capitalism, or to provide an impetus for long-term socially progressive change?


15 thoughts on “Greece, Basic Income and the European Left

  1. The European left (Fabian thinkers really, not those starving) are obsessed with what I call the ‘big hug club’.

    They desperately want to get agreement between all units, because they don’t seem to be able to stand the idea that there are stable systems where all the operational units are independent and working towards their own end.

    I think it boils down to the left’s obsession with centralised control and bureaucracy – there always seems to have to be rigid rules. They just can’t let go of that and embrace distributed lightly coupled cohesive units (aka ‘communities’).

    Right leaning thinkers of course have no problem with sets of people doing their own thing.

    The problem is that the world has changed and is favouring nimble highly cohesive units. States really need to get smaller.

  2. All we need now is a course on how to prepare a consolidated balance sheet for our beloved Chancellor and he can watch £340bn of his so-called ‘debt’ disappear in a puff of accounting logic.

    Use IFRS-10 Luke!

  3. Neil: States really need to get smaller.

    Yes, my main point being that we need to get rid of EU. Industrialization, mass production, standardization etc. are all things of the past. Today it is all about customization, individual needs, efficiency and commitment. The idea that we need big Europe to survive and compete in the globalized world is non-sense. Democracy is not as scalable as any other regime. Where China can still be operationally functional at 1bn population, Western democracies probably start going downhill at 10mn population. And EU has 500mn.

  4. Wow! Good work, Neil. (Thanks for providing the link, Hacky.)

    Interesting comments on centralization, too. It’s probably that libertarian / authoritarian dichotomy you’ve mentioned previously that explains why a policy such as basic income can attract some support from both left and right. It is appealing from a libertarian standpoint.

    Neil, Sergei, or others: Does decentralized decision-making necessarily require smaller states, or perhaps just a relative and progressive strengthening of local autonomy relative to centralized authority? I don’t have an answer in mind. Just interested in opinions on the matter.

  5. peterc, tough question!

    I do not like the motto of EU which is “united in diversity”. Though diversity is generally good, EU unfortunately thinks of a different type of diversity. And in all processes where the benefits of diversity would be felt the most, it is suppressed the most. I guess I do not need to go too far with examples here. And I think it is quite valid for other large countries.

    Does a large state really allow for true diversity? Or is it by nature of size just a declaration? Feels like the answer is NO:YES. But does a small state really allow for true diversity? Or is it by nature of size just a declaration? Feels like the answer is also NO:YES. Does it mean that there is an efficient middle ground? Feels like the answer is still NO since we, in no way, will be able to establish such mathematical concept.

    So I do not know. I would like to have much smaller states with lots of decentralized operational decision making but quite strong centralized strategic decision making. However I do not think that such contradictory combination is ever achievable without a super strong uniting bond defining the state. Which, if you take Europe as an example, simply does not exist. Current state borders in Europe are pretty much random and have very little to do with social bonds among the populace. I do not know much about other regions in the world but would think that it is also the case there. If one looks at the election results in the USA, then one could say that they also have a problem.

    And globalization only make the problem bigger. Because it means that people get progressively less connected to any state and yet there is no mechanism which could allow the states to adapt. It all feels like a state race to the bottom to me.

  6. The central planning approach is top down. The decentralised approach is bottom up. The process of building a society from the bottom up creates evolving complexity by linking smaller units to create more complex structures. The social capital builds by composition from small to large. The first step is to find simple things that work.

  7. “I would be curious to read people’s thoughts on this. Is there method in the European left’s madness or have they just gone mad?”
    What you call European left is not a true left. I think that’s why you can’t understand them. After the fall of the Soviet Union everything changed here. The left became centre-right and embraced neoliberal ideas. They just went mad, money and neoliberal propaganda won them. The true left was marginalized, 3-4% of the electorate. This left didn’t embrace neoliberal thoughts and was always against Maastricht Treaty. Now this left is becoming bigger in the countries that are suffering most (Syriza in Greece for example) but it takes time to rebuild what has been destroyed for years. At the moment the European left that went mad is very slowly realizing that and it is very slowing pushing the EMU to modify her structure, but it is a slow process and nobody knows if they will succeed. The left that didn’t go mad is slowly growing and has not a clear position on the euro, they want to have a referendum, asking the people to decide if they want to go on building a United Europe or to step back.

  8. Thanks for your insights, Jan. Very interesting and much appreciated. There is next to zero real left where I live. It is encouraging to read that a real left may be slowly reviving in Europe.

  9. “The left became centre-right and embraced neoliberal ideas. (…) The true left was marginalized, 3-4% of the electorate.”

    Maybe my experience is different from Jan’s, but I don’t think there is that much difference between the left-gone-mainstream, and the marginalized-left. At least not in Australia.

    In my personal experience, the “left” has gradually moved away from the people they are supposed to represent. This is pretty obvious (and everyone rightly talks about it) with the so-called “social-democracy” and related (what Wilson calls Fabians, the Yanks would call them liberals); it’s far less obvious with the “revolutionary” left, but it is no less real.

    This createas a vacuum. And it is the charlatans of the right who are willing to fill it in:

    “it mainly seems to be the far right – a disturbing trend — beginning to mount an opposition”.

  10. Hi Stan. Thanks for the interesting link. I’ll give it a read.

    I agree that the BIG is an effective “bottom up” method of getting cash to those likely to spend, and also support it as a matter of social justice.

    If you haven’t already, you might find it worthwhile to read any of Bill Mitchell’s posts pertaining to Greece in the Eurozone section at billy blog. Bill is critical of the BIG, advocating a job guarantee instead, but his analyses of Greek exit are excellent.

  11. “Modern monetary theory (MMT) is neither pro nor anti Europe. It simply suggests that ideally there should be either (i) currency sovereignty for individual nations or, if sticking with the common currency, (ii) a fiscal authority that performs transfers between nations as necessary, analogous to the U.S. federal government’s relationship to the states.”

    That’s because the MMT is based on debt money, but I’m not sure either of those things would be necessary if we were in a Basic Income money system (i.e. if money was created regularly at a constant rate and distributed directly to citizens in equal shares).

  12. Thanks for your thoughts, Changaco. I agree with your basic point about a different method of money creation being possible (and, in my opinion, desirable). MMT does in fact indicate that there is no need to issue public debt with currency issuance. It is done currently for political — not compelling operational — reasons. Some MMTers also stress that money could be created directly through government spending without bond issuance by simply allowing reserves to mount at whatever interest rate on reserves the government deemed appropriate (some MMTers advocate a zero interest rate policy on reserves, which I support).

    I agree that a basic income could be used to ensure the elimination of poverty without the need for fiscal transfers. There would, however, be involuntary unemployment in those countries in which deficit expenditure was insufficient to ensure all those who sought employment were able to find it. Whether this would be considered an important matter is a political question. For example, is the emphasis on elimination of poverty or elimination of involuntary unemployment? I am a fan of a basic income, personally, though preferably combined with a job guarantee. However, the MMTers favor a job guarantee and tend to be critical of a basic income. Their priorities are somewhat different to mine in that respect.

  13. @peterc “For example, is the emphasis on elimination of poverty or elimination of involuntary unemployment?”

    For me it’s clearly the first. Employment is not a goal in itself, unlike the right to a decent standard of living for everyone which is stated in the article 25 of the Universal Declaration of Human Rights.

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