Basic Income Isn’t a Handout — It’s a Dividend

It’s also part of a pro-enterprise risk management system.

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In a sense, the nation state you live in is a special sort of giant collective enterprise — and you’re one of the joint owners of this enterprise. But let’s make this ownership arrangement a little more formal and make you, along with all other resident citizens, an official shareholder. It would be a similar situation to if you owned shares in a major corporation - but, in this case, all shareholders own exactly the same number of shares each. And the shares can’t be bought or sold.

And suppose this ‘national corporation’ pays regular dividends — not once a year, but once a week. It’s always the same amount and it’s just about sufficient to pay for all your essentials — such as food and shelter.

What have you got? You’ve got a Basic Income system.

In essence, a Basic Income is a Citizen’s Dividend. It’s not a handout. It’s what you should be entitled to, as a joint owner in your national enterprise.

And we can take this analogy even further, because there’s something else — something very important — that Basic Income and our system of share ownership have in common: They’re both ways of sharing risks, so that each individual’s exposure to risk is limited to what they can afford.

We’re used to the concept of company shares. We’re used to our economies being dominated by large corporations, each owned by many thousands of individual shareholders. Many millions of us own shares ourselves — either directly or through our pension funds. But we don’t often stop to think about what the fundamental point of this share ownership system is supposed to be.

Shares, in essence, are a risk management system. More than that, they’re about actually encouraging risk-taking, by enabling people to share risks amongst large numbers of fellow investors.

Shareholders are further protected by a legal framework that grants them strictly limited liability for the debts of their business. A business may be a risky one. And if things go badly, it may make a loss and end up unable to pay its debts. But each individual shareholder has only limited exposure to such risks.

Shareholders may lose what they paid for their shares in the first place — but no more. We don’t pursue them for any further losses their businesses may have incurred. We don’t force them to sell their houses and go without food in order to pay back the business’s creditors.

We grant this limited liability because we recognize that risk-taking is at the heart of a dynamic, innovative economy.

And we can all benefit from business owners being able to take risks. Launching new products and services involves risk. Innovation involves risk. Seeking efficiency improvements involves risk. Investing in new technology involves risk. And if business owners don’t feel it’s worthwhile to take these risks, our entire society would be risking economic stagnation and decline.

It is true that by allowing limited liability for shareholders, we are allowing business owners some degree of protection from the full downside risks the market might otherwise impose upon them, if things go wrong with their business.

And yet no-one suggests that because we allow risks to be limited and shared in this way, we must therefore have all become communists. Shares and limited liability aren’t regarded as instruments of communism. They’re key features of all modern, market-based economies.

But wait! If shareholders are afforded such protections, what about the rest of us?

What about small business owners, operating as sole traders? What about the workers who lose their jobs through being made redundant or because they fall ill? What about people who have to give up work because they have to care for a family member? Where’s their version of risk sharing? Where’s their version of limited liability?

As a consumer you run risks, too — especially when you make expensive purchases. You might buy a house with a hefty mortgage, only to find it drops dramatically in value during a recession — and you find yourself in negative equity, with a mortgage that far exceeds the value of your house. Or perhaps you buy a used car, only for it to break down and leave you with an enormous repair bill.

Whether you’re self-employed, employed or even just acting as a consumer, there’s a risk to almost anything you do in the marketplace. And Basic Income, like share ownership, is a system for limiting that risk.

For all sorts of reasons, things can go wrong for you. They can go badly wrong. But with a Basic Income system, your risk is limited, because no matter what you lose, you’ll always be able to afford essentials, such as food and shelter.

Basic Income, far from being anti-market, actually operates along the same principles as share ownership. It’s a system for limiting people’s exposure to risk.

Unlike share ownership, however, Basic Income is a system that works for everybody. It works for small traders. It works for employees and consumers. It works for parents and for carers.

Basic Income enables people to take risks, secure in the knowledge that they’ll always have a fallback position, should things go wrong. It means they can risk anything up to, but not including, the money they need for essentials.

Basic Income, therefore, is a logical extension of shareholder economics. It enables people to be more dynamic, innovative and enterprising in their careers and in the way they run their lives. They can pursue their dreams — by making bold career choices or starting new businesses, or perhaps by making innovative lifestyle choices.

Some of these bold choices and innovations will succeed and some will ‘fail.’ But overall, as a society, we gain.

Why? Because dynamic and enterprising individuals make for a dynamic and enterprising economy and a more innovative, more forward-looking society — and perhaps a much happier one, too!