Why the market economy will need a parallel social economy to subsist

Credit: Rodney Minter-Brown

We have all heard about the promises of Universal Basic Income (UBI), but if predictions hold true and automation will inevitably lead to mass unemployment, UBI will not solve the problem of keeping people active, giving them a sense of purpose. Automation will likely both create and destroy jobs, but will the skills of the newly unemployed match the new openings? Sure, some of those losing their jobs to automation will learn to code, start a company or even follow their childhood dreams, but that is only possible for a small part of the population. What will happen to the people with no special talent, luck or motivation? Accepting mass unemployment as fate cannot be a viable strategy for any government. Furthermore, a high enough UBI for people to live on with could potentially be too expensive to get public support or to be financially feasible. While UBI’s downsides include the acceptance of involuntary unemployment, a Job Guarantee (JG), which is a system where the state secures work for all those who need it, makes involuntary unemployment disappear. This solution however still raises a number of challenges, namely not providing for the ones who are unable to accept the guaranteed job. As a consequence, talented people could be forced into the guaranteed public jobs, stopping them from innovating and taking risks because the JG does not provide to people being active in other ways. How should the future’s societies allocate for those who will fall into structural unemployment?

To tackle these problems we need to reconcile UBI and JG supporters, because these two reforms should be combined into one, keeping the unconditional side of UBI as a first level of safety net, and adding guaranteed public work as an optional second one for those who need it. A financially realistic level of UBI combined with the salary from the guaranteed public work would ideally be enough for people to live on decently. Moreover, in this two-level-safety net, the work done through the second layer would create social value for local communities and thus be more achievable politically than some of its competing ambitious welfare reforms. The guaranteed work would consist of socially valuable work, and it would be optional, leaving the freedom for people to start a company or make a living in any other way. The salary from the guaranteed work would logically only be paid to those taking part in the program. The work would be administered locally, depending on localized needs. The options are unlimited, going from maintaining public infrastructure to potentially taking care of public marijuana farming and retail in countries that allow it. The latter would create revenue, but all the work given as guarantee does not need to, the most important being to create social value for the communities while ending involuntary unemployment.

Authors like Jeff Spross and academics such as Felix FitzRoy have written about combining UBI and a JG, but Robert H. Frank is the man behind the idea. In 2014, in an essay called Let’s Try Basic Income and Public Work, he proposed to combine UBI and a JG, rendering him a pioneer in the field. Nonetheless, we need to go further than all those people did, as they did not even give this system a name. To begin with, let’s baptize this structure the Alternative Social Guarantee (ASG). Why this name? This system creates a parallel social economy next to the market economy, giving people an alternative to working at jobs such as the ones that exist today. This system is social because it provides a combination of UBI and guaranteed paid public work, creating two layers of safety net, keeping people active, providing them a sense of purpose, and lifting them from poverty.

Another nice point about the ASG is that it does not require to get rid of the market economy to implement it, but rather to use it in the financing of this parallel social economy. There is thus no need for a revolution to seize the means of production. To the benefit of those running the market economy, there is even no need to fight automation or to try to slow it down. The ASG would allow for the exploitation of capitalism and automation to their full capacity. The gains in productivity could be used to finance the parallel society to the benefit of those who fall out of the system. The ASG does not only help those profiting from guaranteed work, but it gives UBI to everyone, and it also sets a standard minimum wage to the market economy side of society, as no one would work on the private sector for lower wages than those the guaranteed public work would offer.

Automation and future potential mass unemployment aside, such a system would make life easier for policy-makers, creating automatic Keynesian counter-cyclical policy. With the ASG, the number of people benefitting from the guaranteed work, and the net receivers of UBI would both increase during bad economic times, and decrease during better ones. Thus, the cost of the system and the state’s intervention level on the economy would variate without any intervention from politicians required, stabilizing the economy.

The ASG could be financed the same way as current welfare systems, through progressive taxation. However, alternatives exist. Yanis Varoufakis had the idea of providing the state with a small share of companies going public, without hurting small firms and without having to change current tax systems. Using common wealth as the Alaska Permanent Fund does, or Private Equity Swaps as Jason Potts advocates could be other interesting options. Several of those could be combined, and the ASG could as well partially be financed by the revenues it brings through the work done. The system would potentially create savings for the state, as low-skilled public workers could possibly be replaced by ASG program beneficiaries, and as the UBI part of the ASG would probably enable cuts in the public administration, replacing many conditional welfare programs and simplifying the whole system through its unconditionality.

The ASG might divide society in two, but it would leave people the freedom to move from one side to the other. These two societies would complement each other, and share the benefits created by both sides of such a system. The ASG would give a viable alternative to being at home for the future victims of technological unemployment, protecting those who run the market economy from the revolts that could result from mass unemployment. Such a system has potential to stop the poor from getting poorer, and it ambitions to take the best out of different ideologies, pushing for automation and increasing productivity on one side, while guaranteeing a decent life and giving a purpose to everyone on the other. A country implementing the ASG would genuinely be a 21st-century welfare state, one that is ready to face potential crises while pushing for innovation and freedom.

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