For us the living, by Robert Heinlein

Science-fiction can indeed help…
http://www.basicincome.qut.edu.au/documents/HHB212_BK_HEINLEIN%2080468.pdf


…
Actually, Robert Heinlein was coming from a totally different economic perspective.
If you read the afterword, Spider Robinson makes mention that Heinlein was in the Social Credit movement in the United States. I read the book a few years ago, and I got really interested: What was this “social credit” stuff? So I went and searched. Turns out, it was a whole economic movement that’s simply been airbrushed out of history.
C. H. Douglas, the founder of the movement, spoke at halls (where tickets always sold out), made nationwide addresses over the radio in the U.S., Australia, and Britain, and in front of governments on financial inquiry committees. He held several public debates with professional economists (Douglas was trained as an engineer), and his works were studied widely during the 1920’s-1930’s. Yet practically no one has ever heard of the guy.
He came up with the idea that purchasing power was insufficient to distribute the goods of industry 17 years before Keynes wrote about it. He has an entirely different view of the economy. For instance, prices are not determined solely by supply and demand. The equilibrium of the two determines the /upper/ limit; but the lower limit is determined by cost plus a minimum profit. When a product must be sold below cost, the willing seller disappears.
He saw the economy, not as a series of interactions between the nebulous ideas of supply and demand, but in more concrete terms of prices against incomes. The main problem was to ensure that the flow of incomes over time were sufficient to liquidate the flow of prices over time. Prices fluctuate with income only secondarily; primarily, they fluctuated on the basis of the costs involved in their creation, according to the rules of industrial accountancy.
The crux of the argument is what he discovered while working as an engineer. He was called to the Royal Aircraft Factory at Farnsborough to sort out the accounting there; in doing this, he noticed that the total price value of the things the factory produced in a week exceeded the incomes paid out to workers by the factory in that week. He took up a study and found across over one hundred businesses, except for those headed for bankruptcy, the same scenario took place.
What it was, then, was that the consumer was being presented with prices which stemmed from costs generated in the past, and the income with which he had to pay them was derived from present production, which generated costs that became future prices. However, at any one moment, more costs were being generated – not prices, yet, but costs, always – than there were incomes distributed, so that prices kept rising, without incomes necessarily rising with them.
Keynes saw this, and proposed that incomes should be always kept rising with prices via investment. The very act of investment, however, creates an amount of costs at least equal to, if not greater than, the amount invested and paid out; so that, while incomes may rise now, costs, and eventually, prices, will rise by at least an equal if not greater amount. The welfare of the economy depends upon the constant expansion of production.
Douglas saw this, and thought that, instead of requiring people to work just to buy the things they have already made, to simply distribute sufficient purchasing power so that people can buy the things they’ve already made, and allow them to choose whether or not to engage in further production. This he proposed to do with the basic income and a price rebate. The price rebate was designed to be counter-inflationary; it was an agreement on the part of the retailer to lower all his prices by a certain standard percentage, and he would be reimbursed by a monetary authority for the trouble. One could have a profit-limiting agreement as part of the deal. The rebate would lower prices, and the income would raise incomes, so that the two would be equal. If incomes rose above prices, the rebate would be cancelled and a tax could be levied on all retail prices to soak up the extra money.
November 23, 2013 at 2:12 AM
J said…

Douglas also saw the flow of money differently. The Circular Flow has us imagining that all transactions are between businesses and consumers; his conception took into account money creation. Banks create all our money, and all this money comes with an attached debt. Thus, businesses must charge over time enough to bring back all the money they paid out in respect of a loan, and then some (interest). Money flows, thus, generally like this: Banks->businesses->workers/consumers->businesses->banks. When money is repaid on a bank loan, it is simply destroyed. There might be bills left over, but the credit that existed in the economy is now gone.
The biggest problem that Douglas saw from this was the question of the ownership of the community’s resources. Banks have the sole ability to initiate new production; a business might save up money to expand, but this requires that somewhere else a business is not able to sell all its goods. And by attaching a debt to every unit of money issued, they effectively lay a claim on all the things that are created in respect of that credit; so that what is properly the property of the community, held by individuals, is collectively under the threat of repossession by the banks, should they wish to recall the loans. Because of their position, banks wield tremendous power; they can decide which businesses should prosper, and which nations should prosper, and when, using the power of credit-issue, driven by the pursuit of profit, or perhaps for some, for the pursuit of power.
This monopoly of credit, in the context of a financial system that absolutely necessitates the constant, expanding growth of the economy, causes this position. Douglas thought that the State, or some democratically accountable organization, should also have the power to create credit in respect of the proposed basic income and price rebate. The mechanism of loan creation was fine in itself; although he thought that there should be no limit on credit creation, beyond the real productive capacity of the community- not a fractional reserve, as is ostensibly the case here.
So… yea. Perhaps you can tell I researched this. But that sort of thing was what Heinlein was coming from, not Keynesian economics.
I suppose one important aspect to note is that of leisure. Our way of living, our economy, does not, for just about everybody, offer the prospect of leisure as production becomes more automatic. But it ought to, and it ought to have been, according to this view. In 1930, the Technocracy group estimated that only 25% of the population’s effort was required for a very high standard of living for all; now, the Venus Project says, with a properly built-up capital using current technology, only 2% (yes, that’s two) would be required for what is a very high standard of living /now/. Individuals, collectively, should have been able to have the say in whether they should work more and have more, or work less and have more time, as production became automatic. But we haven’t, because we have been forced to keep working to keep a radically defective economic system going- to keep expanding production, whether we really wanted it, based on its merits, or not. It’s all just another job; a way to keep the bills paid; never mind whether what you’re doing is useful or not, whether it interests you or not. What Douglas saw is that, as production became more automatic, the wage would decrease in importance as the basic income would increase. And in that way, they would become economically free.November 23, 2013 at 2:12 AM