A small Flemish political party, called Vivant, member of the Basic Income European network, has a socio-economic program that is a startling mix of socialism and capitalism. Interestingly, the creator of this party is a very succcesful businessman.

The basic idea is that each and every person in society receives a governmentally issued basic income. The figure they propose -but which is open to adjustement- is 500€ (about 635$ today). This right is to be understood as unalienable. No matter what the person does or occupies herself with, this allowance is received. So far the socialist part.

The first effect of this right is that a whole range of governmental systems becomes obsolete (unemployment benefit administration and control, the vast bureaucracy of social security becomes redundant, etc...), thus freeing the funds required to keep this sytem in business.

Of course this basic income can be augmented by the wages from a job. This wage is then exempt from income tax (as is the basic income) and free to 'market forces'. There are also no social security payments on the part of the employer, thus rendering employment more flexible than it currently is.

The funding for the basic income is to come from an increased consumption tax (VAT in Europe), which also puts the responsability for the destruction of the ecosystems where it belongs, viz. with the large consumers.

Another side-effect, Vivant claims, is a (IMO slight) decrease in criminality as the basic income garantuees sustainability and reduces poverty.

There's more to the party : http://www.vivant.org/site/fileadmin.../Manifesto.pdf
but this is its main idea.
Does it sound viable ?

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"Say not, 'When I have free time I shall study'; for you may perhaps never have any free time"
Hillel the Elder

This seems vaguely similar to the infamous 'social credit' game that was popularly born on the Great Plains of North America back in the dirty 30's (which failed in sovereign bankruptcy in every case of known application).

The flaw in the theory is that the solution doesn't address the actual problem. The problem is not a specific shortage of money in people's hands. If it was, then giving away money might address the shortage. But the problem is lack of productive enterprises to profitably engage all of the available labour and giving away money doesn't solve or even address that problem. As Marx quite correctly noted, man is a productive animal suggesting that is the lack of a meaningful productive capacity that hinders human happiness. Giving someone money doesn't make them productive. Only productive people are happy people. Ergo, giving away money never solves the problem of human misery.

A completely secondary argument is to take a look at the numbers here...

Using Canada for an example, $635 per month, per person (30 million population) amounts to 228.6 trillion dollars per year just for Canada. Canada's GDP in 2004 was just over 1 trillion dollars. Even if we eliminate sending cheques to minors, the sums are staggering and seemingly impossible.

Sure, but the incentive to work remains as strong as ever. 500€ isn't enough to have a living standard on the current level of most people (don't forget that the increased tax on consumption elevates the price of commodities). Just about everybody would still seek employment. And the idea is that this would we more readily available in the absence of heavy taxation of labour. And equally, companies would be less hesitant to change the work force (read: it would be easier to fire people, and it would be easier on the fired people too). It's a given that even lottery winners mostly choose to continue to work, so this handout of 500€ wouldn't change much regarding the incentive, IMO.
It's probably relevant to indicate that this is an alternative to the European system, with its high taxation on labour and stringent laws re employment.

PS I'm not advocating this scheme, I merely want to explore it.

That would be 228.6 billion dollars, unless I'm very mistaken. I.e. 20% of the GDP and as such within the realms of possibility. The founder of the party, Roland Duchatelet, owns and manages some really succesful businesses and I would have been very surprised if he made this kind of mistake. I made the exercise for Belgium and it worked. I doubt Canada is a thousand times less wealthy than Belgium. (unless my name were EuroAnarchist )

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"Say not, 'When I have free time I shall study'; for you may perhaps never have any free time"
Hillel the Elder

The level of taxation necessary to provide the funds would be astronomical. High taxes destroy initiative and crush economic growth. Any economic system that discourages wealth creation must fail.

This manifesto was created by a businessman?

I read through the document, and it has almost nothing to do with business. Most of it refers to political correctness and the setting up of a mammoth left-wing beuracracy. Where is all the money necessary to create this vast system going to come from?

However I know that this thread is not for capitalists.....

As I understand it (I haven't read the whole piece yet), this system bases its tax revenue on comsumption taxes, not income taxes. Thus there's no dis-incentive to making money; just to spending it.

Still thinking about it, but I'm (at least initially) wary of any proposal based on the idea that government handouts ("Basic Income" or whatever) is an "Individual", "Universal", and "Unconditional Right". I don't think the "world owes me a living" mentality is one that begets pratical economic theory. But I still have more to read...

If spending is discouraged, the result is the same. Consumer spending would have to be maintained at an extremely high level all the time. What happens when the inevitable downturn happens (even assuming this was even tried...)?

This manifesto is an example of a fundamentally false understanding of the way economic forces work. It is not possible to avoid the realities of the market. It's far from perfect, but at least it works by creating wealth. The combination of idealism (a misplaced religious impulse) with the desire to manipulate the economy - even for the most high-minded reasons - always produces disaster. The world is only now beginning to recover from the various attempts to implement Marxism.

Not more so than the current 40-50% taxation on wages we have around here. It's more a re-alignment than an increase, income tax is totally annulled, mind.

Yes, the group of his companies is the leader in technology in Belgium (mark the scale though )
This is one of his companies: http://www.melexis.be/

I'm surprised you say this. The replacement of the hundreds of currently existing welfare systems and methods by a single, unequivocal one is exactly meant to put a stop to the current bureaucracy (point b on page 24). Where do you see the need for a 'mammoth left-wing bureaucracy' ?

Quite the contrary, it's precisely from people like you I'd like an analysis from.

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"Say not, 'When I have free time I shall study'; for you may perhaps never have any free time"
Hillel the Elder

Any nation - or group of nations - that adapts a radical economic proopsal such as this would immediately put itself outside the global economy. This is the inevitable result of market forces.

It would not involve decision making on the part of politicians. It would be the result of the decisions of tens of millions of investors, traders, brokers and companies, large and small, all over the world. There would be a spectacular flight of capital. The reason is because something like the Vivant proposal would be perceived as radically anti-business. There is no place for investment in a planned economy of that nature, and little room for growth. The currency would plummet, and inflation would take off.

Eventually there would be stability, but at a much lower level of economic development. It isn't possible now to exist outside the world global system without literally paying a very large price. Of course, until 1989, a large part of the world operated outside the system - and remained outside the prosperity of the west. But now, there are only a few holdouts like Cuba and North Korea and some African nations.

It seems to me that the authors are making reference to the EU as their chosen place. If that were the case, within days of the announcement investors all over the world would pull their money out of the wealthiest area in the world. The euro would collapse. This inter-global aspect of the proposal is not addressed at all.

The proposal is radical, sure, but it's not extreme-left-radical. Sweden (to give just one example) currently has a far more socialistic system and Sweden is a well respected member of the world economy with no lack of investors.

This little party has joined up in an alliance with the VLD, the most rightwing, capitalistic party in Flanders (except for the fascists of the Vlaams Belang, but let's forget about them here). There must be some advantage from their perspective. I'm just asking questions here, not advocating this.

I think you might be fixating on the basic income (which of course is a socialist proposition) but seriously underestimate the advantages to capitalists. It's not unusual -now- for companies to pay up to 40% of taxes (social security) above the wages of the employee and the combined contributions of employer and employee run up to 70%. This would be reduced to zero. Surely that is a capitalistic incentive ?

Let's take Belgium as an example : the GDP is about 325 billion $. The current expenditures on social security are about 53.4 billion € = 67.6 billion $. The expenditure for the proposed basic income would be 10M people receiving 500€ a month = 60 billion € or 76 billion $. This is say 10 billion $ more than present, but the income tax is annuled, i.e. 49 billion € or 62 billion $, which leaves the nice sum of 50 billion $ to increase the consumption tax to a degree. That one is currently on 28.3 b€ or 36 b$. So there's a margin of 170% to play with!

Investors would look at these numbers before they would base their decisions on a negative preception, I think. Isn't economics modeled on rational behaviour of the participants?

Figures are rough and come from:
http://www.begroting.be/portal/page?..._schema=PORTAL
http://www.begroting.be/portal/page?..._schema=PORTAL
Alas, in Dutch or French only.

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"Say not, 'When I have free time I shall study'; for you may perhaps never have any free time"
Hillel the Elder

I'm sorry. The math here is confusing me. Let me see if I have this right.

Current expenditures on social security are 53.4 billion €.
The basic income that would replace this would cost 60 billion €
So the government is down 6.6 billion € thus far.
However, income tax is being eliminated. I assume the 49 billion € figure represents that. But that's also a loss for the government.
So total the government is down 49 + 6.6 = 55.6 billion € (something like 70 billion $).

If current consumption tax pulls in 28.3 billion €, then that would have be increased by 55.6 - 28.3 = 27.3 billion €. Which is about a 100% rise which is enormous.

Is my math wrong? Somehow I came out with different numbers.

Here's another thought that came to me while crunching numbers.

How does the proposed "basic income" compare to the existing social security (or equivilent) benefits package which it is to replace?

The numbers you listed showed an increase in the cost of basic income (to the government) as being only about a 15% over social security. But, at least here in the US, social security is only paying a fraction of population. If you took that money (or even 115% of that money) and tried to distribute it among everyone in the country the sum per person would be much, much smaller than the social security check was before. And I think you mentioned before that it wasn't meant to be enough so that people could just stop working.

But what happens to these people at the bottem rung of the economic ladder when their income from the government drops significantly and at the same time the tax on consumables shoots up? The dropping of the income tax will not be a major factor for them, because most countries have severely limited or almost no taxes on the lower-class already.

I imagine this scheme will be accused of being some socialist-bleeding-heart-handout program. But by my reading, the people on the bottom are the ones who are most likely to get burned by it. They're the ones who spend the majority of their income on consumables and they're the ones who can't afford to lose social security.

As a footnote, WoI, I understand you aren't advocating the plan so my criticism isn't directed at you. And I'm still too apathetic to examine the entire proposal in depth so I'm mostly just picking up on stuff from other posts.

It would appear that I slipped a decimal place in my quick mental calculations.

Luckily, it was only my secondary argument. My principal argument still stands. Giving away money is non-productive and thus counter-productive in principle.

I agree that the system would be more stream-lined and less wasteful than the present system, but I still oppose it on theoretical grounds as noted above. There is also the issue of disengagement here which is anti-democratic and that doesn't bode well for the results of applying the system.

As for the number-crunching exercises... the health-expenditure must be maintained (and paid for) separate from the social spending that is 'eliminated' by the basic income.

Dilletante makes a good point also about the regressive character of consumption taxes hitting the poorest the hardest (proportionally).

Sorry I was confusfing and yes, you get it right.

Correct.

It wouldn't HAVE to be entirely compensated. That's the whole point of the party that proposes this system. It's meant to reduce the general level of taxation and bureaucracy, not augment it, as Tim seems to fear. An unalienable right to a monthly susbsistance allowance hardly needs any bureaucracy at all, unlike the Kafkaiesque situation with the myriad of welfare systems there currently is.
I see it as a capitalist/socialist compromise, a win-win situation to use the economics jargon. Simultaneously reducing the depth to which the State currently has its paws in the till and avoiding the poverty traps where people end up with zero income.

Same numbers, different perspective.

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"Say not, 'When I have free time I shall study'; for you may perhaps never have any free time"
Hillel the Elder

This is not a new idea, just a new name for it. It is called the "negative income tax" in its most serious iteration in this country.

While I steadfastly oppose government taking the hard earned money from people merely to give it to another, IF we are going to do it, this would be the most sensible and efficient way to do it.

That said, there would have to be incredibly strong safeguards against the majority voting themselves every increasing "entitlement" on the backs of the minority.

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"It's a good feeling to shoot a bad guy. Something you democrats would never understand. Americans are homesteaders, we want a safe home, keep the money we make, and shoot bad guys!"

----Denny Crane