If Universal Basic Income doesn’t happen, how else are we going to save the economy from austerity?
Updated: Sep 9, 2019
Ten years ago, on 15 September 2008, Lehman Brothers filed for bankruptcy in the US. At the time, it was the fourth largest investment bank in the US, having successfully grown exponentially since its foundation in 1850, so you’d think its directors would have acquired some expertise in what it was they were doing. Unfortunately, they found themselves too reliant on financial instruments that essentially consisted of parcels of mortgages that wouldn’t be paid off. When too many debtors defaulted, they had something of a cashflow problem. The benefit of hindsight may be considerable – but, crumbs, what a mess.
After that, governments bailed out the banks that were teetering in the fallout, opted not to use the shares they acquired to influence the management of those institutions, and decided against major regulatory reform to stop the crisis happening again. And they resolved to cut public services to pay for it. Their faith in the ability of the bankers to get the economy going again in no time was undimmed, and their dogmatic dislike of government ‘interference’ was relentless.
Ten years later in 2018, wages have not reached the levels they were at in 2008, austerity continues without end and there is zero sign of anyone in power thinking that maybe something needs to change. The political consensus has been so solid among the powerful, that anyone who thinks differently has been labelled a crank or a radical or dangerous in some way.
But despite wages flatlining, the world expects growth, companies maintain a strong entitlement to their profits, and voracious appetites to consume must be fed. But there’s only one way to maintain the status quo without improving living standards – consumer debt. This is despite the fact that it was consumers plunging themselves deeper into debt and banks allowing them to do so which started the crisis in the first place. And meanwhile, jobs become redundant to technological solutions, and corporations push for workers who are available for work only at their convenience. Sooner or later, there won’t be anyone left with any money to buy anything.
Of course, the funny thing is that whilst median wages have barely moved, income in the top percentile is booming. So, it’s not as simple as the world of austerity making much less money, it’s just that the crisis has resulted in a gradual shift of where the money is ending up. And you don’t even have to believe in socialist re-distribution to see how this could be changed.
On 5 January 1914, Henry Ford doubled the daily wage of his workers from $2.38 to $5 a day. He did this because he realised that his business needed consumers to sustain it. And despite his best efforts to reduce the costs of production, his workers just didn’t have enough money to buy cars. It seems that 100 years ago, business leaders actually possessed the foresight and planning capabilities that they are currently remunerated for. Henry Ford was vilified for causing wage inflation and undermining the entire US economy in a similar way in which radical thinkers are attacked in the media today. But actually, his deeds provided a much-needed injection of cash for his consumers. And in two years, Ford’s profits doubled.
Is there a CEO brave enough to do something similar today? We live in times where profit is king and the workforce is as disposable as possible, employees merely overheads to be reduced. Even pensions and other terms and conditions have been decimated. Wages won’t provide liquidity to the economy in this environment. Employers won’t voluntarily depart from their pursuit of the bottom line. Corporations would rather start charitable funds than pay higher wages. We’re left with Universal Basic Income to provide the necessary purchasing power. Isn’t it time we gave it a try?
David R Thompson