Tom Streithorst in Evonomics:
The Basic Income Guarantee (BIG) is back in the news. The Finns are considering implementing it, as are the Swiss, replacing all means tested benefits with a simple grant to every citizen, giving everyone enough money to survive. Unlike most current benefits programmes, it is not contingent on being worthy or deserving or even poor. Everybody gets it, you, me, Rupert Murdoch, the homeless man sleeping under a bridge. Last seriously proposed by Richard Nixon in 1969, more and more economists and bloggers aresuggesting that the Basic Income Guarantee may ultimately be the salvation of capitalism. The BIG will eliminate poverty, lessen inequality, and vastly improve the lives of the most vulnerable among us. But that is not why we need it. It may seem impractical, even utopian: but I am convinced the BIG will be instituted within the next few decades because it solves modern capitalism’s most fundamental problem, lack of demand.
Technology and capitalism have largely solved the problem of supply. We are able to make more stuff, with fewer inputs of labour and capital, than ever before. We have the knowhow, we have the resources, we have the trained labour, we have the money. The only thing businesses lack is customers. Making stuff has become easy. It is selling it that keeps entrepreneurs (and central bankers) awake at night. Stagnant wages tell us that the supply of labour exceeds demand. Microscopic interest rates tell us that we have more capital than we need. Since the Great Depression most economists have recognised that demand is the Achilles heel of the modern economy.