the why and how of a ubi replacement for current targeted welfare systems

the why.

Times are changing, many revolutions are in progress, automation, increasing energy use, A.I., virtualization, communications technology, scaling, mtbf etc., all favour capital over labour. The consequent falling labour share of GNP (and the large disparity in distribution of said labour share of GNP) and concentration of capital ownership demand a rethink of resource distribution. The old labour based resource allocation system is becoming untenable. Increasingly desperate attempts to create employment by monetizing everything up to including the air we breathe is taking people to a place they don’t want to go. If we wish to retain the slightest skerrick of human dignity a rethink is in order.

the how

In contrast to the current budget-centric system, this scheme is pro people, it recognizes the right of every individual to live their lives as they see fit or as they are able. And as it is primarily a relationship between the individual and the financial system it largely takes personal financial assistance out of the hands of the state thus reducing everyone’s reliance on the state assistance and its obsession with controlling conditionality and the interference in personal affairs that it inevitably involves. It may also contribute to improving mental health, a much needed development in an increasingly alienated population.

The proposed system aims to be non utopian, it still rewards effort but provides a modern birthright to all.

This alternative model is an extension of, not a replacement for, the current financial system of credit/money creation. It has the potential to not only drastically reduce opportunities for state interference in people’s lives but also substantially reduce taxes. It aims to remove as much conditionality and subsidy/patronage activity as possible, leaving only perhaps age and residency requirements to enable access to a basic income.

The idea is that the reserve bank or its agents buy an annually determined amount of low/zero interest long term bonds from individuals, the purchases being made on a timescale that suited the bond issuer’s circumstances, e.g. fortnightly or annually. The bonds would be progressively repaid once the maturity date was reached. The maturity date could probably be as low as 50 years depending on inflation rate etc. The maturing bonds repayments could be limited to a manageable percentage of the bond purchase amount at that time. Rollover is another option. If we can do it for the elite we can do it for the man in the street.

Commercial banks would likely choose to participate in the scheme as it would facilitate establishment profitable long term relationships by way of additional bond purchases to the customer at commercial rates. How the individual had deployed their initial bond sales income could be a basis for establishing ongoing credit worthiness. In fact it may be that some up and coming fintechs are already positioning themselves to participate in such a scheme or something similar.

A few actuaries could probably knock up a feasible model in short order.

It is not a panacea but maybe a basis to enable progress on other pressing social issues such as welfare traps. It might solve some problems but challenges for individuals and society will remain. It may encourage dissemination of capital ownership but the current capital owners would probably continue to own the majority of old capital . We will still have rich and poor but the disparities could decrease.