Tuesday, October 21, 2008

UNCONDITIONAL basic income: a basis for the future

A basic income: a basis for the future

Is it necessary for our society to allow anyone to fall through the social safety net? Our
productivity is constantly increasing but we no longer notice the fact. Owing to our system of
paid work accompanied by the imposition of high taxes and other levies, labour is becoming
too expensive for companies, so they are streamlining their operations and moving jobs
abroad. However, the unemployed also receive an income, which is financed by taxes, levies
and non-wage contributions. Everyone loses out, and personal incomes and basic benefits are
going down all the time.

This could be changed by introducing an unconditional basic income based on the
amalgamation of existing social transfer systems. This would enable individuals to engage in
activities as free citizens without worrying about their livelihood and, at the same time, to do
work they find sensible and rewarding. They would do work of their own choice for one
other, and do so in social security and dignity. Automation would be a blessing, since the
elimination of jobs that can also be done by programmable machines and robots would not
lead to new unemployment. Rather, the basic income would create freedom of action: it
would be possible to finance many community and cultural tasks, and many new initiatives
would be launched. Many people would rediscover the sense and importance of their work,
for no one would be prevented from working to supplement their unconditional basic income.
The difference would be that they would no longer be forced to work.

A transparent tax system could support the unconditional basic income, which would be paid
to all citizens. The basis would be the gradual restructuring of the tax system to place the
emphasis on consumption taxes. The advantages of this would be that anyone who consumes
less will pay less tax, while anyone who consumes more will pay more tax and at a higher
rate. Citizens would no longer have to fill in a tax return, because taxes would be paid where
items are consumed. Taxation would be competition-neutral.

Germany would become stronger as a business location because capital would be attracted
into the country and domestic employment would be safeguarded.

Some of the 720 billion euros spent on social security in Germany could be saved as a result
of eliminating the bureaucratic apparatus needed to distribute it. However, the most important
benefit would be the creation of an efficient community for all citizens in which there would
no longer be any losers but free and self-determined individuals who no longer regard work as
a burden but as an opportunity.

The unconditional basic income will change Germany for the better.
Will you think about this with us?

www.unternimm-die-zukunft.de Initiator: Professor Götz W. Werner
Inter-Faculty Institute of Entrepreneurship University of Karlsruhe



By Götz W. Werner

We are continually increasing the productivity of our economy but this is leading to more and more people who are mainly contributing to our economic performance through manual labour, such as agricultural or industrial workers, becoming unemployed.

For me, as an entrepreneur, this only presents an apparent dilemma but it will remain one for as long as income is linked to work. The late Peter Glotz pointed out that this linkage cannot be maintained. He even said that in spite of the talk about full employment there was in fact a quiet conspiracy on the part of the Establishment.

In fact, 15 million people in Germany today live on inheritances, social assistance, unemployment benefit, illicit work or donations from third parties. At any rate, they do not rely on their own earnings or the income of a family member.

The way out of the crisis is accordingly the way out of this apparent dilemma, and we can only find it by abolishing the link between work and income. And that will have to be coupled with the introduction of an unconditional basic income.


Net prices are going down as wages and salaries are in some cases being replaced by a basic income. However, since people are compensated for their lower pay their purchasing power remains the same.

A second consideration is that the state is able to discontinue its existing transfer payments to the citizens as well as other benefits. Moreover, grants to pension funds, capital transfers between employment agencies and health insurance funds, child and housing benefit, grants towards travel costs and other subsidies will be abolished.

Thirdly, products destined for export that are currently subject to taxes on company earnings and income taxes will
become much cheaper.

Accordingly, the introduction of an unconditional basic income must be accompanied by a radical tax reform. As the
world’s export leader and as a post-agrarian and post-industrial society in an increasingly borderless world economy,
Germany needs to restructure its tax system and, instead of taxing earnings, place the emphasis on taxing real
income, which will impact on domestic consumption. In other words, the tax should not be on the work performed
but on consumption.

This system of taxing consumption will involve a gradual increase in value added tax accompanied by a lowering of
company taxes.

All those who suspect this is a hidden plan to raise company profits need to be reminded that all taxes are in any case
included in the so-called consumer prices – ie the consumer is already paying for high taxes today by having to put
up with higher prices. Mistrusting the intentions behind the proposal is thus not very helpful.

In my opinion, this mistrust reflects a negative view of others, and this seems to me to be the main problem at the
moment since it is preventing a radical reform of the tax system. It can be assumed that policymakers benefit from
the existing structures, but they themselves appear to believe that an unconditional basic income will weaken the
individual’s motivation to work hard.

I believe, however, that if citizens receive a basic income they will no longer have to look for a job involving work
that does not utilise their skills and aptitudes and will be able to seek employment that gives them the opportunity to
develop their personal potential. The consequence would be that they would increasingly seek jobs they regard as
sensible since they both meet their own aspirations and correspond to generally accepted moral standards.

This would also result in an enormous potential for affordable employment for the benefit of others, such as care
services for the elderly and sick or work in the educational or cultural fields.

Last but not least, as an employer I expect a considerable boost to self-organisation and self-responsibility. Business
start-ups by individuals (in Germany so-called “Ich-AGs” [ich: I, AG: public limited company]) would not receive
state subsidies, but entrepreneurial initiatives would be made possible because the state would provide the freedom
for citizens to engage in business activities.

It is, after all, an objective fact that any work carried out in accordance with the principle of the division of labour is
not done for one’s own benefit, as the concept of “Ich-AG” implies, but for other people. Economic activity is
accordingly based on a constant interexchange of services, ie on an extensive process of working for one another.

As the economy is an organised form of working for one another, it will be necessary to gear our income,
social and tax policy precisely to promoting this organisation in the best way possible.

I think we can only do this if we give people the freedom they need by guaranteeing basic incomes, if we believe that
individuals are willing to make their contribution both intelligently and with a due sense of responsibility and if we
accept that our German economy, with its modern production methods, can generate sufficient income for all the
country’s citizens and that everyone in the country can live a comfortable and economically secure life – without the
questionable obligation to work and without the presumed disgrace of being unemployed.

Professor Götz W. Werner is the founder of the dm-drogerie markt chain of drugstores. Since the 2003/2004 winter semester, he
has been Director of the Inter-Faculty Institute for Entrepreneurship at the University of Karlsruhe.

Goetz W. Werner

What benefits will an unconditional basic income bring?

What previous generations in our country could only dream of has now become a reality: never
before has it been possible to provide the population with such a good supply of goods and
services. Overall, we produce more than we can consume, although not everyone has a sufficient
share of the cake. Comparatively speaking, we are living in a paradise-like situation, but we have
not yet learned how to handle it properly. First of all, the close linkage between work and
income, which has been one of the factors that have brought about high unemployment, will have
to be reviewed. Both are apparently connected with one another in the traditional concept of work
as gainful employment. In fact, this concept is an outdated social convention that can be
reconsidered. We have on the one hand our income, which is needed to satisfy our needs through
consumption, and on the other hand our work, through which we become involved in society in
order to produce products and services for others. However, the prerequisite for a possible new
approach is a fundamental change in our awareness of our relationship with society and the
ability to overcome traditional thinking patterns.

A basic income is affordable – and people would nevertheless carry on working

Two easily comprehensible but at the same time unfounded reservations are voiced against the
unconditional basic income that is under consideration and being called for here: it will set off a
wave of laziness among those who receive it and it is unaffordable.

However, a basic income is not meant to be a way of making people “rich without doing
anything”. On the contrary, its purpose is actually to enable work to be done. A basic income in
the form proposed initially lowers the opportunity costs of a self-determined activity because a
smaller proportion of the income than in the past is made up of remuneration for “dependent
employment”. In this way, individuals would have more time for their family as well as increased
freedom and financial security, which used to be guaranteed by a wage income and are extremely
important, for example when couples are starting a family. A basic income would also provide
individuals with more scope for many different types of voluntary work and for their socio-
political involvement in community tasks, as well as for the development of entrepreneurial
activities aimed at bringing an entrepreneurial idea to fruition and finding supporters to
implement it.

What about socially necessary work that no one wants to do? One answer to this question would
be that these jobs might have to be very well paid, so there would be a greater incentive to
rationalise them. If we have succeeded up to now in using machines and new methods to replace
jobs for which the use of human labour has become too “expensive”, then why should we not
manage to do so in the future too? We will have to find replacements for jobs in which people no
longer see any sense as far as fulfilling their self-determined life is concerned. Moreover, a basic
income would initially only be paid to registered citizens. The community of the Federal
Republic of Germany cannot be required to ensure a basic income for individuals outside it.
Citizens of other states would, after all, have better prospects of finding jobs in these occupations,
for example harvesting fruit and vegetables.
On careful examination, the first objection – affordability – proves to be unfounded, even though
this initially seems surprising to some people. In order to fund a basic income, fundamental
changes have to be made to the tax system. Our present method of taxing incomes or profits,
which is essentially based on nominal (money) income, has its origins in a period when the
majority of human beings were still living in a self-sufficient subsistence economy. In such a
society and economy the state has to tax its citizens’ income at source. Today, however, as our
economic system has become increasingly clearly one in which people work for one another and
is characterised by a considerable degree of interaction and transaction, with individuals now
consuming little or none of what they produce (ie, working almost exclusively for others), this
system is no longer in keeping with the times. This is shown by the fact that our tax revenue is
tending to be based more and more on the taxation of consumption. After all, where is the money
going to come from when income, as an abstract concept, is becoming less and less suitable as a
broad basis for assessing taxes and when budget revenues are declining? The tax system could be
restructured and based on consumption by gradually reducing income taxes and simultaneously
raising consumption taxes, the main type of which is value added tax.

The unaffordability argument can be principally refuted by pointing out that all the money
necessary for the payment of a basic income is already flowing through the system. If the
increased consumption tax revenues were not to flow directly into the general state budget in
Germany but were also to be used for funding an unconditional basic income, then present
income receipts – wages and salaries as well as state transfer payments – could be reduced by the
same (per capita) amount.

The substitutive effect of the basic income under consideration would mainly result in two
developments. Firstly, wage costs, which are passed on by companies to their customers on the
basis of existing market conditions, could decline. This means that net prices would also tend to
go down to the same extent, with gross prices remaining more or less constant following an
increase in consumption taxes. Since lower wages and salaries would be replaced by a basic
income, purchasing power would remain the same. Secondly, the state would also be able to
lower the current transfer payments it makes to its citizens in the form of pensions, child benefit
or the salaries of its civil and public servants and politicians. This would ease the burden on the
public purse. The movement towards a consumption tax is thus nothing for us to be afraid of but,
rather, only a consequence of our society’s outstanding economic development, which is
accompanied by growing transaction volumes. The aim is to restructure the system of levying
taxes on an income-neutral basis. At the same time, corporate taxes could also be lowered and
ultimately abolished. This would appear to be all the more desirable as any corporate taxation is
in the end passed on to customers by way of higher (net) prices.

A further consequence of the overall productivity gains to be expected is the funding of a basic
income, which will also have to be implemented in stages.

Growing productivity facilitates and necessitates the introduction of an unconditional basic

What are the alternatives? Do we want to return to the period of lower productivity? Strange as it
may seem, this is precisely what is being proposed by those who call for low-paid jobs, for
people to accept reasonable work offers (reasonable for whom?, one might ask) and the creation of a low-wage sector. The call for companies not to be so penny-pinching1
is also tantamount to
demanding an increase in the number of jobs at the expense of productivity.

If, as in many instances of current social policy, this is accompanied by the de facto patronising
treatment of citizens through “administrative procedures” and the system “does not in every case
allow individuals freely to choose their occupation and the things they consume, this is a
violation of basic human rights and, as experience teaches us, ultimately harms the social strata
for whose protection the artificial measures were intended”
. In view of the absurdity of many
make-work schemes, with which even the most senseless jobs are justified by reference to the
ability of those involved to “practise their skills and prepare themselves for real work”, who
could have any doubt at all that the citizens are being led by the nose and that we are at the same
time experiencing a reversion to lower productivity?

The discussion of the issue of an unconditional basic income can also show whether a state, in
spite of assertions to the contrary, has an authoritarian self-conception or whether it is serious
when it calls for the citizen’s freedom and self-responsibility. The state should enable its citizens
to work to achieve these two goals and it should do so inter alia through an efficient economic
system. The alternatives currently under discussion appear to boil down to tying the citizens more
and more to the welfare state’s apron strings at a time when the economy is becoming
increasingly productive instead of granting them the freedom of a civil society by providing a
basic income – ie, instead of making a free social order a reality.

Freedom always means the freedom for one to determine how to manage one’s own time. With
the reduction in the amount of paid work involving employees following orders, this may also
mean granting time for self-determined activities. This is all the more likely to be the case as, in
an economic system geared to the efficient handling of resources – including that extremely
scarce resource time – companies are quite rightly dispensing to an ever greater extent with the
use of human labour. This requires a change in awareness. There also needs to be an awareness of
the historically unique nature and extent of the economic development of the past two centuries.
It becomes clear at this juncture that an unconditional basic income is the crucial element when it
comes to answering some of the questions posed by a capitalist economy lauded as a market
economy that maximises wealth, even though it is becoming more and more obvious that the
system in its current form is actually reducing the prosperity of ever larger sections of the

Possible impact of a basic income on the economy

We need goods and services solely for human beings, and we need human beings to produce
them. However, for what purpose are they needed and by what methods is this purpose achieved?
The answer to this question seems immediately obvious, but we still have to recognise what this
means for the organisation of our lives and for an economy characterised by rising productivity.
People are required less and less for their physical work to produce the goods and services they
need, but the demands on their intellect at work and in society are rising. In short, people are

Thielemann, Ulrich: “Mit stumpferem Bleistift rechnen” (interview), in SüddeutscheZeitung, No. 10/11/12, April
2004, p. 27.
Erhard, Ludwig: “Grundentscheidung für die Soziale Marktwirtschaft”, in Stützel, W., et al. (ed.), Grundtexte zur
sozialen Marktwirtschaft, Stuttgart 1981, p. 40. becoming increasingly replaceable in the production process but not as consumers. We are
prevented from recognising this by the way we understand our “outdated funding methods”
because we are still limiting the possibility of acquiring an income to gainful employment, of
which there is less and less available. As this, like the tax system, originates from earlier times
when there was an insufficient supply of goods, there is an urgent need to make an adjustment,
especially with regard to our awareness. That seems to be obvious.

What impact would a basic income, the effect of which would be to bring about this adjustment,
have on the private enterprise sector? As a result of the restructuring of its tax system, Germany
would become a “tax and investment haven”. Falling net prices (see above) would benefit
exports, and low unit wage costs would make Germany attractive as a business location. In
addition, employment market regulations, such as the law relating to collective bargaining and to
protection against wrongful dismissal, would become superfluous and, accordingly, flexible
working arrangements would be possible on the basis of individual agreements.

People’s worries about the future and their need to save and make provision for eventualities
would be reduced, thus making more money for consumption available. The consequence would
be a boost to self-organisation and self-responsibility (freedom). Moreover, people would seek
employment that they regard as meaningful, and the work they do would meet their own
aspirations to a greater extent and accordingly become relevant to them and, ultimately, more
efficient. There would be an additional potential for people to undertake paid cultural,
educational and maintenance work (which would directly benefit their fellow human beings) and
a tremendous impetus would be given to science and research and to entrepreneurial initiatives.

As has been shown, an unconditional basic income has the potential to overcome the apparent
contradiction of high incomes, rising productivity and low wages. Moreover, it would “turn the
catchword ‘freedom’ into a reality”
. The future of democracy is dependent on free citizens, and a
society and a state that take this freedom seriously and for which freedom is not only the
assignment of responsibility to the citizen cannot ignore the possibilities that would be opened up
by an unconditional basic income – and they can do so even less in an economic system that links
time to money as much as our own does. Especially today, our high productivity means that the
opportunities to bring about this freedom are greater than ever. Let us seize them with both

Werner, Goetz W.: “Was bringt ein bedingungsloses Grundeinkommen”,
in: Suchy, Bernhard (Ed.): Was jetzt zu tun ist, Berlin 2005, pp. 41-49.

More information: www.unternimm-die-zukunft.de

Hardorp, Benediktus: “Wir müssen unsere sozialen Einrichtungen neu justieren”, in Das Goetheanum, No. 28
2005, p. 3.
Fromm, Erich: “Psychologische Aspekte eines garantierten Einkommens für alle”, in Erich Fromm, Gesamtausgabe
in zwölf Bänden, Band V, Munich 1999, p. 31

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posted by u2r2h at Tuesday, October 21, 2008


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