Question: Do we need to make the Bank of England tree grow stronger for UBI?

Geoff Crocker (GC) proposes to use Sovereign Money. He will discuss his proposition with Malcolm Sawyer (MS) who is a retired professor of economics from the University of Leeds and a critic of the concept of Sovereign Money. So this promises to be a lively online event where you will learn more about Universal Basic Income (UBI) and Sovereign Money (SM). You will have the opportunity to ask questions and provide comments on the topic.

UBI Lab Leeds and UBI Lab Network invite you to this thought-provoking webinar.

Please book a place to receive the invitation link.

Many opponents of UBI say an adequate amount which is covering all basic human needs is not feasible because of its costs. These critics just multiply the amount of UBI with the number of recipients in a country to calculate the gross cost which is a huge amount of money. They ignore the proposed changes to the tax and benefit system to finance UBI which would lead to much lower net cost.

Geoff takes a different approach. He argues that states can create their own money and fund UBI in this way. This was done during the recent financial crisis using ‘Quantitative Easing’ (QE). The beneficiaries of QE were the large banks and the wealth holders in our societies. The share and property prices have boomed due to QE.

Theories of money are relevant to the financing question of Basic Income. Therefore UBI supporters need to better understand these theories in order to consider all financing options of UBI.

GC claims that UBI is a necessary remedy for the major causes of our recurrent economic crises. The stability of our economic and financial system increasingly relies on the recurrent injection of ‘unearned’ income.

According to the former Conservative Prime Minister Theresa May in the United Kingdom (UK) there was no magic money tree. She used this argument to justify the austerity measures of her government. Similarly many politicians and economists want us to believe that a state economy is similar to a household economy. GC challenges this comparison as misleading. Instead he states ‘Money has no inherent value, but only the value it derives by being socially accepted to purchase goods, services, assets, and raw materials. The reality is that as a society, we can consume what we can produce, and money is only an intermediary in this process, like oil in a machine.’ He further explains ‘Higher productivity using technological automation will require more money to be created to represent the value of that production.’ Sovereign Money means that governments, through their central banks, simply issue money without that money being added to the national debt. This is in line with Modern Monetary Theory (MMT), which argues that a sovereign state can create its own currency.

GC argues that the creation of money to service the economy should never be defined as national debt. A good example is the UK creation of £394 billion of money during the COVID pandemic. This money was initially created as government debt and then bought back by the Bank of England. The Bank of England is part of the state. Therefore there is no net national debt, because the state owns its own debts. It is a good example of debt-free sovereign money.

As a consequence of his theory GC rephrases the typical argument against further government borrowing ‘How much national debt can the government afford?’ into 'The real constraint on any economy is the level of real production output which the economy can achieve. Governments can afford to spend according to what the economy can produce, not according to the Treasury’s financial balance.’

Most UBI proposals choose revenue-neutral or budget-balancing approaches with a change of the tax-benefit system. They propose increases of income taxes for top earners or unearned income, the introduction of carbon, land value and wealth taxes and the removal of certain social benefits which become redundant with a UBI. According to GC these approaches do not address the major dysfunctions in our current economies. We need to get more income to people and get debt out of our economic system. Therefore his proposal is bolder, addresses the technology challenge of increasing production without a similar increase in the total amount of earned income and the increasing debts of households and states.

We invite you to join our stimulating presentation and discussion about UBI and Sovereign Money. MS is a critic of MMT and SM. He will respond to the presentation of GC and afterwards you will have an opportunity to ask questions and comment.

Geoff Crocker

Having graduated in economics (BA), and philosophy of science (MA), Geoff’s main career has been in global technology strategy consulting for multinationals (IBM, ABB, Yamaha, Kone et al.), Small and Medium Enterprises (SMEs), and government departments and agencies. He worked in transition of the Russian economy from 1990 to 2006, supporting the reorientation of industry sectors into the global market economy. He was economics adviser to the President of the Russian coal industry, and later strategy director of one of Russia’s largest companies.  In 1995, Geoff established Bristol Care Homes with a mission statement to provide high quality holistic nursing care for elderly people. He has worked in developing countries, including funding a pineapple investment project in Ghana, advising a pastoralist centre in Kenya, and for several clients in South Africa. Geoff has worked extensively as an advocate for basic income, launching and editing the web site ‘The Case for Basic Income’, and through his recent book ‘Basic Income and Sovereign Money – the alternative to economic crisis and austerity policy’ which was reviewed in the Financial Times. He has also helped initiate a research project on the economics of basic income at IPR Bath, the Basic Income Conversation hub hosted at Compass UK, and the conference ‘Is it Time for Basic Income’ at the Bristol Festival of Ideas, UK.

Malcolm Sawyer

Malcolm Sawyer is Emeritus Professor of Economics, University of Leeds, UK and Fellow Forum for Macroeconomics and Macroeconomic Policies. He was the lead co-ordinator for the EU funded 8 million euro, 15 partner, five year project on Financialisation Economy Society and Sustainable Development. He was managing editor of International Review of Applied Economics for over 30 years. He is the editor of the book series New Directions in Modern Economics (Edward Elgar) and co-edits (with Philip Arestis) the annual International Papers in Political Economy (Palgrave Macmillan). Author of 13 books including The Economics of Michał Kalecki, Macmillan and most recently Financialization: its economic and social impacts published by Agenda He has edited or co-edited over 30 books. He has published over 150 papers in refereed journals and contributed over 170 book chapters on a wide range of topics including on financialisation, fiscal policies, budget deficits and alternatives to austerity, the nature of money and monetary policies, public private partnerships, the eurozone, income distribution, ecological macro-economics and on Michal Kalecki and Kaleckian economics.

Crocker G and Frayne D. How do we pay for it? Basic income and sovereign money. 2022. Basic Income Conversation and Compass. Website: https://actionnetwork.org/user_files/user_files/000/069/886/original/220106_Basic_income_and_sovereign_money.pdf

Crocker G. Basic Income and Sovereign Money – the alternative to economic crisis and austerity policy. 2020. Palgrave MacMillan. Website: https://link.springer.com/book/10.1007/978-3-030-36748-0

Crocker G. 2020. Inequality and the case for UBI funded by sovereign money. real-world economics review, issue no. 92, 29 June, pp. 238-245, Website: http://www.paecon.net/PAEReview/issue92/Crocker92.pdf

Sawyer M, 2019, Modern monetary theory: is there any added value? real-world economics review, issue no. 89, pp. 167-179, Website: http://www.paecon.net/PAEReview/issue89/Sawyer89.pdf