IS THE PRESENT CRISIS AN UNPRECEDENTED OPPORTUNITY FOR

IS THE PRESENT CRISIS AN UNPRECEDENTED OPPORTUNITY FOR BASIC INCOME? Robert Boyer Plenary session 2 – Reforming social protection syste basic income 13 th International Conference – BIEN 2010 Brazil.

INTRODUCTION The three objectives of this presentation Ø Present the origins of the crisis and its structural n Ø In this context assess the new opportunities and co upon the implementation of Basic Income program Ø Embed the issue of basic income into the specifici societies, both capitalist and democratic

I. A STRUCTURAL, SYSTEMIC AND GLOBAL CRISIS 1. The crisis of the asymmetric power of finan 2. Financialization a reaction to widening as inequalities 3. The structural unbalanced the world econo the diffusion of the crisis

1. The crisis of the asymmetric power of finance Ø At the core of the crisis: the erosion of the direct responsibility of credit decision

1. At the core of the crisis: the erosion of the direct responsibility of credit decision…. Need of hedging Various financial entities buy these derivatives Securitisation by investment banks Lehman Brothers Swaps against credit default AIG Deepening of the gap between financing and risk taking Figure 1 – The hidden origin of subprime crisis: a perverse division of labor within finance Risk transfer Externalization of the risk Real estate buyers Credit contract Mortgage financial institution Incentive to take more risk Collapse of the joint responsibility of contract Systemic crisis

… This deterioration of quality is permanent of MBS from 2003 to 2007 Graph 1 Source : Yuliya Demyanyk, Otto Van Hemert (2008), p. 1

Ø The spillover of all the destabilizing mechanisms not corrected during the previous crises… Ø The end of a finance-led growth regime… Ø An unprecedented crisis generated by financial laissez-faire…that diffuses to the rest of the world

Ø The end of a credit led household consumptio Graph 2 – A very low household saving rate Graph 3 – A cumulative debt of households Source : Artus Patrick (2008), « Plaidoyer pour la création « d’acheteurs d’actifs risqués en dernier ressort » , Flash économie, n° 416, 23 septembre, Natixis, Paris, p. 6 et « La finance peut-elle seule conduire à une crise grave ? » , Flash économie, n° 429, 2 Octobre, Natixis, Paris, p. 3.

2. Financialization as a reaction to widening inequalities Ø The crisis of the asymmetric power of fina

ü Stagnating median income, but explosion of CEOs remunerations Source: Piketty, Saez (2003), QJE, p. 33, figure 11.

ü A general widening of income inequality The share of the top deciles income share, US 1917 -1998 Source: Piketty, Saez (2003), figure 1, p. 11

üA clear correlation between financial bubbles and wealth concentration Source: Phillips Kevin (2002), p. 79.

3. The structural unbalanced the world economy and the diffusion of the crisis

• The 2000 s: new unbalances of the world economy üThe de facto but paradoxical and conflict pro interdependence between the United States a especially China üThe emergence of economies as key actors rentier üThe impact of Chinese strategy upon develop emerging economies

Towards a duopoly at the world level? United States Consumer of last resort Center of financial intermediation Raw materials Trade surplus Financing of external / public deficit The rest of the World THIRD WORLD: boom of raw materials EMERGING ECONOMIES: desindustrialization DEVELOPED COUNTRIES: financialization and desindustrialization China As the engine of growth in Asia, saver of the world Raw materials

II. THE CONSEQUENCES OF THE CRISIS: OPPORTUNITIES AND CONSTRAINTS UPON BASIC INCOME

1. The more immediate consequences of this highly specific crisis Ø Disciplining finance : a matter of efficiency in reducing the frequency of crises and an issu concerning social justice Ø Taxing finance it a method for financing Ba : is Income ? Ø Priority to domestic led growth via Basic Income: alternative to laisser-faire globalization.

2. A response to a new wave of pauperization in developed and developing countries

III. IS BASIC INCOME COMPATIBLE WITH EXISTING OR EMERGING FORMS OF CAPITALISM?

1. Not a single form of capitalism

2. The relation of citizens to State: a specific domain

3. A multiplicity of interactions between capitalism and citizenship

Alternative configurations for capitalism and citizenship Market relation IV. Van Parijsian capitalism Society wide, solidarity Basic Income Monopolistic Administered Bismarkian capitalisms Solidarity among wage earners : social contribution II. Oligopolistic I. Purely competitive Inexisting A form of market relation Organized Institutionalized Minimalist Significant Organic Citizen/State relation III. Beveridgian capitalisms segmented solidarity: general taxation Capital/ labor relation

4. A possible virtuous circle between Basic Income and some forms of capitalism

Figure 5 – Capitalism and citizenship: a possible synergy

IV. SOME DILEMMA AND TENSIONS IN THE IMPLEMENTATION OF BASIC INCOME

1. A general overview

2. An optimist vision: a minor variant for income negative tax

3. A pessimistic appraisal: a core contradiction in work discipline and capitalist ethos

V. A POLITICAL ECONOMY TO BASIC INCOME

1. How to build viable compromises among balkanized workers and citizens?

2. How to finance Basic Income?

CONCLUSION C 1 – Any analysis about the future of basic Income has to take into account the novelty of the present crisis. It means that ü the globalization without regulation, ü the excess of financialization ü and the lack of social and environmental sustainability have come to an end.

C 2 – One observes a society wide backlash against capitalist logic and its destructive nature. Citizenship has to discipline it and basic needs about education, health have to be satisfied and put a stop to the legacy of consumerism. C 3 – Basic Income might be a relevant response to contemporary most urgent problems: the jobless recovery, the expansion of the working poor, the continuing excesses of financial remunerations, whereas many workers are loosing their job, house and health insurance.

C 4 –Basic Income schemes appear as an emerging and promising paradigm for many developing countries: ü Quite effective in fighting extreme poverty, and some programs with moderate costs have been promoting employment ü A wave of social inclusion, i. e. a rupture with respect to the trends typically observed in Latin-America. ü A stimulation of the domestic market, ü Clear political dividends for the governments ü A vibrant epistemic community. C 5 – Do not reiterate “The same size for all” error. International comparisons display a variety of national strategies along quite specific domestic political compromises when comparing Brazil, India or Alaska.

C 6 –The societies with already a well developed welfare State experience major difficulties in designing and implementing this strategy: ü The inertia of segmented social allowances ü A threat concerning the dismantling of past compromises, ü The diversity of welfare components, built upon different risks. ü A basic dilemma: should its level be low and/or a variant of a negative income tax … ü …or should it be high and initiate the transition towards a radically new form of society?

C 7 –More research on Basic Income is needed: ü How general and universal are its ethical foundations? ü Can one prove logically its economic coherence with the typical social relations of capitalism? ü Can one explore the nature of the political alliances that could trigger its emergence? ü Practically, how to design such a system and how to promote the transition towards such a new socioeconomic regime?

Many thanks for your attention Robert BOYER CEPREMAP (Paris) – GREDEG (Sophia Antipolis) 140, rue du Chevaleret 75013 PARIS, France Tél. : (33 -1) 40 77 84 12 e-mail : robert. boyer@ens. fr web site : http: //www. jourdan. ens. fr/~boyer/