4. An Economic Transition Income (ETI) as a tool for allowing citizens to act out their choices
In the process of "muddling through," individual citizens and households need to be emboldened to act on their desire for change. Sure enough, large-scale institutions such as the World Transition Organization (or WTransO) and the new nested governance structures discussed in installments #1, 2, and 3 are a crucial aspect of a genuine transition. However, they are hardly sufficient if we are going to start a bottom-up, truly citizens-based movement of "emigration" from the unsustainable niche of industrial-financial capitalism towards a plurality of sustainable niches. One central addition to the set of renewed framework conditions would be a deep overhaul of the current income-redistribution logic of our social democracies. First, let me go back to the general context in which we are to locate this overhaul. (I've already said some of these things in earlier posts, but it probably won't hurt to re-state a number of them. If you feel bored by repetition, just skip the next six paragraphs.)
The industrial-capitalist world will not be able to afford the luxury of annual economic growth much longer. This is not a normative claim. Scientific evidence points to the advent of an age of scarcity, linked mainly to two factors: the current plateau in oil production, and the difficulty of sustaining growth given the heavy debts and the competition from low-wage countries. We are consuming the urban industrial niche as we use the fossil fuels that made the Industrial Revolution possible in the first place. Fortunately, there is another niche open to us: the sustainable niche that supported all human life prior to the industrial era and will do so again as the fossil fuels are depleted -- but with the simpler, more cooperative ways that have passed the test of time throughout human history and can be supported by renewable energy. Those who relish the opportunity of exploring the "sustainable frontier" will be pioneers in (re)creating those ways of life that can go on indefinitely and eventually will be all we have as the fossil fuels grow scarcer. So shouldn't we try to take seriously the call for reasonable frugality? The Latin root of this word means the "full and fruitful use of resources." This is the opposite of how we are using resources now, in an economy that is like a speeding train. It's an impressive train, but it has to keep speeding up all the time. For many would-be passengers, it is going too fast for them to get on. Many others who are already on board aren't enjoying the trip as much as they expected.
It is hardly advisable to even keep the train at its current speed, let alone speed it up even more when less energy means less wealth produced, fewer jobs, and probably more debts. The most pressing issue, therefore, is what shape the transition toward a frugal economy will take. This is where things do get normative. Like in an airplane's landing operation, transition is a combination of keeping sufficient speed while slowing down sufficiently, and touching down on the right strip. In the train metaphor, the ideal would be to control the locomotive so it won't have to keep going faster all the time, and to set it at whatever speed makes the trip most enjoyable -- or even to operate several trains at different speeds to satisfy different travelers. External adjustments at the macro level, such as most prominently the global de-growth compact linked to an economic Kyoto protocol, play a crucial role. But the transition to a post-fossil fuel age is not only a matter of external adjustments, but also of an altered worldview, a new conception of the good life. New macro-systemic conditions and an evolution in worldview actually go hand in hand and are a necessary condition for changes in personal behaviors and in spiritual as well as cognitive modifications. Those of us who can visualize how life can be better as the economy slows down will determine what the future will be like. The "pluri-economic" view I have been proposing in past posts finds its roots in this realization.
The current economic arrangements were inherited from a time when oil and coal were abundant and cheap. These are now being replaced with costly fuels with low or even negative net energy. Scientists from a broad range of fields have been alerting us to these facts for decades. At the same time, unsustainable ways of life have been made into cultural values. We need new ways of living that have long-term evolutionary potential. This includes working to counter the inner defects of the age of expansion: greed, self-centeredness, vain ambition, and declining capacity to work together. If these defects were really linked to "human nature," we wouldn't have much leeway. However, the social and psychological difficulties of the present era suggest rather that our modern, expansion-related ways don't fit the human condition, as reflected in increasing depression, addictions, and manifestations of anger. This is probably best seen as part of the deepening and increasingly untenable tensions within financial and industrial capitalism, and it would get worse if the biosphere were to implode, leaving the planet to create new forms of life almost from scratch -- a million-year task.
Barring this bleak scenario, the idea is to find ways -- political, economic, and cultural -- to re-inhabit the sustainable niche. Should we adopt new ways which are untried and hence as yet unknown, or should we recover some ways of the past which have proven themselves over long stretches of human history? We will learn the answer to this question as people decide to emigrate from a declining industrial and commercial niche toward life practices that can be supported with renewable forms of energy. This is by no means a mere regression; to make simpler, more cooperative ways good once again, they will of course be using the knowledge gained in the modern era. This will require the humaneness that comes with accepting two things: first, that the modern achievement is unsustainable and, second, that the main source of happiness even now lies in frugal ways, in close (though not necessarily parochial, oppressive, or tradition-ridden) human relationships. The most important technologies -- medical care, communications, the knowledge industries, and many others -- can undoubtedly be made sustainable, but not the perpetual "getting and spending" reflexes constantly required by the now dominant system logic.
A frugal economy will still be a market economy. Prices, supply, and demand are not per se culprits to be rejected. They have to be harnessed toward sustainability rather than growth. The division of labor will remain valuable especially in the smaller, more local markets that encourage the use of nearby resources to make life easier in smaller communities. However, money circulation and trade will occur on the backdrop of a different view -- the view of a "real economy" that meets everyday needs rather than merely generating whatever it takes to provide enough jobs in an ever-growing economy. The frugal economy will be a "socio-diverse" network of communities experimenting with frugal ways of life, a loose network of local economies producing primarily for the local population. There will still be some long-distance trade, but with transportation having become so expensive, there will be far more of decentralization, i.e., increasing de-globalization and re-localization. Frugality will have to go along with decreased purchasing power, meaning that in the sustainable niche people will have to make do with lower real incomes. Otherwise we will only perpetuate short-term consumerism. But happily, a rejection of consumerism is precisely what motivates those who venture into frugality. Those who really strive in the mainstream financial and industrial capitalist economy are unlikely to be those who will first move toward frugal ways. The most constructive way of engineering the transition would be to allow both ways to co-exist as the economy slows, rather than squeezing down everyone's incomes right away. In other words, the more people whose center of gravity shifts toward sustainability -- with on-the-spot job opportunities linked to renewable energy, more cooperative relationships with friends and neighbors, and families pulling together as family enterprises become increasingly necessary -- the easier the transition will be for those who initially remain in the mainstream economy. And if the pioneers in this effort do their job well, those who follow later as the economy slows will at least know what to expect, and the shift will be more acceptable to them as their mainstream incomes drop.
This frugal economy will be wishful thinking unless a way of encouraging it is created. The underlying issue is how gradual, smooth, and thus bearable, the transition will be. Will it encourage the cooperation that has always sustained cultural evolution, or will it foster the Darwinian hell of a survival of the most aggressive? Many of us are still under the spell of technophilia, wanting to believe that some miracle technology will make growth possible and postpone the need for change. There is also a resistance to anything seen as "going backwards," and a reluctance to embrace what is viewed as marginality or impracticability. The sustainable niche, however, is not the end of work, nor is it the realm of idle hippies, as the mainstream media often like to portray it. It will mean more work and less consumption, but also a shared commitment to neighbors, with more regard for the well-being of all, rather than trying to stand out from others in a large, impersonal economy. Critical resources will be carefully protected while keeping their use to the minimum possible, and with a high regard to preserving both the beauty and health of environment that everyone is dependent on. But beyond that, those who gain a taste for frugality and its advantages should be able to count on public assistance when taking the plunge into a different way of life, whether in an urban neighborhood, small green firm, community farm, or homestead. This will only be possible if the mainstream economy remains healthy, since that will make it possible to assist those who are creating of sustainable ways of life. Ideally, therefore, the sustainable economy would function in parallel with the mainstream economy as it declines -- hopefully slowly enough so as to stretch out the time available for those who are still accustomed to the mainstream economy. Income support should be low enough to appeal to people who want to live simply, yet high enough for them to get by that way and develop a preference for frugality over unsustainable ways, while being able to count on health care and education.
The challenge is to provide assistance to those interested in the sustainable economy, while simultaneously contributing to the primary need of keeping the mainstream economy on track. We will focus here on one possible such scheme, a welfare reform measure known as the Family Assistance Program (FAP), which was first proposed by U.S. President Richard Nixon in the 1970s. It provided an incentive for recipients to find work by allowing them to keep a portion of the FAP payment as their incomes rose. By the time a modest income base was reached the FAP payment would have declined to zero. Because the FAP would be administered through the Internal Revenue Service, it was often referred to as a "negative income tax." That's how I will conceive it from now on, too, using the acronym ETI: Economic Transition Income. The ETI would not only help those wishing to move in sustainable directions, but would also reduce the stigma of welfare for the poor. This stigma would be reduced even further if ETI payments were used by educated young people -- and, more generally, by those who gave up jobs in the mainstream economy -- to build sustainable ways of life. Creative people could be among the first to use ETI payments as they explore new avenues of living sustainably, but so could those who wanted to try traditional ways that are difficult to uphold now, especially in intentional communities formed around shared values.
An additional benefit of the ETI, however, would be its contribution to keeping the overall economy in balance while maintaining a stable labor market-- which is essential for a smooth transition. This could be done by altering the amount of ETI payments, much as a central bank adjusts interest rates. If, for example, more workers were needed in the mainstream economy, the ETI payments could be reduced enough to draw those marginally involved in the sustainable economy back into the mainstream economy. The more likely problem, at least in the beginning stages of the transition, is apt to be a surplus of people still seeking work in the slowing mainstream economy, threatening to drive wages down and trigger a deflationary spiral. In such circumstances, the ETI payment would have to be increased to entice workers into exploring the sustainable territory, since that will require a certain amount of resourcefulness when there are, as yet, few actual past experiences to draw on. This is where the efforts of the pioneers will be so important, especially as they find the ways that others can follow with better prospects for success, and which can then be expanded in other directions as more experiences are gained. Along this process, giving the ETI a try will become less of a venture into unknown territory, and more one of learning from others. Young people are especially apt to pass information around as they compare the sustainable alternatives with the choices they have in the mainstream economy. As the sustainable economy evolves, it will offer a steadily greater range of opportunities to be explored. These opportunities will be seen as adding to the range of alternatives available in the sustainable niche, but will also leave the mainstream economy more secure because it will be less vulnerable to deflationary forces. Anything that works in the sustainable economy will attract attention and then be replicated and adapted. As the range of alternatives increases, it would become easier for people to find the openings they feel most comfortable in, and to acquire the skills that contribute to a snowballing transition in sustainable directions.
As the difficulties of getting started in the sustainable economy are reduced with more experiences and more people joining it, the ETI payments will decrease automatically, if for no other reason than more people are receiving them, which also means that fewer people are working in the mainstream economy to generate the tax revenues to pay them. As time passes, the sustainable economy will be able to continue more on its own, with lower ETI payments and then none at all. At all times, however, those receiving the assistance will have to accept that the payments will fluctuate with the needs of the overall economy, especially the tax revenues that can be generated as incomes in the mainstream economy will slip along with the energy available to it.
Hopefully the transition will be as slow as possible, and with rising incentives for using energy ever more efficiently to stretch out the time it is available. How well this proceeds will depend on the ongoing health of the mainstream economy, and whether it is chugging along fine or struggling with unanticipated setbacks, shortages, or instabilities. If its health can be maintained, the sustainable economy will become the place where most dynamism is focused on the fascinating task of finding the ways of life that work best in the emerging circumstances, and on using renewable forms of energy as effectively as possible. Conservation taxes, ETI payments, and existing fiscal and monetary tools should be more than enough to keep the transition on track between inflation and recession, and with balanced budgets. The guaranteed income would then genuinely act as a transition income. This will be all the more easy as the vast amounts of money going into trying to keep the mainstream economy growing are reduced as sustainability replaces growth as the goal. The pace of change will slow as sustainable ways emerge that have the capacity to go on indefinitely while making frugal -- full and fruitful -- use of resources, in stable ways such as those that have been valued throughout human history. The issue would not be so much one of cost, since the income support to the "frugalists" would have to be quite modest to assure that the ways of life created could be supported with renewable forms of energy. It would be a fraction of the cost of creating jobs in the mainstream economy-- which, for instance, under President Obama's 2009 stimulus program was about $200,000 per job created. Even if the new "growth" jobs were successfully created, they would still increase the demand for oil that drives up its price. All such mechanisms would be halted as sustainability replaced growth as the goal. Public budgets could be balanced as the building of sustainable ways of life gets under way. The main motivation in all of this will be to create livelihoods that have ongoing value, as opposed to a job that often provides little beyond a paycheck. A key to economic survival will be to learn how to get by with a lower real income. There are many opportunities to do this, and they will become important as needing less income increases the range of economic opportunities available.
Further issues of money creation -- going beyond the mere use of traditional fiscal and monetary instruments to steer first-world de-growth -- will be discussed in a forthcoming post (see installment #6 of Part 4). Let's just hint here that local communities in the sustainable niche could develop their own, complementary currencies (as suggested by frontline thinkers such as Bernard Lietaer, Margrit Kennedy, or Tom Greco) and start labeling part of the guaranteed income in those currencies -- which would be increasingly plausible as sustainable communities develop and practice internal division of labor (local farming and small-scale manufacturing, local health services, neighborhood services, local repair, etc.), so that the scope of local economic activities broadens and the local currency's purchasing power de facto increases by the sustainable increase in the accessible variety of frugality-compatible goods and services. As the rate of emigration from the industrial niche toward the sustainable niche increases, the local currencies may or may not end up disappearing. The most educated guess is that they would remain, and even take on increased importance, as the mainstream -- bank-issued, private-monopoly -- currency loses its grip on many people in many activities. In the meantime, the initial trigger for a move toward the "frugality frontier" (a frontier of a new sort, not geographically visible initially except in people's inner geography of desire and longing) would be a new cultural model. It takes a highly motivated and creative person or family to undertake the risk of developing one's work while getting by with less and learning how to become more self-sufficient. For the first pioneers, it can be lonely and difficult work in unfamiliar territory. As I already wrote in an earlier post, the frequently heard criticism that these people are "dropouts," and that they don't contribute their skills and energies to solving "society's problems," or have developed "adaptive preferences" which lead them to wrongly accept bad situations -- that criticism is totally wrong. They are doing a task that is essential for our future, developing new skills and ways of living that will provide models for others as necessity pushes more of us in that direction. Nothing could be more important. The pioneers -- those who are able to get by on the modest "transition income" right away -- are opening up new economic territory where subsequent settlers can join them.
An ETI is not a basic income. It isn't given "for free" to everyone, whether rich or poor, on top of whatever income they are already earning. The State only pays the gap between what one is earning and the guaranteed income level. Of course, there is always the chance that the bulk of the population will just pocket the income guarantee and either continue playing the financial and industrial capitalist game, or drop out of it through permanent inactivity. This is, as we know, one of the main arguments against any sort of unconditional income support. I am not minimizing this risk. However, I believe the argument as it is most frequently voiced draws too much on assumptions inherited from mainstream economic theory: People are naturally lazy, they want to work as little as possible while getting the highest possible income, and given half a chance they'll slouch in front of the TV with a beer or a Coke (paid for with dole money) instead of investing in socially or economically worthwhile activities. My own take on the human condition is that this description of many people's behavior is indeed empirically valid, but that it betrays the alienating effects of capitalism and consumerism more than it reflects a deeply entrenched "human nature." (Disagreement on this crucial point is one of the watersheds that separate those of us who are optimistic about a transition and those of us who are skeptical.) I start out from the conviction that, given the chance and the right framework conditions, most people will indeed embrace alternatives, linked to both economic democracy (see next post) and to a reasonably frugal life. The presumption behind the ETI mechanism is that appropriate income redistribution can act as a "transition pioneer trigger."
Sure enough, this requires that such a guaranteed-income scheme be viewed as part of larger package in which includes the circulation of ideas and the creation of public forums (inside and outside of mainstream education institutions) where the alternatives to the current system are discussed. Of course, part of the circulation will occur spontaneously as (a) pioneers start sharing their experiences with society at large and (b) the media become increasingly curious about these "fringe" phenomena. This is, to some extent, occurring already. More generally, the ETI has all the more chances to trigger extensive "emigration" towards the frugality frontier if the extended concept of equality of opportunity I have been expounding in earlier posts has become a well-circulating intellectual and political currency -- that is, if enough citizens have started to realize that what is currently being sold to us under the name of equal opportunities is a needlessly truncated notion. Clearly, without some sort of guaranteed income, many citizens today who would like to make the transition to a frugal life will be afraid to do so, because they might lose most, or too much, of the (direct and indirect) income support currently associated with participating in the capitalist social democracy. A guaranteed-income scheme is a crucial centerpiece of any genuine equal-opportunity policy that includes the chance to act on one's "alternative" choice. And quite obviously, unless the rest of the framework conditions being discussed in this Part 4 are put into place roughly in sync with the ETI, perverse effects are likely to occur due to the fact that, for instance, not all trading partners of the country adopting an ETI scheme are themselves adhering to the de-growth compact.So all these framework conditions more or less stand and fall together, which will be huge challenge to face when we come back down to earth in Part 5.
For those of you who are interested in Warren A. Johnson's ideas, you can also have a look at his open letter to President Obama, dated July 30, 2010, in which he neatly summarizes his views: http://ukiahcommunityblog.wordpress.com/2010/07/30/warren-johnson-letter-to-obama/
This post from the "Eco-Transitions" blog by Christian Arnsperger is licensed under a Creative Commons Attribution-NonCommercial-NoDerivs 3.0 Unported License.