In this episode of the Australia Together Podcast on Substack, I read Part 7 of Chapter 5 of my latest book, The Public Interest Economy: the path to wellbeing, security and sustainable consumption in a democratised Australian economy.
Chapter 5 is about how to rearrange Australia’s welfare systems to transform welfare from being the privilege of a few to the permanent entitlement of all. It is about shifting from a targeted welfare system to a system of universal income security. And it’s about how this shift is essential to a flourishing and sustainable economy where no-one need live in poverty as millions of Australians do now.
In Parts 1 to 3 of the chapter, I spoke about:
the history of our attitudes to welfare in Australia;
how that has caused a growth in poverty and inequality;
how welfare can be rearranged to play a much more productive role in the economy; and
the structural changes we need in the Australian economy to overcome the degradation of wellbeing and the growth in inequality caused by neoliberalism and the inherent tendencies of markets to fail.
In Parts 4 to 6, I moved on to discuss how universal welfare is essential to our equality in democracy and to our entitlement as equals to fair shares of the burden and benefits of the economy. This led into a discussion of how Australians can embark on an efficient and democratic process of collaboration to decide what sort of economy they want.
Is it an economy that secures their wellbeing?
Is it an economy that is fair?
What does a democratic economy look like?
How can we build a democratic economy that supports the public interest?
In answer to these questions, I suggested that Australians will need to assess their economy from the point of view of whether it fits with principles that we have all decided will work best to foster the sort of economy we want. These principles are likely to be about fairness. They can be established by the collaboration of Australians to develop a National Accord on Wealth, Welfare and Wellbeing – an agreement that can be struck between Australians and their governments about what will constitute fair economic decision making.
Now in Part 7 of the chapter, I set out the steps by which Australians can transition from targeted welfare to universal income security. They can do it by collaborating to design a universal basic income matched with fair tax reform.
Australians shouldn’t be denied a universal basic income.
Australians can design a universal basic income that is fair, affordable, and economically sustainable. But they need to be organised to design a good one. They need to be given the space and assistance to have a national conversation to design this essential economic reform. This conversation is essential and urgent because without a UBI:
Australia is unlikely ever to have a fair economy;
millions of Australians who currently live in poverty are never going to escape it;
more Australians will enter the ranks of the poor; and
economic and political inequality will cause a festering of grievances, resentment, social disconnection and probably a growth of racism and fascism.
None of that need happen. Australians can avoid that dystopian future and enter a new age of democratic equality and economic prosperity where they have far more control over their future. They can enter this new age by designing a fair universal basic income matched with fair tax reform.
But for this to happen, they will need to conduct a national conversation about a UBI using a democratic process which takes fairness and a commitment to universal, unconditional welfare as its starting point. Conducting the conversation without principles of fairness and an appreciation of the enormous value of universal welfare to both society and the economy will reduce any benefits that may be obtainable in a public interest economy, including the benefits of democratic equality, universal income security and universal services security.
A UBI is likely to open up our minds to a very different conception of welfare, compared to the ideas we have held about welfare since the Universal Declaration of Human Rights. And this suggests that it will require a type of conversation that has never been undertaken by the Australian community.
This conversation will be about the design of an economic instrument that totally reorganises the way national wealth and the burdens of taxation are shared. It is a culture-changing, life-changing, economy-changing conversation.
Why is a UBI essential to a sustainable economy?
If Australians are to build a sustainable economy, they will need to shift away from the current economy, in which demand is driven too much by what private businesses are prepared to supply and the industries in which they are prepared to invest. Inflation in these supplier-driven, poorly composed economies causes high prices for the essentials of our wellbeing such as health, education and housing. A shift towards a demand-driven economy is essential to price control for these essentials of life.
A UBI is the reform Australians need if they are to be able to switch to a demand driven economy. A UBI puts consumers in the driver’s seat of the economy and gives them the chance to:
compose it with a greater proportion of accessible, affordable and non-inflationary industries of wellbeing; and
moderate any inflation by selecting the taxes that will most efficiently prevent inflation.
Conversations about a UBI will fully reverse our understanding of the order in which money can flow into the economy and who gets it first. With a UBI, the first recipients of the money created by governments for their welfare will be consumers, who will then be the initial spenders of the money into the economy according to their preferences. They will have significantly greater autonomy over those decisions. As already indicated, this will allow them to shape demand in the economy more than they can now; and markets will be forced to evolve to meet more of their needs, if they can do so at attractive prices.
A UBI is essential to affordable living and inflation control.
A UBI is not just a handout of money. It is an integration of our welfare and tax systems, which makes it possible to rearrange the order in which money enters the economy and is then retrieved by taxation to help control demand – and hence, prices. In this way, the nation’s total spending (private and public) is controlled so that it does not exceed our capacity for production and therefore does not cause price rises.
A UBI matched with fair taxation is a far more effective way of controlling inflation than interest rate rises. The policy of using interest rates adjustments for inflation control (monetary policy) should be abandoned. That current arrangement of macroeconomic policy which prioritises monetary policy is a failure. (See how and why in Chapter 2 of The Public Interest Economy.)
Australia needs to abandon its current macroeconomic management system and switch to:
composing the economy with a greater proportion of non-inflationary industries of wellbeing (thereby keeping prices for all essentials low); and
selecting anti-inflationary taxes to control any residual inflation caused by private spending and excessive consumption of resources in production.
A UBI gives everyone the chance to increase their after tax income without creating inflation. It does this because it is an integration of the welfare and tax systems. When we integrate those two systems, we give ourselves the chance to arrange all the taxes we pay as individuals so that they are less than the price rises we would suffer if we did not pay those taxes and then allowed ourselves to spend too much into the economy. The net effect is greater spending capacity, especially for the least well off, and simultaneously, greater price control.
Stepping through a conversation on a UBI matched with tax reform
A conversation to design a UBI has never been attempted in Australia. But it is not difficult. Chapter 6 sets out the steps necessary for a democratic conversation. Broadly the steps include:
Step 1 – Organise a randomly selected citizens’ jury or assembly process by calling open expressions of interest from Australians who wish to become involved in conversations to design a UBI. This process can be held in multiple locations across Australia.
Step 2 – Set out the task, namely that it is to design a fair UBI matched with fair taxation.
Step 3 – Allow those in the conversations to determine the principles for selection of a fair design.
Step 4 – Equip those in the conversations with the information and any technical support they need to maximise their chance of coming up with a fair design. As a minimum this will include:
explanations of what a UBI is, how some UBIs are fairer than others, and how fairness in the design will increase if a universal, unconditional welfare system is preferred and decrease if a targeted welfare system is preferred;
information about how a UBI necessitates a comprehensive re-arrangement of tax; and
technical support to enable participants in the conversations to understand the result of their preferences for a UBI and taxes on (a) inflation in the economy and on (b) their own family’s financial position.
Step 5 – Once participants have selected a UBI and quantified its total cost in the first year, support participants to select the combination of taxes (income and non-income) that will allow them to fairly offset enough of the inflationary potential of the UBI.
Tax arrangements are at the centre of the fair design of a UBI. It won’t be possible to come up with a design for the UBI that the majority of Australians can agree is fair without fully re-thinking tax rates and the types of tax we can mix into our economic system.
The path to a social new deal
A UBI will require all Australians to pay more tax in total as a nation than we do now, at least in the first instance. This will be necessary not because the government needs tax to fund the UBI but because any potential inflationary effect of the UBI will need to be cancelled out (otherwise we risk losing some or all of the benefit of the UBI in price rises).
But despite having to pay more tax as a total community, a UBI and the associated taxes can be arranged to ensure that every Australian will end up better off after tax than they would without a UBI. Net incomes will grow. People will have more money left in their pockets after tax and any price increases are taken into account. Disposable incomes can rise for all and will rise substantially for the poorest.
Once the best design of the UBI matched with fair taxes is selected, however, Australians will have the capacity to strike a social new deal with the federal government. They can bind the government into agreeing to spend everything we need them to spend on services for our wellbeing. In this way, the government will get our consent to higher taxes but we get their consent to higher funding for our wellbeing. We can put an end to austerity, which is so detrimental to our interests as individuals and to the public interest as a whole.
In short, what this means is that if Australians are given the UBI and the taxes of their choice they will be able to offer a social new deal back to the government – a deal that secures their consent to higher taxes in exchange for a guarantee from the government that sufficient public monies will be spent on the essentials of their wellbeing.
What we can get in return for paying more tax under a UBI is two-fold.
Firstly, we can do a deal to require the government to spend more on the essentials of wellbeing. This would be like saying to the government – OK, we’ll pay more tax as long as you spend more on the services we want and need. And of course we can readily make that deal, because in spite of paying more tax, we will have the UBI which, depending on how we prefer to tax ourselves, should mean that all of us will still end up better off after tax with a UBI than we would without it. The maths will work out in our favour on this as long as we keep fairness uppermost in mind.
Secondly, with a UBI we can also arrange things to stabilise prices.
The path to universal services security
In this social new deal we can also secure all the services we need for our wellbeing.
Perhaps the most important opportunity that Australians shouldn’t miss – and this is one that will only arise from a conversation about tax reform that is conducted in the context of a UBI – is the opportunity to select what public money should be spent on, or more accurately, to prioritise expenditure of public funds on the essentials of our wellbeing.
The conversations about a UBI can offer Australians their first chance to establish universal services security if they are used to organise the sort of deal mentioned above in which Australians can offer to pay more tax in return for a guarantee of sufficient spending on services for their wellbeing.
For more information about the possibilities for a sustainable society and economy with a social new deal, see ACFP’s question and answer sheet, What is ACFP’s proposal for an Australian Public Interest Collaboration?
Find out more about how a universal basic income will benefit all Australians and their economy
Explore the strategy in Australia Together for a universal basic income.
Find out how Australians can collaborate to design a UBI.
Find out how Australians can enter into an Australian Public Interest Collaboration to develop a social new deal with the governments by designing a UBI matched with tax reform to secure all their necessary wellbeing.
Stay in touch for the next episode
Next Episode: Chapter 6, Parts 1 to 4. Chapter 6 sets out a program of institutional reform that will enable Australians to maximise their chances of building an economy in the public interest.
Listen to a full reading of The Public Interest Economy
You’ll be able to listen to a complete reading of The Public Interest Economy in weekly instalments.
If you wish to keep reading, the full book has already been published and is available on Kindle here. The paperback is available for mail-order here or click on the picture below. Or visit the Australian Community Futures Planning website to purchase The Public Interest Economy at https://austcfp.com.au/publications#public-interest-economy
Useful insights into The Public Interest Economy
Click on the picture to listen to a radio interview with Bronwyn Kelly about The Public Interest Economy.
