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IS THE PRESENT CRISIS AN UNPRECEDENTED OPPORTUNITY FOR BASIC INCOME?. Robert Boyer Plenary session 2 – Reforming social protection system and basic income 13th International Conference – BIEN 2010 Brazil. INTRODUCTION. The three objectives of this presentation

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is the present crisis an unprecedented opportunity for basic income

IS THE PRESENT CRISIS AN UNPRECEDENTED OPPORTUNITY FOR BASIC INCOME?

Robert Boyer

Plenary session 2 – Reforming social protection system and basic income

13th International Conference – BIEN 2010 Brazil.

introduction
INTRODUCTION

The three objectives of this presentation

  • Present the origins of the crisis and its structural nature
  • In this context assess the new opportunities and constraints upon the implementation of Basic Income programs
  • Embed the issue of basic income into the specificity of modern societies, both capitalist and democratic
i a structural systemic and global crisis
I. A STRUCTURAL, SYSTEMIC AND GLOBAL CRISIS
  • The crisis of the asymmetric power of finance
  • Financialization as a reaction to widening inequalities
  • The structural unbalanced the world economy and the diffusion of the crisis
the crisis of the asymmetric power of finance
The crisis of the asymmetric power of finance

At the core of the crisis: the erosion of the directresponsibilityof credit decision

slide5

1. At the core of the crisis: the erosion of the direct responsibility of credit decision….

Various financial entities buy these derivatives

Risk transfer

Need of hedging

Securitisation by investment banks

Lehman Brothers

Swaps against credit default

AIG

Externalization of the risk

Mortgage financial institution

Real estate buyers

Credit contract

Deepening of the gap between financing and risk taking

Incentive to take more risk

Figure 1 – The hidden origin of subprime crisis: a perverse division of labor within finance

Collapse of the joint responsibility of contract

Systemic crisis

this deterioration of quality is permanent of mbs from 2003 to 2007
… This deterioration of quality is permanent of MBS from 2003 to 2007

Graph 1

Source : Yuliya Demyanyk, Otto Van Hemert (2008), p. 1

slide7
Thespilloverof all the destabilizing mechanisms not corrected during the previous crises…

The endof a finance-led growth regime…

An unprecedented crisis generated by financial laissez-faire…thatdiffusesto the rest of the world

slide8
The end of a credit led household consumption boom

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.

financialization as a reaction to widening inequalities
Financialization as a reaction to widening inequalities
  • The crisis of the asymmetric power of finance
stagnating median income but explosion of ceos remunerations
Stagnating median income, but explosion of CEOs remunerations

Source: Piketty, Saez (2003), QJE, p. 33, figure 11.

a general widening of income inequality the share of the top deciles income share us 1917 1998
A general widening of income inequalityThe share of the top deciles income share, US 1917-1998

Source: Piketty, Saez (2003), figure 1, p. 11

slide12
A clear correlation between financial bubbles and wealth concentration

Source:

Phillips Kevin (2002), p. 79.

the 2000s new unbalances of the world economy
The 2000s: new unbalances of the world economy
  • The de facto but paradoxical and conflict prone interdependence between the United States and Asia, especially China
  • The emergence of rentier economies as key actors
  • The impact of Chinese strategy upon developing and emerging economies
the more immediate consequences of this highly specific crisis
The more immediate consequences of this highly specific crisis

Disciplining finance: a matter of efficiency in reducing the frequency of crises and an issue concerning social justice

Taxing finance : is it a method for financing Basic Income ?

Priority to domestic led growth via Basic Income: an alternative to laisser-faire globalization.

alternative configurations for capitalism and citizenship
Alternative configurations for capitalism and citizenship

Market relation

IV.

Monopolistic

Administered

Van Parijsian capitalism

Society wide, solidarity Basic Income

Bismarkian capitalisms

Solidarity among wage earners : social contribution

II.

Oligopolistic

I.

Capital/ labor relation

Purely competitive

Inexisting

A form of market relation

Organized

Institutionalized

Minimalist

Significant

III.

Beveridgian capitalisms segmented solidarity: general taxation

Organic

Citizen/State relation

conclusion
CONCLUSION

C1 – Any analysis about the future of basic Income has to take into account the novelty of the present crisis. It means that

the globalization without regulation,

the excess of financialization

and the lack of social and environmental sustainability

have come to an end.

slide36
C2 – 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.

C3 – 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.

slide37
C4 –Basic Income schemes appear as an emerging and promising paradigm for many developing countries:

Quite effective in fighting extreme poverty, and some programs with moderate costs have been promoting employment

A wave of social inclusion, i.e. a rupture with respect to the trends typically observed in Latin-America.

A stimulation of the domestic market,

Clear political dividends for the governments

A vibrant epistemic community.

C5 – 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.

slide38
C6 –The societies with already a well developed welfare State experience major difficulties in designing and implementing this strategy:

The inertia of segmented social allowances

A threat concerning the dismantling of past compromises,

The diversity of welfare components, built upon different risks.

A basic dilemma: should its level be low and/or a variant of a negative income tax …

…or should it be high and initiate the transition towards a radically new form of society?

slide39
C7 –More research on Basic Income is needed:

How general and universal are its ethical foundations?

Can one prove logically its economic coherence with the typical social relations of capitalism?

Can one explore the nature of the political alliances that could trigger its emergence?

Practically, how to design such a system and how to promote the transition towards such a new socioeconomic regime?

many thanks for your attention
Many thanks for your attention

Robert BOYERCEPREMAP (Paris) – GREDEG (Sophia Antipolis)140, rue du Chevaleret 75013 PARIS, FranceTél. : (33-1) 40 77 84 12

e-mail : robert.boyer@ens.fr

web site : http://www.jourdan.ens.fr/~boyer/