Basic Income: The Potential of Cryptocurrency
In my book World After Capital, I have a chapter on Universal Basic Income, which I see as essential to getting from the Industrial Age into the Knowledge Age. Basic income gives people economic freedom, which is essential if we want them to freely allocate their attention. I am about to rewrite the part on how to finance a Basic Income. Much of the writing on that to date, including my own, has taken the approach of looking at existing budgets and figuring out how to rearrange them. That, however, is thinking too narrowly.
Instead, I am now convinced that the right way to implement a Basic Income is through changing how money is created. At present most industrial economies use some form of fractional reserve banking. Commercial banks can create extra “money” in the economy in the form of credit as they only need to keep a fraction of their deposits as a reserve. Central banks have also used other mechanisms to provide liquidity to commercial banks, especially following the 2008 financial crisis.
An alternative approach would be to move money creation the individual level by issuing a basic income. This is variously referred to as helicopter money and quantitative easing for the people. Now one immediate objection to such a policy would be that it could lead to runaway inflation a la the Weimar Republic. Technology, however, is massively deflationary providing a strong counter forces. And money creation at the people level could be combined with some form of demurrage to withdraw money from the system.
There have been small local currency systems along these lines, the most famous one be the Woergl Experiment. I am grateful to team at Mein Grundeinkommen, which has introduced me to much of the literature on this. One analogy which they use is that money in this system is like water: basic income is rain and demurrage is evaporation (which together form the basis of the water cycle).
One exciting potential of crypto currencies is that they could make it much easier to build such a system. This could happen at the existing nation state level and I was pleased to find out that some central banks are actually thinking along this direction. Even more tantalizing is the idea that with crypto currencies such as system could come into existence that lives outside the confines of nation states and helps bring about a global Universal Basic Income.