A universal basic income in “funny money”? This could seriously work
Local alternative currencies could be the way to create an income floor and reshape the economy at the same time.
Under the signature economic plan put forward by presidential candidate and tech entrepreneur Andrew Yang, everyone would get a Universal Basic Income (UBI) of $1,000 a month. It sounds like an egalitarian policy, but among progressives it gets mixed reviews.
On the one hand, such a policy would disproportionately empower the working class. On the other hand, a UBI could be inflationary and lead to more environmentally harmful consumption. But ultimately, by focusing on increasing consumer purchasing power, the policy proposes to improve the current system rather than to change it. Other critics of UBI say the policy amounts to giving a person a fish instead of a fishing pole.
But there’s a simple way to tweak UBI into a policy that transforms the entire river. By distributing the dividend in the form of an alternative currency—and making sure that currency is democratically governed—such a UBI could actually act as the engine of economic transformation that builds power and wealth in local communities.
We are actually more familiar with alternative currencies than we might realize. Food stamps—formally known as the federal Supplemental Nutrition Assistance Program—operate in a similar manner to an alternative currency, essentially acting as money that can only be used on certain goods at certain places. Community currencies are also quite common, from Berkshares in Massachusetts to the Bristol Pound in Bristol, UK. There is even an experiment in Barcelona called the Real Economy Currency (REC) that pairs a digital community currency with a UBI and aims to increase local economic vitality, protect against economic leakages, improve community relations, and explicitly “offer an alternative to the globally dominant financial and monetary system.”
“Local” is key here because an alternative currency-UBI scheme will work best the more democratic and responsive it is. Think of it like Facebook’s newly announced Libra, except instead of functioning to extract wealth for global oligarchs to reinforce the preexisting structures that benefit them, an “alt-UBI” would do the exact opposite.
Suppose a city gives all of its residents $500 in “Alt-Bucks” every month. How and where would residents spend it? A public, participatory entity could determine specific criteria that businesses would have to meet in order to be able to 1) pay their local taxes in the alternative currency and/or 2) convert the alternative currency back into the mainstream currency. For example, a local community could prioritize enterprises with lower carbon emissions, with GHG reduction requirements getting stricter over time. Or they could prioritize locally owned businesses, unionized businesses, or worker-owned businesses in order to build a more just economy. Or they could prioritize publicly owned institutions like public housing, public transit, public utilities, and other services to effectively establish a locally rooted Universal Basic Services program.
Businesses that met the criteria and were in the program would be the most likely firms to accept the alternative currency. If they didn’t meet the criteria, the firms would have to spend the currency at businesses that do.
As Ellen Brown argues in Banking on the People, “community currencies… allow communities to make decisions about where capital should flow rather than giving decision-making power solely to banks.”
Community currencies face severe limitations when the community lacks any control over credit, writes Thomas Greco. This is why it’s important for the program to operate in context with other democratic financial institutions.
For instance, in order to retain value, a city running the program would need to hold in reserve dollars equivalent to the value of the alternative currency in circulation. (The simplest system for this would be a ‘‘convertible local currency’ in which one unit of mainstream currency—a dollar, a pound, a peso—is equivalent in value to one Alt-Buck.) If that reserve were held as a deposit in a public bank, it would boost that bank’s lending power to invest in the local economy, helping new businesses grow that will be in the partner program or writing loans to firms and enterprises making changes to meet criterion around environmental sustainability. When considering how to pay for the program, using a social wealth fund would, again, be an ideal vessel. For example, an array of taxes (on carbon, congestion, or medical cannabis) could be used to build out the fund, which would make investments in line with aforementioned priorities and use the dividends to comprise the basis of the UBI.
Community currencies tend to be somewhat small in scale and therefore their impact tends to be limited. It’s the UBI that provides the rocket fuel for the program. Even with remarkably small UBI – say, $50 – in the form of an alternative currency, a city with 800,000 residents would be pumping $40 million into the economy, up for grabs only for businesses that meet publicly set priorities.
Combined with a broader context of democratic finance, a city could use this program to create the alternative economy that their constituents wish to see: a flourishing sector of black-owned businesses, numerous environmentally sustainable worker cooperatives, and improved public institutions to meet housing and transit needs. Through a participatory and democratic process, a universally distributed alternative currency would empower communities to build their own economic transitions.
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