As chair of Britain’s Financial Services Authority, Adair Turner saw the collapse of the financial system firsthand. In the aftermath of the crisis, he became one of the main advocates of helicopter money – but today he doubts if universal basic income is the best way to address growing inequality.
Adair Turner is Baron of Ecchinswell and chairman of the Institute for New Economic Thinking. He was Chairman of the Financial Services Authority (2008-20013), and Director-General of the Confederation of British Industry (CBI).
He spoke with EURACTIV’s Jorge Valero during INET’s conference held in Edinburgh (Scotland).
You have said that current technological development is not increasing our leisure time, and this is a problem of collective action. What do you mean?
It is noticeable that, in the early stages of productivity breakthrough, from 1850 to 1950, the benefit was shared between greater material prosperity and less working hours. During that period of time, there were a series of things that clearly and positively transformed human life for the better, like washing machines or cars, freeing people and giving them wider horizons.
We used the benefits for some leisure time and not working so hard. But since about 1970 or 1980, predominantly societies haven’t had more leisure, or it has been incredibly unevenly divided between some people not having any work at all and some people working away very hard. We have devoted all the benefits of rising technological capability to more material and service products.
What does that mean in the current context?
In an environment of rising inequality, people are more aware of their relative status compared to other people and therefore they have to keep working not to have a basic standard of living, but to compete with other people to have positional goods. We could have more technological capability, which automates away a whole lot of jobs, and we could again not take that in extra leisure but just find other things to do so people would have to whizz around working like mad, but it is not clear that this is good for human welfare.
I don’t want to be too paternalistic. I don’t want to say that I have the ability to know what is good for people. But we know that the idea of everybody being perfectly equipped to exercise their own self-interest comes against these problems of collective action. If you are in an environment where the price of a property is driven by people working 40 hours a week, even if collectively we could all decide to work 15 hours a week, and you don’t work those 40 hours, you are not going to be in a nice property.
In an environment where positional goods, like property in a particular location, is a hugely important part of what determines your individual standard of living, we are caught in an environment where individuals don’t have the option of deciding to have more leisure. They are caught in a society where the behaviour of everybody else determines the choices there are available to them. If everybody chooses in a different way, your choices would be different.
You championed giving free cash to every citizen directly from central banks. Could central bankers be an option to finance a universal basic income?
There are two different things here that we must keep separately, or at least I keep them clearly separated. I argue that, in some circumstances, when aggregated nominal demand and the economy are depressed, you should consider the “helicopter money” to help the economy going.
But I am very wary of saying that is how I would pay for universal basic income or something similar. If you want to set up a universal basic income scheme, you want to do it forever. You don’t want to do it just temporarily. But you don’t want to do “helicopter money” forever.
We have to separate what are the things we should spend more money on as a society in a permanent fashion. If universal basic income is among them, we should probably accept that it requires higher taxation on somebody else, rather than trying to pretend that it is a free good, because I can print the money for it.
What is your opinion about universal basic income?
For me, we need to separate the general idea from the specific implementation. There is something about modern technologies, which is likely to drive an increase in inequality. Once you reach conclusion, you need to come up with an intervention to deal with it.
But simply giving people some money creates all sort of political difficulties, as it may require a large sum of money, but also disincentives. If it is a small sum of money, it enables citizens to live in an adequate but pretty poor lifestyle in which you don’t get rid of your problems.
What that suggests is that, although I don’t exclude the possibility of some sort of universal basic income, maybe there are some other things that are more important. For example, making sure you have very good free health services and education. Or making sure citizens enjoy high-quality public transport systems subsidized and pleasant public spaces.
There are many ways of enabling people with relatively low income to have a good, pleasant standard of living that are more important than simply saying, ‘here is some money’. But these are just different ways of solving a fundamental problem, which is that if we just leave it to the free market, we will find that the wage dispersion that will emerge is wider of what we will consider acceptable.