Basic Errors? Winston Churchill deconstructs UBI
Winston Churchill, campaigning for the Single Tax, 1909
How would you spend your UBI? Hard to say? Well, how do you spend your current income? What is your biggest expense? Rent? Mortgage? Probably. You could find a new place with a UBI. Whatever the case, it's fair to assume that a large proportion of a UBI would be spent on real estate.
In 1909 Winston Churchill formed the Budget League in order to counter the newly formed Budget Protest League. In British politics the budget doesn't normally provoke such extreme reaction, but that year's "People's Budget" was different for it proposed a new principle of taxation. Land value taxation (LVT) was seen by Single Tax liberals - there were hundreds of them - as the key to abolishing poverty. Between July and November the League held nearly 4000 meetings and distributed 17 million leaflets and posters.
That year, Churchill travelled up and down the land explaining the philosophy behind the budget.
"...[Previously] I attempted to draw a fundamental distinction between the principles of Liberalism and of Socialism, and I said Socialism attacks capital, Liberalism attacks monopoly. - (Cheers.)
It is from that fundamental distinction that I come directly to the land proposals of the present Budget. - (Cheers.)
Some years ago in London there was a toll bar on a bridge across the Thames, and all the working people who lived on the south side of the river had to pay a daily toll of one penny for going and returning from their work.
The spectacle of these poor people thus mulcted of so large a proportion of their earnings offended the public con-science, and agitation was set on foot, municipal authorities were roused, and at the cost of the taxpayers, the bridge was freed and the toll removed.
All those people who used the bridge were saved sixpence a week, but within a very short time rents on the south side of the river were found to have risen about sixpence a week - (laughter and cheers), - or the amount of the toll which had been remitted!
And a friend of mine was telling me the other day that, in the parish of Southwark, about 350 pounds a year was given away in doles of bread by charitable people in connection with one of the churches. As a consequence of this charity, the competition for small houses and single-room tenements is so great that rents are considerably higher than in the neighboring district!"
- Winston Churchill, King's Theatre, Edinburgh, July 17th 1909
In the examples above, welfare spending generated increased demand for local real estate and consequently prices rose. It is no different now - under our present tax system, increased welfare goes in large part to landowners. The outcome of a UBI, as currently proposed, would be higher rents and, most likely, a property bubble.
Churchill continues ...
"It does not matter where you look or what examples you select, you will see that every form of enterprise, every step in material progress, is only undertaken after the land monopolist has skimmed the cream off for himself."
All goes back to the land, and the land owner, who in most cases is a worthy person, utterly unconscious of the character of the methods by which he is enriched, is enabled with resistless strength to absorb to himself a share of almost every public and every private benefit, however important or however pitiful those benefits may be."
The modern UBI idea can be traced back to Thomas Paine's pamphlet Agrarian Justice (1797). Andrew Yang, who has done much to popularise the UBI idea, name drops Paine in an interview with Joe Rogan. But he does not mention the fact that Paine specified LVT as the funding source for the UBI. A century later Henry George did the same. Both made it clear that a UBI must go hand in hand with LVT. LVT would prevent the scenarios described by Churchill above. It would ensure that that portion of land value attributable to public spending would return to the public purse.
Crucially, LVT links the tax take to productivity. Demand for land rises as profits and wages rise. This would address Yang's core concern with the effect of automation on wages and employment. A UBI funded by LVT is the organic solution to the automation conundrum.
- The Single Tax Platform, from The Single Tax newspaper, Jan, 1895
But Yang never mentions LVT. He suggests a Value Added Tax (VAT) to fund a UBI. VAT, of course, is another form of income tax.
"The way to implement basic income without stifling employment and growth is to tap a source that does not flee, shrink, or hide when paid. That source is land rent.
The three-dimensional spatial land we live in was provided by nature, and in effect, nature says, “Here, humans, is a free source of public revenue for your public goods and basic incomes.”
But people and their governments reply, ‘No thank you, O nature. We shall give this surplus to landowners as a special privilege. To pay for public goods, we will penalize labor and enterprise with high taxes.’"
- Fred Foldvary, Ph.D., Economist
Today’s UBI discussion takes place within monetary paradigm of political economics. LVT comes from the land paradigm.
Today’s UBI discussion supresses its own history. Is it amnesia or is it phobia?
First published at Merion West
References:
Churchill's speech:
https://www.cooperative-individualism.org/churchill-winston_mother-of-all-monopolies-1909.htm
Henry George's UBI: https://www.progress.org/articles/henry-george-in-favor-of-a-basic-income
Fred Foldvary: https://www.progress.org/articles/finlands-basic-income