The connections between supply, demand and inflation are well-known. However, when a great deal of the work performed by a population is not obviously productive in any way and still gets paid for, shouldn’t this result in inflation? If a lot of the work we do really isn’t productive, i.e. does not do much for the supply-side of things, then if UBI is going to drive inflation we should probably already be experiencing it.
So I have written on this before and need here to include the caveats regarding my absence of training in economics. I also want to invite criticism and correction from those with such training.
So here it goes.
I am not a productive worker. By that I do not mean that I don’t work hard: I do upwards of 40 hours a week. What I do mean is that the work I perform doesn’t, as far as I can see, offer much in the way of a service to most of the other people in my community/the world generally. I read, argue (coherently I hope) and then send stuff out for publications for, so I have been told, 0.5 people to read, who will in turn – on the whole – produce the same kind of stuff for the same kind of market (note: our publications tend to avoid advertisements – so I am not productive in the sense of providing gaps between adverts, either). For this I get paid pretty well – though intermittently. (Indirectly it should be said: for the publications themselves I get nothing, but I am “taken care of” with the understanding that this is the work I will do).
I am not the only one in this position: I have friends – and by the way, as preface, not in the public sector – who upon reaching a seasonal impasse in the autumn, spend most of their time stretching out tasks to occupy the working day. Undoubtedly, there’s something creative about that ability – but on any half-way sensible definition of productivity these guys are not being productive. In these instances, wages remain relatively low for sure, but it’s money for nothing – at least beyond some point.
There are also people who get paid massive wages for doing little to nothing we might call productive – indeed, it gets ‘anti-productive’ at some point, the money paid actually sucking the productive force out of the system, diverting what would be otherwise productive capital into unproductive types of activity (though I am not sure if this is in a sense relevant to my argument here, it seems that by reducing the productive possibilities of a society it is doing something relevant to the supply/demand balance).
To sum up the above – there are people getting paid for doing work that does not contribute significantly to the supply-side of the economy. That is, they’re not really doing much to increase the stock of goods/services available for other members of the community to purchase – even when they’re not doing that for 40 hours a week. However, by still getting paid – however minimally – for doing this kind of work, the demand side of the coin is getting loaded up (again, however minimally (include wages and tax-credits – -only available with a wage).
Of course, the problem is one of extent: if the phenomena identified is merely anecdotal or marginal, then any imagined effects will be similarly reduced in severity. But, for the sake of argument, let’s imagine it is not marginal, the more of this work that gets filled up, the more we get of that one-sided loading: Demand increasing with money, supply leveling off or stagnating from reduced productivity. Whatever the improved employment figures might tell us, this should have inflationary effects.
If we don’t see inflation in such cases, then why should UBI produce inflation?
One reason is that the productive are being productive just not around here. Our deficits in productivity are being filled by, amongst others, the Chinese – at least until recently. Torturous working conditions + low pay mean that the costs of goods are kept down and the supply side is leveled upwards.
This explanation doesn’t touch the problem here being considered – the money for nothing problem. If people are occupying unproductive jobs and given money for “free” the presence of cheap goods is the reason for manageable levels of inflation. It’s nothing to do with local labour efficiency of production.
So the real reason to be weary of UBI’s inflationary effects is that a sufficiently high UBI necessarily implies security. With security the demand side is not only loaded up it is activated. Inflation then, is not just about quantity of money but about the relationship one has with that quantity. When the argument that UBI produces inflation is summoned, what is being protested against is this dimension of security, i.e. that people will spend money that otherwise they’d keep stashed in savings accounts and rainy-day piggy banks.
The Inflation-Objection is predicated on an understanding that capitalism (as things stand) must keep a sufficient stock of individuals in a permanent state of precariousness in order to keep the price of things down.
Security, of course, can have a great many uses: Security is not itself the ‘doing’ of anything in particular, it is more accurately a description of ‘being’, i.e. by being secure I can now travel/relax/buy things/take a break from work/change work/retrain/spend time with kids/garden etc ad nauseum. But the defenders of the capitalist vision of economic rationality drawing on that most one-dimensional of knuckle-scraping hominids, homo economicus, can envision that security as the condition of only one activity: Buying stuff.
The inflation argument rests – more deeply then – on a) a paucity of imagination b) contempt for human possibility.
That’s not to say they’re wrong: But if they’re right, if we really are as shallow and materialistic and empty of ambition on the other side of real, genuine security, then my white flag is ready.
Main photo courtesy of Greg Goebel