Reducing wealth inequality using a Social Dividend

It is possible to rethink the creation of money for the benefits of social policy. The idea behind the creation of a social dividend is to link our monetary policy to our fiscal policy, and thus to finance the public social action.

Our current monetary system has been designed by bankers to best serve their own interests. This undemocratic system thrives on its own complexity, the fruit of the most voracious human intelligence.

Indeed, the modern monetary system is based on debt. The private commercial banks have both a monopoly and the privilege of money creation: money is created by these institutions through the issuance of loans.

In this way, at the core of “money” lies our own future’s pledge; our word is our bond. Social pressure coupled with strong legislation put in place to safeguard the banking system ensures that we usually honour our commitments. While many economists believe modern money is created out of nothing, it is actually backed by our debt and our pledge to honour our obligations; basically by ourselves!

While in the past bankers guaranteed the value of paper money based on the quantity of gold in reserve, nowadays bankers guarantee the value of paper money thanks to our collective servicing of debt.

Bankers’ use money to maximize collective debt. The more society is indebted, and the more bankers collect what they call “interest”. In reality, the interest collected by bankers is simply renumeration for keeping the debt registry up to date. But these interests are a scar to the community.

These scars that enrich bankers also install the venom of wealth inequality within society. It is for this reason that the maturing of the banking system goes hand in hand with increased social struggle.

Indeed, the banking system classifies individuals according to their creditworthiness, i.e. their power to repay their own debts. But the more a person is rich, the more able he is to repay his debt. Bankers like this category of individuals. They have become the preferred customers.

In the same vein, the financially weaker have the most difficulty repaying their debts, and therefore have a greater likelihood to default on their commitments. Bankers therefore disadvantage them further by charging them higher interest rates and more elevated operating costs, making their situation even more precarious. In 2016, Out of the 23 billion euros of profits made by the four largest french banking groups, more than a quarter were paid by those with the lowest credit rating.

Where is social justice when the poorest amongst us pay our banking system?

The worst thing about this banking system is how it accelerates wealth inequality exponentionally. The more a person is rich, and the more banks will give him easy access to money through credit. The more a person’s situation is precarious, and the more banks will disadvantage this person by high rates when borrowing. Over time, the more rich you are, the richer you become and the poorer you are, the poorer you become.
So banking ingenuity has exaggerated wealth inequalities.

This monetary and banking system’s exponential character generates bubbles. When these bubbles burst, they spill onto the real economy by giving way to populism, which in its most primitive state leads to wars and xenophobia.

This creation of debt stimulated by our bankers creates another new type of bubble, a bubble that is much more dangerous for the future of humanity. Indeed, debt leads inexorably to overconsumption. By definition, the money created at the time of a loan is generally used to satiate our overconsumption instincts . This consumerist frenzy draws more from our planet than what can be naturally regenerated. Since the 1970s, we went into ecological deficit. This deficit creates an ecological bubble and like all other bubbles will explode sooner or later. It is only a matter of time. Climatic changes and global warming are clear warning signs of this coming danger.

As long as good conscience does not align itself with the monetary system and with the deterioration of our planet, polluters will have good days ahead.

What solution can we bring to slow down this disaster?

As a starting point, nothing will first change as long as the people don't understand what is really going on. The privileged players in this system (bankers and their accomplices), will do all what is in their power to defend their existing privileges. The answer must come from the people. Only a democratic and popular answer is possible.

The first thing to achieve is to stop the bleeding of debt through the creation of money. The monopoly and privilege granted to private banks must stop as soon as possible. Central bank control should return to the state or government, who in turn set the guidelines for money creation.

At the same time, to counter the globalization and tax evasion schemes orchestrated by white collar fraudsters, we need to have full transparency and traceability of our money. What prevents our monetary institutions to use blockchain technology to create a crypto currency? Nothing. Nothing but the fear of bankers losing their monopoly over money creation, or the fear of the ultra rich having their complex and well organised tax evasion schemes unmasked.

Therefore our money should become a crypto currency, both traceable and transparent. Even though this would be against our bankers’ self-interests and against the self-interests of scammers and black economy profiteers. Honest people and middle social classes are exhausted from paying for everyone.

Also, money created by bankers and the various monetary policies of central banks are designed to profit the most financially sophisticated individuals. These policies have two insidious effects on the social balance. On one hand it exacerbates wealth inequalities by allowing the rich an easier access to money. But also, this monetary creation creates a dilutive effect that impoverishes people as a whole. Printing money at large-scale discriminates against employees and retired individuals. They are the main losers of this organized fraud. Over time, this system promotes return on capital at the expense of labour, but also immerses our seniors in poverty. This system, by design, accelerates these inequalities.

Therefore, it is necessary to control our money supply, and to allow a democratically accepted system of money creation.

Without such monetary creation, our savings will be protected. Our salaries and pensions stop losing purchasing power. But, in growing economies, the risk of deflation must be tackled, i.e. a lack of money that could lead to a drop in prices.

If we consider an average growth rate over a long period, say empirically 2.7%, we should create this much money per year, and this newly created money should be re-injected into the economy.

Once this new money supply is created, the question becomes how to redistribute it. This is where the idea of a social dividend comes into play! This monetary surplus creation is naturally dilutive of the excess wealth that exists; and should be allocated to social action within the country. In the United Kingdom, money supply is around 2830 billion pounds. This should generate GBP 76 billion annually to redistribute to the most vulnerable of us.

The aim here is not to create a tax levy, but to create a social windfall via a fair monetary policy. This dilutive effect will be more readily accepted by tax payers than a social tax levy. Nowadays, this impoverishment of the people by money creation already exists. The only difference becomes who benefits from it. It will no longer be our bankers and their accomplices.

In addition, this new monetary system will reduce public debt by allowing a better balance of the State budget. Indeed, on one hand the traceability of the crypto pound will increase tax revenues, and on the other hand the social burden on the State will decrease with the social dividend. This system will create an innovative social fiscal policy servicing fiscal spending and social action.

This creation of money for social purposes must be redistributed to those individuals to whom the utility of money is vital. In economic theory, this tax is very much related to the concept of circulation of money in the economy, commonly called velocity of money. By transferring the money to the needy, the circulation of money increases, and thus makes our economy stronger.

The theory that I just developed remains at best utopian as long as people don’t look to understand what is taking place, rather accepting to be divided on social or religious grounds. The system in place will do everything to distract our consciences. Our collective condition will not change as long as we do not change what is wrong in each of us. To succeed, and beat the fraudulent forces in place, the effort must be collective!

Anice Lajnef

Le Club est l'espace de libre expression des abonnés de Mediapart. Ses contenus n'engagent pas la rédaction.