2. Strategies to Provide a Universal Basic Income (UBI)
In response to growing trends in inequality across the world, the idea of a universal basic income (UBI) is increasingly gaining traction not only in academic circles, but also in policy arenas. Indeed, “[t]he idea of assured [guaranteed/basic] income is in the policy and political air” [9
] (p. 10). Those advocating for a UBI tend to do so on the grounds of social justice, individual liberty, and financial security [66
]. Some advocates argue that policies that more broadly distribute or redistribute income will promote fuller employment and per-capita growth [68
Those opposing a UBI tend to raise questions about its affordability, the need to raise taxes in ways likely to suppress growth-enhancing investment and employment, and the possibility that a UBI would reduce people’s incentive to work. Indeed, labor work plays a role not only in financial stability, but also in psychological well-being and social integration; and a UBI could constitute, in some cases, a disincentive to find a job. This debate has been going for some time in EU countries, where there are typically systems in place covering shortfalls in earning capacity, with the state providing allowances for underprivileged households and/or unemployment compensations. A “solution” has consisted of making unemployment benefits temporary and dependent on the amount of days previously worked, so that beneficiaries have incentives to find a job. However, this arrangement is proving insufficient in cases (increasingly frequent) of the longtime unemployed who often find themselves unable to secure a job, lacking marketable skills, and without unemployment benefits.
Although the approaches may vary, there are only five ways to legitimately increase the funds available to people to cover their consumer needs and wants: (1) labor (wages); (2) capital (dividends, interest, and rent); (3) government redistribution of income and capital; (4) private charity; and (5) consumer debt. Because consumer debt without the future repayment ability is unsustainable, private charity has proven systemically inadequate, and capital acquisition based on mainstream market principles has produced an increasing concentration (rather than a broadening) of capital ownership, most approaches to enhancing income for poor and middle class people are based on increasing wages and/or government redistribution of income or capital.
As will be discussed below, there is an alternative approach to broadening capital ownership that is based on binary economics. This approach maintains that it is the increasing productiveness of capital enhanced by technological advance (not labor) that is doing an ever greater share of the work, creating more of the wealth, and is driving economic growth and inequality [70
]. When understood through this lens, the mechanism of how a UBI is financed matters.
As automation and AI do an increasing share of work relative to labor, financing a UBI in a way that directly links income to the work being done, and wealth created, by capital is critical. When framed this way, people could receive an income from their labor and from the work that the capital they may own does for them. Thus, the understanding of work and its distributive consequences needs to be viewed not only as the work done by labor, but also the work increasingly done by capital. A key question raised by this approach is how people can acquire a capital ownership stake without using labor earnings (which for growing numbers of people are already insufficient to support their needs without being supplemented by growing consumer debt). A second and equally important question is how the ownership-broadening capital acquisition can be structured to advance sustainable, rather than destructive, production and consumption. These questions are addressed below and in Section 3
A UBI could be provided through either a redistributive or distributive approach, or some combination of the two (as proposed in Section 3
). The redistributive approach would finance a UBI by redistributing wealth through taxes on earned income/accumulated wealth. The distributive approach, would finance a UBI by profitable, credit-worthy enhanced growth prospects that can rationally be expected to result from a broader distribution of capital acquisition and future capital income. This approach would cause a broader future distribution, rather than a current redistribution, of wealth and income.
Regardless of the rationale for providing a basic income, the idea is now attracting support from many quarters [71
]. This interest has prompted the launch of a number of basic income pilot projects around the world (Box 1
). While these pilots seem structured to help deepen knowledge regarding the impact of different forms of a UBI on the recipients of the income, a number of proposals exist for implementing a basic income for all citizens/residents of a country/region. Table 1
provides a summary of several economy-wide approaches to providing a UBI (or guaranteed employment) and highlights their financing mechanism, whether the approach has an employment requirement, the income received (if known) and by whom, and whether a connection exists between the approach and sustainable development. A more detailed description of each program is provided in Table A1
in Appendix A
Box 1. Examples of basic income pilot projects.
: Finland ran a pilot project from 1 January 2017, to 31 December 2018 [72
]. The pilot consisted of granting €560 as a tax-free monthly unconditional benefit to 2000 randomly selected unemployed people for two years. The amount was not reduced if they earned an income, and they were not obliged to search for jobs.
: In Kenya, a charity called Give Directly launched in October 2016 a pilot UBI experiment, consisting of giving a number of villages different amounts of money (from $
22.50 to several hundred dollars) during different periods of time (between two and 12 years) and observing the results [73
: In Oakland, California, Silicon Valley’s largest startup accelerator, Y Combinator, announced in 2017 it would be paying $
1000 per month for three to five years to 1000 randomly selected people (from a sample population of 3000 people) across two states [74
In Stockton, California, the Stockton Economic Empowerment Demonstration (SEED) project has been disbursing $
500 per month to 130 recipients. This pilot project started in February, 2019, and will run for 18 months. In order to be eligible, recipients had to be over 18 years old and reside in a neighborhood where the median income was equal or below $
46,003. The payments are made to recipients regardless of their employment status [75
: In Ontario, Canada, the Ontario basic income pilot (which began in June 2017) was designed to provide up to CA $
16,989 for a qualifying low-income single person and $
24,027 for a couple (less 50 percent of any earned income) for up to three years [75
]. However, the pilot was cancelled by a new conservative government and the 4000 recipients received their final payments on 31 March 2019 [76
: In Germany, a new program will be launched in 2019 where 250 qualifying citizens will be “sanction free” for three years under the Hartz IV social security system, enabling them to retain their benefits (income) while trying to search for employment [77
: In India, two basic income experiments in the state of Madhya Pradesh were undertaken in 2010, in which more than 6000 people received small monthly payments for 18 months. The state of Sikkim now plans to provide a universal basic income to more than 611,000 inhabitants, making it the largest pilot program in the world [78
: In Otjivero–Omitara, Namibia, a pilot project ran from January 2008 to December 2009. It provided a monthly income of N$
100 per person. The payments were made to residents who were under 60 years old regardless of their employment status [79
: In Jackson, Mississippi, The Magnolia Mother’s Trust will be giving 15 low-income families headed by Africa American females $
1000 per month for one year as part of a pilot project, more than doubling the annual income of these households [80
: In Barcelona, the City and collaborating partners have been providing payments to 1000 households since October 2017. The pilot will be running until September 2019. The monthly payments can be up to €403 to cover basic needs and up to €260 to cover main dwelling expenditures [81
: In Uganda, starting in 2017 the nonprofit Eight began providing unconditional weekly cash transfers (through mobile payments) to 56 adults (USD ~$
16) and 88 children (USD ~$
8) in a rural village [82
: Provided that Labour is in control of the government, the political party has promised to run a pilot project that provides weekly payments of £100 to every citizen, and an additional £50 for every child in the household, regardless of income or wealth. The trials would be tested in Liverpool, Sheffield, and in some locations in the Midlands [83
: Since 1996, and with now nearly 13,000 members enrolled, the Eastern Cherokee Reservation has disbursed two annual payments from the profits generated by a casino. Recipients must finish high-school to start collecting payments at age 18. Otherwise, the disbursements are postponed until members turn 21. The average per capita payment is approximately $
4000 per year [85
]. However, the largest disbursement took place in December 2018 with a payment of $
7007 before taxes [86
The proposals listed in Table 1
provide a range of ways in which a version of more broadly distributed income via a UBI or a guaranteed job program could be used to address income needs and inequality, to different extents and in different ways.
The Negative Income Tax (NIT) proposal can be implemented in a variety of ways. It is based on the principle that people who work receive more income than those who do not, which, in theory, incentivizes work. While the NIT has a strong employment focus, it is not concerned with the potential technological displacement of work and has no explicit environmental considerations.
The Cost of Living Refund [88
] proposal is a form of NIT and focuses on modernizing the Earned Income Tax Credit (EITC). The proposal broadens the eligibility requirements to all workers over 18 and includes childless workers, caregivers, and low-income students. The proposal does not have any explicit environmental considerations.
The Federal Job Guarantee Program focuses on achieving full labor employment by providing a job to any individual willing to work at a specified wage. While there is a rich debate between the proponents of this type of “workfare” program [100
] and the opponents who prefer a UBI [71
], the focus here is on the scale of each program and its potential impact on inequality and the environment. When compared with a nation-wide UBI program, the targeted impact of the Jobs for All Act makes it considerably smaller (perhaps serving up to 10% of a developed economy’s labor force during a recession). This reduced scale would limit the environmental impact of the program, which does have an explicit focus on creating jobs with a minimal ecological impact. With regards to inequality, the program’s focus on creating employment opportunities in the areas of health, housing, education, and public infrastructure has the potential to reduce local inequalities but is unlikely to address the larger economy-wide polarization of the workforce and decline of meaningful middle-income jobs. The program also ignores unpaid reproductive and social roles and values people by their ability to earn a living through work [104
UK Labour’s Inclusive Ownership Fund (IOF) is based on the argument that the financialization of the economy and concentration of corporate/economic ownership has led to the exclusion of workers (financially and politically) from the economy. The proposed plan is intended to provide both workers and society with a direct stake and say in the economy by reshaping the understanding of the firm under a “more pluralistic and inclusive vision” [105
]. The Labour Party’s plan has no explicit concern for its potential impact on the environment from increased aggregate demand/consumption. Whereas Labour’s IOF proposal places workers first, the Citizen’s Wealth Fund at the center of Lansley and Reed’s [90
] Fuller Basic Income (FBI) program would provide all British citizens with a direct ownership stake in, and income from, the fund. However, like Labour’s plan, the FBI program has no explicit components that target environmentally-sound investments or consumer spending. The idea of an IOF has also gained traction across the Atlantic, where Bernie Sanders is backing the approach as a way for workers to obtain a greater ownership stake and voice in companies, but the details of his proposal have yet to be articulated [106
While Yang’s [11
] proposal is based on the need to financially support workers because of technological (capital) displacement, the UBI financing mechanism is not linked to capital ownership. Due to its proven record outside of the U.S., a 10% value added tax (VAT) is considered to be an efficient mechanism to avoid corporate tax aversion. Yang’s [11
] proposal has no explicit link between the growing aggregate demand it would likely generate and the environmental impacts of increased consumption. While Yang’s proposal built on Stern’s [91
] earlier work, Stern’s UBI proposal presents a broader range of options to fund the basic income, including the idea of developing a common wealth fund based on Peter Barnes’ [97
] UBI proposal (discussed below). If such a fund were to be established, it would link at least a portion of the UBI to an effort to protect ecosystems in the U.S.
The Assured Income [9
] approach also includes a VAT as a potential revenue stream, along with taxes on unearned income, a carbon dioxide tax, and transaction fees on the trading of securities and derivatives. The monthly payments would be managed by the Social Security Administration (SSA). If a well-designed carbon dioxide tax is implemented, it could incentivize low-carbon investments, directly addressing the fourth environmental concern discussed previously.
] UBI proposal is financed using a tax on high-income earners that would be redistributed among adults earning less than $
50,000 a year. The approach is based on the rationale that work (and its incentivization) is essential, but it does not consider the possible implications of technology-displaced employment or consider the environmental implications of increasing aggregate demand. Like the NIT, it is a redistribution approach to addressing income needs and inequality.
The Alaska Permanent Fund (APF), the American Solidarity Fund (ASF), and the Common Wealth Trust (CWT) proposals provide a useful array of options for financing national funds/trusts. These range from taxing non-renewable resources (APF), to voluntary contributions (combined with a range of other financing options) (ASF), to protecting critical ecosystems by levying fees on corporations for the sustainable use of renewable/non-renewable environmental resources (CWT). When viewed through an environmental lens, it is important to assess both the way the funds/trusts are (1) financed and (2) how the principal of the funds/trusts is invested/managed. In general, it is the profits from the managed investments that will finance a UBI via dividend payments.
With regards to the financing of the funds/trusts, the APF and CWT provide two different options that aim to address unsustainable economic activities and promote sustainability. The APF levies a 25% tax on mineral leasing rentals that provides a revenue stream for the fund, which is combined with income generated by the fund’s investments. The fund’s principal may not be spent without approval from Alaskan residents, but its reserve (the realized earnings from investments) can be spent. The financing approach aligns with Herman Daly’s proposal for “taxing the bads, rather than the goods,” and can be used to influence the rate of non-renewable resource extraction. However, there is no explicit consideration of the finite nature of mineral resources or how these could be managed for future generations. In contrast, the CWT proposal addresses these shortcomings. Barnes [97
] (p. 2) claims that organized common wealth “can help fix the two greatest flaws in contemporary capitalism—its relentless destruction of nature and its equally relentless widening of inequality—while preserving the benefits markets can provide.” By putting critical ecosystems and resources under the management of CWTs, the managers of the funds would be required to protect their assets for future generations and to share current income obtained from their sustainable use. Since no CWTs have been created, specific questions on how these funds would be established and managed have yet to be answered. In addition, since citizens would be free to spend their income as they choose, the CWT proposal would not impact environmental/social problems related to the production and delivery of goods/services from outside of U.S. borders.
It can be argued that similar goals (preserving the life-sustaining capacity of the planet and addressing the widening wealth gap) can be achieved by taxing the use of public commons (i.e., the APF approach). Barnes [97
] (p. 6), however, favors the creation of trust-administered property rights over redistributive taxation on the grounds that property rights tend to endure, whereas fiscal policies can fluctuate with the whims of politics.
With regards to investing the principal of the funds/trusts, the APF, ASF, and CWT present three approaches—(1) maximizing the return with no explicit concern for sustainable development (e.g., the APF); (2) maximizing the return, but without investing in firms engaged in human rights violations or environmental destruction (e.g., the ASF); and (3) maximizing the return, but with investments that focus on the sustainable use of resources for present and future generations (e.g., the CWT). The second approach is used by Norway to guide its sovereign wealth fund investments. The third approach has the potential to significantly advance the sustainable management of resources, but it is not clear how the principal of the CWT would be invested.
The final approach listed in Table 1
is based on Robert Ashford’s approach to inclusive capitalism. This approach to addressing inequality and advancing sustainability has similarities with several of the other approaches, but it also has significant differences. (1) Whereas the other strategies are based on what might be called the range of mainstream economic theories of growth, efficiency, and fuller employment, the inclusive capitalism approach is based on binary economics, which presently is not widely reflected in mainstream economics. As explained more fully below, binary economics adds a more nuanced understanding of growth, efficiency, and fuller employment by focusing on the distribution of capital acquisition with the future
earnings of capital. (2) Consequently, only the inclusive capitalism approach recognizes the principle of binary growth (discussed below). (3) All of the other approaches require either redistribution from (or dilution of) existing wealth (including claims acquisition) or the distribution of public wealth (as in the case of the APF); whereas the more broadly distributed capital income associated with binary growth does not require redistribution. (4) As a further consequence, these other solutions compete with one another for the resources needed to supplement existing labor and welfare claims. In contrast, because it is premised on additional
wealth creation incentivized by the broader distribution of capital acquisition, the inclusive capitalism approach does not require redistribution of existing wealth or distribution of public wealth, and is therefore an add-on, not a competitive alternative, to the other approaches. Rather than subtracting from the growth in wealth available for the other approaches, it adds to it.
The principle of binary growth distinguishes binary economics as a distinct paradigm for understanding market economics. The principle provides a theoretical foundation for structuring a private-property system that will tend to broaden rather than concentrate capital ownership and thereby produce enhanced earning capacity for poor and middle class people, greater and more broadly shared prosperity, and enhanced levels of sustainable growth [107
] (p. 26).
To explain the fuller employment and per-capita growth potential of broadening capital acquisition with the earnings of capital, binary economists focus on the distinction between productivity and productiveness. Productivity is a ratio of all factors of production divided by one factor, usually labor; whereas, retroactively productiveness means “work done” and prospectively means “productive capacity” [98
Although most people believe that the primary role of capital in contributing to per-capita economic growth is to increase labor productivity, there is another (binary) way to understand the primary role of capital: to do an increasing portion of the total work done. According to the widely shared perception, per-capita growth might be understood by considering the work of moving products (food, consumer goods, etc.) between points A to B. For illustration purposes, consider the ability of one person to move one unit of product between points A and B in a day, 100 units with the help of a horse, and 10,000 units with a truck. From a binary perspective, the horse and truck are doing more than enabling the person to do more work; they are doing more of the total work (the same can be said for any capital employed in production). Thus, per-capita growth can be understood as capital increasing labor productivity (mainstream view), or as capital doing an ever-increasing portion of the total work done (binary economics view). Through the lens of productiveness, binary economists believe that in a modern industrialized economy (1) capital, not labor, is doing most of the additional work and is thereby creating most of the additional wealth and (2) capital ownership (if broadly acquired) is capable of distributing much more income than can be achieved through wages alone.
Now consider what happens in the above example if an automated truck (with no driver) moves the product from point A to B. In this case, all of the physical work of moving the product is being done by capital. In this scenario, many (if not most) economists typically point to (1) the creation of new jobs (e.g., those in the automated vehicle management center, the jobs for software programmers needed to continually update/advance the automated-driving software, etc.), and (2) the additional jobs that may be created as a consequence of the economy-wide increase in productivity. However, this argument fails to address what is really happening at the task level. With driverless trucks, the physical work of moving a product from point A to B is being done entirely by capital. While such a transformation will certainly create some new jobs in the automated transportation and robotics industries, focusing on these new jobs (that have different task categories) ignores that the specific task of moving a product from point A to B is no longer linked to income from wages. Instead, the only way income can be distributed from this task without redistribution is via a capital ownership stake in the automated truck. Note also that the typical “new-jobs” and “more jobs” response fails to address the income distribution consequences that flow from the fact that labor’s contribution to total production has decreased and capital’s contribution has increased. Now consider what happens if this simple example is extrapolated to specific routine manual and cognitive tasks across the entire economy that have or could be displaced by capital. Consider also the fact that the number of jobs displaced from specific tasks (e.g., driving trucks, providing services at truck service stations, etc.) are rarely replaced by an equivalent number of new jobs (e.g., in the automated truck sector). There is also the critical question of whether a displaced worker can transition into any of the new jobs that may become available in an increasingly-polarized workforce.
The binary economics view of economic growth has profound implications regarding how people can most efficiently participate and share in economic growth. Conventional economists assume that the gains for most people must come via more jobs and higher wages, lower prices for goods and services, and welfare redistribution—all functions of labor productivity. Binary economists see far greater potential for most people via the broader distribution of capital acquisition with the future earnings of capital. They argue that if the effect of technological innovation is to both replace and vastly supplement the work of labor with increasingly productive capital, and thereby reduce the contribution of labor to production while increasing the contribution of capital, then the preservation and enhancement of individual earning capacity and optimization of growth in a market economy requires practical market mechanisms that enable all people to acquire a share of this growing capital productiveness [107
] (p. 34). Like well-capitalized people, everyone needs the competitive opportunity to acquire capital, not merely with the earnings of labor, but also increasingly with the earnings of capital. According to Robert Ashford, a widespread understanding of the principle of binary growth will enable market participants, by way of non-redistributive, voluntary transactions, to do exactly that.
If the basic premise of binary economics—that a broader distribution of capital acquisition provides the rational expectation of more broadly distributed capital income (and consumer demand) in future years and therefore greater market incentives for the fuller employment of labor and capital (and economic growth) in earlier years—is valid, it has implications that either do not follow from conventional economic analysis or may significantly vary from it. Several of these implications are that this premise provides:
an additional approach to fuller employment and per-capita growth;
an additional approach to enhancing the earnings of poor and middle-class people in the age of automation/AI beyond minimum wage legislation, government jobs programs, and guaranteed minimum income (financed via redistribution mechanisms);
a means to reduce the need for welfare distribution;
an additional approach to environmental sustainability by (a) making greener technologies and regulations more affordable and politically achievable and (b) targeting ownership-broadening financing so as to promote the production of inherently sustainable goods and services;
an additional approach to development and foreign assistance;
an additional approach to globalization;
an additional approach to privatization; and
a means to reduce the need for economic immigration.
The present market approach to capital acquisition (which limits capital acquisition primarily in proportion to the existing distribution of wealth) constitutes a major obstacle to sustainability for several reasons, including the following: (1) market prices and the regulatory system do not sufficiently internalize the negative externalities of unsustainable production and consumption nor the positive effects of sustainable ones, especially in the long run; (2) limiting capital acquisition of increasingly capital intensive production primarily to people in proportion to the existing distribution of wealth needlessly deprives most people the competitive opportunity to acquire capital earning capacity thereby making greener technologies less affordable; and (3) conversely, broadening capital acquisition with the earnings of capital renders greener technology more affordable and investment in them more profitable, while reducing the perceived conflict between sustainability and labor employment. Thus, broadening capital acquisition with the earnings of capital on the corporate level, and consequently on the individual shareholder level to increase both individual earning capacity and corporate investment in inherently sustainable goods and services, is thus a crucial endeavor of sustainable development.
Inherently sustainable goods and services can be defined as those which exploit renewable resources “on a profit-maximizing sustained yield basis” [108
] (p. 45). Further, the use of replenishable (i.e., non-living) forms of natural capital (e.g., groundwater and the ozone layer) should not exceed their rates of replenishment or recharge [109
]. The use of nonrenewable resources should be minimized and used in cradle-to-cradle (closed loop, circular economy) systems [110
]. Such fundamental principles could be incorporated into a government-backed set of criteria for inherently sustainable goods and services, which could provide important market signals in much the same way as the U.S. ENERGY STAR system. With bank loans secured by private capital credit insurers, ownership-broadening trusts (Binary Trusts) could invest (on behalf of designated beneficiaries) in common stock voluntarily issued by companies that are advancing inherently sustainable forms of development. The trust could go one step beyond Norway’s list of excluded companies [111
] by reviewing investments using lifecycle assessment and other accepted forms of sustainability analysis. In addition, the trust could finance the growth of employee-owned B Corporations that frequently outperform investor-controlled corporations from an environmental and social perspective [112
Point 4(b) above directly focuses on the growth that an inclusive capitalism approach would generate from the development of inherently sustainable goods and services. Financing a transition to sustainability in this way would result in citizens/residents having a direct ownership stake (and voting rights) in the future (sustainable) economy, which could also have a powerful educational and economic democracy value. We believe that directly linking investment, more broadly distributed ownership, and spending on the consumption of the inherently sustainable goods and services created provides an alternative development paradigm that can grow to replace unsustainable production and consumption systems.
3. An Integrated and Environmentally Sustainable Approach to Providing a UBI
As advanced in this paper, inclusive capitalism based on binary economics recognizes that knowledge (i.e., technology) reflected in the understanding, training, and skills of people enables them to work more productively. It also recognizes the far greater ability of technology embedded in capital to do an ever-greater share of the work. This recognition mirrors Yang’s [11
] thesis of the major driving forces of inequality and technology’s ability to claim in market transactions an ever-greater share of the value being created for those who own the capital. But in contrast to Yang, inclusive capitalism makes available to people (with little or no capital) the voluntary process of capital acquisition of, and thereby ownership in, the very technologies that are displacing workers the principle mechanism for addressing inequality. The IOF, APF, ASF, and the CWTs also have capital ownership as a core or supplemental part of their UBI, with or without explicit citizen/resident ownership of the capital/shares. In contrast to these funds/trusts, inclusive capitalism trusts (Binary Trusts) could invest in inherently sustainable goods and services in a way that would provide citizens/residents with ownership of, and a future income stream (dividend payment) from, these investments. By limiting the opportunity of ownership-broadening binary financing to sustainable production, this approach would create a structural change to investment that specifically encourages and promotes the development of more sustainable products and services. Put differently, the approach would begin to close the production, distribution, and consumption loop and generate future markets for inherently sustainable goods and services. The investment decision makers working for Binary Trusts would need to be able to integrate knowledge relating to corporate finance, green/sustainable engineering, environmental/ecosystem science, etc., and be highly competent with a broad array of environmental assessments techniques, such as life cycle analysis (LCA) and environmental/sustainability certification schemes.
The Binary Trusts would be private entities that would act independently from government. The institutions that can be used most effectively to competitively acquire capital with the earnings of capital in an ownership-broadening way are (1) the largest three thousand or so credit-worthy corporations (roughly comprising the Russell Index) working cooperatively with (2) professional Binary Trust fiduciaries (such as Fidelity, T. Rowe Price, TIAA-CREF, and Vanguard), (3) private lenders, and (4) private capital credit insurers. The capital acquisition approach would work as follows [113
]. First, corporations that meet the government-backed inherently sustainable criteria would need to decide to finance their growth by selling common shares to a Binary Trust. This corporate decision would be based on an expectation that (1) the binary growth mechanism presents the best long-term growth potential for the corporation when compared with all other corporate finance options and (2) any financing received from the Binary Trust would provide a powerful market signal that the corporation is investing inclusively and sustainably. After a corporation makes this decision, the Binary Trust would then need to decide whether to purchase the shares (with bank loans secured by private capital credit insurers) and, in doing so, certify that the corporation’s planned growth (1) conforms with the established criteria for investing in inherently sustainable development and (2) is in the best interest of the Trust’s beneficiaries. Likewise, private lenders and capital credit insurers would need to be satisfied that the loans and insurance needed to finance the corporate capital acquisition are the best use of their available resources. This process of ownership-broadening binary financing is driven by market incentives with the winners being (1) the most competitive corporations seeking to advance sustainable production and consumption systems, (2) the Binary Trusts and their beneficiaries who will receive an income earned from these emerging systems, and (3) the lenders and capital credit insurers earning the best returns from their lending and insuring decisions, respectively. Thus, although the government would determine the sustainability standards needed to qualify for ownership-broadening financing, private decision-making subject to competitive market forces (not government) would determine the winners and losers in the financing and provision of goods and services and the resultant distribution of ownership and income. A more detailed description of ownership broadening financing based on binary economics can be found in [70
A valuable feature of a binary economics approach to inclusive capitalism is that it does not exclude the use of other financing mechanisms to provide a basic income—as mentioned previously, it adds to wealth. In fact, during the launch of an inclusive capitalism UBI program, other mechanisms may be required to ensure the agreed upon basic income can be paid to citizens while the capital invested by a Binary Trust pays for itself out of its future earnings. Figure 6
provides a visualization of this mechanism. For the purposes of this example, let’s assume that the agreed upon basic income will be $
1000 per month for every citizen over the age of 18—i.e., Yang’s [11
] proposed amount. During the Investment Phase, 100% of the basic income could be paid for via a 10% VAT combined with a consolidation of certain welfare programs. During this same period, the Binary Trust would begin the process of purchasing special full-dividend common shares from creditworthy corporations that are seeking capital to invest in inherently sustainable goods or services. These shares would be paid for with a bank loan to the Binary Trust, which is insured by a private capital credit insurer and a government reinsurer. Robert Ashford [99
] (p. 20) explains that “once the capital acquisition loan repayment obligations are met, the full net capital earnings (net of reserves for depreciation, research, and development) would be paid to [… citizens] to help enable them to meet their needs and wants and to provide the basis for increased investment and production.” For example, if the expected timeframe for capital to pay for its acquisition cost (i.e., repay its acquisition debt obligations) out of its future earnings is between five and seven years, then (depending on the loans terms) the Binary Trust might make no contribution to the UBI payment during the initial Investment Phase (i.e., the capital cost repayment period).
During the Investment Phase and into the future, each year the Binary Trust would make a certain number (N) of investments which, if successful (net of investment losses), would pay for themselves with the future earnings of capital, growing the share of the UBI that could be covered by this financing mechanism. The Transition Phase begins the moment the Binary Trust-based financing mechanism has satisfied its obligations to repay the acquisition costs of a particular investment and starts to pay citizens an income from their share of the newly acquired capital managed by the Binary Trust. As the scale of Binary Trust investments grow, the share of the UBI covered by this financing mechanism would also grow as indicated conceptually in Figure 6
. During this same period, the taxes used to finance the UBI during the Investment Phase could be reduced or the funds collected and not allocated to the UBI could be used to support other government initiatives.
Finally, during the Capital Income Phase the majority or all of the UBI would be provided to citizens from the dividend payments they receive from capital, with the tax-based UBI financing mechanism making up for any shortfall.
Of course, depending on the loan terms of specific ownership-broadening financings, in any year in which the Binary Trust’s income exceeds that year’s annual acquisition debt repayment obligation, trust income could be distributed in that year to the beneficiaries. Thus, the Transition Phase could begin years before the acquisition loan is fully repaid.
The above example outlines an inclusive capitalism approach to providing a UBI that is (1) grounded on an economic theory that explains the powerful role of technology in the modern economy, (2) provides citizens with a direct capital ownership stake in, and income (via dividend payments) from, the future growth of the economy, and (3) incentivizes investment in inherently sustainable goods and services. If the income received from capital were then spent on the inherently sustainable goods and services, this would create a circular flow of money and provide more incentives for corporations to finance their growth using the Binary Trust, furthering efforts to incentivize sustainability investments. This integrated approach presents a promising mechanism to realize the massive and targeted investments needed to transition to low-carbon technology and address other critical environmental challenges.