The wealth and income gap between the top 1% and the remaining 99% in the UK, and across much of the western world, is on the increase and showing no signs of slowing down. Many of us do not recognise any positive benefits from this misguided attitude forced upon us by the ruling elite, and we are lectured to like children that by making people richer at the top everyone else will eventually profit below them.

Indeed, many politicians base their entire strategy on this flawed logic without questioning its true effectiveness. They label it as “the trickle down effect”.

The strategy of the top 1%

To be fair, not all that praise the trickle down effect are found in the top 1%. Some are on modest incomes but believe in it nevertheless. But purely for our indulgence in this article let’s group politicians, bankers and big business owners as the beneficiaries of trickle down economics.

To illustrate my argument here is a simplified example. Please don’t be concerned about the round numbers or the fact that there may be more to the process, it’s just a quick case in point. People have written entire books on this subject, so I’m certainly not going to try and give a detailed explanation in a few sentences.

The UK interest rate is at an incredibly low 0.5% and has been since the depths of the 2008 financial crisis. Now let us say for augments sake that UK banks can borrow at or around 1% .Then we borrow from the banks at anything between 5% – 20%.That means it has cost us 10 – 40 times more to get access to the same money once it has passed through the hands of the banks. If you take a payday loan we are talking at borrowing costs of over 1500% in some cases.

It is impossible to have a fair society when its people are forced to pay such dramatic differences in order to get access to the same money. You could then argue that banks themselves are merely an expensive middleman that could easily be removed to make the transaction between money creator and the user cheaper and more effective. In fact that is one reason why crypto-currencies such as Bitcoin have become such a popular area of interest in recent times; they effectively remove the middleman and level the playing field for all. At the very least we should consider nationalising retail banks.

A very possible way out

The problem with most of the failed capitalist models is that they often rely on middlemen and expensive distribution methods like grants government loans and the benefits system to be able to operate. Instead of means testing to find the most deserving recipient, we need to simply ensure everyone gets their fair share. Just as you would receive a dividend as a share holder of a business, every member of society should receive an equal share in the profits of the nation.

The idea of a social dividend is traditionally a left wing socialist policy. Strangely my views were generally right wing, but owing to crony capitalism markets can no longer be trusted to find true value at the time of asking. There are numerous fraudulent price manipulations out there in LIBOR (London Interbank Offered Rate), housing markets and the gold and silver markets just to name a few. I’m going slightly off on a tangent here, but centre ground politics usually results in compromised policies in order try and please the masses, but as a result the centre ground solves very little of today’s major issues. Not sure how radical it is to have both left and right wing principles, but I would argue it beats sitting in the middle any day.

OK… let’s get back on track…

Benefits of a social dividend and basic income

Here is an outline of Social Dividend and Basic Income:

Wikipedia’s definition of Social DividendA social dividend is a payment to each member of the public derived from the economic profits generated by publicly owned enterprises, constituting the individual’s share of capital and resources owned by society. The social dividend is a component of many proposed models of socialist economic systems.

basicincome.org describe a Basic Income as – A basic income is an income unconditionally granted to all on an individual basis, without means test or work requirement. It is a form of minimum income guarantee that differs from those that now exist in various European countries in three important ways: it is being paid to individuals rather than households. 

Personally, I prefer the term social dividend because it sounds more inclusive and suggests you are getting a share of something you own, rather than a free income or handout.

All members of society would receive their share. A social dividend offers us a brand new workable approach to fairness. The benefits system would be replaced with a rational and practical approach to allocate societies proceeds. The amount would be akin to 50% of the countries average wage. If the average wage is £24,000 per annum (exclusive of the dividend), the dividend paid would be £1,000 a month to every member of society over a set age, perhaps 16 years old.

Eradicate rent-seekers

House builders Barratt have made huge profits from the Tory Help to Buy scheme which made up 31% of the companies sales. Barratt’s revenue soared by 19.1% to £3.7 billion, while pre-tax profit escalated by a colossal 44.8% to £565.5 million. At the same time prices for affordable homes still rose 7% for the year. Instead of helping people buy a home the scheme has forced thousands of people to pay a lot more for a house than it is worth. The only beneficiaries are the directors and top management at Barratt Homes.

With a social dividend in place this rent-seeking wouldn’t be an issue because money generated would be equally distributed back into society.

Goodbye student loan vs grant debate

Student loans would be a total non issue. Students could use their dividend to pay for all university expenses without any guilt as everyone else is getting the same amount regardless. This could potentially eliminate student debt if managed properly, or at the very least reduce it to a much smaller sum. 

Great for business

One argument against a social dividend is this. If everyone is given money, why would anyone bother to work to earn it in the first place? As human beings we would not all sit around doing nothing. It would mean more mothers and fathers can work because they can now afford child care, meaning work really well pay instead of working to pay for child care and getting no further forward financially at the end of it.

Entrepreneurship would increase rather than decrease. A dividend would give the self-employed and small businesses guaranteed funding to start and grow and critical income whilst they cannot draw a wage.

How can it be paid for?

Probably the biggest criticism is cost. How on earth can it be paid for? In actual fact, is easily affordable. We waste billions on QE (quantitative easing) with zero benefit to the economy or society. Labour’s new leader Jeremy Corbyn has stated “People’s Quantitative Easing may be the best way to undo the mistakes of the first round of QE”. And if we have QE for the people then at least some of that money should be funnelled into a social dividend. Bear in mind, existing benefits, rent-seeking, loans, grants etc that we know of today will be no longer required, so I would argue it is more affordable than what we currently have in place.

A social dividend, a fair share for all… Let me know what you think.

 

Daniel Thorley

Daniel Thorley

Daniel Thorley is the owner of Business from the Kitchen Table. He writes, publishes and promotes information products and articles in the business, internet marketing, investing and other related niches. His mission is to assist others to produce income streams and invest in real assets in order to become their own bullet proof central bank. To Daniel, everyday is a learning process!

My Story: www.22s.com/242161

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Email: thorleydan@gmail.com
Daniel Thorley

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