E-mail to the treasury – Covid 19 Demand Side Economic Response

Ladies and Gentlemen of the Treasury.

I head up a political party: Direct Democracy Forum Reg Number 936.

We have as cornerstone policies:

1) A Senate, drawn from the streets, 2) Tax Reform (Total Economic Activity Levy, Replaces all other taxes) (TEAL), 3) A Universal Basic Income (Including National Health Insurance Funding) (UBI), 4) An Advancement Grant (for tertiary education and other advancement activities) (AG), 5) A Sovereign Wealth Fund (SWF), 6) Banking and Monetary Reform

We suggest the last five items should be adopted to relieve the effects of the Covid 19 pandemic and any subsequent economic fall-out.

Assuming an adult population of 35 Million adult South Africans, a UBI of R5000 per month would deliver R175 Billion into the demand side of the economy, each month. Apart from the obvious economic stimulus this would bring to the economy it would also have the effect of empowering and uplifting every recipient in the economy, and to ‘challenge’ the supply side to claim their share of that stimulus through trade and industry. A UBI is intended to replace all other grants.

A UBI can be paid for by a 2%TEAL on all the money flowing through the banking system. You would not be printing money so much as re-purposing existing money. If you created or borrowed the money you might wish to recycle it using TEAL. A ½% TEAL could also fund the Fiscus.

You can ‘create’ the required money, if you wish (see below*). This is what the banks would do if you borrowed R175 Billion from them, at interest. They would create the money from nothing, as is their wont, then lend it to you at interest. If treasury themselves created the money from nothing instead of going to the banks, treasury would get the money and save the country and the taxpayers the interest.

The ANC are talking of a Sovereign Wealth Fund (SWF). If you stimulate the demand side of an economy without ensuring that the supply side keeps pace, you have a classic inflation/hyper-inflation situation. The SWF can be used to intervene in the supply side of the economy to help it maintain the required balance between demand and supply. This it does by investing in the supply side economy. This, however, would not be the SWF’s sole function. The SWF can be rapidly funded using TEAL and other mechanisms to become effective in this manner, inside of months, or even days (see below**).

Part of the supply side intervention would be for the SWF to own and run commercial, industrial and community banks alongside privately owned and run banks, thus influencing the financial services sector. We believe that the S A Reserve Bank (SARB) should be wholly owned by the SWF and operated for the benefit of the economy, regulating the money supply and interest rates to that end. Any money creation (see above *) would be under the auspices of such a SARB.

The rational for this is that a UBI is an intervention designed to fill the void left by the already existing 4th Industrial Revolution’s lack of formal sector employment opportunities. The Covid 19 pandemic seems just to have accelerated the onset of this dilemma. There is more to this (see below **).

** Further details are available at our web site, http://ddforum.co.za. If you wish to discuss any of this you may contact me on +27 76 060 1973 and or at

Thank you for your attention.

John Barrington.
Leader, DDF.

The Case for a Universal Basic Income

A UBI is an unconditional income paid to every citizen, without a means test or work requirement.

There are many hard-headed and pragmatic reasons for a UBI:

1) With the advent of the Fourth Industrial Revolution, the capitalist system is failing the market and itself. When everything is automated and there are few employment and income earning opportunities, what will happen to the capitalist market place? A UBI would ensure the market place still exists.

2) To the capitalist elites, poverty is a poor customer, prosperity is a good customer. A UBI would almost guarantee that prosperity.

3) Austerity never lifted any country out of depression or recession. Austerity results in fire sales of an economy’s most valuable public assets. In SA’s case, Eskom, SAA and others, are all at risk. While this may suit the buyers, it does not suit the sellers. A prosperous country need not face fire sales of its priceless assets and a UBI will help secure that prosperity.

4) The trickle down effect is a load of economic codswallop, second only to the banking industry’s scams as a massive confidence trick.

5) In recessions or depressions, stimulating the supply side encourages hoarding by the elite however and wherever possible, thus reducing the trickle down to a smidgen. Rather, give the stimulus to the demand side, who will spend it. Desiring their share of the stimulus, the supply side will respond with investment and increased supply of goods and services.

6) In South Africa’s case, a R5 000 UBI for 35 million head of population would deliver R175 Billion into the demand side of the economy, every month. That would represent an enormous boost for the economy.

7) The reality is you cannot simply pour money into the demand side of an economy without ensuring the supply side is able and willing to meet the demand. If the supply of goods and services lags behind demand, you have inflation, in some cases runaway inflation, and there have been and still are many such examples of hyper-inflation, not least in Zimbabwe. Inflation is a function of supply scarcity in the face of robust demand, not simply a function of a plentiful supply of money.

8) Again for the benefit of the capitalist elite, is it better to be wealthy in a sea of prosperity or in a sea of poverty? Wealth in a sea of poverty breeds, anger, envy, hatred, difficult trading conditions, poor social health, poor economic health, poor physical security and lawlessness, often culminating in extensive social and political unrest, even in anarchy and sedition. You only have to look about you to see evidence of that. Sadly, with only a few exceptions, that is true for much of the world today. A UBI will help create a sea of prosperity,

9) A UBI does not try to know what everyone’s specific needs are and then directly meet those needs. Instead it acknowledges that individuals are the best judges of their own needs and allows them to satisfy those needs without bureaucratic intervention, within the financial limits of the UBI. So a UBI is empowering and uplifting for all, without needing to be tailored for each individual circumstance.

10) It has been said that if all the money spent on Britain’s welfare state were instead given directly to it’s people, there would be no poverty in Britain. The same can probably be said of the effect of a UBI in South Africa.

11) While many argue the masses would squander a UBI, those who posit that, are, generally, from the privileged class, secure in their employment, their wealth and their income, and resentful (I think) of giving money to persons and not expecting anything in return. This is, I believe, largely a result of indoctrination that supports the following, if you keep the population poor, you will have an uninterrupted supply of cheap labour. Ironically, these are the same people who say they would not give up their jobs if presented with a R5k UBI, but that everyone else would not want to work. Everyone cannot be correct in that response. It is a logical inconsistency.

12) The truth is, there is a real expectation of an exchange of value for a UBI. That is, to be and to behave like a responsible citizen. Think about that, particularly with reference to item 8) (above).

13) Many of the poor, whether employed or not, say they would use a UBI to improve their lives, their earning potential, their employability, find jobs, invest in their own businesses or invest in retirement schemes, or all the above. And many have responded that a UBI would diminish crime. These are not the responses of thoughtless ingrates but instead are the responses of a thoughtful people who understand the benefits that could accrue from a UBI.

14) While some who are asked about a UBI might at first say they would no longer have to work, when it is pointed out that by continuing to work they would earn the sum of their wage and the UBI together, and be financially better off for it, they concede they would rather keep their jobs, or even find better jobs, using the UBI to aid them in that objective.

15) That so many South Africans think so poorly of other South Africans, or perhaps even of themselves, is one of the great tragedies of South Africa, and whilst there may be historical reasons for such attitudes, we cannot let bad history forever define our present and our future. We need to move forward with more positive attitudes. A UBI will enable that.

16) A pilot scheme in Canada in the 1970s gave everyone in a quite extensive community, a UBI. It was found that while many low paid workers (particularly among the young) left their jobs, they did so in order to up-skill themselves and returned to the market a better contributor than before. The study was started by a liberal government and closed down by a conservative government, for cost reasons.

17) Not only did the direct recipients in that scheme benefit, but the entire community benefited. This can be scaled up to embrace an entire economy with the same effects at all levels and across all sectors of the economy.

18) There have been a few UBI pilot studies (see also 16) (above)), notably and most recently in Finland where 2000 unemployed Fins were paid a ‘dole’, a stipend, that is, whilst unemployed. The recipients standard of living and psychological well-being improved, obviously. And when the experiment ended, and was declared a failure because there was not a general move amongst the beneficiaries to find work, their expectations and prospects crashed. First, it wasn’t a UBI experiment but a dole experiment. It wasn’t universal, it was highly specific, directed only to those unemployed persons and intended to see how they would respond. Again (see 16) above), the experiment was started by a liberal government and closed down by a conservative government, for cost reasons. Those sorts of pilot studies do nothing for anyone, let alone for those conducting them, and are mostly self-serving. In answer to the cost reservations, see item 26) (below).

19) While it is probably true that some will be satisfied with the UBI as the sole source of income and be satisfied with a subsistence standard of living, the DDF believe that such persons will, in time, become a minority and that most will use the UBI to uplift themselves and their communities. To argue that there will be failures and use that to justify withholding a UBI from all, is a poor argument at best.

20) The dynamics of the work place will probably change. Employers will no longer have to be satisfied with poor quality work product and workers will no longer need to seek employment at any cost, so there will probably be a re-balancing of the dynamics between employer and employee, which we believe will benefit both. That dynamic needs to change to ensure healthy workplaces. If a UBI achieves that, it will have achieved what decades of bargaining councils, strikes and violence have failed to achieve.

21) That a UBI will directly help the poor and destitute is not the primary goal of a UBI. Instead a UBI should be viewed as an investment in the economy and the people, who will use that investment to uplift themselves and their communities. That the poor will be directly helped out of poverty is a welcome side effect of a UBI, no more.

22) There is a saying that you must first give in order to receive. If you invest in the people and the economy, they will indubitably generate the rewards of that investment.

23) The UBI would also help fund the informal economy which is needed to pick up the employment slack resulting from the fourth industrial revolution, as proposed by Jeremy Rifkin in his book, ‘The End of Work’. A UBI will serve to add dignity and purposes to a population abandoned by the formal sectors of the economy.

24) A UBI is intended to replace all other welfare grants, so, in South Africa for example, a UBI would replace child grants, poor grants, old age grants and disability grants et al, but would not obviate government’s responsibility to ensure adequate health and education for the needy.

25) Part of the health support system would come from an intended NHI, which would be funded as the only permitted deduction from the UBI, so, unlike conventional Medical Aid Schemes, the NHI and its members would be funded and served for their lifetimes. The NHI would operate as a medical aid scheme and is not intended to challenge the existence of private schemes but is intended to introduce a new and significant player into the industry with appropriate cost benefits to its members.

26) To pay for a UBI is beyond the scope of a conventional tax system. Tax systems generally aim to collect 30% of the GDP. As a UBI could easily exceed the GDP in value, that really does not make any sense at all. Replacing conventional taxes on income and profits etc. which penalise the successful, with a levy on the money flowing through the banking system will, however, pay for a UBI. In South Africa, a ½% levy on all deposits and withdrawals from the banking system will replace the tax of 30% or so of the GDP, or better, and a further levy of 2% will pay for the UBI and sundry other needs. In short, a 2 ½% levy will pay for the fiscus plus the UBI. This process is called TEAL, or Total Economic Activity Levy, and is more like an economic rent than a tax. TEAL is possible because, historically, something like 30 to 40 times the value of the GDP flows through the South African banking system in any given year. You can read more about TEAL at http://ddforum.co.za/policies/teal/teal-the-big-picture.

27) The effect of replacing conventional taxes with TEAL, will be to reduce income tax from rates between 30% to 60% or more, including direct and indirect taxes, to about 5% of income. This is so because TEAL broadens the tax base from only those in the formal economy to embrace all in both the formal and informal economy. 30% to 60% tax reduced to 5%. What is there not to love about that?

28) While it is true that some who have never paid tax in their lives will suddenly be paying TEAL, it should be considered that the ½% TEAL needed to fund the fiscus would amount to 1% of monies flowing through one’s bank account, or roughly the equivalent of what you pay to run your bank account. Put another way, you would pay the same amount to run your government as you pay to run your bank account. That is a pretty good trade-off.

29) In the DDF model, the UBI is intended for every adult South African citizen. We guess at 35 Million. We will expect parents to look after and be responsible for their children until they in turn, become adults and qualify for the UBI, and enter the tertiary education stream or the employment market. But why should they do further education or enter the employment market? The answer, simply put, is to earn more money and benefit themselves financially, professionally and socially.

30) And why should parents look after their offspring? The answer to the point, is that a UBI would enable stay at home parenting which would consolidate family cohesion and encourage the adoption of family values, which should strengthen all of South Africa’s societies, across all of South Africa’s people.

31) These numbers are just numbers, and proposals and part of DFF policies. 35 Million head of population? We do not actually know how many adult South African Citizens there are. R5 000 UBI? We don’t actually know what is possible. We think and believe R5 000 is a conservative and achievable goal but …? ½ % to 2 ½% levy? That depends on the GDP and the flow of funds through the banking system. Much depends on the economic realities of the time.

32) We believe these numbers should work, but, if and when the DDF ever make it into Parliament and these issues become real issues, everything has to be debated and approved by Parliament. That is also a reality.

Never the less, the impact of the fourth industrial revolution on employment and the market place is going to continue to worsen and something needs to be done to ameliorate it’s effect. We believe that a UBI will contribute significantly to that amelioration process. The blog post http://ddforum.co.za/uncategorized/2019/06/03/democracy-at-risk, or, of more substance, the PDF ‘Democracy at Risk’, available at http://ddforum.co.za/publications, examines these and other issues in some depth.