The economy in any given location, can be likened to the dynamics of water. If the water in a river flows, then the river is healthy, life thrives in its waters and supports the surrounding terrestrial ecosystems.
Water evaporates from the Earth’s surface, transforms into clouds, travels with the wind, and lands in a new area where it can support life.
When water stagnates, it can become stale. Bacteria and disease start brooding and life stops thriving. Water, and more specifically flowing water – is an essential element and resource in sustaining life.
In our society, we have made the primary element that supports life: ‘money’. If you have money, you can eat, you can drink, you can live in a nice house, you can educate yourself, you can start new ventures, you can support a family, you can participate in leisure time. Money is used, and money is spent – and each expense in turn becomes a flow of income for someone else in society.
Money like water – can be stored for the future. Water-grabs in the form of excessive damming can threaten the vitality of an entire ecosystem: as water is held back, not enough water flows and the area that was once supported by its flow is now faced with a condition of lack, resulting in the degradation of the environment. Dams, when properly regulated and monitored, can be a beneficial factor in the environment. In the same way, we know that saving money can be beneficial to get us through a future ‘rainy day’. However, when we hog money, like water, we create averse conditions within the economic environment (=ecosystem) around us.
The Marginal Propensity to Consume, Save and the Multiplier Effect
Within the realm of economics, you may sometimes hear of the term ‘multiplier effect’ and ‘marginal propensity to consume’ or ‘marginal propensity to save’. Although these terms sound daunting, their meaning is actually very simple.
All these above-mentioned terms, relate to changes in the economy when an influx of income (and resulting spending) occurs.
Whenever we have money/an income, we will tend to save some of it and spend the rest. The amount we spend in contrast to how much we save for each unit of additional income, is our ‘marginal propensity to consume’ (MPC). If our MPC is 0.8, then this means that for every additional increase of income, we will spend 80% of it. In turn, the ratio of how much we save over how much we spend for each additional unit of income, is our ‘marginal propensity to save’ (MPS). If our MPC was 0.8, then our MPS is 0.2, which means we will save 20% of any additional income.
When you have little money, your propensity to save will be very low as money will primarily be spent on everyday needs. As your income goes up, your propensity to save will go up as you feel secure enough to ‘put something away’ and still be able to tend to your everyday needs. Once you’re well off, you will be more likely to save a higher portion of additional increments of income, leading to a lower marginal propensity to consume.
The multiplier effect, refers to an effect in the economy where an increase in spending will bring about a ripple effect which results in a greater amount of value as an outcome than the initial amount spent. In a way, one can look at it as ‘returns on an investment’. Here, we can go back to the example of the river, where additional flowing water in a river is not just ‘additional water’. It is also the drinking water for animals downstream whose presence is absolutely vital to the local biome [See ‘How Wolves Change Rivers’ to see how a change in a single variable can have a huge impact]. The same way, money spent in the economy is not just ‘some money spent’, but also the income of another human being who in turn can utilize this income to employ the services of someone else and again contribute to someone’s livelihood.
We can see from the following excerpt, that these propensities matter when it comes down to economic health and vitality:
“Wall Street banks handed out $26.7 billion in bonuses to their 165,200 employees last year. That amount would be enough to more than double the pay for all 1,085,000 Americans who work full-time at the current federal minimum wage of $7.25 per hour.
Purveyors of luxury goods always welcome the Wall Street bonus season, but a raise in the minimum wage would give America’s economy a much greater boost. To meet basic needs, low-wage workers tend to spend nearly every dollar they make. The wealthy can afford to squirrel away more of their earnings.
All those dollars low-wage workers spend create an economic ripple effect. Every extra dollar going into the pockets of low-wage workers, standard economic multiplier models tell us, adds about $1.21 to the national economy. Every extra dollar going into the pockets of a high-income American, by contrast, only adds about 39 cents to the GDP.”
This article nicely illustrates the power of money movement, and where this ‘current’ is the strongest.
By bringing Living Income Guaranteed into the economic picture, we can bring in a gush of fresh new water and transform our stagnant pool into a thriving flowing river. Besides fulfilling our moral duty towards our fellow men through securing each one’s Basic Human Rights, we also put into motion a new economic drive from which will sprout new opportunities of innovation and entrepreneurship.
It becomes possible to have a nice life and to enjoy the latest comfort and tech that science and creativity have to offer, whilst simultaneously making sure that everyone’s livelihood is guaranteed. The principle behind an economy like this is really a simple one: Give, as you would like to Receive.
By changing the money composition in the economy by a fraction, we can bring about tremendous changes. These changes in turn, will bring about their own effects. Even if one might not agree with a Living Income Guaranteed for political reasons, we cannot ignore the ample economic benefits that are coupled with its implementation; to name but just a few: economic growth and expansion, higher living standards, better skilled labor force, lower debt levels and better employment conditions. These in turn translate into social, cultural and psychological benefits such as lower crime rate, lower levels of stress, increased personal freedom, social cohesion, enhanced personal growth and development and overall happiness.
Let’s unleash the wave of economic, social, cultural and personal potential with Living Income Guaranteed.
Within the Living Income Guaranteed with a capitalist approach, profit is one of its cornerstones; therefore it must be ensured. Another point that tends to waste extensive money is the point that new businesses are started which then fail.From that perspective it is a suggested that there – like you have with city planning – you have business planning where it is assessed what type of businesses the community can sustain that is possible within the money supply that exists, and that those businesses are then planned-out and offered to the citizen to take on with full support from the business planning section which should be part as a governmental function, a citizen support function ensuring that businesses do not fail.
This will save massive amounts of money which makes Living Income Guaranteed a very cheap solution to a situation where there is seemingly endless amounts of money ending up in either foreclosure and/or failure and/or abuse and/or maladministration. At this stage there are no actual figures being kept of all of this – we never get to know the real numbers of how much is actually wasted. But there is more wasted through business failure, maladministration, charity and foundation creation abuse due to the influence of the consumer than what is needed to bring about a Living Income Guaranteed.
You should ask yourself some questions:
- Why are the no clear figures that inform the population of the administration of resources?
- Why are there no figures kept of how much is actually lost through foreclosure?
- How much is actually lost through businesses that are going bankrupt?
- How much is actually lost through people losing their jobs at this stage, unable to participate in the system, unable for instance to pay tax or to buy stuff to increase the revenue streams?
- How much is wasted by corrupt government officials?
- How much is directed toward inappropriate placement of tenders?
These are massive amounts beyond belief; how much is happening because there’s no oversight and everybody participating in the system knows one thing: there are resources being stolen and there is maladministration and corruption, that’s why they don’t want transparency, it’s convenient.
In some countries like South Africa, there’s the prospect of placing in laws to ‘limit transparency,’ which is no different to saying ‘Let’s legalize corruption!’. So the integrity of the human within a Living Income Guaranteed system should be administrated through a system. We have the technology now to have systems in place that can support the human to the extent of creating a system that is trustworthy and that assists everyone effectively in the world. We have the expertise to do this, now we need the will to stop corruption and to stop abuse. This can be done by Guaranteeing a Basic Income, guaranteeing a minimum wage and guaranteeing profit because all these three foundational stones will actually guarantee the existence and expansion of Capitalism and bring about a high functioning and effective society with the use of technology to produce what will ensure proper usage of resources, technology and human creativity. This cannot happen without a sense of freedom and money does give a sense of freedom.
We have come to the conclusion that trying to establish a society without a way within which the human can express their freedom is simply not going to work. Freedom is in money, it translates as the ability to express yourself in a way where you feel empowered as well as having your Basic Human Rights recognized and dignified. Not having enough money is to disempower people and to force them into crime and as you’ve noticed, massive amounts of money are lost to crime. All these things will stop if we have in place a proper technological system which we can establish with great ease at this stage. We have the technology and the managerial mechanisms to do so. In a matter of a few years, the whole world will be an internet grid and we can make use of all these things to prevent crime and corruption.
Living Income Guaranteed is not only an opportunity to support yourself from an economic perspective in terms of ensuring everyone’s survival, but also from the economic perspective to have an equal opportunity to support yourself and your family, which is a Basic Human Right. This is the equal right we give to each other to potentially become wealthy individuals while ensuring all resources are made available for everyone equally.