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The socialist move of paying for doing nothing may be the most capitalist decision of all times

For many years the question of “should the government pay individuals for not working” have been out. Numerous studies have been written and also some countries have ventured into beta projects to give individuals money for no reason other than existing.

The helicopter of money, as some call it, has flown over many countries many times recently, especially during economic crises. But what are the consequences of not having a punctual extra income, but making it a regular one (like a “universal income”) just because you were born in that country?

Imagine you have a salary for working at a big fast-fashion chain of around 1.200€ a month. For this amount you have to work 40 hours a week (160 hours per month). At the same time you are offered by the government 1.000€ to stay at home and do whatever you want (0 hours work per month). Even if you love what you do, the likelihood of you taking the deal of staying home is really high. We shouldn't forget that time=money, and we have to calculate not our weekly or monthly salary, but our hourly salary:

Fashion Chain salary: 1.200€/ 160hours/month = 7,5€/hour

Government “universal income”: 1.000€/ 0 hours/mont = ∞€/hour

Of course 1.000€ is a relatively low amount of money to live on, the payment of mortgage, car, insurances, schools and food for sure surpass this amount, meaning people will nevertheless feel the need of going to work even if they prefer not to. But to make a difference to the people working the basic salary will have to go up, at least to make it fair for the difference between working and not working.

Raising the salaries of one basic group may seem easy, but this will mean that the salaries of everyone in the company will have to raise, at least to maintain equality. By doing so, the company will have to get more money from somewhere, meaning that either they will cut the amount of workers or raise the price of the products. Some may argue that they could sacrifice earning and profit to make up for this social change, but since this change comes as something external to the company there is no point for the company to change their guidelines. Another story will be that the company at the same time decides to be more market competitive and more socially equal, meaning that they will sacrifice earnings (something that even sounding really nice utopically, will not be approved by investors and stockholders).

Once the salaries of the company have been raised, and the prices have been raised, all companies will do so to stay competitive (if they don't raise salaries their workers will go to the companies paying more, and if they don't raise prices stockholders and investors will go to the other companies). Indeed, in a few months all companies will have readjusted their teams, salaries and prices.

At this point other industries will have the urge to follow their lead, as they will charge them bigger amounts of money to make it fair and stay at an equilibrium. In other words:

If you are selling someone a shirt for 20€ last month and this month for 25€, to maintain the equilibrium the landlord renting you a house for 1.000€/month will have to raise to 1.250€, the kiosk selling you cigarettes for 2€ will have to raise the price to 2.5€ and the company charging you for consultancy services will have to, as well, raise their fee. If they don't, they won't be able to raise the salaries of their people meaning that they will start wondering why they should stay with you, being able to make more in other industries.

At this point you may be realizing that this is kind of a snowball effect, getting bigger and bigger towards inflation. And we haven't even got to the part where the government HAVE TO raise the taxes. What? More taxes? Of course, even being the government capable of pocketing more money from the raise of the salaries and prices of the products, the cost of giving free money to everyone is one hell of a debt.

You don´t think this can escalate so quickly? Take a look at the Venezuelan Inflation rate between 2017 and 2018. (A normal inflation rate is between 2 and 3%).

The snowball is getting bigger, the prices are growing and to deal with the tax raise the salaries will have to grow a little more if you don't want to pause the economy and collapse the system. This means that prices will likely go up a little more in a game that to readjust will no longer be easy or painless.

By the time the prices have settled people will realise that the money is not as valuable as before the “universal income”. People renting for 1.000€/month a flat will likely be paying much more than that, will be paying a lot more for their daily expenses but they won't be very angry because their salary will have, as well, increased (probably not as much as the prices).

But the damage won't be to the day to day worker, but to the people in need for this “universal income” that will have seen how the amount of money they are getting cannot gran anymore as many things as they thought due to inflation. And one more damaging issue will raise, because prices have gone up, people coming from outside will be likely to rethink their stay as it is going to be more expensive as for the previous time and even more expensive as other countries, meaning this the tourism income will bring a little more pressure onto the economic plans and strategy.

As you reach this point for sure you are thinking that this social measure will bring more money to the rich people while leaving poorer the poor ones. You are not wrong… raising taxes and paying for doing nothing may sound good at first, but it will ultimately be more of a capitalist move than a socialist move.

Many countries have tried or are about to try this economic model and for sure we can´t generalize saying it is bad or good. It depends on the mentality of the people receiving the money, the traditions of the country and the stability of its economy. That is why we have so many examples of this experiment coming to life, having very different results depending on the country, amount and time.

My personal opinion is that this experiment should not be seen as a socialist move, but rather a help for specific groups of people being it not sustainable during a long period of time and that must bring attached the idea that people should learn how money and economy work in return for this money. If not, we are in danger of believing we “have the rights” to receive everything but we have “no duty” towards our country and our fellow citizens.


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