Interview with Lluís Torrens
Maciej Szlinder: What are the problems with economic growth in Spain?
Lluís Torrens: Spain has the same problems as other developed countries; the growth path has stopped after the crisis, and we are in a situation of stagnation. The mainstream economic thought tells us the only way to eliminate poverty is to create jobs by having economic growth. We have two big problems with growth: first, it does not reduce inequalities; second, it is ecologically unsustainable. The unlimited growth is based on the unlimited growth of debt, fostered by the financial sector. This is an infinite path of growth of the financial sector, asking for returns from the real sectors of the economy, but the planet is limited.
Basic income as a tool of redistribution of income from the rich to the poor, who relatively spend more and save less (have smaller marginal propensity to save), should lead to increase in consumption, better possibilities of making a profitable investment, and higher growth. Why then, is it sometimes presented as a part of the degrowth strategy?
Basic income is “basic.” It’s high enough only to satisfy people’s minimum vital needs: food, housing, some minimum leisure, etc. It’s not a factor that can expand consumption. The consumption of energy is bigger among the rich than among the poor. If we redistribute the income from the rich to the poor, we guarantee a minimum standard of living for everyone, so the economy doesn’t need to continuously grow. Second, we could force that the consumption of energy will be reduced in net terms. The number of flights, which consume a lot of energy, would be smaller.
Basic income gives workers an “exit option” – the possibility to live (temporarily or permanently) outside of the labour market and not be excluded from the society. That should strengthen the bargaining power of employees against employers, and increase their wages relatively to profits. As more money is spent on consumption from wages than from profits, basic income could lead to rise, not fall, of consumption. Don’t you think?
We conducted a poll last summer, asking 1600 people from Catalonia if they would leave their jobs or stop to search in case of receiving a Basic Income. The overall results showed that labour offer would increase slightly. But this was conditioned to the almost 20% unemployment rate in Catalonia. Had unemployment been lower, the rate of activity might have fallen slightly. Also, if wages of low-paid workers rise, their substitution for machines or computers is higher. But this is not bad, in the same sense that when slavery was abolished. If consumption is higher among poorest classes, this is not bad either. The important thing is what kind of new consumption is generated (relational goods as local leisure, for example) and which is reduced (transcontinental flights, for example). And you can influence this change through environmental taxes, consumption cap, or more awareness, among others.
Do you think that the degrowth strategy should be limited only to the Western, developed countries?
We need degrowth in some parts of the world, but growth in other parts, in developing economies, we need it among social classes. But they need to grow in different ways than they are growing now. It’s impossible for China to continue growing with the same pace and the same pattern – based on carbon, fossil fuels, etc. China is now the first issuer of carbon dioxide emissions.
Your model of financing basic income is based only on the income tax. Other proponents of basic income seem to prefer other sources, like taxing wealth, increasing ecological taxes, or creating sovereign wealth funds (based on the natural resources or, as Guy Standing proposes, rents obtained because of having patents). Do you think that PIT is a superior source of financing basic income?
No, I agree with all those alternative proposals. We made the calculations with the income tax, only because it was the clearest system to prove it can be implemented in Spain. It was also easy to show who would benefit and who would lose because of its implementation. But, I’m definitely in favour of environmental taxes as one of the sources of financing basic income. They would be easy to introduce in Spain, because our level of such a tax is the lowest in Europe. If we had the average level, we could pay for half of the net cost of basic income in Spain, around 10 billion Euros. We can combine PIT and other kinds of taxes, as the wealth tax that is strongly related to the income tax. I am also in favour of some type of Tobin tax, but as we can see now in Europe, it is very difficult to get a big amount of money that way. Adding the VAT, environmental taxes, PIT, and a property tax could be the best combination to finance basic income.
One problem with basing the funding of basic income partly or completely on environmental taxes is making basic income dependent on the scale of, e.g., excessive pollution. The same applies to funding through profits from extraction of natural resources or consumption. We want to limit bad activity, but we are making the level of granted financial security conditional on those bad activities.
Yes, you are right; it is not a sustainable tax. But still, in our current situation, increasing the environmental tax would be a good solution, because the price of oil has gone down, and we have a low rate of this tax in Spain.
None of the major parties in Spain stick to the proposal of basic income. Podemos, which had basic income in their program before European Parliament election in 2014, now proposes a guaranteed minimum income scheme. What do you think about it?
I think, after the elections Podemos had no good theoretical support to their proposals. So, despite proof of the affordability and feasibility of basic income in Spain, they turned away from it. It’s a part of the more general approach to reduce their radicalism. They resigned not only from basic income, but also from debt audit or reducing the retirement age. I think it has been a mistake, and now the Podemos’ proposal differs little from the proposals of the Socialist Party (PSOE) and others. It’s a pity.
One of the proponents of the guaranteed minimum income in the program of Podemos, José Noguera, argues that now basic income is politically not possible to implement, because among those 20-30% who would lose are also members of the lower middle-class, earning 18-20,000 Euros per year, who often vote for the leftist parties, including Podemos. How would you respond to this objection?
In Spain, the average tax burden is 8 percentage points (of GDP) below the European average. So, almost all people in Spain should pay more taxes to converge with Europe. And, for me, the 20-30% who would lose because of implementing basic income is definitely an acceptable quantity. Besides, who is the medium-class for Noguera? 70-80% of people would benefit from implementing our proposal. I have made calculations to finance basic income, by increasing VAT. Rich people in Spain pay small taxes, compared to other countries. We have a double tax system here that distinguishes labour income from capital income. The highest tax rate in the latter is less than 30%. It’s clear that we must change it. Few days ago, I was comparing the minimum wage in France and Spain. If a Spanish worker was paid the same minimum wage as in France, s/he would pay 7 points more income taxes and payments connected with social security than s/he pays now. The problem is also there are many people who are not paying taxes, a lot of fiscal fraud, a lot of tax evasion. So looking at the corrupted politicians, who often pay almost nothing, we could think that we pay a lot of taxes, but compared to other countries, it is just not true. Noguera thinks middle-classes in Spain are in a bad position relative to other countries, but it is false. We could pay basic income with only half of the gap between Spain and the European average-the average, not the level of Nordic countries. In this average, we have also the United Kingdom, Holland or Ireland, where the pension system is partly private. If we consider this, the real difference with Europe’s average could be around 10 points. And we can pay the basic income for up to 3,5% of GDP, less than half of the difference. So, I absolutely disagree with Noguera . Not only this, in our calculations, we show (and “show” is something that only our calculations can do in a transparent manner) that we could ensure only 10% of richest would be losers, compensating the poorer losers at additional cost of 0,6% of GDP.
Some of the leaders of a different leftist party, United Left (Izquierda Unida, IU), defend a different proposal to solve the problems of unemployment and poverty, which is a job guarantee. What do you think about job guarantee by itself and about this specific proposal?
The IU proposal of job guarantee is not a job guarantee. Daniel Raventós, Jordi Arcarons and I have made the calculations of the cost of a real job guarantee for real unemployed people in Spain, which is creating jobs for 10 Euros per hour for 5 million unemployed, plus 1,5 million involuntarily employed part-time, plus over 1 million not searching for a job anymore; the cost was around 200 billion Euros, which is almost 20% of GDP. When Eduardo Garzón, the member of IU and brother of the party’s leader, Alberto Garzón, read this, they reduced the number of jobs guaranteed in their proposal to just 1 million (i.e., 20% of the official unemployed in Spain), for only 6 Euros per hour with a total cost of 10 billion Euros. This is half of what is needed to implement a basic income for all households (not individuals) in Spain. The idea of job guarantee in countries where unemployment rate is around 6-8% (or smaller) could be a reasonable measure, but in a country with 20%, it is just simply impossible to afford, both economically and organizationally. The proposal of 1 million jobs in social service, health, education, environmental sector, social economy etc. is a big plan of creating jobs, but it is not a job guarantee. I can agree that a program of creating jobs is necessary, because we have a lack of jobs in those sectors. But it is not the solution for the problem of 8 million people, or 14% of working poor currently in Spain. And basic income is a solution.
Leaving basic income, I would like to concentrate on the local level. You are working now as a Director of Planning and Innovation in the area of Social Rights in Barcelona City Council. What are the ways to transform the city towards a greater sustainability?
The first objective is to ensure a minimum of income for the people in the city. We can estimate that 12-18% of households are under the level of poverty. We can’t implement a basic income, because it would need power over PIT or other taxes, which we don’t have, but we can implement a guaranteed minimum income for these people. We want to make pilots with different guaranteeing income, one of those, implemented for some smaller group, could test a basic income. That could help us check and counter the objection to basic income that suggests it creates a huge disincentive to labour. As I’ve mentioned above, last summer, we made a small survey about that, and according to its results, the active population (in labour terms) would grow, not decrease. Some people not searching for work now, with basic income, could become new, small entrepreneurs. Only 1-2% said they would withdraw from the labour market after getting basic income. So it would be a good idea to test those things, like in Utrecht. But, the first goal for us in the city council is to calculate the exact cost and implement a guaranteed minimum income scheme, which we call the municipal income. And the second is to create jobs. We have data for the last 2-3 years; we have created jobs and reduced unemployment in the city, but not for those unemployed for over 2 years in 80% aged above 45. The quantity of people in this group has doubled. This is a big problem, because if they find no job, their pensions would be low . So they would be the poor in our city up to death. So we have to take a strong action to give those people jobs.
What social innovations implemented in other cities do you find most interesting and possible to implement in Barcelona?
We are studying these things now. Barcelona is already participating in a pan-European project to detect and transfer successful social innovations with the cities of Lisbon, Athens, Stockholm, Rotterdam, and Birmingham. We are also a part of the EuroCities network, which is connected to the European Commission. One reason for its existence is looking for and replicating solutions implemented in other cities. We are working to develop the social economy through several actions as social clauses in public procurement, restricted bids, specialized grants, and incubators etc. But surely, we would examine also other solutions to strengthen and realize social rights of every Barcelona citizen.
Lluís Torrens is an economist, Director of Planning and Innovation in the area of Social Rights in Barcelona City Council. He is a professor in International Business High School at Pompeu Fabra University and director of Public-Private Sector Research Center IESE. Collaborates with initiatives for degrowth, that promotes a new sustainable and steady economic model.
The Polish translation of this interview can be found here.
Former interviews about basic income:
José A. Noguera, Basic income as a political horizon
Jurgen De Wispelaere, Exciting Times Ahead: Experiments and the Politics of Basic Income
Erik Olin Wright, Sociology and Epistemology of Real Utopias
Daniel Raventós, Basic Income in the Spotlight in Spain
Guy Standing, The Strategy for Basic Income
The interviewer received funding for preparation of PhD thesis from Polish National Science Centre as part of PhD scholarship decision DEC-2015/16/T/HS1/00295.