A New Fiscal Contract? Constructing a Universal Basic Income and a Social Wage

Keith Rankin

Capitalist societies such as New Zealand depend on a healthy interaction between the private and public domains. New growth theory emphasise the socio-cultural contribution of the public domain to economic well-being. In contrast, neoliberal theory emphasises private sources of growth, such that the state and the social welfare system impose “deadweight costs” on the wealth-creating private sector.

After ten years of neoliberal-inspired fiscal attrition a crisis is emerging in New Zealand. Tax cuts have benefited high-income earners and the expenditure on public revenue has become increasingly miserly. Yet a society cannot be rich if its members are poor. A civilised society requires an adequate public revenue to maintain and enrich its social capital and infrastructure. A fiscal regime that provides a social dividend to all adults regardless of their income is a “basic income system”.

This paper argues that a basic income system can resolve the underlying fiscal paradox facing modern developed economies such as New Zealand’s, and should be incorporated into a new fiscal contract. In fact, a universal basic income is the logical outcome of any social accounting system predicated on the natural synergy between the private and public spheres of activity.