27 Apr 2022

Eurozone Government Debt in 2021 goes over €11.7 trillion - up 5.6%

On the 22nd April, the Eurostat updated their data concerning Government Debt in the European Union and the Eurozone. You can find the full data wet here. But, as usual, I have compiled the data in a Google Sheet that you can find here.
If you include all 27 EU countries, the total comes to  €12,740,563,400,000 - also up 5.6% on 2020.

The increase in debt levels varied a lot between countries, with three countries actually managing to decrease their debt levels a bit - Denmark (-6.4%), Cyprus (-2.4%) and Sweden  (-2.3%). But other countries increased debt levels much more than the average. Czechia's debt went up 26%, and for several others the increase was double digit  including Bulgaria (12.4%, Latvia (15.6%), Luxembourg (12.4%), Malta (18.7%), Romania (13.6%) and Slovakia (11.4%).

The other fascinating information provided by Eurostat concerns the amount paid in Interest on Government debt.  It totaled over €198 billion for the European Union, with a few countries being particularly generous. French taxpayers handed over €34.5 billion, and those in Germany also contributed nearly €21 billion. But the most generous were Italian taxpayers, who paid out over €62.8 billion.

It's particularly impressive when you calculate the total amount of interest payments made since the Eurostat dataset started in 1995. For the 19 Eurozone countries, that total has now reached over €6.64 trillion, which constitutes over 87% of the increase in public sector debt over the same period. 

Have our governments been spending too much? Yes, sure. They have been spending far too much of our taxes paying the entities who lend our governments the money they keep borrowing. Spoiler alert. The banks that lend money to our governments don't actually have the money they lend us. They just create it out of thin air, and then sit back and let the interest payments come in. 

I suppose that you might argue that since interests rates are low at the moment, we are getting a good deal. It's true that Eurozone interest payments have dropped a bit over recent years, as you can see from this graph.


But €179 billion is not to be sniffed at. I suspect that there may be better things to do with that money. 

I really think that fixing this system should be a very high priority.


14 Dec 2021

Global Financial Transactions in 2020 - nearly $15 quadrillion

The Bank for International Settlements published its most recent data set for Payments and Financial Infrastructures on the 7th December 2021. It includes data for 2020 for 27 countries and zones. You can check out the figures yourself here. But, as usual, I have compiled the data myself to get the overall figures for financial transactions, and you can see my calculations in a public google sheet here.  

The bottom line can be seen in the following graph that shows annual transaction values for the period 2012 to 2020. In 2020, the total comes to $14,937,746,000,000,000 - which is nearly $15 quadrillion - up over 6% on the previous year. 

I have also broken down the total by country, as shown in the following table. 

You can see that over a quarter of the total occured in the US, with the UK coming in second with around 13%, and China third with over 12%. The CLS group, which seems to avoid being localised anywhere in particular, accounted for over 10%.

In fact, the bulk of the total involves a relatively small number of players. The following table provides the details for 32 actors that each handled over $100 trillion in 2020.

For me, this concentration means that, if ever there was a political will to use a financial transaction tax to raise the funds needed to do important things like saving the planet, it would be relatively simple to tap a substantial slice of the activity. Those 32 players account for 86% of the total.

Of course, as I have been pointing out every year when I have been compiling the BIS figures, the numbers provided here only cover a selective subset of the total. As the BIS site notes, Table PS3 provides information about  "Payments processed by selected payment system", Table CCP3 provides information about "Transactions cleared by selected central counterparties and clearing houses" and Table CSD3 provides information about "Transactions processed by selected central securities depositories". There is no explanation about how these selections have been made.  And there are some major omissions. One of the most glaring omissions is the Options Clearing Corporation - which describes itself as the "world's largest equity derivatives clearing organization". In 2020, it handled a staggering 7,525,503,088 trades in equity, non-equity, and stock loans - up over 50% on 2019. And already in 2021 they have handled over 9 billion trades - so it is going to be an even bigger year. Unfortunately, I have been unable to find any numbers concerning the value of these transactions. 

When will BIS include OCC's data in their figures? How many other major players don't get included for obscure, probably historical reasons? Is $15 quadrillion just the tip of an iceberg?

Whatever the real figures, there can be little doubt that with $15 quadrillion a year in transactions, there is plenty of scope for raising money via a financial transaction tax if there is the political will. The other very interesting use for a tiny transaction tax would be to allow Central Banks such as the ECB, the Bank of England and the Fed to remove excess money from the system. This would be the perfect solution to allow central banks to inject newly created money directly into the economy without the fear of inflation. As I have argued, a minuscule FTT could be used to automatically remove excess liquidity in the system.

5 Nov 2021

COP26 - Proposition #3 - A global Personal Carbon Allowance (PCA)

The idea of a Personal Carbon Allowance or PCA is not new.  In the 2000s, the British government was already exploring the idea, with the idea of issuing a sort of carbon "credit card" - to be swiped every time they bought petrol, paid an energy bill, or booked an airline ticket.  A related suggestion, applied to industries, is the "Cap and Trade" scheme in which companies have the right to generate a fixed amount of CO2  or other pollutants - the cap.  The trade part is a market where those companies can buy and sell allowances.  Such schemes are already operating in many countries. For example, the EU has been running its Emissions Trading System since 2005. But other schemes have been developed in China, Australia, Canada and some states in the US such as California. The World Bank has a site that lists dozens of schemes as well as other schemes using Carbon Taxes.  

So, could a similar approach be used at the level of individual citizens? Back in the 2000s, the UK government concluded that there would be too much resistance and dropped the idea. However, with the COP26, an increasing number of people are thinking about the idea again. In part this has been triggered by the publication of a research paper in Nature Sustainability in August 2021 entitled "Personal Carbon Allowances Revisted". And it got a further boost when Polly Toynbee  published an opinion piece this week in the Guardian called "We need radical policies to reach net zero. Here's a fairer way to do them". In the Guardian this morning, there was an article  on the fact that "Luxury Carbon Consumption  of the top 1% threatens 1.5°C global heating limit". To keep on track for the Paris Climate agreement, "every person has to reduce their CO2 emissions to about 2.3 tonnes a year by 2030 - roughly half the average of today". But, according to an Oxfam Study released today, the world's richest 1% are on track to releasing 70 tonnes each. They will account for 16% of total emissions by 2030, up from 13% in 1990. 

For me, the solution could indeed be the introduction of a Personal Carbon Allowance, coupled with a trading system that meant that people who exceed their quota would need to buy allowances from those who are living within the budget. 

While some people are talking about introducing such a scheme at the national level, it seems to me that it would be much more interesting to introduce the scheme at a truly global level - and the sooner the better. There might be some people in countries like the UK and France that were able to live lifestyles that enabled them to keep below the 2.3 tonne limit - and those people would effectively receive payments from those in the population who were less frugal and disciplined. 

But the vast majority of the people living within the limit are  in third world countries. The scheme would therefore be a way of providing direct support for those countries. Such a scheme would, in my opinion, be better than the current scheme where western governments provide limited amounts of  direct aid because such aid is always at risk from political decisions, as was recently the case in the UK. The funds would go directly to those who are living within the limits of the planet - wherever they live.  Indeed, the Oxfam report shows that the poorest 50% of the earth's citizens could increase their Carbon footprint by over 200% and still remain within the 2.3 tonne limit. 

How would such a system affect people like me? Well, I was pleased to see that when I typed in the data for my energy usage on the "myclimate.org" website, I discovered that the Carbon footprint of our energy consumption is effectively zero - even when we include all the energy used for heating, lighting, cooking, transport etc etc.  We got rid of our oil-fired central heating system last year and replaced it with a very efficient heat pump. We have also installed 26 solar panels, which currently allows us to export about 30% of our consumption to the grid - which means that we will be able to pay the installation costs in less than 10 years. And for the last 3 years, we have been getting 100% of our electricity from renewable sources - not including nuclear. We have replaced our diesel cars by two electric vehicles which means that essentially all our travel costs (at least for limited distances) can be done with a zero carbon cost. Of course, there is a carbon cost associated with buying solar panels, and electric vehicles, but at least these are one-off costs. And we haven't completely eliminated air travel - we still like to go on vacation! But the myclimate website even allowed me to offset the carbon footprint associated with such trips. That effectively implements something close to the Personal Carbon Allowance mechanism, but on a voluntary basis. It's not perfect, but it does allow me to feel a little more comfortable about my occasional excesses. 

There's still a lot more I could be doing, and I will be trying to do better - I promise! Eating less beef is a good one. Buying locally produced items is another.  And buying second hand goods (clothes, furniture etc) is yet another. Having a Personal Carbon Allowance would be a perfect way to make such decisions much easier to make. Buy a brand new iPhone and you will get a massive hit. But purchase a second hand recycled one, and you would keep your full allowance. Easy.

So, I seriously think that this is something that should be high on the agenda at COP26. 

2 Nov 2021

COP26 - Proposition #2 - Decide how much funding is required and then propose universal FTT and Asset taxes to provide the finance

Saving the planet is going to require a lot of investment. Estimates vary a lot, but a report by Morgan Stanley in 2019 said that it would need around $50 trillion between now and 2050. And the UN's Gap Report in 2019 put the cost at between $1.6 and $3.8 trillion a year - which, over 30 years, would be an even larger amount. 

It seems to me that a very high priority for the COP26 should be to come up with a figure that everyone can sign up to. But let's assume a minimum of €2 trillion a year to play safe.

Once that has been done, there will be the inevitable question of who has to pay for it all. Poor countries will say that the rich countries should foot the bill. The rich countries will try and get other rich countries to pay more. And the result is that much valuable time will be wasted with haggling. This could easily cripple the ability of the meeting to reach agreement.

How could this be avoided? For me, a simple solution would be to introduce new global taxes that are truly universal, and which are clearly ear-marked for solving the problem in hand. They would be implemented by a global authority, independently of national governments, and with the teeth needed to guarantee that everyone plays by the rules. 

 For some time, I have been proposing two such taxes that could be both used to generate the $2 trillion a year that we need. 

The first would be a tiny Financial Transaction Tax that would be paid on all electronic transactions, wherever they occur on the planet. I've been following the Bank for International Settlements data for some time. In 2019, transactions totaled over $14 quadrillion ($14,077,730,000,000,000 to be more precise). How large a transaction tax would you need to generate $2 trillion a year? Answer - about 0.014%. 

Of course, everyone would have to pay. When you receive your salary on your bank account every month, you would have to pay. But for someone on a median income of around €2000 a month, you would have to pay around 30 centimes. You would also have to pay again when you spent the money, or moved it to a savings account, or used it to pay off debt. So that would be another 30 cents. Would people object to paying less than a euro a month to save the planet for future generations? I doubt it. 

So, why aren't we doing it? Well, there are some very powerful people who consider that their ability to do trillions of dollars in transactions every day is somehow vital for the stability of the financial system. In 2016, traders were doing an average of $5.1 trillion a day on the foreign exchange markets, Why? Because they can make a profit doing it. It's possible that if a UN based global authority slapped a 0.014% charge on such transactions, they might do it a bit less - they would not be able to take home such a large bonus at the end of the year. But they would be able to look at themselves in the mirror and say that their speculative activity was doing a bit to help save the planet. 

My second suggestion would be to finance the $2 trillion a year using a universal asset tax on all assets - wherever they are held, and irrespective of who owned those assets. It would not matter whether the assets belonged to a government, a company, a bank, a trust, or an individual. Every asset would be taxed, including land, buildings, yachts, jewelry, as well as any kind of financial assets including money and shares.  There would be no incentive to shift  from one sort of asset to another, because the tax would need to be paid anyway. Nor would it matter where those assets were held. Using a tax-haven would make no difference because the tax would be due every year anyway. Anyone involved in trying to hide assets to avoid paying the tax would be sent to prison. 

How much would the annual asset tax have to be to generate the $2 trillion needed to save the planet? In 2020, I was suggesting that you might fix the tax rate at 1% per annum. But that number was partly justified by the idea that it would mean that someone living for 100 years, would still have a substantial amount left - removing 1% per year, for 100 years, leaves you with 36.6% of what you started with. But that's assuming that the value of the asset didn't increase. Given that global property values have been increasing by about 8% per year recently, I don't think we have to worry too much about those with assets, even with a 1% tax. 

But in fact, 1% is probably way more than would be needed to generate $2 trillion. The property specialist Savill's recently published a report on total value of real estate in the world which "reached $326.5 trillion in 2020, a 5% increase on 2019 levels and a record high. Growth was driven by residential which is by far the largest real estate sector, accounting for 79% of all global real estate value.  It saw its value increase by 8% over the year, to some $258.5 trillion".

They have a fascinating graph showing that real estate is more valuable than global equities ($109.2 trillion) and Debt securities ($123.5 trillion) combined, and almost 4 times global GDP. 

Adding up just real estate, debt securities, equity and gold produces a total of $571.3 trillion. You would not need to tax that at 1% to save the world - 0.35% would be enough. If you own a house or apartment worth €250,000, would you think that it would be excessive to pay €875 a year to save the planet? Of course, if you have a loan, you would only need to pay the tax on the part that you already own - the rest would  have to be paid by the bank that lent you the money. 

But the figures provided by Savill's only covers a part of all the assets that could be taxed. If you own a yacht, or an aircraft, or a Picasso, or jewelry - you could simply be required to pay some proportion of its value per year. 

Here, I am forced to guess, because I haven't been able to find the value of all insured goods. But, I suspect that total asset value could be closer to $1 quadrillion, which would shift the rate required to raise the necessary $2 trillion to 0.2%. 

Finally, remember that my suggestion is that the authority could combine the two taxes. Splitting the tax take between the two would allow the FTT to be reduced to 0.007% and the asset tax to 0.1%. 

Is that too much to pay to save the planet? I don't think so....

One big advantage of my proposal is that by fixing the amount needed at some value - here I have chosen $2 trillion a year - and announcing that the tax rates for the FTT and asset tax will be fixed to provide just the amount needed and not more, everyone who is required to pay will know precisely where their money is going. And, in addition, there will be massive pressure on the cheats to play by the rules. Since everyone except the cheats is contributing (according to their means), it is in the interests of everyone to find anyone who is trying to get round the rules and report them. The people who currently use tax-dodges and tax-havens to hide their money will hopefully soon abide by the same rules as the rest of the population. 

Will it work? Well, the first step is to convince people at the COP26 meeting that this is the right way to go.


1 Nov 2021

COP26 - Proposition #1 - Ban all crytocurrencies

I've been very quiet for several months. But with the COP26 starting this morning, and the prospects for real progress looking very bleak, I am spurred into action. I am very pessimistic about the chances of getting political leaders to make the right decisions on a country by country basis. Politicians are often only worried about getting re-elected in the short term - and making decisions that require their voters to accept constraints tends to be unpopular.  I believe that we need to make decisions at the global scale. For this, the best thing would be for world leaders to accept the need to create a global authority with responsibility for saving our planet from disaster - and with the teeth needed to make the necessary changes. This will not be easy - especially in a world where Trumpist slogans like "America first" are rife. But, it is our only hope. 

What sort of actions could this newly created authority take? Well here's one. Ban all crytocurrencies - with BitCoin at the top of the list. 

The CoinMarketCap website gives an up-to-date list of all traded cryptocurrencies - there are currently 13,390. When I looked at the question in 2015 - there were only 740 of them. How things have changed!

Today, the site shows that the Market Capitalization of those cryptocurrencies has now reached a staggering $2.6 trillion ($2,652,238,051,844 to be precise) - up from a mere $5 billion in  November 2015,  and up 1000% since the start of 2020. Trading in 24h totaled $155 billion last Friday. 

Bitcoin alone has a market capitalization of over $1.17 trillion, with the second runner - Etherium - coming in at over $510 billion. 

But my problem with Cryptocurrencies is not their monetary value. It's the fact that their usage is destroying the planet by using unbelievable amounts of energy and resources. 

According to the Cambridge Bitcoin Electricity Consumption Index Bitcoin mining is currently using an estimated 13 Gigawatts of power, which on an annual basis means an estimated 113.93 TeraWatt hours (TWh) of energy. 

Another site gives the annual figure at 184.59 TWh, comparable to the power consumption of a country like Thailand. It's the equivalent of 87.68 Million tons of CO2, the equivalent of the carbon footprint of Chile. 

But even more mind-blowing are the figures for the energetic costs of a single Bitcoin Transaction - 872 Kg of CO2 and over 1800 kWh of energy. Think about this before you ever decide to buy something with Bitcoin.

In addition to wasting vast amounts of energy, Bitcoin mining also requires the use of huge numbers of very expensive GPU server farms - as anyone trying to get hold of GPU knows. There was already a shortage of chips because of COVID - but this has only been made worse by the fact that vast amounts of computing hardware is being bought up for cryptocurrency mining. The reason is simple - you can make money that way. Sod the planet - if I can make money wasting massive amounts of resources, then so be it. 

Some may argue that people use cryptocurrencies like Bitcoin to avoid having to use the commercial banking system, with its 2-4% merchant fees and international transaction taxes on card-based payments. I have some sympathy for this. But the simple fact is that the people use Bitcoin (and the thousands of other cryptocurrencies) for one of two reasons - to make money by speculation, or to hide transactions that could well be related to illegal activities like drug trafficking

So, if the world leaders meeting in Glasgow wanted to do just one thing that would really have an impact, I would say that a global ban on all cryptocurrencies should be close to the top of the list. Of course, there will be a lot of resistance - particular from the people that currently have a lot of bitcoins. But we will all need to make sacrifices if we are to have a hope of having a planet compatible with human life in the coming decades. Reducing the wealth of some of the people that have made fortunes from speculation is fine with me. 

As I said, I have some sympathy with those who seek an alternative to the current system, where the vast majority of the money we use is produced as interest-bearing debt by commercial banks. But that alternative doesn't have to be cryptocurrencies like Bitcoin.  See my next post for some suggestions for a real alternative.

2 May 2021

EU Government debt goes over €12 trillion with €192 billion in interest payments for 2020

I've been very quiet recently - sorry about that. But I'm still keeping an eye on events. One important annual event that I have been monitoring every year for the last decade is the moment when the European Commission publishes the official figures for government debt and interest payments in April.

You can find the basic data using Eurostat's Data Browser but I have collected the critical information in a Google Sheet that you can find here.  Sadly, for the first year, the Eurostat figures no longer include the UK - no longer a member of the European Union. Sniff.....

The bottom line is that Government debt for the 27 countries that make up the European Union at the end of 2020 went over €12 trillion - €12,078,212,200,000 to be precise. That's an increase of 11.44% in just 12 months. 

For the 19 countries in the Eurozone, the total is now well over €11 trillion - €11,107,740,800,000 - up 10.77% in a year. 

The increases for individual countries varies. Greece's government debt only increased by 3%, and for Italy, the increase was  6.8%. For France, it was 11.4%, but even Germany increased the level of debt by an impressive 13%. The winner in that particular competition was Estonia, which more than doubled the level of debt (108% increase). 

Obviously, we can blame COVID for much of this. Governments have been borrowing like crazy to cope with the impact of the pandemic. 

And of course, the impact of that borrowing will be reflected in the levels of interest payments - the other fascinating story that you can learn from the Eurostat figures.  We learn that taxpayers in the 27 European Union countries handed out a total of €191,646,600,000 in interest payments in 2020. If we only count the 19 Eurozone countries, the total comes to €172,706,500,000.

Now, you might say that this is no big deal. Indeed, the low interest rates that are in part the result of the ECB's policy of buying up government debt on the secondary markets mean that the amount of interest paid actually dropped by around 11% relatively to 2019. I suppose that is good news.

But I think that we should not forget that under the current system, the increase in debt will need to be paid off at some point. And, in the future, there is nothing that can stop the markets from increasing the cost of government borrowing as soon as they can - it's very easy money. Just lend to a government, and sit back and let the taxpayers pay you. No risk - because governments can always tax their citizens to pay the money they owe.

You should also not forget that these massive interest payments have been going on every year for decades - and they are quite unnecessary. 

For example, if you look at the figures for the Eurozone for the entire period from 1995, you will see that that total amount paid out by Eurozone citizens has now reached €6,763,744,100,000. Divide that by the population of the Eurozone, and you can see that every man, woman and child in the region has paid an average of nearly €20,000 in interest payments over the period.  For Italians, the number is even higher - €32,657 to be precise. 

People who have read my blog before may well be aware that I think that these payments are insane. It is a racket. tThe money that our governments borrow from "the markets" is, in large part, created out of thin air by commercial banks who have the virtual monopoly of money creation in the current system. While it is already insane that we allow those commercial banks to create money to loan to citizens and businesses, the insanity is even more obvious in the case where they can create money to lend to our governments. 

Perhaps one positive impact of the current pandemic, and the fact that our governments have been forced to borrow trillions of euros to cope, is that it might finally put the spotlight on the way in which commercial banks create money in the current system. The insanity of allowing our governments to keep on borrowing from banks that don't have the money that they lend should hopefully start to become obvious to all. 

The solution? Simple. We should end the current system where our governments are legally obliged to borrow from commercial banks who can create the money they lend. Instead, governments should be allowed to borrow directly from Central Banks. And those Central Banks should have the option of writing off debt

15 Nov 2020

BIS Transaction Data - Country by Country analysis

If you look at the Bank for International Settlements statistical dataset, you will see that you have a choice between a country by country analysis where the data is provided in National Country Units, or in comparative tables where all the numbers are converted to US dollars. You can see this distinction in this screen shot, which also shows when the data for 2019 became available. It was the 30th October.

The data that I have been analyzing in the past few days has used the comparative tables. But it is also interesting to look at the country tables for the 27 different areas included in the B.I.S.'s dataset.  I've done this using a Google Sheet that you can find (and leave comments!) here. Essentially, I needed to use information from 4 different tables for each country. Here is the full set of tables.

The ones that are useful for looking at transactions are the following

  • T6 Value of cashless payments and withdrawal/deposit transactions
  • T9: Value of transactions processed by selected payment systems
  • T14: Value of contracts and trades cleared 
  • T19: Value of delivery instructions processed   

I've compiled the key information in the following table which provides the numbers for each country for the 5 years from 2015-19 in National Currency Units such as Euros, Yen and Sterling.  

One of the advantages of presenting the figures in National Currency Units is that it makes the numbers more directly relevant for people in a particular country. One of the more impressive sets of numbers are the values for transactions in the UK that have increased from £914 trillion in 2015 to over £1,651 trillion in 2019. 

 I've checked that the numbers in the table are fairly close to the USD numbers that I reported recently (using the average exchange rate for converting the local currency into dollars for the year in question). But importantly, the total falls short of the USD value for the simple reason that none of the national figures includes the figures for CLS group. 

It's particularly unfortunately that the need to include major international players like CLS Group is not taken more seriously. I have frequently pointed out the anomaly of not including the Options Clearing Corporation.

14 Nov 2020

Global Financial Transactions from 2012 to 2019 - nearly $97 quadrillion in 8 years.

I've been examining in more detail the data set provided by the Bank for International Settlements that provides information on the level of transactions for the period 2012-2019. Today, I'm giving you  the breakdown by country for the whole period.

I've generated an additional column with the total transactions for each country for the 8 years, and ordered them according to that total. Not surprisingly, the USA comes top of the list a total of $25.3 quadrillion. Next comes the UK, but its interesting to see that the numbers for the UK have increased a lot from a modest $467 trillion in 2012, to over $2.1 trillion in 2019. China has also climbed fast from $547 trillion in 2012 to over $1.52 quadrillion last year. Other countries have been more stable, but France has actually dropped back a bit from over $512 trillion to 2012 to a mere $354 trillion last year.

The bottom line is that over the 8 year period, there were  $96,790,943,000,000,000 of financial transactions ($97 quadrillion). 

I suspect that some of the numbers may be double counted. For example, BIS gives the data for CLS Group on a separate line marked "Memo". It may be that some of the trading is actually also included in the US or the UK figures. They also mark the numbers for the "Euro area" with "Memo", suggesting that those numbers may be double counted with other Eurozone countries. But I'm doing my best, and the BIS doesn't seem to be clear about how the tables are compiled. 

If you want to try and analyse the BIS statistical data set yourself, you can find it here. But, I warn you, it's quite hard work!  To find out how I compiled the dataset, I you can find my Google Sheet analysis here. I've even made it so that you post comments on the sheet if you see anything that is unclear.

It's really rather a shame that nobody was listening when, 10 years ago, I proposed  that we could replace essentially all existing taxes by a very modest financial transaction tax. At a rate of 0.1% it could have generated getting on for $100 trillion in revenue. We could have fixed climate change, eliminated poverty and done all sorts of very desirable things. 

Better late than never I suppose....

11 Nov 2020

Financial Transactions in 2019 - Country by Country

Given that the Bank for International Settlements provides a country by country breakdown of where the financial transactions, this allows me to produce the following table with the value of transactions in each country.

As you can see, the US is responsible for just over one quarter of all the transactions. Next comes the UK, then CLS group (which appears to be a truly global player), and then China and Japan. 

But it is interesting to see that even some relatively small countries like Belgium can be major players, with some $633 trillion in transactions. 

The following table provides a detailed breakdown for the US, the UK, and four Eurozone countries (Belgium, France, Germany and Italy).  Note that all the values are given in USD for ease of comparison.

Global Financial Transactions : $14.07 quadrillion in 2019

Important Note - added 15th November 2020

I have just discovered that the BIS dataset double counts one of the most significant players, with the results that previous values for Global Financial Transactions have been overestimated. My apologies for that.  If you look at Table T14 for the United States, you will find the following information

I noticed that the FICC value was systematically equal to the sum of FICC:GSD and FICC:MBSD which was very suspicious. And indeed, by clicking on the note (1) you get the following message

As a result, the I provided on the 11th November, claiming a total value of €15.65 quadrillion were substantially higher than they should have been. I have corrected the figures here.

I've just analyzed the Bank for International Settlements data on Financial Transactions for 2019. The total comes to a very impressive $14.07 quadrillion - up 4% on 2018.

It took a bit of work because the BIS has not been particularly forthcoming with the numbers. In previous years, they published the data in September. But for the last couple of years, the data has come out at a later date. Furthermore, they don't include the date for  publishing the dataset on their release schedule. I wrote to them back in October and was told that the data should be available in November. 

Anyway, it has all been published now - see their website. It's not trivial to compile the complete data set because the numbers are contained in several different tables.

Specifically, you need to get the data from  

  • Table PS3  (Payments processed by selected payment systems)
  • Table CCP3 (Transactions cleared by selected central counterparties and clearing houses)
  • Table C3D3 ( Transactions processed by selected central securities depositories)
  • Table CT7 (Use of payment services/instruments)

If you want more specific details, you can use Table CT8, which breaks down payments services into 

  • Credit Transfers
  • Direct Debits
  • Cheques
  • Card and e-money payments
  • Fast payments

The dataset provides information for the following 27 countries and regions that constitute a substantial proportion of the world economy.

  1. Argentina
  2. Australia
  3. Belgium
  4. Brazil
  5. Canada
  6. China
  7. Euro area
  8. France
  9. Germany
  10. Hong Kong SAR
  11. India
  12. Indonesia
  13. Italy
  14. Japan
  15. Korea
  16. Mexico
  17. Netherlands
  18. Russia
  19. Saudi Arabia
  20. Singapore
  21. South Africa
  22. Spain
  23. Sweden
  24. Switzerland
  25. Turkey
  26. United Kingdom
  27. United States

I've downloaded all the different datasets for all the available years (2012-2019) and compiled them in a Google Sheet file that you can find here.  But the bottom line is clearly demonstrated by this graph which shows the total values for each year, peaking in 2019. 


I've already published this sort of data in previous years, but I suspect that this graph is more reliable, since the data formats are consistent from year to year.

If you want to see where those transactions are taking place, the BIS data sets provides a useful break-down. My Google Sheet analysis lists over 200 different items that you can rank in terms of value. The following table shows only those players that handled over $100 trillion in transactions.

The biggest player of them all is  CLS Group which also handled over €1.5 quadrillion. Interestingly, B.I.S. does not even localise CLS Group in a country. Next comes the Government Securities division of the US based FICC (Fixed Income Clearing Corportation) that handled $1.48 quadrillion. In fact, if you add in the second component of FICC - the Mortgage Backed securities division (MBSD), the FICC total exceeds CLS Group, at $1.57 quadrillion.

But it is interesting to see that these keyplayers are spread across the globe, with London based LCH.Clearnet, HVPS in China and Euroclear Bank in Belgium all handling very large sums. 

Although the numbers are very large, it seems clear that they must be seriously underestimated. For  reasons that are unclear, BIS does not include some very significant players. One of the most glaring omissions is the Chicago Based Options Clearing Corporation (OCC), which describes itself as "the world's largest equity derivatives clearing organization". In 2018, they cleared 5,137,201,519 contracts - up 22.6% on 2017. The volume dropped back a bit in 2019 (down to 4,976,978,519), but 2020 has been a truly bumper year. They handled over 636 million contracts in October alone - up 41.1% on the previous year, and bringing the total for 2020 to over 6 billion with two months to go. 

But even without including OCC and other keyplayers missing from the BIS's dataset the potential significance of these numbers should be clear. For over ten years, I have been arguing that a very modest Financial Transaction tax on all such transactions would provide all the funding we could possibly need to tackle global challenges like the Covid pandemic, global warming and poverty.  A 0.01% FTT would generate over $1 trillion in revenue per year. For me, it is simply incomprehensible that our tax systems are essentially all designed to tax citizens via VAT and Income tax. Why not tax financial transactions instead?

10 Oct 2020

10 years of Saving the World by Fixing the Economy

Exactly ten years ago (10th October 2010), I posted the very first entry on my blog. 

Here we are, ten years on. And my blog now extends to no less than 637 posts. So far, it's been visited an impressive 561 389 times, with around 3000 new visits every month.

It would be a very tough job if you actually tried to read through all that stuff on the web. So I have converted the entire thing into a pdf document that you can download using this link

The pdf is quite practical because the hyperlinks work, making it much better than a printed version. Furthermore, you can effortlessly search it using Acrobat Reader (or whatever it is you use to read pdfs)

The whole thing runs to an impressive 914 pages, 431 786 words, and over 2 million characters. Gulp…

When I was updating this version, I had a look at a fair bit of the old material. And, I must say that it is remarkable that there is very little that I have said over the years that I would want to take back. 

Yep. I'm pretty proud of what I have generated over those ten years. 

And if there is anything I said that you don't like, or would want to criticize, feel free. Go ahead and take me up on it. There's nothing I would like than a good debate! 

29 Sept 2020

Universal Basic Income and the Economic Singularity

For the last couple of years, I have been a member of a London-based thinktank called the Economic Singularity Club - or ESC. It was set up by Calum Chace - the author of several books on the impact of AI and Robotics, including "Artificial Intelligence and the Two Singularities" published in 2018. 

Last week, I was invited to present my ideas on why I think that the introduction of a Unconditional Basic Income could be a vital part of our response to the risks posed by the AI revolution. We had a very stimulating evening discussing the pros and cons. 

In preparation for the session, I prepared two documents. The first one was a short two-page executive summary that you can download as a pdf here. The second one is a longer nine-page version that is available here

To facilitate discussion, I'm including the texts here on my blog. Feel free to comment if you find any of the ideas interesting.

Universal Basic Income and the Economic Singularity

Executive Summary

Rapid progress in AI and automation means that in the coming decades, many jobs currently performed by humans will disappear. How can we survive this economic singularity and ensure that our children and grandchildren live happy and rewarding lives despite the loss of paid work? Some believe that we could be moving towards a world of “Fully Automated Luxury Capitalism” where goods and services have virtually zero cost. This is already the case for many internet-based services, and other essential services like education, health, transport, energy and water could follow. But could people really live decently with no money? Here, I propose that a Universal Basic Income (UBI) will be a vital feature of any future solution to the economic singularity.
Contrary to a widely held view, providing a UBI is indeed affordable, and could be implemented by a radical redesign of the current welfare and tax system. Instead of using complex means-tested benefits and a tax system riddled with loopholes, governments could provide a fixed sum to everyone with no strings attached but then tax all additional income at a fixed rate, whatever the source. Simulations for the French economy show that a system with a basic income of €600 per month per adult could be financed entirely by a flat-rate 30% tax on all additional income. The 61% of the population earning less than €2000 a month would effectively be subject to negative taxation – an idea already proposed by none other than Milton Friedman in the 1960s. €2000 is the level of pay where the 30% tax rate cancels out the €600 basic income. Remarkably, the net tax paid by the 39% earning more than €2000 per month is enough to finance the entire system! At a stroke, the reform would also eliminate the hundreds of tax breaks that make current systems so complicated. In all cases, functionally equivalent direct government subsidies for desirable behaviours (house insulation, switching to electric vehicles, using renewable energy sources, etc.) can reproduce the positive effects of tax breaks.
There are already groups of people who can avoid paid work entirely. Retired people with comfortable pensions, people with inherited wealth, and a few people who have earned enough to retire early can all choose to live a low-impact, ecologically sound lifestyle if they so choose. And they can decide to devote themselves to the vast range of activities that are very valuable, yet unpaid.  These include not just charity work, but also creative activities that are highly rewarding, even without pay. Why not give this option to everyone? Even a modest UBI would allow people to adopt a low consumption lifestyle, perhaps by moving to rural areas and growing their own food. The more people make this choice, the better our chances of saving our planet, so it should be actively encouraged. And releasing the natural creative instincts that many people have will also be highly beneficial.
Importantly, with a UBI, people would be free to adopt the lifestyle of their choice. Our current system obliges the vast majority of people to work 9 to 5, five days a week from the day they quit education to the day they retire forty or so years later. Those who fail to fit the pattern and currently depend on welfare payments are often treated as second-class citizens, “scroungers”, or worse. And that is true even if they spend all their free time doing valuable, yet unpaid work.
This discrimination would end with the introduction of a UBI. Some people would no doubt continue to work very long hours because they crave an extravagant lifestyle, with fancy cars and vacations in exotic locations. But others might choose to only work 10 hours a week, or one week or month, or three months a year. Or they might live perfectly happily doing no paid work at all. They might also decide to stop doing paid work for a year or two at various moments in their life without having to wait for some totally arbitrary retirement age. Indeed, there would be no need for a fixed retirement age. Even the very notion of “being unemployed” would no longer be meaningful, making the current obsession with getting the unemployment rate as low as possible a thing of the past. As Dave Graeber argued, around 40% of people think that their jobs are entirely pointless and serve no useful function. Introducing a UBI would eliminate many such “bullshit” jobs and free people to do far more valuable unpaid work.
A UBI also allows the sorts of flexible working practises that drive the shift towards the so-called “gig” economy and zero-hours contracts, so appreciated by business. But this would occur naturally, without the risks of exploitation inherent in the current system. Likewise, pay rates for gruelling but vital jobs (such as frontline work by nurses and carers) would naturally increase. UBI also provides a form of subsidy for local production, just as universal health care would avoid the massive costs of health care that currently cripple businesses in the USA.
While a UBI could be introduced at a regional or national level by radically reforming the welfare and tax system, an even more exciting possibility would implement a UBI for the entire population of the planet. Providing a UBI at 50% of the median wage in every country in the world would cost around $10.6 trillion a year. While this may seem like a huge number, it is tiny compared to the €14.9 quadrillion figure for financial transactions reported by the Bank for International Settlements in 2018. A modest 0.1% on all such transactions would generate more than enough revenue to finance the entire scheme.
Another potential source for a global UBI could be a tax on all assets – financial, real estate, or other forms of wealth, whether held by individuals, trusts or corporations. Imagine imposing a 1% annual tax on all such assets, irrespective of where they are held (including places that are currently tax havens). This could easily provide the money needed to give everyone the possibility to live a modest, low consumption, lifestyle wherever they live on the planet.
Advances in AI and robotics could potentially be immensely beneficial to humanity. But with the current system, there is a genuine danger that such technologies could have devastating consequences. But with a UBI in place, advances in AI and robotics can proceed at full speed without the risk of the massive social unrest. People would simply adopt a less consumption-driven lifestyle in an entirely progressive way, with no need for imposing any particular solution in a top-down manner. At the same time, we would be doing our bit to save the planet. It seems that, with UBI, we really can have our cake and eat it.  



The members of the Economic Singularity Club (ESC) share the belief that advances in AI and automation will have profound effects on humanity in the coming decades. In particular, it seems likely that machines could replace humans in a wide range of situations, making a substantial proportion of the population unemployable. For anyone with doubts about the potential impact of state-of-the-art technologies such as GPT-3 (Generative Pre-trained Transformer 3), the recent article in the Guardian entitled “A robot wrote this entire article. Are you scared yet, human?” gives a flavour of what is already possible. GPT-3’s potential for replacing entire teams of journalists (and other highly skilled and well-paid professions) makes it clear that technology is not just a threat for people earning their livings from repetitive, manual tasks.

Our book “Stories from 2045 – Artificial Intelligence and the Future of Work” published in January 2019, included a wide range of scenarios, ranging from the positively dystopian, to quite optimistic. One of the aims of ESC must be to propose strategies that help ensure that our future is more “White Mirror” than the “Black Mirror” scenarios of Charlie Brooker’s popular television series.  

In this presentation, I would like to argue that providing a Universal Basic Income (UBI) is the single most potent antidote to the societal threats associated with the AI revolution and that we should be pushing to implement such proposals as rapidly as possible.

It is perhaps useful to note that providing a UBI is in no way incompatible with other ideas that have emerged from the ESC group. In particular, Calum Chase has argued that we could move towards a world of what he calls “Fully Automated Luxury Capitalism”, made possible when the cost of providing goods and services drops so low that people could live decently without spending money. This sort of revolution has already occurred in some areas. Here is a list of some of the areas where goods and services can be provided to people with low incomes – even if they do lose their ability to find paid employment.

·      Internet. Billions of people can now access a wide range of services including radio, TV and internet at virtually zero cost. Wikipedia, Facebook, Google, Spotify and Banking services are all available to anyone with an internet connection and a mobile phone or computer. And there are now numerous schemes for providing free smartphones to people who do not have the means to buy one themselves, see for example a recent example in Lagos, Nigeria.

·      Energy and Water. Every citizen could have a basic allowance of electricity and water for free, and companies only allowed to charge for consumption exceeding the basic quotas. 

·      Education. In virtually all countries,  education is provided free of charge at least until the end of high-school, but there are many countries where even university education is either free or at a minimal cost. They include Norway, Finland, Sweden, Germany, France and Denmark.

·      Health. Although there are some glaring exceptions (such as the USA), the majority of countries now provide free universal health care.

·      Transport. There are now well over 100 cities where transportation is free, and the movement is growing. Tallinn became the first EU capital to provide free transport in 2013, and in 2020, Luxembourg became the first country with entirely free transport. But things could become even better when self-driving electric vehicles become a reality. Governments could decide to provide a Uber-like service so that anyone with a smartphone could simply request transport to go anywhere. The reduction in congestion and the number of vehicles required could easily justify the expense.

So, it seems clear that people could have many of the requirements for a modest lifestyle without changing the system completely. And while this is not Fully Automated Luxury Capitalism, this tendency is likely to accelerate. Other vital components needed to live a decent life may be somewhat harder to provide at zero cost because requirements vary so much between individuals. Food, clothing and housing can all be expensive items, even though you can reduce costs a lot by choosing to live a more frugal lifestyle. People could opt to eat less meat and dairy produce, recycle clothes and ignore the need to have the latest fashions and choose to live away from expensive and overcrowded cities.

But could people really live decently when advances in AI and robotics have restricted their ability to earn money? Before discussing the potential role for UBI, let us examine how the current systems would cope with a rise in technological unemployment. In many countries, the state would step in to help people with little or no resources using a whole range of means-tested schemes that often oblige people to prove that they are actively looking for paid work. But such schemes have many serious problems. Many people who are eligible for aid fail to take advantage of the schemes either because they are often overly complicated or because of the shame of living on welfare. And in many cases, the assistance is removed as soon as the person starts to earn any additional income, meaning that the effective marginal tax rate can be very high – 80% or more. The resulting poverty traps can mean that people get stuck in poverty, even if they would like to work.

Poverty traps can be avoided if, instead of providing support in the form of means-tested benefits, the state simply provides support to everyone, using regular monthly payments with no strings attached – the very definition of a Universal Basic Income (UBI). In this article, I will look at the fundamental issue of how such a mechanism could be implemented and how it could change the nature of society. In particular, I will argue that a Universal Basic Income (UBI) will be a vital feature of any future solution to the economic singularity.

The main problem – financing a UBI

One of the objections to a Universal Basic Income is the claim that is would simply cost too much. If you simply multiply the amount of the UBI payments by the number of people, you certainly get huge numbers. But, as we will see, a radical change in the entire tax and welfare system can easily cover the costs.

Suppose that every adult receives a standard sum of money every month, with no strings attached, but then paid tax at a fixed rate on any additional income, whatever the source. Interestingly, it turns out that the resulting scheme could be very close to the current system, but without the administrative overhead. Consider the situation in France where less than half the working-age population pays income tax. You could provide €600 a month to every adult, and tax all earnings at a flat rate of 30%. 61% of the French population earns less than €2000 a month, which is the point where their tax payments (30% of €2000, or €600) cancel out the basic income. All such people would effectively get a form of negative income tax, an idea already proposed by Milton Friedman in the 1960s. Remarkably, the amount of income tax revenue paid by the 39% who earn more than €2000 a month is enough to finance the entire system. In such a case, the UBI coupled with a flat rate 30% tax on all earnings would be a purely redistributive system – taking money from the high earners and using it to pay those earning less than €2000.

Interestingly, a 30% flat-rate tax rate has already been imposed by the French government on all income from financial sources (dividends, rents, etc.). The reform would thus be a simple extension of this same flat-rate tax to all forms of income, including salaries, pensions etc. It is also worth noting that it is easy to scale the amount of the Basic Income even in this self-financing system. Essentially, increasing the flat-rate tax by an additional 10% adds an extra €200 to the UBI. You can therefore choose between €600 a month with a 30% flat-rate tax, €800 with a 40% tax or even €1000 a month at 50%.

Further evidence that a UBI can indeed be affordable comes from a website, developed by a team based in Bordeaux, where you can simulate different ways to finance a UBI. I found that it was possible to provide a UBI of €920 per month for all adults, coupled with half that amount for those under 18 (€460). Total cost would be €645 billion, but the simulator shows that this could be fully financed. There would even be a surplus of €9 million. Much could be achieved by fusing many of the existing benefit schemes into the Basic Income payments. They include the equivalent of the job seekers allowance (€15.4 bn), housing aid (€17.4 bn), tax exemptions for low salaries (€38.7 bn), family benefits (€36 bn), state pensions (€219 bn) and unemployment benefits (38.1 MD€). But it also requires the elimination of tax niches (€34 bn) and the effects of tax individualisation (€37 bn). I also set the rate for Income Tax at 0% but replaced it by something called the CSG (General Solidarity Contribution) which is a flat-rate tax with no loopholes that applies to all forms of income. I increased it from the current rate of 7.9% to 30%. I even managed to abolish VAT altogether, but increased the existing tax on wealth from 1.18% to 2% and set a carbon tax at €100 per ton. I chose the option of taxing financial transactions which would raise a further €50 billion based on a rate of just 0.012%, but this could be easily increased. In conclusion, this official government simulator, using official figures, demonstrates that financing a UBI is perfectly doable – if there is the political will.

Later on, we will look at two additional ways of financing a UBI at a global level. But these can be combined with the proposals mentioned here. So, if we can agree that implementing a UBI is possible, what would be the advantages?

Advantages 1 - Simplification

Implementing a UBI provides a vast simplification of existing schemes for people on low incomes, or who risk losing their livelihoods because of advances in AI and robotics. Some argue that it is better to target such support to avoid making payments to people who don’t need the money – why pay a basic income to millionaires? But fundamentally, providing a basic income of €600 (or whatever) to someone earning €100,000 a month is functionally the same thing as giving them a tax break of €2000 a month.

Another thing comes for free with such a system.  Switching to a Basic Income & flat-rate tax system would allow the suppression of hundreds of tax breaks and loopholes that make many tax systems impossible to navigate without professional help. In the US, the complexity of the tax system forces even people with relatively modest positions (such as university professors) to pay professionals to fill in their tax returns. While the claim that the tax code in the US now runs to around 70,000 pages is apparently not valid, the system is very complex. It could be that the UK wins the title for the most complex system, with 17,000 pages of tax code. Much of this complexity results from lobbying by pressure groups who argue that their sector merits specific reductions in taxation. Trying to eliminate all those loopholes one by one could be extremely arduous, so entirely scrapping income tax would be a simple way to clear the system. But bear in mind that a direct subsidy can replace any tax break – they are functionally equivalent. Of course, it is relatively easy to defend a tax break (since no-one likes paying taxes and lobbying for tax breaks is considered a fair game). In contrast, it is much harder to justify receiving taxpayers’ money.

France provides a good illustration. The government is currently offering €6000 in aid to anyone buying an electric vehicle, and a further €6000 for switching from oil-fired heating to Solar panels and a heat pump. The government could have implemented such aid via tax breaks, but this would only affect people who pay tax - less than half the population. Direct subsidies are thus a much fairer way to distribute state aid because everyone can benefit. And, since they are available to all citizens, they resemble an Unconditional Basic Income. The only real difference is that the help comes as one-off payments – not regular monthly payments.

Advantage 2 – Choice of lifestyle

A second significant advantage of having a UBI is that it enables people to choose their lifestyle without the need to spend a large proportion of their time earning money. Our current system obliges many people to work 9 to 5, five days a week from the day they quit education to the day they retire forty or so years later. Those who fail to fit the pattern and currently depend on welfare payments are often treated as second-class citizens, “scroungers”, or worse. And that is true even if they spend all their free time doing valuable, yet unpaid work.

There are already groups of people who can avoid paid work entirely, without being labelled scroungers for living on benefits. Retired people with comfortable pensions, people with inherited wealth, and a few people who have earned enough to retire early can all live without working for money. Another very significant group, especially historically, are “housewives” or “stay-at-home moms”. At the start of the 20th Century, close to 90% of women were housewives or homemakers. Even as recently as 2011, roughly 20% of French women described themselves as housewives. These days, the status of housewife is only possible for people whose partners are earning enough money to give them that option. Most women are now obliged to out to work to pay the bills.

So there are already several groups within society that already have the liberty to devote their time to a vast range of activities that can be very valuable, even though unpaid. These include working in the home and caring for children but also charity work and other worthy causes. They can also indulge in a wide range of creative activities that are highly rewarding, even without pay.

You might argue that people need to be paid money to motivate them to do things that are vitally important for society. But some of humanity’s most impressive achievements have been done without monetary rewards. The entire Wikipedia project involves only about 280 paid staff, with the rest of the work done by unpaid volunteers. Currently, around 70,000 people make five or more edits to the English language Wikipedia per month – all for free.  It is worth noting that Wikipedia has practically demolished the market for commercially produced encyclopaedias like the venerable Encyclopaedia Britannica that was probably published in print form for the last time in 2010, after 244 years. Likewise, open-source software projects like Linux produced by armies of unpaid enthusiasts have demonstrated that they can rival products from Microsoft and Apple, despite their phenomenal resources. Indeed, since 2017, Linux is now the only system used on the TOP500 supercomputers.

So, there are clearly several groups in society that can choose what they do with their time. Why not give this option to everyone? Imagine the change if everyone could get involved in unpaid work – including those currently obliged to go out and earn a living 40 hours a week, all year round. Should such people be obliged to give up their valuable weekends and vacation time to do useful things that they would be delighted to do if they only had the choice?

Interestingly, in his 2018 book “Bullshit Jobs: A Theory”, anthropologist David Graeber found that around 40% of people in paid work believe their jobs are entirely pointless and serve no useful function whatsoever. It follows that if a UBI allowed all those people to stop wasting their time, and do something useful, we would all benefit. Tragically, David Graeber died on the 2nd  September 2020.

Advantage 3 – Ecology

Yet another advantage of UBI would be its ecological impact. Even a modest UBI would allow some people to adopt a low consumption lifestyle, perhaps by moving to rural areas and growing their own food. Around 1000m2 of land can feed a family of four, but this currently requires about 6 hours of labour per day. However, low-cost intelligent robots could significantly reduce the amount of work needed by picking fruit or removing weeds. Apart from anything else, this would dramatically reduce the need for herbicides and help protect the environment. The more people make this choice, the better our chances of saving our planet, so it should be actively encouraged.

In France, for example, there are around 28 million hectares of agricultural land. If 1% of that land were requisitioned, and distributed to people in the form of allotments that could be used for growing food, it would allow a substantial proportion of the French population (around 11 million people) to become self-sufficient in food.  With the average cost of agricultural land in France at around €6000 per hectare, the land needed to feed a family of 4 would only cost about €600 – a very modest investment. At such prices, rural communes in France could simply give land to all residents, enabling them to attract city dwellers to move to the country and revitalise rural communities.

Advantage 4 – Flexibility

UBI would end the current inflexible system where the length of the working day and the times when people have to work are imposed from above. With a UBI, people could freely decide how much time they spend doing paid work. Some might choose to work 100 hours in a week some of the time (it would be their choice). But others might do only 10 hours of paid work per week or even give up paid work entirely. Likewise, there would be no obligation to work all year round. People could easily decide to work just one week every month, or three months every year. With this degree of flexibility, the entire concept of being “unemployed” would cease to exist.

A UBI would also impact the many vital jobs that are currently poorly paid. The recent covid-19 pandemic has highlighted the importance of frontline health staff, including nurses and auxiliary personnel. If such workers were not obliged to work long hours, they might prefer to work part-time – maybe just one or two days a week, or for relatively short periods. To entice them to work, employers could be obliged to increase the level of pay to convince them to continue working long hours. The net effect would be that vital but gruelling jobs that are currently poorly paid would end up being among the best-paid jobs in the economy.

The desire for flexibility has been a factor in the development of the so-called Gig economy and zero-hour contracts, especially in the UK. For a business, this can be a significant advantage – especially when there is a need for seasonal workers in areas like tourism and agriculture. While current zero-hour contracts lead to worker exploitation, in a system with a UBI, such criticisms lose their pertinence.

UBI has other advantages for business by effectively subsidising local production. Imagine that you are in the business of manufacturing cars, trying to decide where to implant a new factory. A country with a UBI would have a natural advantage because some proportion of employees’ living expenses are already covered, reducing overall manufacturing costs. A similar argument already applies to health provision. In most developed countries, universal health care provision reduces costs for industry. The glaring exception is the USA, where employers have to cover the full costs of health care for workers and their families. Businesses in the USA are thus seriously disadvantaged relative to practically every other country on the planet. It is odd, even incomprehensible, that the business leaders who currently back Trump’s plan to eliminate “Obamacare” have failed to register this point.  

Towards a Global UBI?

So far in the essay, I have talked about implementing a UBI at a local level – national or regional. Replacing the current complex benefits and taxation system by a UBI coupled with a flat-rate tax on all revenues could indeed work locally. But the challenge imposed by advances in AI and automation are ones that will affect just about everyone on the planet. Can we imagine a scenario to introduce a UBI at a global level?

Suppose that we decided to provide a UBI at 50% of the Median Per Capita Income. How much would it cost? Using data from the World Population Review produces a total of just under $10.6 trillion. That may seem a huge number. But choosing to provide a UBI at 50% of the median per capita income is quite generous. For example, in the UK it would correspond to nearly £400 a month for every man, women and child – up to £1600 for a family of four. The figures for France would be similar – around €440 a month. The costs would be much higher in Scandinavian countries where the cost of living is much higher, and where median incomes are about 50% higher. But the cost of the equivalent deal in African countries where median income is typically well below $35 a month would be almost trivial.

In my contribution to ESC’s book on “Stories from 2045”, I made the radical suggestion that a very modest 0.1% tax on all financial transactions could entirely fund the $10.6 trillion needed for a universal UBI. Data compiled from the Bank for International Settlements (BIS) shows that in 2018, these transactions totalled at least $14.9 quadrillion – over one thousand times more than the sum needed to provide a universal UBI. And that sum is almost certainly massively underestimated because the BIS figures fail to include major players like the Chicago-based Options Clearing Corporation (OCC) that describes itself as “the world’s largest equity derivatives clearing organisation”, clearing 5 billion contracts a year. Likewise, according to BIS, foreign exchange transactions total $6.6 trillion a day so that with 250 trading days a year, this totals around $1.6 quadrillion. Daily volumes of interest rate swaps are also around the same value, so the $14.9 quadrillion figure is entirely plausible. Of course, some in the financial sector may claim that even a 0.1% financial transaction tax would have catastrophic consequences. But the fact is that the 0.1% rate is similar to the transaction charges imposed by the industry itself, so this argument is bogus. If 0.1% of the value of transactions was indeed funneled into the general world economy by simply giving it to the worlds’ citizens, the boost to the entire system could be extremely beneficial.

There is another relatively simple, yet currently, unexplored way to move towards a genuinely universal UBI. I have recently proposed the idea of a universal 1% annual tax on all assets – payable wherever they are held. In jurisdictions where no asset tax was present (as is the case in tax havens like the Cayman Islands), the tax would need to be paid to a global organisation such as the United Nations. If international agreement for such a scheme was possible (admittedly a tall order), it could eliminate tax havens at a stroke because it would no longer be possible to avoid the tax by relocating assets.

How much revenue would such a tax generate? The companies in the Forbes Global 2000 list have combined assets of over $200 trillion. Clearly, the total would be a lot higher if we included assets for all the roughly 43,000  publicly traded companies in the world, rather than just the top 2000. We should also include the many privately-owned companies that are also required to declare their assets every year. While those numbers are harder to find, the annual revenue for just the top 50 exceeds $2.5 trillion, suggesting that the accumulated assets of privately-owned companies could also be enormous. We can also add in the global value of real-estate that Savill’s estimates at around $280 trillion and currently increasing at over 6% a year. We should also be able to include the value of other assets such as yachts, aircraft, jewellery and works of art. A simple way to determine the value of such assets for the asset tax would involve using the insured value of the goods. Adding together the values of all these assets, whether owned by individuals, trusts or corporations could easily reach the eye-watering figure of $1 quadrillion. With a 1% annual asset tax, this would be yet another way to finance a universal UBI set at 50% of median income for the entire population of the planet.

We have thus seen that there are various options for financing a UBI. Locally, governments could reform their tax and benefits system to provide a basic income. But with international cooperation, a universal financial transaction tax of around 0.1%, or a universal asset tax of 1% per annum, would be enough to provide a UBI for everyone. By using both taxes, it would be possible to use even lower rates. It is therefore hopefully abundantly clear that providing a UBI is perfectly doable – if there is the political will.

The suggestion that a global organisation such as the United Nations could organise the distribution of a basic income to everyone on the planet is undoubtedly very bold – and perhaps not very realistic. But the advantages could be enormous. Nearly every nation on earth has signed up for the United Nations list of 17 Sustainable Development Goals. While everyone agrees on these objectives, there is little agreement about how to finance them. But it is worth noting that a global UBI could help many of them. The obvious ones are Goals 1 (No Poverty), 2 (Zero Hunger) and 3 (Good Health and Well-being) that would be directly affected, but a global UBI would help just about every one of them. Furthermore, allowing the United Nations to implement the scheme would give it enormous negotiating power, because the provision of the basic income payments could be made conditional on the governments in particularly countries respecting basic civil rights including freedom of speech.

Final comments on UBI and ESC

My final point returns to the fundamental question of how we could cope with the consequences of the AI revolution and increasing automation on the amount of paid work in the economy. I would like to argue that by introducing a modest UBI now, or in the near future, governments could easily cope with any future changes in the job market.

To make this point clear, suppose we start from the “ideal” situation of full employment with 100% of the working age population working full time – five days a week. Imagine that over some period, the amount of paid work drops by 50%. There are clearly a range of strategies. One would be to lay-off 50% of the population, and keep those that still have jobs working full time. Another would be to reduce the working week from 5 days to 2.5 days. But who is to say that everyone would want that solution?

With a UBI in place, and set at a level where it was possible to get by with just the UBI (if someone was happy to live a low consumption lifestyle, growing their own food), you might have a situation where equal numbers of people decide to work full time (5 days a week), part time (4 days a week, 3 days week, 2 days a week and 1 day a week), or to do no paid work at all. With one-sixth of the population in each group, you would also have enough people to do all the paid work that was available. But critically, no one would have to impose this in a top-down way. And market forces would naturally adapt to ensure that all the essential paid work was done by increasing pay levels when necessary.

Suppose that, a few years later, the amount of paid work had dropped to just 20% of the original value. There would again be a wide range of possibilities without having to decree that everyone has to work a one-day week. The obvious option would have 20% of the population working full time, and 80% doing no paid work at all. But you could just as easily have two-thirds of the population opting to do no paid work, and the remaining third being divided equally between 1-, 2-, 3-, 4- and 5-day working weeks – with one in 15 still opting to continue working full time.

Of course, the two-thirds of the population doing no paid work would not necessarily be sat watching endless television series or playing video games (even though they would certainly have that option). They could also indulge in all the enjoyable activities currently reserved for the retired, for those who have inherited wealth, those lucky enough to have earned enough to retire early, or married to someone wealthy. They could also devote themselves to the myriad options for rewarding and valuable unpaid work that would improve our world.

The beauty of having a modest UBI as a baseline is that everyone would be able to choose precisely how they divide their time between paid work, recreational activities, and valuable but unpaid work.

It is also important to realise that in such a scenario, market forces will still be able to play their role. If the level of the UBI is set a level sufficient to live modestly without paid work, but not enough to provide a lavish lifestyle, money will still be effective at motivating people whose hard work is considered particularly valuable, such as chefs in Michelin-starred restaurants, skilled musicians, actors, sports stars and entrepreneurs. You could even decide the level of the optimal amount for the UBI by fixing it such that a given number of people (say 10%) choose to opt out of paid work.

A final point to make is that this future world where everyone chooses freely how they divide their time may be as close as we can get to a real utopia. It would ensure what Jeremy Bentham called “the greatest good for the greatest number”. The simple fact is that people differ and there is no point in seeking a “one-size fits all” solution where everyone has to do what some bureaucrat has decided is the optimal amount of paid work. Not only will people be free to choose their particular mix, but that mix can also change continuously from day to day, from week to week, from month to month and from year to year. There would be no such thing as being “unemployed” since not doing paid work would be a question of choice, and there would be no shame in choosing such a lifestyle. Indeed, if we are serious about saving the planet, we should be actively encouraging such behaviour.  Likewise, the very notion of defining an age when you are allowed to retire would be seen to be nonsensical. Effectively, some people might “retire” as soon as they left school – as the children of millionaires can already. Does that mean that they would never do anything of value?

For me, the main reason why we have ended up in the current system stems from the fact that the vast majority of people appear to believe that their “value” can be measured by the amount they earn. Hopefully, most people will be able to see that this is an illusion. The elimination of this misconception could be the most positive impact of advances in AI and automation.

But the final point is that, with a UBI in place, and the development of a situation where everyone chooses their life mix freely, there will be little need to fear the rise of AI and automation. These new technologies can potentially be enormously beneficial for humanity and for all life on our planet. UBI is the mechanism that we need to be able to see that technology progress without threatening our societies.