Basic Income Capitalism

Author(s): Philippe Van Parijs

Source: Ethics , Apr., 1992, Vol. 102, No. 3 (Apr., 1992), pp. 465-484
Published by: The University of Chicago Press

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 Basic Income Capitalism*

Philippe Van Par'js

Slipping back ever more deeply into laissez-faire capitalism, reaching

desperately for the Swedish model, clinging defensively to the welfare
state-is there any other future worth contemplating for advanced
capitalist countries, now that whatever of genuine socialism was still
left on the list of political possibilities has been decisively squeezed
out by what happened in Eastern Europe? Along with a growing
number of people in Western Europe, I believe that there is, and,
moreover, that this further possible future is more desirable than the
three I have just mentioned. Basic income capitalism is the expression
I shall use to describe this further possibility. It refers to a socioeconomic
regime in which the bulk of the means of production is privately
owned, while each citizen receives, aside from any income she may
derive from participation in the labor or capital markets or may owe
to some specific status, a substantial unconditional income.
The introduction of such an unconditional income is to be viewed
not as the dismantling but as the culmination of the welfare state,
prepared by welfare state achievements in the same way as the abolition
of slavery or the introduction of universal suffrage had been prepared,
and made possible, by earlier partial conquests. Awareness of the
limitations of the protection afforded by associations for mutual aid,
next by compulsory social insurance for all waged workers, and finally
by a conditional form of guaranteed minimum income has gradually

* This is a revised version of a paper prepared for the Ethikon Institute East-We
dialogue on "Capitalism, socialism or mixed economy?" (Berlin, Ost-West Wirtscha
akademie, January 1991). Earlier versions were presented in Madrid (Fundaci6n Pa
Iglesias, March 1990), Madison (Havens Centre for the Study of Social Structure and
Social Change, April 1990), and Florence (European University Institute, January 1
I wrote the final version while holding a Jean Monnet Fellowship at the European
University Institute. I am particularly grateful to Richard Arneson, Reuben Arp
Brian Barry, Samuel Brittan, Andres De Francisco, Gdsta Esping-Andersen, Klaus
Gottstein, Dan Hausman, Will Kymlicka, Andrew Levine, David Miller, Steven Lukes,
Alessandro Pizzorno, Adam Przeworski, Zarko Puhovski, John Roemer, Susan Strange,
and Erik Wright for perceptive and helpful comments, not all of which could be taken
into account in the present version as much as they deserve.

Ethics 102 (April 1992): 465-484

X 1992 by The University of Chicago. All rights reserved. 0014-1704/92/0203-1049$01.00

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466 Ethics April 1992

prepared our minds for this radical step and has helped build the
forces required to bring it about.
At the same time, the introduction of an unconditional income
can be viewed as a strategy for pursuing whatever was and remains
appealing in the old emancipatory ideal associated with the communist
movement, without requiring for this purpose anything like a socialist
mode of production. From this point of view, socialism, understood
as the public ownership of the means of production, is a sheer instrument
that should be, and has been, tried in order to better promote the
achievement of the ideal of a truly free society. Such a society is one
in which every person has access to the "realm of freedom," thanks
to the way in which the benefits of material progress are shared among
all. It is one, more specifically, in which the amount of necessary labor
has been so reduced and/or its attractiveness so enhanced that the life
options of its members need no longer be constrained by the obligation
to earn a living, as a substantial share of the social product can now
be distributed unconditionally to each of them. What socialist exper-
iments, conducted under a variety of circumstances and in a significant
number of variants, have decisively shown is definitely not, in this
light, that the aim they pursued is not worth pursuing, but at most
that socialism constitutes a seriously defective instrument for pursuing
it. Consequently, for those who hold this view, the spectacular collapse
of socialist regimes gives no grounds for despair. But it constitutes a
powerful reminder that it is high time to concentrate on shaping, first
mentally, next institutionally, the best instrument we have: basic income
capitalism. 1
These two viewpoints, I hasten to add, are just two of the many
angles from which people have recently been discussing the idea of a
basic income. I shall make no attempt, in this article, to provide a
comprehensive survey of the arguments that have been used in support
of the introduction of a basic income or against it. Nor shall I try to
explain why I believe this proposal to constitute a genuine political
possibility, at least in contemporary Western Europe.2 In the next
three sections, I shall concentrate instead on what I believe to be the

1. This conception of basic income as a "capitalist road to communism" is developed

and discussed in Robert van der Veen and Philippe Van Parijs, "A Capitalist Road to
Communism," Theory and Society 15 (1986): 635-55 and the Theory and Society symposium
around it. The justification of basic income capitalism presented below is closely related
to, though distinct from, the one stemming from such a conception. In the introduction
to Philippe Van Parijs, ed., Arguing for Basic Income: Ethical Foundations for a Radical
Reform (London: Verso, 1992), in press, I indicate what makes this conception less
adequate than the "real libertarian" approach to be described shortly.
2. I do so, to some extent, in Philippe Van Parijs, "A Revolution in Class Theory,"
Politics and Society 15 (1987): 453-82, and "The Second Marriage ofJustice and Efficiency,"
Journal of Social Policy 19 (1990): 1-25.

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 Van Parijs Basic Income Capitalism 467

most robust ethical case for a basic income. "Ethical" i

it rests on an explicit normative conception. "More robust" in the
sense that I believe the normative principles from which the conclus
is being derived to be less objectionable, and the derivation itself mo
compelling, than would be the case with any alternative. I shall, mor
over, have to confine myself to presenting little more than the intuition
behind this argument, which I have spelled out more fully elsewher
In the last three sections, I shall indicate where this argument, if
successful, takes the old discussion of capitalism versus socialism.

REAL FREEDOM FOR ALL

What is a just society? It is nothing, I propose, but a

understood as a society whose members are all as really
More precisely, it is a society that satisfies the following
(a) There is some well enforced structure of rights (sec
(b) This structure is such that each person owns hersel
condition). (c) This structure is such that each person
possible opportunity to do whatever she might want t
[or lexicographic maximin] opportunity condition). In a fu
each of these three conditions would require a great deal o
Let me just spell out somewhat the third one, which w
for our purposes. In a free society, so the third condi
person with least opportunities has opportunities that
than those enjoyed by the person with least opportun
other feasible arrangement; in case there exists another feasible ar-
rangement that is just as good for the person with least opportunities
then the next person up the scale in a free society must have oppor-
tunities no smaller than the second person up the scale of opportuniti
under this arrangement; and so on. This so-called leximin (or lexi-
cographic maximin) formulation is no doubt better than either a pure
aggregative formula (e.g., in terms of the opportunities of society's
average member) or a more egalitarian formula (e.g., in terms of
maximum equal opportunities) to express the idea that the member
of a (maximally) free society are all as free as possible.
A full characterization of this ideal of a free society would req
in addition, a specification of the standards by which conflicts bet
the three conditions should be settled. Giving some thought to th
conflicts will help to perceive more concretely what each of the condit
asserts. If one is to prevent most effectively the violation of rights, f

3. In a book in progress, provisionally entitled "Real Freedom for All: What (If
Anything) Can Justify Capitalism?" See also Philippe Van Parijs, "Equal Endowments
as Undominated Diversity?"' Recherches Economiques de Louvain 56 (1990): 327-55, and
"Why Surfers Should Be Fed: The Liberal Case for Basic Income," Philosophy and Public
Affairs 20 (1991): 101-31.

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468 Ethics April 1992

example, one may have to restrict severely the self-ownership of some

persons-for example by arresting those suspected of having violated
some rights, by imprisoning or even executing the convicted-and/
or to restrict more mildly the freedom of all-for example, by limiting
freedom of association in order to forestall the formation of terrorist
gangs or by imposing conscription in order to ward off external threats.
In other cases, such as compulsory vaccination against infectious diseases
or the obligation to help a person in danger when the risk to oneself
is small, there is a direct conflict between self-ownership and the pro-
tection or expansion of opportunity sets. In other cases again, the
conflict between self-ownership and leximin opportunity is less direct
and contingent upon specific empirical assumptions. Suppose, for
example, that in the absence of a legal obligation to vote, the proportion
of comparatively poor people who vote is considerably less than if
there were such an obligation. Political platforms would then tend to
display less concern for the opportunities of the worst off, and the
outcome of the political process would systematically diverge from
what the leximinning of opportunities would require.
As they have only little bearing on the argument of this article-
mostly concerned with the opportunity dimension of freedom- I shall
not discuss the complex issues raised by such conflicts. As a rough
guideline, let me just state that a free society should give a priority to
the security condition over self-ownership, and to the latter over leximin
opportunity. But this priority need not amount to a rigid lexicographic
priority. In other words, mild disturbances of law and order can be
tolerated if getting rid of them would require major restrictions of
self-ownership or major departures from leximin opportunity.4 And
mild restrictions of self-ownership can be incorporated into the insti-
tutional framework of a free society, if a good case can be made to
the effect that a significant improvement would result in terms of
leximin opportunity.5 Nonetheless, for the sake of simplicity, I shall
summarize the three conditions and the priority relations among them
by stating that they amount to requiring the leximinning of people's
opportunities subject to the protection of their formal freedom, that
is, the respect of a structure of rights that incorporates self-ownership.
This, in turn, I shall further abbreviate by saying that a free society,

4. Thugs and thieves are terrible for freedom, in particular that of the most vulnerable.
But a police state or abysmal poverty are not prices worth paying in order to get rid
of every one of them.
5. What would count as a mild restriction might be characterized, e.g., as one to
which everyone would agree when looking as an intelligent and sober adult at all the
relevant facts (this may apply to the paternalistic restrictions), or as one to which
everyone would agree if it could be part of an enforceable insurance contract (this may
apply to compulsory vaccination and help). But the example of compulsory voting
shows that I am willing to go beyond this.

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 Van Parijs Basic Income Capitalism 469
as characterized by the three conditions and their articulation, is one
that leximins real freedom. And I shall call real libertarian the position
that consists in asserting that ajust society is a free society in this sense.
Where can this real libertarianism be located on the map of existing
theories ofjustice? If the Right/Left axis is to be defined by the degree
to which a position caters for the interests of the least advantaged, it
is hard to think of a position that could unquestionably be located to
the Left of real libertarianism. Yet, the latter falls far short of plain
egalitarianism, for three distinct reasons. First, it imposes formal freed
as a constraint on any substantive equalization. Second, it focuses on
opportunities, on feasible sets, rather than on the outcomes of people's
choices among the options open to them, as measured, for example,
by the welfare levels they actually reach. Finally, by opting for a leximin
criterion, it does not demand that the least advantaged should be given
a worse deal for the sake of more equality. Real libertarianism is not
satisfied as long as any member of society can point to another (formal-
freedom-respecting) possible arrangement in which she would have
greater opportunities, while no one would have opportunities as bad
as hers currently are. This indicates in which sense any remaining
inequality must be justifiable, on a real libertarian view, to those who
feel they are getting a worse deal. But howeverjustifiable in this sense,
undeserved inequalities of opportunities will remain.
Each of these three features describes a major departure from
unqualified egalitarianism (as well as from unqualified utilitarianism).
Their conjunction also points to a close family resemblance between
real libertarianism and the positions defended by Left liberals and
justice-minded radicals.6 It further shares with these positions (as well
as with standard libertarianism and modern utilitarianism) a general
postulate of neutrality, that is, the demand that what counts as a just
society should not be determined on the basis of a particular conception
of the good life. Along with these positions, real libertarianism can
therefore be presented as a meaningful way of articulating the im-
portance we ascribe to liberty, equality, and efficiency. Liberty comes

6. John Rawls, A Theory of Justice (Cambridge, Mass.: Harvard University Press,

1971), remains the fullest formulation of such a position and is explicit about each of
these three features. Less explicit but belonging to the same family are Ronald Dworkin,
"What Is Equality? II. Equality of Resources," Philosophy and Public Affairs 10 (1981):
283-345, and "Foundations of Liberal Equality," in The Tanner Lectures on Human Values,
vol. 2, ed. by G. B. Peterson (Salt Lake City: University of Utah Press, 1990), pp. 1-
119; Amartya Sen, Commodities and Capabilities (Amsterdam: North-Holland, 1985), and
Inequality and Freedom (Oxford: Oxford University Press, 1990); G. A. Cohen, "On the
Currency of Egalitarian Justice," Ethics 99 (1989): 906-44, and "Equality of What? On
Welfare, Goods and Capabilities," Recherches Economiques de Louvain 56 (1990): 357-
89; and Richard Arneson, "Equality and Equal Opportunity for Welfare," Philosophical
Studies 56 (1989): 77-93, and "Liberalism, Distributive Subjectivism, and Equal Op-
portunity for Welfare," Philosophy and Public Affairs 19 (1990): 158-94.

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470 Ethics April 1992

in through this neutrality postulate, through the constraint of self-

ownership, and through a concern, not directly with people's happiness
itself, but with the means required to pursue it. Equality and efficiency
are combined in the selection of a leximin criterion. Though the latter
cannot be correctly described-as it sometimes is-as the most egal-
itarian criterion compatible with efficiency, it does constitute, among
all criteria compatible with efficiency, the one that is most heavily
biased in favor of the victims of whatever inequalities are allowed to
subsist. Thus, "real freedom for all" can make at least a prima facie
plausible claim, along with the other positions which share these features,
to capturing the importance we intuitively attach, notjust to freedom,
but also to equality and efficiency. Whether one can sustain this general
claim, as well as the more specific claim that real libertarianism should
be preferred to the other members of the family, can only be assessed
by spelling out and assessing its institutional implications.

MAXIMUM BASIC INCOME

What, then, is the best institutional expression of the ideal captured

by the slogan "Real Freedom for All," as explicated by the conjunction
of conditions a-b? One is really free, as opposed to just formally free,
to the extent that one possesses the "means," not just the "right," to
do whatever one might want to do. But how is this to be understood
in concrete terms? When arguing against this "real" conception of
freedom, Hayek and Buchanan are more specific: by abandoning their
own ("formal") definition of freedom, they claim, one is bound to slip
into equating the latter with wealth or the budget set] This prompts
the suggestion that the ideal of real freedom for all requires us to
leximin people's incomes, subject of course to respecting everyone's
formal freedom. Somewhat more concretely, but less exactly, our ideal
would require us to raise the lowest incomes as much as is compatible
with a ban on forced labor.8
But let us be very careful here. The real freedom we need to be
concerned with is not just the real freedom to choose among alternative
bundles of consumption goods. It is the real freedom to lead one's
life as one pleases. Obviously, this does not deprive income, or the
budget set, of its importance. But it makes it crucially important that

7. See, e.g., Friedrich Hayek, The Constitution of Liberty (London: Routledge &
Kegan Paul, 1960), pp. 12-13, 17, and 137; James Buchanan, "The Ethical Limits of
Taxation," in Limits and Problems of Taxation, ed. F. R. Forsund and S. Honkapohja
(London: Macmillan, 1985), pp. 4-16; andJames Buchanan and Loren Lomasky, "The
Matrix of Contractarian Justice," in Liberty and Equality, ed. E. F. Paul, F. D. Miller, and
J. Paul (Oxford: Blackwell, 1985), pp. 12-32.
8. Less exactly, not only because leximin is not quite the same as maximin, but
also because forced labor is only one way, though plausibly the principal way, in which
formal freedom could be violated in order to boost the lowest incomes.

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 Van Parijs Basic Income Capitalism 471

the income should be given unconditionally, no strings attache

any constraint on the conduct of the person concerned,
restriction, in particular, to those who make themselves
paid work. Hence the following far more radical suggestio
at all serious about pursuing real freedom for all-and if w
to abstract for the moment from both dynamic consider
interpersonal differences in abilities-what we have to go
highest unconditional income for all consistent with secur
ownership.
As it happens, this suggestion converges with a proposal for s
policy reform that has recently been gaining ground in a numb
European countries.9 Most of these countries introduced some fo
of minimum guaranteed income at some point since World W
A minimum guaranteed income scheme differs from a social insur
scheme to the extent that its beneficiaries need not have contrib
to the scheme out of their past earnings in order to benefit fro
But the form of guaranteed income that has been introduced in t
countries typically remains conditional in the following respects
To be entitled to the benefit, the beneficiary must be willing to a
a suitable job, or suitable training, if offered. (2) She must p
means test, in the sense that she is only entitled to the benefit if
are good grounds to believe that she does not derive a sufficient in
from other sources. (3) Whether she is allowed to a benefit and h
high the latter is depends on whom she lives with, for example,
whether she lives on her own, with a person who has a job, with
unemployed person, etc. And finally (4) whether she is allowed t
benefit and how high the latter is depends on where she lives
example, in a metropolitan area, in a provincial town, or in the c
tryside. Proposals for what has been variously called a state bonu
national or social dividend, a citizen's income or wage, a demogra
a basic income, a universal grant, etc., have typically been propo

9. Anne Miller, ed., Proceedings of the First International Conference on Basic In

(London: Basic Income Research Group, 1988); Tony Walter, Basic Income: Free
from Poverty, Freedomfrom Work (London: Boyars, 1989); Bill Jordan, The Common
Citizenship, Morality and Self-Interest (Oxford: Blackwell, 1989); Hermione Parker, In
of the Dole (London: Routledge & Kegan Paul, 1989); James Meade, Agathotopia
Economics of Partnership (Aberdeen: Aberdeen University Press, 1989); Walter Van Tr
ed., Basic Income and Problems of Implementationi Proceedings of the Second Interna
Conference on Basic Income (London: Basic Income Research Group, 1990); Sam
Brittan and Steven Webb, Beyond the Welfare State: An Examination of Basic Income
Market Economy (Aberdeen: Aberdeen University Press, 1990); and Van Parijs, ed
some recent English books discussing this proposal. The Bulletin of the Basic Inco
Research Group (102 Pepys Road, London SE14 6SG) and the Newsletter of the
Income European Network (21 Bosduifstraat, 2018 Antwerpen, Belgium) keep t
of relevant events and publications throughout Europe and beyond.

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472 Ethics April 1992

for a form of guaranteed minimum income that is instead unconditional

in all four of these respects.'0
Because it is the expression that is now most widely used, in
English at any rate, I shall use the term basic income to refer to such
a scheme. A basic income, in other words, is an income that (1) is not
restricted to the work-prone, (2) is made available ex ante, (3) is given
irrespective of the household situation, and (4) does not vary with the
place of residence. The choice of the expression is meant to convey
the idea that, because of its unconditional nature, we here have some-
thing on which a person can safely count, on which a life can firmly
rest, and to which any other income, whether in cash or in kind, from
work or savings, from the market or the state, can legitimately be
added. On the other hand, there is nothing in the definition of basic
income, as it is here understood, that connects it to some notion of
"basic needs." A basic income, as defined, can fall short of or exceed
what is regarded as necessary to a decent existence.
In this light, it seems possible to rephrase the radical suggestion
made earlier by stating simply that what a real libertarian should
endorse is the formal-freedom-respecting institutional framework that
yields the highest basic income. Before being able to assert this with
any confidence, however, it is important to check whether a concern
with real freedom for all can justify not just the first sense in which
a basic income is unconditional-the absence of a (willingness to) work
test, which is the only unconditionality explicitly discussed so far-
but also the other three. What is involved in 2 is the choice between
an (ex ante) basic income and an (ex post) negative income tax scheme.
At first sight, both approaches may seem equivalent, from a real lib-
ertarian standpoint, since exactly the same distributions of post tax
and transfer income can in principle be achieved with a means test
and without, with a negative income tax, and with a basic income
scheme (see App.). Yet, the absence of a means test does make a
difference in the pursuit of leximin real freedom, for three distinct
reasons. 1I1
First, it is obvious enough, given the time lag unavoidably involved
in any income assessment for tax purposes, that a negative income
tax scheme can only hope to compete with a basic income scheme in

10. On the other hand, advocates of such an unconditional scheme typically want
to keep additional social insurance or disability compensation schemes that remain
conditional in some or all of these senses. Indeed, many of them want to maintain (at
least as long as the unconditional income remains rather low) a complementary minimum
income scheme that remains conditional in some or all of these senses.
11. Note that the question of whether the minimum income is guaranteed ex ante
or ex post is orthogonal with respect to the question of whether or not the scheme
involves an unemployment trap, understood as a strongly dissuasive effective rate of
taxation on low earnings (as distinct from the dissuasive effect linked to the uncertainty
involved in shifting from one income status to another, an often overlooked but very

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 Van Parijs Basic Income Capitalism 473
terms of leximin real freedom if it is supplemented by a system of
advances that will at least give people the real freedom not to starve
while waiting for the tax administration to calculate their entitlement.
But sheer ignorance or confusion is bound to prevent some people
from getting access to advances they could have claimed. The una-
voidably higher rate of take up therefore associated with a basic income
scheme is an advantage that matters supremely when prior importance
is being given (as it is under our leximin formulation) to the real
freedom of the least really free. Second, the fact that, in the case of
a negative income tax, the relevant feature of the budget set takes the
form of a contingent promise of corrective transfers rather than of a
sum of money on which one can fully bank simply because it is tangibly
there, is bound to hamper the confidence needed to actually make
use of the options contained in the (abstractly identical) budget set.
Finally, in an era of computerized transfer payments and pay-as-you-
earn tax collection, and assuming that there is no need for control on
some other grounds (to check work-proneness or household situation,
e.g.), the administrative costs involved in the advance scheme that
must be coupled to a negative income tax system make the latter more
likely expensive to run for a given level of income guarantee and,
hence, to absorb resources that could otherwise be used to swell the
latter. Even on its own, this would suffice to justify the choice for 2,
that is, for the universal over the means-tested variant of an otherwise
unconditional income.12

significant aspect of the unemployment trap). As linear negative income tax schemes
illustrate, a means test does not entail a higher rate of taxation (or of "clawback") in
the lower ranges of the income distribution. And as (rather unusual) basic income
proposals show, it is perfectly conceivable to have an ex ante payment of the minimum
income to all, together with a 100 percent tax rate on all other incomes below some
threshold (see William Saverda, "Basisinkomen en inkomensverdeling," Tijds
Politeke Ekonomie 8 [1984]: 9-41, for a discussion of such a scheme). If we are concerned
with the real freedom to work as well as the freedom not to work, should one not
exclude this possibility in the very definition of basic income? For one could not plausibly
say, it seems, that the real freedom of the least free is being maximized if the basic
income is being maximized with a tax schedule that amounts to confiscating low earnings.
Yet, this is what we would have to say. For factual reasons, it is unlikely that the relevant
maximizing exercise will select such a tax schedule. But concern with the real freedom
to work does not force us to define the maximizing exercise so as to rule it out a priori.
For the real freedom to take a low-paid job which one wants to take, say, because of
the training or experience it provides or because of the value one attaches to working
per se, is unambiguously increased as the level of the unconditional income goes up,
even if this is at the cost of lower net earnings from the job. Indeed, the higher the
unconditional income, the more one acquires the real freedom to take, be it for a short
period, jobs which pay a negative wage. Consequently, for basic income to adequately
reflect the freedom to work as well as the freedom not to work, no such restriction
needs to be made about the way it is funded.
12. Only under the assumption (made above) that no control is needed for other
reasons (e.g., to check willingness to work). If such control is needed (and it may be,
even on real libertarian grounds-see below), the administrative-cost argument may
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474 Ethics April 1992

For the definition of basic income to square perfectly with a real-

libertarian perspective, it must include, finally, the requirement that
the right to it and its level should be insensitive to household situation
and place of residence. This is so in part because of the controls,
indeed the invasion of people's privacy, which would be mandated if
such circumstances were deemed relevant. The more fundamental
reason, however, is that there is no positive reason for differentiation
consistent with a real libertarian standpoint. It may of course be the
case that what one needs when living alone far exceeds what one needs
when living in a commune, or that what one needs when living in the
capital city far exceeds what one needs when living in a remote hamlet.
But from a real libertarian standpoint, this is irrelevant. For what a
real libertarian is concerned to leximin is not the real freedom to get
what one happens to want, or what one needs in order to maintain
one's way of life, but it is the real freedom to do what one might want
to do. It is therefore enough to assume-innocuously enough-that
someone living in a commune might wish to live alone, or that dwellers
of the countryside might want to settle in the city, for a uniform,
undiscriminating basic income to be the obvious choice.

UNDOMINATED DIVERSITY, SUSTAINABILITY:

TWO CRUCIAL CONSTRAINTS

Leximinning real freedom, it thus emerges, does require us to introduce

a basic income, as defined by unconditionalities 1-4 above, and to
pitch it at the highest level consistent with the protection of formal
freedom.'3 There are, however, two further important constraints to
which this maximization needs to be subjected. One needs to be in-
troduced as soon as we lift the assumption that people's capacities, or
internal resources, are identical. For, surely, two people can have very
unequal opportunity sets, and hence very unequal levels of real freedom,
despite their having an identical basic income, if one of them can
physically and mentally do everything the other can do and far more.
In general, therefore, real freedom will not be leximinned if all one
does is give everyone a basic income at the highest possible level. The
best way of handling this important complication consists, in my view,
in imposing a constraint of undominated endowment diversity: specific
lump sum transfers must be made-and the level of the basic income

go the other way, and this may be sufficient to justify a means-tested form of guaranteed
minimum income.
13. I am here leaving aside altogether what I regard as the most serious objection
to this claim, namely, the objection that the highest possible basic income involves a
bias in favor of the freedom to enjoy free time at the expense of the freedom to consume.
I discuss thoroughly this objection, there labeled the "crazy-lazy challenge," in "Why
Surfers Should Be Fed: The Liberal Case for an Unconditional Basic Income," Philosophy
and Public Affairs 20 (1991): 101-31.

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 Van Parijs Basic Income Capitalism 475

correspondingly reduced-up to the point where nobody

hensive endowment (consisting of her internal resourc
lump sum transfers) is found worse than somebody else's b
in the society concerned.
This is not the place to justify this criterion by indicating wha
believe to be its decisive advantages over competing proposals.'4 Le
me just point to one important implication of this constraint. Presumabl
if someone's comprehensive endowment does not enable her to hav
access to what is required for her to survive, this endowment w
unanimously be considered inferior to that of anyone, or nearly anyone,
who does manage to earn a decent living. As long as this type
dominance exists, specific transfers to the less able will have to
increased at the expense of the universal basic income (unless of cou
the latter is sufficient to live on), up to the point where everyone w
be able to have access to an income that covers at least bare necessiti
In a poor society, this may well mean driving the basic income dow
to zero-indeed, driving it into negative figures (in the form of a lu
sum tax) if this were not preempted by the constraint of self-ownership
And if, aside from obvious handicaps, the most effective way of ide
tifying those whose endowments do not enable them to earn a livin
is by restricting transfers to those who give evidence that they ar
unable to find an adequate job, then it is right, even from a r
libertarian perspective, that the minimum guaranteed income sche
should be conditional, in the sense of involving a willingness to wo
requirement. There are no doubt many countries in today's world th
are in this situation. For any society thus situated, real libertarianis
does not recommend the introduction of a basic income, because th
highest (even the only) level of basic income that could be introdu
in those countries, consistent with both formal freedom and undo
inated diversity, is zero. It is only in those societies which have got r
of starvation, or clearly could get rid of it without violating self-ow
ership, that a basic income is worth talking about.
The final constraint that needs to be introduced is sustainability
So far, I have loosely talked about the highest possible level of basi
income and made no reference to dynamic considerations. But f
the sake of real freedom for all, it is obviously very important th
this level should be sustainable from one year to the next, and fro
one generation to the next. This requires, first of all, that one shou
pay attention to incentives. In terms of our criterion, it would ser
no purpose, for example, to select a level and type of taxation that

14. See Van Parijs, "Equal Endowments"; and, for critical discussions of this approac
Amartya Sen, "Welfare, Freedom and Social Choice: A Reply," Recherches Economiq
de Louvain, vol. 56 (1990), sec. 3.1; and Richard Arneson, "Property Rights in Person
Social Philosophy and Policy, vol. 9 (1991), sec. 5.

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476 Ethics April 1992

would make it possible to finance a lavish basic inc

period, if even average income falls below this lev
when labor supply (remember the constraint of f
capital supply (at least in a capitalist society) will
tax structure. This suggests that one should choose th
that can durably generate the highest yield and th
be pitched at a level corresponding to the peak of
curve," that is, to the highest yield that can be du
this form of taxation-bearing in mind, of course,
yield must be used so as to take care of formal freedo
diversity.
Even this formulation is not quite correct, how
relevant is the per capita level of basic income, which
by the total yield but also by the number of peop
we also need to take demographic effects into acco
in the basic income leads to population expansion, the
tax yield will only manage to finance a declining b
libertarian, arguably, need not be committed to a
invariant with age, and it may therefore be possib
implementation of our criterion of sustainable bas
ization (without restricting the formal freedom to pr
the level of the basic income a function of age. In some societies at
least, giving a comparatively higher basic income in the form of a
universal pension and a comparatively lower one in the form of universal
child benefits should reduce significantly, indeed may even offset com-
pletely or reverse, any positive effect a basic income may otherwise
have on population growth.
How high this highest sustainable level can be expected to be is
of course most likely to be affected by other institutional features. F
example, a society which takes no precaution to slow down the depleti
of its natural resources may find itself unable to maintain its productive
capacity through time without a higher rate of accumulation than
would otherwise be the case and would therefore be unable sustainably
to afford as high a basic income as would be the case had it taken
adequate conservation measures. Also, how high a basic income a
society can sustainably afford is likely to be significantly affected b
whether the bulk of the means of production is privately or public
owned. Let us define capitalism (socialism) as self-ownership-respecti
regimes (unlike slavery or what could be called collectivism) in which
the bulk of the means of production is privately (publicly) owned. Fo
a real libertarian, the choice between them (unlike the choice for eith
of them against slavery and collectivism) hinges on the purely empiri
question of whether some feasible form of one or the other can safe
be expected to yield the highest sustainable basic income consistent

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 Van Parijs Basic Income Capitalism 477

with both formal freedom and undominated diversity. This is the

question to which I now turn.

BASIC INCOME CAPITALISM OR BASIC INCOME

SOCIALISM?

Note, first of all, that whatever the exact answer turns out to be, it
looks bound to be some form of "mixed economy." This is not just
because the mode of income distribution necessarily involves two central
components-the transfers required by the constraint of undominated
diversity and the maximum basic income-that pull it far away both
from the mode of distribution that is naturally associated with cap-
italism -"To each according to her (market-determined) marginal pro-
duct"-and from that most commonly associated with socialism-
"To each according to her (somehow assessed) labor."
One should also expect the real libertarians' favorite to be some
form of "mixed economy" because it is a priori most unlikely that the
basic-income-maximizing regime will involve either the full private
ownership or the full public ownership of all means productions.
While retaining the "essentially" public ownership of the "bulk" of the
means of production, the optimal form of socialism may, for example,
allow for the development of small individual and cooperative private
firms, or give such decision-making or residual-earning powers to the
managers or work force of publicly owned firms so that the sort of
public ownership over the means of production that prevails in the
public sector cannot be said to be full. Symmetrically, while retaining
the "essentially" private ownership of the "bulk" of the means of pro-
duction, the optimal form of capitalism may, for example, involve
public ownership of waterways, banks, or nuclear power stations, and
it may subject private firms to regulations that amount to weakening
considerably the extent to which they can be said to own their means
of production. Taxation of both profits and wages, measures aimed
at containing environmental externalities, and the recognition of the
right to strike provide familiar illustrations. But the optimal form of
capitalism could also contain less familiar restrictions on the private
ownership of capital, such as the constraint that only the firm's workers
can own vote-conferring shares in the firm's capital-as in Peter Jay's
"cooperative economy," for example-or the constraint that workers
need to be paid at least in part in the form of fixed percentage shares
in the firm's profits, rather than in the form of wages fixed in absolute
terms-as in Martin Weitzman's "share economy. "15

15. Peter Jay, "The Workers' Cooperative Economy," in The Political Economy of
Co-Operation and Participation, ed. A. Clayre (Oxford: Oxford University Press, 1977);
Martin Weitzman, The Share Economy: Conquering Stag/lation (Cambridge, Mass.: Ha
University Press, 1984).

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478 Ethics April 1992

These remarks point to the possibility that, as between capitalism

and socialism, there may be no clear winner in the real libertarian
contest. For as we move away from the cases in which either all the
means of production are fully private or they are all fully public, we
may soon be entering a gray area in which one can no longer uncon-
troversially assert that the "bulk" of the means of production is "es-
sentially" privately, or 'essentially' publicly, owned. However, that the
optimal regime should lie in this gray area is, at this stage at any rate,
just a possibility. There may, after all, be knock-down arguments in
favor of either private or public ownership of the means of production
that will force real libertarians to steer clear of the gray area and tell
them beyond any doubt on which side of it they should keep. Such
arguments, if they exist, can only be of a factual nature and, therefore,
escape a philosopher's competence. Yet, they are so central to the
question addressed by this article that I cannot really afford to skip
dealing with them. In the remaining pages, I shall therefore express
and explain, however schematically, the convictions I have reached
about these crucial factual matters, in the light of some casual observation
of empirical facts and some less casual screening of theoretical claims.

PRODUCTIVE POTENTIAL VERSUS POPULAR

SOVEREIGNTY

As the size of the highest affordable basic income massively depends

on a society's productive potential, the obvious place to start is the
efficiency discussion. But I shall not spend much time on it here.
Though it may be hard to remember now, there used to be a time
when there was a strong presumption in favor of socialism, as far as
efficiency was concerned. Advocates of capitalism had to work hard
if they wanted to reverse this presumption, and often retreated instead
into arguing that a lesser efficiency was a price worth paying for the
sake of other values.16 Needless to say, there is today a very strong
presumption in the opposite direction. Thanks above all to its superior
ability to handle shortages and to the competitive pressure to innovate,
existing capitalism, taken as a whole, has proved able to expand its
productive potential far faster than existing socialism.17 This i
rate what today's common wisdom says. And it must be recognized
that the traditional battery of arguments in support of socialism's
superior rationality-which appeal, for example, to crisis tendencies
induced by the "anarchy of production," by "overaccumulation," by

16. A typical example is Henry Wallich, The Cost of Freedom: A New Look at Capitalism
(New York: Harper & Brothers, 1960).
17. And even faster, one might wish to add, than socialism as here defined would
have done. For, surely, the scrapping of "antiparasite laws," free occupational choice,
the right of exit, and other correlates of self-ownership would arguably have further
impaired the growth potential of existing public-ownership societies.

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 Van Parijs Basic Income Capitalism 479
"underconsumption," or by the "squeeze of profits by wages," to a
systematically suboptimal choice of techniques, to the permanence of
a "reserve army," or to thefauxfrais of capitalist production-however
formidable it may have sounded one or more decades ago, cannot
now hope to shake this common wisdom to any significant extent.
The most that advocates of socialism can hope to do, it seems, is argue
persuasively that there is a feasible form of socialism whose economic
institutions sufficiently resemble those of capitalism for the presumed
handicap of socialism in handling shortages and fostering innovation
to be reduced significantly.'8 Turning the handicap into a reliable
advantage, however, seems to me to lie far beyond the reach of such
theoretical arguments.
Suppose, then, that some feasible variant of capitalism can be
safely expected to have a productive potential superior to what any
feasible form of socialism could achieve. It does not follow that the
highest level of basic income that can be sustained under capitalism
(subject of course to our constraints of formal freedom and undominated
diversity) is greater than the highest sustainable level under socialism.
Why not? One possible reason, which I shall leave aside here, is that
either or both of our constraints (formal freedom and undominated
diversity) might be satisfiable at a significantly lower cost under socialism
than under capitalism. Formal freedom, for example, would be cheaper
to protect under socialism (other things being equal) if less police were
needed to protect society's means of production when they are publicly
owned than when they are privately owned. And undominated diversity
might be easier to achieve under socialism if a weaker pressure to
consume created less need for targeted transfers to those with a low
earning power.
The more important reason relates to the theme of popular sov-
ereignty. Let us say that the latter obtains, by definition, if "the options
open to a collectivity are constrained only by conditions [such as limited
material resources] independent of anyone's will."'9- Popular sovereignty
is therefore threatened, in particular, by its individual members' dis-
cretion in using resources at their disposal. Paradigmatic illustrations
are provided by socialist Chile, to the extent that Allende's experiment
came to an end as a result of the truck owners' strike; by socialist
France, to the extent that the Mauroy government's expansionary
policies (in 1981) collapsed as a result of the French citizens' propensity

18. This I take to be the essence of the approach illustrated by Gerard Roland,
Economie politique du systeme sovietique (Paris: L'Harmattan, 1989); orJohn
Possibility of Market Socialism," Department of Economics Working Paper, no. 357
(University of California, Davis, 1990).
19. Following Adam Przeworski and Michael Wallerstein's definition in "Popular
Sovereignty, State Autonomy and Private Property," Archives Europeennes de sociologie
27 (1986): 215-59.

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480 Ethics April 1992

to spend their increased purchasing power on foreign goods; or by

the constraints on egalitarian wage policies that stem from the fact
that the skilled workers trained at great expense in a comparatively
egalitarian country may choose to emigrate to less egalitarian countries,
where their skills command higher net wages.
But arguably the main threat to popular sovereignty under capitalist
conditions, and uncontroversially the one that is most relevant to the
choice between capitalism and socialism, is the one that is rooted
directly in the private ownership of the means of production. Whether
or not it is concentrated in few hands, whether or not those who own
it are driven by purely selfish motives, private capital tends to move
where profitability is highest. Now, even if the basic income were not
financed at all out of capital income but entirely out of wages, so the
argument goes, the effect on profits is bound to be negative. For by
taxing wages and-above all-by giving everyone a substantial un-
conditional income and thus strengthening the bargaining power of
each individual worker, one forces capitalists to pay higher pretax
wages and/or to provide more attractive working conditions. As a
result, capitalists will invest less or invest elsewhere, and because in-
novation is closely tied to investment, technical progress will also suffer
in the country concerned. Hence, the highest sustainable level of basic
income will be lower than what would otherwise be the case-quite
possibly less than what would be possible under socialism, despite the
latter's admittedly inferior productive potential. For under socialism,
society as a whole controls the allocation of the surplus and if it decides
to introduce a substantial basic income, it will not defeat its own decision
by using capital in a way that makes such a grant unsustainable. Hence,
even if one takes it for granted that socialism's productive potential
is inferior to capitalism's-that is, the maximum output achievable
under capitalism (at a sufficiently low level of basic income) is greater
than the maximum output achievable under socialism-it may still be
able to finance a higher basic income than capitalism, thanks to its
greater ability to use its productive potential in this sort of way.20 This
provides, I believe, the strongest real libertarian case against capitalism
and therefore, for those committed to real libertarianism or neighboring
positions, the strongest available defense of socialism.

MORAL PROGRESS AND THE PROFITABILITY

CONSTRAINT

It may be objected that even this strongest available defense is pretty

weak if, as is argued by contemporary economic advocates of a basic

20. One version of this argument is at the core of the critiques by both E. 0. Wright
("Why Something Like Socialism Is Necessary for the Transition to Something Like
Communism" Theory and Society 15 [1986]: 657 - 72) and Gerard Roland ("Why Socialism
Needs Basic Income, Why Basic Income Needs Socialism," in Miller, ed.) of the feasibility
of basic income capitalism.
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 Van Pariqs Basic Income Capitalism 481
income, the introduction of an unconditional income in the context
of advanced capitalist societies would not depress but boost profitability.
Quibbling about marginal tax rates, they argue, is of little significance
in regard to the massive contribution that a basic income would make
to rendering our economy more dynamic, less cripplingly rigid, and
less stiflingly conflict-ridden than it currently is or would otherwise
be.2' If, and as long as, arguments of this sort can actually be sustained,
the introduction of a basic income and the rise of its level do not
constitute a liability but an asset in terms of international competitiveness.
Although the existence of such a "marriage between justice and
efficiency" is, or would be, of great practical significance for someone
committed to real libertarianism in an advanced capitalist society, it
does not do away with the prosocialist argument. For as basic income
increases, it is bound to reach a point from which any attempt to
further raise it would depress profitability and may thereby trigger a
steady and damaging decrease in domestic investment. This is where
the prosocialist argument comes into its own. For a socialist country
is not similarly constrained by the profitability criterion. This does not
mean that it could freely distribute its national income irrespective of
market constraints. In the case of (formal-freedom-respecting) socialism,
too, possible choices are constrained by some Laffer curve: the highest
relative share distributed in a market-insensitive way will not yield the
highest absolute amount. But because a socialist society is not submitted
to the profitability criterion, the absolute amount available for nonmarket
redistribution is not likely to fall as steeply as under capitalism once
it has become a significant proportion of national income. Consequently,
even granted that socialism has a significantly lower productive
potential-that is, that it is unable to generate as high an average
income as capitalism can at some sufficiently low level of basic in-
come-it is at least conceivable that socialism, thanks to a better collective
control over society's surplus, may be able to sustainably raise the basic
income above the highest level at which capitalism could sustain it
and, thereby, to outperform it on real libertarian standards.22

21. The last section of Van Parijs, "The Second Marriage," provides a rational
reconstruction of arguments of this kind, as illustrated, e.g., by Guy Standing, "Meshing
Labour Flexibility with Security: An Answer to Mass Unemployment?" International
Labour Review 125 (1991): 87 - 106, and European Unemployment, Insecurity, and Flexibility
A Social Dividend Solution (Geneva: International Labour Office, 1989); Bart Nooteboom,
"Basic Income as a Basis for Small Business," International Small Business Journal 5 (1986):
10-18; or Meade, sec. 3.
22. In this article I adopt individual societies, rather than the world
as the realm to which the real libertarian standpoint is-being applied; I sh
the following, otherwise most relevant, objection to the argumentjust stated
capital from going to places where workers are less well protected than t
with a basic income-as one can do better under socialism than under capitalism-is
one not preventing it from moving, among others, to the poorest countries in which
however indirectly, it would help raise the options of the worst off, or at least of some
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 482 Ethics April 1992

Is this theoretical possibility at all likely to materialize? There are

reasons for doubting it. First of all, one might want to point out that
a capitalist country could impose significant restrictions on capital
movement in order to prevent capital flight, whether economically or
politically motivated. There would be a price to pay in terms of efficiency,
as capital movement plays an important role for an efficient allocation
of resources. But it may be worth paying if the country is thereby
enabled to sustainably fund a larger basic income. In practice, however,
it is hard to see how this could give much leeway. For in a democratic
country (which, for factual reasons, a basic income country needs to
be), the debates that unavoidably precede the introduction of tough
measures directed against capital outflow seem bound to trigger suf-
ficiently significant preemptive moves (to an extent that will of course
vary as a function of, e.g., patriotic feelings, financial instruments,
territory size, and conjunctural prospects abroad) that in order to recall
at least some of the capital thus lost it will have to offer levels of
profitability in excess (due to a risk premium) of what was previously
needed to retain it. The profitability constraint, therefore, seems ines-
capable in a capitalist country.
But is it not so too in a socialist country? To start with, it is clear
at once that the argument just presented, if correct, applies a fortiori
to any capitalist country that contemplates moving even furtherfor
this sort of reason, into the gray area that separates capitalism from
socialism. But what about a country that is already socialist? If its
productive potential is low, due to a small capital stock and backward
technology, is not its sustainable basic-income-maximizing strategy
bound to be one of attracting foreign investment and advanced tech-
nology by providing attractive profit prospects? Very far from indulging
in a basic income that exceeds the demands of profitability, it would
have to submit to the latter constraint even more dutifully than a
capitalist country exclusively concerned to retain domestic capital. Hence,
it seems that only an affluent socialist country could and should neglect
to some extent the profitability constraint and take advantage of the
greater popular sovereignty conferred by public ownership in order
to raise basic income above what is warranted by the pursuit of maximum
profits. And there is, to my knowledge, no such country around.
Thus, though not altogether absent, the challenge that could be
mounted against basic income capitalism from a real libertarian point

people who are less well off than the worst off in countries whose citizens enjoy a basic
income? The very argument that would make socialism superior as far as the pursuit
of intranational leximin real freedom is concerned, would make it worse in terms of
international leximin real freedom. See Brian Barry and Robert Goodin, eds., Free
Movement: Ethical Issues in the Transnational Migration of People and Capital (Hemel-Hemp-
stead: Harvester, 1992), for a thorough discussion of the problematic relationship between
the demands of justice and (restrictions on) transnational mobility.

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 Van Parijs Basic Income Capitalism 483

of view does not represent a serious threat. For the advocates of basic
income capitalism, however, there is something worrying about the
considerations that have been appealed to in order to defuse the chal-
lenge. Increased capital and skilled labor mobility across political
boundaries makes it increasingly costly (in forgone GNP) to take mea-
sures that do not boost as much as possible the net return on capital
and the net advantages for the holders of highly valued skills (with
each of these parties benefiting indirectly from any advantage concede
to the other). The room to maneuver has not vanished altogether,
and its size is greater, for example, when political unrest abroad or
patriotic feelings at home reduce the outward mobility of both capital
and skills, or when ethnic and cultural heterogeneity (or hostility)
makes it less attractive for people to move. But there is little doubt
that it has shrunk substantially over the last two decades.23
So, the prospects for basic income capitalism-and more generally,
for making any moral progress as measured by libertarian standards,
instead of scoring ever worse as our species is whirled into the next
millennium by anonymous forces totally insensitive to the imperatives
of justice-hinge on three main possibilities. One is a (highly specific
pattern of) world-wide revival of nationalism that would inhibit the
movement of both capital and skilled labor to such an extent that
countries would be under less pressure constantly to mind their com-
petitiveness. Another consists in introducing the required transfer
schemes on such a scale-which cannot be far less than a world
scale-that international competitiveness is no longer a relevant con-
cern.24 The third one is the "marriage of justice and efficiency": if,
and as long as, a basic income does not hinder but boosts a country's
average profitability, factor mobility is no problem-indeed it is a
help. As the first two possibilities, to say the least, are rather remote
(and, moreover, rather scary, each in its own way), it is on the validity
of the empirical conjecture that makes up the third possibility, and
on the widespread belief in that validity, that we have to bank if the
advanced capitalist countries-or any other-are to experience in our
lifetimes any significant further progress toward "real freedom for
all."

23. See, e.g., Mickey Kaus, "For a New Equality," The New Republic (May 7, 1990),
pp. 18-27, for an argument that much of the dramatic rise of wage inequality in the
United States in the last twenty years is due to the pressure of increased mobility.
24. Gunnar Adler-Karlson argues in "Towards a World Citizen Income" (paper
presented at the third International Conference on Basic Income, Florence, September
1990), mainly on the grounds of factor mobility, that this is the only realistic possibility
but that it would require, as a quid pro quo, an effective limitation of population growth
in the Third World.

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484 Ethics April 1992

APPENDIX
BASIC INCOME AND OTHER GUARANTEED INCOME SCHEMES

The relation between typical basic income and negative income tax proposals
can be read from the comparison of figures Al-A3. Both differ from the
most common, "make up" type of guaranteed minimum income (fig. Al) by
making posttax and transfer income (on the vertical axis) a monotonously
increasing function of pretax and transfer income (on the horizontal axis).
But, for a given level of guarantee and assuming proportional taxation, a
negative income tax scheme (fig. A2) achieves the same end result (with qual-
ifications mentioned at the end of the second section) as a basic income scheme
(fig. A3) by only giving to some people the net transfer due to them and only
taking from the others the net taxes owed by them, instead of giving them
all the same gross transfer and including all income from other sources in
the tax base.

gross

FIG. Al.-"Make up" type of guaranteed minimum income

FIG. A2.-Negative income tax scheme

net

gross

FIG. A3.-Basic income scheme

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