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Jan 8, 2021
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“Pandemic” accelerates tectonic social processes

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Prediction # 6 from Shocking Predictions Saxo Bank sounds like this: “Unconditional Basic Income Will Devastate Major Cities”… Although this forecast is medium- and even long-term, we saw some signs that the “devastation” of large cities is beginning already in 2020.

Author of the sixth forecast Kay Van-Petersen, specialist Saxo Bank on the global macroeconomic strategy, focuses on the “pandemic” as a catalyst for tectonic processes in the social sphere. The polarization in society is increasing, the real incomes of even those employed are falling, the cost of living in cities is growing: “Even if young professionals get a job … one income is barely enough to support a family, if you take into account insurance payments, education fees and rent and mortgage payments”

The growing financial nature of the economy and the introduction of digital technologies lead to an increase in unemployment, the “pandemic” only highlighted this problem: “For centuries, big cities have been a driver of job growth. But in a new era … job cuts caused by the introduction of technology, as well as the increased incidence of working from home, which has become commonplace due to the Covid-19 pandemic, have led to the fact that office space in the city was suddenly empty by at least 50%. Commercial real estate plummeted in value, as did commercial real estate, which housed restaurants and shops aimed at serving workers commuting to work from the suburbs. “

In the face of the constraints of economic life (quarantine) the number of people who have lost their livelihood has increased dramatically. According to the World Bank, the number of poor in 2020 worldwide will grow by 88-115 million people. The total number of people with no income or incomes below the subsistence level will increase in 2020 to 9.4% of the total population of the Earth. At the end of 2019, this figure was 9.1%. It is predicted that in the new 2021 the number of beggars will increase by another 150 million.

Since 2020, there has been a pauperization of the population of those countries that are commonly referred to as the “golden billion”. In many countries, according to the author of the forecast, large-scale measures have been taken to combat poverty and poverty, sometimes they are called the distribution of “helicopter money”. The most striking example is the United States. There, in March 2020, the government decided to issue each adult citizen of the country $ 1,000 and $ 500 per child. The distribution of money was carried out. According to experts, this measure cushioned social overloads among the poor strata of the US population and to some extent helped the economy by creating additional effective demand. In Europe, the distribution of “helicopter money” was also carried out, although on a more modest scale.

Someone hastened to conclude that, finally, there will be a system of the so-called unconditional basic income (UBI), which has been talked about in recent years. UBI can be defined as a money income guaranteed to every citizen, the receipt of which does not depend on any conditions, except for a condition that a person belongs to one or another state jurisdiction (this assistance does not apply to foreigners). The amount of money received by a citizen must provide him with at least a minimum standard of living. In other words, the UBD should free a person from dependence on work as a source of existence.

At the end of the 20th century, experiments with road safety began to be carried out in some countries. For example, in Holland and Finland. The possibility of introducing a BDB was seriously discussed in Switzerland. It provided that every adult resident of Switzerland (including some categories of foreigners) receives from the state a monthly social allowance in the amount of 2,500 Swiss francs (at the then rate of about 2,260 euros or 170 thousand Russian rubles). For children, the amount of the allowance was determined at 625 francs (565 euros; 42.5 thousand Russian rubles). Simultaneously with the introduction of a single benefit, all social benefits and benefits were to be canceled. A referendum was held in Switzerland on the BBD issue in the summer of 2016, and the Swiss rejected the idea. I think that the main reason for their “no” was that for the implementation of the BBV project it was required to almost double taxes.

And, of course, the “helicopter money” that was distributed in 2020 can hardly be classified as a BBD. First, “helicopter money” is not distributed all the time, but one-time. Secondly, only in the United States this year all citizens received them; in other countries, the recipients of the money were certain categories of the population (“helicopter money” is distributed to everyone). Thirdly, the amount of money handed out almost never reached the subsistence level.

Another thing is that the distribution of “helicopter money” has revived the fading discussion about the need to switch to the LBD. After all, it is possible that if there is no second, third, etc. waves of “pandemic”, some other infection will appear. In addition, digitalization and robotization processes inevitably increase unemployment. All this sharply increases the relevance of the widespread introduction of the BDB. Forecast author Saxo Bank this explains the connection between COVID-19 and BDB: “Another driver is technology – the development of software, artificial intelligence and automation is leading to the disappearance of a large number of jobs in all industries. The risk of social stratification is leading to the realization that the implementation of the Covid-19 pandemic measures to provide benefits due to loss of income was not just a response to panic, but was the beginning of the introduction of an unconditional basic income on an ongoing basis. “

So, the author of the forecast has no doubts that the BDB will be introduced everywhere in the near future. If so, it will motivate many people to change their lifestyle. Including to leave megacities, moving to the countryside or small towns: “The new unconditional basic income is also changing attitudes towards work-life balance, as many young people now have the opportunity to stay where they spent their childhood. At the same time, professionals and marginalized workers are starting to leave large cities due to the disappearance of jobs, poor quality of life, and overpriced apartment prices in areas with high crime rates. Large cities are losing their attractiveness “

My attitude to this forecast is twofold.

I cannot agree that the BDB will be introduced everywhere. It is good if in at least one country the BDB has moved from the experimental stage to the phase of a permanent program. It will take too much money. For example, for the “helicopter money” that was distributed to citizens in the spring of 2020, the US government had to borrow a trillion dollars from the Fed, which was additionally printed. Imagine that the US government does not distribute money once (“helicopter money”), but permanently (this is really a BDB). Then every month the government will have to borrow a trillion from the American Central Bank, and every month this trillion will be reprinted … The US national debt will begin to grow rapidly, and the US dollar will depreciate just as quickly, finally losing the position of the world currency.

By the way, today in the USA preparations are underway for the release of the digital dollar. The American digital currency project provides that all individuals open accounts directly with the US Federal Reserve. In this scheme, not only private banks become superfluous as intermediaries between the Fed and citizens, but also the American treasury. The Fed will be able to directly supply all citizens with money. Those who advocate and promote the digital dollar project sometimes say that digital currency will make it easier to provide basic income for American citizens. Everything is beautiful on paper, but such projects have a lot of pitfalls. My opinion: in 2021 no country in the world will have a BDB. And even where in the long term it will be possible to launch the BDB project, the distribution of money to citizens will not last long – the financial system will not stand it.

But the fact that the outflow of people from megacities and large cities will occur is true. The reasons lie in the restrictions and prohibitions imposed on city dwellers and city businesses. Both people and businesses are starting to leave the big cities. There has been an outflow of population from Moscow, large cities abroad have experienced a serious outflow of population in 2020. New York, where the population is 9 million, “due to coronavirus” lost approximately 420 thousand people from March to May 1. This data New York Timesbased on the geolocation of mobile phone users. An increasing number of New Yorkers are switching to telecommuting. Some residents continue to move from New York to small cities and rural areas where the police regime is absent or not characterized by harshness. There is confidence that quarantine will last a long time.

The most pronounced flight from big cities is in countries such as the United States, Great Britain and Australia. UK Real Estate Site Analysts Rightmove note that the number of requests for houses and apartments in cities with a population of less than 10 thousand people doubled in 2020.

Cover photo: REUTERS / Hannah McKay

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