Universal basic income in post-pandemic world
16 May 2020
6 min read
The pandemic may not be the only by-product the Western world imported from China. China's socio-economic structure encompasses a bi-modal organisation, governed by the principle of "One country, two systems". One the one hand, the big mass of the population, is governed by the communist idea blended in the Confucianist tradition. On the other hand, a small number of people function in a hypercapitalist mode. In a post-pandemic world, capitalism, as we know it, may reach an end and need to reinvent itself and cope with the new realities. Therefore, the traditional western democracies may need to implement and adapt the Chinese bi-modalism.
The progressist leaders hasted to foresee that the solution to the current crisis is implementing sustained climate actions. The green recovery would require significant investments in renewable energy, big reductions of carbon emissions and focus on environmental preservation.
Moreover, social distancing may lead to significant mutations in the retail, entertainment, catering and tourism industries. Therefore, entire sectors could be wiped out, leading to a permanent loss in employment. The technology, banking and other service-oriented sectors that can function in a social distancing society can continue operating and propose decent wages to their employees.
The United States counts between 23 and 30 million persons without employment currently. It is highly probable that this tendency may not be only temporary, and many people will remain jobless in the long-term. Many developed countries are facing similar dilemmas and need to find solutions to massive structural unemployment.
How can a government solve unemployment with climate actions?
Universal basic income seems to be one if not the only solution. The US
Federal government proposed for two months a basic income to all citizens
struggling during the crisis. There are many reasons to believe that this
solution could be soon extended. "One society, two systems" embraces both
capitalisms governed by corporations and socialism backed by national
governments. Capitalism may continue for a part of the society, which is
highly skilled, working in the corporate-dominated sectors proposing. But
for the rest of the population, socially oriented measures encompassing the
universal basic income may be a necessity.
By destroying small-scale production, capital leads to an increase in productivity of labour and to the creation of a monopoly position for the associations of big capitalists.
V.I Lenin, Soviet leader
The market is waiting. What is waiting for? GDP is dipping across all
economies, and unemployment reached unprecedented levels in the US. Despite
all these negative news, the leading equity indices oscillate around the
same levels over the past four weeks. A major correction could appear when
central banks will stop injecting liquidity into markets.
Bitcoin after halving
Bitcoin had its third halving on May 11, and its price oscillates below the resistance level of 10,000 USD. The leading cryptocurrency dipped below 9,000 USD earlier this week and bounced back quickly after. Nevertheless, at the current price level, the mining is far from being profitable. The cost of mining a Bitcoin is somewhere around 12000 USD, thereby with the current level solving the SHA256 is not lucrative. Bitcoin evolved into positive territory amid the pandemic and naturally should reach at least the real mining cost.
Low-cost Airliners into thin air
The leading European national air carriers including Lufthansa, Air France and SAS Scandinavian are in advanced discussions with their respective governments for ample bailout packages amid coronavirus crisis. The pandemic impacted heavily the air traffic that dipped with more than 90% compared to the last year numbers. The bailouts aim to support the leading companies and some of their subsidiaries offering low-cost flights.
The big names of the low-cost like Ryanair and Easyjet, are in a difficult
situation as they may face a distorted competition. Airlines underperformed
on the stock market compared to the leading indices, Ryanair losing for
instance almost 50% of its capitalization. In this context low-cost are
facing extinction because their just-in-time business model is not viable
when an aircraft is grounded more than a few days. Ryanair's flamboyant CEO
Michael O'Leary announced that he intended to take this matter to the Court
of Justice of the EU.
The Dow Jones could enter into a negative territory below 23,000. We expect to see Bitcoin moving north above 10,000 USD, the Gold ounce to reach 1,760 USD and the Brent crude to progress slowly towards 33 USD per barrel.
The information and data published in this research were prepared by the market research department of Darqube Ltd. Publications and reports of our research department are provided for information purposes only. Market data and figures are indicative and Darqube Ltd does not trade any financial instrument or offer investment recommendations and decision of any type. The information and analysis contained in this report has been prepared from sources that our research department believes to be objective, transparent and robust.