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Participatory budgets

In previous posts we have discussed how the governments of space settlements can raise money and how they can avoid to borrow money. We will summarize the key points of these post: 1. Since governments are the owners of space habitats, they can use the collection of land rents to fund government expenditure, hence all other taxes can be abolished. 2. Because the government of a space settlement can require that land rent has to be paid in government issued money, it creates an effective demand for national currency and gives value to this money.

By playing with the height of (the total sum of) land rents (R), and the height of public expenditure (S), the government can control to growth of the money supply. This because the change of the money supply (delta M) is simply: delta M = S – R. In this way, governments of space settlements can control the level of inflation. Because this system is vulnerable for abuse by politicians seeking electoral gains, we have proposed to establish an independent body which will set the height of land rent, and the level of government spending. How the government would spend this money will remain a political issue.

The authority to prove the government budget is among the most important powers modern parliaments have. Without an approved budget, a government can’t function since they can’t pay its bills. In modern democracies the influence of citizens on the budget is limited to their ability to participate in voting for the legislature.

Attempts to increase citizen participation in budgetary matters, haven’t been successful. The most simplest version, the government just proposes a budget, which is subsequently subjected to a referendum. Then the citizens can either vote for or against the proposed budget. The result is quite predictable: since any given budget would contain measures a particular citizen does not agree with, many people will simply vote against the budget. Hence there will be no approved budget, and even if the government would submit a modified budget to a popular vote, there will be no guarantee the citizens will approve it this time.

A more extreme, and even more dysfunctional, example of budgeting by referendum is California. As a result of a series of initiatives the Californian state budget is fixed for a substantial portion. Such initiatives have form of “Do you agree that the government should spend 30% of its budget to education?”, on which the citizens can only vote “yes” or “no”. And whatever the majority wants, will be done. The result is that some government programs are over-funded, while others are underfunded. Another problem which might arise is an inconsistent budget, i.e. a budget which spends more than 100% of the budget.

Often this example is used by opponents of direct democracy to “prove” that direct democracy does not work.  However, the problem here is not (direct) democracy as such, but the “dogma” that a budget has to be approved by a majority of the voters. It’s taken for granted that if the government would want to spend one million MU on public parks, this should be approved by a majority of voters, even if this is a majority of one vote.

This majoritarian thinking has several problems. First, it forces the minority to spend its money on things they do not want. Secondly, a complex compromise has to be found, since money spent on A cannot be spent on B. It’s this second issue what goes wrong when you attempt to make a budget by referendum, millions of citizens cannot negotiate a budgetary compromise.

The whole concept of a non-majoritarian budget seems strange and democratic, but I will give you a non-budgetary example. A few years ago I heard on the radio the story of a father and daughter who had written a crime novel together, and how did they do this? Well, first the father wrote a chapter, than his daughter the next one taking her father’s contribution into account, then the father wrote the third chapter and so on. The father and his daughter did not vote, nor were they seeking a compromise on each chapter. And still they managed to finish the novel together.

Can we conceive a similar approach for participatory budgets? Yes, it can and several proposals have been made. One idea is known as “tax choice“, in this concept each tax payer determines how his or her tax money will be spent by checking the appropriate boxes on his tax form. This approach has two problems: it requires to have an income tax, the very thing we wants to avoid in a space settlement. And secondly it gives more power to those who pay more tax, and thereby violating the “one man-one vote” principle. A slightly different version has been proposed by Mark Rosenfelder.

The version of participatory budgets we propose is as follows. Each year each adult citizens receive a form from the national budget office. On this form the citizens can distribute, say, 10,000 MU among different government programs. One can spend all money on the military or distribute it evenly among education, science, healthcare, arts and infrastructure or some other combination. By filling in this form, he or she has only to consider his or her own preferences. After filling this form, it’s returned to the national budget office, which collect all these forms of the whole citizenry.

In this proposal every one has an equal vote on the budget, which follows from the arguments discussed in “The problem of taxation. Part Two“. Since land should be a collective property, the revenues from land rents should be enjoyed by all in an equal fashion. Hence it is justified that all citizens should have an equal say into the budget.

The next question is whether the entire budget should be determined in this way? No, we believe that a fifty-fifty split between the citizens and the legislature would be appropriate. It’s important that the state has some discretionary spending power, for example to act in an emergency.

Why should we consider participatory budgets at all? Because it enhances the concept of self-governing citizens, the core of classical republicanism. As we said above, the most important power of modern governments is the power to spend money. Participatory budgets gave citizens a real stake in the governance of their nation, state or city, and create also a sense of responsibility among the citizens.