La Renta — Basic Income With A Twist

A form of universal income imagined to incentivise participative economy and fight corruption
21 May 2018
Laboratorio Para la Ciudad, Mexico City Local Government
In Collaboration With

When necessary decisions radically impact the lives of millions, some form of compensation is needed to support them during the transition. La Renta is a take on universal income that turns infrastructural lemons into economic lemonade.

La Renta is a sub­set of the CDRMX project, which pro­posed to relo­cate inhab­i­tants of Mex­i­co City away from the urbanised lakebed and onto new­ly-print­ed neigh­bour­hoods on the hill­sides sur­round­ing the city. The goal of this oper­a­tion, pre­sent­ed as ongo­ing, is to retrieve the essen­tial eco­log­i­cal zone of for­mer lake Tex­co­co. Mul­ti­ple city offi­cials, along­side local archi­tect Alber­to Kalach, claim doing so is the only way for the city to sub­sist into the future. It is also con­sid­ered that hill­side set­tle­ments might — rather coun­ter­in­tu­itive­ly — be less sub­ject to the dam­ages caused by seis­mic activ­i­ty. At the request of the city council’s think tank LabCD­MX, we decid­ed to explore how relo­cat­ing cit­i­zens could hap­pen in the con­text of a dense­ly pop­u­lat­ed metro­pole strug­gling with endem­ic unem­ploy­ment and corruption. 

When a New Home isn’t Enough

That the new neigh­bour­hoods are of high­er hous­ing stan­dards than the Colo­nias Pop­u­lares, where many res­i­dents cur­rent­ly live, makes lit­tle doubt. The mod­ern Impre­sos Pop­u­lares are built using state-of-the-art habi­tat-print­ing tech­nol­o­gy, pair­ing seis­mic resilience with ingen­u­ous ways to opti­mise resources usage and access to sun­light. But even pro­vid­ed free of charge might not suf­fice to con­vince res­i­dents of the Colo­nias to leave the hous­es they often built with their own hands, to instead move into areas where eco­nom­ic activ­i­ty is uncer­tain. 
	The ques­tion then made itself clear: how can one offer a fair incen­tive that alle­vi­ates doubts and makes the pro­posed alter­na­tive a clear improve­ment. Sim­ply hand­ing out mon­ey was not an option, as the risk of it land­ing in the wrong hands was sim­ply too high. From this chal­lenge, an answer quick­ly became evi­dent: the CDRMX project should ensure every relo­ca­tee a guar­an­teed income that would allow them to cov­er their needs, and some wants. But that income should not just give peo­ple mon­ey to consume—it should also stim­u­late the Impre­sos’ econ­o­my. We would have to think a way to incen­tivise invest­ing local­ly: la Renta was born.
	La Renta is a uni­ver­sal income with a twist: it is grant­ed at the start of every month, and deval­ues itself in full at the end. This means any mon­ey not spent is lost to the user. As La Renta is designed to cov­er more than the basic needs, there should remain mon­ey at the end of the month. From this, dif­fer­ent strate­gies exist to keep the ben­e­fits of that over­head: it can be saved, at a loss, or invest­ed at a return.

A Currency For The Impresos: The Mexicoin

To avoid prob­lems linked to dis­trib­ut­ing the income in Mex­i­can Pesos, a new cur­ren­cy was cre­at­ed. The Mex­i­coin is a new cryp­tocur­ren­cy devel­oped for local use only, and which can only be used for the pur­pose of dis­trib­ut­ing La Renta. It relies on the HashMesh: a cus­tom tech­ni­cal infra­struc­ture designed specif­i­cal­ly to offer “fast, secure, fair, and low-cost trans­ac­tions on net­works of any scale.” 

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Fictional whitepapers

To avoid objec­tion from the tech-savvy, we gave the Mex­i­coin its own tech­no­log­i­cal frame­work and asso­ci­at­ed jar­gon. The fic­tion­al whitepa­pers describ­ing the HashMesh were writ­ten as a way to sup­port our claim. To pro­vide enough the­o­ret­i­cal back­ground — even if made-up — that tech­ni­cal­i­ties wouldn't be ques­tioned. As such, the con­tent only needs to be cor­rect enough to be believable. 

Doing so lets us focus on the project, rather than the under­ly­ing technology.

Mex­i­coins exist sole­ly with­in what some may call a microso­cial­ist sys­tem: its min­ing is cen­tralised and capped, and it can­not be bought using oth­er currencies—you can exchange Mex­i­coins for pesos or dol­lars, but not the oth­er way around. 
	The HashMesh is the infra­struc­ture sup­port­ing Mex­i­coin, which is the cur­ren­cy sup­port­ing La Renta. While these two ele­ments help proof the fic­tion and keep tech­ni­cal objec­tions at bay, the unique­ness of this project lies in it act­ing as a self-sus­tain­ing ecosys­tem. Its pri­ma­ry goal is to ensure every­one gets their allo­cat­ed income, and its sec­ondary goal that the mon­ey ben­e­fits local economy. 

A Composite Economic System

To achieve this dual objec­tive, the sys­tem brings four dif­fer­ent accounts into play: the first two are pri­vate, equiv­a­lent to a cur­rent and a sav­ings account; one is a type of invest­ment port­fo­lio keep­ing track of sup­port­ed projects; the last is a col­lec­tive account owned by the entire Impre­so. They are called la Cuen­ta, los Ahor­ros, los Proyec­tos, and el Tarro.

1. La Cuenta

The first account is La Cuen­ta, on which La Renta is deposit­ed at the start of each month. 1500 Mex­i­coins for adults, 1000 for chil­dren, no exceptions—within the pro­posed eco­nom­ic mod­el, that’s more than enough to live com­fort­ably. La Cuen­ta is the cur­rent account used for dai­ly trans­ac­tions, and is ful­ly devalu­ing. That means that at the end of the month, every Cuen­ta goes back to zero before being refilled. Any over­head auto­mat­i­cal­ly goes to a sec­ond account called Ahorros.

2. Los Ahorros

Los Ahor­ros is a sav­ings account which oper­ates in two dif­fer­ent ways based on the Mex­i­coin time­stamp. It’s devalu­ing any coin deposit­ed after March 1st of the cur­rent year by 20% each month, while keep­ing pre­vi­ous funds whole. For chil­dren, the miss­ing 500 Mex­i­coins to their Renta are deposit­ed on this same account with a spe­cial stamp that locks them until their 18th birth­day. 
	The rea­son behind this sys­tem is to dis­cour­age cap­i­tal­is­ing, so that most of the Mex­i­coins left untouched at the end of the month will be inject­ed in a local, par­tic­i­pa­tive econ­o­my pow­ered by Los Proyectos.

3. Los Proyectos

Los Proyec­tos are at the very core of the par­tic­i­pa­tive econ­o­my mod­el. Think of it as an incen­tivised kick­starter, which allows res­i­dents to invest their spare Mex­i­coins in return for goods or ser­vices — nev­er mon­ey — that will make their life cheap­er, or more com­fort­able, or more fun. For instance, a small spender, whose main expense in terms of enter­tain­ment is going to the movies will prob­a­bly invest in a local cin­e­ma project that, once fund­ed, will grant them a free movie tick­et each week. They will spend less on movie tick­ets, and have more mon­ey to invest else­where. This way we can fund qual­i­ty school­ing and retire­ment homes, local com­mu­ni­ty gar­dens, sport and cul­ture events, col­lec­tive gifts, secu­ri­ty ser­vices, etc… We are get­ting a lit­tle clos­er to the idea of dis­trib­uted pol­i­tics in the sense that most pub­lic projects are vot­ed for through par­tic­i­pa­tive econ­o­my. 
	It might some­times hap­pen that a project doesn’t get fund­ed in the allo­cat­ed time­frame, which shows it isn’t a pri­or­i­ty for the dis­trict. In this case, the project is can­celled and all allo­cat­ed funds are auto­mat­i­cal­ly redis­trib­uted to each contributor’s Ahor­ros, and will be deval­ued month­ly until March. The Mex­i­coins lost in this process are col­lect­ed on a col­lec­tive account known as El Tarro.

4. El Tarro

El Tar­ro allows pub­lic ser­vices to cov­er func­tion­ing costs. We have esti­mat­ed that 7.8% of all pro­duced Mex­i­coins will fall back to pub­lic use through that sys­tem which, con­sid­er­ing the low­ered infra­struc­tur­al costs of print­ed dis­tricts and the pri­vate injec­tion of fund in local ser­vices, will keep all basic main­te­nance expens­es cov­ered, with some to spare. This also acts as a buffer that lets the machine keep infla­tion under control.

Case Studies: La Renta Eradicates Poverty, not Wealth

In order to illus­trate the pos­si­bil­i­ties offered by La Renta, var­i­ous cas­es were imag­ined and dis­sect­ed. They cor­re­spond to dif­fer­ent spend­ing, sav­ing, and invest­ing behav­iour, as well as ways to use allo­cat­ed Mex­i­coins collectively—for instance as part of a fam­i­ly. These exam­ples show that, while there exist ways to build wealth with­in this sys­tem, these go through dif­fer­ent chan­nels in ways that prof­it the com­mu­ni­ty as a whole. It is also a much need­ed par­a­digm shift to con­sid­er that when the com­mu­ni­ty ben­e­fits, so does the individual. 
The Investor

The best way to take advan­tage in the sys­tem is to invest in projects. Con­sid­er some­one who backs projects with good chances of suc­cess. Once fund­ed, these projects give out perks — a week­ly fruit bas­ket or a month­ly the­atre tick­et — which allow them to reduce spend­ing, and to invest more. The occa­sion­al fail­ure (here in August) leads to invest­ed funds being trans­ferred to Los Ahor­ros, and each month 20% of the remain­ing sum is lost to El Tar­ro. There is an under­stand­able spike in spend­ing dur­ing Christ­mas sea­son, fol­lowed by a log­i­cal deci­sion to save all in Feb­ru­ary, just before Los Ahor­ros are locked. By the end of the year, this investor has saved half a Renta, invest­ed three, and con­tributed 2.7% of their income to the collectivity.

The Spender

On the oth­er end of the spec­trum, the spender is some­one who lives a life of rel­a­tive lux­u­ry, spend­ing near­ly all their Renta every month. Despite not doing any invest­ing, this spender only lets 200 Mex­i­coins fall to Los Ahor­ros every month. Their sav­ings top at one third of a Renta, while con­tribut­ing around 4% to El Tar­ro. That strat­e­gy is not the most fruit­ful in terms of long-term plan­ning, but the mon­ey is spent nevertheless. 

The Saver

The tra­di­tion­al method of sav­ing, while pos­si­ble, pro­vides the least return due to the strong deval­u­a­tion of Los Ahor­ros. Some­one who aggres­sive­ly saves a third of their Renta every month will end up hav­ing saved 2300 Mex­i­coins, and con­tributed 3600 to the collectivity—over 20% of their orig­i­nal income. In this sys­tem, pure cap­i­tal­i­sa­tion yields little.

The Family

The last case is that of a cou­ple with two chil­dren, who start the month with 5000 mex­i­coins — it’s of course pos­si­ble to join accounts. They invest wise­ly in the com­mu­ni­ty gar­den and a school fund, and only when they try to fund a restau­rant does their invest­ment col­lapse to Los Ahor­ros and they start pay­ing tax­es. Because it’s close to the end of the year, they change their strat­e­gy and do full-on sav­ing after that, which allows them to push over half their com­bined month­ly income into locked sav­ings, while hav­ing con­tributed 2.14% to El Tarro.

Physical and Cultural Extensions

Because Mex­i­coin is a ful­ly dig­i­tal cur­ren­cy, there is no paper mon­ey or pay­ment card. Instead, every cit­i­zen is giv­en a phone-sized ter­mi­nal let­ting them receive pay­ments: the Mexi­Wal­let. A fin­ger­print scan and pin code is all one need to issue a pay­ment, and since ter­mi­nals are used to receive, not send funds, a lost or stolen Mexi­Wal­let is no big deal. Using it, one can also check one’s accounts bal­ance, nav­i­gate proyec­tos, and com­mu­ni­cate for free with oth­er impre­sos res­i­dents using a local network.
Fol­low­ing the ini­tial CDRMX pre­sen­ta­tion, sev­er­al grass­roots projects emerged that were direct­ly influ­enced by La Renta.
	Among these, a polit­i­cal group cam­paign­ing for deci­sion­less pol­i­tics, propos­ing instead a cen­tral algo­rithm able to autonomous­ly start Proyec­tos based on people’s best inter­ests, as per­ceived through their dai­ly rou­tines or emo­tion­al states. 
	Anoth­er was the Cryp­to­ball, a new sport stem­ming from the prac­tice of invest­ing left­over Mex­i­coins into a phys­i­cal Proyec­to: a ball hid­den some­where on the Impre­so on deval­u­a­tion night, which spills out mon­ey at a steady rate to the account of who­ev­er holds it, for as long as they hold it. In its lat­er evo­lu­tion into an offi­cial sport, the prac­tice sees two teams com­pete in a ver­ti­cal are­na, attempt­ing to hit a fly­er as high as pos­si­ble. The last per­son to launch it scores points until the oppos­ing team gets a hit. 
	Like many sports, pro­fes­sion­al Cryp­to­ball doesn’t come free of shady operations—these were explored in an arti­cle titled I Went to Mex­i­co City to Dis­cov­er How Cryp­to-eco­nom­ics Could Save the Envi­ron­ment, and All I Got Was This Lousy T‑shirt, pub­lished a few years lat­er as a col­lab­o­ra­tion between Goethe Insti­tut Mex­i­co, Cen­tro de Futur­os, and Pitzilein Books.

In 2018, La Renta had the occa­sion to take a life of its own. It was then pitched by Rajesh Laghari as part of a series of Fin­Tech con­fer­ences at re:publica18 in Berlin. Fol­low­ing this event was an offer by (real) econ­o­mist Joe Rini from IASS Pots­dam to have a clos­er look at the pro­posed solu­tion, which sparked inter­est­ing debate on pos­si­ble ways to make use of such an approach, as well as pos­si­ble improve­ments on the orig­i­nal idea.