With the accelerating onset of automation, the loss of manufacturing jobs in the West, an increasing rise in income inequality, and the obvious failure of the welfare state to provide a clear path out of poverty, many are looking for alternative economic policies that will meet everyone’s needs and guarantee everyone a dignified standard of living.
The most prominent of these proposals is the Universal Basic Income (UBI) or Basic Income Guarantee (BIG). The idea is quite simple. Each and every citizen will be entitled to receive a regular sum of money from the government – regardless of their income or occupation. Not a huge sum of money, but enough to ensure that basic requirements are met and that no one will go hungry.
It’s easy to see the appeal. Proponents claim that UBI would do away with poverty traps wherein people who earn more will actually take home less because they will lose their entitlements. Additonally, it will simplify the complex array of welfare benefits into one scheme which would be less bureaucratic and cheaper to administer than the current system. It would remove the stigma of welfare recipients being labelled “parasites” because everyone would get the same handout. It would remunerate people who engaged in voluntarism such as care work, child care, care for the elderly (much of which currently goes unpaid for and is conducted predominantly by women).
UBI may also reduce government expenditures on law enforcement and healthcare if it leads to a drop in poverty-driven crime and stress. It would also encourage independent entrepreneurship and hedge against the onset of automation if people could use their UBI to take time out of the workforce to retrain for different professions.
On the conservative side, it would preserve the market economy from outright socialism. Many services which are currently provided by the state may be deemed affordable to all once a basic income scheme is instituted. This would allow them to be placed back on the market, for competition and increased efficiency through private provision. Faced with overbearing bosses or unreasonable conditions, employees could walk away from their positions with relative security putting pressure on employers to reform hostile, unpleasant, or needlessly stressful workplaces. As a consequence, many labour laws and regulations might become unnecessary and could be abandoned, cutting the red tape, and unnecessary expenditure on monitoring compliance from businesses and government departments.
So far so good.
But, the Universal Basic Income scheme is not without its discontents. Opponents say that at least the current welfare system is somewhat discriminatory, and will not lead to more government handouts to the very wealthy (not to mention to people with substance addictions and unhealthy lifestyles who will not be helped, but rather hindered, by the UBI).
Some say the UBI might be a fine solution to income inequality, but the combined wealth of all the billionaires in Britain wouldn’t cover the scheme for a year. The combined wealth of all the billionaires in the world ($8.7 trillion, according to Forbes) would only cover a Universal Basic Income of $1000 a month for about two and a half years in America. So, the tax burden will have to be spread across everyone who is working. Paying the UBI out to people who are following their passions, at the expense of people who are still working, is to disincentive the creation of wealth on a scale not seen before in contemporary nations with a market economy. The people who are doing the necessary work will have to admit lower standards of living to subsidise those who are pursuing leisure, even though they are the ones doing the heavy lifting. Highly qualified professionals, like surgeons and engineers, are hardly likely to work long hours only to be taxed at 70% to 90% of their income as a standard. They are likely to cut back on hours, decreasing the availability of critical services. And with less to go around, the price of what is produced is liable to rise in accordance with the laws of supply and demand.
The UBI could cause massive inflation where landlords and shop owners simply hike prices to take advantage of the new pounds or dollars entering the economy that is not backed by human labour, but a mere wave of the government’s printing press. I fear that without helping the poor develop their skills (so they can earn a higher wage and capital) they are stakeholders in the creation of wealth in a society and can only draw minute percentages of corporate profits. This merely gives working class individuals the crumbs of wealth and UBI is the equivalent taking water from the deep end of the swimming pool and pouring it into the shallow end. They will go into the marketplace and spend their money, and it will predominantly go back to the rich again.
We are told that the UBI will replace the costly bureaucratic web of failed welfare programs, but is that sustainable? How long before people start saying their group should be earning a higher basic income?
Families with children, single parents, the elderly, disabled persons, or those who live in areas where rents and costs of living are relatively high, or where they have to travel long distances to work… On the face of it, why shouldn’t vulnerable groups, and those who have to pay more to live, get a supplement? But then we are back to the problem of towering administration costs.
Even avoiding that pitfall, with everyone “in on the action”, receiving the same basic income, come election time each party is likely to hold office by offering to increase their living allowance by more than the next candidate. At some point this must become unsustainable, but will we be able to see clearly through the promise of more booty? What about the prospect of a dystopian future where the government holds everyone’s purse strings and can crackdown on dissidents who are absolutely dependent upon them by cutting them off from their basic income?
So far, redistributive policies have never ended poverty anywhere. The United States has spent nearly $15 trillion on welfare since President Lyndon Johnson declared a “war on poverty” in 1964. In 2012, the federal government spent $668 billion on 126 separate anti-poverty programs. State and local governments added another $284 billion, bringing the total to nearly a trillion! This amounts to $20,610 for every poor man, woman and child in The States. Poverty should have been well abolished in the US given that it only has a tiny proportion of the world’s poor.
Will the UBI prove to be the alternative to these wasteful programs that finally cracks the problem for good? We want hope! We don’t want to know what won’t work – we want to know what will!
As the ol’ saying goes: “You can’t beat Somethin’ with Nothin”
Opponents of the UBI are going to have to do better than just saying “no”, “no”, “no”, if we are to inspire imaginations and satisfy the world’s thirst for positive change. I have my own ideas on how to end poverty which I have detailed in my little book Universal Basic Income – For and Against in which I give further air time to considering the arguments in favour of and against the UBI, but for now I’m interested in hearing other peoples…
With that said please enjoy contributions to issue No. 6 of PoliQuads Magazine!
Antony Sammeroff is host of the Scottish Liberty Podcast and a populariser of economic concepts and thinking. His writing can be found on The Mises Institute, The Foundation for Economic Education, The Scottish Libertarian Party, The Cobden Centre, The Backbencher, The Rational Rise, and especially his blog www.seeingnotseen.blogspot.com