Universal basic income: Bridging the inequality chasm
It should not replace all social benefits or services and it should not be solely a way of taxing some people to pay others. Rather, it should be part of a new distribution system — one that recognises it is impossible to attribute income solely to merit
groundbreaking pilot project was launched last week in Finland. The government is going to give a randomly-selected group of 2,000 unemployed citizens a monthly income of $587 (Dh2,159) with no strings attached and no need to report how they spend it. The project aims to test the feasibility of a programme — called basic income — that has worked in earlier pilot projects elsewhere in the world.
Basic income — also known as universal basic income and basic minimum income — is a modest amount paid individually and equally to citizens, without behavioural conditions. It has proven to reduce inequality and enhance economic and social freedom. And its time has come.
In the old 20th-century income distribution system, the shares of income going to capital, mainly in profits, and labour, in wages and non-wage benefits, were roughly stable. But that system is no more. Now, growing inequality is threatening democracy and breeding anxiety, alienation, anomie and anger among the losers. That mix leads to support for unsavory characters who promise to turn the clock back to some imaginary golden age.
The collapse of the old income distribution system is evident in a dramatic rise in the income share going to rentiers — that is, to those receiving income from financial, physical and intellectual property. Meanwhile, we are witnessing a rapidly growing social class that I call the “precariat”, consisting of millions of people experiencing declining wages, volatile earnings and no occupational identity or security. The political establishment ignored the precariat and is now paying a heavy price.
The political near future is gloomy, but not everything is. As the American poet Theodore Roethke wrote, “In a dark time, the eye begins to see.” The response to these darkening times must be to devise and then rally support for a new income distribution system.
Remarkably, a host of ethical and pragmatic reasons for moving in that direction have come to the fore at the same time. It is now a political imperative. Unless this is on the table, the drift to the far right will only grow. The fundamental justification for a basic income is ethical. It is a means of enhancing freedom and a means of providing basic security without which it is unfair to expect people to behave altruistically or vote responsibly.
New distribution system
As someone who has advocated a basic income for 30 years, I am elated by the recent surge of support. The biggest challenge may be one of framing or labelling. Basic income is not a panacea: It should not replace all social benefits or services and it should not be solely a way of taxing some people to pay for others. It should be part of a new distribution system — one that recognises it is impossible to attribute income solely to merit or individual productivity.
The sceptics persist with old objections, which have been refuted numerous times. But what is most encouraging is that the surge in support is coming from both liberals and conservatives. And it is leading to national and sub-national pilot programmes. In Ontario, a pilot project is set to start soon, organised by the provincial government. In California, an ambitious project is planned for this year, largely funded by the startup incubator Y Combinator. Others are starting in perhaps two dozen Dutch municipalities and there are plans to conduct pilots in Scotland and Spain.
I am involved in some of these and I hope they will help legitimise this idea. From 2011 to 2013, I worked on an early basic income pilot with the Self-Employed Women’s Association of India, funded largely by Unicef-India. For 18 months, 6,000 men, women and children in nine villages in Madhya Pradesh, a state in central India, were provided with a modest basic income, without conditions. What happened to them was compared with what happened in 12 similar villages. In the basic income villages, health and diet improved, and school attendance rose. People also often used some of the income to start or boost entrepreneurial efforts, stimulating the local economy and ensuring some income going forward.
Earlier, I had been involved in a smaller pilot in Namibia, which showed similar results. And we complemented the bigger pilot in India along with two smaller pilots, one of which involved giving families a choice between continuing with rationed food and fuel or having a basic income of equivalent monetary value. A majority preferred the cash, and after a year of observation, their diets were more diversified and health status improved. Now, there are exciting plans by a well-funded American non-profit organisation, GiveDirectly, to launch a long-term pilot in rural Kenya. And smaller experiments are proliferating in both developed and developing countries. Given all this, let’s reflect on four important impacts of basic income.
1. Basic income is transformative
The evidence shows that a basic income transforms lives. The pilots in India showed several positive results. First, welfare improved, with better sanitation, child nutrition, health and schooling. Meanwhile, the consumption of private vices (in this case, usually tobacco and alcohol) declined. Second, the equity effects were positive. Those with disabilities, the elderly, women and those from lower castes all benefited more than their counterparts. Third, the economic effects were positive: People did more work, productivity increased and income inequality declined.
Of course, India is not the United States or the United Kingdom, but the human condition is similar across the world. People in general want to improve their lives and the lives of their children and other loved ones. The claim that if people had a basic income they would become lazy is prejudiced and has been refuted many times in many places.
2. Basic income enhances freedom
The basic income pilot programmes in India had strong emancipatory effects, particularly for women, who gained a greater say and control over their lives. The incidence of bonded labour also declined.
Basic income enhances freedom from figures and mechanisms of unaccountable domination, particularly for women. It aids precariats in their unedifying and undignified struggle with bureaucrats, in whose shadow they tremble. Targeted, conditional benefits erode freedom.
3. Basic income ensures basic economic security
It doesn’t eradicate poverty, but it moves society in that direction by providing basic economic security. There is vast evidence that social and economic insecurity has grown and that it corrodes mental health, lowers mental bandwidth, fosters opportunistic decision-making rather than longer-term strategic thinking, and corrodes empathy, altruism and an ethos of social solidarity.
4. Basic income promotes ecological justice
At present, in most of the world, fossil fuels are subsidised as an anti-poverty device, but they lead to pollution and global warming. If subsidies were removed and if fossil fuel taxes were raised to cover social costs, which is desirable for ecological reasons, the poor would suffer. Accordingly, a basic income could be seen as the necessary quid pro quo for what is eminently desirable.
The above four-fold rationale and evidence constitute the most important grounds for supporting basic income. Yet today, advocacy is coming mainly from another direction. Many prominent people, including some in Silicon Valley, are convinced that the march of the robots and artificial intelligence will generate mass unemployment and impoverishment. As a result, they see a basic income as essential.
What we can say with confidence is that the technological revolution is worsening inequality, due mostly to mechanisms that limit free markets. It is also bringing about disruptive change that is intensifying insecurity and may indeed lead to large-scale labour displacement. As such, a basic income system could be a preparatory defence system and an automatic economic stabiliser, with basic income amounts rising in recessions and falling in booms.
Basic income becomes affordable by cutting all subsidies that go to upper-income earners and corporations, putting a levy on all forms of rental income, increasing taxes and setting up a sovereign wealth fund, like the Norwegian Pension Fund — a large fund made up of surplus wealth from Norwegian oil revenue.
Thomas Paine, a leading light in the American and French revolutions, argued that the wealth of society is the result of collective efforts over generations and that everybody should receive an equal social dividend as a right of citizenship. Jump forward to the 21st century, and rentier income is increasingly flowing to property owners, many of whom have done little work to gain it. Universal basic income is a revolutionary solution without a blood-soaked revolution. Leaders across the world should start implementing it now.
Guy Standing is a professor of Development Studies at the University of London and the author of The Precariat: The New Dangerous Class.