Could handouts end the ‘welfare trap’?
Over the last three decades, technology and globalization have combined to eliminate millions of jobs in advanced industrial countries, shifting an increasing share of national wealth to those at the top while incomes at the bottom stagnate or decline. And if you believe the talk in technology circles, robots and intelligent software are quickly becoming so sophisticated and so ubiquitous that they are about to take over the work done by millions more. How will we deal with a world where leisure is abundant and there aren’t enough good-paying jobs to go around?
To meet this political and economic metachallenge, the hot new idea is the universal basic income — using some of the wealth generated by all this new technology to guarantee everyone a baseline income, whether they are working or not.
It’s not as crazy as it may sound. In recent years, a guaranteed income has been proposed on the right by Charles Murray at the American Enterprise Institute and Michael Tanner of the Cato Institute, and on the left by former labor secretary Robert Reich and labor leader Andrew Stern. Switzerland gave it serious consideration last year before three-quarters of its voters turned down the idea in a nationwide referendum. And beginning this year, wellfunded, large-scale, long-term experiments in Finland and Kenya will examine whether providing a guaranteed income is an effective way to relieve poverty and cushion the effects of economic dislocation without encouraging idleness and sloth.
To capitalize on this sudden surge of interest, Phillippe Van Parijs and Yannick Vanderborght have reprised and updated their decade-old study in “Basic Income: A Radical Proposal for a Free Society and a Sane Economy.” The two Belgian academics are charter members of a global network of activists and thinkers who for decades have been trying to build the intellectual and political foundation for the idea.
Guaranteed-income schemes can take various forms, but in its simplest the government sends every citizen an annual check in an amount sufficient to keep the wolf from the door when misfortune strikes but not large enough to satisfy anyone’s idea of a good life. Paying for it would require raising taxes in some fashion that would have the effect of clawing some or all of the money back from most households while hitting up the wealthy for even more.
For Van Parijs and Vanderborght, the case for a guaranteed income begins and ends with freedom. There is the freedom from want, despair and psychological insecurity that would come from having income sufficient to provide the necessities of life. But there is also the freedom to choose not to work for a time in order to take care of family members, pursue a passion, acquire education or contribute to a worthwhile community project. There is the freedom to start a new business with an uncertain future, the freedom to say yes to a job that pays little but yields joy and satisfaction — and the freedom to say no to a job that pays too little or is demeaning and unpleasant. Why, they ask, should such freedoms be reserved only for the wealthy?
“Its point is not just to soothe misery but to liberate us all,” they write. “It is not simply a way of making life on earth tolerable for the destitute but a key ingredient of a transformed society and a world we can look forward to.”
Van Parijs and Vanderborght trace the political roots of guaranteed basic income to England in the late 18th century, when Prime Minister William Pitt proposed to replace the country’s poor law, which channeled public generosity through gruesome workhouses, with cash supplements to low-wage workers. Pitt’s proposal drew the opposition of the leading economists of the day, Thomas Malthus and David Ricardo, who predicted that rather than making the poor rich, they would wind up making the rich — and everyone else — poor by reducing incentives to work and invest. And so the economic argument against it has been framed ever since.
Proponents, however, prefer to frame the debate in moral terms. In proposing a national trust fund that would award every American 15 pounds upon reaching the age of 18, Thomas Paine said, “It is not charity but a right, not bounty but justice, that I am pleading for.” The British philosopher John Stuart Mill argued for “a legal guarantee of subsistence for all the destitute . . . whether deserving or not.” Then, as now, schemes that would have allowed able-bodied men to live off the hard work of others were as apt to prompt moral outrage as moral sympathy.
With the growing affluence generated by the Industrial Revolution, however, came the gradual rise of the welfare state, a safety net woven from myriad programs offering cash and services to anyone who was poor, disabled or involuntarily unemployed. Enforcing such conditionality not only required a large and expensive bureaucracy, but created a perverse incentive for beneficiaries to remain poor and unemployed so as not to lose their benefits. It was the desire to free the poor from this “welfare trap” and eliminate the bureaucratic middlemen that revived interest in a universal guaranteed income in the 1960s and attracted support from across the ideological spectrum.
As free-market champion Friedrich Hayek saw it, guaranteeing everyone a subsistence income was the moral precondition for opposing broader socialist schemes to equalize incomes. For Milton Friedman, it was an opportunity to eliminate expensive layers of government bureaucracy.
On the left, a guaranteed income won the support of economists James Tobin, Paul Samuelson and the sharp-tongued John Kenneth Galbraith, who chided the idle rich about their outrage at the prospect of being joined by a new class of idle poor. Among American political leaders, populist Huey Long was first to embrace it, followed later by Martin Luther King Jr. In 1972, Democratic presidential candidate George McGovern proposed sending an annual check of $1,000 to every American but changed his mind after it became the subject of attack ads run by his Republican opponent, Richard Nixon, who himself had previously flirted with the idea.
Although their goal is utopian, Van Parijs and Vanderborght aim to infuse it with economic and political realism.
They are strongest when framing the guaranteed income as an economic dividend to which all citizens are entitled. In any country, they argue, only a small portion of the income earned in any year is a result of individual work effort, ingenuity and risk-taking. The rest is explained by the natural resources with which that country is endowed, the physical infrastructure, the collective know-how of fellow citizens, the quality of public and private institutions, and the degree of trust that greases the wheels of commerce, politics and everyday life. This “social capital,” as the economist Herbert Simon once called it, was developed by many people over many generations and provides a collective inheritance that is now unequally and unfairly apportioned by markets in setting wages and salaries.
“What a basic income does is ensure that everyone receives a fair share of what none of us today did anything Vanderborght write.
Giving some a fairer share, of course, means taking a share away from others, and these Belgian academics certainly don’t shy away from the redistributionist nature of their project. In their ideal setup, every adult would get the equivalent of an annual unconditional allowance from the government equal to onequarter of the country’s average personal income (in the United States, that would be about $12,000). Exactly who would win and lose, and by how much, would be depend on the structure of the tax regime used to finance it.
While this give-with-one-hand, take-awaywith-the-other quality strikes some as inefficient, it is that structure that allows guaranteed-income plans to avoid the “welfare trap” caused by today’s “conditional” welfare programs. But it also makes them a tough sell politically. The sums involved would be enormous. And the ripple effects — on wages, labor participation and the fate of other social benefits — make it difficult for many people to imagine how it would all turn out. Indeed, after a labored chapter assessing the political challenges, even Van Parijs and Vanderborght acknowledge that it is unlikely any country will adopt a generous, unconditional basic-income plan, at least all at once. The best they can hope for are slow, incremental steps in that direction.
Although not a technical book, “Basic Income” is more academic than most readers would prefer. Americans will not fail to notice the authors’ abiding enmity for “the dictatorship of market” or the European left-wing filter through which they view political reality. The more philosophical sections are given to hairsplitting, while those on financing beg for more specifics.
What Van Parijs and Vanderborght bring to this topic is a deep understanding, an enduring passion and a disarming optimism. It is no more utopian, they argue, for us to imagine the liberation that a guaranteed income would deliver than it was for earlier generations to imagine the abolition of slavery, universal suffrage or adoption of progressive income taxes. And while the coming debate over the guaranteed income will inevitably focus on political and economic viability, in the end the authors believe we will embrace it, as we embraced those others, because it is the right thing to do. for,” Van Parijs and Steven Pearlstein is a Washington Post business and economics columnist. He is also the Robinson professor of public affairs at George Mason University.
A poster in Geneva last year ahead of a Swiss referendum on guaranteed income.
BASIC INCOME A Radical Proposal for a Free Society and a Sane Economy By Philippe Van Parijs and Yannick Vanderborght Harvard. 384 pp. $29.95