(by Stuart Watkins | Money Week) – The law for any great social reformer is “First they ignore you, then they laugh at you, then they fight you, then you win”, a quote often attributed to Mahatma Gandhi (wrongly, though he had expressed similar ideas).
The battle for universal basic income (UBI) – the idea that everyone should get a regular sum of money to live on from the state with no strings attached – seems like it might be entering the final stage.
The response of governments in the rich world to the Covid-19 pandemic made the idea seem plausible – as businesses were shuttered, states picked up the wage bill for workers, sent them cheques in the post, and boosted benefits for the jobless and the sick. And trials of a basic income proper – or of something resembling it – have been carried out, or are about to begin, in countries around the world.
South Korea’s presidential candidate Lee Jae-Myung, for example, was in favour of introducing one nationwide following a six-month trial he introduced while governor of Kyonggi province. (Sadly for UBI enthusiasts, Lee lost narrowly to the conservative candidate in March.)
In the US, there are more than 20 trial schemes handing out direct cash payments to poor families – Bloomberg reckons they’ll have handed out at least $35m by the time they end if they run as planned.
Similar experiments have been run in Canada, Brazil, Kenya, Iran, Finland, Germany, Spain, the Netherlands, Namibia, India, South Africa, China and Japan. And the idea is washing up on these shores too: the Welsh government has committed to running a trial, and the Scottish government and several English cities are keen too.
And why not? Many welfare states already guarantee their citizens access to health and education. Why not to an income too?
What the Alaskan experience teaches us
Perhaps the best place to start to consider the merits of the idea is Alaska, as Martin Sandbu points out in the Financial Times.
When oil tax revenues started flowing in 40 years ago, the state set up a permanent fund with the idea of preventing politicians wasting the money and paying out dividends to every citizen.
In a good year, such as in 2015, when oil prices were high, the dividend reached $2,072 per person – so more than $8,000 for a family of four.
What the long Alaskan experiment has shown – and it’s a result borne out in most of the long list of studies carried out so far – is that such payments do not lead, as some critics fear, to idleness, or people refusing jobs or wasting the money on frivolities, but to more secure and hence happier individuals, families and societies.
For those just about managing, the money comes as a welcome helping hand for meeting the mortgage or putting food on the table. The more well-to-do invest the money in their children’s educations, their properties, or their businesses.
Small businesses and community organisations get a boost as people spend their dividend cheques.
In other words, the Alaskan experiment and the studies being carried out around the world all follow faithfully in the social-science tradition of revealing what you might call the bleeding obvious – that more money is better than less, especially if you are poor, and that a windfall is often taken as an opportunity to improve one’s lot, a means to help us acquire all the things money can buy, or establish a more stable base for enjoying all those things it cannot.
A nice Christmas present
What none of these studies really test, however, is the actual proposal. The ideas behind UBI (also known variously as citizen’s, basic or guaranteed minimum income) were first floated in this country around the time of the enclosures. If people were not henceforth to be entitled to enough land to live on, then they should instead, as they flocked into the towns and cities in search of work, be given a sum of money that would achieve the same end.
The argument has been reheated at regular intervals since, employing a similar logic. If new technology and robots are taking all the jobs, as one modern version of the argument goes, then the gains from these technological developments should be shared out to everyone in the form of a basic income. UBI proper is, then, the idea that every citizen should be paid a sum of money sufficient to live on with no preconditions – that is, regardless of willingness to work or any other qualification. And that has never been tried.
By comparison, the Alaskan scheme seems more like a very nice Christmas present. Other trials around the world have generally given sums much smaller than would be required to cover living expenses, and only to a small group of an area’s poorest citizens. Whatever else can be said in favour of these efforts, one cannot say that the UBI proposal has actually ever been tested. Why not, then, actually test it?
What would it cost?
The eye-watering sums involved would be one reason. True, as MoneyWeek pointed out at the start of the pandemic, the pile required – think annual costs of more than £260bn, around twice the NHS budget, for a basic income paying only £5,000 a year, or just a third of the poverty line – looked somewhat less towering in relation to those that were already being shovelled out the door to pay for furlough and other pandemic-related economic assistance.
But the UBI proposal would be to keep on shovelling for ever, when it seemed far more likely that states would one day have to get a grip on the escalating costs of the crisis. Read Full Article >