Money for nothing? A few thoughts on Universal Basic Income

A concept that has been steadily entering the public consciousness in recent years is that of Universal Basic Income (UBI) and the similar (but not synonymous) Negative Income Tax and Basic Capital Grant. It is an idea that has fascinated me for some time, and though (caveat emptor) I am certainly no economist or public policy expert, I feel that I have read enough of the literature on the topic to have a reasonable understanding of UBI.

So what is UBI? Crudely, it is an unconditional ‘welfare’ payment granted to every citizen, regardless of their economic or social position in society; an elderly unemployed male will get exactly the same grant as a young female lawyer, for instance. Opinion of the level of income provided of course varies, but most authors seem to agree that it should ensure, in the words of Guy Standing (2017), “basic security” – i.e. enough so that the individual can operate in that society at a basic level without recourse to other forms of income.

At first glance, this policy sounds, to put it mildly, rather odd. So distanced is it from our modern conceptions of welfare and the economy, in many ways it appears downright mad and utopian – I certainly thought so when I first heard about it. However, I believe that UBI has a lot going for it, and though it is certainly not without issues, the concept is tantalising enough to explore and one which should be further introduced into the wider public debate over the economy, welfare and society.

The element which perhaps interested me the most about UBI when I first came to know of the concept is the fact that it is loved – and hated – by both the political left and right; as somebody who dislikes the right-wing spectrum and considers themselves a ‘radical centrist’, this instantly piqued my interest.

Thomas Paine: early supporter of the concept (Britannica)

Another aspect of note is that though it has only really started to enter the public consciousness relatively recently, UBI – like most ideas – is not particularly new or ultra-modern. Some have (rather optimistically, I would say) seen origins as far back as Ancient Athens and Sir Thomas More’s Utopia; however, it definitely has a notable early supporter in the figure of Thomas Paine, the famous radical revolutionary and Founding Father. His pamphlet Agrarian Justice (1797) is essentially an argument for a land value tax (another idea I quite like) and universal welfare in the form of an old-age pension (50 years +) and a capital endowment:

“there shall be paid to every person, when arrived at the age of twenty-one years, the sum of fifteen pounds sterling…. [it should be] be made to every person, rich or poor.”

From Paine the idea was quietly developed in the writings of (mostly) radical and liberal theorists of the 19^th century, until by the 20^th century it was being supported by figures from an array of different political backgrounds.

Perhaps most surprisingly at first, forms of basic income guarantees have been enthusiastically adopted by some notable free-market economists, including titans such as Milton Freedman (in the form of a NIT) and Friedrich Hayek. The fact that a policy can be endorsed by both Hayek and modern left-wingers such as the British Greens and the recent Socialist candidate for the French Presidency is fascinating; on the flip side, it has also been hated by some traditional conservatives and ardent trade unionists for a variety of reasons, which I will touch upon below. Pilot programmes have been trialled across the world, from India to Finland to even the United States, with varying degrees of success.

Now, enough with the caveats and history. Why do I think UBI is worth talking about?

I would say that there are two main strands of thinking on UBI – one is the more ‘left-wing’ version which prioritises equality and social justice, and the other is more libertarian and free-market which emphasises the possibilities of increasing market efficiency and reducing the size of the state. I will admit that I am more inclined towards the latter than the former, as somebody who is generally in favour of the market and suspicious of ‘big government’.

Hayek: darling of the free-market libertarians, and a supporter of UBI (Britannica) 

As such, the major benefit of UBI for me is the possibility of reducing the size and role of the state in the everyday lives of citizens. I believe that, in general, the government is a bloated monster of tangled bureaucracy and inefficient mismanagement, driven by the conflicting interests of different parties rather than the general public good. This is especially so when it comes to the problem of welfare. Wouldn’t it be so much easier, efficient and productive to just provide a flat rate of income to everyone rather than wasting untold labour hours and tax-receipts on the administration costs of means-testing? Despite the billions that western governments currently spend on welfare, our societies are still afflicted with poverty, homeless, and food banks – to me, that suggests the current system is not working. A universal basic income could be the answer to eliminating poverty and hardship as much as possible in our societies.

It would also do it in a way that maximises freedom. Currently, welfare payments are usually given with certain conditions – food stamps can only be used to buy food, universal credit requires that you go to the job centre for so many hours a week, etc. I am fairly convinced by the argument that this concept is rather paternalistic and illiberal, and a basic income allows the recipient personal freedom to make choices and also – we will come to this later – a freer, more effective economic agent in the market.

But surely, you might cry, nobody would work if the government gave them benefits! We would all become lazy ‘chavs’ and layabouts, watching television and playing PlayStation all day!

Would we? While it is true that a few individuals probably would just laze about, there is actually little evidence to suggest that this is an inherent human trait; most people, I think, want to make something more of their lives, and would seek out jobs to enrich themselves. There are amazing testimonies of people who have been on unemployment benefits for years on end, and who yet have never stopped trying to find a job.

The introduction of UBI could actually have a very positive impact on the labour market and the economy. It gives employees far more bargaining power – if they are unhappy with their job they can more easily leave knowing they already have a fallback option, rather than being trapped in unpleasant working conditions through lack of alternative options; this makes workers something far closer to the rational economic agents predicted in classical economic models. You can see why trade unionists might have hated UBI – it could in theory make the concept of a trade union obsolete, though paradoxically some supporters actually believe a basic income could strengthen voluntary membership of such organisations.

Small governments…free markets….you can see why Libertarians might love UBI (Wikimedia)

UBI could further free up the market in other ways – artists, for example, could practice their skills without having to work several jobs to support themselves. This means that they could specialise on their art, creating more cultural good for society, while others could move into the jobs they vacated. Adam Smith might have approved!

Additionally, UBI could very easily create a more dynamic entrepreneurial culture. Currently, starting a business is a risky prospect without significant amounts of capital for support; a basic income provides a nice ‘cushion’ and a steady income to keep entrepreneurs on their feet during the risky first years of their enterprise. The dream of the free-market proponents of UBI might be an economy which is more free, dynamic and efficient, less hampered by the state or megacorporations.

Well, there is a few glimpses at the free-market libertarian argument for UBI. Let’s also have a look at the more ‘left-wing’ and social aspects of the policy, shall we?

Firstly, of course, UBI could be an excellent way to ‘bring the bottom up’ and eliminate poverty. It also reduces the stigma of being unemployed – as everyone gets the grant, why be ashamed of receiving this form of welfare payment?

Secondly, it divorces the concept of ‘work’ from that of ‘economic labour’, so that the two are not necessarily conflated. A good example are housewives (or house-husbands, of course); while they are not technically economically active, they still work hard at home, yet are not financially compensated despite doing the same basic job as a contracted housekeeper. Similarly, those who choose to care for disabled or elderly family members are still doing valuable ‘work’ for society, yet are not economically profiting from doing so; UBI would ensure that they are ‘paid’ for their labour.

Thirdly, UBI provides the freedom to take a break from labour and enjoy life, or make a radical change in lifestyle – this links in with the free-market arguments outlined above. People can take time off to learn new skills, go to college, work on a hobby, etc. without having to worry about their financial status for a while. Similarly, it allows people to form meaningful relationships and live together without needing to be overly concerned about financial problems.

Fourthly – and I think this is one of the best arguments for the concept as a whole – is the coming wave of automation that will almost certainly lead to incredible levels of mass unemployment if not managed effectively. Quite simply, robots are taking our jobs and if the current trends continue, there will be nowhere near enough employment for humans in the future. I highly recommend Martin Ford’s Rise of the Robots (2015) – an enlightening read in itself, the book is also relevant to this topic as he suggests that a form of UBI may be the only way of keeping the majority of our populace from falling into desperate poverty.

Fanciful perhaps, but the risk is quite real (vietnamnet)

This last point is a rather dark one, but I believe UBI can be supported on its own merits rather than just as the buffer against a dystopian future. The policy certainly seems optimistic and suitably forward-thinking for me, and a concept that pleasantly straddles both left and right without being ‘owned’ by either side.

That is not to say the concept is perfect or instantly practicable. There are many arguments against UBI, though most of them tend to focus less on the actual concept itself and more on the issue of how to put it into practice effectively. Certainly, doing so in our current system, with its huge tangled welfare state and almost infinite conflicting interests, would be very hard indeed – when do state officials ever agree to mass reductions in the size of the government? The policy would of course be extremely expensive, and would require novel ways of funding beyond the usual forms of taxation; however many libertarians argue that the reductions in the state administration costs and general efficiency gains would contribute significantly to making UBI less expensive than it might first appear. Nevertheless, the battle over practicality continues to rage and will not be won anytime soon.

So, there we have it – the Paradoxical Millennial’s thoughts on Universal Basic Income. This has been an extremely fast-and-loose overview, and I have left out many of the arguments and ideas about the concept; nevertheless, it should with luck leave the reader with some food for thought. It has certainly been fascinating for me to explore an area of interest that I rarely touch upon in this blog; I hope you have found it as interesting to read as it was for me to write it.