// archives

Universal Basic Income

This tag is associated with 3 posts

Spain, Coronavirus and Basic Income

In times of great emergency, when the normal rules have been suspended, all sorts of things that used to seem unthinkable suddenly enter the realm of possibility. A national health service paid for by taxes and free at the point of delivery in the United States, for example – or a guaranteed basic income in Spain.

“We are going to implement a minimum basic income as soon as possible,” said Nadia Calviño, Spain’s deputy prime minister and economics minister, on Monday. She added that it will not “just be for this special situation, but for good.”

Plenty of governments are providing what amounts to a basic income to millions of laid-off employees for the duration of this ‘special situation’. Britain is covering 80% of people’s normal salaries for at least three months, up to a maximum of £2,500 ($3,000) a month, if their employers will just keep them on the books.

Even freelancers and ‘gig’ workers are not being forgotten (80% of the income they reported for taxes, averaged over the past three years). And all this from a Conservative government.

Canada is paying workers affected by the coronavirus outbreak $C2,000 a month for up to four months. Even the US government will be providing its citizens with two $1,000 cheques over the next three months (plus $500 extra for each child) – and they don’t even have to be out of work to get them.

But all these benefits are temporary, to be withdrawn again when things are back to normal. The question is: do we really want to go back to ‘normal’, if that means that many people live on welfare and barely scrape by, and a great many more (the ‘working poor’) do have jobs and work very hard, but still don’t have enough to live a comfortable life?

In normal times, this is a highly ideological issue, with a lot of people convinced that those below them on the income ladder are just lazy and undeserving even of charity, let alone welfare payments. Yet those convictions are easily put on hold when some unforeseen emergency means that those higher up the ladder also need government help.

Calviño is clearly using this crisis to advance a project that she and many others in her party have long favoured: a basic income that nobody can fall below, with any shortfall made up by the government. (Not, as some have incorrectly reported, a ‘Universal Basic Income’ that goes to everybody regardless of need).

There’s nothing wrong with exploiting the disruption caused by a crisis to launch new policies. As Niccolo Machiavelli said 500 years ago: “Never waste the opportunity offered by a good crisis.” But is Basic Income a good policy?

It’s certainly a good policy politically, because those who benefit from it will probably vote for you. It’s probably a good policy economically, because the beneficiaries, still being relatively poor, will immediately spend the money and boost the economy.

And it may well be neutral fiscally, because the money doled out in various unemployment and welfare programmes, plus the cost of administering all those programmes, may be around the same as the cost of bringing the poorest fifth of the population up to the level of the slightly higher earners in the next fifth in a single, simple payment.

If it should turn out to cost a bit more, it would still be a small price to pay for raising so many people out of desperation and giving their children better opportunities for the future.

This was the kind of thinking that motivated the people who had lived through the Great Depression and the Second World War to build welfare states in all the developed countries in the quarter-century after 1945. They wanted to improve the lives of their citizens, but they also wanted to head off the populist anger and nationalist demagoguery that had made the war possible.

Those things are on the rise again, because the gap between the rich and the rest has widened steadily for the past forty years in the developed countries. Fixing it will require a reshaping of the welfare state, and nothing will narrow the gap faster than raising the incomes of the poorest.

Making that kind of change in normal times is a Sisyphean task, but when the government must confine much of the population to their homes because of the pandemic and many of them lose their incomes as a result, it tends to broaden people’s minds about the possibilities.

A small wager. The Spanish government will be only the first of many to propose a basic income as a permanent part of the economy before the current crisis is over.
____________________________________
To shorten to 725 words, omit paragraphs 1 and 4. (“In times…Spain”; and “Even…government”)

The Plague: A Few Changes

They teach you in journalism school never to use the phrase “…X has changed the world forever”. Or at least they should. Covid-19 is certainly not going to change the world forever, but it is going to change quite a few things, in some cases for a long time. Here’s nine of them, in no particular order.

1. The clean air over China’s cities in the past month, thanks to an almost total shutdown of the big sources of pollution, has saved twenty times as many Chinese lives as Covid-19 has taken. (Air pollution kills about 1.1 million people in China every year.) People will remember this when the filthy air comes back, and want something done about it. India too.

2. Online shopping was already slowly killing the retail shops. The lock-down will force tens of millions who rarely or never shop online to do it all the time. (Yes, all the websites are crashed or booked until mid-April now, but there will be lots of time to scale them up to meet the demand.) Once customers get used to shopping online, most of them won’t go back, so retail jobs will be disappearing twice as fast.

3. Not so radical a change with restaurants, but basically the same story: more take-aways and home deliveries, fewer bums on seats. Habits will change, and a lot of people won’t come back afterwards. Food sold out the door generates much less cash flow than food served at the table, and half of the waiters’ jobs are gone. There will be a severe cull of restaurants.

4. Once it becomes clear that ‘remote working’ actually works for most jobs, it will start to seem normal for people not to go in to work most days. So a steep drop in commuting, lower greenhouse-gas emissions, and eventually a lot of empty office space in city centres.

5. There will be a recession, of course, but it probably won’t be as bad or as long as the one after the financial crash of 2008. It isn’t a collapse of ‘the market’ that has cost people their jobs this time. It was a virus that made them stop working, and governments are doing far more than ever before to sustain working people through what will probably be a long siege.

When the virus is tamed and they can go back to work, the work (in most cases) will still be there. Although there will also be a few trillion dollars of extra debt.

6. Don’t worry about the debt. Banks have always created as much money as the government requires. Put too much money into the economy and you’ll cause inflation, which is bad, but just replacing what people would ordinarily be earning so that the economy doesn’t seize up is good.

So President Macron can tell the French that no business, however small, will be allowed to go bankrupt. Prime Minister Johnson can tell the British that the government will pay them 80% of their normal income, up to a limit of £2,500 ($3,000) a month, if their work has vanished. And President Trump can talk about sprinkling ‘helicopter money’ on the grateful masses.

7. What is being revealed here is a deeper truth. ‘Austerity’ – cutting back on the welfare state to ‘balance the budget’ – is a political and ideological choice, not an economic necessity. What governments are moving into, willy-nilly, is a basic income guaranteed by the state.

Just for the duration of the crisis, they say, and it’s not quite a Universal Basic Income, but that idea is now firmly on the table.

8. Collective action and government protection for the old and the poor will no longer viewed as dangerous radicalism, even in the United States. Welfare states were built all over the developed world after the Second World War. They will be expanded after the Plague ends.

Indeed, if Joe Biden were to drop out of the presidential race tomorrow for health reasons, Bernie Sanders would stand a fair chance of beating Trump in November.

9. Decisive action on the climate crisis will become possible (although not guaranteed), because we will have learned that ‘business as usual’ is not sacred. If we have to change the way we do business, we can.

So it’s an ill wind that blows no good (a saying that was already old when John Heywood first catalogued it in 1546). Some of the anticipated changes are definitely good, but we are going to pay an enormous price in lives and in loss for these benefits. It could have been dealt with a lot better.

And the West should learn a little humility. Taiwan, South Korea and China (after the early fumble) have handled this crisis far better than Europe and North America. These are already more dead in Italy than in China, and America, Britain, France and Germany will certainly follow suit.

To shorten to 700 words, omit paragraphs 9 and 16. (“So…masses”; and “And the…suit”)

(Not Quite Universal) Basic Income

In Switzerland last June, they had a referendum on a universal basic income that would have given each adult Swiss citizen $2,500 per month. It was a truly universal basic income, because it would have gone to everybody whether they were working or not – and the horrified Swiss rejected it by a majority of more than three-to-one.

In Finland last January, the government actually launched a pilot programme for a “basic income”, but it was a timid little thing that gives the participants in the trial just $600 per month. It certainly isn’t universal: it only goes to jobless people who are receiving the lowest level of unemployment benefit.

And in Canada last Sunday, the province of Ontario launched a pilot programme that sits somewhere between the other two. It pays out more than the Finns – CAD $1,400 a month (US $1,050). Moreover, you don’t have to be unemployed to get it, just poor.

“The project will explore the effectiveness of providing a basic income to people who are currently living on low incomes, whether they are working or not,” explained Ontario Premier Kathleen Wynne. But it’s still far from universal, and its supporters are keen to stress that the ultimate goal is to get people back into work. As is Finland, they believe (or at least profess to believe) that the only real solution to poverty is full employment.

In the early 21st century, this quaint belief is about as credible as the Easter Bunny, but in last November’s US presidential election campaign both Hillary Clinton and Donald Trump were still peddling the same sepia-tinted fantasy of crowded assembly lines and the return of the Good Old Days.

Trump was even promising to “bring back the jobs” from abroad, as if they were all now sitting in China or Mexico. He may or may not know that most of the missing jobs whose loss created the “Rust Belt” were killed by automation and simply don’t exist any more, but he certainly doesn’t mention it in public. And Clinton was equally reticent about the fact that full employment is not a realistic option for the future.

A lot of other people have finally focussed on the real future, however, because if you want to understand the rise of Trump you first have to acknowledge what automation is doing to jobs, especially in the United States. And then you have to figure out how to prevent this huge shift from causing a great political, economic and social disaster.

That is why Universal Basic Income is now a hot topic in political circles throughout the developed democratic countries: it might prevent that disaster. But the curious thing is that none of trials now being undertaken is actually universal, with everybody getting the same “basic income” regardless of what other income they may have. Why not?

UBI is not meant to be merely a more effective and less bureaucratic means of helping the poor. It is also intended to abolish the stigma of “unemployment” and the misery, anger, and political extremism it breeds. If everybody gets the basic income as a right, the argument goes, then receiving it causes neither shame nor anger. And if the anger abates, then maybe democratic political systems can survive automation.

But nobody really thinks we should introduce UBI at a national scale today. We will need a majority of people to go on working for a long time to come, and we don’t even know whether enough people would choose to do so after they start receiving the basic income. That is one of the questions that the current pilot programmes are designed to answer.

However, these UBI test programmes are being smuggled in disguised as anti-poverty projects, with the announced objectives of streamlining the system and encouraging people to re-enter the job market. That’s because the public really isn’t ready for full-blooded UBI. There is a very strong popular belief that people should work for a living, even if the society as a whole is very rich and the work doesn’t actually need to be done.

This prejudice applies especially strongly to the poor. As Harvard economist John Kenneth Galbraith once put it, “Leisure is very good for the rich, quite good for Harvard professors – and very bad for the poor. The wealthier you are, the more you are thought to be entitled to leisure. For anyone on welfare, leisure is a bad thing.”

So these early experiments with guaranteed income pretend to be aimed solely at getting people back into work. But meantime they will be gathering valuable data about the actual behaviour of people who have a guaranteed basic income.

When the supporters of UBI come back with concrete proposals for national systems in five or ten years’ time, they may have much more solid arguments than they do now.
_________________________________
To shorten to 725 words, omit paragraph 6. (“Trump…future”).