The case for a universal basic income

July 10, 2020

 

Rule number one of crisis management: When you find yourself in a hole, first, stop digging.

In the COVID-19 outbreak frenzy, several countries are considering massive fiscal stimulus packages and printing money, to blunt the concurrent crises underway: the pandemic and the unraveling economic depression.

These plans are essential, but they need to be strategic and sustainable. Because in addressing the current crises, we must avoid sowing seeds of new ones, as the stakes are incredibly high.

It is time to add a new element to the policy packages that governments are introducing, one we know but have abandoned: Universal Basic Income (UBI). It is needed as part of the package that will help us to get out of this yawning pit.

The naysayers, and there are plenty, will point out that it won’t work because no country can afford to regularly dole out money to every citizen. They will argue that we will run unsustainable deficits, which cannot be financed.

This is a valid concern. But the alternative will result in a greater surge in inequality, increasing social tensions that would cost governments even more and open countries to heightened risk of societal conflict.

The pandemic that began in China has raged across Asia and beyond, exposing inequalities and vulnerabilities of huge populations in the region. This includes informal workers – estimated at 1.3 billion people or two-thirds of the Asia-Pacific workforce – as well as migrants, with almost 100 million dislocated, in India alone. If a large part of an entire generation loses its livelihood, with no safety net, the social costs will be unbearably high. Economic instability will follow the flare-up of social tensions.

During these times, when we need to kickstart sputtering economies, the payoff of social stability would be tremendous, making an even more powerful argument for UBI.

A new social contract needs to emerge from this crisis that rebalances deep inequalities that are prevalent across societies. To put it bluntly: The question should no longer be whether resources for effective social protection can be found – but how they can be found. UBI promises to be a useful element of such a framework.

The United States and Canada are already making such plans. Alaska, in fact, has been making annual UBI-type payments, to every state resident, for decades. Canadian prime minister Justin Trudeau pledged CAD$2,000 a month, for the next four months, to workers who have lost income due to the pandemic. Now we need to expand it and make it work in the long-term, and we can.

We must approach it differently from in the past. We should neither view it as a hand-out, nor as an add-on solution to add on to those already in place. Instead, we should use the twin crises to re-evaluate where we are “still digging”.

We will need fair taxation. Countries will have to work together, exchanging data, to stop people and corporations from evading taxes. We must all pay our fair share. In good conscience, we can no longer privatize profit and socialize loss.

Then we must stop subsidies, notably for fossil-fuels, which hinder the path to the Sustainable Development Goals, especially climate-change targets. This would benefit us all, while generating financial resources for a basic income but also to support fossil-fuel companies.

Warren Buffet and Bill Gates, among the richest people on the planet, have both advocated for the rich to pay more in taxes, the lack of which has led to a growing and enormous disparity. According to Credit Suisse’s 2018 Global Wealth Report, 10 percent of the world’s richest people own 85 percent of the wealth.

Multinationals too are not paying their fair share. Apple, Amazon, Google and Walmart to name just a few, generate mind-boggling profits and, after taking advantage of all the wrinkles in tax systems, pay limited amounts. If the top 1,000 corporations in the world were fairly taxed, it would allow for a modest UBI to be tightly and reasonably dispensed across the world. Something is simply wrong and broken when governments are deprived of funds they should justifiably have to construct a better state.

Lest the naysayers think this is a theory from the left, the idea of tax competition has been touched upon, for years on end, by the Organization of Economic Co-operation and Development. Its members include the US, Canada and Western European countries.

This is what its fiscal policy experts say: “To work effectively, a global economy needs some acceptable ground rules to guide governments and businesses. Such a framework can help businesses to move capital to locations where it can optimize its return, without impeding the aim of national governments to meet the legitimate expectations of their citizens for a fair share in the benefits and costs of globalization.”

To achieve “acceptable ground-rules” and “a fair share in the benefits and costs” will require global coordination; because if one country begins taxing this way, highly mobile capital will flee to countries that do not.

There is no question that UBI will be hard to get going. It is important to impartially consider the pros and cons, the reasons why it has not been widely implemented so far, and what could would make it workable.

A key complicating factor, beyond its cost, is that it would not arrive in a vacuum. It would need to fit into and complement the existing social programmes, both insurance-based and needs-based. And rules would be needed to prevent double-dipping of benefits.

Moving to such a system would need to ensure that the incentives to have a job remain intact. That is relatively simple to do: A UBI should be sufficient, to sustain a person at a modest minimum, leaving sufficient incentives to work, save, and invest.

Finally, good arguments can be made for having it linked to very selective conditions, some that relate to public goods, such as vaccinating all children and ensuring they attend school. Such selective conditions would not undermine the main purpose of eliminating poverty and allow low-income people to take calculated risks, to try to lift themselves out of poverty.

The alternative to not having UBI is the rising likelihood of social unrest, conflict, unmanageable mass migration, and the proliferation of extremist groups that capitalize and ferment on social disappointment. It is against this background that we seriously need to consider implementing a well-designed UBI, so shocks may hit, but they won’t destroy.