A universal basic income would provide a wage to every citizen irrespectively of their contribution to society // Ph: Hans Splinter/ Flickr
The concept of a universal basic income has become fashionable in academic and policy circles, but doubts about its merits abound. We discuss this revolutionary idea which could change the dynamics of modern societies
|
Alessandro Massa
|
2017. Finland has initiated a revolutionary social experiment avidly watched by the rest of the world. The Nordic country is the first in the world to universally implement a country-wide form of basic income. From January 1, 2017, 2,000 of its unemployed citizens will be receiving a sum of €560 (£470) monthly for two years and will continue to do so regardless of whether they eventually find employment. The principal aim of the Finnish government is to attempt to reduce the gargantuan bureaucratic machinery which assigns money to be given, by the state, to the various groups of individuals entitled to different subsidies. These assignments include students, social welfare for disabled and the unemployed. The array of categories requesting state funding requires a significant paper trail, inevitably bogged down with glacial bureaucracy, red tape and recertifying. A trail the Finnish government hopes to dispel. Additionally, the initiative, which is part of a series of economic measures taken by Prime Minister Juha Sipilä, hopes to reduce poverty and, perhaps counter-intuitively, wishes to boost employment. The not-so radical idea to avoid creating a paradoxical dependency situation in which it is more advantageous for the unemployed to receive state-funding than to find an occupation, has invoked calls for state-funding to discount occupation. Finland’s experiment fits rather nicely in a general context of emerging support for the notion of Universal Basic Income (UBI). States and public figures are becoming increasingly interested in the potentials of UBI: In Europe, the Netherlands have designed their own projects acting on the municipal level; in Italy, the outspoken political star Beppe Grillo, leader of the Five Star Movement, has been vocal on the issue for years. In Greece, Yanis Varoufakis, founder of the Democracy in Europe Movement 2025 and professor at the University of Athens, who was also the country’s Minister of Finance in the Syriza administration from January to July 2015, has two main arguments in favour of basic income, which he calls “a necessity”: Firstly, the increase of automation and the financialisation of the capitalist society. Secondly, Varoufakis argues that the economic system which we have inherited following the Great Recession cannot be understood in the same terms as the economic system we were enjoying before. He insists that the economic collapse of 2009 has destroyed faith in the Capitalist model, comparable to Socialism’s decline following the collapse of the Soviet Union in 1991. We now find ourselves in a new system. In this the salaries of the higher earners are increasing, while the wages of the majority stagnate or even fall in real terms. The data backs up this impression: the Economic Policy Institute (EPI) noted when it comes to the pace of annual pay increases, the top 1 per cent wage grew 138 per cent since 1979, while wages for the bottom 90 per cent grew 15 per cent. In fact, despite half-a-decade of growth and record breaking stock market performance in the United States, real wages are still 1.2 per cent below what they were at the beginning of 2009. |
States and public figures are becoming increasingly interested in the potentials of a universal basic income: in Europe, the Netherlands have designed their own projects acting on the municipal level; in Italy, the outspoken political star Beppe Grillo, leader of the Five Star Movement, has been vocal on the issue for years.
|
Meanwhile, across the pond, the United Kingdom experienced real wages contractions annually between 2009 and 2014 - the longest consecutive decline since the mid-1800s. The Economist stresses that this cannot only be understood as a consequence of recession — as Tim Worstall, Senior Fellow of the Adam Smith Institute, argues — because the economy of wages has simply not been developing as expected. Strikingly, if compared to the increase of productivity, the minimum wage in the United States would be about 18 US dollars. (Compared with the current 7.25 US dollars) With these trends, Varoufakis argues that the “social contract”, based particularly on strong minimum wages and cooperation between labour unions, the state and employers, which has formed the basis of labour sustainability in the 20th century, no longer exists. He maintains that the social-democratic tradition of the working labour effectively providing for the unemployed (and for health services, state pension systems, etc.) is no longer bearable. There have been increasing political responses to these trends, attempting to empower the labourers and disenfranchised long term unemployed against the economical elitism of the top 1 per cent. Donald Trump was elected President on the grounds of being anti-“establishment” and with the promise to be more resolute and active in tackling Wall Street. Bernie Sanders, the Democrat candidate displayed some similarities which Trump appeared to pick up on and capture as he went forward. Sanders was notably opposed to international trade deals, such as the Trans-Pacific Partnership (TPP), and has been especially vocal for the need to raise minimum wages. Populist (National Collectivist) parties across European offer similar solutions: A return to national economic identities, abandoning the globalised market, forfeiting supra-national organizations, such as the European Union — exemplified by the Brexit Referendum, in the United Kingdom 2016. Political figures such as Marine Le Pen, Matteo Salvini, Geert Wilders, respectively from France, Italy and the Netherlands, have also been presenting themselves as champions of the working class, promising a stop to migrant flows and a return to state sovereignty. Immigrants these leaders allege have taken peoples’ jobs. Trump is the first of these to have risen to power in a More Economically Developed Country (MEDC), having been sworn in as the 45th President on the 20th January 2017. He has made inroads to fulfil his campaign pledges: Executive orders have been enacted to withdraw the US from the TPP and Trump is attempting to strike deals with several corporations to ensure that the jobs they create in the United States do not get outsourced to other countries, particularly to Mexican maquiladoras. Carrier Corporation was one of the first to succumb to the President’s “persuasion”. The firm was convinced by the President to not take away 2,000 jobs from a factory in Indiana. This was lauded by certain factions of the Republican Party, with one commentator claiming this action to be a sign of “republicanism in new accord with the needs of the moment.” |
Automation of many jobs is underway // Ph: Army Medicine/ Flickr
|
Beppe Grillo is a keen supporter of UBI // Ph: Liwax/ Flickr
|
|
Their thinking appears misguided, however. Carrier confided with CNN that in about a decade, those jobs will be automated, making the action devoid of meaningful long-term benefits. The protectionist policies promised by Trump, and those politically aligned with him, often show a lack of appreciation of the reality of job loss/creation within the context of a globalised world. As Federica Cocco, from the Financial Times, revealed: “The US did indeed lose about 5.6 million manufacturing jobs between 2000 and 2010. But according to a study by the Center for Business and Economic Research at Ball State University, 85 per cent of these job losses are actually attributable to technological change — largely automation — rather than international trade.” This leads us to the second argument Varoufakis presents for the necessity of rolling out a Universal Basic Income: Automation (computerisation or mechanisation), i.e. the replacement of human labour with more efficient and less costly machines as technology advances. Henceforth, a society in which automation has replaced the majority of jobs renders the glaringly barefaced solution to be a form of basic income. Providing individuals with the means to live decently, without needing to be reliant on jobs, could bring the benefit of flexibility, as workers no longer fear losing their employment, being secure in the survival of their families and themselves. This could, as Andrew McAfee, scholar at the Massachusetts Institute of Technology (MIT), believes, bring innovation and new ideas from freed up minds, not idled and weighed down by stress and worry. Out of this innovation and creative flair will come diverse and engaging new fields of expertise, inventions, industry and, coincidentally, jobs. David Autor, another professor at MIT, remains unconvinced automation and job creation need be mutually exclusive. He claims that we are unable to form predictions on the future of labour, using the paradoxical fact that despite a century of creating machines to do our work for us, the proportion of adults in the US with a job has consistently gone up for the past 125 years — for example, bank tellers in the US have nearly doubled since the introduction of Automated Teller Machines (ATMs). Previous Industrial Revolutions have had their notable sceptics, such as the followers of Ned Ludd (the Luddites), who believed machines were taking their jobs — thus, sensibly, decided to hang about, smashing factory machineries. Curiously, more jobs have been created and employment has always risen following Industrial Revolutions. Could the past track record hold to be the same this time around? Probably not. The growth of artificial intelligence is exponential; the time of machines which, cannot only do tasks assigned to them but, can learn alone to do new ones, is approaching. Nigel Cameron, leader of a Washington, D.C. think-tank, is adamant: Of course new jobs will be created to replace the ones which will be gone, however the majority of those will also be done by machines, which “is the entire point!”. Not everyone’s sold, though. One of the first concrete political initiatives of UBI in Switzerland was rejected by a referendum held on June 5, 2016. Swiss people voted firmly (77 per cent) against a proposal which would have granted every Swiss citizen a monthly income (the suggested amount was of 2,500 Swiss francs (£1,755). The Swiss failure highlighted some of the most evident issues with the implementation of UBIs, starting from the most basic question: How much? The best answer to this so far has been to look at the average social security per capita payments and sign a check to everyone with that amount. That seems to have been the logic behind the amount in the Finnish experiment (€560) seen as the per capita public social spending in Finland is of roughly €600. But there is not accord on this: In the suggested Swiss project, and generally amongst supporters of basic income, the core idea is that UBI should not only provide basic sustenance, but be one’s main income, if the necessity was to arise. Any amount would also need to consider the Purchase Power Parity: Any given sum would be entirely susceptible to the strength of national currencies, the living costs, etc. A situation could arise where a migrant moves between two states, which both have UBIs, but where the cost of living in one country is much higher than the other. |
As inconceivable as it may be, a society where work is no longer the fundamental pillar of human existence, but rather part of a larger human experience, might just be revolutionary; a renaissance of sorts.
|
Once a compromise is reached and a sum agreed on, we would have to ask: Is it economically feasible? Danny Vinik, from Business Insider, looked at the US’ economic prospects and crunched some numbers: “In 2012, there were 179 million Americans between the ages of 21 and 65 — when the pensions system would kick in. The poverty line was $11,945. Thus, giving each working-age American a basic income equal to the poverty line would cost $2.14 trillion.” Moreover, Noah Gordon, from The Atlantic, noted that “cutting all federal and state benefits for low-income Americans would save around a trillion dollars per year, so there would still be a significant gap to be closed by revenue increases like higher taxes or closing existing loopholes.” However, this outlook considers matters too narrowly. For instance, Bill Gates insists that the lack of liquidity would be solved by automation itself. As more productivity, with fewer costs, leads to larger profits, these could provide the state with larger revenues than the costly process of taxing worker’s wages ever could. Therefore, they conclude it is more a matter of political will and cohesion — which to be frank will be troublesome to find — than economical limitations. Where there’s a will, there’s a way. Another tough question must be asked: Who should have the right to receive UBI? Especially in times, such as these, where migration represents one of the most sensitive issues, politically and socially, and large sections of the population are upset by their leaders accepting immigrants in “their” countries. The notion that these citizens would accept the state gifting money to immigrants is inconceivable, as the 20th century tradition mentioned above has designed our societies thus that by contributing to society — say through taxes — one is granted certain rights in return. A certain “incubation period” could be agreed upon — with difficulty — but some would argue that such period would defy the purpose of basic income: If migrants come to a new country and are granted fewer rights than the already resident citizens, not only are they likely to suffer from economic difficulties which will represent a burden in their economic integration, but also be subject to cultural alienation, as they risk feeling excluded from the already established society. Universal Basic Income, basic income, citizen’s income, social dividend, guaranteed income — regardless how you name it, will be controversial. Nearly all human societies have engraved in their fabric the notion that work equates to income which leads to all the benefits which derive from being an active member of the community. So much so that we are often identified by what we do, what occupation we hold, rather than by our own identities. Our societies are thus shaped by this social dogma: School systems are designed to kick out educated individuals, yet more crucially create workers who can contribute with their work to society. It is nearly inconceivable to sever this quasi-symbiotic relationship. As Voltaire eloquently posited “Work keeps at bay three great evils: boredom, vice, and need.” However, this relationship, as all healthy relationships, can only function if both partners are committed. If jobs start to disappear we begin to suffer. Daniel Straub, a figurehead for the referendum campaign in Switzerland, is convinced our relationship with work must to be reinvented, and is adamant basic income is the solution: “[People] aren’t happy. They fear for their jobs. There is a gap between the economic possibility in [the western countries] and the quality of life.” As inconceivable as it may be, a society where work is no longer the fundamental pillar of human existence, but rather part of a larger human experience, might just be revolutionary; a renaissance of sorts. TMM |
More TMM articles on this topic...
"The basic income concept is becoming a reality" by Margarita Poluektova
You may also be interested in...
"The future of cash" by Richard Bolton
"Oxfam, Davos, and inequality today" by Ryan Khurana