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From populism to basic income

Hasnat Abdul Hye | November 23, 2020 00:00:00


A beggar can't be a chooser: A woman with no basic income begs in a Dhaka street to feed her family — FE photo

So far it has been akin to kite flying or amounted to loud thinking among a few, but the idea seems to be gaining ground at the level of think tanks, if not with policy makers yet. It is not likely to overtake like a tidal wave in countries where it is being debated but the distant rumblings can be heard like an inchoate build-up of a possible sea-change. It is possible, though not yet probable, according to skeptics. But even that qualified prospect makes one sit up and take the possibility into cognizance.

The name of the new candidate claiming for adoption as a major policy change in economic governance, even an endearing one, is universal basic income (UBI). It has an egalitarian ring about it and that is the cause of its power of drawing adherents among those frustrated, even made angry, by growing inequality. It is being touted as the timely response to runaway populism in the West. According to those given to tinkering with new policy options the idea is not new really, it has been kicking around in left-wing circles for quite some time-a quarter century by some accounts. It is now poised to go to mainstream, claiming to be a viable alternative to the welfare state. The universal basic income (UBI) has already become a pilot programme in a few countries where it is being tested for its practicality and acceptability.

Populism led to Brexit in the UK and in America threw up an unlikely candidate like Donald Trump to lead the most powerful country in the world. The groundswell of right-wing populism could give France Marine Le Pen and Orban in the Netherlands, the mantle of power with the Alternative Party in Germany making steady inroads among the electorate. The basic manifesto of populism in these countries embodies staving off of immigrants and generating employment through an arcane mix of fiscal measures and beggar-thy-neighbour trade policy. Bringing back jobs from foreign countries, reversing the process of globalisation, has become a common refrain mantra, a promise of the leaders riding the crest of popular wave.

Donald Trump promised to bring jobs back from countries that, according to him, had `stolen' them with the help of sweatshops, like garment industries or through unfair terms in trade agreement that were skewed against America. The North American Free Trade Agreement (NAFTA), for example, allegedly benefited Mexico more at the cost of American workers. Not to be left behind in this popular parlour game during the presidential campaign, Hillary Clinton promised a full employment economy where everybody had enough to raise a family and live in dignity.

Neither of them mentioned the elephant in the room, automation that was gobbling up jobs in industries rendering workers redundant. Nor did they berate the stratospheric salary, allowances and mouthwatering bonuses sequestered by top echelon executives in banks and financial institutions of Wall Street. Hillary Clinton had no qualms in taking hefty fees for speeches made at one of the behemoth habitué of the financial district, Goldman Sachs, that was made much by her rival during the one-to-one debates. Ranting against the rapacity of Wall Street did not prevent Donald Trump from maintaining cozy relations with some of the powerful denizens of the fabled street. After winning the election he did not feel squeamish about appointing some of them to his cabinet as rewards.

According to available data, thousands of automatic teller machine (ATM) have replaced hundreds of thousands of human bank tellers. Reliable sources put 7.0 million jobs in America that have been eliminated in the past 35 years by automation, while factory production has actually doubled. And the self-driving cars that are about to hit the road will destroy most of the 4.5 million driving jobs in the USA.

Meanwhile, Uber, the online taxi service, has already thrown thousands of taxi drivers into unemployment in America and in Britain almost overnight. It is the anger of millions of people who became victims of new technology in the digital world that broke the normal voting pattern and gave White House to Donald Trump, an outlier in the political arena. But the popular anger was misplaced, loss of jobs was not due to free trade, and globalisation as was being alleged by the contender to the American presidency. The villain of the piece was the robotic machine outcompeting men on the assembly line. Donald Trump either did not realise this or preferred to play on the fear factor among the unemployed and stoke up xenophobic feelings of the easily gullible.

As automation continues its march like a juggernaut, the anger can only be expected to grow and spread among the populist public obvious of the main causes of their misery. Keeping pace with this trend and further stoking the fire with lies and half-baked truth, the leaders cashing in on populism expect to keep the momentum of popular anger to implement their agenda. The root cause for the malaise is not likely to be addressed in this power politics any time soon.

Automation will continue to spread into newer sectors at an exponential rate in the near future. The estimated impact over the next 25 years includes the loss of 47 per cent of all existing jobs in America, 57 per cent in Europe and even China will not be spared, losing 77 per cent of manufacturing jobs, according to an estimate. These are whopping figures which translated into human livelihoods on daily basis could mean nothing short of a social catastrophe. That could mean a lot more anger among the losers, a growing army of populists.

This would conceivably precipitate the collapse of democracy as it has known so far. The dystopian reality is now slowly dawning on the CEOs and owners of major enterprises that if half of the population suffers long-term unemployment they will not be able to buy the goods and services that the free market produces. That would lead to the collapse of the capitalist business model. Enters UBI, universal basic income, drawing their nervous attention. Can it be the saviour? They have started to wonder. Not a few in the corridor of power is paying attention, too. It seems to be an idea whose day has come.

The principle of UBI is that every citizen will get a basic income from the state that allows him to maintain a decent standard of living whether he/she are employed or not. They may also work, if they like, in order to earn additional income but that income outside of UBI would be taxed to prevent inequality. Thus, UBI has been conceived to save capitalism at its moment of existential crisis. Sceptics ask, why pay UBI rather than unemployment benefit to the unemployed as has been the practice so long? The answer given is, firstly, the continuation of the welfare system has become unbearable and secondly, payment of unemployment benefit entails humiliation while accentuating social division and unrest. If everybody gets UBI, egalitarian principle will be at work, assuaging the grievances of the poor.

The sixty-four thousand dollar (the expression has ignored inflation to retain the original flavour) question is: where would money to finance UBI come from? The proponents have pointed out that half of the fund will come from ending all existing government social welfare payments, including national health services. The assumption is that if one gets UBI, one will not need unemployment benefit or old age pension. Heavy taxes on financial institutions and automated factories will rake in substantial fund, it is pointed out.

The trickiest question is: how many people would still choose to work even when UBI becomes universal? By a rule of thumb, if 47 per cent of today's remaining jobs are taken over by automated machine in 20 years' time, then 53 per cent of today's jobs would still need people. Might some of them drop out, relying on UBI and opting for job-free living? Finding the answer to that will determine the total liability of the state and the potential income from taxes. If recipients of UBI save for the future when in old age expenses will rise and UBI, even when inflation adjusted, may not be enough to compensate, the fall in consumer spending will hurt the economy.

Then, there is the question of providing social services like education and health care. Payment of UBI will absolve the state from providing these and the private sector will take over this role of the state but against payment. Then the question will be: will the pricing of the services be commensurate with the income from UBI or will the private sector provider of these services follow their own estimate of cost and profit? If the answer is the latter, will there be a mismatch between availability of fund under UBI and the liability to pay to the private sector providers? These are the `unknown unknowns' at the moment. Finding the answer to these questions is important before embracing the new idea.

Pilot programmes are under way in a few countries to test-run the model. Ontario in Canada, Utrecht in the Netherlands and Norway have already started pilot projects to find out the advantages and disadvantages of introducing the UBI. Scotland and Italy are seriously considering joining the experiment. Dismissed when first broached, the idea of UBI is now drawing serious attention from policymakers in a number of countries. If ultimately introduced, it will be the most spectacular arrangement to manage society and run the economy ever made by any government. But with so much leisure made available by income without having to work, will life be enriched with a sense of fulfillment? Will people be able to handle the new life without any psychological fallout? One can only wait and see until the results of the pilot programmes are known. UBI is unquestionably a great challenge for governance. It can also offer an attractive opportunity to those who feel marginalised by the present system. The question is whether it can be put into practice as outlined by its advocates.

II

The introduction to the article gives the impression that Basic Income as a concept is new. This is far from the fact; the idea has not only a rich pedigree but also an antecedent that goes far back into the past. In this section a brief review will be given of its history and the tortuous journey that it has made to date.

There are several candidates claiming for pride of place as the originator of the idea that the state should provide all its citizens with a basic income. Sir Thomas More, in his fictional vision of the island of Utopia ('no place'), published in 1516, has been identified as the first to portray a society with a basic income.

However, one can go much further to the times of Pericles and Ephialtes, who in 461 BC as leaders of the plebeians (common man) in ancient Athens initiated democratic reforms that involved paying citizens for their service. After Ephialtes, Pericles instituted a sort of basic income for citizens as rewards for their time spent in the political life of the city. The payment, however, was not conditioned on actual participation which was seen as a moral duty. This enlightened system of participatory democracy, facilitated by the basic income, was overthrown by an oligarchic coup in 411 BC and with that the practice of paying a basic income came to an end in ancient Greece.

The medieval roots of basic income can be found in the Charter of the Forest which was issued alongside the Magna Carta in 1217. The Charter of the Forest asserted the rights of the common man to subsistence and to what were described as the means of subsistence in the commons. In the 13th century, every church was required to read out the Charter to congregations four times a year. A feature inserted in the revised Magna Carta was the right granted to widows an allowance for subsistence. Every widow had the right to a basic income in the form of the right to take food, fuel and housing materials from society.

But historians agree that it was Thomas More who first depicted what a society with a basic income might look like. As justification, he saw basic income as a better way to reduce thievery than hanging, the prevailing punishment even for petty crime. According to him, if everyone was provided with some means of livelihood nobody would be under the necessity commit any crime for the same. About a decade later, a Spanish-Flamish scholar and a friend of Sir Thomas More, Johannes Vives submitted a detail proposal to the mayor of Bruges in Holland for ensuring a minimum subsistence for all the city's residents, which led to a brief trial of the idea. For this reason, some credit Vives with being the first to initiate basic income. But in his programme the assistance consisted of food only and was targeted on the poor. Vives was also a proponent of 'workfare', making the poor work in return for income. On the basis of these antecedents, it has been concluded that Thomas More and Vives helped to legitimise the idea of publicly funded relief for the poor rather than reliance on charity by the church.

In the centuries after More and Vives, a few other thinkers followed in their foot steps. In France, Montesquieu's Spirit of the laws (1748) asserted that the state owed all its citizens a secure subsistence including food, clothes and a way of life that did not damage their health. Later, the Marquis de Condorcet, a noble man with enlightened ideas, argued for something similar. However, the most influential advocate of basic income in the early phase was Thomas Paine, the author of The Rights of Man. In his essay `Agrarian Justice' written in 1795 he proposed a capital grant as well as a basic income for the elderly. Thomas Paine's contemporary in England, Thomas Spence also argued for basic income as a natural right of citizens. He envisaged a sort of social dividend derived from land rents paid into church funds with the proceeds distributed equally among all inhabitants.

In the 19th century, a few writers toyed with the idea of basic income with some variations. In Europe, French, Dutch and Belgian thinkers were prominent in this regard, particularly the socialists Charles Fourier, Joseph Charlier and Francois Huet, who in 1853 advocated an unconditional transfer to all young adults, funded by taxes on inheritance. They became marginalised by advocates of communism and the paternalism of social democracy. Across the Atlantic, in America supporters of basic income included Henry George, whose book `Progress and Poverty' advocated the idea for a long time. In Britain, William Morris's radical novel `News from Nowhere' (1890) envisaged a co-operative craft-based society in England. The book captured the imagination of many by portraying a society where, with a basic income granted by the state, people pursued work as creative activity, not as labour for employers. The idea did not make much headway beyond the literary circle.

What might be regarded as the second wave for the idea of basic income came in the wake of the World War I, in the writings of Bertrand Russel, Dennis Milner, Bertram Pickard, GDH Cole and the disciples of Henry George. Shortly after them came CH Douglas, founder of the social credit movement and the first proponent of a basic income inspired by widening income of inequality.

However, it was Bertrand Russel who stated the aim of basic income clearly and in a forthright manner. He wrote: when a education is finished no one should be compelled to work, and those who choose not to work should receive a bare livelihood, and be left completely free. (Roads to Freedom, 1920). But the Labour Party, which discussed the ideas of basic income and state bonuses at its annual conference in 1920, formally rejected them the following year. Subsequently, the various related proposals figured in the debates on the formation of the welfare state, notably in the early work of James Meade and Juliet Rhys-Williams (1943). But the Labor Party's version of the welfare state prevailed, tying income and benefits to the performance of paid labour. The Frankfurt School psychoanalyst Erich Fromm in his book `The Sane Society' discussed about guaranteed income but his voice and that of others were ignored.

What might be called the third wave for the idea of basic income came in the 1960s, mainly in America in the backdrop of rising concern over technological unemployment. This was reflected in the 1972 proposal by President Richard Nixon for a Family Assistance Plan, a form of negative income tax. He refused to use `guaranteed annual income'. He believed in supporting the working poor by which was meant those in low-paid jobs, ignoring the many forms of unpaid work. Nevertheless, the measure was an advance in the basic income direction. Ironically, the reform was killed by Democrats on the ground that the proposed amount was not enough.

In 1968, about 1,200 economists from 150 universities signed a petition in favour of a negative income tax. There were many other advocates around this time, though most seemed to have supported a means-tested guaranteed minimum income. They included a number of Nobel Prize-winning economist-James Meade, James Tobin, Jan Tinbergen, Paul Samuelson, Friedrich Hayek, Milton Friedman and Gunnar Myrdal. The idea was also supported by other prominent economists, such as JK Galbraith and by some sociologists including Senator Daniel Patrick Moynihan who supported Nixon's proposed Family Assistance Plan.

The fourth wave of basic income can be said to have started with the establishment of the Basic Income European (now Earth) Network (BIEN) in 1986. After attracting a steady stream of converts, the wave gathered momentum in the wake of the financial crush of 2007-8. Since then a wide range of economists and commentators have come out in support of some variant of basic income, often associated with fears of technological unemployment, growing inequality and high unemployment. Supporters in this fourth wave include: Nobel Prize-winners James Buchanan, Joseph Stiglitz, Angas Deaton and academics Tony Atkinson, Robert Skydel and Robert Reich, prominent economic journalists Sam Brittan and Martin Wolf. Later, the idea was taken up by Silicon Valley celebrities and venture capitalist, some putting up money for the cause.

Looking at the four waves of the idea basic income, the first one can be described as a response to the crisis of emerging industrial capitalism, imagining a way to adjust society to preserve communities against advancing proletarian labour. The impetus for the second wave was primarily social justice, the need to right the wrongs of the World War I and the impoverishment of the working class. But it was crushed by the strong wave of Labourism supported by social democrats and Fabian socialists. The third wave reflected the fear of technological unemployment and faded as that fear receded.

The fourth wave has been spurred by the emergence of mass insecurity and rising inequality as well as by concerns about labour displacement by robotics, automation and artificial intelligence. Basic income now appears to have become an issue of lively debate, both in academic and government circles. It remains to be seen how far the idea will go this time around. As of now, it is merely embedded in public debate. But it must be admitted that an idea that has persisted for such a long time has some merit in it.

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