WES: Universal Basic Income

Mia Sannapureddy

By Mia Sannapureddy

At the recent Warwick Economics Summit, Professor Guy Standing (co-founder of the Basic Income Earth Network) challenged the key merits of capitalism by discrediting the ‘free’ nature of free markets, questioning the extent to which property rights foster economic development, and criticising the current lack of incentive to protect common goods.

Whilst not providing an overarching solution to the problems outlined, Standing discussed the exciting concept of a Universal Basic Income (UBI) which acts as an interesting alternative to current welfare mechanisms and has been credited for potentially being able to create a ‘post-capitalistic economic system’.

So, what is UBI?

Under a Universal Basic Income everyone would receive a regular, livable, and unconditional sum of money from the government which would meet their basic needs and put them just above the poverty line. Essentially, they would be at subsistence level and able to sustain themselves without having to work.

On the surface, the idea seems to make little sense. Why would giving everyone, even the rich, the same amount of money be better than providing welfare to those who need it the most? However, there are several theoretical arguments supporting the theory.

 The Benefits of UBI

Firstly, and most importantly, UBI would end absolute poverty. By providing a basic income for everyone, everyone would be living at an acceptable level. Under current systems, this is almost a utopian aim.

Furthermore, despite uncertainty over whether UBI would be implemented alongside current welfare systems or replace them entirely, it would provide transparency and administrative efficiency. UBI is much simpler than current, multi-means-tested welfare systems, meaning a lot of money can be saved in administration.

It would also prevent wage slavery. Fox Piven argues that having a guaranteed income would benefit all workers by allowing them to pursue education or different interests, meaning they can add more value to the economy.

Additionally, UBI is likely to offset the human impact of the large wage wave of automation which is predicted to occur in the near future.

It is also argued that currently welfare systems act as a disincentive to increase income as acquiring a job often results in loss of welfare and following tax, a lower net income than prior to attaining the job. This is not a problem that would be present with UBI.

Therefore, having received support from both the left wing (for its social merits) and right wing (for reducing bureaucracy), UBI seems to be an exciting alternative to current welfare systems.

Concerns about UBI

An argument against basic income is that recipients might ‘get lazy’ and choose not to work. Following several experiments in the US and Namibia, researchers found this was not the case, which raises important questions about human nature and behaviour, as well as the impact of culture on UBI across the world. Similarly, there were concerns that people might spend their basic income on alcohol and drugs; however, a 2014 World Bank review of thirty scientific studies concluded that ‘concerns about the use of cash transfers for alcohol and tobacco consumption are unfounded’.

Funding is also a big concern when considering UBI. It is argued that the abolition of current welfare systems should be able to cover large proportions of the cost of the scheme, though it is still uncertain whether a UBI initiative might run alongside current systems or as a direct substitute for one. In the case of service-based welfare provisions such as healthcare and education, UBI would not be able to directly replace their benefits. So, funding for UBI would have to come from elsewhere. Suggestions of increasing income tax and introducing taxes on capital, carbon tax and financial transaction tax as well as taxing data giants, who largely support the idea, have been put into play.

Another concern regarding UBI arises when considering those with disabilities or with serious health problems – it is clear that such citizens would require a higher rate of basic income, undermining the central pillar of the concept.

So far, have trials of UBI worked?

Trials have largely produced positive results. More detail can be found here: http://basicincome.org/news/2017/10/overview-of-current-basic-income-related-experiments-october-2017/. Trials in India and Canada have also proved successful. However, they have mainly focused on lower incomes; to understand the true potential impacts of the scheme, many more experiments that incorporate a wider class range and more countries would have to be conducted to legitimise the idea.

From a social welfare point of view, in the eyes of this correspondent, UBI is genius: everyone can live at a good level and it decreases the problems of inequality despite the concerns outlined.

Whilst the idea of getting something for nothing is at odds with the meritocratic ideology that capitalism promotes, UBI might be the solution to real world problems by combining the left wing view of state responsibly for its citizens with the right wing desire for a smaller State.

This article is only a brief summary and an introduction to universal basic income; there is a wealth of literature about the concept, which I would urge you to explore further.

Some suggested items to explore:

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