Unconditional Basic Income (UBI)

For a few decades we were told that money from the government should be spend cautiously, so that it would not make its beneficiaries lazy. The unconditional basic income (UBI) mocks all these sanctities.

So far, it is the Finns who went furthest in this direction. Since January 2017, the local government agency of social security (called Kela) gives you money for the very fact that you exist. Specifically, €560 a month. For the time being it that does not give the money to everyone. Randomly assigned to this experimental program were 2000 unemployed from the 25-56 age group. They’ll get the money for two years. The €560 will replace the benefits they were getting from various government programs of the welfare state. If they received more, Kela will make up the difference.

The new transfer is unconditional. That means that it will be paid regardless of how the life of the beneficiary will play out. He finds work? Then he will have his salary plus the €560. He will lose his job? The €560 is supposed to cushion the fall, to prevent him from falling into the trap of exclusion and permanent unemployment. It will also put an end to calculations by the poorest if it is profitable for them to take up work risking the loss of social benefits. The unconditional nature of the €560 has one more advantage. It is an income which does not depend on the good will of the bureaucratic machine. It is rightfully owed to the citizen, which is why it does not create this peculiar relation of clientelism, the side effect of the classic philosophy of welfare state in the second half of the 20th century. In this sense, it does not deprive the beneficiary of his dignity and does not stigmatize him as a parasite, living at the expense of others.

We will learn in early 2019 how the Finnish project plays out. Will unconditional income lead to a decline in unemployment? Does it become a model for reforming the welfare state? What side effects (good and bad) will be produced by giving money to people for the very fact that they exist? The answers are awaited not only in Helsinki. Unconditional basic income is spoken about today in many places of the developed world. Last year, the proposal for unconditional basic income to the tune of CHF2.5 thousand was put forward in Switzerland. However, it was rejected by a significant majority. One of the reasons was that it was not supported by the government. Still, it should be said that 25% of the voters were for this proposal, which may mean that one day the issue will come back.

This year, pilot projects will also be launched in a number of Dutch cities. For example, the authorities in Utrecht developed the following scheme: the basis is €970. Some participants of the experiment will receive the sum under the condition that they actively seek work. Another part will receive the money unconditionally. Yet others will get an additional €125, but only if they sign up for voluntary work. Yet others will pocket the €125 automatically, but will have to give them back if they do not undertake voluntary work. In the same period, a number of Italian cities will provide the poorest families with financial injections. In a sense, the group of experimenting countries also includes Poland with the government’s flagship program 500+. Although in Poland the target group is households with children, it is worth noting that from two children up the Polish program works exactly as the UBI. The PLN500 (about EUR115) per child is to be paid regardless of any other criterion. This sum in the Polish financial reality may constitute an important item in the household budget, especially in poorer homes.

The UBI Cannot Be Easily Labelled As Ideological

The above enumeration itself shows that unconditional basic income is the hottest economic idea of recent years. Its charm also lies in the fact that it cannot be easily labelled as ideological. In fact it was so ever since the idea for “money for existence” emerged. Thomas Paine, one of the American founding fathers, was the first to put it forward in 1797. He proposed creating a fund from which every citizen would receive “start-up” money when reaching 21. It was not intended as an act of charity, but as a kind of compensation for the universal expropriation of land ownership, which occurred as a result of land ownership becoming common. Echoes of the French Revolution (in which Paine participated) could definitely be heard in this idea. At the same time, the concept was acceptable for colonial elites which pursued the American Revolution. A revolution much less socially radical, and at times even reactionary.

The subject of the basic income came back during the Great Crisis. It was quite seriously discussed in the 1940s in Great Britain (it was then called “social dividend”). But ultimately it lost out to the ideas of the classic welfare state based on conditional transfers directed at the poorest. Another chance for introducing the idea appeared in the US under the economically conservative administrations of Nixon and Carter. The idea even took the shape of specific bills, but they were rejected by the Congress. Something like the UBI was introduced only locally in the resources-rich and not very populous Alaska. Also economic liberals were interested in the idea, and Milton Friedman considered a vision of a “negative income tax,” however, under his conception it was meant rather as a way for shedding the burden of social security expenditure by the government. It is worth noting that all these discussions ended when neoliberalism entered the historical stage (sometime in the 1970s).

It was only the shock of 2008 and the stagnation which is going on until today that created a new political constellation favorable for the UBI. Today it is liked by many communities including economic conservatives, who see in the basic income a chance for the “return to the roots,” slightly curbing the influence of the too expansive (in their opinion) government, which too readily assumed the role of a nanny. It is also liked by the left, mostly the more radical one. They believe that the UBI is one of the most innovative ways of countering the pathologies of contemporary capitalism. Such is the situation that with globalized markets and the lack of a sensible systemic alternative (for no one treats communism seriously today), capital has gained too much advantage over labor. The problem is that the bulk of humanity lives from work, so an excessive power of capital inevitably increases social inequalities and leads to political tensions. A well-structured UBI could at least partly remedy that.

The Universality of the Basic Income Is Important

But what does it exactly mean, “remedy”? For the unconditional basic income to make sense, three fundamental assumptions must be fulfilled. First, the income must be high enough to ensure economic existence to everyone. If it is too low, it will only become yet another way of stimulating demand, subsidizing business from the government budget.

For the income to really influence economic emancipation of the citizens, it also has to be unconditional, it cannot stigmatize those who receive it as losers. In other words, it must be their right. Universality of the basic income is important, for in the real world its introduction will certainly encounter much resistance. The demand to introduce income limits (cutting off the highest earners from the UBI mechanism) will certainly appear. Experiences of social policy in democratic capitalist countries prove that there is a catch in such thinking. Namely, when redistribution programs (that is transferring resources from the wealthy to the less wealthy) are not universal, they very easily end up in a box labelled “fight against poverty,” and their efficiency is limited. Such programs are then an easy prey to be liquidated under pressure for consolidation of public finances. All this because politically active social classes do not regard such programs as “their own” and they are not much interested in defending them.

Third, UBI should be a supplement to the mechanisms of the welfare state rather than its replacement (in this sense the Finnish pilot program does not meet the most maximalist assumptions). Let us imagine a situation where today’s complex and sophisticated mechanisms of the welfare state are dismantled. Of course, I am speaking about those mechanisms which exist in Western Europe and not about their much reduced and grotesque versions created on our side of the Iron Curtain. So I am speaking not only about unemployment benefits, but also housing benefits, a system of government aid for families with children and seniors, or the institution of the social worker. And now let us imagine that it all disappears, replaced by the UBI. Does it not lead to the dangerous market logic invading those areas which it has been forbidden to enter? Unfortunately, chances for that are quite big. There is a risk that it will all end up with climbing to another level of brutal
neoliberal reality, rather than reviving the concept of the common good and welfare state.

Will Be the People Discouraged from Working?

UBI’s critics of course repeat that such an income will have one fundamental flaw: it will discourage people from working. And how will societies create wealth then? This argument can be taken on in many ways. One of the most interesting counter-arguments was presented recently (January 2017) by the commentator Matt Bruenig in the journal Jacobin. He said that discouraging from work does not bother anyone in the context of the really existing mechanism of unconditional basic income: capital gains. Bruenig quotes recent (2016) assessments of the well-known French trio (Piketty, Saez, Zucman), who show that about 30% of income acquired by Western economies is a rentier income: interest, dividends, or other types of rent. And it is by no means a new phenomenon. A century ago this percentage was at a very similar level.

It is worth recalling that only a small part of capital gains comes from the fruit of your own work (savings or some very good investments). In most cases the rentiers are the heirs of some previously accumulated capital. So why do we allow them to get unconditional basic income and deny it to those who had less luck? People who “did not choose their parents well,” as Jan Kulczyk said? Why do the former have the right to get money for nothing and the latter do not have it? What kind of morality is that? Besides the famous satirical principle: “Free market for the poor, socialism for the wealthy.”

The coming years will be crucial from the point of view of UBI supporters. The first hard conclusions from field experiments will start coming from numerous places of the Western world. And our discussion about the income will cease to be almost entirely theoretical and maintained in the tone of “wow, what a curious concept!” The time will come for politicians to translate the UBI idea into a specific project. How much? Should everyone be eligible? How do we combine it with the existing mechanisms? And finally, how do we provide the project with solid financing? We may cautiously assume that it will occur in the 2020s or the 2030s—a not too distant future.

Rafał Woś

Rafał Woś works for the Polityka weekly and is the author of the book Liberalism: An Infantile Disorder. Winner of Grand Press Economy, Fikus Prize, and Polish German Journalistic Award. His next book No Country for the Worker will be out in 2017.

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