By Tenzin Chomphel
Editor in Chief
The back and forth of the best way to resolve extreme poverty, wealth inequality, and just taxation, may often appear endless to most. While global poverty is lowering at a rate of roughly sixty-eight million people per year, that still leaves an unacceptably high level of poverty around the world. Domestically, the United States experiences an estimated thirty-eight million still in poverty, and inequality has additionally been on the rise, with the bottom ninety percent of households accounting for less than a quarter of the total wealth.
Arguably one of the most controversial, yet blossoming proposed solutions to come out of this sphere, is a system where the government theoretically transfers payments directly into the hands of the individual citizen, commonly dubbed Universal Basic Income.
Universal basic income has taken on other monikers such as Guaranteed Income and Basic Pension, and differed in the exact schematics. The only core principles necessary to define a program as UBI, is that it serves as a periodic money payment, unconditionally delivered to all on an individual basis, with all receiving the same amount. Hence the universal aspect. Additionally, the amount provided is generally intended to skew towards the necessary amount to purchase only critical needs such as food and rent costs. Hence the basic aspect.
Discussion of a basic income can be dated back as far as the early 16th century. However concrete proposals that are often cited as the first hints can be drawn more so from the late 18th century, the most notable of these brought up by American founding father Thomas Paine. In his “groundrent” proposal, every citizen would receive fifteen pounds from the government after turning twenty-one years old. Since then, accounts of politicians, CEO’s, activists, and academics pushing for their various iterations of wealth redistribution have popped up throughout modern history.
The primary motivations for a UBI foremost are poverty alleviation and combating wealth inequality. This applies particularly to developing countries with large populations still living in harsh socioeconomic conditions. In the hands of an individual living marginal to the poverty line, implementing such a systematic approach would theoretically allow for that person to possess disposable income, which they could then use to reinvest into their human capital, health or education for example. Applying the theory of influential economist John Meynard Keynes, this would also provide additional money being injected back into these local economies through the multiplier effect. The resulting increased consumption would spur economic activity, and thus growth.
For developed economies, an argument for UBI also stems from advancements in automation and technology. As machinery becomes more sophisticated and able to do the work of more individuals at a much cheaper rate, the resulting effect is job loss from largely low skill workers. This is interpreted from projections that automation will displace twenty million jobs globally in the manufacturing sector alone by 2030. Proposals for UBI however, contrary to popular belief are not meant to be interpreted as a replacement to these jobs. Similar to welfare programs such as subsidies, they are meant to provide a safety net to support a person’s main source of income. Individuals would not be incentivized to quit their jobs based off of a basic income placed marginal to their country’s poverty line. In the words of social entrepreneur Hillary Cottam, “Welfare systems are designed to manage needs, but not designed to manage capabilities so that families can stand on their own.”
If UBI can indeed theoretically serve as an effective panacea for wealth inequality, the question then is why the idea has struggled for centuries now to gain traction. One of the main reasons is how difficult it is to sell the idea of a basic income politically. With such minimal evidence on the long-term effects of UBI on a population, particularly one scaled to the size and diversity of a country, it is no surprise why it may be a political risk. Other common criticisms include the real impact on labor force participation, inflation, and of course the large price tag of such a program. These concerns also emphasize the need for additional real-world evidence to provide more conclusive answers to.
We have established that UBI faces a serious barrier to progress without more concrete evidence of its effects. Only within the 21st century has any actual progress in this sense been made. One notable success is Brazil’s conditional cash transfer scheme Bolsa Familia, which has helped half the amount of Brazilians living in extreme poverty, and lowered income inequality as well. India is another country where Basic Income is already in the mainstream political discussion. Numerous Indian economic advisors argue that it should be considered to help the country’s mass chronic poverty, especially in light of weak local administration and apathetic public officials. Variants are currently being trial run, such as in 2019 when the government began doling out a minimum income to small and marginal farmers.
One of the world’s largest experiment in cash transfers however, is not being performed by any government at all, but through the nonprofit GiveDirectly. GiveDirectly aims to transfer cash directly into the hands of populations living in extreme poverty, such as over ten million dollars specifically to rural residents in Siaya county, Kenya. The experiment was meant to examine its effect on the overall region, testing the “general equilibrium”, and it found that estimated a “fiscal multiplier” of 2.6 for this area, implying that every one dollar invested in fiscal stimulus grew the local economy by more than double. A breakthrough for the credibility of cash transfers, and by extension UBI.
It is worth noting that the United States also recently began to consider the idea of a UBI more seriously, again mostly based on arguments of inequality and job displacement due to automation. Public advocates of these efforts include tech entrepreneur Chris Hughes in Stockton California, Newark mayor Ras Baraka, and democratic presidential candidate Andrew Yang‘s Freedom Dividend of one thousand dollars a month for every American citizen. Within the context of the 21st century milestones, UBI’s notoriety has gained a second wind that may be unprecedented for its proponents. The question we are now presented with is whether governments, and the people they represent, will view it as an undeserved handout, a costly and outlandish dream, or a decisive investment into the individual.