UBI: The Global Antipoverty Experiment

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 the age of twenty-one. 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 certain 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 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. 

A young girl’s Bolsa Familia registrant card.

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 UBIIt 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.

Photos courtesy of:
Scott Santens
Senado Federal

The Closure of the WTO Appellate Body: The End of World Trade As We Know It?

by Pankhuri Prasad
Staff Writer

Is the world coming to an end? Hopefully not. But it could be the end of world trade as we have known it for the past two decades. During a course I took in the winter of 2018, my International Economics and Politics professor mentioned how the World Trade Organization (WTO) may face a severe crisis in the near future. At the time, the likelihood of such a crisis seemed low and distant. However, with the end of 2019 looming near, international trade is quickly heading into uncharted waters as the Appellate Body of the organization is facing extinction. The World Trade Organization (WTO) can be understood as the only global organization mediating nations by establishing the international rules of trade. At its core, the WTO is held up by the many multilateral agreements that are signed and negotiated by a majority of the world’s trading nations. The WTO is unique from other major international organizations because it yields effective enforcement through its dispute settlement mechanism. The dispute settlement mechanism, as the name suggests, is a system of solving disputes that may arise when one country or a group of countries believe that another country’s trade policies could be considered as a violation of WTO policies and principles. If the dispute cannot be settled through negotiations, an impartial panel of experts issue a ruling on the matter. 

The Appellate Body essentially acts as a supreme court and hears appeals about rulings issued by panels. This translates into a strong enforcement mechanism because the ruling goes into effect unless all WTO members vote unanimously to block the ruling. The defendant must then end the offending policy or pay compensation to the complainant. If no agreement can be reached on compensation, the injured party is authorized to impose retaliatory tariffs. Thus, this system differentiates the WTO from other international organizations because it imposes real economic consequences for flouting rules. 

As mentioned before, the Appellate Body may shut down at the end of this year. How did this happen? The answer is complicated. The immediate reason is that the United States vetoed the appointment of judges to such body. On December tenth of this year, two of the three remaining members will retire. Without them, the body will not be in quorum and will be forced to stop operations. The body typically consists of seven people but needs a minimum of three judges to hear cases and issue rulings. It is important to note that WTO panels will still be functional, but there will be no finality on issues since appeals to these decisions will be impossible.  

Why has the United States blocked appointments of judges? They have a long-standing list of complaints and criticisms of the WTO. Most importantly, the United States believes the Appellate Body has strayed away from its original mandate of a body that simply clarified existing rules. Instead, in many cases the system has been accused of “judicial activism”—taking decisions that are not grounded in preexisting rules of the organization. The reason for this is that the original rules of the WTO have seen almost no revision since the organization was created twenty-four years ago. Negotiations on new rules have been slow. The last round of negotiations started in 2001 and ended in failure in 2015. Other than asserting that the body is overly deliberative, the United States also believes the dispute mechanism process simply takes too much time. The 2019 Annual Report presented by the body showed that the average trade dispute takes about three and a half years, in total, before it is settled. 

How are other countries reacting to this? Canada and the European Union have agreed on a “shadow Appellate Body” that will operate similar to the current body. The United States expressed concern that other WTO members, including the European Union, are not as concerned about how the body has overstepped its jurisdiction. Although the Trump administration has been more assertive about the issue than other administrations, America’s grievances with the organization go back to President Obama’s term when his administration blocked the appointment of judges in 2016. 

The possibility of resolution seems low when there is disagreement among members on whether a problem exists or not with the dispute settlement mechanism itself. Furthermore, the United States has not signaled that it would be willing to lead reforms that might save the Appellate Body. Any leverage the White House might have will be substantially lowered once the body ceases to function in December. In fact, quite the opposite direction, as they are going from leading reform to threatening to block the passing of the international organization’s budget. 

Photograph of the second WTO Ministerial Conference which was held in Geneva, Switzerland in May of 1998.

What will this mean for world trade? Some have argued that dispute settlements should proceed as usual, only without America’s involvement, but that comes at the risk of ostracizing the system’s most frequent user. Disputes will still be decided by the panels. Without an appeals system however, the decisions could be used by countries to pressure trade rivals. Without a functional appeals system, international trade disputes could evolve into tit-for-tat tariff wars. Countries may feel emboldened to flout trade laws. 

There is no question that the WTO needs structural reform, but the United States will not lead this reform unless other countries concede that the international organization has overstepped its jurisdiction. This is yet another example of the country’s decreasing appreciation of international organizations. Earlier this year, the United Nations declared a cash crisis, partly due to lack of funding from its largest contributor, the United States. The question remains whether the economic hegemon sees these global regimes as worth saving. Do they see the WTO as vital to strengthening the global trading system and thus the American economy? The verdict is out. Meanwhile, what is certain is that global trade is entering a period of unprecedented uncertainties. 

Photos courtesy of:

Chutter Snap

World Trade Organization

China, Hong Kong, and Basketball: How One Tweet Started a Firestorm in the NBA

by Nicholas Kishaba

Staff Writer

In March, demonstrations began in the streets of Hong Kong, largely in protest against a bill which would essentially allow the Chinese government to extradite fugitives from regions they do not currently control, such as Taiwan, Macau, and Hong Kong. Since then, Hong Kong City Leader Carrie Lam has agreed to withdraw the bill, however, as protests have increased in both frequency and violence, protesters’ demands have consolidated into a call for democracy. Among other demands such as amnesty for arrested protesters, and an inquiry into police brutality, there are also demands for the resignation for Lam, who is believed by the protesters to be a pawn for Beijing.

Continue reading “China, Hong Kong, and Basketball: How One Tweet Started a Firestorm in the NBA”