An Economic Bill of Rights for 21st Century: the Universal Basic Income

An Economic Bill of Rights for 21st Century

In the summer of 1967, King announced what was to be the most expansively radical adventure of his life – a national movement called the Poor People’s Campaign, mobilizing Black, White, Hispanic, Native American. It was to demand an annual $30bn federal investment to deliver full employment, guaranteed annual income, 300,000 units of low cost housing per year.

Tragically, Dr. King was assassinated on 4th April 1968, and the April 16 edition of USA Look magazine carried a posthumous article from King titled “Showdown for Nonviolence” — his last statement on the Poor People’s Campaign. The article warns of imminent social collapse and suggests that the Campaign presents government with what may be its last opportunity to achieve peaceful change — through an Economic Bill of Rights. Three weeks after Dr King’s death, the Committee of 100 — set up to lobby on behalf of the campaign – called for just this – an economic bill of rights with five planks to deliver economic justice.

A meaningful job at a living wage
A secure and adequate income for all those unable to find or do a job
Access to land for economic uses:
Access to capital for poor people and minorities to promote their own businesses:
Ability for ordinary people to play a truly significant role in the government

Despite the intervening decades since the Poor People’s Campaign, it is true to say that Dr King would recognise the same issues today as he faced then – inequality, corporate power, racism and militarism. Now, we have other factors that also need to be incorporated – climate change, the total capture and consolidation of political power by the financial and business class; the globalisation of the neo-liberal agenda (north and south alike). So, it is imperative for our renewed Economic Bill of Rights to reflect this.

Among the big ideas, the one that will be integral for us to solve the first 2 demands of the 1968 Economic Bill of Rights in the 21st century is the universal basic income.

Why do we need universal basic income?

The idea of universal basic income is rapidly gaining traction among people who are either worried about or looking forward to an automated future and people who are deeply concerned with rising inequality in the society. However, the ideas of a basic income goes back centuries – from Thomas More, Johannes Ludovicus Vives, Marquis de Condorcet, to Thomas Paine and John Stuart Mill, they have all argued a basic income, in its various forms, as a way to solve some social ills and improve social welfare, resulting in a more civilised and equal society.[i]

The danger that we would be underwriting the failures is trivial compared with the benefits the guaranteed annual income would provide us. It would provide dignity for every citizen and choice for every citizen.

Margaret Mead, Anthropologist, Women’s Rights Activist

Universal basic income in its essence is to give a flat, non-means-tested payment to every citizen , at a level sufficient for subsistence. It is a simple idea that has something in it for everyone —socialists, conservatives, liberals, libertarians. From Milton Friedman to John Kenneth Galbraith, from right to left, intellectuals and political activists have voiced their support for basic income based on their own beliefs and concerns. During the final year of his life, Martin Luther King Jr. strongly advocated for guaranteed income as ‘the solution to abolish poverty’. In the 1970s, the Nixon administration pushed for Guaranteed Annual Income (GAI) and the House of Representatives even approved the proposal (but the Senate killed the bill).[ii]

The solution to poverty is to abolish it directly by a now widely discussed measure: the guaranteed income. … We are likely to find that the problems of housing and education, instead of preceding the elimination of poverty, will themselves be affected if poverty is first abolished.

A host of positive psychological changes inevitably will result from widespread economic security. The dignity of the individual will flourish when the decisions concerning his life are in his hands, when he has the assurance that his income is stable and certain, and when he knows that he has the means to seek self-improvement.

There is nothing except short-sightedness to prevent us from guaranteeing an annual minimum – and liveable – income for every American family. The time has come for us to civilize ourselves by the total, direct and immediate abolition of poverty.

Martin Luther King Jr., Where Do We Go From Here: Chaos or Community? (1968)

We are at the dawn of the age of robotic automation, so, whether we like it or not, the universal basic income is inevitable. It is not just manufacturing jobs that will go. A third of jobs in UK retail are forecast to go by 2025. It will also affect professional jobs like lawyers and doctors – for example, recent research predicted 114,000 jobs in British legal sector would be automated over the next 20 years.[iii] No job no income; in a society where the market dictates our means of subsistence, if most of the jobs are automated and taken over by robots, how do we earn a living? No income no capitalism; when people don’t have income, whom do the owners of the capital expect to buy their goods? No ‘job’ is not the same as no ‘work’. While there is no longer the need for people to do the traditional salaried jobs, people will still work, paid or unpaid, to pursue their passion, to satisfy their interests and to fulfil their lives. Our thirst for knowledge, curiosity about the world and appreciation of its beauty will still make most of us work on, for example, cultural or scientific endeavours.

70 years of the neoliberalism movement has convinced many of us that everything has its price – things that cannot be priced are of no value and hence no importance.[iv] The ‘price’ of climate inaction is trillions of dollars of economic/financial loss when in truth you cannot put a price on the future of humanity.[v] We are leaving behind a world with a potentially hopeless future to the next generation, but it is OK, because we are at least trying to ‘manage’ the potential enormous economic and financial losses.

The same neoliberal logic applies to our daily lives. Our lives exist to ‘work’ – and a very specific type of work at that. Our lives’ worth is judged by how much we earn and in order to earn, we need to get jobs that pay us money . Any other work that does not offer monetary returns is of no value and importance, but this is not how we live our lives. Our lives are full of work – we talk, we read, we play and we volunteer – not related to jobs, and our lives are, and sometimes out society as whole too is, better for it. This is also how humanity progress – a perfect example is the father of the electric age, Nikola Tesla. He came up with the ideas that are now the foundations of our modern world, like alternative current (AC), radio, radar, x-rays, electric motors, etc. without any concern/prospect of financial rewards. With universal basic income, we no longer need to spend most if not all of our time and energy just to earn enough to survive. We will not expect anyone to be the new Tesla, but at least we can improve our quality of life and maybe also make our little contribution to our collective heritage. A basic income that makes it possible to divorce work from pay will significantly enable everyone to execute their ‘unalienable right’ to the ‘pursuit of happiness’ (one of the three universal rights declared in the United States Declaration of Independence).

For Karl Polanyi, labour, along with land and money, is a “fictitious commodity,” but none of them were created for the purpose of being turned into market commodities. He writes:

Labor is only another name for a human activity which goes with life itself, which in its turn is not produced for sale but for entirely different reasons, nor can that activity be detached from the rest of life, be stored or mobilized; land is only another name for nature, which is not produced by man; actual money, finally, is merely a token of purchasing power which, as a rule, is not produced at all, but comes into being through the mechanism of banking or state finance.

Furthermore, marketisation is inherently destabilising:

To allow the market mechanism to be the sole director of the fate of human beings and their natural environment . . . would result in the demolition of society. For the alleged commodity “labor power” cannot be shoved about, used indiscriminately, or even left unused without affecting the human being who happens to be [its] bearer.

Isn’t our current state of the world just what Polanyi predicted if the move towards a market society goes unhindered? However, he also believed that people will always eventually resist being commodified. People eventually have brought in systems to decommodify labour, the extent of which Gøsta Esping-Andersen argued is what explain the differences between the welfare states of the United States, Sweden and France. Decommodification, for him, means that “a service is rendered as a matter of right, and when a person can maintain a livelihood without reliance on the market.” For us, the universal basic income by guaranteeing livelihood to all women, children and men is a way to decommodify labour. It is also highly potent tool with which to fight back against neoliberalism. It is also an integral component that will lead us to the post-capitalism world.

In essence, the universal basic income is not just a useful and effective tool for fighting poverty, but it would also have other important benefits. It sets a floor to everyone’s minimum income and, in turn, increases workers’ bargaining power, potentially driving up wages (especially for workers that provide essential services that currently are massively underpaid, for example, cleaners, social workers and nurses). It would make it easier for people to invest in their own education/training and to be entrepreneurial and take risks in career opportunities.[vi] Most significant of all, for many of us, it lets us dictate our lives as we want rather than us being dictated to, by the work we do.

In the short run, concerns about robots taking all our jobs are probably overstated. But the appeal of a basic income — a kind of Social Security for everyone — is easy to understand. It’s easy to administer; it avoids the paternalism of social-welfare programs that tell people what they can and cannot buy with the money they’re given; and, if it’s truly universal, it could help destigmatize government assistance. As Sunkara puts it, “Universal programs build social solidarity, and they become politically easier to defend.”

Basic Income has been tried around the world

In the 70s, the US government did a series of experiments with a basic income at New Jersey, Seattle and Denver, Colorado. It was also tried in the small Canadian town of Dauphin, Manitoba and it worked as well as anyone could have hoped. Among the results were a drop in hospital admissions, and a rise in the number of teenagers staying on in school.[vii] Contrary to the neoliberal belief that “welfare” makes people lazy, a basic income might actually increase people’s willingness to work, by giving them sense of stability, and reducing other distractions and worries such as transport and childcare.

“What was really interesting about it was the wider benefits of a basic income, in terms of health, education, kids staying in education for longer, better mental health and fewer hospital visits,” he says. “Whereas now, our entire conversation about welfare has been narrowed down to a single question: is someone in work, or not in work?”

Anthony Painter, author of the RSA’s basic-income proposal, commenting on the experiment in Manitoba[viii]

Brazil in 2004 became the first country in the world to pass a law declaring that everyone has a right to a minimum income. A pilot project on basic income was conducted in India with many positive outcomes.[ix] Finland is considering giving its citizens an unconditional stipend of €800 a month and the Dutch city of Utrecht is carrying out a similar experiment.[x] On 5 June 2016, the Swiss voted against a referendum on a plan that would see all adults receive about £1,700 a month, with an extra £400 for each child. Nevertheless, the referendum created a huge awareness both in Switzerland and elsewhere. The survey of the Swiss voters also showed there was popular support to test UBI in smaller scale and high expectation that some form of UBI would be needed in the future.[xi]

In the USA, given Dr.King’s visionary calls in 1968, UBI has come to have a particular resonance for African Americans, through the lens of reparation. Four hundred years after slavery, 50 years after the right to vote and Jim Crow laws, African Americans are still trying to catch up. For the issue of mass incarceration and re-entry into society, these too can also be looked at through the UBI lens (what people leaving prison need to get back on their feet is a guaranteed income). Here is TaNehesi Coates’ article on reparations. Meanwhile, The Movement for Black Lives regards UBI as a means to address reparation in this 21^st century. As part of their economic platform demands, is ‘Reparations for the continued divestment from, discrimination toward and exploitation of our communities in the form of a guaranteed minimum livable income for all Black people, with clearly articulated corporate regulations.’

Basic Income for Development

The winds are shifting in the world of development policy:

A recent World Bank study concludes that “skills training and microfinance have shown little impact on poverty or stability, especially relative to program cost. In contrast, injections of capital — cash, capital goods, or livestock — seem to stimulate self-employment and raise long term earning potential, often when partnered with low-cost complementary interventions.”

The European Commission recently suggested that policymakers “need to always ask the question, ‘Why not cash?’ ”[xii]

U.N. Secretary-General Ban Ki-moon has argued that “Where markets and operational contexts permit, cash-based programming should be the preferred and default method of support.”[xiii]

The current aid narrative of the global north-south divide is both damaging and counter-productive. It massively distorted the reality of the relation of Africa with the rest of the world – Africa loses $192 billion each year to the rest of the world (via lost tax revenues to tax havens, unfair trade deals and irresponsible loads; specifically, including $35 billion in tax dodging, $21 billion in debt payments, $17 billion in illegal logging and $46 billion in profits made by multinational companies) while receiving less than $30 billion each year from the rich countries in return.[xiv] It greatly damages people’s right to self-esteem and self-determination in the global south. The aid programmes have not been ineffective. After so many years of failed experiments, it is time to change course.

Many direct-cash-grant programs in the developing countries suggest that, as the Columbia economist Chris Blattman puts it, “the poor do not waste grants.” This is in stark contrast to the belief that handing people cash, instead of targeted aid (like food stamps), would be a waste of money, and that UBI will take away people’s incentive to work – make them lazy and hence reducing their country’s GDP. If anything, the universal basic income will deliver more progress – enabling women to be more independent, providing incentive for children to be educated and challenging people to think twice about taking unrewarding jobs (for the money)[xv]

Universal Basic Income isn’t really about welfare spending – It’s about tax policy. And it is affordable.

Universal Basic Income is an unconditional direct cash transfer from the government to individuals. The Government provides social security (eg. unemployment benefits, disability allowances), spending money on essential public services (eg. health care, education, national infrastructure) and gives conditional cash transfer (eg. tax credits, food stamps) to maintain a civilised society. UBI is therefore unique and it is a misunderstanding to think UBI is all about the welfare spending. UBI does not substitute the welfare state and does not necessarily mean the welfare spending have to increase.

The government spends a lot money each year on indirect cash transfers through tax exemptions (so-called ‘tax expenditures’) – money which the government does not collect because of exemptions, deductions and credits to select groups or specific activities. There is much evidence showing that many tax exemptions and deductions (for example, those aimed at incentivising behaviours such as, tax deductions for expenditure on energy saving and insulation) tend to benefit the rich much more than the poor.[xvi] By replacing them with UBI, we would create a more progressive tax system. This, not the elimination of welfare spending, should be the starting place for debates about UBI. The handout of UBI benefits lower income groups more than upper income groups. It may also necessarily require the rich to pay more tax than they do now and receive less money. But the lower and middle income groups would get more. This is a good thing. This is what a progressive tax system should be about.[xvii]

One major criticism of UBI is it will be very expensive. It will be if we are talking about £15000, or even just £8000, annual cash transfers to a large population. However, there is no reason why UBI has to start too ambitiously and beyond the means of a given individual country. As discussed in the preceding paragraph, a modest UBI programme in a developed country could readily be funded by reforming the tax system and getting rid of some of the redundant welfare programmes (if UBI is introduced) such as child benefits and job seeker’s allowances. Even if the UBI is just £4000 a year, since it is affordable and universal, it would have broad political support, just like personal tax allowances in the UK (personal exemptions in the USA). Nevertheless, personal tax allowances are regressive and benefit wealthy individuals disproportionately. In contrast, UBI would be progressive and popular.

There is no one-size-fits-all scheme for the universal basic income. BUT IF ONE CAN IMPLEMENT, ALL CAN. YOU JUST NEED TO FIND THE WAY THAT WORKS FOR YOU.

Gross-Rich-per-Capita-Rich Countries (eg. USA, UK, Japan and Australia)

USA (2016): GDP $19 trillion; GDP per capita $57000
UK (2015): GDP $3 trillion; GDP per capita $43000

Modest but sensible UBI schemes do not make the state any bigger than it already is in most rich countries.

UBI critics, especially those on the political right, worry that UBI would make the state too big – a bigger state as a share of national income. In fact, rich countries are not small states in essence, even those on a relentless programme of scaling down the state. It is because a lot of government ‘expenditures’ are off the balance sheet. As the Financial Times’ Martin Sandbu explains, “the share of the government’s tax take and redistributive spending in the economy does not include tax exemptions (eg. £50 billion a year pension tax relief in the UK[xviii]) and allowances (eg £100 billion income tax allowances in the UK), where the state selectively refrains from imposing normal taxes. If such ‘tax expenditures’ were included in tax revenue and spending, all rich countries would look like they had much bigger states already.”[xix] A UBI would remove the rationale for many of such plentiful hidden expenditures and simply replace them; see Alexander Holt for the US case[xx] and Martin Sandbu for the UK case. What we need to take from these discussions is as Sandbu summarises:

“The point is that a state paying UBI may look bigger than what we are used to, but it would not in fact be bigger. Conversely, a UBI can be designed (like tax expenditures) to make the state look smaller. Design UBI as a tax credit people get even if they pay zero taxes, then levy the net amount of tax — which means only the lowest earners get an actual payout from the public treasury. For the richer, the UBI is then accounted for as a tax expenditure.”

“In summary, modest but sensible UBI schemes do not make the state any bigger than it already is in most rich countries. They require marginal tax rates no higher — but more fairly and rationally apportioned — than already exist.”

The political left has often been, fairly or not, accused of idealism over pragmatism, introducing public spending programmes good in principle but unaffordable in the long term. However now even the mouthpiece of Anglo-Saxon capitalism, the Financial Times, is saying that UBI can be (is) affordable. It is inevitable that a rich country will need to introduce UBI. A report (2016) by the Joseph Rowntree Foundation found that poverty costs the UK taxpayer £78 billion a year in additional public services spending and lost taxes.[xxi] A UBI will not substitute the welfare state but

It will significant reduce poverty and hence reduce the associated burden on the public services. The additional spending to treat health problems associated with poverty alone costs £29 billion a year.

It will increase tax revenue. UBI is a cash transfer and the poor necessarily have to spend all their money just to meet their living expenses. Because of the multiplier effect in the economy, a pound given by the government to spend in the economy will create economic benefits multiple times its original value. The economy grows, the economic pool that the government can tax becomes bigger and so is the tax revenue.

Despite the British government spending £78 billion a year, poverty has been going up, inequality is getting wider and the living standard for most people has not improved, if not actually getting worse. This certainly calls for a rethink about our approach to poverty elimination.

A carefully designed UBI not only is affordable but gives the initiative back to the individual, making them more entrepreneurial and ‘more healthy’. It gives everyone an equal and fundamental stake to participate in our civilised society. Both economically and politically, it is imperative for a rich country to start thinking about UBI and to embark on a serious discussion about its form, when and how it will be introduced.

Gross-Rich-per-Capita-Poor Countries

China (2016): GDP $14 trillion; GDP per capita $10000
India (2016): GDP $2 triliion; GDP per capita $1800

These tend to be countries with very large populations and land masses, such as China and India; these countries despite being economic powerhouses, they remain (relatively) poor countries (measured by GDP per capita) with very high inequality. A universal basic income, carefully considered and effectively implemented, will be a powerful tool to eliminate poverty and bring down inequality.

(Matthew Hartell) [xxii]

China

Let’s consider China as an example. China is now either the largest or second largest economy in the world, depending on the measure used. The provinces along the coast are very rich and some megacities such as Shanghai and Shenzhen regularly ranked as two of the most expensive cities in the world. There is however a significant regional imbalance and inequality within China. The inland provinces are vastly poorer than coastal provinces. It is a direct consequence of Deng Xiaoping’s economic reforms: let the coastal areas become rich first, and the others will gradually follow. It made sense at the time – if the reform programmes were successful at the coastal regions, they would then be replicated in the rest of the country and the newfound wealth shared to achieve the goal of making everyone rich. The cheap labour – “world’s factory” – economic model kickstarted the Chinese economic miracle. At one time, there was genuine optimism that the inexhaustible supply of cheap labour would sustain this economic miracle almost indefinitely. The factories would simply be moved inland to counter the rising cost of labour at the coastal regions and bring economic development to the poor inland provinces. Then the global financial crisis happened.

The demand for goods has never really recovered from the economic shock, especially in the Europe. Meanwhile the Chinese have not stopped manufacturing for the world. With a stagnating global economy, there will clearly be massive over-manufacturing-capacity in China in the years to come. This is a big obstacle for the Chinese inland regions to overcome if they are to recreate the economic miracle of the coastal regions. Compounded with this is the advancement in automation technology, where computing and robotics replace human labour. Chinese manufacturers knew they had to scale down to meet the declining demand but they also realised they could remain profitable by aggressively cutting costs. Cheap labour, despite what the name suggests, is still much more expensive than robots/automation.

The biggest manufacturer in the world is Foxconn (the manufacturer of Apple or Samsung mobile phone). It has reportedly replaced 60000 factory workers with robots.[xxiii] Another iPhone manufacturer Pegatron has since follow in the footsteps of Foxconn and begun to automate its factories. It is inevitable that more and more factories will be automated and much fewer people employed. With this in mind, how is China going to make its inland regions rich? Clearly the manufacture-based economy with its massive scale of automation will no longer be able offer large number of employment opportunities to increase earnings or elevate people from poverty.

A region-based approach to UBI might be the way for China to reduce regional inequality and eliminate poverty in poor inland regions. UBI will be universal but there will be effectively two schemes; one for rich coastal regions, one for poor inland regions. More people live in inland regions than coastal regions but they are also significantly much poorer. The scheme for inland regions will offer less money than the scheme for coastal regions but because the living costs in the inland regions are much less, people would likely still perceive it as a fair amount. Rich coastal regions may be required to subsidise the poorer regions but following Deng’s mantra, they got rich first so it is only fair they contribute to the economic well-being of their fellow citizens in the poorer regions. Furthermore, the UBI in the inland regions will reduce people’s incentive to migrate, especially to the coastal megacities, and hence reduce burden on their public services and public spending.

Most importantly, the UBI will reduce the over reliance on the cheap-labour-manufacturing model for economic development. It offers an income cushion for people in the poorer regions to be entrepreneurial and more adventurous in other types of economic opportunities. China is undergoing a massive urbanisation, but what happens if there are no longer enough jobs offered by the automated factories? Widespread unemployment and loss of income will create unrest that might be just too much for a government that has put stability as the foundation of its governance. It might be time for the Chinese government to be brave and offer UBI to its citizens in the poorer regions an alternative for economic development.

Poor Countries, especially those with many people living in absolute poverty

896 million people live on less than $1.90 a day and over 2.1 billion people in the developing world lived on less than $3.10 a day in 2012.[xxiv]

$392 billion per annum is enough to give the 896 million people who live on less than $1.90 a day a boost of $1.20 a day to raise their income level to $3.10 a day. It is not much, especially compared with the middle income threshold of $10 a day commonly associated by economists with economic security and “insulating” people from falling back into poverty.[xxv] For most people in extreme poverty, that means doubling or more their income, it might just make their lives meaningfully better.

The time has come to do it

A universal basic income would not be cheap, but as we have discussed, there is no one-size-fits-all solution and a modest UBI scheme would be affordable. Radical social and welfare reforms all seemed utopian at first, universal suffrage, universal health care and social security, to name just a few. They are now not just popular, but natural, or should we say self-evident, in a civilised society.

If some kind of universal basic income is implemented, even if modest, the political implications would be huge. Finally, we are on the road to being free from the tyranny of the market on our means to subsistence. There is an ‘exit’ from the job market for everyone. Our (working) lives are no longer completely dictated by capital and the dogma of failed neoliberal policies. Supplemented by other welfare programmes (for example for people with additional needs such as the disabled and the children), (absolute) poverty could be eliminated. People will be free to pursue their interests (of which commercial values are not obvious but potential, say cultural or scientific, value could be immense), and more people would be able to provide public services without worrying about subsistence living – public services such as open-source software programming, creative commons projects, research and creative work for the public domain, or even just taking good care of children outside schools, activities that have no monetary rewards but inherently beneficial to the wider society.

With our broken neoliberal economic system, unequal society and the unprecedented challenge of the climate change, we need more than ever as many people as possible to work on solutions to fix the system. It is time to wake up. We can no longer let the majority of the humanity spending all their time and energy simply trying to survive while the system we created is literally boiling humanity in the pot. These times demand radical solutions. The universal basic income is one of them. When it happens, which is inevitable, it will go overnight from absolutely improbable to totally necessary.

But we need to make this paradigm shift happen and this window of opportunity to change the fate of humanity is closing.

08/2016