I enjoy reading The Economist. The writing is superb, and the analysis usually solid and even-handed. However, I strongly disagree with The Economist’s latest piece on recent proposals about basic income policies.
A major ideological flaw is exemplified by the quote: “Work is one of society’s most important institutions. It is the main mechanism through which spending power is allocated. It provides people with meaning, structure and identity.”
This premise only has meaning for a specific set of ideals that are not universal. I prefer to side with Bertrand Russell, who wrote in 1932: “I think that there is far too much work done in the world, that immense harm is caused by the belief that work is virtuous, and that what needs to be preached in modern industrial countries is quite different from what always has been preached.”
I also side with John Maynard Keynes, who warned, in 1930, of the dangers of the ideology explicit in the Economist’s article: Keynes wrote that “we have been trained too long to strive and not to enjoy. It is a fearful problem for the ordinary person, with no special talents, to occupy himself, especially if he no longer has roots in the soil or in custom or in the beloved conventions of a traditional society.
Today, the idea that work provides meaning is largely irrelevant for the majority of the world’s population who work not to starve. The idea that work provides meaning applies to a precious few, including readers of The Economist, like myself. For most people, society-at-large defines them by their profession, but it is certainly not or should not be demand-driven.
Another of the article’s premises is disingenuous: “The basic income is an answer to a problem that has not yet materialised. Worries that technological advance would mean the end of employment have, thus far, always proved misguided; as jobs on the farm were destroyed, work in the factory was created.”
One does not need Maslow’s hierarchy of needs to know that basic income is an answer to income volatility, something that affects disproportionately poor people. There is a plethora of evidence of positive externalities in cash transfer programs, and it is even responsible for lowering crime and conflict-related incidents in a situation of civil conflict. Granted, nothing like universal basic income program has been attempted, but it is certainly not a response to technological changes. Universal basic income is simply an evolution from the positive evidence from unconditional and conditional cash transfer programs.
The logic is also wrong in your explanation of the U$10,000 scheme. You wrote: “An economy as rich as America’s could afford to pay citizens a basic income worth about $10,000 a year if it began collecting about as much tax as a share of GDP as Germany (35%, as opposed to the current 26%) and replaced all other welfare programmes (including Social Security, or pensions, but not including health care) with the basic-income payment. (…)Yet an income of $10,000 is still extremely low: it would leave many poorer people such as those who rely on the state pension, worse off than they are now—at the same time as billionaires started getting more money from the state”
There are two major mistakes here:
1 –The text implies that U$10,000 is too low an amount for a single individual, which is true. However, the hypothetical would give the average American family (3.14 members in 2015) U$31,400, which is 58% of the median household income. That would immediately increase the income of more than one third of all American families.
2 – Billionaires would not necessarily get richer. There were 536 American billionaires in 2015. It would cost U$5,36 million to pay every single billionaire a basic income of U$10,000 — or U$16,83 million if we consider that the average billionaire family also consists of 3,14 family members. This total is 0.0005% of all federal tax revenue in 2015, something that society could certainly afford. It is hard to imagine a situation in which billionaires would not have to pay more than U$16,8 million in taxes if tax revenue rose 9%.
Yes, some people, like pensioners, might be worse off from this highly unlikely hypothetical example. However, even in this scenario such a scheme would result in more income for most poor families.
“A universal basic income would also destroy the conditionality on which modern welfare states are built. During an experiment with a basic-income-like programme in Manitoba, Canada, most people continued to work. But over time, the stigma against leaving the workforce would surely erode: large segments of society could drift into an alienated idleness.”
There is absolutely no evidence that such an erosion would ever take place. It reeks of elitism, and the worst kind to boot.
Universal basic income is probably untenable right now. However, the article builds a straw man and tries to beat it to death. If anything, the straw man is actually appealing and there are certainly ways to design a universal basic income scheme to prevent some of the costs of running such a program. Basic income is worth a try. Maybe not a universal program in a large developed economy like the U.S., like the straw man created by the Economist. Nevertheless, why not a controlled experiment on a country like the Netherlands, which is trying something similar in small towns? Worst case, we can always return to the status quo. The possible reward is certainly worth the risk.
This is a sensible and well written essay.
But it still misses some valid points which I may add:
A basic income makes it cheaper to hire people and may increase job opportunities.
It does not need to replace pensions but state pensions may take it into account.
A basic income makes it easier for people to negotiate a decent wage.
People mostly want to work because it is something that raises their profile and their marketability as future and current parents.
Those who want to drop out can. That is a freedom of choice many of us dream of even if we do not drop out. The ability to do so is a huge comfort.
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I agree with all your points! Basic income is something that truly has the potential to be a game changer, and give people options. It is funny that, as a Finance professor, one of the most common sayings in the field is: Options are valuable, even though we don’t act on what we preach. A basic income would give millions (billions?) of people options that they currently do not have. Again, I agree wholeheartedly with your comments.
Thanks. You may also like to familiarise yourself with my work on Macro-economic Design.
See the reviews of it here:
Someone else there agrees with most if not all of what I am doing to reform economics taking it back to Adam Smith and skipping much of Keynes.
It is far cheaper to eliminate financial instabilities than to try to cope with them…
Professor Zeidan criticizes ideology sustaining the claim that “work is one of society’s most important institutions. It is the main mechanism through which spending power is allocated. It provides people with meaning, structure and identity.”
I criticize it on the facts. More spending power is allocated through financial dealings, corporate dealings, private investment and private fraud than by working and middle class wages and salaries.
Let me quote another of Russell’s remarks (albeit loosely from memory: “Work is of two kinds. Altering the position of matter at or near the surface of the Earth and telling others to do so. The first is unpleasant and ill-paid. The second is pleasant and well-paid.” I’ll just add that accumulating the benefits of both without doing anything is best of all.
I couldn’t agree more. My critique is far from exhaustive and I feel there are many aspects of this lazy piece from the Economist that can be criticized. You raise valid points and I welcome them,
Isn’t it rather that the Economist is stupid? Global basic income is an idea whose time has come, and the Economist is decidedly looking like there is a little too much ivy showing on the nose.
I find that they are right in many subjects regarding economics and finance. I just think they blew on this one.
The Basic Income movement is not going away. Hanna Arendt distinguishes Work which is creative and free from Labor which is physical and necessary. As machines take over Labor more people will be able to Work. The Predatory Capitalists want to replace Laborers with Machines to increase their profits If successful and it looks like they will be, the alternative to Basic Income will be a world of Super Rich and their impoverished Slaves or the liberation that comes with Basic Income for all. I don’t meant a poverty level basic Income but a Decent Living Basic Income. In such a worl Creative Work will Flourish.
I sense a strong almost religious overtone in your comment. I am far from convinced that Basic Income is such a panacea, but I would like to see experiments that go far beyond what we have today. I do think that by framing BI as a response to “predatory capitalists” defeats its purpose. There are no Illuminati secretly conspiring on how to replace L with K. I am a mainstream economist and want evidence-based science, not ideology.