We have often dealt with universal basic income. It is a theme on which some of the most brilliant minds of our time have intervened, dissatisfied with what they read and see in the cities where they live. There is a return of poverty, the middle classes are impoverished, the future of humanity is not bright, inequality is becoming increasingly unbearable even for those who benefit from the current state of affairs.
The drive to embrace a basic income is still largely utopian and idealistic. No one is yet able to even figure out which category of public policies to place it in: welfare?, labor policies?, tax policies?
However, universal basic income is not an idea born yesterday. It is an idea that has come a long way not only in theory, but also in practice.
A new generation of scholars
The following contribution was written by Stephen Mihm, a brilliant young historian at Georgetown University who now lives on a farm near Athens.
Mihm is part of the generation of cosmopolitan and global historians who interpret the discipline as a synthesis narrative of human development over the long term. The best known exponent of this multidisciplinary trend is undoubtedly the Israeli historian Noah Yuval Harari. But Mihm certainly shares something with maverick sociologists like Malcon Gladwell.
Like Harari and Gladwell, Mihm features heavily in the public conversation. You write for the "Boston Globe", the "New York Times" and other publications. A book by her from 2010, written together with Nouriel Roubini, The crisis is not over (ed. Ital. Di Feltrinelli) was for a long time on the bestseller list of the “New York Times”.
The eclecticism and versatility of Mihm's interests has materialized in works of a different nature such as Artificial Parts, Practical Lives: Modern Histories of Prosthetics (2002) and The Life of PT Barnum (2017) of which he is the curator. For Harvard he is working on a book on standards and standardization in the United States.
In this speech on basic income entitled “Why Legendary Economists Liked Universal Basic Income. The idea wasn't invented by today's big government left. It has intrigued thinkers from John Stuart Mill to Milton Friedman”, Mihm retraces the stages of the debate among economists on basic income. He discusses the different approaches and the possible errors that these approaches contain and that should not be replicated. The first mistake is to understand the basic income as a measure that helps labor policies, the second is to let the State manage the service.
Happy reading.
The renaissance of basic income
Is socialism really taking over the Democratic Party and the United States, as President Donald Trump asserts on every useful occasion? This is a highly improbable and highly exaggerated prospect. However, there is a big "but".
Indeed, the axis of the Democratic Party is shifting to the left and a part of its electorate seems to filter with the idea of socialism. Naturally a socialism in the Stars and Stripes version closer to that of the Nordic European democracies than to Syriza. It is also true that the idea of a cash payment disbursed by the State to all citizens is gaining more and more popularity even among more moderate and even conservative MPs.
The first impression, given the state of public finances around the world, is that the idea of a universal basic income, or UBI, has the anesthetic flavor of utopia. However, it is gaining traction among American progressives. Indeed, it is no longer just the cornerstone of the program of the most traction current in the Democratic Party, the Green New Deal.
Also, it is entering the conversation in several countries including India. You have already passed a trial period in Finland, a country well known for its widespread social safety net.
The project of distributing an equal lump sum of money to everyone with no particular constraints, other than that of existing, is not just a project of the left. Since the late 18th century, basic income has not been thought of so much as a form of welfare as a measure to get rid of welfare altogether. This possible purpose may explain why basic income has received the endorsement of such an eclectic group of economists and politicians over the centuries. And it may also explain its renaissance today.
Subsistence, period
UBI is based on the idea that every member of society is entitled to a contribution that enables him to survive. The key to everything is subsistence: most of the proposals postulate that the payment is of pure subsistence. That is, so basic that it has to be transformed into an incentive for recipients to seek supplementary work.
Thomas Paine, one of the founding fathers of American democracy and an 18th century revolutionary, was among the first to define the contours of an idea that he defined as “Citizen's dividend”. The value of the subsidy should have been sufficient for a young couple to "buy a cow, and the tools to cultivate a piece of land".
Writing a few decades after Paine, the Belgian radical thinker Joseph Charlier outlined an indigenous version of the UBI. He assured his critics that the size of the payment should have been quite modest. “The State will guarantee bread to everyone but truffles to no one - split - . Sorry for the lazy; they will have to get by on the minimum allowance. The duty of society does not go beyond this”.
Charlier's idea failed to gain much support. But the London thinker John Stuart Mill had better luck finding a follow-up to this proposition. In Mill's time, poverty was managed in two ways: with private charity or with compulsory work in the so-called workhouses, a typical institution of the Victorian era. Both methods left too much room for discretion - often arbitrary - in assessing a person's state of poverty and its possible remedy
Mill aimed to get rid of both approaches. “Dispensators of public assistance have no competence as investigators“, He ruled. Mill thus promoted the project of guaranteeing everyone a subsistence income, but nothing more than a subsistence one. He wanted to secure "all people against absolute necessity", but this minimum subsistence income was to be made "less desirable than the condition of those who find support on their own".
The Austrian School
Although proponents of the idea in the 20th century, including members of the British Labor Party, were staunch statists, the same could not have been said of another convert to the UBI idea: the libertarian economist Friedrich Hayek.
Like his predecessors, the Nobel laureate believed that UBI should be a bare minimum; anything more would have meant “the control or abolition of the market”.
Hayek thought that "the guarantee of a certain minimum income for all, or the identification of a condition under which one is unable to provide for oneself" was "entirely legitimate" and a "necessity" of modern society. But Hayek, however, did not translate his conviction into an institutional project.
This was done by the University of Chicago economist, and Nobel laureate in turn, Milton Friedman. Like Hayek, he abhorred government welfare programs, which combated poverty through an elaborate web of provisions such as food stamps, housing subsidies and other needs-based measures. Friedman wanted to sweep that all away, replacing it with something he called a "negative tax." That is, an instrument of fiscal policy on individual incomes
The functioning of the negative tax is simple: for those taxpayers below a certain income threshold, defined as the taxable minimum, the tax is transformed into a subsidy. Friedman believed the threshold should have been "low enough to give people sufficient incentive to exit the program and look for a job." In return, any other type of public assistance should have been abolished.
The builders of the Great society
Other proponents of a universal basic income in the 60s and 70s held different political philosophies from Friedman. Like Friedman, however, they believed that the existing welfare system was outdated.
One of these was historian and economist John Kenneth Galbraith. In 1966 he intervened on the idea of minimum income as a negative tax. He wrote about it:
This welfare system couldn't be better designed to destroy any kind of desired incentive. First we give money to the needy and then we take it away from them if the recipient gets even the lowest paying job. This is not how it should work, the income from work must add up to that provided by the UBI.
Much better, according to Galbraith, was to provide a minimum contribution for everyone, leaving those with the will to work the possibility of supplementing this basic income with the income from their work. In 1968, a thousand economists petitioned Congress in favor of Galbraith's idea. The Commission "Income Maintenance Programs", established by President Lyndon Johnson in 1969, provided further support to the proposal
The Commission proposed eliminating the current social security system, replacing it with a "Basic Income Support Program" based on Friedman's negative income tax concept. The proposal was not a welfare measure, but neither was it a workfare measure.
We do not consider it desirable, the report concluded, to place in the hands of a government agency the decision whether an individual should work when this decision can be left to the individual and to market incentives.
It was a radical idea, which severely curtailed the power of the state to dictate terms of service.
Nixon and McGovern
That same year, Richard Nixon assumed the presidency, and the new administration confirmed the minimum income bill, but added a job requirement to it. The new proposal, known as the Family Assistance Plan, eventually died in Congress because it included the worst of both philosophies: lavish money lavishness on the undeserving and government meddling.
Democratic candidate George McGovern revived the idea in the 1972 presidential campaign, proposing a universal basic income plan dubbed the "demogrant." The demogrant set out to give $1000 a year to every American man, woman and child.
In reality, the concept behind the demogrant was similar to the negative tax of Milton Friedman and the Nixon administration in the aforementioned Family Assistance Plan, which provided for a minimum family benefit of $1.600 per year, later increased to $2.400.
McGovern had previously backed a bill, introduced by the National Welfare Rights Organization, for a guaranteed $6.500 annual minimum income for families. But the demogrant differed from all of these programs in that it went to everyone and was not needs-based. Nixon successfully accused the demogrant of being a concession to the undeserving, and McGovern dropped the project.
Progressives and billionaires together
Today, the idea of a universal basic income has once again given rise to the push of an unlikely coalition of subjects: progressives eager to revive the "war on poverty" and Silicon Valley libertarian billionaires.
Enthusiasm seems to have spread all over the world, especially India and, more obviously, Finland where there is already a dense network of welfare services. In this country, a two-year experiment ended in December 2018 and yielded mixed results.
Perhaps there is room for a grand compromise of the kind envisioned by Mill, Friedman, Galbraith and others: a universal basic income that ends traditional welfare programs. But if UBI becomes yet another hybrid of welfare and workfare, history suggests it is doomed to fail.
