Nine arguments against basic income debunked
1. Such a system removes the incentive to work
One of the most popular arguments against basic income is that providing everyone with enough money to live off could reduce the incentive to work, leading to a drop in productivity, higher unemployment and a subsequent slowdown in growth. Current benefit systems often fail to ‘make work pay’, with sharp cut-offs leading to additional earnings being cancelled out by the withdrawal of benefit payments. If a system like the NIT was carried out correctly, there would be no such disincentives - the more income earned, the more income kept. We see in the US pilots of basic income in the 1970s that overall hours worked fell slightly, with the most significant reduction in work coming from single mothers. Most often the drop in hours worked was due to people allowing themselves more time to find new, more suitable jobs, rather than them simply working less.
Despite the ability to get by on no work at all, the individuals who would be most likely to ‘slack off’ are those whose productivity is low in the first place, perhaps due to lack of motivation or aptness to the role they are in. The absence of these workers from the labour market could actually boost productivity as they could be replaced by new capital - their roles could be automated. These individuals could then have the opportunity to learn new skills and become productive in other industries where they are better suited (see point 2). More people could find a role that motivates them, and as the US pilots suggest, few appear to drop out of the labour force solely due to the UBI received. Additionally, many of those who could benefit the most from basic income would be those who often face difficulties in full-time work (i.e people involved in childcare, domestic duties, those who are disabled). In this case it makes it easier for these people to manage as they are now receiving their own income and aren’t reliant on another’s, assuming that the basic income is paid out on an individual rather than household level.
2. People are more likely to find work meaningless when it is no longer their main source of income
Won’t those who choose to stay in employment find little value in their work if they don’t need the money they earn? This argument holds little reason itself; many people relish work itself and hold a sense of pride and identity in what they do. With the current welfare system millions are stuck in ‘unfulfilling’ jobs, often because they cannot afford to take time off and obtain the skills needed to switch industries. Basic income could allow those who feel this way to be free to pursue the positions they are really interested in, rather than having to take anything to keep afloat. People could have the liberty to learn skills that would allow for an expansion into more creative, or simply more enjoyable and fulfilling roles. Greater bargaining power for workers could mean businesses having to replace mundane, but essential, jobs requiring little skill with automated capital or AI – otherwise market distortion would occur due to labour being more expensive than capital.
3. Such a scheme would be too costly to be feasible
Perhaps the most popular criticism of basic income is its apparent cost. The money needed to give an entire population enough to live off of has to come from somewhere. What could make such a system affordable – potentially even revenue neutral – is a withdrawal rate in the case of Negative Income Tax (or clawing back money through taxation in the case of a UBI). As people earn more, the amount they receive through the NIT decreases on a tapered rate until they reach a certain income where they are no longer eligible for the NIT. It is entirely possible to set the withdrawal rate and the baseline at a level where sustenance is possible and the cost of introducing the scheme is not prohibitive to implement - a revenue neutral UBI could provide those over 25 with over £70 a week.
Additional savings from basic income could be made through the reduction in the number of DWP employees as much of the bureaucracy that is attached to the current welfare system might no longer be required.
4. Giving everyone money would lead to excessive inflation
A common misconception is that as an entire population now has enough money to live off, more money will be injected into the economy leading to higher levels of inflation. This is not the case. Firstly, the money supply isn’t changing due to the nature of the funding behind the NIT (see point 3). Demand-pull inflation would not occur because we’d have to be close to full capacity to experience high inflation in this scenario; more likely is that we’d experience a healthy level of inflation and growth. In fact AD itself might not shift out as you’d expect. And if inflation were to occur, we would expect to have seen it already with the current welfare system providing substantial payments through Universal Credit.
When the UK employed QE after the 2008 recession it didn’t cause excessive inflation, though we’d injected huge amounts of money into the economy. This is because the banks who received this extra cash didn’t actually push it straight into the economy - they held onto it. Similarly, those who receive extra income may choose to hold onto it rather than spend it immediately.
5. A basic income would worsen poverty and inequality
Some say, like Ian Goldin of the Financial Times, that by replacing specific benefits with a single grant, those who are dependent on multiple benefits won’t have enough income to cover basic needs, and those who don’t need the additional income will get it anyway. But those receiving the income would have the freedom to spend it on whatever they want, covering previous benefits they received and more. And basic income trials suggest that people tend to spend such money on necessities like food and shelter, rather using it to fuel addiction or ‘wasting’ it in some other manner. A GiveDirectly trial, in which entire villages in Kenya were sent direct cash transfers, resulted in individuals being able to literally build a roof over their heads, as well as start businesses and invest in livestock.
Though inequality is not something to be concerned about, the actual level of inequality might actually decrease with UBI as there would be a baseline standard of living, narrowing the gap between the rich and poor. Billionaires don’t ‘get a little more’ out of the system because with both a NIT and a UBI, and those with greater income pay it back via withdrawals or taxation. A basic income would be even better for many in poverty than the National Minimum Wage; those whose skills demand less in wages than the NMW may usually go unemployed, but with basic income in place these less-skilled workers could still receive a small wage (and supplemented by their basic income).
6. There are political implications - excessively high levels of UBI/NIT would be promised by politicians to garner support
There could be the issue of opposing political parties promising higher and higher levels of basic income in order to accumulate greater levels of political support. For basic income to work it should optimally be at a revenue neutral level – otherwise it could become unaffordable or force the government to borrow to fund it. A solution to this might be to have a third party administer the level of basic income (we see something like this in the Low Pay Commision advising the government on the National Minimum Wage). Removing politics from the payments means evidence based increases or decreases in the level, rather than rhetoric driving the debate.
7. Increased costs from higher levels of welfare tourism
There are concerns that countries providing a basic income for all open themselves to being ‘swamped’ by an inflow of immigrants into the country looking for a stable income. The argument goes that the country would then end up increasing the amount spent on such a programme, and so decreasing its affordability.
What this argument doesn’t take into account is the additional revenue provided by immigrants in terms of productivity and growth. Studies have shown that UK immigrants should not be generalised as sucking the cash out of the welfare system, and most immigrant groups are actually less likely to claim benefits than natives. Many forms of basic income such as CBI are only paid out to citizens of the country, so migrants would have to wait several years after moving before they could claim basic income, weakening any incentive to emigrate solely because of the programme.
8. Basic income makes people more reliant on the state
This argument suggests that by spending more on welfare, individuals become more reliant on said welfare and this dependency could be detrimental when trying to cut down on spending in this sector. However, by introducing a UBI scheme you are letting people spend money on what is their personal priority rather than tying them to a state-funded welfare programme or busybody groups that decides what people need for them.
By taking a less interventionist approach, governments are allowing individuals to become consumers: they are now contributing to market forces. With benefits and more specific programmes, the government could actually be creating surpluses and shortages in various industries by distorting demand and supply.
9. Introducing basic income could create a ‘slippery slope’
Some argue that the laissez-faire approach basic income provides to welfare could open the gate to more reforms of a similar nature, for example increases privatisation, or cuts to other schemes. programmes. While more free-market policies may not necessarily be a problem, worries about this are unfounded: basic income is an idea that has garnered support from the left, right and everywhere in between. As the Citizen’s Basic Income Trust puts it: ‘[CBI] is not the possession of any political ideology.’ The introduction of basic income would not make ‘right-wing’ policies more viable anymore than it would do for the left.
Emma Weber is a research intern at the Adam Smith Institute.
How can they charge these prices? Because people will pay them
Some questions in newspaper advice columns are easy enough to answer. "No, ee's not worf it" being a useful one that applies to many. This is equally simple:
How can Viagogo get away with charging such big fees?
Because they can - some people will pay them. Enough people will pay them to make the tactic viable that is.
At which point a slightly deeper dive into the explanation. People will charge absolutely as much as they can for anything. We can ascribe this to capitalism if we desire - that lust for profit - but it's more a feature of being human. We'd all like to get more coming to us for what we've got to send the other way. So, therefore, people do charge as much as they possibly can.
The solution to this is market competition. It is true that there's some limited number of anything. Most especially tickets to an event. Price is not the only but it's the most efficient manner of sorting through who really, really, wants a ticket and who would prefer to be doing something else given what they'll have to give up to gain one.
OK. But how is that margin, mark up, that the intermediary able to charge limited? By the fact that they don't have a monopoly. Sure, they've an effective monopoly over that specific pair of tickers but not over all those to that event. Thus the competition of others also willing to sell their tickets brings down the margin that can be charged for any specific pair.
Or as we've been known to put it, it's market competition that reduces the gouging that human nature makes us all prey to. Which is why we have market competition of course.
Voluntary exchange is the very definition of what it is to be human
Adam Smith was here a little earlier with his comments upon the innate tendency to truck and barter of course. But we seem to be gaining proof that it's more than just humans like or tend to do so, it's the very definition of what makes us human in the first place:
Researchers reviewed ancient fossils and landscapes and found that what separates us from other forms of early man was our ability to flourish in even the most extreme environments, from searingly hot deserts and tropical jungles, to icy mountains and wastelands.
Scientists at the Max Planck Institute in Germany, claim that ability was far more important than art, language or technology, at setting us apart from other hominids, such as Neanderthals or Homo erectus, who also had rich cultures, yet still died out.
Not only did Homo sapiens survive in harsh landscapes but they thrived there, learning to become ‘generalist specialists’ who could out-compete those around them no matter what the environment.
There must be something that led to that ability to outcompete of course. That being:
Dr Brian Stewart, study co-author said:"Non-kin food sharing, long-distance exchange, and ritual relationships would have allowed populations to 'reflexively' adapt to local climatic and environmental fluctuations, and outcompete and replace other hominin species.”
The first two of those both being trade, that propensity to truck and barter.
Observation of modern humans tells us that this is something that we do, the best we know of proto-humans tells us that those who succeeded did it too. Voluntary exchange seems to be at the heart of our very identity - a fact which makes it very odd that so many people wish to protect us from trade.
One of these numbers is entirely unlike the other
There might be some impersonation at British elections. This is, of course, just as much a matter of the security of our democracy as all that shouting about who shows what adverts on Facebook. And as that episode shows, the security of our democracy is something all agree must be not just preserved but enhanced.
Thus trying to find out how much impersonation there is seems sensible to us:
More than 20 charities and civil society groups have urged the government to halt plans to expand compulsory voter ID, arguing that a trial at local elections in May did nothing to dispel fears it would put off vulnerable and disadvantaged groups.
The organisations, including the Salvation Army, Age UK, Liberty and Centrepoint, have written a joint letter warning that the idea was an excessive response to an almost negligible problem of voter impersonation at polling booths.
Well, we don't know that it's negligible, that's what we're trying to find out. By, you know, running trials and tests?
The joint letter, sent to the Cabinet Office minister Chloe Smith, said that during the trial 350 people were turned away for not having the correct ID and did not return to vote – and there were just 28 allegations of voter impersonation throughout 2017.
The thing is, one of those numbers is entirely unlike the other. The lower one, 28, is the number which a system of no checks appears to think worth pursuing. The 350 is the number the new system of checks seems to think is worth pursuing.
Sure, we don't know why those 350 didn't return. They were legal but didn't have the docs, they weren't legal to vote, they couldn't be bothered to prove matters either way, who knows?
Note also that the 28 concerns the whole country, the 350 only five local authorities. Of which there are some 400. Meaning that if we scaled up our trial results we'd be talking about 28,000 people nationwide.
Well, yes, that does seem to be worth further investigation, doesn't it? Certainly, those sorts of results concerning Facebook would be bringing calls for regulation. Why not here?
A truly appalling demand from Damian Collins
The furore about Facebook and political campaigning has always struck us as being much more about the wrong people winning than anything else. When the Obama campaigns used this bright new world to connect with the young there was nothing but praise for the tactics. About the only accusation this time around that we think can actually be made to stick is that Leave were marginally better at using the new tools than Remain.
Yes, we know of the overspend claims and so on and regard them as marginal matters - for they are indeed matters at the margin - even if we're still awaiting more information about the other campaign.
However, that's not what actually worries us at all. Rather, what rules might be put in place as a result of all this? Which brings us to the truly appalling suggestion by Damian Collins:
Damian Collins, the Tory MP who chairs the DCMS committee, said that to breach an agreement to stop campaigning in Cox’s honour would be “totally unacceptable, and those responsible should explain why they did it”. Collins also called for a new “fit and proper” test to be introduced for those who run referendum campaigns in future.
“This happens with company directors and football clubs. There is a strong case for a similar rule for those running our elections,” he said.
The claim is that only the right sort of people should be allowed to run campaigns. It doesn't take long for the right sort definition to morph into "those who agree with me." We have actually seen this in history as well. John Wilkes had certain problems in being accepted as a duly elected member of Parliament for example. It's also not true that one had to be a communist to stand for election in the Soviet bloc. Several countries had multiple political parties - but candidates did all have to be the right sort, signing up to the basic primacy of communism and or socialism etc.
Rather the point of this democracy kick is that, if we feel like it, we get to throw the bastards out without the requirement of a bloody revolution. The limitation of entry into such bastardy to only the right sort militates against this essential function, no?
We're a great deal less worried about whatever use was made of Facebook et al than we are about the proposals that are slithering out of the woodwork to cure the claimed problem. It all smacks much to much of the wrong people won so let's make sure that can never happen again.
Venezuela Campaign: Corruption & Catastrophe
Running a country in crisis is challenging for even the most capable politicians. When thinking of those that have successfully led a country out of crisis, you might think of a leader with the vision of Roosevelt and the personality of Churchill. What then of a country where politicians are not only incompetent, but extraordinarily self-interested?
Venezuela is such a country.
Ranked 169th in the world by Transparency International in its Corruption Perceptions Index, with the seventh lowest score, Venezuela is one of the most corrupt places on the planet. Elections are widely regarded as shams, political accountability is non-existent, and former President Hugo Chavez’s daughter is worth billions.
Venezuela’s ongoing economic crisis may be a direct result of falling oil prices, but corruption and political cronyism have exacerbated the situation. After a failed strike in 2003, Chavez fired 18,000 employees of Venezuela’s state oil company, PDVSA. The skilled and experienced workers who left were replaced by Chavez’s political supporters, regardless of their qualifications. This started a catastrophic decline in oil production, as valuable technical knowledge was lost.
Faced with declining oil production and falling oil prices, Venezuela’s political elite were faced with a tough decision. One option was to remodel the economy, diversifying away from oil and encouraging foreign investment to help stave off future crises. The other was to print money to allay its short-term cash flow issues.
President Nicholas Maduro chose the latter. Ignoring the well-known fact that printing money is like playing economic Russian roulette with only one empty chamber, Maduro ploughed on ahead. Maduro believed that printing money and hoping the price of oil would recover and replenish his foreign currency reserves before hyperinflation began.
Fast forward several years and the economically illiterate Maduro has driven inflation rates up so far that the IMF predicts that inflation will reach 1,000,000% by the end of 2018. Farcically, Venezuela now owes money to the foreign firms that print its currency. Oil production may drop to 1 million barrels per day in 2018, down from almost 2.5 million as recently as 2016.
Catastrophe in Venezuela is political: it comes from the top, from the corrupt and incompetent politicians that are driving the country to ruin. Only when Venezuela’s leaders are held to account can the recovery efforts begin.
More information on the Venezuela Campaign can be found on their website.
Iresa going bust probably is evidence of a competitive market
We mentioned a couple of months back that in order to determine whether a market is competitive or not it's not really possible to look at pricing alone. For manipulated markets and free ones can look remarkably similar through that one lens. We can though look for other events which will guide as to whether we've that desired competitive market.
One of which is people attempting to be the low cost provider going bust:
We can though think about what should be true if it is a competitive market, look for that occurring and thus come to a determination. One of those things being, well, if the market is competitive on price then we'd expect to see those attempting to be the lowest cost provider experiencing significant difficulties in keeping going. For trying to be the lowest cost provider - without any particular low cost production method - is a precarious place to be in a competitive market.
Everyone is already charging just the minimum necessary to keep afloat and you're coming in lower? You're going to have a little problem there or two, aren't you?
Our example of someone apparently suffering such competitive problems was Iresa. And Lo!
Almost 100,000 energy customers have been left in limbo after Britain’s cheapest energy supplier went under after months of poor service and more than 2,000 complaints to the Ombudsman this year alone.
Iresa Energy, which is also the country’s most complained about energy supplier, collapsed on Friday after a lengthy, public battle with the regulator over its poor customer service and billing.
The company is the latest casualty of fast-rising energy costs that have forced standard energy tariffs across the market higher in the last few months.
A competitive market should see some people going bust as a result of that price competition. We are seeing people going bust because of that price competition. A useful conclusion would thus be that we've a competitive market here.
It's the same old Grand Delusion all over again
Should we replace some part of doctoring and nursing with artificial intelligence and robots? At one level this is the same question as should we replace markets with government planning? The thing we desire to know is not are there, or even what are they, problems with AI, robots or markets. We want to know what is the balance of problems between those and doctors, nurses and government planning. It's the net position that matters, not the identification of a problem or two either side.
As we might put it, there's no value in shrieking market failure without also pointing out planning and government fail at times too.
As we start to see these possibilities as fantastic rather than fantastical, we must also be aware of unintended consequences. What impact would doctors increasingly coming to rely on algorithms have on the body of medical knowledge? And how do we mitigate the risk that algorithms may not be sufficiently sensitive to everything going on in a patient’s life? For example, a patient with a high level of anxiety and stress may suffer an impact that no machine is able to capture. Algorithms will also have to be assessed to ensure they are not biased against certain groups, especially as they make decisions which may have very long-lasting consequences on individuals.
In detail that's to fail to ask whether humans might be biased against certain groups - not our historical experience really, is it? - or that all NHS employees are exquisitely sensitive, even that each doctor is aware of all of medical knowledge.
This is the same grand delusion as insisting that because markets aren't perfect therefore government must be. To insist upon the existence of market failure but refuse to note government failure..
Ivana Bartoletti is a privacy and data protection professional, and chairs the Fabian Women’s Network
Ah, yes, that explains the belief in that delusion, doesn't it?
Book Review: Give People Money by Annie Lowrey
Universal Basic Income (UBI), is a programme that has raised questions across the political spectrum: who will fund it? Won’t it create even greater declines in productivity and cause mass unemployment?
In her new book Give People Money, The Atlantic’s Annie Lowrey tackles these queries by taking us through a number of case studies - from Kenya to Alaska - to explain how our current welfare systems aren’t working.
With the automation of vehicles and the rise of artificial intelligence both looking to be game-changers, Lowrey kicks off by cheerfully forecasting mass structural unemployment. She believes that self-driving vehicles alone could wipe out between 2.2 to 3.1 million jobs in the US. She argues that current redistribution policies employed by the state would not be able to stand up against the longer spells of technological unemployment many look set to face as their jobs become obsolete. UBI would give them cushion needed to obtain new skills and enter new industries.
Predictions about the state of the future labour market aside, a UBI would remedy current inequalities between different races, classes and genders. And Lowrey contends it would also create a sense of inclusion: a chance for each and every poor, disabled and marginalised individual to play an active role in the economy. Caregivers usually receive little to no pay, and on the flip side, many find it impossible to afford childcare - both issues that a UBI would address. Lowrey mentions Sandy J. Bishop, a disabled woman in Maine who reported that she often lost food stamps because of the cloud of paperwork required, to emphasise how the level of bureaucracy in the current system makes it hard for most in need of help to reach it, even when it is available.
Lowrey also highlights the increased bargaining power for workers that a basic income would create. She uses the example of the Ortizes, a family dealing with poverty in downtown Houston by juggling as many as eight jobs at once - even the children are forced to forgo school over low-paying fast food jobs. For families like these, UBI would not only give them something to fall back on, but also allow them to demand better working conditions and wages.
Lowrey assuages worries over a UBI in developing countries while exposing the pitfalls of current aid programmes. In the Kenyan village she visits, there is a massive surplus of Toms slippers from their ‘One for One’ campaign. Rather than wasting money on the transportation of unneeded supplies like slippers and water jugs, we should draw back such a paternalistic approach and instead give those in extreme poverty the funds they need to survive. That’s not to say there aren’t issues with direct cash transfers too: in India where they have replaced old welfare programmes citizens have been plagued with technical issues and there’s been general confusion over the new system. For UBI to work effectively the public must be well educated on the policy and the payments must be easily accessible for all.
A solid case is made for the reasoning behind the UBI, but the book only gets into the nitty-gritty of funding such a scheme (in the USA) in its final chapter. It suggests several tax hikes, including a potential robot tax, as well as the scrapping of all other welfare as it takes its place. The most sustainable route to basic income for the masses would be a Negative Income Tax (NIT), which Lowrey does touch upon, though only briefly.
Lowrey suggests that the NIT would drive people to hide their earnings in order to get more from the tax. She is right in saying that this wouldn’t be an issue with UBI, but with many current welfare programmes and levies like the income tax there are sharp cut-offs, creating a very strong incentive to misreport income or simply work less.
Fraud in any policy is a possibility; what’s important is the level we’re willing to tolerate. The ease with which NIT is implemented makes it a strong candidate over the UBI and it wouldn’t make sense to dismiss it over minor concerns like fraud risk and allow inferior programmes to stand. The NIT reduces the amount of bureaucracy within welfare, providing security to those, who like Sandy J. Bishop, are currently falling through the existing safety net the US government has in place. The system may not sound as flashy as the UBI, where one can envision politicians throwing reams of $100 bills from a helicopter, but it is easier to navigate, and there may be less resentment over withdrawals taking place before the payment rather than after it.
From the mention of a basic income in More’s Utopia to Milton Friedman’s support of the NIT, the notion of providing a baseline for all has attracted the attention of luminaries across the political spectrum and through the centuries. Lowrey has presented a strong case for a basic income in Give People Money. The next step is advocating a feasible policy, like the NIT, that can be executed in the near future.
Emma Weber is a research intern at the Adam Smith Institute.
If only Owen Jones Actually understood his history
Owen Jones is attempting one of the standard tu quoques. Sure, communism was a rapacious and murderous ideology that exterminated tens of millions at least. But, look, capitalism! This is, obviously enough, rather to miss the difference between sins of omission and commission. That famines happened under early capitalism, just as they did before capitalism, is in a different moral class from shooting people in dank basements.
But it's not just - as the good little propagandist that Jones is - this false comparison, there's a significant lack of understanding of basic fact:
That is, of course, not to excuse the horrors of Stalinism: the totalitarian model pioneered and exported by Stalin’s regime deprived millions of their liberty and, in so many cases, their lives; similarly, the millions of lives lost to murder and famine in Maoist China can never be forgotten. Yet the charge sheet against communism does not aid the champions of capitalism quite as much as they would like. According to The Black Book of Communism, a disreputable key reference point for the right, almost a hundred million humans perished at the hands of self-described “communist” regimes, mostly victims of Mao Zedong’s regime in China. The Nobel prize-winning economist Amartya Sen notes that between 23 and 30 million people did indeed die as a consequence of Mao’s catastrophic Great Leap Forward policies in the late 1950s and early 1960s.
But he also noted in a 2006 paper that in the middle of the 20th century, China and India had the same life expectancy – around 40 years. After the Chinese revolution, a massive divergence took place. By 1979, Maoist China had a life expectancy of 68 years, more than 14 years longer than that of capitalist India.
The error there - and one that Sen would laugh at - is to think that post-independence India was in any manner a capitalist economy. Quite famously it wasn't, in fact it was the one place that the fantasies of Fabian Socialism were enacted for any substantial number of decades.
For yes, Nehru's India was planned socialism. Not, note, communism, but that intermediary stage oh so close to the sort of policies that Jones recommends we follow today.
Which really is something Jones should know about the history he points to, isn't it? That his preferred policies are even less successful at raising lifespans than full on communism?