New report suggests a Universal Basic Income (UBI) is the answer to large-scale change from globalisation and automation

• New trials in countries such as Canada, Finland, Uganda and Kenya highlight growing interest in Universal Basic Income across the world
• Automation, the gig economy and global trade could deliver massive improvements in standards of living but also risk populist backlash from those hit by creative destruction
• Luddite regulation and protectionist tariffs, backed by Trump and Corbyn, risk economic stagnation. Basic Income could deliver popular consent for globalisation and technological change
• Ahead of Davos, the ASI calls on the world's policy makers to back free trade and innovation, and urges more governments to conduct experiments on Basic Income

Current welfare systems are ill-suited to adapt to the challenges presented by automation and globalisation. That's the view of a new paper from the Adam Smith Institute ahead of the World Economic Forum meeting in Davos next week. Governments should look to Universal Basic Income experiments around the world as they seek to address the risks posed by large-scale changes to the labour market while retaining the benefits of trade and technological progress.

While politicians like Trump and Corbyn might suggest a move to more interventionist and protectionist policies, the paper argues that economic theory and empirical evidence show there are good reasons to believe that a “hands-off” approach would produce superior outcomes.

Fresh experiments are being carried out in several countries to test Basic Income feasibility and how it could be implemented successfully. In Ontario, Canada, the local government is trialling payments to 2,500 people that ensure a minimum income level of at least C$1,320 a month, regardless of employment status. In Finland, 2,000 unemployed people across the country are being trialled with an universal basic income of €560 a month for two years, with expansion to a further 1,000 for 2-3 years if initial results suggest success. In Silicon Valley, Y Combinator (early backers of AirBnb and Dropbox) are funding a long-term study of 2 to 3 years which will ultimately include up to 3,000 individuals. 

Yet UBIs are not just limited to rich western countries, small non-means tested payments systems have been trialled in the developing world. In Uganda, the Belgian charity Eight are funding a two-year project in Fort Portal with payments to 50 households of $18.25 per adult and $9.13 per child each month. While in Kenya, GiveDirectly (backed by Facebook co-founder Dustin Moskowitz) is aiming to pay 6,000 people the equivalent of £18 a month over a 12-year period; while at present the scheme reaches just under 100 people it promises to be the largest Basic Income experiment in history.

The paper says countries should see large scale automation not as a threat but as an opportunity, a chance that with Basic Income would ensure that ‘capitalism and efficient redistribution can be vindicated in equal measure’.

The idea of a Universal Basic Income is not a new one. First touted as far back as 1792 by Thomas Paine, the idea is that government provides a regular modest income without any means-testing. Support comes from across the political spectrum. Thinkers like Hayek and Friedman, Martin Luther King and tech superstars Elon Musk and Mark Zuckerberg have all advocated the policy, and even Labour's John McDonnell supports the principle.

Organisations in the UK such as the Buchanan Institute, the Citizen’s Income Trust and Royal Society for the Encouragement of Arts, have called for the idea to be put into practice.

Technological advances, such as driverless trucks, could disrupt the haulage industry but also reduce emissions, road accidents and prices for ordinary people. Basic Income is both politically feasible and financially sustainable, the report argues, smoothing the transition for workers displaced by automation. Short-termist regulations designed to protect jobs from competition risk economic stagnation and mass retraining schemes rarely live up to their lofty promises. 

Basic Income could help secure popular support for the changes that automation and globalisation will bring, while cash transfers allow the unemployed and retain the dignity of personal choice. More experiments in how to provide it could help secure the gains of growth for the decades to come.  

Sam Dumitriu, Head of Research at the Adam Smith Institute, said:

“New developments in machine learning, from driverless cars to AI medical diagnostics, will change the way we live, work, and play for the better. But they also risk disrupting traditional professions and career paths, from lorry drivers to lawyers. To avoid a populist backlash, we need to design policies for those left-behind by creative destruction. Attempts to protect jobs through luddite regulation will backfire and mass retraining schemes have a shaky track record. Cash transfers are our best bet at ensuring the benefits from coming technological change are felt by everyone.

“We now need to experiment with different ways of doing it – should we tweak the tax credits system, should we introduce a ‘Negative Income Tax’, or is a Universal Basic Income the best approach? And, if we’ve decided on the best way of doing things, what should things like the withdrawal rate be? This paper is a welcome contribution to the debate around welfare reform in the UK and puts evidence at the front and centre of improving policy, just as it should be.”

Otto Lehto, author of the paper, said:

"The theoretical case for unconditional cash transfers over command and control solutions has been strong ever since the birth of welfare economics. Now we have increasing empirical evidence from global field studies to corroborate the desirability of granting people a modest, universal income floor.

"A UBI streamlines the provision of welfare services and improves the autonomy and incentives of individuals. Allowing poor people to spend their money as they see fit stimulates bottom-up market solutions and cuts down on bureaucratic red tape. All this pulls resources away from wasteful rent-seeking into wealth creation."

Notes to editors:

For further comments or to arrange an interview, contact Matt Kilcoyne, Head of Communications, matt@adamsmith.org | 07584 778207.

The report "Basic Income Around the World’’ is available here.

The Adam Smith Institute is a free market, neoliberal think tank based in London. It advocates classically liberal public policies to create a richer, freer world.