Universal basic income in a post-pandemic world

Resources for a reasonable guaranteed basic income may be within the realm of fiscal feasibility even for poor countries

In coping with the dire economic crisis in the wake of the pandemic, many developing countries have resorted to cash assistance to the poor for immediate relief. Beyond the relief aspect, many macro-economists have also pointed to the need for such programmes to boost mass consumer demand in a period of one of the deepest slumps of general economic activity in decades. As I have been an advocate for universal basic income (UBI) in poor countries for more than a decade now — my first published paper on the subject came out in India in March 2011 in the Economic and Political Weekly— I have often been asked if the widespread adoption of such cash assistance programmes indicates that it is now a propitious time for UBI. 

While I have supported the cash relief programmes in the context of the crisis (most of these programmes have not been universal, mainly targeted to the poor) and consider the experience gained in this as generally useful, I think those who like me have supported UBI have usually thought about it in a longer-time framework and in the context of a more “normal” state of the economy with appropriate institutions, political support base, and administrative structures in place. Of course, I’ll not object if in a post-pandemic world attempts are made to help the temporary crisis programmes ultimately extend or evolve into a more general UBI programme in poor countries.

A bit of history

By now it is well-known that the idea of UBI or that of a guaranteed minimum income enabled by a public assistance programme has a long history in Western thought, going back about 500 years to Thomas More and his friend, Johannes Vives, or that over the years the idea has been supported (and also attacked) by people in the whole range of the political spectrum, by libertarians and socialists alike. On a practical level, it has been tried on a large enough scale briefly in the beginning of the last decade in two countries, Iran and Mongolia, and for the last four decades in one US state, Alaska. 

In all these three cases the funding source has been the bounty from some natural resource (oil for Iran and Alaska, copper for Mongolia). For rich countries in general, many economists, even in cases when they are otherwise supportive, think that it is much too expensive for the government to fund a UBI at a decent level. In recent years, however, additional support has come from people (including some from the techno-utopian entrepreneurs of Silicon Valley) who are worried about the work-displacement effects of automation and artificial intelligence in the near future. Inducements for automation may be reinforced if we have to live with the virus for quite some time, as there will then be attempts to avoid production conditions where lots of workers have to congregate.

In this essay I shall primarily talk about developing countries, where more than looming automation there may be some other special factors why UBI may be imperative, and also show that finding resources for a reasonable UBI supplement may be within the realm of fiscal feasibility.

My friend, Philippe van Parijs, a political philosopher, who has been one of the leading intellectual proponents of UBI over many decades, and who has been a source of inspiration for me to think on these lines, once told me that just as Marx had originally thought the communist revolution would first come to an industrially developed country, while it actually came to relatively poor countries, maybe UBI, even though originally thought up for rich countries, may end up coming first in a poor country.

Illustration: Ajay Mohanty

 

Not an anti-poverty programme

Let me start by pointing out that I have noticed an important difference in emphasis between my position on UBI and that of many of my fellow development economists. The latter look upon a UBI or UBI supplement as part of an anti-poverty programme — some think of it as an administratively simpler substitute for other anti-poverty programmes, while others think of it as supplementary to those programmes. Then they have to contend with other development economists who try to show that UBI is less cost-effective in reaching the poor than a more targeted anti-poverty programme. In the implementation of anti-poverty programmes there are usually exclusion errors (that of excluding some of the poor people) and inclusion errors (that of including some not-so-poor people). These errors in implementation of anti-poverty programmes can be quite large, particularly when means-testing is difficult to implement. For example, in India (where targeted programmes use a BPL or below the poverty line card to mark the eligibility of the poor) some survey data have shown that, through administrative lapses and malfeasance, about half the poor people do not have the BPL card, while about one-third of the non-poor have the card.

By design, UBI includes all people and excludes none. To those who look to UBI as mainly an anti-poverty device, minimising the exclusion error so that hardly any of the poor people are left out is worth the cost of the inclusion error of paying the rich as well. (They sometimes suggest some easily enforceable ways of reducing that inclusion error, say, by denying the UBI to the small fraction of people in a poor country who own a car or pay income tax. In any case, it is easier to weed out the few rich than to search for the really poor among the vast numbers who are almost-poor). To the targeted policy supporters, however, the inclusion error is too large and it tends to make UBI too costly in trying to reach the poor. Of course, the magnitude of these errors will vary from context to context, and so it may be difficult to generalise for or against these two different positions among the poverty-fighters. It has, however, been pointed out in favour of anti-poverty UBI that the latter by enlisting the political support of the influential middle classes may sustain anti-poverty programmes in a way not attainable for purely targeted programmes that leave out the middle classes. Also, poverty is not a static demographic category. People, sometimes the same people, transit in and out of poverty all the time, which is difficult to track for official targeted programmes that usually work with pre-fixed poverty lines and BPL cards, a problem avoided by UBI. In any case, many people who are just above the poverty line also require a great deal of economic support.

In my own approach to UBI I look upon it as part of a basic human right of every citizen to minimum economic security. One should remember that Right to Social Security was part of the Universal Declaration of Human Rights of 1948. In recent years, even in rich countries, globalisation, automation, decline in labour institutions, and cuts in public services under macro-economic austerity policies have made the life of ordinary workers more precarious. Now, the pandemic has heightened the sense of social insecurity, particularly in countries (like the US or India) without a robust public health infrastructure. 

(This is the first of a three-part series)

The writer is professor of Graduate School at University of California