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Universal Basic Income: Doomed to fail?

25 Apr , 2016  

By
Matthew is a Health & Education worker, Trade Unionist, Blogger & Poet, commentator on most things, and from the North West.

“A certain small income, sufficient for necessities, should be secured for all, whether they work or not.” – Bertrand Russell

“I am now convinced that the simplest solution to poverty is to abolish it directly by a new widely discussed measure: the guaranteed income.” – Martin Luther King

Up until a month ago I was not particularly familiar with the details of the concept of a “Universal Basic Income.” I have listened to the arguments for and against and initially I couldn’t disagree with much of what is put forward by its proponents; it all sounded perfectly reasonable and sensible.

However, several of the criticisms I have encountered (and some of my own) have now led me to believe that implementing the Universal Basic Income would be “square pegs in round holes” and fundamentally flawed.

For me, separating the idea of work being linked to living and survival can only be a positive thing. My thoughts on this are summed up perfectly by the American Polymath, Buckminster Fuller – We must do away with the absolutely specious notion that everybody has to earn a living. It is a fact today that one in ten thousand of us can make a technological breakthrough capable of supporting all the rest. The youth of today are absolutely right in recognizing this nonsense of earning a living. We keep inventing jobs because of this false idea that everybody has to be employed at some kind of drudgery because, according to Malthusian-Darwinian theory, he must justify his right to exist. So we have inspectors of inspectors and people making instruments for inspectors to inspect inspectors. The true business of people should be to go back to school and think about whatever it was they were thinking about before somebody came along and told them they had to earn a living.

The first concern that struck me was that; if you provide everyone (regardless of wages) with £400 a month Universal Basic Income, then what about the people whose benefit payments currently exceed £400 a month? What about relatively wealthy individuals who absolutely do not require a £400 a month Universal Basic Income?

The stock answer to this seems to be along the lines of  – “We will just adjust payments at both ends of the spectrum, to make it fair.” How then, is that going to be any different than the benefits system we currently have?

Secondly, while people with little or no income will (in theory) benefit from having an extra £400 a month to spend on essentials and provide for themselves something approaching a dignified existence; essentially, it would be replacing benefits with a Universal Basic Income that is a marginally larger sum than they would have received on the old benefits system.

While nobody would argue against this theoretical uplift in income (however minor), what about those who are paid a relatively comfortable wage? What benefit is the Universal Basic Income to them?

I include myself in this category so I can answer this question from my own perspective. There are two people in my household so a Universal Basic Income would mean an extra £800 a month. We do not require this money for the essentials of living or for the fripperies and extras that take up our disposable income. We do not require the money (as much as I would like it) so why give it to us?

I would spend the money on what for many people would be considered luxury items. Maybe an expensive holiday, a car, an ISA, a deposit for a house, or maybe become a “Buy to let Landlord” (I wouldn’t, but it would provide opportunity for many in my position to do so).

A Universal Basic Income would essentially provide my household with £9,000 a year that I would spend on things that many would find unnecessary or indulgent. It seems to me that a Universal Basic Income would actually increase the gap in standard of living between people on very low incomes and those considered to be middle income earners.

basic-income

This is illustrated by a quote from the, pretends not to be posh, Laurie Penny, in a New Statesman article calling for a Universal Basic Income, who asked the question: “What would you do if somebody gave you a few hundred pounds each month to spend on whatever you wanted? Would you quit your job? Retrain and look for a better one? Spend more time with your kids?

I have no idea of who Laurie is thinking of when writing this guff but someone without a job and (or) not much money, would not be able to undertake any of those things by having a £400 a month Universal Basic Income. Those folk who have had reasonably well paid jobs (or partners with the same) may be able to be part of Laurie Penny’s fantasy vision, but for most people, it will remain unattainable.

The reason why the idea of a Universal Basic Income is being floated is because of the inequality that exists under capitalism. While the basic income is designed to remedy some of those inequalities, it is exactly because it will be implemented within a capitalist system that should it ever be implemented it would be strangled at birth.

Firstly, society and work functions in a way as to ensure that the boss class has the whip hand. An in-built unemployment line is a central component of the capitalist system. This coupled with the divide and conquer tactics from the government of the day, pits worker against worker. In theory, a Universal Basic Income would go some way to reversing this. For that reason, we will never see a Universal Basic Income, and if we did, it would be very different from that which is being proposed. The ruling class cannot and will not tolerate a system that puts working people in the driving seat.

Secondly, as soon as every adult is guaranteed a Universal Basic Income; company bosses will be rubbing their hands with glee.

Pressure to increase wages annually or provide decent terms and conditions with go out of the window. Business exists to create and maximise profit, therefore, the state providing workers with £400 a month will undoubtedly lead to a severe driving down of wages in the medium to long term; rendering the Universal Basic Income, completely worthless.

The same idea applies to inflation. If you provide everyone with an extra £400 a month to spend, this will have a knock-on effect on the cost of things like rent, shopping, and energy prices. The more money you have in your pocket, the more that big business knows it can charge you. This really is elementary stuff.

Again, within no time at all your extra £400 becomes worthless.

Advocates of the Universal Basic Income would say that – “We could legislate to prevent bosses from cutting wages and against retailers increasing prices.” Oh really? That begs the question why we wouldn’t or can’t do that now. If it was so easy to reform the corrupt and rigged system we live in then we wouldn’t require a Universal Basic Income in the first place.

While the criticisms that my cursory thoughts have raised are all of a financial nature there is also the problem of attitudes and perception. Whilst the overwhelming majority of the population buys into the concept of hard working people & scroungers, a Universal Basic Income could lead to the creation of a new underclass to be sneered at as lazy and feckless.

You can’t create round pegs and expect them to fit in square holes. You have to change attitudes and fashion round holes first.

I have no problem with the underlying principle of a Universal Living Wage. I am just sceptical of the practicalities of implementing it within a system that is anathema to it.

The list of criticisms and queries that I have discussed is in no way exhaustive; and I am positive that others will have thought of numerous other potential problems and undesirable knock-on effects of implementing the Universal Basic Income.

If anyone has solutions to the pitfalls I have discussed or can tell me why I am wrong, then let me know as I would genuinely love to be convinced.


5 Responses

  1. charles says:

    “The same idea applies to inflation. If you provide everyone with an extra £400 a month to spend, this will have a knock-on effect on the cost of things like rent, shopping, and energy prices. The more money you have in your pocket, the more that big business knows it can charge you. This really is elementary stuff.

    Again, within no time at all your extra £400 becomes worthless.”

    You appear to be claiming that a landlord, grocery store, and/or local utility will say “You used to have no money so you had to be homeless, beg for food, and/or not pay your electric bill, but now you have £400 so instead of giving you nothing for free we’re going to conspire to give you nothing and also charge you £400. *SOUNDS OF EVIL LAUGHTER*”

    By the same reasoning, I could tell my landlord that previously he got no Basic Income but now he’s getting £400 per month so I demand a reduction in my rent since he doesn’t need as much money from me to meet his expenses.

    • Mssssss says:

      I agree with the former bit of thiw comment but the last paragrph does not work. Landlord has all the power. My current landlord is millionaire. I have negative pounds in the bank, an overdraft. I can’t get him to reduce my rent by £5 a month. A tennent can never demand a reduction in rent, ESPECIALLY if everyone else has the extra 400 you have too.

  2. John Doe says:

    You really need to read some more about the subject. All your questions\issues are answered.

    Start here: https://www.reddit.com/r/basicincome/wiki/index

  3. BJ Hanssen says:

    The author is right to quote Buckminster Fuller. The notion that a living must be earned is not just specious, it is actively harmful. It impedes our progress as a society, and restricts our individual ability to build our own lives. Note, of course, that the problem is not in the concept of earning a living, but in the *demand* of it. It would be equally absurd to keep one from earning a living as it currently is to demand that one does so.

    However, the rest of the article is largely drivel, filled to the brim of equally specious arguments and fundamental misconceptions of both basic economics and the mechanics of a universal basic income. It is easy for me to recognise these, because many of them are the same misconceptions I used to hold until I finally realised the inevitability, necessity, and moral duty of its introduction. I shall cover each error in turn.

    The first error is obvious; the assumption that the UBI will be set at £400. It’s an arbitrary decision, and only serves as a point of attack against a non-existent enemy. The author is essentially inventing his own points against which he can argue, here. That said, let’s assume the validity of his argument and counter it on that basis (which is giving him an advantage). What about the individuals whose current payments exceed that sum? Well, one would assume those individuals have needs that qualify them for those sums, and further that there would still exist programs to cover those needs.

    The introduction of a UBI neither signals nor necessitates the abolition of the welfare state. What it does is reorganise it. It changes it from a set of boxes in which you are always in danger of not fitting, into a system that lifts the economic floor for everyone to (at least) the basic subsistence level instead of where it is now (absolute zero). Those boxes could absolutely still exist, and many of them *should* still exist. The disabled, as an example, would usually have needs that go beyond those of the general population, and those needs must be met. In our current systems, those needs are met both by way of money transfers and by other resources, such as utility assistance (such as wheelchairs) and actual assistants (like home carers). There is no need for this to disappear, and there is no argument here against the UBI.

    Further, the point about ‘wealthy individuals who do not require a UBI’ is silly. The whole point of the UBI is to raise the economic floor. You shouldn’t think of it as a cash transfer to individuals, but as a universal decision that NO ONE should risk falling through the economic subsistence floor. No one. That includes the rich. Of course you could argue that they don’t stand that risk, but that’s beside the point; if you’re building a floor, you don’t put holes in it for the people who walk around on stilts.

    The ‘stock answer’ is not to adjust payments. The stock answer is to realise the silliness of the argument to begin with.

    Now, for the argument of “what about those who already make money”. Well, what about them? It’s not like they will be kept from continuing to do so, and just because you don’t “require” the UBI money, do you really think you wouldn’t benefit from it? That’s the whole point here; the UBI is a system EVERYONE benefits from. If you decide to spend that money on what you term luxury items, then that money pays for the production of that item, which in turn pays for the job of factory workers, and pays for the people who sold it to you, and the people who work in the warehouse that stocks it, and the people who distribute it, and so on. This isn’t the so-called ‘trickle-down economics’, by the way, this is a money multiplier. This is fundamental economics.

    The author’s idea that the UBI would increase the standards of living gap is preposterous and betrays a fundamental failing to understand basic mathematics. Specifically, ratios. The ratio of the UBI to your absolute income gets higher the less money you make, meaning that it gets higher the lower you are on the economic class scale (the lower your standard of living is). Which in turn means that it will have a progressively reduced impact the richer you are. This BY DEFINITION means that it will *reduce* the standard of living gap. Making an argument to any other effect means you are in fundamental misunderstanding of basic primary school mathematics.

    The author then continues to attack a specific rhetorical device used by a single UBI proponent, as if it is a general argument against the UBI. Specifically, this argument (and his counter) is that his arbitrarily low UBI wouldn’t provide someone who does not have a job with the ability to ‘quit your job, retrain and look for a better one, or spend more time with the kids’. Which is fair, I mean, with a UBI that low you probably wouldn’t be able to do those things. But that goes back to the arbitrarily low UBI he has for some reason decided to stick with, when in reality the UBI should definitionally be set to *allow just this*. The author himself argues in favour of that concept early on with his Buckminster Fuller quotation!

    He then goes on to generalise that ‘the reason’ UBI is being floated is because of the inequality that exists under capitalism. I’m not even sure where to start on this, but let’s give it a go. First, it is almost insulting to suggest that there is only one reason a UBI is being floated. Personally, as an example, I came to approve of the idea because of a different phenomenon entirely; technological unemployment. Inequality is certainly another valid argument, but it is NOT the only one. Further, placing the idea as a universally capitalist concept both in implementation and in political context is a dishonest move. The UBI has strong support among both capitalists and socialists. Further, that is a false dichotomy, and in your agreement with it you are supporting a neoliberal framing of politics that is not at all beneficial to your own political perspectives. I would suggest the author correct these notions.

    The author’s frankly conspiratorial idea that the UBI would never be implemented because The Employer – the ruling class – would stop it from ever happening, is both factually false (explain the popularity of the concept among the rich people of Silicon Valley, the primary employers of the modern economy?) and nihilistic. The author is supposed to be a trade unionist; why is he arguing against a system that *in his own words* would ‘put working people in the driving seat’, simply because he believes (wrongly) that it would be opposed by his own political opponents? A curious argument indeed.

    Further, the idea that the pressure to increase annual wages would disappear is false. What would actually happen is that the system providing those pressures would shift, and the power dynamics would shift with it. The source of pressure on employers would shift *in part* away from the individual labourers and the unions unto the State. Why? Because the UBI, and therefore its associated cost, would be dependent on not just the UBI money in circulation, but also (and primarily) the wages in the market. If wages are reduced, the UBI must increase to compensate. If wages stagnate, inflation still occurs, and the must UBI adjusts with it, increasing State costs. This potential for increased State cost will mean the State must keep the pressure on employers to at least the same extent that workers and unions do now. At WORST, the pressure on employers remains the same. At best, it may increase.

    Now, that is not to say that there won’t be some immediately (and arguably) negative effects. It’s possibly (maybe even probable) that many jobs will disappear, and more will become unemployed. However, the UBI is specifically designed to handle this. Those people now have the opportunity to do something about it. They could go back to school. They could find other work. They could become entrepreneurs. The UBI allows them the economic security to maneuver even without paid employment. That’s the whole point here.

    Now, the big one. Inflation. This keeps being brought up in anti-UBI arguments, and it’s frustrating because doing so betrays some fundamental misconceptions of economics.

    There is NO EVIDENCE that providing everyone with some extra money will have a knock-on effect on basic costs of living. This effect would only occur if you assume that all markets are monopolies, and that supply in most modern markets is finite and unadjustable, and isn’t set by demand (which is false). The more generalised inflationary effect theorised to come from the UBI – simply put that adding more money into the market will necessarily increase inflation – also betrays some fundamental economic misconceptions. For one, it appears to assume that there would actually be more money in the economy. In some conceptualisations of the UBI this is true, but in most it assuredly is not. The UBI is a redistribution of resources. It has no impact on inflation, because the ratio of available money to available product remains the same (this is a massive oversimplification, I am aware, but it doesn’t meaningfully change the argument).

    With the presentation of a false pro-UBI argument about anti-wage-cutting legislation he is digging himself a hole. Why would a UBI campaigner make such statements? It doesn’t make sense, because it wouldn’t be needed. The author has constructed a logically inconsistent narrative within which he is Above All Scrutiny, and all arguments must fail because they, too, were constructed within the same narrative. But that’s not true. Your fictitious pro-UBI arguments aren’t given. Your anti-UBI arguments fall flat. You have no case.

    The final point, really, is actually insulting. Why would a class of people be vilified for doing *exactly the same thing that everyone else is doing*? It doesn’t make any sense, particularly if the author is *actually* in agreement with the Buckminster Fuller quotation he gave in the beginning of the article.

    (This reply has also been posted to the Basic Income subreddit thread for this post, permalink in the Website field of this form.)

  4. Stephen says:

    The Achilles heel of BIG is it unknowingly removes the ‘price anchor’ in the economy – namely the pool of unemployed. Theres only one way out of that dead end…

    https://originofspecious.wordpress.com/2015/01/07/basic-income-thanks-youre-not-helping/

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