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52,000 people will soon begin indefinitely receiving a basic income in a Brazilian city
Maricá, a suburb of Rio, has already enrolled thousands.
Dylan Matthews | Oct 31, 2019
Topic category: Pilots & Experiments
FROM:VOX
Basic Income Today
Yasuyoshi Chiba/AFP/Getty Images

A Mumbuca card, through which the basic income program will distribute its benefits.

About 52,000 people in the small Brazilian city of Maricá in the suburbs of Rio de Janeiro are set to receive a basic income set at roughly three-quarters of the national poverty line as part of a major new program to test basic income policies in the South American country.

The benefit, called the Renda Básica de Cidadania (Citizens’ Basic Income), is worth 130 reais per person per month; per recent OECD data, that’s around US$64 a month. For context, the Brazilian poverty line is set at 178 reais a month, and the minimum monthly wage for a full-time job is 998 reais; a family of four, each getting 130 reais each per month, would wind up getting over half a minimum salary from the program. Many families living just below the poverty line will be lifted above it. As of November, about half the eligible individuals will be enrolled, and enrollment is expected to be complete by early 2020.

Maricá, a city of about 157,000 located a little over an hour by car from Rio de Janeiro currently governed by a mayor from the left-leaning Workers’ Party, is hardly the first city to try something like this. In the last few years, there have been basic income initiatives everywhere from Stockton, California to Kenya to Finland to (abortively) Ontario. In the US, the idea of basic income has been popularized by presidential candidate Andrew Yang, who has made it his flagship proposal.

But the Maricá program stands out for a few reasons. It’s not a pilot program, as with other basic income forays, it’s a policy being adopted across the municipality. Everyone who has lived in Maricá for at least three years and with low-enough income to qualify (well above Brazil’s minimum wage) will get the benefit. As a consequence, the scale is considerably larger than those of pilot programs. Finland’s pilot involved about 2,000 people; about 26,000 people total got aid through the Kenya pilot; 52,000 people are getting aid through the Maricá program.

The team working on the Maricá program evaluation. Paul Katz/Jain Family Institute

More importantly, the Maricá program is indefinite and has a dedicated funding stream. Like a number of municipalities around Rio, Maricá gets a share of Brazil’s oil royalties; the country is the ninth-biggest oil producer in the world, just after Iran and the United Arab Emirates. The basic income program is funded out of the city budget, mostly from those royalties. That means it has a stable funding stream and is not reliant on taxes, much like the Alaska Permanent Fund dividend or the basic income program in Iran, which are both oil-funded and have proven pretty resilient.

Unlike those programs, though, the Maricá program is being set up from the beginning for evaluation. Researchers at the Jain Family Institute, a social and economic research organization based in New York, are working with Brazilian academics, primarily Fabio Waltenberg at the Federal Fluminense University, to evaluate the program, and have access to an unusual amount of data on what the benefit is spent on.

Because the Maricá program is a model of a basic income complete with a funding stream, it could prove to be one of the most interesting attempts at the policy so far. To know if basic income works as a policy, we need to know not just if benefits funded through philanthropy (as many pilots are) help; we need to know if benefits funded by the government, through taxes and royalties, see positive results. Maricá, unlike most trials to date, allows researchers to test that.

It also represents the beginning of the realization of a law passed in 2004, under left-wing president Luiz Inacio Lula da Silva, that established a basic cash transfer as a right of all Brazilians. That law did not actually implement such a benefit, however, and a full national basic income program was not budgeted in subsequent years, making the law an unfunded promise.

But Eduardo Suplicy, a longtime senator and municipal politician in Sao Paulo who was the driving force behind the 2004 law, sees Maricá as a step toward the law’s true implementation. “There are consequences for each man, each woman, each child, and in Maricá we will have a way to inform what are the main consequences of the experience of a basic income,” Suplicy told me.

How the Maricá program will work

An important aspect of the Maricá basic income is that it doesn’t distribute reais: it distributes mumbuca. That’s a local currency, issued by the Banco Mumbuca in Maricá, that can only be used locally. You can stash mumbucas in your account at the Banco Mumbuca, or spend them with a card, or use your cell phone to spend and receive them. The city has offered an extremely small basic payment — about 10 mumbucas, or 10 reais, per month per person — to its poorest residents for a few years now, as detailed in the above video; the new program is a dramatic expansion of that initiative.

The usage of a local currency is a crucial feature of the project, says Paul Katz, a historian and fellow in JFI’s guaranteed income project. “The fear is otherwise the money might leave the city,” Katz explains, noting that most Maricá residents who work in the formal economy do so in the city of Rio. “The idea is [the money] remains there and forms what the broader left movement calls a ‘solidarity economy.’”

Beyond the desire to concentrate spending from the program in Maricá, the usage of an alternative currency offers distinct advantages from a study design perspective. Because all mumbuca transactions go through it, Banco Mumbuca will have detailed data on what exactly the funds are spent on, and how spending by recipients changed after getting the payments. That’s much better than some of the self-reported data other basic income evaluations have had to rely upon.

The use of mumbucas also allows researchers to easily pinpoint effects on inflation. A constant worry with large-scale cash programs like Maricá’s is that flooding in more money and stimulating more consumer spending will cause prices to increase, but there are thousands of factors that affect the spending value of a national currency, making the effects of any one program difficult to determine.

What’s more, limited experiments with a few thousand participants make conclusions about the macro economy hard to draw. Even if a 2,000-person experiment in Finland didn’t spark inflation, that tells us nothing about what a 5.5 million-person all-of-Finland policy would do.

The Maricá experiment is different: Any price effect will be localized to the city, because it’s the only place where mumbucas are usable, and being able to compare mumbucas’ trajectory to that of local currencies (which are quite common in Brazil) in other neighboring cities gives the evaluation an uncommon ability to draw conclusions on macroeconomics.

Recently, some researchers, like UC Berkeley’s Hilary Hoynes and Jesse Rothstein, have argued that too many basic income pilot programs and evaluations focus on topics where we already have considerable evidence, like whether giving out cashes reduces work effort, and not enough on questions that are not yet answered, like macro effects and “the psychological and political effects of universality.”

The Maricá program is not truly universal — to receive the payment, people must be in an existing city database for which the maximum earnings is three times the Brazilian minimum wage — but it’s sufficiently different from existing evaluations that it should provide real additional knowledge once JFI’s evaluations begin next year (they hope to continue studying, both quantitatively and with qualitative interviews with recipients, then and in following years).

“Scaling up is extremely fascinating and a partial saturation site lends itself to so many research questions that haven’t been answered yet,” Sidhya Balakrishnan, JFI’s director of research and a principal researcher on the Maricá project, says. “They’re excited to see how this can be improved and scaled up to the entire population. We’re acknowledging Hilary and Jesse’s points and addressing some of the key issues with pilots.”

The Maricá program is also different from the existing Bolsa Família, a wildly successful and incredibly popular conditional cash program in Brazil that pays checks to families that meet certain criteria, like vaccinating kids and putting them in school. “This benefit is just much larger,” Katz says. “As of three years ago the average Bolsa Familia recipient households were getting 160 reais; that’s about four people, so about 40 reais each. You get three times that amount from this program — a much, much larger cash transfer than BF offers.”

This is what progress toward basic income looks like

In the US, support for basic income is often associated with entrepreneurs and tech enthusiasts like Andrew Yang, who warn of mass automation-caused unemployment and pitch basic income, financed by a broad-based revenue stream like a value-added tax, as the solution.

No country has adopted a basic income policy for that reason yet. But a bunch of countries and subnational governments, like Iran and Alaska and now Maricá, have adopted basic incomes meant to more fairly distribute oil revenues and other natural resources.

That’s a repeatable model throughout the developing and middle-income world, not to mention in other Brazilian cities. The biggest country outside Brazil where an oil-to-cash program could have a major impact is Nigeria, which has 182 million people and considerable oil wealth.

But smaller oil states like Angola and Equatorial Guinea are promising places too. In Angola, the poverty gap — the amount of money, perfectly targeted, that it would take to lift everyone up to the international poverty line — is only 6 percent of oil revenues. If, say, a quarter or a third of revenues were distributed as a basic income, you could probably wipe out extreme poverty altogether.

This approach is not without its risks; it could create a powerful political constituency for the continuation of the oil industry, a potential danger with climate change. But those oil revenues are going to go to someone, and it might as well be the poor of these nations.

SOURCE:
Dylan Matthews |Oct 30, 2019
FROM: VOX
Tags: Renda Básica de Cidadania, Citizens’ Basic Income, Maricá, Brazil, Andrew Yang, Alaska Permanent Fund Dividend, basic income program in Iran
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