In the past few weeks, calls for a universal basic income have been louder than ever. Even the US is sending cheques to most citizens. And rightly so – the coronavirus pandemic requires radical action. Seven years ago, I wrote for the first time about a forgotten idea whose time has come—
In times of crisis, radical ideas are suddenly pulled out of the hat. The same is true ofWhen I wrote one of my first articles on the idea seven years ago, it was almost completely forgotten. But economists and sociologists had already shown heaps of evidence that “free money” could be more effective than traditional forms of social security and development aid.
In recent weeks, calls for a basic income have been louder than ever. In the US,US presidential candidate Andrew Yang ran on a platform of universal basic income and qualified for the first six Democratic debates. The idea of guaranteeing all US Americans $1,000 a month
There’s no other choice. In normal times, politicians and policymakers like to put conditions on social security benefits – a move that usually comes from mistrust. Because don’t people get lazy from free money? And won’t they just waste their allowance on alcohol and drugs, computer games and Netflix?
But whatever you think of this discussion, the reality is that there is now no time for mistrust. Because mistrust is expensive. And bureaucratic. If the government wants to keep tabs on self-employed workers to check if they really need the assistance, the scheme will go awry.
Fortunately, there are good reasons to rely on trust.
Keeping all that in mind, here’s the chapter on universal basic income from my book Utopia for Realists. The arguments for a universal basic income may be stronger than ever.
Has the time finally come for universal basic income?
London, May 2009. An experiment is underway. Its subjects: 13 homeless men. They are veterans of the street. Some have been sleeping on the cold pavement of the Square Mile, Europe’s financial centre, for going on 40 years. Between the police expenses, court costs, and social services, these 13 people have racked up a bill estimated atPer year.
The strain on city services and local charities is too great for things to go on this way. So Broadway, a London-based aid organisation, makes a radical decision: from now on, the city’s 13 consummate drifters will be getting VIP treatment. It’s adiós to the daily helpings of food stamps, soup kitchens, and shelters. They’re getting a drastic and instantaneous bailout.
From now on, these rough sleepers will receive free money.
To be exact, they’re getting £3,000 in spending money, andHow they spend it is up to them. They can opt to make use of an advisor if they’d like – or not. There are no strings attached,
The only thing they’ve asked is: what do you think you need?
“I didn’t have enormous expectations,” one social worker laterBut the drifters’ desires proved eminently modest. A telephone, a dictionary, a hearing aid – each had his own ideas about what he needed. In fact, most were down right thrifty. After one year, they had spent an average of just £800.
Take Simon, who had been addicted to heroin for twenty years. The money turned his life around. Simon got clean and started taking gardening classes. “For some reason, for the first time in my life, everything just clicked,” he said later. “I’m starting to look after myself, wash and shave. Now I’m thinking of going back home. I’ve got two kids.”
A year and a half after the experiment began, seven of the 13 rough sleepers had a roof over their heads. Two more were about to move into their own apartments. All 13 had taken critical steps toward solvency and personal growth. They were enrolled in classes, learning to cook, going through rehab, visiting their families, and making plans for the future.
“It empowers people,” one of the social workers said about the personalised budget. “It gives choices. I think it can make a difference.” After decades of fruitless pushing, pulling, pampering, penalising, prosecuting, and protecting, nine notorious “vagrants” had finally been brought in from the streets. The cost? Some £50,000 a year, including the social workers’ wages. In other words, not only did the project help 13 people,Even the Economist had to conclude that the
People living in poverty can’t handle money. This seems to be the prevailing sentiment, almost a truism. After all, if they knew how to manage money, how could they be poor in the first place? We assume that they must spend it on fast food and soda instead of fresh fruit and books. So to “help”, we’ve rigged up a myriad of ingenious assistance programs, with reams of paper work, registration systems, and an army of inspectors, all revolving around the biblical principle that “those unwilling to work will not get to eat” (2 Thessalonians 3:10). In recent years, government assistance has become increasingly anchored in employment, with recipients required to apply for jobs, enrol in return to work programmes, and do mandatory “volunteer” work. Touted as a shift “from welfare to workfare”, the underlying message is clear: free money makes people lazy.
Except that, according to the evidence, it doesn’t.
Meet Bernard Omondi. For years, he earned $2 a day working in a stone quarry in an impoverished part of western Kenya. Then, one morning, he received a rather peculiar text message. “When I saw the message, I jumped up,” Omondi later recalled. A sum of $500 had just been deposited in his bank account. For Omondi, this was almost a year’s wages.
Several months later, a journalist from the New York Times visited Omondi’s village. It was as though the entire population had won the lottery: the village was flush with cash. Yet no one was drinking their money away. Instead, homes had been repaired and small businesses started. Omondi invested his money in a brand new Bajaj Boxer motorcycle from India and was making $6–$9 a day ferrying people around as a taxi driver. His income had more than tripled.
Touted as a shift ‘from welfare to workfare’, the underlying message is clear: free money makes people lazy
“This puts the choice in the hands of the poor,” says Michael Faye, founder of GiveDirectly, the organisation behind Bernard ’s windfall.Faye doesn’t give people fish, or even teach them to fish. He gives them cash, in the conviction that the real experts on what people living in poverty need are the people living in poverty themselves. When I asked him why there are so few peppy videos or pictures on the GiveDirectly website, Faye explained that he doesn’t want to play on emotions too much. “Our data are hard enough.”
He’s right. According to a study by the Massachusetts Institute of Technology, GiveDirectly cash grants spur a lasting rise in incomes (up 38% from before the infusion) and also boost home ownership and possession of livestock (up 58%), while reducing the number of days that children go hungry by 42%.Presented with GiveDirectly figures, Google soon handed over a
But Omondi and his fellow villagers haven’t been the only ones to luck out. In 2008, the government of Uganda decided to distribute almost $400 to some 12,000 16- to 35-year-olds. The money was all but free; the only thing they had to do in return was submit a business plan. Five years later, the effects were staggering. Having invested in their own education and business ventures, the beneficiaries’ incomes had gone up nearly 50%. And their odds of getting hired had increased
Another Ugandan programme distributed $150 to over 1,800 women living in poverty in the country’s north with similar results: incomes shot up by almost 100%. Women who received support from an aid worker (cost: $350) benefited slightly more, but researchers subsequently calculated that it would have been much more effective to lump the aid worker’s salary inAs the report dryly concluded, the results imply “a huge change in poverty alleviation programmes in
Manna from heaven
Studies from all over the world offer proof positive: free money works.
Already, research has correlated unconditional cash disbursements with reductions in crime, child mortality, malnutrition, teenage pregnancy, and truancy,“The big reason poor people are poor is because they don’t have enough money,” notes economist Charles Kenny, “and it shouldn’t come as a huge surprise that giving them money is a great way to reduce that
In their book Just Give Money to the Poor (2010), scholars at the University of Manchester give examples of cases where cash handouts with few or no strings attached have worked. In Namibia, figures for malnutrition took a nosedive (from 42% to 10%), as did those for truancy (from 40% to virtually nothing) and crime (by 42%). In Malawi, school attendance among girls and women surged 40%, regardless of whether the cash came with or without conditions. Time and again, the ones to profit most are children. They suffer less hunger and disease, grow taller, perform better at school, and are
From Brazil to India, from Mexico to South Africa, cash transfer programmes have become all the rage across the global south. When the UN formulated its Millennium Development Goals in 2000, these programmes weren’t even on the radar. Yet by 2010, they were already reaching more than 110 million families in 45 countries.
Back at the University of Manchester, the researchers summed up these programmes’ benefits: (1) households put the money to good use, (2) poverty declines, (3) there can be diverse long-term benefits for income, health, and tax revenues, and (4) the programmesSo why send over expensive white folks in SUVs when we can simply hand over their salaries to people living in poverty? Especially when this also takes sticky civil service fingers out of the equation. Plus, free cash greases the wheels of the whole economy: people buy more, and that boosts employment and incomes.
Countless aid organisations and governments are convinced that they know what people living in poverty need, and invest in schools, solar panels, or cattle. And, granted, better a cow than no cow. But at what cost? A Rwandan study estimated that donating a pregnant cow costs around $3,000 (including a milking workshop).Or take the patchwork of courses offered to people living in poverty: that they cost a lot but achieve little, whether the objective is learning to fish, read, or run a business. “Poverty is fundamentally about a lack of cash. It’s not about stupidity,” stresses the economist Joseph Hanlon.
The great thing about money is that people can use it to buy things they need instead of things that self-appointed experts think they need. And, as it happens, there is one category of product which poor people do not spend their free money on, and that’s alcohol and tobacco. In fact, a major study by the World Bank demonstrated that in 82% of all researched cases in Africa, Latin America, and Asia,
But it gets even stranger. In Liberia, an experiment was conducted to see what would happen if you give $200 to the alcoholics, addicts, and petty criminals from disadvantaged neighbourhoods. Three years later, what had they spent the money on? Food, clothing, medicine, and small businesses.
Yet the “lazy poor people” argument is trotted out time and again. The very persistence of this view has compelled scientists to investigate whether it’s true. Just a few years ago, the prestigious medical journal the Lancet summed up their findings: when people living in poverty receive no strings cash, they actually tend toIn the final report on the Namibian experiment, a bishop offered this neat biblical explain action. “Look in depth at Exodus 16,” he wrote, “the people of Israel in the long journey out of slavery, they received manna from heaven. But,” he continued,
Free money: it’s a notion already proposed by some of history’s leading thinkers. Thomas More dreamed about it in his book Utopia in 1516. Countless economists and philosophers – Nobel Prize winners among them –Its proponents have from left to right, all the way to the founders of neoliberal thought, Friedrich Hayek and Milton Friedman. And Article 25 of the Universal Declaration of Human Rights (1948) promises that, one day, it will come.
A universal basic income.
And not merely for a few years, or in developing countries alone, or only for those living in poverty, but just what it says on the box: free money for everyone. Not as a favour, but as a right. Call it theA monthly allowance, enough to live on, without having to lift a finger. The only condition, as such, is that you No inspectors looking over your shoulder to see if you’ve spent it wisely, nobody questioning if it’s really deserved. No more special benefit and assistance programmes; at most, an additional allowance for seniors, unemployed people, and those unable to work.
Basic income: it’s an idea whose time has come.
In a warehouse attic in Winnipeg, Canada, nearly 2,000 boxes lay gathering dust. The boxes are filled with data – graphs, tables, reports, interviews – about one of the most fascinating social experiments in postwar history.
Evelyn Forget, a professor at the University of Manitoba, first heard about the records in 2004. For five long years she tried to find them, until finally, in 2009, she discovered the boxes in the National Archives. “[Archivists] were in the process of wondering whether, in fact, they could throw them out because they took up a lot of space and nobody seemed interested in it,”
Stepping into the attic for the first time, Forget could hardly believe her eyes. It was a treasure trove of information on the real world implementation of Thomas More’s dream from five centuries before.
One of the nearly 1,000 interviews packed away in those boxes was with Hugh and Doreen Henderson. 35 years earlier, when the experiment began, he had been a high school janitor and a homemaker taking care of their two kids. The Hendersons didn’t have it easy. Doreen kept a garden and raised chickens to ensure they’d have enough to eat. Each dollar was stretched “until it snapped”.
Until, on one ordinary day, two sharply dressed men appeared on their doorstep. “We filled out forms, they wanted to see our receipts,”And then, just like that, the Hendersons’ money troubles were a thing of the past. Hugh and Doreen were signed up for Mincome – the first large-scale social experiment in Canada and the largest basic income experiment in the world, ever.
In March 1973, the provincial governor earmarked a sum of $83m in modern US dollarsHe chose Dauphin, a small town of 13,000 northwest of Winnipeg, as the location of the experiment. Everybody in Dauphin was guaranteed a basic income, ensuring that no one fell below the poverty line. In practice, this meant 30% of the town’s inhabitants – 1,000 families in all – got a cheque in the mail each month. A family of four received what would now be around $19,000 a year, no questions asked.
At the start of the experiment, an army of researchers descended on the town. Economists would monitor whether its inhabitants worked less, sociologists were there to scrutinise the effects on family life, and anthropologists ensconced themselves in the community to see firsthand how residents would respond.
For four years, all went well, but then elections threw a wrench in the works. A conservative government was voted into power. The new Canadian cabinet saw little point to the expensive experiment, for which the national government was footing three-quarters of the bill. When it became clear that the new administration would not even fund an analysis of the experiment’s results, the researchers decided to pack their files away in some 2,000 boxes.
In Dauphin, the letdown was huge. On its launch in 1974, Mincome had been seen as a pilot programme that would quickly be rolled out nationwide. Now, it seemed destined to be forgotten. “Government officials opposed [to Mincome] didn’t want to spend more money to analyse the data and show what they already thought: that it didn’t work,” one of the researchers recounted.
When Forget first heard about Mincome, no one knew what, if anything, the experiment had actually demonstrated. But as coincidence would have it, Canada’s Medicare program was introduced around this same time, in 1970. The Medicare archives presented Forget with a wealth of data to compare Dauphin with nearby towns and control groups. For three years, she rigorously subjected the data to all manner of statistical analysis. No matter what she tried, the results were the same every time. Mincome had been a resounding success.
From experiment to law
“Politically, there was a concern that if you began a guaranteed annual income, people would stop working and start having large families,”
What really happened was precisely the opposite. Young adults postponed getting married, and birthrates dropped. Their school performance improved substantially: the “Mincome cohort” studied harder and faster. In the end, total work hours only notched down 1% for men, 3% for married women, and 5% for unmarried women. Men who were family breadwinners hardly worked less at all, while new mothers used the cash assistance to take several months’ maternity leave,
Forget’s most remarkable finding, though, was that hospitalisations decreased by as much as 8.5%. Considering the size of public spending on health care in the developed world, the financial implications were huge. Several years into the experiment, domestic violence was also down, as were mental health complaints. Mincome had made the whole town healthier. Forget could even trace the impacts of receiving a basic income through to the next generation, both in earnings and in health.
Dauphin – the town with no poverty – was one of five guaranteed income experiments in North America. The other four were all conducted in the US. Few people today are aware that the US was just a hair’s breadth from realising a social safety net at least as extensive as those in most western European countries. When Lyndon B Johnson, the former US president, declared his “War on Poverty” in 1964, Democrats and Republicans alike rallied behind fundamental welfare reforms.
Few people today are aware the US was just a hair’s breadth from realising a social safety net as extensive as western European countries
First, however, some trial runs were needed. Tens of millions of dollars were budgeted to provide a basic income for more than 8,500 US Americans in New Jersey, Pennsylvania, Iowa, North Carolina, Indiana, Seattle, and Denver in what were also the first ever large-scale social experiments to distinguish experimental and control groups. The researchers wanted answers to three questions: (1) Would people work significantly less if they receive a guaranteed income? (2) Would the programme be too expensive? (3) Would it prove politically infeasible?
The answers were no, no, and yes.
Declines in working hours were limited across the board. “The ‘laziness’ contention is just not supported by our findings,” the chief data analyst of the Denver experiment said. “There is not anywhere near the mass defection the prophets of doom predicted.” The reduction in paid work averaged 9% per family, and in every state it was mostly the twenty-somethings and women with young children
Later research showed that even 9% was probably exaggerated. In the original study, this was calculated on the basis of self-reported income, but when the data was compared with official government records, it turned out that a significant portion of earnings had gone unreported. After correcting for this discrepancy, the researchers discovered that the number of hours worked had scarcely
“[The] declines in hours of paid work were undoubtedly compensated in part by other useful activities, such as search for better jobs or work in the home,” noted the Seattle experiments concluding report. For example, one mother who had dropped out of high school worked less in order to earn a degree in psychology and get a job as a researcher. Another woman took acting classes; her husband began composing music. “We are now self sufficient, income-earning artists,”Among youth included in the experiment, almost all the hours not spent on paid work went into more education. Among the New Jersey subjects,
And thus, in the revolutionary year of 1968, when young demonstrators the world over were taking to the streets, five famous economists – John Kenneth Galbraith, Harold Watts, James Tobin, Paul Samuelson, and Robert Lampman – wrote an open letter to Congress. “The country will not have met its responsibility until every one in the nation is assured an income no less than the officially recognized definition of poverty,” they said in an article published on the front page of the New York Times. According to the economists, the costs would be
The letter was signed by 1,200 fellow economists.
And their appeal did not fall on deaf ears. The following August, President Nixon presented a bill providing for a modest basic income, calling it “the most significant piece of socio legal action in our nation’s history”. According to Nixon, the baby boomers would do two things deemed impossible by earlier generations. Besides putting a man on the moon (which had happened the month before), their generation would also, finally, eradicate poverty.
A White House poll found 90% of all newspapersThe Chicago Sun Times called it “A Giant Leap Forward”, the Los Angeles Times The National Council of Churches was in favour, and so were the labour unions and even the At the White House, a telegram arrived “Two upper middle class Republicans who will pay for the program say bravo.” Pundits were even going around quoting Victor Hugo – “Nothing is stronger than an idea whose time has come.”
It seemed that the time for a basic income had well and truly arrived.
“Welfare Plan Passes House … a Battle Won in Crusade for Reform,” headlined the New York Times on 16 April 1970. With 243 votes for and 155 against, President Nixon’s Family Assistance Plan (FAP) was approved by an overwhelming majority. Most pundits expected the plan to pass the Senate, too, with a membership even more progressive than that of the House of Representatives. But in the Senate Finance Committee, doubts reared up. “This bill represents the most extensive, expensive, and expansive welfare legal action ever handled,”Most vehemently opposed, however, were the Democrats. They felt the FAP didn’t go far enough, and pushed for an even After months of being batted back and forth between the Senate and the White House, the bill was finally canned.
In the following year, Nixon presented a slightly tweaked proposal to Congress. Once again, the bill was accepted by the House, now as part of a larger package of reforms. This time, 288 voted in favour, 132 against. In his 1971 State of the Union address, Nixon considered his plan to “place a floor under the income of every family with children in America” the most important item of
But once again, the bill foundered in the Senate.
Not until 1978 was the plan for a basic income shelved once and for all, however, following a fatal discovery upon public action of the final results of the Seattle experiment. One finding in particular grabbed everybody’s attention: the number of divorces had jumped more than 50%. Interest in this statistic quickly overshadowed all the other outcomes, such as better school performance and improvements in health. A basic income, evidently, gave women too much independence.
Ten years later, a reanalysis of the data revealed that a statistical error had been made; in reality, there had been no change in
Futile, dangerous and perverse
“It Can Be Done! Conquering Poverty in America by 1976,” Nobel Prize winner James Tobin confidently wrote in 1967. At that time,supported a guaranteed basic income. Years later, Ronald Reagan would famously sneer, “In the sixties we waged a war on poverty, and poverty won.”
The great milestones of civilisation have the whiff of utopia about them at first. According to renowned sociologist Albert Hirschman, utopias are initially attacked on three grounds: futility (it’s not possible), danger (the risks are too great), and perversity (it will degenerate into dystopia). But Hirschman also wrote that almost as soon as a utopia becomes a reality, it often comes to be seen as utterly common place.
Not so very long ago, democracy still seemed a glorious utopia. Many a great mind, from the philosopher Plato (427–347 BC) to the statesman Edmund Burke (1729–97), warned that democracy was futile (the masses were too foolish to handle it), dangerous (majority rule would be akin to playing with fire), and perverse (the “general interest” would soon be corrupted by the interests of some crafty general or other). Compare this with the arguments against basic income. It’s supposedly futile because we can’t pay for it, dangerous because people would quit working, and perverse because ultimately a minority would end up having to toil harder to support the majority.
But … hold on a minute.
Futile? For the first time in history, we are actually rich enough to finance a sizeable basic income. We can get rid of the whole bureaucratic rigmarole designed to force assistance recipients into low productivity jobs at any cost, and we can help finance the new simplified system by chucking the maze of tax credits and deductions, too. Any further necessary funds can be raised by taxing assets, waste, raw materials, and consumption.
The great milestones of civilisation have the whiff of utopia about them at first
Let’s look at the numbers. Eradicating poverty in the US would cost only $175 billion,That’s roughly a quarter of US military spending. Winning the war on poverty would be a bargain compared to the wars in Afghanistan and Iraq, which a Harvard study estimated have cost us a staggering As a matter of fact, all the world’s developed countries had it to wipe out poverty years ago.
And yet, a system that helps solely those living in poverty only drives a deeper wedge between them and the rest of society. “A policy for the poor is a poor policy,” observed Richard Titmuss, the great theoretician of the British welfare state.
It’s an ingrained reflex among those on the left to make every plan, every credit, and every benefit income dependent. The problem is, that tendency is counterproductive.
In a now-famous article published in the late 1990s, two Swedish sociologists showed that the countries with the most universal government programmes have been the most successful atBasically, people are more open to solidity if it benefits them personally. The more we, our family, and our friends stand to gain through the welfare state, the more Logically, therefore, a universal, unconditional national basic income would also enjoy the broadest base of support. After all,
Dangerous? Certainly, some people may opt to work less, but then that’s precisely the point. A handful of artists and writers (“all those whom society despises while they are alive and honours when they are dead” – Bertrand Russell) might actually stop doing paid work altogether. There is overwhelming evidence to suggest that the vast majority of people actually want to work,In fact, not having a job makes us
One of the perks of a basic income is that it would free the poor from the welfare trap and spur them to seek a paid job with true opportunities for growth and advancement. Since basic income is unconditional, and will not be taken away or reduced in the event of gainful employment, their circumstances can only improve.
Perverse? On the contrary, it is the welfare system that has devolved into a perverse behemoth of control and humiliation. Officials keep tabs on public assistance recipients via Facebook to check whether they’re spending their money wisely – and woe betide anyone who dares to do unapproved volunteer work. An army of social services workers is needed to guide people through the jungle of eligibility, application, approval, and recapture procedures. And then the corps of inspectors has to be mobilised to sift through the paperwork.
The welfare state, which should foster people’s sense of security and pride, has degenerated into a system of suspicion and shame. It is a grotesque pact between right and left. “The political right is afraid people will stop working,” laments Professor Forget in Canada, “and the left doesn’t trust them to make their own choices.’’ A basic income system would be a better compromise. In terms of redistribution, it would meet the left’s demands for fairness; where the regime of interference and humiliation is concerned, it would give the right to a more limited government than ever.
Talk different, think different
It’s been said before.
We’re saddled with a welfare state from a bygone era when the breadwinners were still mostly men and people spent their whole lives working at the same company. The pension system and employment protection rules are still keyed to those fortunate enough to have a steady job, public assistance is rooted in the misconception that we can rely on the economy to generate enough jobs, and welfare benefits are often not a trampoline, but a trap.
Never before has the time been so ripe for the introduction of a universal, unconditional basic income. Look around. Greater flexibility in the workplace demands that we also create greater security. Globalisation is eroding the wages of the middle class. The growing rift between those with and those without a college degree makes it essential to give the have-nots a leg up. And the development of ever smarter robots could even cost them their jobs.
In recent decades, the middle class has retained its spending power by borrowing itself into ever deeper debt. But this model isn’t viable, as we now know. The old adage of “those unwilling to work will not get to eat” is now abused as a license for inequality.
Don’t get me wrong, capitalism is a fantastic engine for prosperity. “It has accomplished wonders far surpassing Egyptian pyramids, Roman aqueducts, and Gothic cathedrals,” as Karl Marx and Friedrich Engels wrote in their Communist Manifesto. Yet it’s precisely because we’re richer than ever that it is now within our means to take the next step in the history of progress: to give each and every person the security of a basic income. It’s what capitalism ought to have been striving for all along. See it as a dividend on progress, made possible by the blood, sweat and tears of past generations. In the end, only a fraction of our prosperity is due to our own exertions. We, the inhabitants of the Land of Plenty, are rich thanks to the institutions, the knowledge, and the social capital amassed for us by our forebears. This wealth belongs to us all. And a basic income allows all of us to share it.
Of course, this is not to say we should implement this dream without forethought. That could be disastrous. Utopias always start out small, with experiments that ever so slowly change the world. It happened just a few years ago on the streets of London, when 13 rough sleepers got £3,000, no questions asked. As one of the aid workers said, “It’s quite hard to just change overnight the way you’ve always approached this problem. These pilots give us the opportunity to talk differently, think differently, describe the problem differently … ”
And that’s how all progress begins.
This article is part of Utopia for Realists published byand and was translated by Elizabeth Manton and Erica Moore.
For the idea of universal basic income to work, we have to trust people. That’s an idea I explore furtherWe’re taught that human beings are selfish by nature and governed primarily by self-interest. But it’s realistic, as well as revolutionary, to assume that people are good.