Universal Basic Income & the 21st Century Welfare State
Image credits: Andrew J. Nilsen
In his 1875 letter to the Social Democratic Workers Party of Germany subsequently titled Critique of the Gotha Program, Karl Marx hypothesized two phases of communism. The lower phase was to adhere to the maxim: “to each according to his contribution,” the higher was to adhere to the maxim “from each according to his ability, to each according to his need.” While 20th century socialist states experimented with reorganizing the relationships between labour and capital in order to fulfill the Marxist mandate, their failures had the adverse effect of largely discrediting leftist redistributive programs, and precipitating the ascension of Fukuyamaist teleological neoliberalism. Perhaps it is for this reason, that contemporary leftists such as Slavoj Zizek claim that the left has been defeated, and that its defeat is marked by the fact that “it is much easier to imagine the end of all life on earth than a much more modest radical change in capitalism.” The program of “the perfect welfare state” which Zizek identifies as being the primary proposal from today’s left is of course that of the universal basic income (UBI), by no means a new idea of the 21st century nor a “leftist” proposal. However, it is an idea that has been receiving growing attention among economists, and while they are largely divided on the issue, the divide is not so clearly marked as one between left and right. The concept is in fact projected to receive popular support in Canada, and $25 million has been set aside from the Ontario budget to experiment with the program beginning in the spring of 2017. In fact, a recent poll on the issue shows that two-thirds of 1500 Canadians participating in the study are open to the idea of a basic income. To what extent is that support justified? For UBI, which appears to be a simple 21st century redistributive program, is in fact neither a proposal of the 21st century nor of the left. Therefore, owing to its deceptively complex history and implications, thorough consideration is required for this latest iteration of “from each according to his ability, to each according to his need” so that we do not repeat the mistakes of the past and, to quote Mao, “take a great leap into the dark.”
As mentioned earlier, UBI was not an idea of the left. It is in fact a later development from Milton Friedman’s proposal for a negative income tax, itself put forward as a proposal to reduce the size of bureaucracy in the United States which in 1968 accounted for 72% of spending on welfare. Friedman, who was perhaps the greatest champion of the free-market, was the earliest proponent of UBI. While it may be hard to grasp the apparent contradiction of a free-market economist advocating some version of a “perfect welfare state”, this is a result of contemporary misconceptions of what the negative income tax was meant to achieve. As Friedman conceived of it, the program would mean everyone files their taxes, and everyone receives the same tax deductibles. For example, if the tax deductible for supporting a family of four was $3000, a person making $4000 in taxable annual income would pay only $1000 in taxes, and a person making $3000 would pay none. However, if another person in the same situation had an annual income of only $2000, the additional $1000 for which they are eligible as a deductible would see a percentage refunded to supplement their existing income. The percentage would be the same for everyone, so if it were 50% for the above case, a person with no income would still have a basic income of $1500, a threshold below which nobody in society could fall.
Concurrently, critics from the left, such as Slavoj Zizek, who are more sympathetic to the effects of basic income (creating a real choice to work), reject the measure as a form of rent creating a hierarchical structure in society of those collecting rent from private ownership and those collecting rent from UBI.
The negative income tax was not, as we like to perceive UBI today, intended to ensure that the basic needs of all citizens in a society are met. Rather, it was conceived of as a cost-saving measure, one that could reduce administrative spending and thereby increase the efficiency of welfare programs. It also included an underlying assumption that providing the poor with public goods was a wasteful endeavor since the rules of the free-market dictate that if they don’t want the goods they receive they can always sell them (a sack of wheat for example) to obtain other commodities, even ones that might be harmful. Thus, while on the one hand an intention of the negative income tax was to alleviate poverty and promote equity, the primary purpose of the initiative was to facilitate reducing the cost by scaling back the degree of state intervention on consumer choice. This was in line with Friedman’s overarching agenda of government retreating from the market.
Despite its historical roots, the function of UBI as a redistributive measure has led to its association with the left. This association has caused a schism among leftist thinkers on whether to embrace or denounce the measure. Conventional wisdom opponents to the idea, such as economist Jeffrey Sachs, author of The End of Poverty, argue that guaranteed income can lead to the emergence of low incentives to work. Instead, he supports a strong social safety net (a conventional welfare state) which provides healthcare, fair tuition, maternity leave, etc. and believes that the failure of some countries to create an equitable society is a failure of their political culture (e.g. too much emphasis on greed and money). Concurrently, critics from the left, such as Slavoj Zizek, who are more sympathetic to the effects of basic income (creating a real choice to work), reject the measure as a form of rent creating a hierarchical structure in society of those collecting rent from private ownership and those collecting rent from UBI. This, Zizek argues, would serve to further disadvantage an already underprivileged working class. Zizek also points out the hypocrisy of traditional supporters of UBI, such as Milton Friedman and Toni Negri, who on the one hand advocate increasing globalisation, “that we are all global nomads,” and on the other a concept such as basic income which requires a strong central state because the payment of income (Zizek calls this rent) by the state requires that you be acknowledged as the citizen of that state.
Thus, while on the one hand an intention of the negative income tax was to alleviate poverty and promote equity, the primary purpose of the initiative was to facilitate reducing the cost by scaling back the degree of state intervention on consumer choice.
On the other hand, notable supporters of UBI, such as former Greek Finance Minister Yanis Varoufakis, see it not only as a benefit, but as “necessary for any attempt to civilize capitalism.” To address critiques such as that by Sachs, Varoufakis argues that the 20th century New Deal paradigm is no longer possible today. He attributes the deterioration of the conventional welfare state to two factors, the replacement of industrialized capital by financialized capital which has pushed the working class from high-paying manufacturing jobs to low-paying service jobs, and the rise of machines which will inevitably consume all repetitive work. The effect of these two factors has meant stagnating wages and increasing job insecurity. This, in turn, erodes the ability of the working class to insure itself, which Varoufakis identifies as the underlying dynamic of the 20th century welfare state: an imposed redistribution of income for goods. Thus, UBI within this framework is not an alternative to a viable conventional welfare state but rather the only path forward due to the prescient conditions of contemporary capitalism.
Furthermore, Varoufakis argues against the notion of universal basic income as a harmful form of basic rent by demonstrating that it is not something for nothing. Rather, most fall victim to the dominant narrative in capitalism that redistributive policies are simply state appropriation of privately produced wealth. He claims that almost all wealth is socially produced, since goods such as the iPhone are the products of technologies developed through government grants which are funded by publicly taxed capital. Basic income is thus merely a dividend paid to each person for their collective contribution to their society’s production of wealth. While it is difficult to imagine that a leftist such as Zizek would conceive of redistribution as an (unjust) appropriation by the state of private wealth, Varoufakis’ argument does reveal how Zizek overlooks this collective contribution to the production of wealth in the first place. In this conception, it is therefore not, as Zizek claims, that basic income creates a dual rent structure, but rather, productive labour takes place in the initial contribution of taxable income to the public fund which in turn is responsible for the majority of wealth production in society.
Theory and hypotheses aside, what do real world experiments with UBI indicate? A limited test of the measure has been conducted in Canada in the past. The town of Dauphin in Manitoba saw the distribution of stipends to 1000 residents of a sum equating to 60% of the income necessary to meet Statistics Canada’s poverty threshold (equivalent to $16,000 today) between 1974 and 1977. When the results of this study were analyzed decades later by Evelyn Forget, a professor at the University of Manitoba, they showed that hospitalisations, accidents, injuries and mental health issues all declined in the community while the basic income was in place. No reduction in the tendency to work was found except among mothers who took longer maternity leaves, and teenagers who showed a greater tendency to stay in school rather than pursue work.
Basic income is thus merely a dividend paid to each person for their collective contribution to their society’s production of wealth.
While a broader test conducted over a longer period of time is needed to provide definitive conclusions on the effects of UBI, the results of the Manitoba study do to some degree discredit arguments against the measure that are founded on a reduction of the tendency to work such as that by Sachs’ point on disincentive, and to a lesser degree Zizek’s on the underprivileged position it creates for the working class. Certainly, the implications from the limited study in Dauphin should be sufficient for anyone who seeks to take a results-oriented rather than principle-oriented position to concede that a UBI is worthy enough of further experimentation. Conservatives such as Hugh Segal describe the initiative as “the precinct of rational people when looking to encourage work and community engagement and give people a floor beneath which they’re not allowed to fall.” For leftists as well, the potential of UBI to fulfill (through capitalism no less) Marx’s promise of a society “from each according to his ability, to each according to his need” should also be clear, since “according to his need” is the direct outcome of unconditional basic income, while “according to his ability” is an indirect effect through its creation of conditions where people have the option not to work. Any labour therefore becomes a truly free choice.
That is not to say that universal basic income is not without problematic implications, however. For starters, it was originally conceived as a negative income tax with its primary intent being the reduction of state intervention in welfare and overall government retreat. Despite Friedman’s vision of a reduced welfare bureaucracy, as Zizek notes, the payment of UBI requires a centralized rather than decentralized state, which has the capacity to recognize, tax, and only then to distribute basic income to its citizens. In light of these requirements, the capacity of UBI to address the circumstances which precipitated the deterioration of the 20th century welfare state, of financialized capital (also a product of globalization) for example, can therefore be called into question. Hence, the idea of UBI facilitating a “perfect welfare state” in the 21st century remains uncertain. In fact, I borrow the term “perfect welfare state” from Zizek who himself finds the very notion to be undesirable, viewing all welfare states as the products of strong nation states which likewise will eventually cease to exist in an increasingly globalized world. However, globalization is not in itself problematic, and despite the risk of sounding teleological, I honestly believe it to be inevitable as a consequence of increasing technological development which will continue to reduce the scale of our planet. The problem is not globalization, it is the failure of past solutions, what Varoufakis identifies as the “New Deal Paradigm,” to address the issues of the contemporary globalized world. Thus, experimentation with new solutions is necessary since the alternative would be “to take a great leap into the dark.” UBI is an option that has proven worthy for further consideration in the creation of a new paradigm, a 21st century welfare state.