Guest Post: Investing in Human Potential – the Great UBI Experiment

This is a guest post by Eva Schlunke, who is a political artist, activist and writer.

I wonder if Finland can feel the rest of the world peering cautiously over the hedge, pretending not to be interested in how their little Universal Basic Income (UBI) experiment is going? Potentially, trials of this kind could provide an opportunity to find out once and for all if poor people can be trusted to better themselves, and serve as a demonstration of how much value we place on human capital and how willing we are to make the fair sacrifices necessary to give everyone a go.

Finland’s government-led program, which began in January 2017, of giving obligation-free payments to a selected group of unemployed participants, may seem like an ambitious undertaking, but may not, in practice, turn out to be as conclusive or experimental as we’d have liked. Critics of Finland’s trial have pointed out that the trial size is too small to be scientifically viable, and the ‘Universal’ component doesn’t really apply because the 2,000 Finnish recipients of this trial are people who were already receiving unemployment benefits.  There is also a risk that replacement of existing welfare support with a too-modest UBI could actually increase poverty in households that rely solely on welfare and are currently receiving more generous forms of support.

Still, well done for getting our attention, and while Finland is currently in the limelight, it’s not alone in its efforts to experiment with different forms of unconditional income as a means to combat inequality.

Trials are currently taking place in various cities in the Netherlands , and the poorest areas of Barcelona  in Spain. Three regions in Ontario Canada, have been chosen by local government for trials due to begin in 2018, and two cities in California, Stockton  and Oakland,  will also begin trials of unconditional payments in 2018.  Scotland’s Royal Scottish Academy has announced  its commitment to study the feasibility of municipal-level basic income experiments in Fife, Glasgow, North Ayrshire and Edinburgh.  But perhaps the largest UBI project to date is currently being run in Kenya where $30 million has been allocated to run community wide projects in 120 rural villages.

In contrast to the majority of UBI pilot programs which are run by local governments in partnerships with foreign research institutes, funding for trials in the US and Kenya comes exclusively from philanthropic sources. Networks of CEO’s, academics, social justice campaigners and silicon valley entrepreneurs, have come together to form the Economic Security Project and Y Combinator , who are the two groups responsible for setting up and funding UBI trials in California. Projects in Kenya are being funded through Give Directly , an aid platform which was set up in 2012 by a group of philanthropy students from MIT and Harvard .

The UBI isn’t a recent invention. Thomas Paine advocated the idea of a ‘Citizens Dividend’ in his paper Agrarian Justice  written in the winter of 1795 – 1796. He argued that “Men did not make the earth. It is the value of the improvements only, and not the earth itself, that is individual property. Every proprietor owes to the community a ground rent for the land which he holds.” This principle has been recognised in Alaska , Norway  and Chile , where a kind of state owned pension fund has been established to capture a share of windfall revenue from natural resources which is then returned to citizens in the form of an annual dividend or pension.

In addition to current programs, US trials in negative income tax  were undertaken from 1968 – 1982, and the Mincome Guaranteed Annual Income project was run in Canada during the 1970’s. More recently Brazil, Uganda, Namibia and India, have also run pilot programs in impoverished rural areas.

The idea to simply give people, or whole villages, cash and let them decide how they spend it is the next logical step after well intentioned paternalistic programs in microfinance training have shown disappointing results. The current thinking in poverty alleviation is that what poor people need is money, not skills or training, and when given the financial support they desperately lack, people in need are the best judges of how to spend or invest it.

These trials have consistently shown substantial long-term benefits to participants, and in many cases whole communities. These positive impacts range from increased investment in skills and business assets, construction of new housing, and improvements to existing buildings, improvements in nutrition, food security, health and energy of children, more money for shoes and school essentials, (factors which makes children more likely to go to school), disadvantaged groups such as women and the disabled gain greater bargaining power and stronger positions in households, household debt is reduced, there is increased psychological well-being, greater social interaction and raised expectations of the future, and participants of trials have shown an increase in both quantity and quality of labour.

Further independent studies by researchers at MIT, Harvard and University of Chicago have also concluded that cash transfer programs do not discourage work, nor do they lead to an increase in the consumption of alcohol, drugs and other temptation goods.

It seems reasonable to conclude from previous pilots that basic income security energises and motivates people to be more productive, cooperative and altruistic. As summed up by Guy Standing, professor of development studies at the School of African and Oriental Studies (SOAS),  and co-founder of the Basic Income Earth Network (BIEN),  “We need to realise that the human condition as an overwhelming norm is to desire to improve one’s life, the lives of our loved ones and the quality of our community.”

Guy Standing is perhaps the world’s most experienced and qualified advocate of UBI. He has written several books on the topic including his latest book Basic Income: And How We Can Make it Happen which explores the arguments for and against a UBI in detail. While most people are familiar with the standard arguments to do with the cost involved in implementing a UBI, and the threat to employment posed by automation, Standing brings a new argument into the mix. He sees the implementation of a UBI as a matter of social justice, and what is often left out of the UBI argument is the amount of wealth which gets absorbed by rentiers.

This is a class which has long been immune to the struggles faced by the workforce. They are separate to it in that their income and wealth is not a product of their labour, it comes in the form of rent off a range of tangible and intangible assets both in their country of residence and abroad. In his book The Corruption of Capitalism , Standing shows how capitalism is geared to benefit the rentiers through taxation, monopolies on patents, trade agreements and outsourcing. While these issues are no secret to most of us, the corruption of capitalism is the elephant in the room which is at the heart of the UBI debate. It’s the sticking point that needs to be examined before we can talk honestly about public spending and income equality.

Guy Standing puts it simply “(the UBI) should be seen as part of a new income distribution system, used to redistribute rental income… If properly designed, as a form of social dividend, then the rentiers would be the primary losers, as their income is mainly unearned, this would be socially beneficial.”  So with this in mind arguments about how to pay for it are stripped to the blindingly obvious fact that the first step to addressing inequality is to accept that our current system of wealth distribution is unfair and needs to change.

On this front, the countries prepared to give dividends back to their citizens or run UBI pilots are the brave ones. They are embracing the challenge of transitioning to a fairer, more effective, practical solution to inequality.

In my opinion any discussions or plans for improving income inequality which don’t include some form of UBI are insincere gestures that lack the courage to address fundamental issues to do with social justice and fairness. We’re currently failing in our attempts to patch up the gaps between wealth and poverty and the excuses used to justify this are feeble and procrastinatory.

Our current system for doling out welfare does very little to encourage people to make the most of themselves. Instead it serves as a demeaning trap, which in many cases reduces the sparse opportunities for self development in people who need them most. We risk plundering our human capital without ever giving it a chance to prove its true value, and our society as a whole suffers as a result.

Good for you Finland.

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