Universal Basic Income is a neoliberal plot to make you poorer

Picture by Khalil Hamra AP/Press Association Images

Picture by Khalil Hamra AP/Press Association Images

Basic Income is often promoted as an idea that will solve inequality and make people less dependent on capitalist employment. However, it will instead aggravate inequality and reduce social programs that benefit the majority of people.

At its Winnipeg 2016 Biennial Convention, the Canadian Liberal Party passed a resolution in support of “Basic Income.” The resolution, called “Poverty Reduction: Minimum Income,” contains the following rationale: “The ever growing gap between the wealthy and the poor in Canada will lead to social unrest, increased crime rates and violence… Savings in health, justice, education and social welfare as well as the building of self-reliant, taxpaying citizens more than offset the investment.”

The reason many people on the left are excited about proposals such as universal basic income is that they acknowledge economic inequality and its social consequences. However, a closer look at how UBI is expected to work reveals that it is intended to provide political cover for the elimination of social programs and the privatization of social services. The Liberal Party’s resolution is no exception. Calling for “Savings in health, justice, education and social welfare as well as the building of self-reliant, taxpaying citizen,” clearly means social cuts and privatization.

UBI has been endorsed by neoliberal economists for a long time. One of its early champions was the patron saint of neoliberalism, Milton Friedman. In his book Capitalism and Freedom, Friedman argues for a “negative income tax” as a means to deliver a basic income. After arguing that private charity is the best way to alleviate poverty, and praising the “private … organizations and institutions” that delivered charity for the poor in the capitalist heyday of the nineteenth century, Friedman blames social programs for the disappearance of private charities: “One of the major costs of the extension of governmental welfare activities has been the corresponding decline in private charitable activities.”

To Friedman and his many powerful followers, the cause of poverty is not enough capitalism. Thus, their solution is to provide a “basic income” as a means to eliminate social programs and replace them with private organizations. Friedman specifically argues that “if enacted as a substitute for the present rag bag of measures directed at the same end, the total administrative burden would surely be reduced.”

Friedman goes on to list some the “rag bag” of measures he would hope to eliminate: direct welfare payments and programs of all kinds, old age assistance, social security, aid to dependent children, public housing, veterans’ benefits, minimum-wage laws, and public health programs, hospitals and mental institutions.

Friedman also spends a few paragraphs worrying whether people who depend on “Basic Income” should have the right to vote, since politically enfranchised dependents could vote for more money and services at the expense of those who do not depend on these. Using the example of pension recipients in the United Kingdom, he concludes that they “have not destroyed, at least as yet, Britain’s liberties or its predominantly capitalistic system.”

Charles Murray, another prominent libertarian promoter of UBI, shares Friedman’s views. In an interview with PBS, he said: “America’s always been very good at providing help to people in need. It hasn’t been perfect, but they’ve been very good at it. Those relationships have been undercut in recent years by a welfare state that has, in my view, denuded the civic culture.” Like Friedman, Murray blames the welfare state for the loss of apparently effective private charity.

Murray adds: “The first rule is that the basic guaranteed income has to replace everything else — it’s not an add-on. So there’s no more food stamps; there’s no more Medicaid; you just go down the whole list. None of that’s left. The government gives money; other human needs are dealt with by other human beings in the neighborhood, in the community, in the organizations. I think that’s great.”

To the Cato Institute, the elimination of social programs is a part of the meaning of Universal Income. In an article about the Finish pilot project, the Institute defines UBI as “scrapping the existing welfare system and distributing the same cash benefit to every adult citizen without additional strings or eligibility criteria”. And in fact, the options being considered by Finland are constrained to limiting the amount of the basic income to the savings from the programs it would replace.

“Basic Income” won’t alleviate poverty.

From a social welfare point of view, the substitution of social programs with market-based and charitable provision of everything from health to housing, from child support to old-age assistance, clearly creates a multi-tier system in which the poorest may be able to afford some housing and health care, but clearly much less than the rich — most importantly, with no guarantee that the income will be sufficient for their actual need for health care, child care, education, housing, and other needs, which would be available only by way of for-profit markets and private charities.

Looking specifically at the question of whether Friedman’s proposal would actually improve the conditions of the poor, Hyman A. Minsky, himself a renowned and highly regarded economist, wrote the “The Macroeconomics of a Negative Income Tax.” Minsky looks at the outcome of a “social dividend,” which “transfers to every person alive, rich or poor, working or unemployed, young or old, a designated money income by right.” Minsky conclusively shows that such a program would “be inflationary even if budgets are balanced” and that the “rise in prices will erode the real value of benefits to the poor … and may impose unintended real costs upon families with modest incomes.”  This means that any improved spending power afforded to citizens through an instrument such as UBI will be completely absorbed by higher prices for necessities.

Rather than alleviating poverty, UBI will most likely exacerbate it. The core reasoning is quite simple: the prices that people pay for housing and other necessities are derived from how much they can afford to pay in the first place. If you imagine they way housing is distributed in a modern capitalist society, the poorest get the worst housing, and the richest get the best. Giving everyone in the community, rich and poor alike, more money, would not allow the poorest to get better housing, it would just raise the price of housing.

If UBI came at the expense of other social programs, such as health care or child care, as Friedman intended, then the rising cost of housing would draw money away from other previously socially provisioned services, forcing families with modest incomes to improve their substandard housing by accepting worse or less childcare or healthcare, or vice versa. A disabled person whose mobility needs requires additional expenditure on accessible housing may not have enough of the basic income left for any additional health care they also require. Yet replacing means testing and special programs that address specific needs is the big idea of UBI.

The notion that we can solve inequality within capitalism by indiscriminately giving people money and leaving the provisioning of all social needs to corporations is extremely dubious. While this view is to be expected among those, like Murray and Friedman, who promote capitalism, it is not compatible with anticapitalism. UBI will end up in the hands of capitalists. We will be dependent on these same capitalists for everything we need. But to truly alleviate poverty, productive capacity must be directed toward creating real value for society and not toward “maximizing shareholder value” of profit-seeking investors.

There is no possibility of another kind of ‘Basic Income’.

Many people don’t dispute the fact that establishment promoters of UBI are only doing it in order to eliminate social programs, but they imagine that another kind of basic income is possible. They call for a basic income that disregards the “deal” that Charles Murray advocates, but want UBI in addition to other social program, including means-tested benefits, protections for housing, guarantees of education and child care, and so on. This view ignores the political dimension of the question. Proposing UBI in addition to existing program mistakes, a general consensus for replacing social programs with a guaranteed income for a broad base of support for increasing social programs. But, no such broad base exists.

Writing in 1943, with the wartime policies of “full employment” enjoying wide support, Michal Kalecki wrote a remarkable essay entitled “The Political Aspects of Full Employment.” Kalecki opens by writing, “a solid majority of economists is now of the opinion that, even in a capitalist system, full employment may be secured by a government spending programme.” Though he is talking about full employment, which means an “adequate plan to employ all existing labour power,” the same is true of UBI. The majority of economists would agree that a plan to guarantee an income for all is possible.

However, Kalecki ultimately argues that full employment policies will be abandoned: “The maintenance of full employment would cause social and political changes which would give a new impetus to the opposition of the business leaders. Indeed, under a regime of permanent full employment, ‘the sack’ would cease to play its role as a disciplinary measure. The social position of the boss would be undermined, and the self-assurance and class-consciousness of the working class would grow.”

The conflict between the worker and the capitalist, or between the rich and the poor, can not be sidestepped simply by giving people money, if capitalists are allowed to continue to monopolize the supply of goods. Such a notion ignores the political struggle between the workers to maintain (or extend) the “basic income” and the capitalists to lower or eliminate it in order to strengthen their social position over the worker and to protect the power of “the sack.”

Business leaders fight tooth and nail against any increase of social benefits for workers. Under their dominion, only one kind of UBI is possible: the one supported by Friedman and Murray, the Canadian Liberal Party, and all others who want to subject workers to bosses. The UBI will be under constant attack, and unlike established social programs with planned outcomes that are socially entrenched and difficult to eliminate, UBI is just a number, one that can be reduced, eliminated, or simply allowed to fall behind inflation.

UBI does not alleviate poverty and turns social necessities into products for profit. To truly address inequality we need adequate social provisioning. If we want to reduce means testing and dependency on capitalist employment, we can do so with capacity planning. Our political demands should mandate sufficient housing, healthcare, education, childcare and all basic human necessities for all. Rather than a basic income, we need to demand and fight for a basic outcome — for the right to life and justice, not just the right to spend.

 

This article was originally published on the 8th of August 2016, on Furtherfield website. 

Dmytri Kleiner will speak as part of a panel dicussion on Universal Basic Income at

MoneyLab #3 Failing Better 

1 – 2 December 2016

Pakhuis de Zwijger

tickets: bit.do/moneylab3

Info: networkcultures.org/moneylab/ 

  • Hello World! That’s the name.

    I see the logic in demanding social provisioning. Yet I see the sense only in some social provisioning. Relying on for-profit market processes is not a capitalistic notion, it’s a notion to relegate decision making to the individual, and with varying degrees of democratic components. Not much more or less.

    A democratically enabled customer is one, who commands access rights to resources with his spending, who regularly obtains such access rights to command, at a stable expression towards the aggregate of all resources, infrastructure, ideas and money (where it’s a resource as well), and temporarily parts with em, to obtain from fellow people what is desired. Sometimes tolling some respect, in the form of a temporary profit, temporary additional resource usage rights; Maybe that’s human nature, even.

    Now the more such resource access rights can be re-traded, the less the process is democratic. Yet the less re-tradeable they become, the more complex (and seemingly exponentially so) becomes the delegative democratic burden on the individuals.

    Envisioning currency as a compromise of delegative democracy, and respectful granting of blanket access to additional resources (in some way temporary, depending on how we arrange the taxes surrounding money and propert), seems most sensible. Market income not as a work income, but as a respectfully granted extra opportunity to command resources, to enjoy or to improve on one’s undertakings. A greater unconditional income could blanket compensate for any notion of labor value, so that’s not a point of concern anymore when it comes to taxes. Taxes (on one hand, and Unconditional Income height on the other) become purely a matter of how much or how little we want to compromise on economic democracy, delegative democracy applied to resource affairs, for efficiency reasons.

    It is our money to give purpose to. No need to fall short of the goal of democratically taking control where it is owed to the people. We deserve a money that works for all, as long as we don’t have artifical super intelligence to manage the near infinitely complex questions of ideal resource allocation for the purpose of all of today’s and tomorrow’s people.

  • Hello World! That’s the name.

    I see the logic in demanding social provisioning. Yet I see the sense only in some social provisioning. Relying on for-profit market processes is not a capitalistic notion, it’s a notion to relegate decision making to the individual, and with varying degrees of democratic components. Not much more or less.
    A democratically enabled customer is one, who commands access rights to resources with his spending, who regularly obtains such access rights to command, as a stable expression towards the aggregate of all resources, infrastructure, ideas and money (where it’s a resource as well), and temporarily parts with em, to obtain from fellow people what is desired. Sometimes tolling some respect, in the form of a temporary profit, temporary additional resource usage rights; Maybe that’s human nature, even.

    Now the more such resource access rights can be re-traded, the less the process is democratic. Yet the less re-tradeable they become, the more complex (and seemingly exponentially so) becomes the delegative democratic burden on the individuals.

    Envisioning currency as a compromise of delegative democracy, and respectful granting of blanket access to additional resources (in some way temporary, depending on how we arrange the taxes surrounding money and property), seems most sensible. Market income not as a work income, but as a respectfully granted extra opportunity to command resources, to enjoy or to improve on one’s undertakings. A greater unconditional income could blanket compensate for any notion of labor value, so that’s not a point of concern anymore when it comes to taxes. Taxes (on one hand, and Unconditional Income height on the other) become purely a matter of how much or how little we want to compromise on economic democracy, delegative democracy applied to resource affairs, for efficiency reasons.

    It is our money to give purpose to. No need to fall short of the goal of democratically taking control where it is owed to the people. We deserve a money that works for all, as long as we don’t have artifical super intelligence to manage the near infinitely complex questions of ideal resource allocation for the purpose of all of today’s and tomorrow’s people.

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  • Oz

    This article is so flawed, and from the outset. UBI isn’t meant to solve equality at all! Also the following statement demonstrates your complete lack of understanding

    “Savings in health, justice, education and social welfare as well as the building of self-reliant, taxpaying citizen,” clearly means social cuts and privatization.

    No it does not mean cuts. IT MEANS there will be savings that happen as a consequence of UBI, not that they are required in order to achieve UBI. In other words, there will be less need for health care, justice and social welfare. It is not quite clear to me where the savings in education would be however but none the less, your analysis of it is complete tripe.

    Now grab your dunces cap and go and sit in the corner!

    Could not be arsed to read any further as I lost interest in this tripe from that point on.

  • HomerJS

    I was really confused by all this talk about UBI and poverty/equality. In terms of benefits, the main (or only) one to be replaced is job seekers allowance. UBI could have advantages now but its major role is in the future when 90% of jobs have been lost due to automation. Overall though I was most disappointed by the negativity. “The rich and powerful will take over UBI so what’s the point?” You don’t just dump something because others might misuse and abuse it. Where’s your fighting spirit?

    • Akos Tarkanyi

      ” 90% of jobs have been lost due to automation” New human services will become popular and many people can be retrained to new jobs. This is what have always happened in the last centuries. 90 to 99% of jobs of farmers have been lost due to technical development of humankind in the last century and we still have jobs. Just different kinds than then.

  • Akos Tarkanyi

    A great article!

  • Jason Burke Murphy

    A Basic Income would bring everyone to the poverty line with about 3% of a country’s GDP.

    There is no reason whatsoever to say that you must cut anything to fund a BI.

    Left thinkers should include a basic income with their proposals. They can just say “Tax wealth and pollution and fund a BI. No cuts.”

    Or don’t and expect the precariat to believe that all of your other provisions will include them. This time. as opposed to the past.

    • Andrew Percy

      We have just done the work on the cost of a £20/week UBI and that would cost 2.3% of GDP without coming anywhere near the poverty line – see igpspn.org

  • Pete Bateman

    No. Universal Income does not imply the shutting down of all social provision. There is no expectations of limiting it to the money saved. These are assumptions that you have attached to the idea in order to dismiss it. This is known as a strawman argument.

    F. Must try harder.

    • Andrew Percy

      Pete, if you don’t replace public services, where do you get the money from?

      • Jason Burke Murphy

        Taxing pollution and wealth? We’ve done it before.

  • Arnold Smith

    Strongly disagree. If you look at the actual reality of welfare systems such as the UK, if you don’t have some form of unconditional payment, you’re eventually going to end up with a system of slavery where Job Centre staff attempt to micromanage a person’s life using the loss of all benefits as a very big stick in order to make the person comply. Furthermore non-claimants may no longer be able to compete with claimants, therefore forcing much of the population to have to claim, and undergo interviews, sanctions regimes, etc.

    The idea that you could, today, introduce a UBI so large to replace all disability benefits is a strawman. In actual fact you’d introduce a lower rate which could be either topped up with conditional extra allowances (e.g. for disability or for job seeking), or the person could supplement their income with work.

    • Andrew Percy

      Arnold, we just did the work to figure out the cost of a small UBI, see igpspn.org

  • Andrew Percy

    Great analysis, so glad to see others really look into the mechanics of UBI.

    The recent report from UCL on Universal Basic Services (igpspn.org) also looks into this. For the same cost as a £20/week UBI many public services could be expanded with a transformational effect on society.

    UBI proponents that have done the arithmetic come to the point where they start advocating magic monetary theory because they understand that no society can withstand the tax burden of decent public services + UBI, so they are left to conjure up extra funding from previously unknown sources to pay for their UBI. And that’s without considering the inflationary impact on basic resources as highlighted in this article.

    • Jason Burke Murphy

      Andrew. this article and your comments are brilliant examples of a straw man fallacy.

      I have been to several meetings of the Basic Income Earth Network and its national affiliates. I follow the Citizen’s Income Trust. I have seen no “magic monetary theory”.

      Several Nobel Prize winning economists have supported basic income. Of course, several have not. But I really don’t think these supporters are failing to do the math or are guilty of magical reasoning. Nor do I think they are plotting against the poor.

      This is really beneath us.

      • Andrew Percy

        Nothing conspiratorial here… just read the reports of people who have actually done the maths. See IPR Bath report, or LSE Piachaud, or UCL.
        Either the BI is so small it doesn’t make a difference, or so expensive it breaks the tax burden, or is substituting for public services. If it’s big enough to make a difference, it has to find new money.

        Lots of people “support” basic income. Much fewer have actually modelled it in detail.

      • Derrick Bonsell

        Look at who awards this supposed (hint it’s not the same thing as an actual Nobel Prize, such as Medicine, Physics, Peace, etc.) Nobel Prize in Economics. A capitalist central bank (the Swedish Riksbank).

        In fact it’s not even called a Nobel Prize. It’s the Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel. People really need to stop calling it a Nobel Prize, giving it a measure of respectability it doesn’t actually deserve.

        See more: https://fivethirtyeight.com/features/the-economics-nobel-isnt-really-a-nobel/

  • The combination of “The worst possible version of this policy is the only possible version we could ever have” and the misunderstanding of how pricing and inflation works make it a tossup of whether this is disingenuous anti-UBI propaganda or just deeply dumb.

  • Derrick Bonsell

    It’s been very perplexing to see leftists, i.e. people who wish to end or severely curtail the excesses of capitalism, embrace UBI.

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