The End of Poverty

 ‘The world’s hunger is getting ridiculous. There’s more fruit in a rich man’s shampoo than on a poor man’s plate.’

The world lies in shambles. Hunger, poverty and disease threaten to rip apart the fabric that is humanity. Fed on a diet of elitism, with a side of abject hunger, how do we save the world? There is no silver bullet of a cure, no panacea for poverty: but one feasible solution exists. Universal Basic Income (UBI). With a perfect track record in trials and no lack of supporting evidence, we have found the needle to stitch back the fabric of humanity. All we need to do is use it.

What is UBI?

Universal Basic Income is a social security and welfare programme that aims to provide every person within a nation a certain preordained inflation-adjusted amount periodically with no contingencies attached regardless of their social status, gender, creed, race, sexuality, etc. This scheme is often called a negative income tax (although the terms have different meanings) or minimum income. The exact amount differs from model to model. UBI, in its quintessence, implies a sense of universality to welfare. Minimum Basic Income or minimum income connotes the provision of unconditional aid to a targeted section of society. 

Has it been implemented before?

Not essentially, to the misfortune of so many billions of impoverished people. However, multiple nations have run UBI trials and pilot projects. The results? All successful. Prominent examples include:

1. Namibia, Africa – The Namibian Basic Income Grant Coalition, funded by the German Protestant Church, conducted UBI trials in 2 Namibian villages, giving villagers $13 (Rs 943), about 8% of the average income, every month. (2008-2009)

2. India, Asia – The Self-Employed Women’s Association, funded by the UNICEF, carried out two pilot projects (one in 8 villages across Madhya Pradesh, the other in a tribal village), giving every adult $4.14 (Rs 300), and every child $2.07 (Rs 150), about 14% of the average income, every month.

What problems can UBI solve?

1. Poverty – UBI's principal function is to address poverty - which it performs flawlessly (as every simulation has confirmed). This programme provides unconditional aid to the poor, acknowledging that the poor know how to manage their finances best. Bureaucrats often string up the poor like puppets (for economic statistics). But that's what current welfare programmes do! Welfare programmes frequently allocate material resources - crop seeds, fertilizers, land - but never money. Our governments believe that the poor cannot manage money (hence they're poor). Otherwise, why would they be poor (see the previous article)? Because their parents were. Additionally, the bureaucracy involved in getting aid from the government often frightens the poor from their rights, thus letting them slip through the cracks. By providing everyone with capital, no questions asked, we ease the process infinitely. Everyone is entitled to a livable income, and poverty is not a parameter.

2. Literacy – When a poor person receives an unconditional sum of money every month, he would not have to work overtime or in dangerous conditions. Labour provided would decrease to one job, increasing time to spend on other pursuits. The highest on the list is education. Low-income and Middle-income people who receive this money will save up for pursuing further education for themselves or their children, increasing the literacy and ‘merit’ of the person. Such equality would bring the world one step closer to solving the problem of ‘merit’ (See the previous article). We can finally democratize education.

3. Crime – Crime is often done for money, survival or out of desperation. Now, if people can fend for themselves, they need not turn to crime for survival. Similarly, with enough capital to invest in their education, upliftment or businesses, they need to steal to make ends meet. As the motive for low-profile crime disappears, crime rates drop (as was seen in the Namibian UBI project). 

4. Drug abuse, Alcohol, and Transactional Sex – In all UBI pilot projects, we noted that drug abuse rates reduced dramatically, contrary to doomsday prophecies by many scientists. Alcohol sales decreased, brazenly negating the poor man’s stereotype as an alcoholic good-for-nothing addict. Transactional sex work also went down dramatically: most people had enough income to survive without it. 

5. Workers’ Rights – So many workers today are forced to labour in inhumane conditions - faulty safety gear, hazardous effluents, rickety buildings! Without the means to negotiate their surroundings, workers have wallowed in their misery for centuries. However, with UBI, they no longer need to work in such appalling companies for the money. They can save up and gain access to higher education or vocational training. Such a turn of events could promote a boycott of employment in corporations without adequate facilities and incentive. In the past, such efforts were undermined by the desperate poor. Due to UBI, everyone has the same solid footing above the poverty line - and nobody wants to go below that. 

6. Child development – Most of these impacts and efforts would be greatest seen in the children, with whom the poor can finally spend more time. Since they don’t need to work for such great hours, they can spend time with children, an important aspect of the development of a child, which is responsible for many traits expressed by them in the future. Providing them access to amenities and education which they did not possess will not only change their child but also them. Mindset change can shift in with UBI.

The list just goes on – wealth inequality, automation unemployment, health, democracy, development etc. 

What is the criticism of UBI?

1. People will not be motivated to work because of UBI.

This is false. In every UBI simulation run (except, as was claimed, in Iran, but analysis later confirmed that the data was manipulated by the government) people did not stop working. Primary findings from the Helsinki Trial in Finland showed that people, when given UBI, worked modestly more than those on unemployment benefits. People work for a variety of reasons and do not need a monetary incentive to do so. Many social experiments have gone to show that people work because they wish to better society. Of course, it may seem hard to believe that humanity is inherently good, it will be covered in a future article, but there are other incentives at play too. Firstly, social status. People like to better their social standing, which is partly the reason why Veblen (in the simplest of terms, luxury goods) goods sell so well, and jobs help them reach that status. Secondly, conformity. People like to work so that they belong. Belonging is a core component of human psychology, ingrained since prehistoric eras. Work provides us with a community of like-minded people with similar aspirations and goals so that we fit in and belong. Thirdly, desire. People work because they want to. They want to do something, and that something is mostly for the betterment of society. Perhaps one day, UBI will be high enough so that work will not be a necessity, but a choice.

1. UBI is too expensive to be practical.

Governments usually spend about 5% or more of their GDP in financing social safety nets. A UBI scheme has a raw cost that is close to 4% of a nation’s GDP essentially. As it should ideally reduce or replace social welfare schemes, it would not drastically impact the budget of a nation. Additionally, if we calculate the real cost of UBI, then we must take into account that any unemployment schemes, literacy campaigns, and healthcare costs would reduce dramatically in terms of government expenditure. A sizable UBI scheme (say of $1000) would potentially grow the American economy at a whopping 12.56% per annum, up from the 2.16% it is growing at currently. Therefore, instead of taking more of the pie, UBI just makes a bigger one (thus keeping costs lower than prior social safety spending). 

1. UBI causes inflation.

Firstly, UBI is not financed by governments printing money, so a direct inflationary result cannot be due to UBI. UBI is financed by a redistribution of money that is already available in the system. The second commonly-held misconception is that because people all get a similar bailout every month, they would not be compelled to work at lower wages (which is selfish to think of as an argument). This meant that companies have to increase labour prices, which would cause consumer prices to rise, thus leading to inflation. Suppose, in the US, every person received a basic income of $12,000 (Rs 870,000) per annum. If you had a job earning $20,000 (Rs 1.5 million) per annum, now you would have an income of $32,000 (Rs 2.3 million) per annum. However, corporations, in a bid to keep you at your job with many others, might decide to give you a wage hike – at the most, say, $10,000. Now, your total income per year is $42,000 (Rs 3.1 million). But, as analysis by Marketplace and Slate showed, this would increase your average expenditure by just 1.4%. Thus, you would probably have to pay $90 more than usual – while your income increases by $22,000 (Rs 1.6 million). The effects of UBI are not cancelled out by inflation. Indeed, UBI would initially make prices volatile and might change them, but, as a study in Mexico showed, its effect on inflation is minimal if none.

1. UBI should only be for the poor.

While that would be optimum, there is no real definition of what constitutes poor. To add on, if we set a bar for what is considered poor, and thus requires our assistance, there would be no motivation to move out of that zone. This is known as the welfare trap. Take for instance that we take our target beneficiaries for an MBI scheme to be those below 3 times the poverty line (Rs 23,000 [$316] per annum), giving them Rs 12,000 ($165)  a year. This scheme would veritably assist those beneath the poverty line to come above it. However, what about those who earn about Rs 20,000 ($275), those near the limit of the scheme. These people, if they find a job which raises their income by say Rs 5000, or Rs 10,000 ($137), will not accept it. They would prefer to stagnate at Rs 20,000 ($275) than get a job worth Rs 30,000 ($412). Why, you ask? Primarily because their real income, when adding UBI, is Rs 32,000 ($439). Unless they get a job giving them a Rs 12,000 ($165) raise, they would not accept, setting society’s bar at Rs 23,000 ($315). This would concentrate wealth towards the bar, and limit the opportunities of going beyond it. Hence, an MBI scheme would alleviate poverty to some extent, but only to create a new class of poor. Another criticism notes that the ultra-rich do not need to get the same payout as the ultra-poor: that’s a waste of money. It may be, but to avoid a scenario of stopping growth altogether, it must be done. Additionally, following Engel's Law, the poor spend a greater proportion of a given dollar than the rich, thus receiving a greater benefit for every dollar they get. While a rich person decreases the value returned to the economy (for every dollar given to a rich man 75¢ return), a poor person multiplies it manifold (for every dollar given to a poor man $2.2 return). Therefore, a dollar is more productive and important for the poor. Ergo, the rich and poor do not actually get the same amount of value from the government. However, instead of a government regulating every individual’s provided value, the market is far more efficient and can respond to any income fluctuations and changes faster than a government official. Hence, UBI must be universal to achieve the desired effects.

1. The Social safety net will be wiped out overnight.

No. Obviously, UBI programmes will ensure that for a while both exist while transitioning completely. Agreed, this may be more expensive than utilising either programme, but for the sake of progress and development, the government will have to begin siphoning away funds to UBI over a few years.

How much should UBI be?

There are many estimates about the exact cost of UBI, varying greatly from the poverty line to high enough that work becomes a choice (and why not?). In India, two detailed plans exist, both for rather small amounts:

1. Rs 1,200/month ($16.5) or Rs 14,400/year($199): Such a plan estimates that it would cost the government about 21.6 lakh crore rupees ($300 billion).

2. Rs 635/month ($9) or Rs 7,620/year($105): Such a plan estimates that it would cost the government about Rs 9.4 lakh crore rupees ($130 billion) for 75% universality.

Conclusion.

For decades, various nations have tried to perfect what neoliberals have called ‘catch-up’, a way for developing nations to reach the level of advanced economies. Various methods have been tried, but one solitary problem threatens its framework – poverty. Perhaps UBI can help us there: help so many underdeveloped nations to reach out to the first world. Universal Basic Income is an idea of great potential which has been stewing for the past half-century in the minds of radical politicians and social scientists. Rarely have we been so sure about the consequences of programmes (I mean: a thousand pilot projects have been run), and rarely have we hesitated so much to act on them. We must act to end the misery that is poverty.