What is Universal Basic Income (UBI)?

Pandora: A moon where the famous movie Avatar played out seems as far-fetched as Universal Basic Income may appear today.

Recent advances in technology, especially artificial intelligence and automation, have lead to a growing belief that in a few decades there won’t be enough opportunities to satisfy the workforce. A shrinking middle class and growing income inequality, coupled with a virtual abundance of goods and services in the future thanks to automation and artificial intelligence have prompted many leaders of different types, including distinguished names in the technology sector, to come up with new ideas or revive some old ones to tackle the situation.

Most prominent among these ideas is Universal Basic Income. In simple terms, Universal Basic Income is a form of unconditional money handed out to every citizen, regardless of your income, social status, education, or whatsoever.

But wait a minute! Cash handed out to every citizen unconditionally? Sounds more like a far-fetched idea out of a science fiction book. Well, not entirely. Let’s look at the whole picture summed up in a few hundred words.

UBI or Utopia

As a kid, I used the notion Utopy as something fantastic in the sense of being totally remote from reality. It also conveyed a sense of naivete on the part of the believer to accept such a “Utopian” idea.

Later on, I read the book Utopia, by Thomas More, written 500 years ago, which is maybe the first notion of Universal Basic Income (UBI) in history. Further studies made me familiar with the fundamental Idea of a Social Welfare System, Guaranteed Minimum Income and the many underlying philosophical tenets and political views that lead to a colorful spectrum of flavors.

But some of the most fundamental characteristics of human nature, like the need for reward when taking risks or working hard, made all of these ideas, well, Utopian.

And as the Eastern Bloc has shown flagrantly, the mere idea of eliminating reward and the artificial creation of an equal society with coercive power can only lead to a totalitarian regime where basic human rights are disregarded, innovation is devastatingly curbed, and the overall living standards downgraded. So then, is Universal Basic Income any different?

Universal Basic Income


Is Universal Basic Income a cash out to every citizen?

A Basic Income, also called Citizen’s Income, Basic Income Guarantee or similar names, is basically a guaranteed minimum income with no strings attached. Contrary to current welfare systems, the beneficiaries include every citizen of a particular state or the world. The amount of Basic Income or eligibility for receiving it does not depend on recipients’ general income level or their active pursuit of working opportunities. In a nutshell, no questions asked, no forms filled. Or more formally as BIEN, the Basic Income Earth Network puts it, “a periodic cash payment unconditionally delivered to all on an individual basis, without means test or work requirement”.


A little bit of history

Sir Thomas More

The first notion of basic income appeared in a novel written by Thomas More, an English lawyer, statesman and counselor to Henry VIII. The novel, prominently called Utopia, plays out on a fictional Island with the same name where the society shares income equally among its citizens.

In the 1790s, Thomas Paine, one of America’s Founding Fathers, proposed the idea of a “citizen’s dividend” in his work “Agrarian Justice”. It was basically a payment to all citizens, financed by a tax on landowners.

Milton Friedman

Milton Friedman was famously a prominent advisor to Prime Minister Margaret Thatcher and President Ronald Reagan. But surprisingly, he had been a vocal advocate of a form of basic income, since 1962. He claimed that it would be economically more feasible than the current welfare bureaucracy.

In his fight for racial equality, Dr. Martin Luther King Jr. came to the conclusion that racial and economic equality are fundamentally intertwined. In his last book, Where Do We Go From Here?, Dr. King called for a basic income “pegged to the median of society.”

From 1968 to 1971, Richard Nixon’s administration ran several UBI pilot projects in different states.

Approximately at the same time, Canadian Prime Minister Pierre Trudeau’s administration launched the Mincome experiment that continued through the Edward Schreyer’s government and was finally closed down in 1979.

Recent attraction and popularity of Universal Basic Income

Rising inequality figures despite the overall increase of wealth and accelerating automation of jobs due to the advancement of artificial intelligence have lead to UBI’s increased popularity.

Many industry leaders and politicians have added their support for some sort of basic income. Hillary Clinton in her new Book, “What Happened,” laments not having proposed bold ideas in her campaign, including a form of Basic Income. Facebook’s Mark Zuckerberg believes that UBI would encourage innovation, and the famous Elon Musk says that “There is a pretty good chance we end up with a universal basic income, or something like that, due to automation.”

Earlier this year, Y Combinator’s Sam Altman wrote, “I’m fairly confident that at some point in the future, as technology continues to eliminate traditional jobs and massive new wealth gets created, we’re going to see some version of this at a national scale,” while their new research project on the subject.

Is Universal Basic Income socialism?

Karl Marx (1818-1883), philosopher and German politician
Karl Marx

Well, absolutely not. Basic Income is a form of redistribution of wealth that does not alter the form of production and resource ownership. You can definitely say that UBI maintains—and even strongly promotes—the notion of private property. In addition, under UBI, citizens have more freedom in making their financial decisions (compared to current welfare systems). In a nutshell, centralization and government are reduced. Looking at some of the conservative and new liberal advocates of UBI, like Milton Friedman or Friedrich Hayek, both considered fathers of free-market economics, or more recently the Adam Smith Institute gives ample indication that Basic Income is in no way socialism.

How Does Universal Basic Income work from a financial point of view

There isn’t a silver bullet solution on how to finance Basic Income. On one hand, there are too many local economic and political parameters. In addition, data and experiments are nearly not enough to come to a decisive conclusion. And like all socio-political problems, there isn’t a mathematically provable solution. It also depends on the level of the agreed basic income, how widespread and inclusive it actually would be, and whether it substitutes current welfare benefits or is added to it, to name just a few variations.

The proposed solutions and estimates differ wildly and while there are those who believe it would lead to huge tax increases and inflation, others show that UBI not only helps the economy to stay healthy but would grow it, in the case of USA, by 2.5 trillion dollars.

Recent Universal Basic Income Projects

  • Kenya: GiveDirectly, a US-based charity, has financed direct cash transfers to poor villages in East Africa since 2008. In October 2016, the charity started a small-scale initial project including just one village. Beginning in November, the experiment has scaled up dramatically, including about 300 villages, with different levels of cash payouts and duration to help the study.
  • Oakland, California: Y Combinator, the Silicon Valley most prominent VC, has started a large-scale project to give insight into the dynamics and effects of universal basic income.
  • Ontario, Canada: This year, the Canadian government has started a basic income experiment that ultimately will include 4000 people. In October 400 people received their first paychecks. It is notable that this project is not a pure basic income experiment since for every additional dollar earned, the recipient’s basic income will decrease by 50 cents.
  • Finland: Kela, Finland’s Social Insurance Institution, has started a UBI experiment since 1st January 2017 that will continue until end 2018. The project entails 2000 randomly selected individuals that are eligible for social assistance. The basic income is exempt from taxation.

Final thoughts

As history has shown time and again, it wouldn’t be prudent to predict the future with exact blueprints and solutions; the most game-changing ideas were those least anticipated. So predicting that Universal Basic Income is the one and only viable solution to a mounting sociopolitical problem, and the inevitable disruption of the job market by artificial intelligence and automation is not only naive but also narrow-minded.

But there is no question that the underlyings are changing fundamentally and the current status quo will become more and more unsustainable. So, instead of trying to forecast definite outcomes, I will rather anticipate the bigger trend and embrace change as it comes, believing that an open mind gives me the courage to put unforeseeable opportunities to good use while adding my share as a human being to the common progress of my species.

Feel free to comment. Would love to hear your feedback.

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