Universal Basic Income, a concept advanced by democrat Andrew Yang in the presidential primary season is an idea whose time may have come, and may even be overdue. The premise is that all citizens or residents of a country receive some sort of flat payment per month. The arguments on both sides tend to be – For: That it permits some purchasing of necessities and smooths out the acquisition of some basic needs, perhaps housing, health insurance, food, or other needs. Against: The country can’t afford it and such payments remove the incentive to work.
This post is likely to be the first in a series to explain some thoughts for discussion. And before I start, please be aware that the United States already has two “universal basic income” plans in the welfare system which gives systematic monthly payments, and the social security old age and disability systems which give systematic monthly payments. Both of which are a type of UBI. And then there are other US plans like the Alaska Permanent Fund that makes an annual payment to all Alaska residents. The difference between those plans and a Universal Basic Income plan are the costs associated, the way they are paid for, and the eligibility rules.
Now on to the “why we need UBI.” Or wasn’t I taught in Economics 101 that transfer payments like UBI were bad for the economy? Yes, that principle has been taught for years and years. And it is now as obsolete as a printed newspaper showing up at your doorstep. The basic capitalist construct, that has been taught since the 1700’s until now, was that some parties provided the “risk capital” and built the businesses and the businesses could thrive or go bankrupt, that was part of the risk, but they would reap the upside rewards. That is where we get the richest people from like Jeff Bezos, Bill Gates, Mark Zuckerberg, Warren Buffet, etc. All very smart people, all risk-takers, all wonderful business people. And the other general set of parties is the “labor,” the people who provide the labor and intellectual input into the success of the companies, sometimes with some modest stock ownership, sometimes with just a wage. Sometimes with health benefits, sometimes without. Sometimes with a retirement plan, sometimes without. I am not arguing for a change in the basic capitalistic construct, only a slight modification, based on well-traveled economic places that the US has already made home.
So what has changed? Interconnectedness The one thing the worldwide pandemic has taught us is that everyone is now part of the risk machinery. No one is isolated from the entire system collapsing. And more than just losing jobs, in the US you lose healthcare because healthcare is often tied to employment. And then the monetary markets can freeze up. And then companies can instantly go bankrupt. So the laborer who could take their labor down the road to the next company or to over to the next city if their company had trouble and went bankrupt now has a new level of risk. It is not the fault of the companies, but it is a symptom of the world-wide interconnected Internet economy that has instantaneous travel.
The tangible sign that something needs to be changed to prepare for the rest of the future is that the US government needed to figure out how to distribute money to the entire population as quickly as possible. The government voted in a bi-partisian way on a minimum of three relief packages that distributed, distributed, distributed money to help though the hugely risky time. It took months to distribute money this time. Next time there is a risk-based problem, we might not have months. Failure to plan for the next event would be like us not thinking about stockpiling some extra healthcare supplies now that we have learned our lesson. Next time might not have months to react financially, we might have only have weeks, days, or even hours. The Interconnectedness, the Internet, and Instantaneous travel has made this a different world than in the 1700’s, 1800’s, and 1900’s. Time for some new thinking.
PLAIN ECONOMICS 