Basic income - free money for everyone? Fleur de Beaufort is a member of the scientific staff at TeldersStichting (Telders Foundation), the Dutch Liberal think tank Over the past few months intensive discussions have been taking place in several West-European countries about the introduction of some form of unconditional basic income. Some Dutch municipalities have prepared plans for pilots at a local level, which will probably remain restricted to those currently receiving social welfare benefits. The Finnish government intends to start a pilot no later than 2017, whereby only the amount of the payment is still subject to discussion. In early June of this year, the Swiss population were able to express their opinion through a referendum about an elaborate plan for an unconditional basic income for all citizens. Every adult Swiss citizen would receive an amount equivalent to €2,250 a month, and on top of that, all parents would receive the amount of €560 per child. An overwhelming majority of 78% of the voters decisively dismissed the plan in the referendum. Those who voted ‘No’ gave unaffordability, in particular, as their reason for doing so, as well as the disastrous effect it would have in disincentivising the labour market. One interesting aspect of the discussion about the basic income is that those advocating and opposing it cannot easily be classified into political right and left. Perhaps against all odds, socialism, liberalism (of both the classical and social variety) and libertarianism are not facing each another head-on on this issue, which makes the concept of a ‘basic income’ an exceptionally interesting one for further consideration. Historical background Ideas about forms of a basic or minimum income, whether conditional or unconditional, for all adults in a society have existed for a long time, and the forms taken vary from a guaranteed minimum subsistence income for everyone, or only for those who need it, through an unconditional, one-off lump sum for everyone, to a combination of these forms; the basic income as it is being discussed today. Various thinkers have contributed their ideas about matters such as social security, the need for a minimal level of subsistence or even an unconditional basic income for everyone to the discussion. A concise exploration of the way in which these ideas have developed will be provided before the benefits and drawbacks of an unconditional basic income are analysed. As early as the sixteenth century, the humanist philosophers raised the idea of a minimum income for all members of a community. The English humanist, Thomas More, published his work Utopia in 1516. In this – prompted by his dissatisfaction with the political and economic situation in his own country – he sketched the contours of an ideal state. More linked the idea of a minimal income for all to the fight against theft. Severe punishments were common in his time, not only for serious offences but also for minor felonies such as theft. The main character in the book – Raphael Hythlodaeus – is of the opinion that hanging as a punishment for thieves is not only unjust but also ineffective. If theft was the only way to procure food for basic survival, then no threat of punishment, no matter how severe, would be likely to change the behaviour of thieves. In Utopia, More speculated that theft was therefore not a choice, but an evil which was necessary for the thief to stay alive, and according to More, this was precisely the issue which must be solved. ‘Instead of inflicting these horrible punishments, it would be far more to the point to provide everyone with some means of livelihood, so that nobody’s under the frightful necessity of becoming, first a thief, and then a corpse.’ In this context, it should be noted, though, that Utopia was not written as a practical example, but rather as a form of satire. The idea of a guaranteed basic income was worked out more seriously by the Spanish humanist Juan Luis Vives, who was a good friend of Thomas More. With his essay De Subventione Pauperum he addressed the city council of Bruges in 1526. In the essay, Vives advocated a centrally organised local policy for the poor, providing a minimum subsistence income for all residents of a local community. He sustained his plea not with an appeal to justice, but rather to efficiency in fulfilling the moral obligation to be charitable. In the view of the humanist, local authorities could judge much more efficiently who should be eligible for poor relief than the churches, which had assumed this task so far. The idea was taken up by Charles V in his Eternal Edict of 1531, which constituted the basis for communal legislation for districts in the Habsburg Netherlands, and in which cities were obliged to institute an urban fund for the poor; the so-called Common Fund. So in this instance, minimum subsistence was only envisaged for those who actually needed it. The Common Fund was to be managed by local worthies. According to Vives, this minimum subsistence should not be unconditional: poor people had to earn it by demonstrating their willingness to work, and Vives felt that some kind of work should be found for everyone. He felt that even those who had frittered away their income in gambling, fornication or excessive luxury should not be allowed to perish, and were also entitled to food. However, the income paid to such people should be so minimal that it only just prevented them from dying of hunger; they would still have to endure the feeling of hunger. Only in that way could they serve as a role model for others, as well as having an incentive to work. Vives was of the opinion that there was appropriate work available for everyone in society. In this way, the poor would not only contribute to their own income, but would also be prevented from being seduced by the bad ideas and behaviour that would emanate from idleness. With his ideas, Vives laid the basis for general state-provided care for the poor. Various Enlightenment thinkers elaborated on the ideas previously published by humanists with regard to a minimal subsistence income. However, by the end of the eighteenth century new ideas about ownership and redistribution had begun to emerge. In 1797, the British-American political philosopher and activist Thomas Paine – one of the American Founding Fathers – published the pamphlet Agrarian Justice, in which he went into the individual right of ownership. It is a position not to be controverted that the earth, in its natural uncultivated state was, and ever would have continued to be, the common property of the human race. In that state every man would have been born to property. […] But the earth in its natural state, as before said, is capable of supporting but a small number of inhabitants compared with what it is capable of doing in a cultivated state. And as it is impossible to separate the improvement made by cultivation from the earth itself, upon which that improvement is made, the idea of landed property arose from that inseparable connection; but it is nevertheless true, that it is the value of the improvement only, and not the earth itself, that is individual property. Every proprietor, therefore, of cultivated land, owes to the community a groundrent (for I know of no better term to express the idea) for the land which he holds; and it is from this groundrent that the fund proposed in this plan is to issue. Further on in his pamphlet, Paine explains that a ‘National Fund’ would have to be created: …out of which there shall be paid to every person, when arrived at the age of twenty-one years, the sum of fifteen pounds sterling, as a compensation in part, for the loss of his or her natural inheritance, by the introduction of the system of landed property. And also, the sum of ten pounds per annum, during life, to every person now living, of the age of fifty years, and to all others as they shall arrive at that age. Whereas Paine still emphasised the idea of communal ownership of the earth as a basis for the one-off refund to which everyone was entitled, later thinkers worked out the idea in more detail on the basis of righteousness and equal opportunities. The idea was that the one-time payment of a certain sum of money when citizens reached the age of eighteen, irrespective of their background, would give all people an equitable chance of a good start. The idea of making a one-off payment of starting capital to anyone who reached the age at which they could work autonomously and start a family had already been briefly suggested in the work of Marie Jean Antoine Nicolas de Caritat, Marquis de Condorcet, Esquisse d’un tableau historique des progrès de l’esprit humain, published after his death in 1795. Condorcet, however, did not work out this particular idea in detail. In his book, he mainly outlined the contours of a system of social security for all citizens not unlike that which was introduced in many western European countries in the nineteenth and twentieth centuries. Condorcet felt that a system of social security, in addition to abolishing unjust inequalities, uncertainty and poverty, would also reduce corruption and theft; in this he was following the reasoning applied by the humanists earlier. Criticism of too much state interference with care for the poor through re-distribution came from another quarter early in the nineteenth century. The French philosopher Alexis de Tocqueville delivered his speech Mémoire sur le pauperisme to the Royal Academic Association of Cherbourg after a journey through England in 1833. Whereas other thinkers had speculated about the possibilities of social security, a minimum subsistence income for those who needed it, or a one-off lump sum for everyone starting their adult life, Alexis de Tocqueville perceived mostly dangers. ‘Man, like all organised beings, has a natural propensity for idleness. However, there are two motives that induce him to work: the need to stay alive and the wish to improve his conditions of life’. By making available state-funded care for the poor, these essential stimuli would be taken away from people. Poverty may have been a persistent issue to Tocqueville, but it was also a logical consequence of economic progress. The Frenchman was very sceptical about the possibility of solving inequality, dissatisfaction and poverty through state-funded care for the poor, not only because it would take away essential incentives to work, but also because it would become a bottomless pit, with new needs continually emerging which demanded relief. In addition, the anonymous character of public care for the poor would mean that those who benefitted did not feel any moral imperative to change their situation. Tocqueville expected more from private care for the poor; the individual moral obligation of those citizens who could afford it. Looking after one another in this way created a bond between provider and receiver, whereby the latter would feel the moral obligation, or so Tocqueville thought, to at least use the benefit properly, and in addition, to do anything possible to avoid dependence on charity in the future. It goes without saying that Tocqueville would consider an unconditional basic income for everyone to be a disastrous idea. Nevertheless, others elaborated on earlier ideas about a minimal subsistence income or a one-off lump sum, and this eventually resulted in the current plan for an unconditional basic income for everyone. In 1836, the ideas of the utopian socialist Charles Fourier laid the foundations for the unconditional basic income, although he proposed that it should be strictly limited to those who really needed it. In La Fausse Industrie, Fourier argues that the violation of anyone’s fundamental right to hunt, fish, pick fruit or have his cattle graze on communal land, implies that society owes at least a bed in a basic hostel and three modest meals a day to those who cannot fend for themselves. Several of Fourier’s disciples – known as Fourierists – elaborated on these ideas, always with the conviction that the guarantee of a minimum income would not detract from the willingness to earn money over and above that by working. The British philosopher, John Stuart Mill, a very famous thinker among liberals, pronounced his views on the basic income in his book Principles of Political Economy. Next to a basic income for everyone, Mill left room for ‘inequality’ in the distribution of other resources. The pros and cons of an unconditional basic income The recent discussion in Finland about the introduction of an unconditional basic income for everyone concerns a monthly allowance of between €800 and €1,000, without any effort being required on the part of the beneficiary. In the Netherlands, discussions concern a similar amount. This means that this basic income is situated around the poverty threshold; those who received it, however, would have the right to earn as much additional income as they themselves considered to be desirable. What are the arguments raised by advocates and opponents today as to why the unconditional basic income should, or should not, be introduced? Advocates of the basic income see in it a number of advantages. For example, the unconditional basic income would mean an end to the so called ‘poverty trap’, the situation faced by many recipients of benefit, the consequence of which is that they would be worse off if they were to work. Because of the poverty trap, working provides less, the same, or only a little more income than welfare benefits, particularly because various additional sources of income supplements and subsidies are also lost when a recipient no longer receives state benefits. Advocates of the minimum income feel that a basic income would allow people to do jobs to increase their income without losing the money they receive. Working would thus still be rewarded, and in spite of the ‘free money’, people would be incentivised to participate in the labour market. The potential to significantly reduce government infrastructure is considered by advocates to be another advantage. Not only could today’s complicated system of social security involving many different kinds of benefits and subsidy arrangements be greatly simplified, multiple controls (for example, the current obligation to apply, or dealing with benefit fraud) could be abandoned, and an entire army of integration consultants could be dispensed with. Advocates feel that the re-distribution would, at any rate, be ‘fairer’. After all, many people who really need support get lost in the web of social security arrangements, whereas clever benefit recipients who manage to ‘work the system’ can secure a substantial income by applying for every potential subsidy. Finally, advocates appeal to the expectation that people with an unconditional basic income would be able to lead a happier and more worthwhile life. No longer harassed by the obligation to apply for benefits or by checks on, for example, cohabitation, people who do not work – for whatever reason – could also lead a worthwhile and happy life. Advocates do not express themselves quite so emphatically when it comes to the affordability of the idea, apart from their expectation that the costs are bound to be covered by the abolition of complex benefit and subsidy regimes, and by the consequent reduction in the number of civil servants required to operate them. So, on the one hand, advocates of an unconditional basic income expect that people will continue to be incentivised to go to work, while on the other hand, they see an important advantage in the expectation that people without work would also be enabled to lead a happy and worthwhile life. Opponents invariably start by highlighting the unaffordability of the idea. A broad calculation for the Dutch situation that has meanwhile been presented in the media by several economists shows that the costs of the unconditional basic income will amount to nearly €200 billion a year. About €130 billion could be funded from the savings derived by abolishing benefits, subsidies and income tax allowances, but this still leaves a gap of €70 billion, which could only be bridged by means of significant tax increases for the working population of the Netherlands. Furthermore, this calculation model does not take account of those people who will still need to appeal to the collective system for additional benefits on top of the basic income, for example, because of illness.7 The necessary tax increases would have a disruptive effect on the economy. There is also the risk that raising taxes would lead to an increase in illegal employment with a view to dodging the higher taxes. Additional controls on this ‘black economy’ would then seem to be unavoidable, so that more staff to do the monitoring would then be required in another domain. Opponents from the classical-liberal school also dispute the assumption on which the idea of an unconditional basic income is based, ie. that there is a substantial communal fund that can, or even needs to be, re-distributed. Ultimately, it is individual working citizens who bring such collective resources together. In that context, classical-liberals are definitely in favour of supporting, from collectively funded financial resources, those people who through no fault of their own cannot fend for themselves either temporarily or permanently. Such support, however, is always aimed at ensuring that people are enabled to be as self-sufficient as possible in the long run. In a manner of speaking, the basic thought behind the basic income is not part of liberal DNA. Left-wing opponents, in particular, disagree with the idea that the unconditional basic income is in fact a major re-distribution operation, because a large group of people who have no need of it at all would also receive money from collective resources. These opponents would be much more in favour of a minimum subsistence level only for those who need it. The distortion of competitive forces is also a potential threat, according to some opponents. Those who wished to do so would be enabled to do work they enjoyed for less money, since they would be assured of a minimum basic income. On the other hand, it would become virtually impossible to find applicants for less attractive work which was poorly paid, especially low-skilled or unskilled jobs. Opponents do not share the optimism of those who advocate such a scheme that people would keep working despite having a minimal income, or that due to the abolition of the poverty trap they would be more incentivised to earn money in addition to their basic income. Quite the contrary; opponents anticipate that such a financial safety net would make people extremely lazy. After all, the need to work would become less urgent, particularly for low-skilled and unskilled workers. This is because it follows from the unconditional nature of the basic income that no reciprocal action is demanded of the recipients. Ultimately, the affordability or unaffordability of an unconditional basic income for all citizens in a society can only be convincingly demonstrated in practice. Until such time, whether the arguments of the advocates or those of the opponents best reflect reality remains nothing more than guesswork. The principle-based objection to the assumption that there should be a large common fund that could be re-distributed at will naturally still stands.
Ultimately, the affordability or unaffordability of an unconditional basic income for all citizens in a society can only be convincingly demonstrated in practice