Source: Mises Institute
Most of us have heard the arguments from the Left on the emancipatory power of the Universal Basic Income Guarantee to free us from the chains of work, stress and poverty, and to liberate the creative impulses of man. We also hear from conservatives like Charles Murray, who stress that welfare cliffs under the current system create a poverty trap, where by earning more people will take home less, creating a permanent disincentive to work which the UBI would partially solve.
There is a contingent of libertarians who also hold the view that the UBI is better than the current system. They highlight the fact that bureaucratic costs will be lower and, theoretically, many public sector workers could be axed from welfare departments — reducing the overall size of the state. Government outgoings on law enforcement could be reduced, if the UBI leads to a drop in poverty-driven crime. And, if people are already receiving the basic means of survival, we can cut regulations around hiring and firing people and labor laws, since workers, faced with poor conditions, will have the f-you money to walk away from them. What’s more, if people can shop around for services currently provided by the government then some programs can be cut into the bargain.
Ultimately, since people would be given their basic income directly to spend as they please, it would preserve the market economy relative to more intrusive forms of government assistance or central planning, where officeholders and bureaucrats attempt to organize production “on behalf of the poor” (or “the workers” or “the people”) leading to a disastrous misallocation of resources and authoritarian dictatorship.
At least that’s what the pro-UBI libertarians claim.
I want to present five alternative arguments for why we should not be unduly taken by these views. They are not the tried and tested arguments such as, “The UBI will place a huge tax burden on working while rewarding idleness,” or “The UBI will cause spiraling inflation!”
While those have some validity, we have all heard them before.
These are my arguments appealing specifically to libertarians rather than economic progressives.
One: the UBI will not make statists go away because it will not, and cannot, address the underlying causes of poverty and inequality — which is that poor people have low skills and no capital.
There is nothing about a UBI that makes people at the bottom of the ladder more self-sufficient and able to command, for themselves, a higher wage, or gain a share of corporate profits by investing them in the stock market or property. All that will happen is that poor people will take their UBI to the shops, spend it on products, and it will go straight back into the pockets of the rich people. The Left will continue to complain about inequality and the fact the poor are beholden to large corporations, and advocate for more government programs to solve these issues rather than fewer.
All that is happening is money is being taken from the deep end of the swimming pool and shoveled into the shallow end (with large quantities of it being spilled along the way). This is not a zero-sum game. There will be a huge loss of capital investment resulting from the UBI. When you tax the rich to pay for the Basic Income they will not be able to invest in machines, factories, and technologies which make everyone richer by reducing the cost of goods and services.
To illustrate: suppose the owner of a chain of stores is taxed $10 millon to pay for the UBI, but that money is given to his customers who come straight back into his shops and spend the money they have been given. All this means is he has $10 million less goods which he has to replace. That means less money to invest in employing people or in machines to bring the cost of his products down. People at the bottom, whose primary outgoings are the essentials, will suffer the most from higher prices
Two: With the UBI, the state is potentially handing out a large sum of money each month to people who may spend it to ruin their own health, or destroy their lives. Individuals with substance addictions, gambling problems or bad spending habits which get them in trouble. People who are addicted to computer games or Facebook might benefit from getting out to work in a bar or cafe and mingling with the public for some occupational therapy. But the UBI will allow them to isolate themselves further. Thus, in many cases with the UBI, payments may not actually be helping people. Recipients lives could be made worse by payments.
It takes a pretty callous person to say, “Well, it’s their life, they’ve got a right to ruin it. Let them take out their UBI and spend it on hard drugs if they want to.” While it’s true people ought to be able to spend their own money as they see fit, how they spend other people’s money is another matter. Handing a suicidal person a bottle of sleeping pills might not be identical to murdering them, but it’s still highly questionable ethically.
Three: Even if the UBI will allow us to replace all sorts of systems and reduce the size of government, that will not be the end of the story. UBI will inevitably grow arms and legs.
After the UBI is instituted, it will only be a matter of time until we hear this group or that group should be earning an even higher basic income. “I am disabled, I should have a higher basic income, some may say. Or other may object “All my relatives live in a more expensive city, so I need a higher basic income.” And so on. Then people will advocate for a higher UBI for the elderly, disabled, people who live in areas where the rents and costs of living are high, or where they have to travel long distances to work, and so on. Ad infinitum.
Any group which represents a large enough voting block can influence the government to add supplements to their basic income, and there is no compelling reason for any administration not to cater to them to buy votes. On the face of it the argument will sound quite compelling. I mean, why shouldn’t vulnerable groups and those who have to pay more to live get a supplement? It’s only fair, right? But then we are back to towering administrative costs. We’re bac to needing public sector workers to figure out who is due what, and to check that people aren’t abusing the system. We’ll need public money for lawyers and judges to prosecute abusers.
Four: And perhaps the scariest aspect of it all is that in most cases when the government creates handouts, there is always a group that stands to benefit and another that stands to lose. With the Universal Basic Income it seems on the face of it that there is no “out” group. Everyone is in on the action.
But that’s not really the case.
The state, policymakers, and government employees will benefit relative to everyone else.
After all, the UBI legitimizes government and brings everyone into a system which they could otherwise often ignore. The state is provider, and each of us becomes its ward.
Once this relationship between individual and state has been established it will be hard to go back. We will enter into a frightening era where the UBI can be weaponized by the government to threaten people with benefits sanctions for not behaving as our rulers see fit. Criminals first. Then unpopular groups. Then political dissidents with opinions like our own. We will be threatened into silence with the threat of the removal of our UBI.
People may be forced to accept a mandatory government ID card in exchange for their UBI. Then they will be asked to show it everywhere they go, and even refused access to venues, events, public transport, or even to the roads. In a time of war you will be asked to enlist or risk losing your UBI for denying your patriotic duty.
It will be worst for the people at the bottom of the economic ladder. They will be forced into a far worse position, particularly if they have been lead, by their access to a basic income, not to pursue economic skills that would make them self-sufficient, or to lose the ones they already have because they have not needed to use them in a very long time. They will be completely at the mercy of the state under the threat of poverty or even starvation because they have no hope of being able to provide for themselves or their families.
This would make the basis of a good dystopian science fiction novel, but sadly I’m only too convinced that this is what would end up happening if those in power were to be put in charge of the purse strings.
[For more, see Universal Basic Income — For and Against (with a foreword by Robert P. Murphy).]