by Andre Coelho | Jan 13, 2019 | News
Milton Friedman once gave a lecture in which he demonstrated, in a very particular logic, that the so-called “free lunch” was a myth. The origin of the term is unknown, but in early twentieth century it was already in use. Since then it has been so frequently employed that people have been explaining and rationalizing over it up to the present. In physics, to do something – which is called “work” – is to spend energy, and so, physically speaking, there is nothing ever for “free” (free from some energy usage). However, in economics, “free”, and particularly the “free lunch” term refers to an opportunity cost that always exists, because the human imagination is infinite (at least in possibilities), and the Earth resources are limited. So, Friedman’s logic is that there will never be a “free lunch” because spending money somewhere always takes money away from something else (the opportunity cost). Others believe, however, that these “costs” and the inability to provide “free lunch” is only a reflex of a scarcity mentality that, for instance, considers that money – an imaginary construct – is finite and that its management amounts to a zero-sum game (if I win, you lose). An alternative belief is that, while acknowledging that physical resources are scarce (Earth is a finite planet), their distribution can be made available to everyone, and we could be living in a “free lunch society”, if only we shifted our mentality of scarcity to one of abundance, and generously shared those resources among every human being on Earth.
Given this introduction of the “free lunch” dilemma and what could be the transformation of our way of life into a “free lunch society”, Christian Tod, an Austrian economist and filmmaker intelligently used the term to name his most recent production: “Free lunch society”. The film is due to come out on iTunes on January 22th 2019 and on DVD on February 5th 2019. Previously, a short version of the film (50 min.) had already been presented at the Basic Income Earth Network’s (BIEN) Conference at Tampere, Finland, last August 2018.
The movie is composed as a documentary, featuring interviews, animation and film footage from all over the world, and announces itself as follows:
“What would you do if your income were taken care of? Just a few years ago, an unconditional basic income was considered a pipe dream. Today, this utopia is more imaginable than ever before. FREE LUNCH SOCIETY provides background information about this idea and searches for explanations, possibilities and experiences regarding its implementation.
Globalization, automation, Donald Trump. The middle class is falling apart, but we hear more talk about the causes than about solutions. From Alaska’s oil fields to the Canadian prairie, from Washington’s think tanks to Namibian steppes, FREE LUNCH SOCIETY takes us on a grand journey to answer one of the most crucial questions of our times.”
The film’s trailer can be watched here:
More information at:
Free Lunch Society website
Free Lunch Society Twitter account
by Andre Coelho | Jan 11, 2019 | News
Flowers, on the way to the mountain. Picture credit to: Rookie’s Journal
Sikkim, the second smallest state in India, has grown a reputation, over the years, for environmental consciousness, ethnical diversity and tourism. It is also the home of one of the most educated people on Earth, with a 98% literacy rate. Moreover, in the last couple of decades, policies in the state have been implemented in order to reduce poverty, which presently sits below 8% (from a 41,4% in 1994). The Sikkim Democratic Front (SDF), the democratically elected party governing the state since 1994, has written basic income into its manifesto for the 2019 Assembly elections, and aims to have it implemented by 2022.
SDF’s MP in New Dehli’s Lower House of Representatives (Lok Sabha), Prem Das Rai, has said that “our party and Chief Minister Pawan Chamling (…) are committed to bringing in Universal Basic Income. This, we will do three years of coming back to power in the state”. This initiative is not intended as a pilot test, but as an actual implementation, hence Prem Das Rai words: “Basically, it’s an income given to families irrespective what do they do. In Sikkim, it will be for everyone and every household.”
As for financing the basic income scheme, SDF officials are considering surplus energy generation revenue (from hydropower) and redirecting costs from welfare programs which cease to be relevant. Restructuring the tax edifice and using tourism revenues are also future financing routes to cover for basic income. In any case, Prem Das Rai is confident that this is “not just a feasible idea, but a very positive idea”.
About this issue, basic income activist Scott Santens has written, on Twitter: “What makes this news so big in my opinion is the fact they’re talking about full universality, unlike what’s being discussed at the national level right now, where cash may be targeted to the poorest 33% of the country and thus not actual UBI. This news out of Sikkim is actual UBI.”
More information at:
Liz Mathew, “Sikkim says it will become first state to roll out Universal Basic Income”, The India Express, January 10th 2019
André Coelho, “India: 2019 General Elections and basic income”, Basic Income News, January 9th 2019
by Andre Coelho | Jan 9, 2019 | News
Indian woman worker with spectacles. Picture credit to: Sarah Day
New ideas seem to be running dry in the Indian political context. Within Congress, Government (BJP – Bharatiya Janata Party) and opposition parties (ex.: AAP – Aam Aadmi Party). Tweaking with the minimum support prices for food production and/or with the multiplicity of welfare programs is not going to substantially change rural population’s main concern, which is declining real wages (purchasing power after adjustment for price variations). These have been steadily falling since 2014, ever since the BJP came to power, which means that to stay too focused on the former issues will not probably get BJP reelected this year. Also farm loan waivers (credit write off) has been used as a political tool, especially by the opposition (mostly center and left-wing) parties, given the high indebtedness rates of rural families (over 50%) and their dependency on predatory lenders (also over 50%).
However, according to political analyst Saubhik Chakrabarti, from The Economic Times, loan waiver is not going to be decisive for these next elections, even though it has been flagged by the opposition in regional suffrage (which has won three states from BJP). This decisiveness might very well come from pushing the basic income policy, an old new idea that has been hot in India ever since the 2016-2017 Economic Survey Report featured a whole chapter to it. And this applies to both parties / coalitions with a shot at forming a government in 2019, because what really impacts real wages is not topping crop prices or forever trying to fix a broken welfare distribution system (very complex and prone to corruption). A real difference may come from directly and unconditionally giving people what they need the most, economically: money.
Even though there will be no time to properly design, let alone implement a basic income scheme regionally – and even less likely a national implementation – before this year’s elections (latest in May), Chakrabarti suggests that one or more pilot tests could be tried out. According to him, that could be done “in chosen districts, accompanied by a blaze of political publicity, [being] enough to take to voters, with the promise that re-election will lead to an across-India UBI program.”
More information at:
Saubhik Chakrabarti, “Doling out a universal basic income scheme may be Narendra Modi’s best chance to win 2019 mandate”, The Economic Times, 24th December 2018
“Farm loan waiver: How to nip it in the bud”, The Economic Times, 7th January 2019
Kate McFarland, “India: Government Economic Survey presents case for basic income”, Basic Income News, February 4th 2017
by Andre Coelho | Jan 7, 2019 | News
A new series of demonstrations have erupted in France: the “gilet jaunes [yellow vests]”. This movement started in 2018, from an online petition which had grown 300 000 signatures large by October. From there, massive street demonstrations have followed, with some violent eruptions, particularly in France (but in other regions of the world too). The causes for discontent have been mainly economic, related to taxes on fuels, income taxes, minimum wage and the monopoly of large retailers in villages and cities (which end up asphyxiating small businesses). However, the list of claims grows larger, including demands like eliminating homelessness, financial incentives for home insulation, protecting national industry (in France) and a cap on salaries (at 15000 Euro/month). It even includes the controversial claim that the production of hydrogen vehicles should be incentivized, instead of electrical ones (even though hydrogen for vehicles is produced using electricity).
The basic income movement in France (MFRB – Movement Français pour un Revenue de Base) has written on the “yellow vests” phenomena. In this article, it is suggested that demands from the “yellow vests” movement are aligned with the basic income idea. However, the list of demands above mentioned do not refer basic income, and do not question the conditionality of the present system of benefits and taxation. These do contain the immediate call for taking people off the streets (ending homelessness), but no further ideas on how to do it.
On the other hand, these social events and demonstrations have spurred discussion and public appearances voicing the basic income concept. Public figure and philosopher Abdennour Bidar, has defended basic income as a way to “stop strangling citizens with economic constraints”, on France TV (C La Suite). Cyril Dion, a known French filmmaker and environmental activist, has also supported basic income, alongside Bidar, as a way to both reduce acute inequalities and bring forward true environmental protection. According to him, there can be no ecology without social justice, which is also the opinion of other French thinkers and activists, such as Guy Valette. Also, on the political ground, Benoît Hamon (individually and under his recently formed Génération.s. party) has been defending the basic income policy in France, ever since the beginning of the last presidential elections.
More information at:
[in French]
Movement Français pour un Revenue de Base, “Gilets jaunes: le revenu de base comme réponse aux inégalités et à la pauvreté [Yellow Vests: basic income as a response to inequality and poverty]”, December 5th 2018
by Sarath Davala | Jan 6, 2019 | Opinion
Written by: Sarath Davala [1]
In the last two weeks, there has been much speculation in some sections of media about Prime Minister Narendra Modi seriously considering Universal Basic Income (UBI) as a policy option. This comes on the heels of the electoral debacle Modi’s party faced in the recent elections in four states, and coincidentally just months ahead of the 2019 parliamentary elections.
This is the second wave of interest the current government has shown toward the idea of Universal Basic Income (UBI). The first wave was in early 2017 when the then Chief Economic Advisor to the Government of India, Dr. Arvind Subramanian, included a substantial chapter [2] on UBI in his annual Economic Survey (2016-17) which was presented to the Indian Parliament. The chapter explored the concept of UBI and observed that it could be a way forward to address poverty. Subramanian stated that a full-fledged UBI may not be feasible in India immediately, though it was possible to think of a Quasi UBI (QUBI) which would identify specific demographic groups in the population and give them an unconditional basic income. One of his speculations was that a QUBI could be to all women citizens, which would ensure that every household will receive a basic income. The discussion within the government did not proceed beyond this point, apparently as the Prime Minister was not convinced at that time of the political dividends flowing from this policy route.
The immediate trigger for the second wave of interest in basic income is the recent elections in the states of Telangana, Rajasthan, Madhya Pradesh and Chhattisgarh. At the time of these elections, the financial crisis affecting farmers became center-stage and the Congress party promised that they would waive farm loans as soon as they came to power. And they did so when they took charge of three states.
In the state of Telangana, the ruling party TRS went a step further by implementing several months before the elections a scheme called Rythu Bandhu, (Farmer Investment Support) which gives to the farmers Rs. 8000 (USD $115)[3] per acre per annum[4]. The cutting edge of the scheme is that it is unconditional, a feature that is considered central to the idea of basic income. Irrespective of whether farmers take up cultivation or not, the investment will be transferred to the farmers. The scheme benefited about 5.8 million farmers who own a total of 14 million acres of cultivable land in Telangana.
In 2017, responding to farmers’ agitation in the state, the Madhya Pradesh government implemented a different kind of scheme for farmers. It was called Bhavantar Bhugtan Yojana (BBY) which originally intended to pay farmers the net difference between the actual sale price and the Minimum Support Price announced by the government. Subsequently, however, the government introduced the notion of a modal rate which is the average of the sale price of a given crop sold in Madhya Pradesh on any given day, and in markets of two other neighboring states.
Both the schemes ran into controversy, particularly the latter. Regarding the Rythu Bandhu scheme, the criticism was that the scheme does not give any benefit to the tenant farmers who actually cultivate the land. Secondly, the scheme was criticized as regressive since it was paying rich farmers as well. The government then appointed J-PAL, a reputed international group based in the Massachusetts Institute of Technology in the United States to monitor and evaluate the scheme. In the initial survey conducted by it after the first round of transfers were made in June 2018 revealed that most cheques were for less than Rs.20,000 (USD $287), and only 0.8% of the farmers received more than Rs.50,000 (USD $718). A follow-up survey by J-PAL revealed that farmers spent the money judiciously with over 77% purchasing crop inputs, and 92% percent saying that they were satisfied with the scheme.
The Madhya Pradesh scheme was criticized because it brought in the notion of a modal rate which was far above the actual sale price. Ordinary farmers, who were unaware of the critical distinction between the actual sale price and the modal price, were in for a shock. Assuming the government would compensate them the difference between MSP and Sale Price, many of them also made distress sale of their produce and then realized that they would get much less compensation. Disappointed with this conditionality, many farmers were unwilling to sign up for the subsequent crop. This was not the only conditional aspect of this policy. The sale must take place during a prescribed window of three months. There was a cap on the volume that a farmer can get compensated per hectare. There was also a proposal that if a farmer sells his produce for less than 50% of the MSP, he becomes ineligible since it is the poor quality of his produce that is the reason for the low sale price, and that government should not compensate the farmer for producing low quality produce. And lastly, the scheme was applicable to only seven specific crops.
It appears that these two schemes and the farm loan waivers are the three primary options that the central government is discussing in order to find an effective response to the distress farmers all over the country are experiencing. Let us consider each one of them.
First, the loan waivers. All the three new Congress governments have announced loan waivers within days after assuming power. Even as these announcements have been taking place, experts from different locations have criticized loan waivers as harmful to the economy. Following these announcements by the new Congress governments, the former RBI Governor Dr. Raghuram Rajan released a document entitled ‘An Economic Strategy for India’ which he co-authored with 12 other well-known economists including the IMF Chief Economist Gita Gopinath and Sajjid Chinoy of JP Morgan, among others. The report advises the government to “… eschew loan waivers that divert resources from needed investment.” Arvind Subramanian in a recent interview severely criticized farm loan waivers as “an inefficient, retrograde and even perverse method of addressing farmers’ distress”. He further added that nearly 50% of the small and marginal farmers cannot and do not borrow from formal banks and they are completely left out of this mode of addressing farmers’ issues. Dr. Urjit Patel who had recently resigned as the RBI governor criticized farm loan waivers as corrupting the credit culture in the country. Addressing his party workers in Karnataka, PM Modi himself called Karnataka government’s farm loan waivers as a “cruel joke on farmers”, and that it benefits only a handful of farmers.
It is clear the farm loan waiver is not likely to be part of PM Modi’s new grand electoral narrative. This now brings us to the other two options. Between the two, the Rythu Bandhu seems to be a clear winner not just because of the electoral gains that the TRS party reaped from its introduction. It is because of certain essential features it has that are unique and demonstrate a clear transformation in the very grammar of welfare policymaking in India.
Firstly, it is an entitlement without having numerous conditionalities. The only conditionality is that the recipient must have a clear title. The curse of various welfare schemes in India is that each one comes with innumerable conditionalities thereby giving extraordinary discretion to inspectors who administer it. Rythu Bandhu makes a departure from this welfare practice. This is based on the assumption that any support given by the government must be given only to the deserving and that we need to ensure that it is spent only for the purpose it is given. Who deserves and who does not is decided by the government. And so is the purpose. Secondly, Rythu Bandhu is a proactive policy and not relief after the calamity has occurred. In fact, some economists such as Ashok Gulati, Arvind Subramanian, Bimal Jalan, etc., have said that it could be a potential agricultural policy for the entire country. The main point is that it is defined as an investment rather than welfare. Thirdly, because it is unconditional and a cash transfer, it is very easy to deliver. The record of delivery of Rythu Bandhu has been very impressive. Except in those cases where the land ownership is in dispute, the majority of farmers in the state have received cash in their bank accounts.
In addition to these innovative features, the TRS government has also added an additional scheme to all farmers called Rythu Bima, a life insurance scheme which provides coverage of Rs. 500,000 (USD $7,179). The annual premium of Rs.2272 (USD $33) per farmer is to be paid entirely by the state government.
This is this grand electoral moment that PM Modi is facing. What is he likely to do? Given that farmers have become quite vocal and that there is hardly any time before the Model Code of Conduct would come into operation around March 2019, he must respond in some form in the interim budget. Most likely, he will implement some version of Rythu Bandhu in combination with an insurance scheme for farmers. While this cannot be called a true UBI, it does carry the spirit of the idea of basic income because of its unconditionality. Normally we would be inclined to dismiss this is an electoral gimmick. We should not forget that in an electoral democracy, change comes in a clumsy way. We must be clear when we are positively moving forward and when we are not. In this case, the Indian political parties are embracing the spirit of basic income. This shift in India’s policy grammar should be seen as a welcome move in our journey to build a better society.
[1] Sarath Davala is the Vice-Chair of BIEN and Coordinator of India Network for Basic Income (INBI).
[2] Universal basic Income: A Conversation with and within the Mahatma
[3] To make sense of these amounts, it is useful to know that the rural poverty line in India is defined on the basic of per capita expenditure, which is half a dollar a day.
[4] This amount will be disbursed twice in a year, one just before Rabi crop season and one before the Kharif crop season.
