Response: Indian MP Thinks Basic Income is The Cat’s Pajamas

Response: Indian MP Thinks Basic Income is The Cat’s Pajamas

An article on basic income appeared in The Hindu newspaper recently and is potentially significant because it was written by a Member of Parliament in the ruling BJP party. Does it reflect possible government policy? No one, including Varun Gandhi, is telling. Moreover, what he means by the “need to talk about basic income” is anyone’s guess.

The article is a bit of a mish-mash of history in North America, but also includes reference to the cash transfer pilots in India. Gandhi makes the usual mention of the 1970s Canadian experiment in Manitoba with a negative income tax, but I think interested readers should examine the more recent work of Evelyn L. Forget, the author of the oft-cited study “The Town with No Poverty: The Health Effects of a Canadian Guaranteed Annual Income Field Experiment.” (The 2008 draft version of this article has an extended discussion of the history of the idea in North America. However, the draft isn’t available on ResearchGate.)

At the University of Manitoba, Dr. Forget has a project that asks the question, “Is MINCOME useful in the development of a Basic Income pilot in Ontario and elsewhere?” She points out that the sociopolitical environment, research methods and policy context are all different now than they were in the 1970s and demanding a critical examination of the relevance of the old experiment.

From her ResearchGate site you can download an April 2016 presentation prepared for a symposium on UBI pilot design for the Ontario government. You might also access the following valuable documents: “Cash Transfers, Basic Income and Community Building,” and “The Experiment that Could End Welfare.”

Mr. Gandhi’s piece extols the virtues of a basic income but overstates his case in a number of areas—village sanitation, access to drinking water, growth of rural employment and the national economy, and the pursuit of happiness. He even makes the startling declaration that with respect to automation and the threat to work “the basic income stands out as a panacea”. With such statements you might wonder if he’s being serious, or aware that he could inadvertently be discrediting the idea with extravagant claims.

India presents complex development challenges and it’s not clear that a basic income is the best or only approach. For example, Joseph Stiglitz, who generally supports the idea of a basic income, argues that targeting the needy is a necessary trade-off when public budgets are tight. And, I wonder, when aren’t they tight?

India is home to more than one-third of the world’s stunted children. If current trends continue, by 2030 India will have the world’s highest global burden of under-five year old deaths (17 percent). It has more poor people in absolute numbers in eight states than the 26 poorest sub Saharan countries combined. The main reason for extreme poverty in rural areas lies in the still largely agrarian economy and its very low productivity due to small landholdings and underemployed farming labor. Droughts have also taken their toll. People resort to informal agricultural work because there is no alternative, or landowners need to supplement their incomes and join the landless in seeking wage labor. It is estimated that 5.5 percent of a country’s GDP will be required to provide education for all by 2030, yet in 2012, India invested 3.9 percent. Corruption is endemic.

With such a constellation of issues, interventions can quickly get complicated, producing tensions between targeted transfer approaches and universal approaches. Nutrition is one example. Pakistan is modifying its unconditional cash transfer program (the Benazir Income Support Program) so that it can better respond to—read target— the nutritional needs of women and children.

India currently addresses the underlying determinants of nutrition—food security, rural livelihoods, and sanitation—with a smorgasbord of programs that include the Public Distribution System, the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA), and the Swachh Bharat Mission. These centrally sponsored programs are then delivered by state governments, where there are risks of corruption or of states simply not prioritizing nutrition.

Others argue that without targeting for health, households will not get around to malnutrition or education. At the same time, studies confirm that health deficiencies lead to cognitive deficits and experts recommend that health and cognition be addressed in tandem to potentially reinforce each other.

But out-of-pocket health expenditures, especially for non-communicable diseases (NCDs) can impoverish Indian households. A recent systematic review of the global impact of NCDs on household income (Jaspers et al., 2015) found that cardiovascular disease (CVD) patients in India spent 30 percent of their annual family income on direct CVD health care.

Finally, providing equal amounts of finance on a per pupil basis is not necessarily a formula for equitable education funding. For children who enter an education system with disadvantages associated with poverty, gender, disability or ethnicity, more resources may be needed to achieve opportunities equivalent to those enjoyed by more privileged children.

As they say in India about so many things, what to do?


More information at:

Jaspers, Loes, Veronica Colpani, Layal Chaker, Sven J. van der Lee, Taulant Muka, David Imo, Shanthi Mendis, et al. 2015. “The Global Impact of Non-Communicable Diseases on Households and Impoverishment: A Systematic Review.” European Journal of Epidemiology 30 (3): 163–88

Feroze Varun Gandhi, “Why we need to talk about a basic income”. The Hindu, June 30th 2016

Response: Could a Basic Income Help Poor Countries?

Response: Could a Basic Income Help Poor Countries?

The editorial below is a response to Pranab Bardhan’s “Could a Basic Income Help Poor Countries?”

Pranab Bardhan is a professor of economics at the University of California, Berkeley. Writing on the Project Syndicate website, he is skeptical about a universal basic income in rich countries, but asks if it isn’t both fiscally feasible and socially desirable in poor countries.

Comparing applicability of a Universal Basic Income (UBI) between advanced and low-or middle-income countries, Bardhan argues that there is a better fit where “the poverty threshold is low and existing social safety nets are both threadbare and expensive to administer.” His response to his own question is still cautious. “In India,” he says, “the answer could be yes.”

Unfortunately, his argument is muddled. He correctly diagnoses the administrative chaos that is India, and identifies sources of funding for a UBI in subsidies and tax exemptions that could be ended. At the same time, he warns that existing key social welfare programs cannot all be eliminated, nor should the government get out of the business of public education, health care, preschool nutrition or employment guarantees in public works. In effect, a UBI would supplement existing programs and thereby loses its rationale as a reducer of bureaucracy.

Bardhan also paints a contradictory picture of the results, describing it as both a “reasonable basic income”, yet “severely limited,” which is why other social welfare programs can’t be discontinued. And ignoring the ample evidence to the contrary from cash transfer experiments in India, he says there is “no way to ensure that individuals would allocate enough of it to achieve socially desirable education, health or nutrition levels.”

Apparently agreeing with “prominent advanced-country economists” who warn that a UBI is “blatantly unaffordable,” Bardhan uses the United States as an example. He writes that an annual payment of $10,000 per adult would “exhaust almost all federal tax revenue, under the current system,”, and suggests that this sort of arithmetic explains the failure of the Swiss UBI referendum last month.

Invoking the specter of affordability to end debate on UBI is reminiscent of earlier and now discredited arguments that it is too expensive to do anything about climate change, which is tantamount to saying our world is short of wealth, so “Say goodnight, Gracie.”

The Global Commission on Economy and Climate makes the evidence-based argument that climate-smart cities can spur economic growth and a better quality of life—at the same time as cutting carbon pollution. Recent research (from economists, no less) has found that investing in compact, connected, and efficient cities will substantially reduce greenhouse gas emissions and generate global energy savings with a current value of US $17 trillion by 2050 (Gouldson et al., 2015).

To these savings can be added reduced pollution impacts and costs. In 2013, the World Bank conducted its first-ever economic assessment of environmental degradation in India and reported the amount to be 5.7% of the country’s GDP (World Bank, 2013). And in another first-of-its-kind study conducted in 2015, the Organisation for Economic Co-operation and Development (OECD) found that air pollution-related illnesses and mortalities cost $1.7 trillion annually in OECD countries, $1.4 trillion in China, and $0.5 trillion in India (WHO Regional Office for Europe, OECD, 2015).

And then there is inequality. The global inequality crisis is reaching new depths, with the richest 1% now having more wealth than the rest of the world combined. The wealth of the richest 62 people on the planet rose by 45% in the five years since 2010 to $1.76 trillion, while the wealth of the bottom half fell by just over a trillion dollars in the same period—a drop of 38% (Oxfam et al., 2016). Meanwhile the tiny elite at the top is using its power and privilege to manipulate the economic system to further concentrate returns to capital.

Paying taxes is not high on the agenda of the absurdly wealthy, and the use of tax havens and other tax-dodging practices afflicts countries of all income levels, even the poorest. It is estimated that tax dodging by multinational corporations costs developing countries some $100 billion annually, and a global network of tax havens enables the richest individuals globally to hide $7.6 trillion. As taxes go unpaid due to widespread avoidance (with political approval and support), government budgets shrink and vital public services and social programs are diminished. Levying higher taxes on less wealthy segments of society just hurts the poor and makes inequality worse.

Despite Professor Bardhan’s quick dismissal, the United States would seem to be a good test case for UBI. For a number of reasons, the country has been characterized as an outlier among developed nations. It is one of the richest in the world, but among wealthy nations it has the highest income inequality. It has high private but low public social spending, with vast differences within the country as a result of states’ rights under federalism. Public expenditures have tended to shift toward the disabled and elderly, and away from those with the lowest incomes—consistent with a widespread belief that people are poor because of laziness or lack of incentive. Tony Judt’s rejoinder is, “Anyone who thinks that the poor like living on a pittance should try it.”

There is bipartisan aversion to taxes, especially among the rich — it is difficult to imagine how much worse income inequality might be had the United States spent even less on reducing poverty. Progressive taxation that would redistribute wealth from the rich to the poor is political anathema, and taxation is increasingly regressive—the poor pay higher effective tax rates than the rich. Enforcing tax avoidance and tax evasion is correspondingly weak.

It is one of the richest nations in the world, and yet among the 35 wealthiest countries it has the second highest child poverty rate (Adamson, UNICEF, and Innocenti Research Centre, 2012). More than one in five children is food insecure, and nearly one-third of U.S. children are in a household where neither parent holds full-time, year-round employment. The cost of child poverty in economic and educational outcomes has been recently estimated to be half a trillion dollars a year, or the equivalent of nearly 4 percent of the Gross Domestic Product (Coley, J. and Baker, 2013).
Reducing child poverty seems sufficient in itself to justify a UBI experiment. Not only would public social assistance costs fall, but families with more income are better able to purchase nutritious meals and better housing, and support child development with higher quality family relationships and parental interactions. Some observers warn that current poverty levels combined with the growing wealth gap threaten to destabilize the US democracy and curtail the social and economic mobility of children for generations to come (Coley, J. and Baker, 2013).

Professor Bardhan would also have found money for UBI just by crossing the Berkeley campus. His colleagues at the Institute for Research on Labor and Employment (IRLE) published a research brief in 2015, titled The High Public Cost of Low Wages: Poverty-Level Wages Cost U.S. Taxpayers $152.8 Billion Each Year in Public Support for Working Families.

Over the past three decades the share of income going to labor has been declining in most countries around the world, while the capital share has been rising. Unemployment is part of the problem. The International Labour Organization (ILO) estimates that over 201 million people were unemployed around the world in 2014, an increase of over 31 million since the start of the global financial crisis. The ILO reports that this trend is common in all regions of the world, despite an overall trend of improved educational attainment. At the same time, wages are not keeping up with the productivity of workers. In the US between 1973 and 2014, net productivity grew by 72.2 percent, yet inflation-adjusted hourly pay for the median worker rose by just 8.7 percent. (Oxfam et al., 2016).

As the authors of the IRLE research brief point out, when jobs don’t pay enough workers turn to public assistance to meet their basic needs. These programs provide vital support to millions of working families in the United States whose employers pay less than a living wage. The researchers found that between 2009 and 2011, more than half of the combined state and federal spending on public assistance went to working families—a total of $152.8 billion per year. “Overall, higher wages and employer provided health care would lower both state and federal public assistance costs, and allow all levels of government to better target how their tax dollars are used” (Jacobs, Perry, and MacGillvary, 2015).

Next stop for UBI, the United States.


Adamson, Peter, UNICEF, and Innocenti Research Centre. 2012. Measuring Child Poverty New League Tables of Child Poverty in the World’s Rich Countries. Florence, Italy: UNICEF Innocenti Research Centre.
Coley, J., Richard, and Bruce Baker. 2013. Poverty and Education: Finding the Way Forward. Princeton, NJ: Educational Testing Service, Center for Research on Human Capital and Education.
Gouldson, A. P., S. Colenbrander, A. Sudmant, N. Godfrey, J. Millward-Hopkins, W. Fang, and X. Zhao. 2015. “Accelerating Low Carbon Development in the World’s Cities.”
Jacobs, Ken, Ian Perry, and Jenifer MacGillvary. 2015. “The High Public Cost of Low Wages: Poverty-Level Wages Cost U.S. Taxpayers $152.8 Billion Each Year in Public Support for Working Families.” Institute for Research on Labor and Employment, UC Berkeley Center for Labor Research and Education.
Oxfam, Deborah Hardoon, Sophia Ayele, and Ricardo Fuentes Nieva. 2016. An Economy for the 1%: How Privilege and Power in the Economy Drive Extreme Inequality and How This Can Be Stopped. Briefing Paper 210. Oxford, UK: Oxfam GB for Oxfam International.
WHO Regional Office for Europe, OECD. 2015. “Economic Cost of the Health Impact Air Pollution in Europe: Clean Air, Health and Wealth.” WHO Regional Office for Europe, Copenhagen.
World Bank. 2013. “India-Diagnostic Assessment of Select Environmental Challenges: An Analysis of Physical and Monetary Losses of Environmental Health and Natural Resources.” World Bank.

INDIA: Economist declares the UBI debate not over

INDIA: Economist declares the UBI debate not over

Abhijit V. Banerjee. Credit to: Financial Times

On June 18, The Indian Express—an English-language daily newspaper, published an article about the Swiss vote on UBI. The piece titled “The best way to welfare,” was written by Abhijit V. Banerjee, a professor of economics at the Massachusetts Institute of Technology. (His book—co-authored by Esther Duflo—Poor Economics: A Radical Rethinking of the Way to Fight Global Poverty, won the 2011 Financial Times and Goldman Sachs Business Book of the Year Award)

Banerjee says that although the Swiss voted against a universal basic income, polls conducted after the referendum suggest that the debate is not over. He gives two reasons, the first being the widespread concern, especially in the West, about the future of work. An increasing topic of concern is that absent a radical reassessment of the fundamentals of how our economy works, there could be an enormous population of permanently unemployed whose jobs have become superfluous by automated and intelligent machines.

Banerjee then says the UBI debate is still alive because our current welfare systems are fragmented, bureaucratic and overly complicated. He reminds readers that reshaping its social security system is the primary purpose of Finland’s basic income experiment, scheduled to take place in 2017–2018, an experiment he says that is ‘clearly relevant’ for India.

For more information on the Finland experiment, read the Basic Income News reports listed below.

Banerjee cites Renana Jhabvala, an Indian social worker who gained prominence through her work on behalf of women in the informal economy, and, with Guy Standing among others, co-edited Basic Income: A Transformative Policy for India (published by Bloomsbury in 2014). The book reports on the results of three basic income schemes piloted in India between 2010 and 2013, in which 6,000 individuals received completely unconditional monthly cash payments. The book was reported in a Basic Income News item, December 8, 2014.

A summary of results of the project was released on the Basic Income Earth Network (BIEN) website. On the United Nations Research Institute for Social Development (UNRISD) website, Guy Standing reports on the main outcomes of the social experiment. The UNRISD also hosted a seminar on May 13th 2016, titled “Informality and Income Insecurity: Is Basic Income a Universal Solution?”. Seven speakers are also featured in videos as part of this event.

Jhabvala estimates that there are more than 350 separate welfare programs in the India. “Why not,” says Banerjee, “have one universal basic subsidy that covers everything (perhaps except health and education) and let people decide how they will spend it, rather than trying to target subsidies based on our imperfect knowledge of what people need and deserve?”

Credit to: Give Directly

Credit to: Give Directly

The immediate benefits are reduced poverty and less red tape, enabling the bureaucracy to be deployed elsewhere. And potentially the poor might use their financial security to plan their lives more effectively and invest in their families and businesses.

Finally, Banerjee mentions another pilot project, announced in April 2016 by the NGO GiveDirectly, that will test a universal basic income in Kenya. The plan is to provide at least 6,000 Kenyans with a basic income for 10 to 15 years. The parameters of the study are that it generates unbiased and transparent estimates of impact, that it is a long-term commitment, and that it is operationalized within well-defined communities. Banerjee is among a group of academic researchers who will test the impacts of the experiment.


More information at:

Stanislas Jourdan, “FINLAND: Government Forms Research Team to Design Basic Income Pilots,” October 15th 2015.

Vito Laterza, “FINLAND: Basic income experiment – what we know”, December 9th 2015.

Tyler Prochazka, “Dylan Matthews, ‘Finland’s hugely exciting experiment in basic income, explained”, December 13th 2015.

Kate McFarland, “FINLAND: KELA has sent preliminary report to Prime Minister”, April 5th 2016

Give Directly website

Wikipedia, “Renana Jhabvala“, 16th May 2016

Wikipedia, “Abhijit Banerjee“, 20th May 2016

Wikipedia, “Poor Economics“, 26th March 2016