by Guest Contributor | Mar 30, 2023 | Opinion
This month Silicon Valley Bank defaulted causing the biggest bank failure since Lehman Brothers in 2008. The US government helped in finding a solution to stop the depositors from losing their money. The main reason for the bank’s failure was a bank run because of the bank’s inability to raise enough capital after miscalculating its investment strategy and not preparing enough for the US Federal Reserve’s interest rate hikes. Credit Suisse also faced a lot of trouble which caused the Swiss government to pressure UBS (Switzerland’s biggest bank) to acquire Credit Suisse. Those two incidents might seem irrelevant to a UBI, but such events show us the importance of UBI now.
The current economic and political scene is unstable. There are a lot of tensions between the main actors USA and China on the global stage as well as the conflict in Ukraine in combination with the aftermath of the Covid crisis which hurt the global economy and supply chains. Especially Russia’s attack and Ukraine and the resulting trade war with Europe caused a supply shock in the Energy sector which led to global inflation hence rising poverty and forcing the Fed to raise interest rates. Those hikes in interest rates, slowing economic growth, and an underperforming tech sector are causing a lot of economic instability and caused recent bank failures. But the question is how that is connected to UBI.
To understand why recent events, show the importance of a Universal Basic Income it is important to think about the potential worst-case scenario. The scenario that happened to SVB and Credit Suisse might repeat. Bank depositors might fear the repetition of such a bank failure in different banks and cause more bank runs as the whole banking sector is based on trust and there is no single bank that would survive a bank run without government support. There is also doubt in the current political climate how much possible bank bailouts are politically doable especially as most people will feel that the government supports the banking gamblers with their tax money while leaving the normal average people who didn’t do anything wrong alone when they struggle because of different reasons.
So, the first connection between UBI and the current banking problems is that the implementation of UBI would increase the population’s trust in the government as people will now feel seen and protected by society and will be less negative towards a potential bank bailout. Although possible bank bailouts would have to come with increased regulation to avoid giving the banks the feeling that they can do whatever they want, and the government will protect them while they screw the people’s money.
Another reason why the current economic situation makes UBI more necessary than before is that in a climate of increasing interest rates and declining trust in banks people will draw money from the economy, hence decreasing demand. Decreasing demand will lead to decreasing supply and will increase unemployment. A lot of economists like Larry Summers confess that and say it is a bitter pill to take to reduce inflation. Let’s assume that’s correct although I’m not sure that this is the best way out of the current situation that would mean that society is sacrificing jobs and hence the wealth of a lot of people to reduce inflation for the rest.
Such action is morally wrong, especially if people aren’t given a social net that protects them after losing their jobs to provide for themselves and their families. And we have to remember that the sole reason for them being unemployed will be that the FED and other Central Banks in other countries decided that higher unemployment is necessary to reduce inflation. This would make those people and their families suffer a lot financially and mentally and they might not find a way back to bring back structure in their life without support that relieves them of the stress of having just lost their livelihood. UBI would be the perfect measure to achieve that
The third argument which highlights the importance of UBI now has to do with the real economy and supply and demand. While a huge part of inflation is caused by the supply shocks from the Ukraine war it can’t be denied that it is also caused partly by a demand that might be higher than the current supply especially as supply chains haven’t recovered completely yet. And while many people might assume that this would be an argument against UBI as UBI would most probably increase demand we have to look at it from the other side too. Giving people a Universal Basic Income would mean giving people more flexibility and more control over their lives. People will choose the jobs they want to do instead of just taking any job. This dynamic might be crucial in overcoming the current crisis. It is expected that UBI will have a positive impact on entrepreneurship and small investments and such effects have been seen partly in previous pilot programs. Giving people a UBI would hence increase supply as smart entrepreneurs will see the gap between supply demand and work on filling that gap to make profits. This will mean a virtuous way out of inflation instead of a vicious way out of inflation. It would be also a way of directly supporting the victims instead of rewarding the gamblers
While a bank crisis is still avoidable, the current situation shows the importance of UBI on multiple fronts to help people in those difficult times. The government has tried to rescue the economy through trickle-down measures often and now it’s time to give people the chance to rescue the economy themselves by giving them a fair chance and promoting entrepreneurship by introducing a UBI and following a spirit of capitalism that left and right will be able to agree on.
Written by: Ahmed Elbas
by Guest Contributor | Mar 15, 2023 | News
By: Nika Soon-Shiong, Founder and Executive Director, Fund for Guaranteed Income
Less than an hour’s drive from the pristine homes of Beverly Hills, the tree-lined campuses of UCLA, and the booming heart of the entertainment industry, Compton faces an economic crisis. Of its 100,000 residents, 19.5% are living at or below the federal poverty line, compared to 11.6% nationally.
In the absence of well-paying jobs, its residents – 30% of whom are Black and 68%, Latinx – are ever vulnerable to the willful neglect of our threadbare safety net. Many are unbanked, uninsured, and at the height of the pandemic, one in five was unemployed. While Hollywood has capitalized on an image of Compton as the “murder capital of the United States,” profited off of Compton’s talent, its real story is one of resilience – a bold demand for dignity in the face of an illusory American dream.
In 2020, Former Compton Mayor Aja Brown called for an abolition of poverty in the United States. Building on the ideological foundation laid by Dr. Martin Luther King, she explained that this was neither niche nor “radical,” but a politics of care rooted in decades of empirical research. Since that day, we at the Fund For Guaranteed Income (F4GI) have worked tirelessly to advance that vision: building and scaling the technological infrastructure needed to disperse cash payments broadly, including to people historically excluded from the welfare state like undocumented and formerly incarcerated individuals.
Beyond economics and the pursuit of good public policy, our work is deeply human.
Our implementation of guaranteed income pilots began with the Compton Pledge, a two-year program supporting 800 low-income families in the cultural heart of California. Since launch, it has distributed $6 million out of a total allocated $10.2 million, which the Jain Family Institute projects will close 70% of the racial wealth gap for the average participating family. Additionally, The Compton Pledge has brought calls on the government to “pilot programs for universal basic income” into the national mainstream. Collaborating with independent researchers to study the impact of raising the income floor, we have been able to see first-hand the benefit of these cash flows on employment opportunities, mental and physical health, and the strength of these communities.
A mother of two with chronic illness was able to afford her medications; a woman subsisting on poverty wages was able to pay her bills, then invest the incremental time on finishing her degree. In essence, they were afforded the dignity we all deserve. We are actively working with participants to tell their stories, through narrative cohorts like The Voices of Compton Pledge (VOCP), reframing flawed and racist welfare stereotypes, and advancing a liberatory shift in paradigm.
Today, F4GI connects ~2000 low-income residents to cash, case management, and community resources monthly. New pilots have emerged in other cities, most recently Long Beach, where the Long Beach Pledge will provide 250 single-head families in one of the areas most devastated by COVID-19 with cash payments, $500 per month for one year, along with services like financial counseling intended to invest in their long term prosperity. It is made possible by the Long Beach Recovery Act, a plan to fund economic and public health initiatives for Long Beach residents, workers and businesses critically impacted by the COVID-19 pandemic. The City of Long Beach has partnered with F4GI to create the program’s payment platform, which connects qualified participants to support services like financial counseling, in addition to distributing the monthly payments.
Our work aims to be as nimble and innovative as the systems cementing poverty are sinister. We will continue to advance the evidence base around accessible welfare systems, develop the tools which can create them, and build the coalitions that will demand them. Forever grateful to the City of Compton for allowing us to implement this initiative, we aim to continue expanding our pledge across city lines, and eventually the nation.
by Peter Knight | Feb 10, 2023 | News
“We need a new approach to addressing poverty in South Africa. The current system is not working and we can no longer pretend that there will be enough jobs for everyone. By bringing visibility to the benefits of a digital basic income transfer, we’re expanding the possibilities for South Africans and nourishing the creativity and entrepreneurial spirit present in the country ”, says Karen Jooste, Founder of RightfulShare.
The project began as a policy proposal in the South African parliament and has since moved into an independent initiative. Every month for one year, beneficiaries receive a digital basic income in GoodDollar to use as they choose.
Read the details in the full press release.
by Tyler Prochazka | Jan 17, 2023 | Featured
Taiwan is making history by sending out a one-time universal cash payment of $6,000 New Taiwan dollars (NTD) to every citizen “young and old.” This is the first time the country has implemented such a policy, and it comes as a result of excess tax revenue of $450 billion NTD, much of which is coming from corporate taxes that have seen record-high profits. $140 billion NTD will be dedicated to the cash payments, with the remainder going towards improving labor and health insurance systems and providing funding for local governments.
UBI Taiwan hailed the move as a victory for Taiwanese citizens, as the payment is unconditional and universal, meaning that everyone in the country will receive it, regardless of income or other circumstances. They said it reflects the growing demand that a greater proportion of Taiwan’s growth is shared with average families.
“This is a huge victory for the basic income movement,” UBI Taiwan founder Tyler Prochazka said.
UBI Taiwan promotes unconditional basic income (UBI) in Taiwan. UBI is a policy that periodically sends out unconditional cash payments to every citizen in a country regardless of an individual’s income or job status.
The organization has noted the problem of stagnant wages for the last two decades in the country and the rising cost of housing. Through basic income payments, they argue that many Taiwanese could pursue better opportunities and improve their education.
“Unconditional cash transfers are an efficient way to provide an ‘economic vaccination’ to make sure that everyone can face the future in a healthy and happy manner,” said Jiakuan Su, the new chairman of UBI Taiwan.
Over the last few years, Taiwan’s economy has experienced record-breaking 6.45% GDP growth in 2021 and over 8.73% growth in exports in 2022. However, most people have not enjoyed the fruits of this economic growth, as a 104 Job Bank survey found that real wage growth was nearly zero in 2022 due to inflation. The universal cash payment is a way for everyone to have a small share in Taiwan’s economic success.
“With the rise of the pandemic over the last few years, Taiwan has experienced rapid changes in its economy and society,” Su said. “We have experienced directly why Taiwan needs a resilient social welfare system to protect each person’s economic security.”
Since the payment is equal to all taxpayers, it will have a progressive effect with a greater proportion of the refund going to low-income earners. There is some expectation that the cash payment could help stimulate the economy because low-income households are more likely to use the money to satisfy their essentials, such as food and housing, freeing up some additional discretionary money for recreational uses as well. A greater willingness to spend by average families could help smaller businesses that may have struggled since the pandemic.
Both political parties have agreed on the general outline of the proposal and the cash could be sent out as soon as February. A surprise has been that the plan appears to be a universal rebate of the revenue instead of a targeted one, which will make it easier for everyone to apply and reduce administrative costs and time. One area still under consideration is whether foreign taxpayers will receive any of the money.
Previous cash assistance schemes during the pandemic were targeted and a stimulus voucher was sent universally. The pandemic vouchers were limited in how they could be spent and had an expiration date, similar to the vouchers under former President Ma Ying-Jeou.
Members of the Kuomintang (KMT) and Taiwan People’s Party (TPP) argued during the pandemic that cash should have been sent out instead of vouchers. At the time, the TPP held a news conference with UBI Taiwan to discuss the benefits of cash over vouchers. Many also complained that the targeted cash programs were difficult to receive because of the strict conditions.
Research by the World Bank later demonstrated that the simplicity of universal and unconditional cash payments during the pandemic increased access to the assistance and likely provided economic stimulus. Previous research showed a multiplier effect up to $2.6 for every dollar sent. Fears of saving the cash were largely overblown. For example, in over a dozen economies primarily in East Asia, 40 percent of the universal cash transfers during the pandemic were directly used for consumption.
Besides improved standard of living, research on basic income consistently shows improved mental health and trust in society. A meta-analysis of basic income policies looked at eight governmental reports as well as seven peer reviewed studies. They found there was justification that the alleviation of stress from financial instability could be a reason for improved mental health from basic income.
There have been criticisms of the current cash payment plan, including concerns about inflation. However, it is important to remember that this is surplus tax revenue that has already been collected and is not new money created by the central bank. An effect on inflation is just as likely if the government directly spends the money or if it is sent back to taxpayers.
Additionally, while it is true that Taiwan’s insurance systems require further reforms for sustainability, the vast majority of the surplus revenue is being used to shore up these systems and provide an emergency fund. A one time injection of funds is helpful but will not save these systems in the long run.
Previously, basic income advocates from UBI Taiwan have suggested that Taiwan could establish a sovereign wealth fund (SWF). Such a fund would act as a guarantee that Taiwanese could enjoy more equity in the growth of Taiwan’s economy even if wages remain stagnant. Excess revenue could be placed in the SWF and invested in the economy, with dividends from the SWF distributed back to the people each year, similar to the system in the US state of Alaska. The Alaska Permanent Fund sends out a yearly payment from the oil revenue generated in the state. In 2022, the universal payout reached a record high of $3,284 USD.
“I applaud the government’s decision to send the universal cash transfer and hope this establishes the precedent for Taiwan to consider making this a permanent policy,” Su said.
Prochazka furthered that by making this payment equal to all citizens, the government is taking the “first small step” towards ensuring that the benefits of economic growth are shared by all.
by Peter Knight | Aug 25, 2022 | News
Readers and BIEN members might be interested in a new book, IN THE BALANCE: The Case for a Universal Basic Income in South Africa and Beyond, which has just been published and is drawing good reviews.
It’s available from online retailers, New York University Press (for North America and Europe) and Witwatersrand University Press (for Africa). An open access PDF version can also be downloaded for free.
Here are a few excerpts from reviews:
“Hein Marais delivers a theoretically powerful, impressively documented, timely and urgent case for radical wealth redistribution …. Crucially, the book supports a basic income not as a policy fix, but as a far-reaching political and imaginative response to the steady collapse of a wage-centered social order. This is a book destined to have lasting influence.”
—Franco Barchiesi, Ohio State University; author of Precarious Liberation: Workers, the State, and Contested Social Citizenship in Post-apartheid South Africa
“If you have been searching for a way to clearly understand the concept of a Universal Basic Income (UBI), then this is the book that you have been waiting for.”
— Awande Buthelezi, coordinator for the #UBIGNOW Campaign and activist with the Climate Justice Charter Movement
“This book is a major contribution to our understanding of the possibility for policies to achieve more equitable levels of well-being in the contemporary political economy of South Africa and the world.”
– Peter B. Evans, Professor Emeritus, Department of Sociology, University of California, Berkeley
And here is a short description:
“As jobs disappear, wages flat line and inequality grows, this timeous book presents a
compelling analysis of the need, conditions and possibilities for a universal basic income (UBI) in South Africa and globally.
Paid work is an increasingly fragile and unattainable basis for dignified life. This
predicament, deepened by the COVID-19 pandemic, is sparking urgent debates
about alternatives such as a universal basic income (UBI). Highly topical and
distinctive in its approach, In the Balance: The Case for a Universal Basic Income in
South Africa and Beyond is the most rounded and up-to-date examination yet of the
need and prospects for a UBI in a global South setting such as South Africa.
Hein Marais casts the debate about a UBI in the wider context of the dispossessing
pressures of capitalism and the onrushing turmoil of global warming, pandemics and
social upheaval. Marais surveys the meaning, history and appeal of a UBI before even
handedly weighing the case for and against such an intervention.
The book explores the vexing questions a UBI raises about the relationship of paid
work to social rights, about prevailing notions of entitlement and dependency, and the
role of the state in contemporary capitalism. Along with cost estimates for different
versions of a basic income in South Africa, it discusses financing options and lays out the social, economic and political implications. This incisive new book advances both our theoretical and practical understanding of the prospects for a UBI.”
