Anna, 29 – Participant in the HartzPlus experiment in Berlin, Germany
The HartzPlus experiment is starting in Germany this month. Previously summarized, the experiment will involve 250 welfare beneficiaries, subject to the Hartz IV welfare scheme. For three years, the randomly selected participants will receive 416 €/month, whether they comply with the Hartz IV conditions or not. For comparison purposes, the minimum wage in Germany is around 1500 €/month, and the poverty line stands at approximately 1100 €/month. So, just like the recent experiment in Finland, this is an test which on objective terms cannot be said to be reproducing a “basic” income, in the sense of providing the basic for achieving a minimum dignified standard of living (in this case, in Germany). Like in Finland, it is mainly testing the effects of introducing an unconditional element on the income of a group of people, for a limited period of time.
Other propositions have been vocalized in Germany, mainly in response or even as an expression of protest against the Hartz IV, enforced in the country since 2003. One of such voices has been Berlin Mayor Michael Müller, a long time Social Democratic Party (SPD) official. However, what Müller is defending, in essence, is a job guarantee, over a basic income. Beneath the “basic income based on solidarity” concept lies a fundamental distrust in Berlin’s citizens: that the latter must be coerced into municipal or social service jobs, in exchange for their “basic income” (a gross amount or around 1500 €/month). However, the proposition has been popular in Germany for a long time, with the Social Democratic Party and the Left Party having subsidized public employment in Berlin between 2002 and 2011.
While politicians and voter’s stomach for Hartz IV is running dry, after more than 15 years of enforcement, clear justification for a UBI kind of policy still seems to be lacking on the public arena. For instance, funding a basic income is still publicly presented as value of basic income times number of recipients which, of course, leads to prohibitive costs. This comes at a time when ever more studies demonstrate that providing a basic income to citizens can cost much less than that to the State on a net basis, or it can even be calibrated in such a way as to be cost neutral (by applying changes to social security schemes and taxation).
Hilmar Schneider, an economist for the IZA Institute of Labor Economics, actually thinks that creating a financial floor for poor people means spending money on all the population. Internally, he is also thinking in a “value of basic income times number of recipients” mentality, not understanding the income transfer mechanism inherent in basic income implementation. According to him, present day low paid jobs will become less attractive, which sounds reasonable to assume, since most people only accept those jobs because they are permanently threatened with destitution. What might not be so reasonable to assume, however, is to think that it may lead to price increases, and a general downward trend in income for many people. If people can accumulate a basic income with whatever income they can get from paid work, within a properly setup tax structure which incorporates basic income at its core, a rise in poverty is surely questionable.
What we are going through now is not a disaster, it’s a process. Last time, it took over a century of mass misery and, occasionally mass bloodshed to get through it (…) We should try to do it a lot better and quicker this time.
By Lynette Geddes
International affairs commentator Gwynne Dyer latest book, “Growing Pains: The future of democracy (and work)”, is a balanced and compelling look at the current rise of populism and how a Universal Basic Income (UBI) could be “a tool that might cool the anger (…)”.
The first chapter, titled “A giant orange canary”, claims the election of Donald Trump might actually be good for history as he is the canary in the coal mine of the growing unrest in the developed world. Dyer argues that, contrary to political rhetoric, it is not the immigration of cheap labour, or the out-migration of factories to other countries or free trade that are at the root of the problem. It is automation and the concomitant stagnation of middle-class incomes. The author states that “out of 7 million manufacturing jobs lost in the United States in the past forty years, at least 5 million were lost to automation.”
Dyer briefly outlines the calamities of the twentieth century – economic depression and wars – and draws parallels to our current geo-political conditions. However, he believes it to be widely accepted that the social safety nets that were implemented during that time in all western countries – though to varying degrees – have almost certainly mitigated the conditions that might now lead to similar extremes. But more must be done if we don’t want to slip back into the destruction of the past century.
Dyer argues that humans, unlike our simian ancestors/cousins, are fundamentally egalitarian and that solutions lie in understanding this. Though acknowledging that “non-violent revolution” sounds like a contradiction in terms, history shows us that “people can and will act together spontaneously to resist domination”. He quotes Harold Schneider, economic anthropologist, “All men seek to rule, but if they cannot rule, they prefer to remain equal.”
Throughout the book, two premises arise repeatedly: that income inequality brought about by automation is the problem and that some form of a UBI is a solution. He concedes that the concept of UBI is not new but it is an idea which is compelling, plausible, and gaining traction. It is also one that appears to span the political spectrum. The World Economic Forum (WEF) is a well-known International Institution for Public-Private Cooperation that brings business and political leaders together annually. In January 2017, several of the invited speakers addressed the concept of UBI.
Arguments against UBI, Dyer writes, include the notion that people’s self-respect comes from their job, or that countries can’t afford it, or that giving people “free money” will lead to laziness. He neatly disputes those ideas with facts but also a little facetiously. “As Harvard economist, John Kenneth Galbraith once put it, ‘Leisure is very good for the rich, quite good for Harvard professors – and very bad for the poor. The wealthier you are, the more you are thought to be entitled to leisure. For anyone on welfare, leisure is a bad thing.’”
Dyer closes the book with his opinion that, with climate change physically threatening existence as we know it, there isn’t time to waste on these political issues. “What we need now is a quick fix that reduces inequality to a tolerable level and re-stabilises our democracies, (…) ensuring that everybody has a decent income despite the unstoppable advance of automation, and doing it in a way that does not humiliate those who no longer have jobs.”
Minho, Portugal. Picture credit to: Notícias ao Minuto
Last Wednesday there was a Conference on Basic Income at Universidade do Minho, called “Rendimento Básico: uma Ferramenta para uma Europa Social? [Basic Income: a Tool for a Social Europe?]”. It was organized by Centro de Ética, Política e Sociedade [Center for Ethics, Politics and Society] (CEPS), together with several institutional partners, for instance Universidade do Porto (Porto University) and Ministério do Trabalho, Solidariedade e Segurança Social (Social Security, Solidarity and Work Ministry).
On the aftermath of this event, several interviews and articles were published, confirming the rising interest in basic income within the Portuguese reality. Interviewed by Público newspaper, van Parijs clarified that, although automation is largely seen as the prime mover of basic income, at least in “developed” countries, it is “not at the bottom of the basic income proposal”. According to him, basic income is, rather, a way to include everyone in work. Answering a series of questions focused on the perceived problems with basic income – work disincentive, contrary to work ethic, social cleavages, menace to the welfare state – van Parijs defended the proposal as non-conflicting with the work ethic, since people can choose better what to work for with a basic income, and also as collaborating with the welfare state and its function to provide material security.
Minister Vieira da Silva, also interviewed by Público, believes that basic income, if ever to become a reality, can only be implemented at an European scale. His greatest fear is that, with basic income, society will become polarized between the employed, who would (in his view) be financing basic income, and the unemployed, who would only be surviving on that unconditional stipend. He also claims that basic income experiments “have not been very successful”, and that basic income in Portugal “seems an option still far away from implementation”. The minister has not justified any of these assertions, which may unveil doubts on his knowledge about the successful experiments already undertaken (e.g.: India, Namibia, Canada), and the most recent events in India related to unconditional cash transfers. Nevertheless, Vieira da Silva acknowledges that in an era of robotization, basic income can be seen as an investment, “guaranteeing access to consumption for everyone”.
Ex-Work and Solidarity minister, Paulo Pedroso was also interviewed in this sequence of opinion on basic income. To Pedroso, people should simply not be exempted from their duty to contribute to society. However, he also acknowledges that creating a financial floor which eliminates the possibility of not having enough resources to live with dignity, is a good idea. Hence, he supports universality, but not unconditionality. More, according to Pedroso, basic income “aims to replace the welfare state”, which is an opinion shared by many on the Left on the Portuguese political spectrum, namely Francisco Louçã. The ex-minister assumes that the implementation of a basic income in Portugal will demand so much financial resources that the government would be forced to cut on essential services, like education and health, although that has aldready been proven unnecessary. Pedroso’s views on basic income do not come as a surprise, though, as he already had delivered his opinions before, having then stated that basic income “amounts to suicide”.
Discussions in Portugal about welfare, taxation and, ultimately, basic income, do not seem to share a rational basis. From several interviews it becomes clear that opinions get formed on emotional grounds – particularly fear and hesitation – and not over evidence. However, the conversation continues, in the midst of international experimentation (with basic income-related policies) and tentative implementation moves (India).
The main opposition party in India, the Congress party, has just promised to implement a “nationwide minimum income for the poor”, rolling out the unprecedent scheme starting as soon as May 2019, if it gets elected. The party’s president Rahul Gandhi, has announced this on Monday, while speaking to farmers in Chhattisgarh state, where Congress was elected after promising statewide loan waivers.
Critics from the Bharatiya Janata Party (BJP), currently in power, dismiss this minimum income for the poor as a false promise from Congress, taken in a populist fever given the upcoming general elections, but Congress leaders have replied with the fact that they are fulfilling their promises on farm loan waivers in the states where they have been elected to recently. According to them, namely though BJP leader Ravi Schankar, this is just one more announcement, among many others which never saw the light of day. As Shankar speaks, though, regional leaders are fulfilling some of the Congress party regional electoral promises. Ashok Gehlot, just recently elected as chief minister of the Rajasthan region, India’s largest state located on the East side shouldered by Pakistan, just said on Monday that “whatever promises [Rahul Gandhi] made during assembly elections in Rajasthan, Madhya Pradesh and Chhattisgarth, we are fulfilling them, be it farm loan waiver or allowance to unemployed youths.”
Rahul Gandhi has firmly stated: “Nobody will remain hungry and nobody will remain poor as all poor people will be entitled to a guaranteed income. We will do this in Chhattisgarh, Madhya Pradesh, Rajasthan and all other states as well. All you have to do is to give us an opportunity”. Particulars have not yet been revealed (for instance, what are the parameters defining “poor” in India), but this announcement from Congress comes on the wake of the 2016-2017 Economic Survey, which suggested the implementation of a basic income to support the bottom 75% of the population in terms of income. In that document, the scheme’s realization would include the rollback of several (conditional) subsidies.
Running up these last months to the general election, spirits are agitated. There has been speculation on whether Narenda Modi and his government would attempt to implement a nationwide basic income on this week’s presentation of the interim budget, as a response to farmers protests all over the country. That led some to think that Ghandi’s move was meant as a strike to turn the table and get Congress one step ahead facing the impending elections. Could be. However, government officials are sceptical about how to finance such a bold policy, without cutting on State essential services and unleashing “runaway inflation”, which discourages the belief that government will make history in only three months.
As expected, the Congress party leadership was quick to support Gandhi’s announcement, with messages and statements from Chidambaram, Sheila Dikshit and Bhalchandra Mungekar, all Congress heavyweights (Chidambaram occupied ministerial positions for ten years, from 2004 and 2014, and Sheila was the longest serving Chief Minister of Delhi). Chidambaram as stated that “the poor in India have the first charge on the resources of the country and the party will find the resources to implement the promise of Rahul Gandhi.” He has been nominated the Congress Manifesto chairman for the 2019 elections, steady on the belief that “now we should make a determined effort to wipe out poverty in India”.
Chidambaram. Picture Credit to: The News Minute
Whoever gets to implement basic income in India, the proposal as it stands seems to be framed as a Negative Income Tax (NIT), since it is being direct to the poor. Arguably, the financing mechanism will expectedly use taxes and savings on welfare schemes to make direct cash transfers to those who fall below a certain poverty threshold. The next few months will be critical to Indian politics, and probably to the world’s social landscape. Right now, all eyes are on India. Sarath Davala, a long-standing basic income activist in India and internationally, has stated on Facebook:
“Indian National Congress, the main opposition party now announces Basic Income to the poor. Details are yet to be worked out. I cannot ask for more. Ironically though, our real challenge begins NOW – translating the idea plus evidence into concrete national policy without diluting the spirit of basic income.”
Indian farmer pouring fertilizer. Picture credit to: The National
As indicated before, there is political movement in India in the direction of basic income. Particularly in the state of Telangana, which started the implementation of its Rythu Bandhu (Farmer Investment Support) program in May 2018. Other Indian states, namely Maharashtra, Rajasthan, Madhya Pradesh, Jharkhand, Odisha, and Chattisgarh, have also introduced farm support initiatives, but Telangana conveyed the novelty of unconditionality. Sarath Davala, Vice Chair of the Basic Income Earth Network (BIEN), and coordinator of the India Network for Basic Income (INBI), has written extensively on this matter, as well as contributed with clarifications and specifications on social media.
In a nutshell, the current Rythu Bandhu program in Telangana, features the following characteristics:
1 – It is universal. All farmers with a land property registration are entitled to 4000 Rupees (50 Euros) per acre per season, making it 8000 Rupees (100 Euros) per annum. Cheques or money transfers were made directly to farmers bank accounts;
2 – It is unconditional: no conditions were prescribed. The farmer needn’t even cultivate. It is left to the farmer what he / she wants to do;
3 – It is called Farmer Investment Incentive Scheme. It was not called welfare, but termed as an investment. This means that, unlike conventional welfare schemes, such as loan waivers or crop insurance scheme, it is not intended as a relief after a calamity has hit, but as an investment.
Telangana has also introduced state-financed life insurance for farmers, over 5,8 million potential beneficiaries, and covering a sum of 500 000 Rupees (6190 Euros). The annual premium, paid by the government, is to be 2000 Rupees (25 Euros). Normally, if anyone wanted life insurance, they would have to visit a particular website to buy a policy, but now, the government is implementing these policies themselves.
This first attempt at unconditionality has had its problems, though. The program was criticized for being regressive, since no account was made for redistribution of these benefits to farmers, and so rich farmers were also getting the money from the government. And, since these farmers owned more land, they receive a greater portion of the investment. Another downturn was that tenants, or landless farmers, haven’t benefitted from the program since these do not possess property rights.
To address this last problem, the state of Odisha has announced in December 2018, and will roll out the scheme between February and March this year, pretty much the same as in Telangana but including landless tenants, estimated to cover around 1 million people (and their direct families). Under Odisha’s scheme, there are also available loans (for crop) at zero interest rates. In Jharkhand, Odisha’s neighbour state up North, the farmer assistance plan also disburses a fixed unconditional value per acre of cultivable land, 5000 Rupees (62 Euros) per annum, directed at small farmers (owners of less than 5 acres), for the next 4 years, benefitting over 2 million workers. So, in Jharkhand, rich farmers will be mostly excluded from the scheme. On the border with Bangladesh, in the West Bengal state, the scheme is somewhat more complex. Starting in February 2019, there will be a crop insurance for farmers land, with the state covering its premium. Plus, the same cash transfer as in Odisha will be rolled out, but with spending conditions (on seeds, fertilisers, pesticides, etc.). On top of that, a life insurance similar to Telangana’s, but covering only 200 000 Rupees (2470 Euros). West Bengal state farmer support scheme is directed at an estimated population of 7,2 million small and marginal farmers.
Other states, like Maharashtra, Rajasthan and Madhya Pradesh, have also announced and are implementing policies to help farmers, namely in-kind benefits and loan waivers. But, overall, and according to Sarath Davala, is it a very positive thing to “see a shift from many conditionalities to unconditional”. However, he points out that these policies should not be lightly called “basic income”, as they depart in several ways from definitions of basic income (as, for instance, that of BIEN). Telangana’s policy is neither individual (it is family-based), nor universal (only for farmers, and not even for all of them), nor basic (not enough to cover individual basic needs). However, it does go a step further as far as the unconditional part is concerned.
The State Bank of India (SBI) has also taken an interest in unconditional cash transfers to farmers, although at the expense of the universal basic income (UBI) policy, as presented in a recent report. The SBI confirms that unconditional cash transfers will have a more “meaningful impact” on farmers, than conditional policies applied up to now. However, it advices against UBI, stating that a “cash transfer scheme is always a better option than a UBI scheme. Many countries have found that UBI does not address the structural problems and is at best a solution in interregnum”. It remains unclear, though, how did the SBI found that one policy is superior to the other, in the lack of real UBI implementation around the world. Also, the SBI does not mention which “structural problems” UBI was found not to solve, and in which countries.
