by Will Wachtmeister | Dec 18, 2015 | News
Finland is putting basic income on the map and has attracted worldwide media attention by spearheading plans for the world’s largest basic income pilot.
Over the past month, the planned Finnish experiment has fascinated such a large number of readers and news outlets that – perhaps inevitably – many aspects of what is happening in the Nordic country have been misconstrued or exaggerated.
At the same time, most reports have overlooked the underlying reason why Finland is able to even contemplate a basic income experiment at such a comprehensive scale.
During the past year, Finland has been exploring possibilities to reform policymaking, with the aim of moving from a speculative approach to one that is experimental and evidence-based. This allows the government to systematically test new policies, such as a basic income, before introducing them on a larger scale.
Finland’s approach exemplifies a completely new way of doing politics, based on scientific research on how people react to new policies and policy changes. This policymaking approach is expected to spread to other countries, potentially bringing basic income experiments with it.
Why Finland?
Anyone trying to figure out why Finland has taken the lead needs to take into account that the new policymaking approach gives governments the knowledge and confidence to engage in large-scale experimentation. This is exactly what Finland is now doing with basic income, along with other policies.
Future designs: Students participate in a hands-on course in Design for Government at the Finnish Prime Minister’s Office. (Picture: Demos Helsinki)
Demos Helsinki, a Nordic think tank, is behind the experimental policymaking approach that is paving the way for the Finnish basic income experiment, among other research initiatives. Working with Aalto University and fellow think tank Avanto Helsinki, Demos Helsinki developed the Design for Government model, having been commissioned by the Prime Minister’s Office who wanted an “agile, human-centric and evidence-based” factor underpinning experiments and behavioral approaches.
The European Commission and the OECD have recently issued recommendations to their respective member states to use behavioral insights in their policymaking processes. This reflects a widely recognized need for innovative policymaking processes that are more efficient and allow policies to be tested before implementation.
This is why, according to Demos Helsinki, Finland’s basic income experiment is “only the tip of the iceberg” of a major paradigm shift that could well spread across borders.
A step further
While other countries like the UK and Denmark have taken tentative steps towards experimental governance, Finland has gone all the way. “It’s bizarre that the rest of our society works with testing, prototyping and then scaling, but not governance. It makes politics very theoretical, slow and reliant on guesses as opposed to evidence,” says Demos Helsinki researcher Mikko Annala, who was part of the team that produced the Design for Government model.
Taking it a step further: Demos Helsinki researcher Mikko Annala. (Picture: Demos Helsinki)
Annala mentions the UK’s Nudge unit and Denmark’s Mindlab as significant examples of this new type of experimental government innovation. “But,” he says, “we wanted to take this a step further, with large experiments and scaling up to the policy level.”
As a result, the Finnish Design for Government initiative is much more ambitious and comprehensive than any other projects in experimental governance. It is founded on the careful study of the effects of policy changes and the accumulation of a mass of knowledge and models. This will allow policymakers to make bold changes, because their effects will have been properly tested and modeled beforehand. At the same time, the experimental approach will make it easier to fine-tune new policies in response to feedback.
“What the typical government innovation units lack is a feedback loop to policy,” Annala explains. “That is different with the Design for Government initiative. Now the experiments are designed to scale from the start.”
Design for Government
This political direction was set by the Finnish Prime Minister’s Office. Wanting to explore the opportunities offered by behavioral science, the government commissioned a consortium to carry out the Design for Government project, under the leadership of Demos Helsinki.
The Prime Minister’s Office is now setting up an experimentation office to oversee the experiments and scaling. In addition to the basic income experiment, Finland’s ministries are testing other innovative initiatives — such as over a hundred planned or on-going mobility experiments across the country. Eventually, the Ministry of Traffic and Communications aims to “turn Finland into one giant Mobility Laboratory”. Additionally, of more direct relevance to the basic income project, Demos Helsinki is also investigating ways to transform to the funding mechanisms for the experiments themselves. Finally, Finland is sponsoring a project to create advanced communication platforms for experiments so that information, know-how and practices are more easily and more quickly shared.
Radical and fast
“There are clear reasons for Finland to change its governance this radically and this fast,” says Annala. He says the motivations for the change are both “qualitative and quantitative”.
“The need for experimental governance has been recognized in many nations,” he says. “One reason for this is the simple fact that the world is changing faster than ever: for example digitalization, immigration, aging populations and such phenomena bring up situations which we have never encountered before. In these situations it’s almost impossible to plan, and it’s better to experiment.”
The UK’s Nudge initiative has shown that experimental governance can unlock real potential and that there is every reason to take them to a larger scale, he says. “Many [Finnish] ministries are exploring the possibilities of doing large scale experiments and the Prime Minister’s Office is building structures for supporting the experimental culture. On this scale, the basic income experiment is one single experiment among many. Yet it is an intriguing one, of course.”
Annala points out that the Finnish basic income experiment has been misunderstood in some quarters.
Referring to articles in The BBC, Forbes, The Independent, Mashable, The Telegraph, Time and Quartz, among others, Annala also says that “none of the articles uncover the reason why Finland can pull off such ambitious policies in an age where so many government are left powerless with even smallest of changes in the way society works.”
He adds that Finland has taken a promising course, which could spread to other countries in the future. “If steered well, it can turn Finland into the world’s first country with truly experimental governance.”
FURTHER READING:
Demos Helsinki “Design for Government” Demos Helsinki website, accessed 14 December 2015
Vito Laterza, “FINLAND: Basic income experiment – what we know” Basic Income News, 9 December 2015
Mark Easton, “How politicians learned the power of the gentle nudge” BBC News, 22 July 2015
by Vito Laterza | Dec 10, 2015 | News
At the end of November, a coalition of eurozone campaigners, civil society organizations and economists launched the campaign Quantitative Easing for People, calling for the European Central Bank (ECB) to radically change its approach to the current Quantitative Easing (QE) program. At the time of writing, 75 economists have endorsed the campaign.
The initiative brings together groups including Social Justice Ireland, Collectif Roosevelt (France), World Future Council (Germany), FairFin (Belgium), European Alternatives, and Basic Income Europe. The campaign is also supported by organizations from Italy, Greece, Spain, Austria, and the Netherlands; see the full list here.
QE is an unconventional monetary policy used by central banks to stimulate the economy. It usually consists of buying government bonds or other securities in order to lower interest rates and increase the money supply. QE began in the eurozone earlier this year, and the ECB is currently creating 60 billion Euros each month. Matthias Kroll from the World Future Council said: “So far the ECB’s QE program has proven to be ineffective in raising inflation back to its 2% target.”
“Flooding financial markets inflates share and bond prices, which makes the rich richer, but does little to help households and business. In fact, QE is helping fuel a new financial bubble, laying the foundation for another financial crisis. The eurozone needs a more direct and efficient stimulus.”
European stock markets plunged on December 3, when Draghi announced that the current QE program would be extended by six months to March 2017. This is a sign that even large corporations and financial markets do not believe in Draghi’s QE and expect more.
The aim of the QE for People campaign is to push the ECB to spend the money differently, by focusing on public investment, key social services or redistributive mechanisms like a citizens’ dividend – the last idea resonating well with basic income activists.
The proposal was first put forward in a letter signed by 19 economists and published in the Financial Times in March this year:
Rather than being injected into the financial markets, the new money created by eurozone central banks could be used to finance government spending (such as investing in much needed infrastructure projects); alternatively each eurozone citizen could be given €175 per month, for 19 months, which they could use to pay down existing debts or spend as they please.
Cash transfers under QE for People and basic income have common features. Both are directed to all citizens, with no strings attached. The time dimension differs though, as QE measures are by definition temporary, while basic income is a permanent scheme.
The 75 experts who support the campaign include several pioneers of the idea, such as Professor Steve Keen, Professor David Graeber and fund manager Eric Lonergan, as well as other influential economists and financial analysts like Ann Pettifor and Frances Coppola. These experts signed a statement of support that lays out the reasons behind the campaign:
1. Conventional QE does not work
Since it started in March, the eurozone QE program has not helped to rescue the eurozone economies from stagnation.
2. Conventional QE is risky and harmful
Flooding financial markets inflates share and bond prices, which makes the rich richer but does little to help ordinary people and businesses. In fact, QE is helping fuel a new financial bubble, laying the foundation for another financial crisis.
3. A more direct approach is needed
Countries in the eurozone need to stimulate their economies without increasing public and private debt, without increasing inequality, and without creating bubbles.
4. QE for People is possible
Instead of flooding financial markets, money created through QE should be spent into the real economy, on essential public investment such as green infrastructure, affordable housing and/or distributed as a citizens’ dividend to all residents.
5. QE for People is urgently needed
Given the challenges facing the eurozone, we urge economists, civil society organizations, and people from across the eurozone to join us in calling on the ECB to implement QE for People as soon as possible.
The campaign will focus on raising awareness of the failures of the current QE program, building political momentum around alternative monetary policies and fostering further research. “Having more than 70 economists endorsing the idea is a huge milestone, but this is only the beginning. Our goal is to create a much bigger coalition with citizens, academics and civil society organizations,” said Stan Jourdan, campaign coordinator.
If you want to know more about the campaign, visit the campaign website.
You can join the movement QE for People by signing up here.
Economists can endorse the campaign here.
See also: Stanislas Jourdan, “Europe: 19 economists call on the ECB to make ‘QE for the people’ in a letter to the Financial Times,” Basic Income News, March 27, 2015.
by Vito Laterza | Dec 9, 2015 | News
In the last week, the basic income experiment in Finland has gone viral, making headlines around the world, from UK-based Telegraph to Russia Today. Not all the reports however were correct. Here is what we know.
Update March 2016: KELA has published its recommendations – see a summary here.
Some articles mistakenly gave the impression that the Finnish government has already made plans to introduce a nation-wide basic income. As we reported before here and here, for now the government has committed to implement a basic income experiment. KELA, the Finnish government agency in charge of welfare benefits, rectified the misperception on Tuesday.
In a previous statement released on November 19, KELA provided additional information about the experiment. It highlighted four objectives behind the program. It aims to find feasible options for an overhaul of the social security system in response to labor market changes. Some of these trends include the growth of temporary contracts and freelance work that is not covered by the current work-based benefits structure. The experiment will also explore how to make the system more effective in terms of providing incentives for work, and avoiding the poverty trap – benefit recipients are discouraged from taking up employment, if the additional income received from a job is only marginally higher than means-tested benefits. Another goal is to reduce bureaucracy and simplify complex and costly procedures for administering benefits.
The experiment will be carried out in a context marked by three years of economic downturn, which has led to rising unemployment and pressures on public spending. The current center-right government took office after general elections in April this year, and is carrying out a wide-ranging program of cuts that will affect education, health and welfare provisions.
A working group has been created with the task of providing a preliminary study that will lead to the actual experiment. The study will identify a model for basic income to be tested. The experiment will evaluate the effects of giving a basic income to members of different population groups, and produce an overall cost estimate.
The preliminary study is a collaboration between Kela’s Research Department, the Universities of Helsinki, Tampere, Turku and Eastern Finland, the Sitra Innovation Fund, the think tank Tänk, and the VATT Institute for Economic Research. Kela’s research director Professor Olli Kangas is the project’s head. The study is already under way. A decision by government on the details of the basic income experiment is expected in the second half of next year. The experiment is scheduled to start in 2017.
The American news website Vox published a PowerPoint presentation by Kangas that highlights some of the issues currently under discussion in the working group. BIEN-Finland President Otto Lehto stresses that this should be read as a general indication, rather than an official position of government or the working group.
The government has set aside 20 million euros for two years for the experiment. There are several options that the working group will consider. The first is a full basic income, where the amount paid to participants would be high enough to replace “almost all insurance-based benefits”, hence a significant monthly sum. As in other European welfare states, Finland has an insurance system where workers receive their unemployment and pension benefits from sector-specific funds. These are usually higher than the basic benefits administered to welfare beneficiaries regardless of their occupational status. The figure of 800 euros per month circulated by many news outlets is to be read as a possibility under this option, rather than anything set in stone.
The second option is a partial basic income that would replace basic benefits, but leave intact almost all existing insurance-based benefits. The presentation notes that, in this case, the monthly sum should not be lower than the existing level of basic benefits, which is around 550 euros per month. The same figure was reported in several media without the appropriate context.
A third option is that of a negative income tax, where income transfers are made through the taxation system. Other models might also be considered, including the option of a participation income given to unemployed people as an incentive to seek additional income – this alternative is discussed by Kangas himself and Jan Otto Andersson in a 2002 paper.
The size of the sample and the geographical areas covered are other key topics to be addressed. According to Kela, the next step will be the delivery of a review of available evidence from universal basic income models tested in other countries, which will be presented to government in spring 2016. In a recent survey carried out by Kela, nearly 70% of respondents support the idea of a universal basic income, and most of them think it should be set at around 1000 euros per month.
Here is a list of relevant sources for more information:
Kela, “Universal basic income options to be weighed,” November 19, 2015.
Kela, “Contrary to reports, basic income study still at preliminary stage,” December 8, 2015.
Kela, “Experimental study on a universal basic income.”
Olli Kangas, “Experimenting basic income in Finland,” presentation, December 8, 2015.
Liam Upton, “Finland: New government commits to a basic income experiment,” Basic Income News, June 16, 2015.
Stanislas Jourdan, “Finland: Government forms research team to design basic income pilots,” Basic Income News, October 15, 2015.
“Kela to prepare basic income proposal,” Yle, October 31, 2015.
Ben Schiller, “How Finland’s exciting basic income experiment will work – and what we can learn from it,” Fast Company, December 7, 2015.
Dylan Matthews, “Finland’s hugely exciting experiment in basic income, explained,” Vox, December 8, 2015.
Jan Otto Andersson and Olli Kangas, “Popular support for basic income in Sweden and Finland,” Conference paper presented at the 9th BIEN Congress, 2002.
by Adrian Planken | Nov 1, 2015 | News
The Dutch Ministry of Social Affairs wants cities who are interested in experimenting with basic income to come up with a common plan.
The municipalities of Utrecht, Tilburg, Groningen and Wageningen will jointly submit a ‘ uniformly ‘ plan ‘ before they can get permission for their experiments, including ‘ free money ‘. That has a spokesman of the Ministry of Social Affairs Wednesday evening told. This summer it became known that Utrecht, Tilburg, Groningen and Wageningen did want to set up experiments around social security payments.
According to the municipalities the current rules for the social security are too rigid and they work sometimes counter-productively. There would be too many re-integration and interview obligations with high penalties, such as suspension of the benefit. Customization is not possible and the municipality would have lost a lot of time with the controls.
For this reason, the four municipalities do want to give some of their social assistance receivers an unconditional social security payment – what they call a ‘ basic income ‘-, i.e. a monthly income of the Government without an obligation to take paid employment, to be involved in community service. Persons entitled to this assistance may also reserve their extra earnings. Tilburg, Utrecht, Groningen and Wageningen want to examine whether this group will become more active than others with the current, strict regime.
The four municipalities spoke with to PvdA-Jetta Klijnsma State Secretary of Social Affairs during a ‘ first ‘ conversation to get approval for the experiments. Admittedly the current “Participatiewet” (=participation law, to which the social assistance belongs) allow some ‘room for experiment’, but that seems not spacious enough for what Tilburg, Utrecht, Wageningen and Groningen are heading for. Klijnsma now wants that the four municipalities come up with a common, unambiguous proposal, because their ideas are still far apart. Tilburg for example is planning a four years experiment in cooperation with the University, while Utrecht goes out of a year. Utrecht also wants, in addition to providing a basic income to some social assistance receivers and to compare the results of it with the results in other groups in which they use positive incentives. One of this groups will for example be rewarded with a bonus if they (volunteer) work.
A follow-up appointment with Klijnsma is planned in the first half of November this year. Then they will try on the basis of a new proposal to come to an agreement about the possibly stretching of the experiment space in the Participatiewet. In the meantime there is much discussion about the basic income in the Netherlands. Proponents commend on the aim to give social assistance receivers an unconditional social security payment as a means to free the recipients of the restrictions and humiliations they have to suffer and think that this freedom will lead to creativity. Opponents, such as the Netherlands Bureau for Economic Policy Analysis (CPB), warn that it will be prohibitive to give everyone a ‘basic income’ and thinks it will discourage the people who get it to be active.
Ria Cats, “Four municipalities have to make a uniform plan for ‘ free money ‘ “. Financieel Dagblad, September 23, 2015.
De Gelderlander, “State Secretary of Social Affairs ask for additional research welfare experiment Wageningen” De Gelderlander, September 27, 2015.
by Stanislas Jourdan | Oct 15, 2015 | News
The Finnish government has just taken a first step towards delivering on its promise to implement a basic income pilot during its term in office.
After committing itself to conducting a basic income pilot in Finland the Finnish government is putting words into action. Formed after the general election last Spring the new government of Finland led by the Centrist party announced in September the allocation of a grant to a group of researchers from the Finnish social security and pension department (KELA).
The group also includes researchers from the University of Tampere, the influential Institute for Economic Research and the independent think tank Tänk, which previously published its own proposal for a basic income pilot project. This working group is now in charge of designing parameters for the pilot project, which should be delivered by 2016.
Otto Lehto, President of BIEN-Finland told Basic Income News this week, “We welcome the creation of this working group and are happy that KELA, Tänk and researchers from the University of Tampere are involved in it. They are authoritative organisations with people that actually understand what basic income means.”
Strong and persistent popular support for basic income
KELA has already started to work on the topic of basic income with a series of articles and studies. In September, it conducted an opinion poll which showed 70% of Finns in favour of basic income, confirming the strong popular support witnessed in similar polls in 2002 and earlier this year. The poll also revealed that most people think a good level of basic income would be about 1000 euros a month.
The publication of KELA’s Annual Report provoked a debate in the Finnish Parliament about basic income, where even skeptics and opponents thought it would be a good idea to organise a pilot study.
This resonates with an editorial published on October 11 in the influential newspaper ‘Helsingin Sanomat’ which argued that “the basic income pilot study is a good idea” while carefully stressing the need for a pilot programme. The editorial also said that whatever difficulties basic income might have, it is important to study its effects, and that the Finnish welfare system is in desperate need of a complete overhaul.
The pilot should start in 2017
Despite a push by one member of the Center Party Jouni Ovaska, to start the pilot project by 2016, the two ministers responsible for the project, Hanna Mäntylä (True Finns party) and Anu Vehviläinen (Centre Party) stressed that the experiment should not be conducted hastily since nobody wants a badly executed study. The pilot program should therefore not start before 2017.
BIEN-Finland fully shares the government’s concerns. “A pilot project organised without sufficient planning and on a low budget would not be scientifically significant,” stressed Mr Lehto.
“The worst option would be a geographical study that takes place in one location only, since it would be susceptible to uncontrollable local variables. Ideally, we would want to study the effects of basic income on a wide variety of people in different circumstances and different locations. This means either having a proper randomized trial across the whole population, geographically dispersed across the whole country (as suggested by the Tänk/Sitra study last winter); or a regional pilot involving many different locations with different sociological, economic and demographic profiles.”
Mr Lehto concluded, “We put our hopes in the KELA-led team to produce a good plan that actually helps moves forward the discussion on basic income.”
Credit Picture © Finnish Parliament
