Insecurity is the problem, universal basic income part of the solution

According to a new book by a distinguished economist, insecurity and not inequality is the source of our worldwide democratic malaise. And in poor countries even more than in rich ones a basic income is required in order to reduce not poverty but insecurity.

Insecurity is the problem, universal basic income part of the solution
Robots in a fulfilment warehouse. Technological insecurity is one of several sources of insecurity that is believed to contribute to populism and anti-democratic sentiment. A universal basic Income could be the solution. Credit: 123RF

Not poverty, not inequality, but insecurity is at the root of the worldwide upsurge in populism and disenchantment with democracy.

This is the main message of A world of insecurity, just published by Harvard University Press. The author, Pranab Bardhan, is a Calcutta-born, Cambridge-educated, highly respected professor of development economics at UC Berkeley. He is an expert on China and India. But his impressively comprehensive, richly informed and balanced book is about Europe just as much as about Asia and America.

The insecurity which Bardhan identifies as the source of our democratic troubles is in the first place economic. Globalization, understood as the expansion of world trade, has produced undeniable benefits. The poverty rate in India and China, for example, would not have shrunk as much as it has done had it not been for massive exports. But globalization has also shattered economic security in many places as a result of international competition annihilating millions of decently paid stable jobs and threatening to annihilate many more.

Globalization, however, is not the only source of this economic insecurity. Technological change is equally important. Projections about the rate of replacement of humans by machines may be exaggerated, but the ubiquitous invasion of automated digital services is now part of everyone’s daily life.

The insecurity created by fast technological change does not only affect workers whose jobs may be lost or unpleasantly redefined. It also affects consumers and users of public services who are constantly expected to acquire new skills if they are not to be left behind, deprived of access to what they are entitled to or subjected to heavy costs that the technologically up-to-date can avoid.

These two major sources of economic insecurity, which have been very perceptible for some time, were more recently joined by three more: climate change, the pandemic and the war. Climate change creates insecurity not only because of its haphazard physical manifestations but also because of the economic disturbances created by the urgent changes in production and consumption required to address it.

The Covid pandemic disrupted economic activities throughout the world both directly, through illness, lockdowns and other restrictive measures, and indirectly, by creating havoc in supply chains. And the Russo-Ukrainian war has not only affected the livelihood of the residents of the war zones and the economies of the two countries at war. It has also made access to energy and food problematic in countless places very remote from the fighting.

Economic insecurity, whether generated by globalization, digitalization or any other cause, is not the sole culprit. Cultural insecurity, Bardhan insists, also plays an important independent role. It is triggered when people feel that the identity of their community is threatened by the arrival, or the growth in numbers or power, of people who do not share their native language, cultural references, religious or civic beliefs and customs, dress, culinary and other everyday practices.

The upsurge in populism is sometimes strongest in places where economic insecurity is low, due to a thriving labour market, but where cultural insecurity, so understood, is high, owing to real, alleged or prospective immigration.

Both economic and cultural insecurity breed democratic disenchantment because of the feeling that democratic national governments, often bridled by international treaties or constitutional constraints, are unwilling or unable to address them effectively.

Because of the largely unstoppable cross-border movement of capital, goods, services and people and because of the need to keep pace with technological progress, governments often have to capitulate to market forces, or to resort to laborious supranational decision-making processes, more or less remote and more or less democratic. Faced with the impotence of democratic governments, the temptation to call for strong leaders and to embrace simplistic nationalist solutions can seem irresistible.

What can be done to resist this temptation nonetheless? Bardhan believes in the importance of markets, both domestically and globally. He does not want national autarky to replace globalization, nor all means of production to be nationalized. The state, the community and the market all have shortcomings, but all have a role to play.

However, globalization — migration included — urgently needs to be better regulated so as to protect the weaker actors while enabling win-win deals. Meanwhile, at the national and local level, measures can and must be taken to enhance the security, both economic and cultural, of the least secure, including among autochthonous majorities.

Bardhan discusses many such measures — from lifelong learning to strengthening the voice of the most vulnerable workers —, often in the light of empirical evidence from all over the world. But there is one measure to which he devotes an entire chapter: universal basic income. In his view, the best argument in favour of basic income is not that it is an instrument against poverty or inequality, but that it is an instrument against insecurity.

The fact that some non-poor receive a basic income is therefore not a regrettable targeting error. It is essential in order to Increase the economic security of both the poor and the non-poor: for women even more than for men, a sturdy universal floor in the form of an individual unconditional income is far superior, in this respect, to a means-tested safety net.

While the introduction of a basic income is mainly advocated in the context of relatively rich countries, Bardhan argues that it is even more relevant and may prove more realistic in poor countries. In his book, he presents some calculations for India.

Many subsidies currently in place mainly benefit relatively affluent parts of the population and are explained by effective lobbying rather than justified as useful incentives. They should be scrapped. And the overall rate of taxation is particularly low in India, in particular where real estate is concerned. It should be increased. These two potential sources of revenue account for about 10% of GDP.

If the whole of this amount could be allocated to a universal basic income, each person would receive the purchasing-power-equivalent of nearly 70 dollars per month, slightly above the World Bank’s extreme poverty line of 60 dollars per person per month. But given the other needs that must be addressed, Bardhan recommends that the additional revenue should be shared equally between education, health care, infrastructure and a universal basic income.

The basic income would then just be 17 dollars per person per week: peanuts by our standards, but “some minimum income security” for tens of millions of vulnerable Indian households, which “even under the pressing fiscal constraints may not be unaffordable”.

Whether in India, Europe or America, Bardhan does not claim that basic income constitutes a magic potion to guarantee security, let alone a magic bullet to kill populism. But it is part of the battery of security-enhancing policies that are needed if the root causes of the worldwide disenchantment with democracy are to be addressed.

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