Thursday, 02 April 2020
The American Congress decided in March that most US citizens will be paid an unconditional income of 1200 dollars.
Dozens of members of the British Parliament signed a letter pleading for an “Emergency Universal Basic income”. In order to deal with the economic and social impact of the COVID 19 crisis, many more around the world, from Italy to India, are now advocating the introduction of an unconditional basic income.
You have been defending that idea since the early 1980s. In 1986, you convened in the university town of Louvain-la-Neuve the first international conference on basic income, which saw the birth of BIEN, a network that now spans the whole world (basicincome.org). And you recently published a reference book on the subject (Philippe Van Parijs & Yannick Vanderborght, Basic Income. A radical proposal for a free society and a sane economy, Harvard University Press, 2017) already translated into several languages, including Chinese and Korean. Has its hour finally come?
In these forty years, I have learned not to get excited too quickly. It is true that the idea is coming up right, left and centre. But there are several versions, with distinct purposes.
One purpose is to ensure that no one ends up with no income for weeks on end as a result of the lockdown imposed by a government.
In many countries, including Belgium, some scheme of “technical” or “temporary” unemployment is triggered, with workers receiving a benefit worth 70 or 80 percent of their wage for a limited period of time. But it is harder to design a scheme that covers satisfactorily the growing category of the self-employed, the platform workers and workers with irregular or “zero-hour” contracts.
In several countries, these are the categories that have been growing fastest in recent years. This is what inspired the British proposal you mentioned. At the end of March, over 170 members of the House of Commons and the House of Lords advocated the introduction of an “Emergency Universal Basic Income” for the duration of the pandemic: an amount equivalent to the after-tax living wage, to be paid weekly to all residents and funded by public borrowing.
Compared to the existing schemes, including the UK’s so-called “universal credit”, such a genuinely universal scheme would have the advantage of reaching all households with a minimal amount of bureaucracy.
But it would have the disadvantage of increasing at a high cost the net income of a majority of people whose problem is not that they have too low an income, but that they cannot spend it due to shop closures.
It can therefore be argued that the public debt would be unnecessarily swollen by such a measure, and that something more finely tuned to address the sudden fall in income of the people hit by the crisis would make more sense, even if the targeting is imperfect.
Is an “emergency basic income” different from so called “helicopter money”, a label sometimes also used to defend a universal basic income?
The purpose is different. When an economy is in a recession, a central bank will want to boost it by pumping more money into it. This is commonly called “Quantitative Easing” and usually achieved by enabling and inducing private banks to lend more to both firms and households.
But as interest rates approached the lowest possible level, many economists started pleading for so-called “Quantitative Easing for the People”, the “printing” of money to be distributed directly to households.
The simplest way of doing so consists of a direct payment of the same amount into the bank account of every resident. Of course, such a payment has an inflationary effect, and it is meant to have one. It is to be used when there is not enough inflation, and it must therefore necessarily be temporary, which is also the case for an emergency basic income or other measures meant to address the immediate impact of the pandemic on the disposable incomes of many households.
But its optimal timing is different. Helicopter money is best reserved for the moment businesses can reopen and will welcome a strong demand.
The fear sometimes expressed is that, just as firms may not invest even when interest rates are very low, households may not spend but rather hoard the additional income they receive.
Some of the proposals for a “QE for the people” therefore propose that this payment should be made in a “melting” currency that loses value through time, so that households would be encouraged to use it straight away.
Some of the proposals also exclude households with high incomes and therefore a lower propensity to consume. As well explained in a recent paper by the NGO Positive Money, the European Central Bank would be well advised to adopt some version of this “QE for the people” as soon as the confinement measures can be relaxed in the Eurozone.
How does Trump’s “universal basic income” of 1200 dollars fit into this distinction between two distinct purposes?
The bill that was passed in March by the US Congress promises the one-off payment of an unconditional grant of 1200 dollars to all residents with an annual gross household income of less than 90 000 dollars.
In addition to the wish to be generous in an election year, both purposes are relevant here: buffering the immediate income loss of many and boosting aggregate demand for the whole economy.
But from what I read, the administrative challenge of reaching many of those who most need the buffer is such that it will take several weeks before they get their 1200 dollars.
As to the macroeconomic stimulus, it will presumably work in the parts of the country least affected by the crisis but will hit against the lockdown in those most affected.
You seem rather lukewarm about these various developments.
The measures proposed or about to be implemented serve useful purposes and, in certain circumstances, they can provide the best tool available. But they are all intrinsically temporary.
Over more than the short term, they are unsustainable. However, they all share a most welcome virtue. They all boost our awareness of how much better equipped our societies and our economies would be to face challenges such as this one if a permanent unconditional basic income were in place.
Had this been the case, there would be no people left with no income at all, waiting for ad hoc schemes to be implemented or trying to find out how they could access existing schemes they never dreamt of ever needing.
Contrary to an emergency basic income, a permanent basic income would not boost the net income of the rich nor need to be funded by a massive increase in public borrowing. The bulk of it would be paid for by those whose income is not affected by the crisis.
This would not make it unnecessary to have social insurance schemes that protect both wage earners and the self-employed against a sudden income loss. But such schemes would come on top of a basic income security provided unconditionally to all.
If such a basic income existed at EU level, it would in addition operate as automatic solidarity between member states, with the shock attenuated in the countries hit hardest.
Moreover, whenever Quantitative Easing would be required, the pipeline would be ready for it, in the form of an administratively straightforward temporary increase of the basic income regularly paid to all.
So, do you think that the time is ripe for a fundamental reform of our social protection systems that would incorporate such a permanent basic income, even possibly at the European level?
I believe in opportunistic utopianism. Crises can provide opportunities for major breakthroughs.
In Belgium, universal male suffrage was the product of World War I, and a developed welfare state, like in many other countries, the product of World War II.
We do not know at this stage how long, how deep and how wide the economic crisis triggered by the coronavirus pandemic will be. But we must try to use the momentum to restructure our institutions so as to make our economies and our societies more fair and more resilient.
After the Swiss referendum and the Finnish experiment, the presidential campaigns of Benoit Hamon in France and Andrew Yang in the United States the many proposals for an “Emergency Universal Basic Income” or for a “QE for the people” in response to the current crisis can further contribute to persuading people that an unconditional basic income is a central part of what we need.
To make it a reality in a particular national context or at the European level, visionaries and activists are needed, but also, at the right moment, clever institutional tinkerers and courageous politicians.