The New Cold War
America, China, and the Echoes of History
A basic income—a regular, unconditional payment distributed by the government—is an old idea. Thomas More wrote about it during the Renaissance in Utopia, and Thomas Paine preached its merits when the United States was in its infancy. But the idea never gained mainstream acceptance. Although social scientists had long been testing the effects of a basic income with pilot projects around the world, it was easy to imagine that the governments permitting these experiments hoped that public enthusiasm might die out by the time the results were compiled. After the 2008 financial crisis, the International Labor Organization, the Organization for Economic Cooperation and Development, the World Health Organization, and, especially, the World Bank showed some interest in a basic income. Never, however, did the idea make the leap from white papers to real-world policy.
In the United States, the most prominent advocate of a basic income was the 2020 Democratic presidential candidate Andrew Yang. As a solution to structural unemployment caused by automation, Yang proposed that every American adult receive a monthly check of $1,000. He called it the “Freedom Dividend,” and it formed a major part of his platform. But on February 11, having received just 2.8 percent of the votes in the New Hampshire primary, Yang dropped out of the race. The lack of interest in his idea didn’t seem surprising. In most high-income countries, it was fair to say that a basic income had a cult following, popular only among the kinds of people who read speculative fiction and wore T-shirts sporting jokes disguised as mathematical equations. It was something of a fringe interest.
Then came the pandemic. In March and April, after COVID-19 forced governments to shut down entire economies, leaders across the world realized that existing benefit programs weren’t up to the task of helping people meet their basic needs while not working. In the United States, even conservatives lined up to support unconditional cash grants. Senator Mitt Romney, Republican of Utah, proposed sending every American adult a one-time payment of $1,000. Congress swiftly passed a massive stimulus package, which handed out payments of up to $1,200 to people under a certain income threshold, expanded the class of people eligible for unemployment insurance, and added an extra $600 to every weekly unemployment check. In less than a month, an idea that nearly all politicians had considered off the wall had—in temporary, partial form—become actual policy.
What changed, of course, was the politics. In normal times, the unemployed hardly constitute an important voting bloc, but the pandemic dramatically increased the number of people without jobs, and politicians felt they had to respond. As the lockdowns began and businesses shuttered, people who had never expected to need government assistance began to panic when their paychecks stopped. Many turned to established social programs and discovered that they didn’t qualify—because they worked part-time, worked for themselves, or worked in the gig economy. Those who did qualify found that the level of benefits they were eligible for wouldn’t come close to meeting their basic expenses.
Faced with millions of applicants who had never before needed support, welfare systems were overwhelmed. The pandemic revealed the degree to which unemployment insurance and other social programs had failed to keep up with the evolution of the labor market. Around the world, civil servants were tasked with designing stopgap programs that were rolled out in a matter of weeks—some more successfully than others. Many high-income countries made cash infusions to individuals a centerpiece of their response. In June, Spain rolled out a program offering monthly payments of around $1,100 to poor households. In August, Germany started a pilot project in which 120 Germans would receive $1,400 a month for three years. Without any intention of doing so, governments found themselves experimenting with various forms of basic income.
A basic income—a regular, unconditional payment distributed by the government—is an old idea.
Fiscal hawks had long argued that more generous social programs were simply too expensive to fund and too complicated to manage, but this was revealed to be untrue. Canada had a generous emergency response benefit up and running just two weeks after the World Health Organization declared COVID-19 a pandemic. The program covered not only people who lost their jobs or had their hours reduced due to the shutdown but also those who couldn’t work because they were quarantining or taking care of children. Gig workers and the self-employed were eligible. People could apply online or over the phone in minutes, and payments were deposited directly into recipients’ bank accounts within days.
Neither the Canadian program nor its counterparts in other countries are true basic incomes. All were designed to be temporary, and virtually all of them required recipients to have worked in the previous 12 months, a rule that excluded the long-term unemployed and people with disabilities. But with their larger size, looser eligibility requirements, hassle-free application process, and underlying trust in recipients to make their own decisions, the programs evoked some of the hallmarks of a basic income.
A real basic income is not a short-term emergency benefit but a permanent program offering a predictable payment. There are two main forms. The first is a universal basic income, which pays everyone the same amount on a regular basis and relies on a progressive tax system to recover some of the payments from high earners. The second is a guaranteed minimum income, which pays higher earners less (and nothing at all to those at the top). But both types are designed to ensure that everyone in society has enough money to live a modest but dignified life. And both do not require people to show a history of paid work, prove that they are looking for a job, or participate in job-training programs.
A basic income is not a replacement for public services; people with disabilities or addictions still require special support, and everyone needs health care and education. A basic income is just money, but that is its advantage over other income-support programs. With a basic income, all governments have to do is transfer cash to people. That is a far more efficient method of support than many of the complex, bureaucratic systems currently in place. A basic income has another leg up over existing programs: it does not presume to know what someone needs. Think of the U.S. government’s Supplemental Nutrition Assistance Program, which provides money that can be spent only on food. The underlying assumption is that people will make bad decisions if left to their own devices. The premise of a basic income, by contrast, is that the proximate cause of poverty is a lack of money, and so the government should solve that problem and let the people decide for themselves how to spend it.
Viewing basic income as an expenditure is the wrong way to look at it.
When they do, good things begin to happen. For one thing, people get healthier. My first foray into a basic income was a reexamination of the Manitoba Basic Annual Income Experiment, or Mincome, which offered a basic income from 1975 to 1978. I found that people who received a basic income used hospitals 8.5 percent less than those who didn’t. The decline was largely due to reduced demand for mental health services: fewer people visited family doctors complaining of depression, anxiety, sleep disorders, or family dysfunction. Other studies have reached similar conclusions. In an experiment conducted in Malawi in 2008–9, for example, researchers found that when families were given regular cash payments, HIV transmission rates fell, possibly because fewer adolescent girls engaged in transactional sex work.
There is also reason to believe that a basic income could reduce crime. Sociologists have long linked poverty and crime, and many of the most common offenses—theft and drug trafficking—have an economic motivation behind them. During the Mincome experiment, crime declined by 15 percent in the small rural town that served as a test site where all families were eligible to participate. The community recorded not only less property crime but also less violence.
One of the biggest arguments against a basic income is that it will discourage work, but there is no evidence to support that claim. Consider the Mincome experiment again. The payments were relatively modest, with a family of four that had no other income receiving around $15,000 annually in current U.S. dollars. The experiment, which was intended to see whether those who received a basic income worked less, found that most did not.
A basic income does not presume to know what someone needs.
Two groups, however, did reduce their hours, but they were the just the kind of people one might hope would temporarily remove themselves from the labor market. One was new mothers, who used the stipend to buy themselves longer maternity leaves to care for their children at a time when most companies offered just four weeks off, the legal minimum. The other was young men, who, instead of dropping out of high school as soon as they turned 16, stayed in school and graduated—a decision that delayed the start of their working lives but drastically improved their long-term career prospects.
Every other experiment with a basic income reveals similar outcomes: receiving one has virtually no effect on primary earners, while secondary and tertiary earners—mostly people working only a few hours a week to begin with—work a little less. Moreover, people invest in education. In the Mincome project’s rural test site, more boys from poor families graduated from high school. In a randomized control trial conducted in Ontario in 2018, recipients used the extra cash to enroll in community college. In the Malawi experiment, families receiving payments were more likely to send their adolescent girls to school. This is not merely charity; it’s smart strategy for increasing the productivity of the labor force.
Two other recent experiments—one in Finland and the other in the Netherlands—found evidence that a basic income can also help people who have been unemployed for years. In both trials, those who received a basic income were more likely to find full-time jobs by the end of the experiment than the control group, where subjects stuck with the status-quo approach of mandated job searches, job-readiness programs, and regular contact with a case worker. Researchers theorized that without all the bureaucratic requirements, participants had more time to look for a better job; they didn’t have to settle for a temporary gig that was available immediately just to meet the program’s requirements.
Perhaps the most common argument against a basic income is that however beneficial one may be, it is simply too expensive. One estimate put the cost of Yang’s proposal, for example, at $2.8 trillion a year. Although the gross cost of a universal basic income is eye watering, some of the expenditure would be returned to the government through taxation, especially if the program goes hand in hand with a more progressive tax system. Guaranteed minimum incomes, for their part, are targeted to those with low incomes and thus have a much lower price tag. In fact, their cost is comparable to the expenditures on social programs that many governments already make, such as child benefits, and much lower than what most governments spend on pensions.
But viewing basic income as an expenditure is the wrong way to look at it. It is an investment in the kind of society people want—one that values and invests in their health, education, and security. The returns on that investment come not only in a higher quality of life but also in dollars, because a basic income reduces the burden on other programs, such as Medicare, that have long been responsible for treating the consequences of poverty. Better to give poor people money upfront so that they can care for themselves than wait until they get sick and pay for their treatment then. A basic income is both cost-effective and humane.
For a long time, policymakers have been reluctant to embrace a basic income. It seemed too unthinkable, too unconventional. But crises have a way of changing politics overnight. The pandemic has awoken politicians to a truth that many have known for a long time: the existing social safety net is riddled with holes, and it’s time something new.
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