Lena Lavinas argues that no universal basic income scheme can work unless it decommodifies access to all essentials

Lena Lavinas argues that no universal basic income scheme can work unless it decommodifies access to all essentials

Universal basic income is hardly a new concept, but it has taken on a new life in recent years.

Voices on both the left and the right now argue that a UBI could be the key to addressing major social and structural problems, including technological unemployment and underemployment, extreme poverty, welfare traps, and hidden disincentives to work.

By freeing people from the shackles of low-quality jobs and endless bureaucracy, the logic goes, a UBI would enable them to reach their full potential.

It is certainly an appealing argument, especially at a time of protracted wage stagnation, persistent poverty, rising inequality, and low economic growth. But, so far, the only versions of UBI that have been tested – in places like CanadaFinlandKenya, and the Netherlands – are essentially just new modalities of unemployment and welfare benefits. These experiments contradict the fundamental logic of a UBI.

To be sure, incremental approaches to UBI can drive forward welfare reform. In particular, by reducing or eliminating the need for means testing and other forms of conditionality, these so-called UBI-based schemes can alleviate bureaucratic burdens and the associated administrative costs, while delivering a new income stream to the poor.

The controls and conditionalities that have characterized the means-tested programs that have proliferated since the 1990s, especially in the Global South, are proving ineffective. Making income transfers truly “duty free,” as the Belgian philosopher and UBI proponent Philippe Van Parijs has stressed, would be a major victory. However, this may come about less in the name of justice and equity, and more because it serves a new regime of accumulation that can guarantee that everyone has a regular no-strings-attached monetary income. In turn, all citizens will be granted permanent access to financial markets, the advance of which has taken on staggering dimensions.

In 1990, global financial assets amounted to 50% of global GDP, or some $150 trillion; in 2015, that figure exceeded 400% of global GDP, or $500 trillion.

Under financialized capitalism, regular income streams facilitate market incorporation and financial inclusion. They serve as collateral in a world where debt, acquired through various kinds of loans and consumer credit lines, is increasingly used to pay not just for durable goods, but also for services like health care and education, which previously constituted the bulk of public provision.

Financial innovations based on income-backed loans to individuals are one pillar of a securitisation dynamic that enables the continuous renegotiation of debt, and thus the continuous expansion and consolidation of new financial instruments. The transformation of social policy into collateral reflects the logic of financialised capitalism, which converts cash transfers, pensions, and other monetary schemes – that is, sources of regular income streams – into assets placed at the disposal of the financial sector.

When social policy is used primarily to service debt and secure new loans, it stops serving as a mechanism for de-commodification, as it was originally conceived. Instead, it becomes both a vector for increasing household income and a source of financial profits for the banking system and the insurance industry.

Following this pattern, by providing a stable income stream and thus a reliable form of collateral, paid by the state, UBI would strengthen and even create financial markets, particularly for consumer credit, mortgages, and pensions. Far from serving as a revolutionary route to freedom from the whip of the market, UBI may end up yoking all citizens to rentier capital through indebtedness.

It doesn’t have to be this way. Certain conditions must be met to prevent UBI from being subordinated to the finance-dominated mindset.

That would mean, first and foremost, that UBI must be established not as a complement to welfare measures, but as a means of fully decommodifying access to basic needs, including food, clothing, and transportation. Current experiments offer too little cash. Providing enough is the only way to diminish the chance that UBI will serve primarily and predominantly as collateral.

Second, governments would need to guarantee vital public services, such as free universal health care, education, and training. Strong housing policies – including aggressive rent regulation, increased property taxation, and an expanded supply of affordable housing – would also be needed, not least to ensure that the rise in real incomes doesn’t fuel real-estate speculation.

Finally, financial-sector regulation would have to be strengthened considerably. High taxes on financial rents should also be introduced, in order to revitalize the real economy.

No doubt, this is a huge – and hugely complex – endeavor. But it must be undertaken if the ideal of a basic income is to remain intact and grounded in sound principles and decent values.


Lena Lavinas, Professor of Welfare Economics at the Institute of Economics at the Federal University of Rio de Janeiro, is the author of The Takeover of Social Policy by Financialization: The Brazilian Paradox. This content is © Project Syndicate, 2019, and is here with permission.

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UBI wont work, because it requires an extraordinary increase in personal income taxes to fund it all. People who are capable of earning good money will quickly immigrate to countries where they are rewarded for their hard work rather than being stripped of it, leaving behind all those dependent on the UBI. Its a bit like the NZ economy, when talented Kiwi's feel they are hard done by the NZ Government, they up sticks for Australia, leaving behind a low wage, low productivity, welfare dependent population and a Government forced to increase taxes even more to pay for them. I also appreciate the irony of the fact that the loonies proposing the UBI are also the same loonies proposing open global borders for everyone, thus ensuring that wealthy people are free to flee the jurisdiction LOL

Maybe, maybe not.

In Theory UBI should see a decrease in total welfare spend. As a single equal payment is made to everyone, replacing all the convoluted welfare payments/super/WFF we currently have. It is then up to the individual to provide any extra for themselves.

Then in theory the related Bureaucracy/administrative costs should also drastically reduce. i.e. a giant overall cost to the taxpayer is saved.

Again in Theory, the UBI would be in addition to your regular salary. i.e. you could earn more here than overseas. So if anything more skilled people may want in.

I use "in theory" deliberately, as I doubt the theory would ever hold true. But you never know.

The real problem in my view, it that UBI is an all or nothing gamble. You must implement it in its entirety at a singular point in time. You can't implement it in stages, or by location/demographic/industry, or in conjunction with existing systems. Otherwise it is not UBI, it is just another complicated welfare payment so adds to the already complex system(s) we have.

It is for this reason alone I can't see it ever working.

Your logic fails me. How is giving full welfare to 100% of the adult population going to be less than giving welfare to the current 50-ish% of the population who receive either full (benefit/pension) or partial (WFF/Accommodation supplement) welfare?

1. Because the welfare is less. TOP's and Gareth Morgan's Big Kahunal was $200 per week, with no extra top-ups from accommodation supplement, WFF or any other cash welfare payments.
2. You introduce a flat tax rate, under Gareth's Big Kahuna IIRC this was a 25% tax.

Thus if you earn $40,000, you pay $10,000 back to the government in tax, and therefore the UBI is pretty much totally offset for you.

Someone earning $200,000 would pay less under a 25% flat tax UBI (50,000 - 10,400 = $39,600) than they do now ($56,920). The Big Kahuna also had a deemed rate of return for a wealth tax, so you'd pay tax on the assets you own rather than solely based on your income, which ensures wealthy but income-poor people will pay more tax than they do at present. The Big Kahuna has special carve-outs for superannuitants so that they can keep living in their houses until they die. Basically TOPs tax policy at the 2017 election was closely based on the Big Kahuna, but re-worked in a fashion where it could theoretically be introduced incrementally to the existing tax regime rather than as one fell swoop.

The problem with UBI is not that people will pay too much income tax - because actually everyone would pay less income tax under Gareth's Big Kahuna model.

The problem is the insistence / assumption that everyone could survive on $10,400 annually. People on disability and other forms of welfare currently receive more money than that. If you're capable of working then probably you will do better under UBI than the present system since it's a flat tax rate and there's no punishing abatement rate that makes working part-time pointless. But if you can't work, then $10,400 is almost certainly too little to live on, and you'll need a top up, and then the government will need to reinstate some of that bureaucracy to manage these people, and pay them more. And so now the cost savings aren't as apparent as they were previously, and the tax rate probably has to be a bit higher, etc.

But that comes back to K.W.'s assertion that "UBI wont work, because it requires an extraordinary increase in personal income taxes to fund it all." $200/week is not enough, so the 25% flat tax would not be enough - unless you can extract even more from assets. And everyone will still be competing for the same resources so whatever $/week you set the UBI to, prices will inflate so that those living on the UBI alone will struggle and need extra handouts.

His assertion was based on the misapprehension that the welfare under UBI would be equivalent to current levels and therefore it would not be possible to afford, when actually it is possible to afford with less income tax than we take in now, due to abolishing a lot of jobs at IRD and WINZ.

I corrected his assumption and then pointed out the 'real' funding problem is that the proposed UBI wouldn't be enough for many people.

A real UBI is not a token amount, its the amount needed to maintain a basic lifestyle. In the US its estimated at $12,000 a year, which would be $18,250 a year in NZD. And cost of living is lower in the US, so the NZ amount would need to be even higher. It would need to be at least equal to the pension, which is $24,700 a year. How is $200 a week going to support someone, that wouldnt even cover the cost of renting a bedroom in a flatshare.
Perhaps you missed the point of the article? "That would mean, first and foremost, that UBI must be established not as a complement to welfare measures, but as a means of fully decommodifying access to basic needs, including food, clothing, and transportation. Current experiments offer too little cash. Providing enough is the only way to diminish the chance that UBI will serve primarily and predominantly as collateral."

The UBI is not intended to be a universal benefit. It's universal *basic income*.

Exactly. A basic income that you can live on permanently as opposed to temporarily, so approximately the level of a pension not the level of the unemployment benefit.
"A universal basic income is a government guarantee that each citizen receives a minimum income. It is also called a citizen’s income, guaranteed minimum income, or basic income. The intention behind the payment is to provide enough to cover the basic cost of living and provide financial security."

It's not my logic. It is the UBI theory. As I stated. I don't think it could ever work.

I agree it is an all-or-nothing approach that would be needed. Thing is, we already have a UBI in place with respect to 55% of our social welfare expenditure;

https://www.interest.co.nz/news/100033/budget-2019-social-welfare

And we know it works, as we have some of the lowest elder poverty in the OECD (in fact we were ranked first equal with Netherlands and the Czech Republic).

The numbers of people receiving a UBI are likely greater in number than those receiving other income support assistance. When you take the savings associated with no need for the WINZ organisation that administers all these non-UBI means-tested income support services, extending the UBI becomes a viable possibility for NZ.

It is wrong however to pitch/aim for such a proposal to be tax neutral. That should not be the aim - and which is why The Big Kahuna proposed too low a UBI for it to be a basic income.

"People who are capable of earning good money will quickly immigrate to countries where they are rewarded for their hard work rather than being stripped of it,"

Yeah it's like that 'income tax' idea. never gonna take off, the workers will just flee

It depends how much friction there is in moving and what the tax differential is between countries.

Not just the workers. The wealthy flee first. The US grew rich for a century as wealth fled from Europe. Now you get the current clustering of wealth in isolated spots like Monaco and Bermuda. Wealth gets deployed in finance. The best and brightest work for banks in London. So the whole structure of society becomes more polarised as finance become more predatory. The earlier system of low taxes and low benefits encouraged entrepreneurial engineers to put financial capital to work making their society more productive. Now they are encouraged to sell up to financiers and move somewhere less parasitic. Debt farmers prosper, engineers not so much. It is a complex adaptive system, so it is hard to know in advance what the likely outcomes of policy will be. The ability to deploy capital well is a rare skill and hard to acquire; yet everyone else assumes they are an expert.

Exactly. There is a reason why Singapore and Switzerland are incredibly wealthy countries, and its not because they have natural resources that cant be found elsewhere LOL

Income=processed-resource purchasing capability.

You cannot have unlimited resource-purchasing within a bounded system (Earth, Brazil), and certainly not with unlimited population.

So this piece fails the reality test, for the same reason the Millenium Development Goals fail.

The valid question is whether equalising buying-power (taxing the 1% and giving it to the bottom 50%) could 'eliminate poverty' and the answer is 'no'. Sure, it will help the bottom end, for a while. But it will be a very short while, because the increased resource-consumption (it's more direct at the needy end) meets the depletion of resource-supply. The graphs cross.

You have to address population first, or all bets (including the 'eliminate poverty' ones) are off. Then you work out sustainable consumption divided by number of people.

In terms of de-commodifying, you can indeed facilitate folk growing their own food etc, and you can reverse the trend to own the commons, but even de-commodified food-production needs to stay shy of soil-degradation, and the commons still needs to be sustainably managed. Brazil is overshot now - drawing-down soil/land capacity hand over fist. We shoud be 'paying' them for the lung service they give the deforested rest-of-us too.

Ultimately, her mistake is being 'economics' trained. The scope and vernacular are inadequate, simple as that, really. Too many assumptions to list individually.

TOP supposedly support UBI, although I wonder if they have abandoned it now as I haven't heard them mention it for a very long time. They also say their Marxist tax proposal is revenue neutral, which will make UBI almost impossible. They are either lying about their tax proposal being revenue neutral, will be making unprecedentedly high spending cuts, or don't support UBI any more. Which one is it, Geoff?

I suppose you could give everyone a UBI then make them pay it all back in health levies, housing taxes, GST, capital gains, education fees, and road taxes. Which kind of defeats the point of the UBI doesnt it?

TOP still support the UBI policy although I'm not sure if the policy outline has changed much from what they presented at the 2017 election. Also note that their 2017 tax policy was never a full UBI, but a stepping stone towards one.

I'm not really following them that much now because I think without Gareth's monetary backing they simply have no hope of getting over the 5% threshold and there's no indication they can win an electorate.

Yes, I did notice they started referring to a watered down UBI as "Unconditional Basic Income" instead of "Universal Basic Income". I think they say they'd cut pensions or something to pay for the stepping stone option first. But I do think it is very disingenuous for them to claim that their tax plan is revenue neutral, when in fact it is just revenue neutral "for now", until they need to pay for their Universal Basic Income proposal. I think they'd certainly opt to increase tax take instead of massive spending cuts.

Sounds like more socialism to me, but then I'm old school. If I want money I find a job. When I get too old to work I'll get other's to work for me. Simple really. Everything else is b.........t, including central government.

Does the pension sound like socialism to you?

Henry George covered all this ground over 100 years ago. Check out his works "Progress and Poverty". His version of UBI was described as a citizens dividend which wasn't necessarily tied to the poverty line, it was more like the Alaska dividend. Also to deal with the other issues mentioned a restructure of the tax system would be required, starting with a comprehensive land tax.

Our economies do not need to be debt based. But in the current paradigm, there is no other way.

A UBI would not and could not be paid for with income taxes. A UBI would be gathered from the robotics, technology and automation that will continue to do people out of meaningful work that provides enough income to live off. It will eventually lead to us completely rethinking how society is run, and yes, de-commodification of essential stuff will be part of it. Also ownership of the means of production will become an issue.
The reasons for a UBI are happening already, just not to the extent that we have any sense of urgency about this, but it will need to be addressed at some future point, unless you want to deny the vote for all.

I have trouble understanding UBI - tending to agree with whichever comment last read.
However recommend a cut down version: generous Universal Child Benefit. Main cost would be increasing income tax to pay for it. But consider the advantages: no admin coast and no rorting for WFF and accommodation allowance because they would disappear. It would nudge couples to stay together unlike our means tested benefits that tend to split families (the biggest factor in producing a successful adult is two parents cohabiting). It would encourage parents to reduce full time work and spend more time with their kids.

You know, here in NZ we have a sort of UBI it's given to around 20% of the population, it's not income or asset tested, and we been able to afford it for quite awhile!

We are even told that it is affordable way into the future, so it's certainly possible to have a UBI we have proved this as a country and over a lengthy time period.