Category Archives: Economics

What is UBI?

The idea of a Universal Basic Income (UBI) paid to everyone (or every adult?) in a particular country, without any preconditions, has been floating in the political ether for many years. But in many countries it has recently moved higher up the political agenda.

Ubi is not a panacea, but it could ease a number of social problems

Indeed the concept has been partially implemented in a number of countries, including Brazil and Namibia. And several pilot schemes on a limited scale have been tried, for example in Finland. But the conclusions from such pilots are inevitably unreliable either because the trial was not unconditional, or it was just for a limited period or was for a small delimited community. I believe the only place where such a scheme actually operates at a modest level, typically around €1000 a year, is the Alaska Permanent Fund dividend paid to all long-term residents in Alaska.

UBI has to be paid to everyone. If a means test were to be imposed it would eventually fail to receive continued political support and would in due course be watered down as (I understand) happened in the UK with Child Benefit, which was originally a universal unconditional scheme. UBI would however have to be taxable; thus for wealthier recipients the benefit would be partially withdrawn through taxation.

However, ‘universality’ immediately raises the most widespread objection: that UBI is unaffordable and would demand such high rates of taxation as to be unacceptable. Various detailed studies attempt to refute this argument. However, I’m more inclined to say: ‘Where there’s a will (which for the moment there isn’t) there’s a way’. The fact is that we live in a society of abundance and it is intolerant, and indeed sinful, that some members of western society are rich beyond the dreams of Croesus, while others struggle to put a roof over their heads or to feed themselves or their families. For me this is more a moral than a political issue.

Another difficulty is how to draw a boundary around those who are entitled to receive the benefit; should they be residents or citizens? And how would one deal with the inevitable pressures of economic migration towards a country which offered UBI? There is no easy answer to this one, except that the geographically larger the ‘eligible’ community the smaller the problem. So, for instance, I support the campaign for an EU-wide UBI. A modest sum, say €500, a month would have little impact in Luxembourg but could be hugely important in Greece. But that would involve the EU becoming a ‘Transfer Union’ which is anathema to many prosperous northern EU Member States.

Then, the question arises: wouldn’t an unconditional payment, especially if set at an amount sufficient to live off, reduce the incentive to work and thereby lead to a community of skivers? Well: No and Yes. Most people would still want to work for a higher income. But if a UBI reduced the incentive to do mindless, menial or dirty jobs for poverty wages – cleaning toilets for example – it could have the desirable effect of driving up the wages for this type of work. And indeed there’s a fundamental human desire to contribute to society in some way or another, either through paid ‘socially useful[1]’ work, or through unpaid (and undervalued) work such as caring for a family or for elderly relatives – which is now most commonly done by women. A UBI even at a modest level would, at the margin, increase the incentive for many to opt out of the ‘paid’ economy and contribute to society and the common good in the unpaid economy. (Look for example at the amount of unpaid work done by retired people in our Church communities – including by the editor of Lumen!)

Finally, it is worth noting that UBI is often supported on the right of the political spectrum as well as on the left. But the right wing politicians that do so tend to view the concept as a panacea that would replace all other forms of social assistance. UBI might replace a basic state pension. But it is obvious that people who are, for example, severely disabled in one way or another would continue to need additional support beyond that of other members of society.

UBI is not a panacea but it could help to overcome the obscene inequalities of the society in which we live.

This article was originally published in Lumen, the magazine of the Anglican Chaplaincy in Luxembourg, in November 2019


[1] David Graeber in his book ‘Bullshit Jobs’ has pointed out how much paid work in our society is not socially useful. This includes many bullshit jobs in, say, the financial sector, but does not include ‘dirty jobs’ such as cleaning toilets which are indeed socially useful.

End of the era of mass consumption?

Yesterday (18 January) Steve Howard, IKEA’s head of sustainability said that we are witnessing a ‘peak’ in home furnishings – like peak oil (!) Today it is announced that China’s growth rate  has fallen to its lowest level, at 6.9%, in twenty five years, primarily as a result of slow down in manufacturing. Are we beginning to see the end of the era of mass consumption? There will certainly come a day, sometime, when people give up worshipping this false god. According to Grant McKraken: ‘Consumer culture perpetuates itself here precisely because it succeeds so well at failure.’ It offers a brief flicker of satisfaction which quickly dies away.

Then of course there are the arguments made by Robert Gordon in his famous 2012 article and his new book, that high rates of economic growth, as witnessed over the last 250 years,  are a thing of the past – at least for countries on the technological frontier, such as the US and Europe. His explanation is that there is no technical discovery on the horizon that could have anything like the same impact as that of first steam power and then electricity. (The telegraph was a more significant innovation than the internet.) So if we’re going to see decling demand as people get turned off mass-consumption, and declining supply of technical innovation all the government and central banks playing with mirrors will not restore economic growth. A more likely outcome will be, again, asset price inflation which will only further increase wealth inequality.

Yet in the West we live in an economy of great abundance. There is no absolute need for people to be homeless or cold or hungry. But there is a need to rethink economic institutions and structures so that thise abundance is shared more equally.  For this, at the moment a universal basic or citizen income seems to be the best idea around.

Turning the other cheek on the Fiscal Charter

In his book The Powers that Be Walter Wink considers the meaning of Christ’s teaching to turn the other cheek.  He argues that this does not mean passively to accept violence, but rather to render it ineffective by making the violator look foolish.

The proposed legislation on the Fiscal Charter being debated today is fatuous nonsense. For a start the bill says that the government would not run a deficit in ‘normal times’. What are ‘normal times’? Secondly no government can tie the hands of a future government; legislation can always be repealed. No, the purpose of the legislation is primmarily to embarass and trick the Labour Party.

Now if the Parliamentary Labour Party had ‘turned the other cheek’, in the sense that Wink understands this, they would merely have refused to debate such a ridiculous, unnecessary bill and would have simply not turned up in the House of Commons – and preferably persuade the SNP to do the same. Osborne and his cronies would then have been the ones looking foolish debating with empty opposition benches and wasting Parliamentary time.


Corbynomics – how much more orthodox could he be?

Corbynomics, the economic policies being advocated by Jeremy Corbyn and Shadow Chandelor John McDonnell, are far more orthodox and respected by professional economists than those of George Osborne and the Tory government.  In the week of the Labour Pary Conference, Dantemag published an article of mine making this point. Click the link here to read the article: Jeremy Corbyn’s economic turn.


Jeremy Corbyn

Jeremy Corbyn, elected today as the new leader of the British Labour Party, may not have had much to say on environmental issues and, for all I know, my never have heard about a ‘basic income’. But he is passionately committed to eradicated unnecessary poverty in Britain and reducing inequality.

He has been criticised by the Labour Party establishment and most of the media as a sort of throw-back to the past – someone who has never moved on from the 1980s. But actually he tapped into a new reality – which the other candidates completely failed to do – the increasing tendancy, among young people especially, not to join an organisation, but rather to ‘support’ a movement. So his campaign successfully  mobilised thousands of people who stumped up just £3 as ‘supporters’ of the Labour Party. The ‘establishment’ may feel that this was a bit unfair, but they made up the electoral rules and Corbyn showed himself the more able politician in using them.

No doubt the future will be full of in-fighting and compromises and disappointments. Nevertheless I joined the Labour Party today.


On Wealth and Happiness

In the weekend edition of the Financial Times, dated 5 September 2015, a front page article carried the title: ‘UK number crunchers conclude that money can make you happier after all’. The article was based on surveys carried out by the UK Office of National Statistics, and claimed that the result of the surveys disproved the widely supported thesis that higher levels of income do not bring more personal happiness. Specifically however, according to the ONS survey, it was net financial wealth (which might include cash under the mattress) that was associated with increased happiness, whereas: ‘physical assets such as antiques, yachts or cars […] had no relation to personal well-being’. So contrary to the claim of the article’s headline, this conclusion is hardly surprising. Net financial wealth offers people, whatever their level of income and wealth, some degree of security – which is certainly associated with greater ‘happiness’. Mr. Micawber said something very similar in David Copperfield: ‘Annual income twenty pounds, annual expenditure nineteen pounds nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds nought and six, result misery.’ The fact that physical assets make no difference to perceived happiness is indeed in line with, rather than in contradiction to, other studies that have been done on the matter.

Income and happinessThis diagram shows the result of one such international study on the correlation between the proportion of people ‘happy and satisfied with their life as a whole’ to per capita income of the country concerned. Broadly it shows that at relatively low levels of average income, where many people will be struggling to satisfy their basic needs reported happiness is low, but from middle income countries onwards this proportion tends to level off, making very little difference indeed among those countries with a high average income. While the conclusion may seem plausible the methodology of such studies is debatable. First, is the issue of how happiness is identified and indeed how easily the word and the concept can be translated into different languages and cultures. The second problem is that the income X-axis can extend to infinity, whereas the happiness, Y-axis, is constrained to lie between 0% and 100%. This of itself is bound to lead to some ‘levelling-off’ in the resultant graph.