Universal Basic Income: A reality check


I came across a podcast recently that extensively discussed the idea of UBI as a default policy for the future. Post GFC, Euro crisis and the current Covid crisis, left wing wokes with their freshly minted humanities, marxist degrees and inbuilt conjectures voiced their blind support to this, without much contemplation of how delicately poised the world is. Half their arguments interestingly refers to Nordic region / Northern European nations which supposedly distribute national dividends to its citizens. The issue with reading a flashy Bloomberg article and building an opinion is that it affects fair judgement. For one, a country like Norway for instance is rich in natural resources with negligible population relative to Asia. Government collected hefty taxes for social security and played the role of an asset manager with the surplus, by investing the hard earned tax money into foreign assets. The gamble paid off and the returns generated out of the capital invested for decades got back to the citizens as annual dividends.

When we talk about the protracted world, we are not just considering significantly deficit-ridden fiefdoms, but also extremely high population, lack of strong economic structure, abject poverty, corrupt welfare programs and crippled politics. What surprised me was that UBI found its support from among the greatest entrepreneurs of the Silicon Valley (that’s a topic for another time).

Covid crisis saw a spike in a section of the society that demanded money be directly put into pockets of the public till broader recovery, regardless of material and occupational situations. Beyond the political rhetoric of social justice (borrowed from the wokes of 20th century), what politicians fail to realize is that every crisis is the onset of a death-knell to a way of life, a particular industry and warrants a paradigm shift that replaces the old monotonous perpetuity.

Simply put, UBI or Universal Basic Income is a regular, equal and non-reversible grant given to public regardless of their social and economic situation. What’s worse is that the UBI is considered different from a typical welfare state idea of conditional money transfers to the bottom of the pyramid (which is quite famous with most of the emerged and emerging nations). The reality is that these welfare schemes promoted by most governments are testing grounds for UBI and UBI is taking it further into the quagmire, where citizens are clearly disincentivized to work. Welfare schemes turned out to be massively successful for the politicians (only) within democracies as such handouts ensure that powerful people remain in powerful positions for eternity.

For few socialists, social and ecological justice always trump economic efficiency and the natural law of human life. In their quest for the former, the world was knocked into Orwellian regimes as no such absolute concept exists.

So what kills the idea of a UBI at the very initiation? To name a few productivity, innovation, motivation to work. Tardiness creeps into human minds like a virus as it makes no logical sense to work to make ends meet anymore. Even if work progresses, a guaranteed monthly cheque increases the wage bill (due to lesser labour supply) with a significant slump in motivation to work. Another major challenge is the cost to the State. With majority of the world running significant deficits, it’s humanly impossible to run a wage bill that doesn’t devour the fiscal discipline without higher taxation, thus leading to flight of capital, labour and innovation. The toxic remnants pursuant to the above is a perfect recipe for a failed state like that of a Venezuela today. Another famous proponent for a UBI is economic inequalities. Inequalities stood the test of the time as a natural part of the economic system and I believe they prime aspirations and competition within the society as a natural driver to progress. When attempts are made to alter economic inequalities via excessive debt and taxation, apart from disincentivized hard work and innovation, chances are that the nation’s deviously crafted tax laws and restrictions are bound to backfire as the devil’s workshop within the human brain begins seeking its natural territory of liberty and freedom. Similarly, automation of work doesn’t justify a UBI. Automation / AI doesn’t necessarily put people out of work, but rather upgrades work of those who lost jobs and gets machines to report to human beings thus increasing human dignity. The society will always evolve into newer professions where human brains and cognitive skills will be necessary to face the next big challenge, as against the faulty assumption that runaway progressivism/capitalism impedes a potential societal change. This fear psychosis of automation and perennial job losses generated by certain intellectuals, was the root cause for most developed nations to run into heavy debt and deficits beyond repair, so much so that each citizen carries an implicit debt obligation to the world at the very birth. This in-turn challenges the principle of individual liberties where her/his liability is only towards what they knowingly commit to rather than by virtue of the nation’s mistakes. Ironically, UBI and a Welfare state vows to protect the same.

At a time when the world is shouldering a crisis due to a virus and also excessive micromanagement from governments, an idea of this nature (if it takes shape) will further increase the intervention of establishments. What’s worse is that, UBI once implemented can never be rolled back without a massive civil war. Another major Covid like crisis will warrant governments to implement austerity measures and such measures will bring us back the memories of Greece and Lebanon.

Classical branch of economics dictates that there is never enough of everything to go around. Scarcity and shortfalls are bound to exist as human beings live through an urge to constantly upgrade their wants and needs with passage of time. The naturally occurring sinusoidal economic phenomenon can’t be altered beyond a certain level as also confirmed by the Keynesian theory which most of the world champions (or rather thinks) today. The human value can never be decoupled from work / production. In other words, there’s no such cinematic utopia shown in one of those Sci-fi movies that most of self proclaimed liberals fantasize about. This brings us to the point that an individual will always have to work to earn a living. The Austrian theory (as a branch of philosophy more than economics) that speaks about “marginal utility curve”, states that as the production simply exceeds the aggregate demand build-up, the consumption will see an end and resources get redirected to something more scarce but the cycle never halts.

UBI simply perpetuates our roles as consumers at the behest of a printing press manager called Government. For one, it asks the consumer to do its duty and hand holds the consumer to prime the economic cycle rather than encouraging them to consume by inspiring animal spirits within them.

A basic income floor is a sin committed upon people working their day off who don’t get incentivized and instead taxed for their work. Following passion (another argument of UBI) can also be monetized as long as there’s innovation and may make more money than the usually perceived high paid 8 hour desk jobs. The definition of meaningful work should be the prerogative of the individual as an entity and the needs of that entity but not of a revolution-obsessed philosophy. A simple job and a humble income can be a choice and can’t be a societal norm as every individual carries her/his own desire, dream and greed for more. Respecting that and letting an individual choose what she/he wants to achieve with the resources earned is the cornerstone for liberty.

This whole century will be wiped out under tax slavery, as it’s not possible to turn the clock backwards and create an incorrigible society. Rather, the idea has to be to let people decide what they want and begin demanding a free world instead of freebies. What governments can instead do (post their ritualistic obligations), is focus on building strong human capital within the country by offering free and incentivized education to economically weaker sections and focus on building a strong innovation hub within the country supported by pragmatic institutional infrastructure, before taking a permanent backseat from the societal choices for good.



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