I was planning this as a followup to my earlier post on the feasibility of guaranteed minimum income (GMI) and universal basic income (UBI) policies. Chris has opened debate on some of the fundamental issues associated with a Rawlsian transition, so there might be some benefits in a parallel discussion of the specifics of these policies, which seem to me to capture a fair bit of what Rawls had in mind.
Although the two kinds of policies can be made roughly equivalent in terms of their effects on the distribution of income net of taxes and transfers, they seem (to me, at any rate) to indicate quite different political approaches, and therefore different transition paths, each with their own difficulties.
For UBI, it seems natural to start with existing examples of unconditional and universal payments, such as the Alaska Permanent Fund, and the issue of shares in formerly state-owned enterprises in some transition economies. The natural approach, which seems close to what Chris is discussing, would be to accumulate a steadily increasing stock of income-generating public capital, and use the return to capital to fund a Basic Income Payment.
The easy case is then the capital comes as a windfall, for example from mineral discoveries. But this is unlikely to be sufficient, except in the most favorable cases. Norway has probably done a better job of managing oil wealth than any other country and has accumulated about $600 billion, or around $120 000 per person, in its Government Pension Fund. Carefully invested, it might return $6000 per person per year. That’s impressive, but nowhere near enough to fund a poverty-line UBI.
So, any serious approach must, as Chris suggests involve transferring a large proportion of existing wealth from its private owners to the public. Leaving aside questions of justice, I can’t see an obvious transition path here. The problem, as illustrated by the existing wealth-based funds, is that it takes a lot of capital to generate a return that would finance a UBI at or above the poverty line. In the US context, you’d need something much larger than the Social Security Trust Fund (2.7 trillion) to get near the target. On the other hand, it’s hard to see how a universal payment at a level far below the poverty line could mobilise the kind of popular support needed for a policy of radical redistribution. Obviously, lots of people have thought about UBI, so maybe there is an answer to this problem I haven’t seen. I’ll be interested to see what commenters have to say.
For a GMI, the transition path looks a lot more feasible, though still way out of the realm of current political feasibility – more so in some countries than in others, but outside the Overton window everywhere. As I said previously, the approach would be to raise existing conditional benefits to a level on which people can live decently (in most developed countries, basic incomes for old people are at this level or not far from it, but other benefits are often less) and then to relax conditionality. The relaxation could be done in stages, rather than by instituting an unconditional payment instantly. For example, work tests for the unemployed could be relaxed or abandoned for those engaged in voluntary work or artistic endeavours, or bringing up children.
Of course, recent policy shifts have been exactly in the opposite direction (such as US welfare reform) and have been fairly popular. So, even the first steps towards a GMI would require a radically different political and economic context. Partly, as with UBI, this would involve identifying the wealthy, rather than the undeserving poor, as the primary source of the economic problems faced by the middle 60-80 per cent of households, and ensuring that the burden of tax fell on them. At least as importantly, though, such a policy can only achieve mass support in a context where workers in general are doing much better than at present, and expect to do still better in the future. That means genuinely full employment, reversal of the post-1980 trend to wage inequality, and some combination of a restored trade union movement and pro-worker government intervention. In this context, people would, I think, see the option of a GMI as something that enhances their own wellbeing by saying that they can do without a job if they have to, even if their current job is good enough that they wouldn’t want to quit, rather than an additional burden on hard-pressed workers, handed over to lazy layabouts.
In summary, I don’t think a transition to a GMI would be easy, but I think it could form part of a ‘real utopian’ vision more appealing than the shades of grey offered by (US-style) neoliberals and Third Way advocates. As I’ve argued quite a few times, the left needs a genuine hope for a better world to oppose to the angry tribalism of the right. Cautious and sensible management of a declining status quo, as offered by Blair, Obama and others, is not enough.
fn1. Precise definitions vary, but I’m going to use GMI to refer to any policy designed to ensure that no-one falls below some given income level, and UBI to refer to a policy that pays a given amount to everyone in the community, regardless of their economic circumstances. A UBI implies substantially more expenditure, and therefore more taxation than a GMI, but broadly speaking the two will have similar effects on the distribution of income, after taxes and transfers, at least until we consider administrative costs and effects on participation in employment.
fn2. We had a big, and not very satisfactory, discussion of this recently – I’ll offer as a working definition, the situation prevailing in Australia in the 1960s when, for most kinds of jobs, there were more vacancies than unemployed workers. That makes an employed worker’s (implicit or explicit) threat of going elsewhere more credible than the boss’s threat of dismissal.