Capitalism has a problem. Is free money the answer?

LONDON • One need not be a card-carrying revolutionary to deduce that global capitalism has a problem.

In much of the world, angry workers denounce a shortage of jobs paying enough to support middle-class life.

Economists puzzle over the fix for persistently weak wage growth, just as robots appear poised to replace millions of human workers.

At the annual gathering of the global elite in the Swiss resort of Davos, billionaire finance chieftains debate how to make capitalism kinder to the masses to defuse populism. Enter the universal basic income.

The idea is gaining traction in many countries as a proposal to soften the edges of capitalism. Though the details and philosophies vary from place to place, the general notion is that the government hands out regular cheques to everyone, regardless of income or whether people are working.

The money ensures food and shelter for all, while removing the stigma of public support.

Some posit basic income as a way to let market forces work their ruthless magic, delivering innovation and economic growth, while laying down a cushion for those who fail. Others present it as a means of liberating people from wretched, poverty-level jobs, allowing workers to organise for better conditions or devote time to artistic exploits. Another school sees it as the required response to an era in which work can no longer be relied upon to finance basic needs.

"We see the increasing precariousness of employment," said philosopher Karl Widerquist, an associate professor at Georgetown University in Qatar and a prominent advocate for a universal social safety net. "Basic income gives the worker the power to say, 'Well, if Walmart's not going to pay me enough, then I'm just not going to work there.' "

The universal basic income is clearly an idea with momentum. Early this year, Finland kicked off a two-year national experiment in basic income.

In the United States, a trial was recently completed in Oakland, California, and another is about to launch in nearby Stockton, a community hard-hit by the Great Recession in the late 2000s.

The Canadian province of Ontario is enrolling participants for a basic income trial. Several cities in the Netherlands are exploring what happens when they hand out cash grants unconditionally to people already receiving some form of public support.

A non-profit organisation, GiveDirectly, is proceeding with plans to provide universal cash grants in rural Kenya.

As a concept, basic income has been kicked around in various guises for centuries, gaining adherents across a strikingly broad swathe of the ideological spectrum, from English social philosopher Thomas More to American revolutionary Thomas Paine.

Populist firebrand Louisiana governor Huey Long, civil rights icon Martin Luther King Jr and laissez-faire economist Milton Friedman would presumably agree on little, yet all advocated some version of basic income.

In a clear sign of its modern-day currency, the International Monetary Fund recently explored basic income as a potential salve for economic inequality.

Not everyone loves the idea. Conservatives fret that handing out money free of obligation will turn people into dependent slackers. In the American context, any talk of a truly universal form of basic income also collides with arithmetic. Give every American US$10,000 (S$13,600) a year, a sum still below the poverty line for an individual, and the tab runs to US$3 trillion a year. That is about eight times what the US now spends on social service programmes.

Some advocates for working people dismiss basic income as a wrong-headed approach to the real problem of not enough quality pay cheques. "People want to work," saideconomist Joseph Stiglitz when asked about basic income . "They don't want handouts."

Yet some of the basic income experiments now under way are engineered precisely to encourage people to work while limiting their contact with public assistance.

Finland's trial is giving jobless people the same amount of money they were already receiving in unemployment benefits, while relieving them of bureaucratic obligations. The bet is that people will use time now squandered submitting paperwork to train for better careers or start businesses. Under the system the trial replaces, people living on benefits risk losing support if they secure other income.

In short, basic income is being advanced not as a licence for Finns to laze in the sauna, but as a means of enhancing the forces of creative destruction so central to capitalism. As the logic goes, once sustenance is eliminated as a worry, weak companies can be shuttered without concern for those thrown out of work, freeing up capital and talent for more productive ventures.

Silicon Valley has embraced basic income as a crucial element in enabling the continued roll-out of automation. While engineers pioneer ways to replace human labourers with robots, financiers focus on basic income as a replacement for pay cheques.

The experiment in Stockton, California, is underwritten in part by an advocacy group known as the Economic Security Project. The trial is set to begin next year, with an undisclosed number of residents to receive US$500 a month.

One key element of the basic income push is the assumption that poor people are better placed than bureaucrats to determine the most beneficial use of aid money.

From a research standpoint, these remain early days for basic income, a time for experimentation and assessment before serious amounts of money may be devoted to a new model for public assistance. Yet, from a political standpoint, basic income appears to have found its moment, one delivered by the anxieties of the working poor combined with those of the wealthy, who see in widening inequality the potential for mobs yielding pitchforks. "The interest is exploding everywhere," said University of London research associate Guy Standing. "The debates now are extraordinarily fertile."


A version of this article appeared in the print edition of The Straits Times on November 18, 2017, with the headline 'Capitalism has a problem. Is free money the answer?'. Print Edition | Subscribe