Keith Rankin: The New American debate

Thursday, 14 December 2000, 9:47 am
Column: Keith Rankin

Universal Basic Income: the new American debate

At last there are signs in the United States that at least some influential people realise that, if we are to distribute income equitably in the world's modern high productivity economies, the labour market that we take for granted just cannot do everything that is expected of it. The Boston Review of October/November 2000 has featured, for the first time as far as I know in America, a debate about the universal basic income (UBI) alternative to our reliance on the labour market as a means of distributing income.

The lead article – A Basic Income for All (http://bostonreview.mit.edu/BR25.5/vanparijs.html) – is by Europe's most prominent UBI advocate, Philippe van Parijs, who holds the Hoover Chair of Economic and Social Ethics at the Catholic University of Louvain in Belgium. Philippe van Parijs' best known recent publication is his 1998 book, Real Freedom for All. He made his reputation as an advocate for a universal basic income with articles in 1986, "A Capitalist Road to Communism" and "Universal Grants versus Socialism" (Theory and Society 15, 1986) which trod on the toes of the then leading socialist intelligentsia of Europe who were looking for a state-led labourist solution to the enigmas of 1980s' capitalism.

The Boston Review article is a very useful summary of the UBI concept, written particularly for an uninitiated American audience. Van Parijs' article is followed by 15 replies by leading American and European intellectuals, which are in turn followed by a response from a very encouraged Van Parijs.

In Europe, the UBI alternative is promoted by the Basic Income European Network, an organisation of the 'libertarian left' that occupies a space on the political spectrum in Europe that has been ignored in the United States and in those countries (like New Zealand) which take their intellectual lead from the USA. To too many here, the phrase 'libertarian left' seems too much like an oxymoron, not worthy of further contemplation.

So what is a universal basic income (UBI)? It is the idea that some amount of a nation's – or indeed of the world's – economic cake should be distributed equally to at least every adult tax resident of that nation. It's conceptually no different to the principle that every shareholder of a company should be paid a share of the profits, and that each person with equity should receive exactly the same dividend as each other person with the same stake in that company. In the case of the New Zealand economy, each resident adult would be considered an equal 'shareholder' in, if you will, New Zealand Inc.

The most radical component of the UBI idea is that a basic income, like a company dividend, is an unconditional payment. It is a payment that is not dependent on some labour contribution. It is a form of public property income rather than a payment for a service rendered.

While a UBI need not be enough to live on without any other income, most UBI advocates look towards a future in which citizens of the developed world will be able to choose to live, albeit modestly, solely on their universal income. Their modest low impact lifestyles would offset the more affluent lifestyles of those with significant private sources of income. Naturally, therefore, it is the Greens who have been most willing to push the UBI concept in New Zealand.

Is a UBI an arcadian pipedream? I guess that the answer is 'no and yes'. No, it's quite realisable in any national economy under any budget constraint. The size of a UBI payment must of course be set to fit that budget constraint. So a UBI is possible in New Zealand, even under the Fiscal Responsibility Act. However, so long as too many political, media and other leaders with a stake in our present ways of doing things resist the idea (much as they resisted electoral reform for many years), then it seems almost too radical to contemplate that everybody might be entitled to at least some grovel-free unconditional income.

Despite its marginalized status, the UBI tax-benefit system is already very close to been realised in New Zealand. First, we do, through our existing welfare arrangements, accept the concept of a guaranteed minimum income. We do not consign long-term unemployed persons to a life without income. With an explicit UBI, the first x dollars of a beneficiary's benefit would be designated as a basic income.

In addition to benefits targeted to working-age New Zealanders, we pay all persons over 65 a UBI called New Zealand Superannuation. NZ Super remains the most efficient and sustainable solution to the problem of retirement income.

Today we pay all employed persons a range of benefits and tax credits. Some are obvious – Independent Family Tax Credits, Accommodation Supplements – while others are less obvious. The most important of the less obvious benefits we pay to workers is a discount on their income tax. For example a person grossing $40,000 receives an annual discount of $5,130, on account of the first $38,000 of their earnings being taxed at a lower rate (19.5%). Under a formal UBI system, we would be more explicit in our accounting. Such a person (and every other person) would be said to be taxed at a flat rate of 33 percent while receiving a weekly UBI of $99 ($5,130 per annum). In other words, for many, the introduction of a UBI would be no more than an accounting exercise.

We are moving closer to a UBI in other ways too. For example, every Auckland household is at present anticipating a dividend of $650 from the Auckland Energy Consumers Trust, arising from the profits of community-owned Vector, formerly Mercury Energy. (Unfortunately, like the American presidency, this payment is forever going back to the courts as various parties opposed to economic and/or political democracy try to obfuscate the process.) We could pay direct UBI-like dividends out of all of the profits of SOEs (state-owned enterprises) and LATEs (Local Authority Trading Enterprises), much as Alaska does at present (as van Parijs notes) through the Alaska Permanent Fund.

Even the much despised community wage is a step towards a UBI. By making certain benefits nominally conditional on approved community service or training, we have come to accept that people contributing to our society outside of the market economy should be supported. We still have a long way to go before such support is unconditional, but we are moving away from the belief that our incomes should be determined solely through labour force participation.

I have written perhaps more than anyone else in New Zealand about the advantages of a universal basic income (see http://www.geocities.co m/ke ith_rankin/KR_UBI.html), including "A New Fiscal Contract? Constructing a Universal Basic Income and a Social Wage" published in the Social Policy Journal of New Zealand (1997). It was in 1991 that I coined the name 'universal basic income' for use in a paper that I submitted to a symposium on basic income held that year at Waikato University.

I met Philippe van Parijs and others in Vienna at the 1996 congress of the Basic Income European Network, and used the UBI name which, by then, others in New Zealand had also adopted (eg UBINZ). Since then he has become familiar with my writing. I was thus particularly gratified to find from the Boston Review forum on UBI that the European basic income movement has taken to using the UBI name, and has merged many of my economic arguments with the socio-political arguments that had earlier prevailed in Europe.

Now that the UBI concept has made a bridgehead into the United States, and given that American intellectuals are more amenable to capitalist arguments based on property rights than are those of many other countries, we can expect a diminution of the scepticism and prejudgement that has surrounded the concept in the past. It's an important debate, not least because the United States is at present creating unheralded levels of national wealth while failing completely, despite near-full employment, to distribute that wealth in a way befitting the world's most productive country.

The United States needs the UBI solution as much as the UBI movement needs traction in the USA. Watch this space.

© 2000 Keith Rankin

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Keith Rankin

Political Economist, Scoop Columnist

Keith Rankin taught economics at Unitec in Mt Albert since 1999. An economic historian by training, his research has included an analysis of labour supply in the Great Depression of the 1930s, and has included estimates of New Zealand's GNP going back to the 1850s.

Keith believes that many of the economic issues that beguile us cannot be understood by relying on the orthodox interpretations of our social science disciplines. Keith favours a critical approach that emphasises new perspectives rather than simply opposing those practices and policies that we don't like.

Keith retired in 2020 and lives with his family in Glen Eden, Auckland.

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