The case Against Universal Basic Income

02/24/2017 06:34 am ET Updated Feb 27, 2017

Universal Basic Income (UBI) suggests that all adults should receive the same minimum, guaranteed, income from the State irrespective of their other incomes. It is being put forward as the “solution” to the obliteration of jobs due to robots, artificial intelligence and machine learning. In a future, when work will be intermittent or absent, UBI could provide a safety net and replace the current, complex welfare systems ― or so its advocates claim.

  A life on UBI may not be so joyfull.
A life on UBI may not be so joyfull.

UBI is not a novel idea. Thomas Paine first proposed it in the late 19th century, when he suggested that big landowners should be taxed and the dividends redistributed to every young man in America. Paine’s economic argument rested on the idea of “rent”: the owners of producing assets gain from the work of those who use these assets to produce goods and services. This gain is a rent because the owners do not participate in production. It is rather significant that the business models of the big high-tech companies in the modern digital economy are founded on rent. Think of digital platforms, or the cloud, or XaaS (“everything as a service”) models. In a highly automated economy the owners of the automating technology will be akin to the Paine’s big landowners. So why not tax them and redistribute the money to the rest of us?

There are several arguments against this, and I would like to separate them in three categories: economic, political, and ethical. Let’s start with economics. In a globalized economy capital is free to move to the lowest cost. In the absence of a world government that can enforce a tax regime on every country, the practicality of taxing the cash reserves of fully automated companies – as suggested by Thomas Piketty among others - is a moot point. Besides, such a tax would impact on those companies’ ability to invest and innovate, which could result in losing their competitiveness. In such a scenario companies operating from low or zero tax regimes would win. By curbing innovation in their jurisdictions governments of today’s advanced economies will also lose from the productivity dividend that automation is expected to deliver. According to a recent report by Accenture and Frontier Economics intelligent machines will raise the annual growth rate of gross value added (a close approximation of GDP) by 4.6 percent in US, 3.9 percent in UK, and 2.7 percent in Japan. Governments may like UBI because it is the sword that can cut through the messy Gordian knot of their welfare systems, which are generating generational poverty rather than helping anyone. But going for UBI may have adverse effects both on tax receipts as well as in losing the battle of the fourth industrial revolution to low tax competitors.

Politics comes into play as well. It is curious that big high-tech companies in Silicon Valley are such fervent supporters UBI. Perhaps they are fearful of replacing the bankers as the most-hated capitalist villains, or maybe they want to pass the bucket to governments and relieve themselves of the responsibility of destroying the livelihoods of many. Nevertheless, many of those companies would be happy to contribute some of their vast wealth to fund UBI, for this will allow them to have much greater leverage on government decisions. There has been a tag of war between high tech companies and energy companies for who will have the greatest influence over government ― for quite a while ― and UBI seems to fast becoming the new front line. While Bill Gates suggests a “robot tax” and Elon Musk advocates UBI, a conservative think tank led by notable republicans such as James Baker and Henry Paulson suggested a carbon tax for financing basic income. If you think that that the so-called “free economy” is a euphemism for crony capitalism, wait till the automation era kicks in! But the deeper collusion of governments and capital can only lead to the further alienation of citizens. We are in the cusp of a citizen rebellion across the developed world. It would be foolhardy to suggest that, somehow, citizens will be quelled by UBI to the extend that they relinquished their rights, privacy and well-being to decisions made behind closed doors between politicians and high tech, or energy, executives. Also, when we think of UBI we must ask ourselves: do we want to become financially dependent on the State? Especially on a State that is itself financially dependent on the owners of automation technologies?

Finally, there are many ethical problems with UBI. Quality of life is often ignored in the current discussion. There are millions of people currently on benefits whose life is miserable. Extending the idea of welfare to all under the guise of UBI we are in danger of extending misery. There are certainly many who would prefer to live poorly, as long as they do not have to get up in the morning and do any work. To them UBI will be just some extra cash to spend on life’s little luxuries. But most people need to feel valued and productive, to live meaningful lives, to support and nourish loving families, to be creative and develop their full potential. For them a life of idleness on borderline poverty, paid by taxing others who will be enjoying riches beyond imagination, does not seem like a desirable future. Quality of life requires a new way of thinking about work, not government handouts so we can stay home and play videogames all day.

So if not UBI then what? How should we manage the transition to a post-work future? There is too much hype about what AI can really do, and big questions regarding how companies will adopt these new technologies in practice. But if for the sake of simplicity we assume that most jobs will become obsolete by mid 21st century, then we ought to go back to the basics, rather than patching up what has gone wrong with welfare. And the basics include defining the role of citizens in a democratic society as the creators of wealth and prosperity. Democracy is based on the assumption that citizens are the producers of wealth and the owners of property. UBI is undermining the foundations of democracy because it transforms citizen freedom to citizen dependency. We must think beyond dependency, towards innovative systems where machine intelligence leverages our creativity and self-development on a bottom-up, rather than top-down, fashion. In short, we need to reinvent democracy in a post-work future. The alternative would be to enter an era of corporatist totalitarianism dressed up as representative democracy.

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