Table of Contents

India’s interest in a UBI program has been spurred, at least in part, by vigorous debate and policy trials in several advanced Western economies in recent years. The idea of eradicating poverty by simply giving people money dates back to at least the sixteenth century. Between the early sixteenth and the early twentieth centuries, a host of luminary thinkers—including Thomas More, Thomas Paine, John Stuart Mill, and Bertrand Russell—all endorsed the idea of a UBI in one form or another. For instance, the Renaissance humanist Thomas More proposed providing everyone with a basic means of livelihood to curtail theft. In the late eighteenth century, the political philosopher Thomas Paine recommended the creation of a national fund to pay every English citizen a fixed amount each year. The philosopher and economist John Stuart Mill, in the nineteenth and early twentieth centuries, wrote sympathetically of providing “a certain minimum [to] every member of the community, whether capable or not of labour.”1 The notion continued to gain support in progressive European intellectual circles in the 1920s and 1930s, based on the thinking of Nobel laureate and economist James Meade and political theorist G. D. H. Cole.2

The basic income concept grew in popularity across the Atlantic in the United States after the world wars, where it enjoyed support through much of the 1960s among free-market evangelists like Milton Friedman and Keynesian liberals like James Tobin and Paul Samuelson alike. Then U.S. president Richard Nixon’s administration made some attempts to pass such a proposal into law in the 1970s; while these efforts were ultimately unsuccessful, the government did undertake trials in cities like Denver and Seattle, which produced inconclusive results on the impact of a basic income on work habits. Around the same time, the Canadian government ran a five-year pilot program in a town called Dauphin that provided a guaranteed annual income to households whose incomes fell below the poverty line. In the intervening years, economic policy and public attitudes in the United States and the UK grew increasingly skeptical of the welfare state, and the idea temporarily receded from public memory.3

For advanced economies, interest in UBI has stemmed from rising concerns about stagnant trade flows, growing economic inequality, slow productivity gains, and especially automation-driven job losses.

The basic income idea has enjoyed something of a popular resurgence in recent years. This has been driven by the convergence of at least three key trends: apprehensions about how automation may affect the future of the labor force, the growing use of cash-transfer interventions to reduce poverty, and mounting interest in a social dividend funded by redistributing income from common resources.4

First, for advanced economies, the interest in UBI has stemmed from rising concerns about stagnant trade flows, growing economic inequality, slow productivity gains, and especially automation-driven job losses. Regarding automation, scholarly estimates of the likely magnitude of future job losses have differed dramatically, from a widely cited 2013 University of Oxford study warning that nearly half of U.S. jobs would likely be automated within twenty years to a 2016 study claiming that 9 percent of jobs were at risk across twenty-one countries in the Organization for Economic Cooperation and Development (including the United States).5 Despite differing projections, discussions about a basic income have coincided with uncertainty about the prospects of job creation amid rapid technological innovation.

The UBI has emerged as a popular solution among a diverse range of actors, including proponents in Silicon Valley concerned about automation, libertarians eager to simplify dysfunctional welfare states, and progressives seeking to improve the bargaining power of workers.6 It is perhaps no coincidence that governments in several advanced economies—including Canada, Finland, the Netherlands, Italy, the UK, and the United States—have already instituted or appear poised to institute some form of UBI pilot program.7

Second, the rapid growth of cash-transfer programs in low- and middle-income countries—including India—suggests that policymakers are increasingly comfortable using such tools to improve welfare outcomes. Governments have typically delivered these payments in one of two ways: unconditional cash transfers that recipients can spend any way they like, and conditional cash transfers offered to citizens who meet predefined conditions like undergoing regular medical checkups or sending their children to school. Conditional cash transfers became popular in the 1990s with the success of Brazil’s Bolsa Família and Mexico’s Oportunidades initiatives.

Yet several new programs that are seeking to do away with conditions entirely and provide unqualified income support have shown promising results. For example, a nongovernmental organization (NGO) called GiveDirectly has distributed unconditional, one-time lump sums through mobile money services to poor households in rural Kenya, Rwanda, and Uganda; GiveDirectly observed substantial improvements in household consumption and psychological outcomes.8 Similarly, in 2010, then Iranian president Mahmoud Ahmadinejad instituted a scheme of compensatory cash transfers to offset cuts to expensive food, fuel, and electricity subsidies. These payments were initially targeted to the poor, but difficulties with identifying and verifying income thresholds eventually led the government to institute uniform, universal payments amounting to 29 percent of the country’s median household income.9

Taken together, a vast and growing body of high-quality empirical research lends credence to the hypothesis that cash transfers help the poor.

Taken together, a vast and growing body of high-quality empirical research lends credence to the hypothesis that cash transfers help the poor. As of 2015, 130 countries ran at least one unconditional cash-transfer program, while sixty-four countries operated at least one conditional cash-transfer program as part of their poverty alleviation strategies and social safety nets.10 Reviewing the results of 165 studies comprising both unconditional and conditional programs, the Overseas Development Institute found that cash transfers offer many benefits. For participating households, cash transfers can reduce monetary poverty, improve school attendance rates, increase use of health services, have positive effects on savings rates, have a positive (or negligible) impact on employment rates, and grant more agency to women.11

Studies comparing unconditional and conditional transfer programs find that each have their comparative advantages. The former approach appears to work best when households’ core problem is a lack of funds, while the latter helps households make socially optimal decisions, like delivering a baby in a formal healthcare environment or investing in a child’s education, when they may do otherwise without such incentives.12 Cash transfers, with or without strings attached, appear set to make substantial inroads in welfare states around the world.

Third, the UBI concept shares a close intellectual affinity with the idea of countries using the proceeds from selling their natural resources to fund universal cash transfers to their citizens. A foundational example of this approach, the Alaska Permanent Fund, gives all the state’s citizens an annual, unconditional, taxable dividend funded by state oil revenues.13 A 2011 working paper by the Washington, DC–based Center for Global Development recommended that resource-rich countries place resource revenues into dedicated funds designed to disperse consistent, uniform, taxed transfers to citizens according to transparent criteria in such a way that creates shared social (and fiscal) contracts between governments and their citizens. Doing so, the study argued, can help such countries improve governance outcomes while defying the resource curse—the idea that countries enriched by fossil fuel or mineral wealth are doomed to suffer from corruption, poor institutions, and lopsided development.14

The most extensive investigation of a real UBI test case is occurring in Kenya, where GiveDirectly is conducting a privately funded randomized controlled trial.

The central idea of a “direct distribution of resource revenues” is expanding to new parts of the world, including India and other emerging economies.15 In 2014, for instance, the Indian Supreme Court ordered mining companies to deposit 10 percent of the proceeds from the sale of iron ore in the state of Goa into a permanent fund. The Goa Foundation, an environmental NGO and the petitioner in the case, has proposed that income from the fund be distributed among all Goan citizens.16 Likewise, in 2003 and 2004, Arvind Subramanian, who was then with the International Monetary Fund, made the case for transferring state oil revenues directly to Iraqis and Nigerians to improve both institutional and economic outcomes. Meanwhile, Center for Global Development senior fellow Todd Moss and World Bank economist Shanta Devarajan have outlined similar reforms in resource-rich African nations like Angola, Gabon, Ghana, and Uganda.17 Elsewhere, in recent years, politicians and commentators in Western countries like the United States and the UK have proposed various UBI initiatives funded by a range of sources, including proceeds from fossil fuel use, financial transactions, and the profits of technology companies like Facebook and Google.18

Among all of these examples of basic income proposals, the most extensive investigation of a real UBI test case is occurring in Kenya, where GiveDirectly is conducting a privately funded randomized controlled trial comparing a variety of unconditional cash transfers that will be provided over a period of twelve years.19 More than 26,000 individuals in 200 villages will receive cash transfers, with 6,000 receiving long-term basic incomes. As the world’s first comprehensive test of a UBI, this study may help answer core questions about basic income as its initial findings are released in the coming years.20 It may, for instance, make clear whether recipients, as some UBI critics fear, will fritter the cash away on drugs and alcohol, or work less (current data seems to indicate otherwise).21 Another key question is whether participating individuals change their financial behavior in response to long-term income security.

Notes

1 John Stuart Mill, “Of Property,” in Principles of Political Economy With Some of Their Applications to Social Philosophy (originally published 1848, 7th ed. hosted by the Library of Economics and Liberty, 1909), accessed July 5, 2017, http://www.econlib.org/library/Mill/mlP14.html.

2 “What Is Social Credit?,” Clifford Hugh Douglas Institute for the Study and Promotion of Social Credit, accessed July 5, 2017, http://www.socred.org/index.php/pages/what-is-social-credit.

3 Andrew Flowers, “What Would Happen If We Just Gave People Money?” FiveThirtyEight, April 25, 2016, http://fivethirtyeight.com/features/universal-basic-income.

4 Google Trends, search conducted by the author on July 5, 2017, https://trends.google.co.in/trends/explore?date=all&q=%22basic%20income%22,universal%20basic%20income.

5 Carl Benedikt Frey and Michael Osborne, “The Future of Employment: How Susceptible Are Jobs to Computerisation?,” Oxford Martin Programme on Technology and Employment working paper, University of Oxford, September 17, 2013; Melanie Arntz, Terry Gregory, and Ulrich Zierahn, “The Risk of Automation for Jobs in OECD Countries: A Comparative Analysis,” OECD Social, Employment and Migration Working Papers no. 189, May 2016. Also see Daron Acemoglu and Pascual Restrepo, “Robots and Jobs: Evidence From US Labor Markets,” National Bureau of Economics Research working paper no. 23285, 2017. For a counterpoint, see Lawrence Michel and Josh Bivens, “The Zombie Robot Argument Lurches On,” Economic Policy Institute, May 24, 2017, http://www.epi.org/publication/the-zombie-robot-argument-lurches-on-there-is-no-evidence-that-automation-leads-to-joblessness-or-inequality/.

6 Jathan Sadowski, “Why Silicon Valley Is Embracing Universal Basic Income,” Guardian, June 22, 2016, https://www.theguardian.com/technology/2016/jun/22/silicon-valley-universal-basic-income-y-combinator; Matt Zwolinski, “The Pragmatic Libertarian Case for a Basic Income Guarantee,” Cato Unbound, August 4, 2014, https://www.cato-unbound.org/2014/08/04/matt-zwolinski/pragmatic-libertarian-case-basic-income-guarantee; and Robert Kuttner, “A Conversation With Andy Stern on the Case for a Universal Basic Income,” American Prospect, June 28, 2016, http://prospect.org/article/conversation-andy-stern-case-universal-basic-income.

7 “Switzerland’s Voters Reject Basic Income Plan,” BBC, June 5, 2016, http://www.bbc.com/news/world-europe-36454060; “Experimental Study on a Universal Basic Income,” Kansaneläkelaitos, November 2015, accessed July 5, 2017, http://www.kela.fi/web/en/experimental-study-on-a-universal-basic-income; Jon Henley, “Finland Trials Basic Income for Unemployed,” Guardian, January 3, 2017, https://www.theguardian.com/world/2017/jan/03/finland-trials-basic-income-for-unemployed; Tracy Brown Hamilton, “The Netherlands’ Upcoming Money-for-Nothing Experiment,” Atlantic, June 21, 2016, https://www.theatlantic.com/business/archive/2016/06/netherlands-utrecht-universal-basic-income-experiment/487883; Elizabeth Rhodes, “Basic Income Research Proposal,” Y Combinator, September 20, 2017, https://basicincome.ycr.org/blog/2017/8/24/basic-income-research-proposal; “Ontario’s Basic Income Pilot,” Government of Ontario, Ministry of Community and Social Services, accessed July 5, 2017, https://www.ontario.ca/page/ontario-basic-income-pilot; Libby Brooks, “Universal Basic Income Trials Being Considered in Scotland,” Guardian, January 1, 2017, https://www.theguardian.com/politics/2017/jan/01/universal-basic-income-trials-being-considered-in-scotland.

8 Johannes Haushofer and Jeremy Shapiro, “The Short-Term Impact of Unconditional Cash Transfers to the Poor: Experimental Evidence From Kenya,” Quarterly Journal of Economics 131, no. 4 (2016): 1973–2042, https://www.princeton.edu/~joha/publications/Haushofer_Shapiro_UCT_2016.04.25.pdf.

9 The beneficiary population has shrunk under current President Hassan Rouhani’s tenure. See “Iran Home,” World Bank, last modified April 1, 2017, http://www.worldbank.org/en/country/iran/overview. For an overview of the mechanics of the subsidy reform, see Djavad Salehi-Isfahani, “Iran: Subsidy Reform Amid Regional Turmoil,” Brookings Institution, March 3, 2011, https://www.brookings.edu/opinions/iran-subsidy-reform-amid-regional-turmoil/. Studies have found a positive impact on poverty reduction in the early stages of the program, and no evidence of a significant negative impact on labor supply or labor force participation between 2010 and 2011. Djavad Salehi-Isfahani and Mohammad H. Mostafavi-Dehzooei, “Cash Transfers and Labor Supply: Evidence From a Large-Scale Program in Iran,” Economic Research Forum Working Paper No. 1090, May 2017, https://erf.org.eg/wp-content/uploads/2017/05/1090.pdf; and Djavad Salehi-Isfahani, Bryce Wilson Stucki, and Joshua Deutschmann, “The Reform of Energy Subsidies in Iran: The Role of Cash Transfers,” Emerging Markets Finance and Trade 51, no. 6 (2015): 1144–62, http://www.tandfonline.com/doi/abs/10.1080/1540496X.2015.1080512.

10 Honorati, Gentilini, and Yemtsov, “The State of Social Safety Nets.”

11 Francesca Bastagli et al., “Cash Transfers: What Does the Evidence Say?,” Overseas Development Institute, July 2016, http://www.cashlearning.org/downloads/cash-transfers-what-does-the-evidence-say-report.pdf.

12 Jishnu Das, Quy-Toan Do, and Berk Ozler, “Conditional Cash Transfers and Equity-Efficiency Debate,” World Bank, April 2004, http://documents.worldbank.org/curated/en/527311468779409474/120520322_20041117183542/additional/wps3280transfers.pdf.

13Alaska Permanent Fund Corporation home page, accessed January 19, 2018, http://www.apfc.org/home/Content/home/index.cfm. According to one estimate, the dividend has contributed to a decline in Alaska’s poverty rate, especially among Native Alaskans. See Scott Goldsmith, “The Alaska Permanent Fund Dividend: A Case Study in Implementation of a Basic Income Guarantee,” (paper presented at 13th Basic Income Earth Network Congress, University of Sao Paulo, Brazil, July 2010), http://www.iser.uaa.alaska.edu/Publications/bien_xiii_ak_pfd_lessons.pdf.

14 Todd Moss, “Oil to Cash: Fighting the Resource Curse Through Cash Transfers,” Center for Global Development, Working Paper no. 237, January 2011, https://www.cgdev.org/publication/oil-cash-fighting-resource-curse-through-cash-transfers-working-paper-237.

15 Todd Moss, Caroline Lambert, and Stephanie Majerowicz, “Oil to Cash: Fighting the Resource Curse Through Cash Transfers,” Center for Global Development, June 10, 2015, https://www.cgdev.org/initiative/oil-cash-fighting-resource-curse-through-cash-transfers. “Goa Foundation vs Union of India & Ors on 14 October, 2014,” hosted on Indian Kanoon, accessed January 19, 2018, https://indiankanoon.org/doc/193275439/.

16 “Goenchi Mati Manifesto,” Goenchi Mati Movement, accessed January 19, 2018, http://goenchimati.org/manifesto/; and Rahul Basu, “A Mining Fund in Goa Could Soon Give All Its Residents an Equal, Regular Income,” Scroll.in,December 26, 2016, https://scroll.in/article/820010/a-mining-fund-in-goa-could-soon-give-all-its-residents-an-equal-regular-income.

17 Arvind Subramanian and Xavier Sala-i-Martin, “Addressing the Natural Resource Curse: An Illustration From Nigeria,” International Monetary Fund, Working Paper no.03/139, July 2003, http://www.imf.org/en/Publications/WP/Issues/2016/12/30/Addressing-the-Natural-Resource-Curse-An-Illustration-From-Nigeria-16582; Nancy Birdsall and Arvind Subramanian, “Saving Iraq From Its Oil,” Foreign Affairs (July/August 2004), https://www.foreignaffairs.com/articles/iraq/2004-07-01/saving-iraq-its-oil; Shantayanan Devarajan and Marcelo Giugale, “The Case for Direct Transfers of Resource Revenues in Africa,” Center for Global Development, Working Paper no. 333, July 2013, https://www.cgdev.org/sites/default/files/direct-dividend-payments.pdf; and Todd Moss and Lauren Young. “Saving Ghana From Its Oil: The Case for Direct Cash Distribution,” Center for Global Development, Working Paper no. 186, October 2009, http://www.cgdev.org/content/publications/detail/1422981.

18 Hearing before the U.S. Senate Committee on Finance, American Opportunity Carbon Fee Act: Report (to Accompany S.1639), 115th Cong. (2017–2018), https://www.congress.gov/bill/115th-congress/senate-bill/1639/text; “California Global Warming Solutions Act of 2006: Market-Based Compliance Mechanisms,” California Senate, May 1, 2017, https://leginfo.legislature.ca.gov/faces/billTextClient.xhtml?bill_id=201720180SB775; David Bornstein, “Cracking Washington’s Gridlock to Save the Planet,” New York Times, May 19, 2017, https://www.nytimes.com/2017/05/19/opinion/cracking-washingtons-gridlock-to-save-the-planet.html; “The Basics of Carbon Fee and Dividend,” Citizens’ Climate Lobby, accessed January 19, 2018, https://citizensclimatelobby.org/basics-carbon-fee-dividend/; “Taxation of the Financial Sector,” European Commission, accessed January 19, 2018, https://ec.europa.eu/taxation_customs/taxation-financial-sector_en; Bernie Sanders, “Reforming Wall Street,” accessed January 19, 2018, https://berniesanders.com/issues/reforming-wall-street/; Henry Mance, “Labour Calls for UK Financial Transaction Tax,” Financial Times, May 14, 2017, https://www.ft.com/content/c87d3a72-388c-11e7-821a-6027b8a20f23; “For the Many, Not the Few,” Labor Party, October 2017, http://labour.org.uk/wp-content/uploads/2017/10/labour-manifesto-2017.pdf, 16 and 86; “The Four Pillars of Our Carbon Dividends Plan,” Climate Leadership Council, accessed January 19, 2018, https://www.clcouncil.org/our-plan/; “Put a Price on It D.C., Explained,” Put a Price on it D.C., accessed January 19, 2018, http://www.carbonpricedc.org/; Yanis Varoufakis, “The Universal Right to Capital Income,” Project Syndicate,October 31, 2016, https://www.project-syndicate.org/commentary/basic-income-funded-by-capital-income-by-yanis-varoufakis-2016-10; John Thornhill, “Why Facebook Should Pay Us a Basic Income,” Financial Times,August 7, 2017, https://www.ft.com/content/5103204e-7b5b-11e7-ab01-a13271d1ee9c; and “The Guardian View on Universal Basic Income: Tax Data Giants to Pay for It,” Guardian, September 15, 2017, https://www.theguardian.com/commentisfree/2017/sep/15/the-guardian-view-on-universal-basic-income-tax-data-giants-to-pay-for-it.

19 “Basic Income,” GiveDirectly, https://www.givedirectly.org/basic-income, accessed July 5, 2017.

20 Joe Huston and Caroline Teti, “What It’s Like to Receive a Basic Income,” GiveDirectly, February 23, 2017, https://www.givedirectly.org/blog-post?id=1423924916713458127.

21 David K. Evans and Anna Popova, “Cash Transfers and Temptation Goods: A Review of Global Evidence,” World Bank Policy Research Working Paper No. 6886, May 2014, https://economics.mit.edu/files/10861.