Why basic income will fail (and what should be introduced instead)

Basic income concept shows moderate to excellent results, but why it will fail on scale?

Swiss activists dropping 8 million coins (approx. one per citizen) to support basic income vote in 2013. Wiki

Modern society, while providing and individual with endless possibilities, exposes a lot of uncertainties — especially when it comes to living, transportation, education and medical care. In modern capitalistic countries and average person is left with a bit of monthly salary after covering all the leasing, insurance and mortgage payments. It’s OK when you have a nice job with respectable salary, but a lot of people doing service jobs have income right above survival level. Basic income, in turn (I will call it BI forward for short), may support these folks and allow them look into future without fear.

Just in case you forgot what BI is — it is a concept, when each citizen of a particular country will receive a fixed sum of money. It is a non-revokable right which has no limitations, terms, and always arrive to your bank account on the same day of the month. Automatically.

Surely, from the first look it is as close to long-promised socialism as it can be. What is better than having your back covered? You can freely work (and the idea of BI is that it is not optional, no matter how much you earn), spend time with your children, study, experiment, dedicate yourself to science or art completely if you want to, and you know that you will not go bankrupt when rough times come. In fact, many countries experimented with BI from late 50s — USA experimented with negative income tax, Canada and Finland did two year trials recently and a lot of experiments were carried in Uganda / Kenya / Namibia and other poor countries. Results varied—from one hand, Canadian government claimed BI as “expensive and unsustainable”, Finland ended the trials without much explanation, and Switzerland voted about 70+% against BI; from the other hand, trial results from African countries clearly stated that BI helps fight poverty, social anxiety, and re-focuses people from daily survival towards education and future.

So, what’s going on? Does BI only works in developing countries? Are modern governments too greedy to distribute money for nothing? To explain the past end predict the future of the BI, we need to study the reasons that started this concept.

There are several “classic” reasons — BI is claimed to increase equality, reduce wage slavery, it is believed that BI will make people less nervous and finally will allow them to quit shitty jobs and spend more time with their families.

Sorry to interrupt, but this picture sums up the next paragraph perfectly. WP

However, there is one more thing. Remember I mentioned folks who have salaries that barely cover monthly needs? There is a reason for that, and it is called Market. The market always adapts its consumer prices to consume near 100% of the poorest members of the society. Simply saying, if a minimal salary in a country is 100$, the cheapest flat will cost 30$ per month, food and daily needs another 30$, transportation, medicine and loans will consume last 30$, and this proportion will scale accordingly if minimal salary grows to 1000$ — just the 30$ becomes 300$.

Again — let me summarise that — free market always adapts to increase in purchasing power by increasing prices.

So, let’s imagine what happens when the BI becomes universal (that is, available to any citizen of some country). What happens next?

Each citizen will have a significant amount of money, so prices (rent, groceries, and transportation) will adapt to consume that money on whole, but in case of BI — the prices will even go up a bit, as people will start to work to costs of living. This way, no matter how high the BI will be — the market prices will quite soon adapt to make BI a little bit below a survival minimum, increasing inflation, and making the BI basically worthless.

Let’s summarise it again — free money makes money loose its value.

OK, BI is a dead end, giving away free money is unbelievably stupid idea because it’s against how money actually works, but what can we do instead?

The answer is simple — each citizen should have access to basic free survival elements, including:

  • a minimal shelter / habitat (imagine capsule hotels)
  • minimal food (nothing fancy, but nutritionally complete, Soylent will go just well)
  • full medical services (because there’s nothing more pathetic than a country that allows cancer patients to die because they have no job)
  • free education (allowing you to learn something new and get out of this survival system)
  • simple, society — oriented jobs (cleaning, public services, farming etc) — something to get you some extra bucks

This approach is basically dead simple — when you are broke, or want to take a break and enjoy the glimpse of socialism, you have a place to live, something to eat, you will have your medical help in time, and some simple work to do together with education to get something better. You are provided with everything to survive and your dignity is still intact as you are not asking for money under the bridge. This even feels somewhat secure, as you can’t go lower that that. Want to go up where capitalism kicks in? Educate, find a job and move forward.

No homeless. No disabled persons decaying in their flats, alone. No fear to loose the only place to sleep. No elderly people who don’t know how to get to next month. No stress. No free money.

To make it possible, the country must become a corporation, still producing and selling things — that’s why the “free shelter, free food, free medication, free education” have that “and a simple job for anyone” included, but it should not be that complex as modern countries already take roles of corporations, employing numerous people and returning goods and services to the market.

Have a thought or two? Please share them in comments below.

I write about things I wonder about