The idea of Universal Basic Income (UBI) or Basic Income Grant (BIG) has once again begun to feature prominently in the policy discourse in the economic and political circles, not just in the economically advanced countries but in the developing ones as well. Couple of weeks ago, one of the columns I follow very closely, Economics Express in Mint on Sunday, ran an elaborate piece, “Is it time for a universal basic income in India?” The essay gives a panoramic view of the idea; explains its concomitant benefits and pitfalls by drawing upon the existing literature on the subject and situates its relevance in the Indian context.
In fact, there is a web page that seeks to serve as a one-stop destination for all the debates and discussions on the universal basic income idea, Basic Income Earth Network (BIEN). Many renowned economists have been throwing their weight behind this new magic bullet, presenting a range of interesting and plausible arguments for going ahead with a universal basic income, which they believe is economically sound and politically canny.
In June, Switzerland held a referendum on a basic income plan and the idea was unequivocally rejected by the citizens of the country. Finland has decided to set the ball rolling by instituting the idea on a pilot basis. While it can be expected that Europe will be spearheading the project, given its long-standing track record as the exemplar of the idea of ‘welfare state’ and the problem of persistent unemployment in the last two decades that got accentuated after the global financial crisis in 2008, some developing countries also seem to have lapped up the idea.
In his most recent book, Give a Man a Fish: Reflections on the New Politics of Distribution, the anthropologist James Ferguson makes a compelling pitch for basic income grant, by presenting examples from the countries of southern Africa that have been making unconditional transfers to women, children, old-age people and unemployed men. He lays out detailed arguments for a wholesale shift to the “new politics of distribution” on the grounds that BIG has the potential to liberate men and women from dependencies of a crushing nature and empower them to claim their “rightful share” of the collectively produced social wealth.
Ferguson sincerely believes that by making the income transfer “unconditional” and “universal”, the cash transfer architecture can get a radical impetus, thus getting the approval of intellectuals, ideologues and politicians across the spectrum.
It is germane to recognize that while capitalism destroyed other forms of production as it arose in the European countries, it hasn’t done the same in post-colonial societies where capitalist and non-capitalist modes of production continue to coexist. While many see this as a failure of contemporary capitalism, it needs to be understood that these are spaces capital has created outside its sphere for its own survival. The system we have is one of a complex hegemonic order in which heterogeneity exists, and capital is the most influential and decisive of all the modes in that heterogeneous system, as argued by Kalyan Sanyal in his book Rethinking Capitalist Development: Primitive Accumulation, Governmentality and Post-colonial Capitalism. The book offers an elaborate critique of the dominant narratives of the transition to capitalism. Capital expresses its superiority in terms of difference, by thriving in a heterogeneous order which it leverages to engage in “unequal exchange”.
Using the term “primitive accumulation of capital” in a loose sense can be misleading because the process has its historic specificity as put forward by Karl Marx. In the contemporary economic landscape, using “unequal exchange” would be more appropriate, where those lying outside the pale of capital are dispossessed in both stock and flow terms since the terms of exchange are skewed.
The term “unequal exchange” is used in the broadest possible sense here, encompassing unequal exchange in international trade, capitalist production and other domains. Extending it to the nature of exchange between the capitalist and non-capitalist spheres of production can help us understand how capital thrives in the heterogeneous order.
But if one chooses to use the primitive accumulation phrase to refer to the exchanges that happen between the capitalist sphere and the non-capitalist sphere, it could be argued that in post-colonial societies, welfare state exists to give political legitimacy to capitalist mode of production by transferring a segment of the surplus to the dispossessed, thereby ameliorating the consequences of primitive accumulation.
It is important to observe the distinction between the welfare state that emerged in the advanced capitalist societies and the welfare state in the developing world. In the former, it emerged to provide safeguards to those who were within the logic of capital, while in the latter, it exists essentially to mitigate the material deprivations of those who lie outside the domain of capital.
Today, because capital is not able to absorb enough labour, the transfers to those lying outside of the sphere of capital are touted to become the new domains of political struggles. The general argument is that giving people fish can have indirect and roundabout positive consequences at a time when teaching people to fish doesn’t guarantee employment and consequently, a stable source of livelihood.
Also, some of the proponents of BIG argue that it can potentially solve the underlying problem of capitalism: lack of aggregate demand. It is their contention that while capital, technology and innovation have made it possible to crank out enough goods for consumption by using as little inputs as possible, there simply isn’t enough purchasing power in the hands of people to consume all that is produced. Simply put, supply is not creating its own demand. This problem of lack of aggregate demand is not new. It was addressed decisively after the Great Depression by the Keynesian multiplier. What the literature on UBI suggests is that ramping up public spending to put money in the hands of people in order to make them demand goods in the market is an idea that hasn’t lost its relevance. The difference is the means and the modus operandi.
At a time when the world output is experiencing “secular stagnation” and the global economy is entering a phase of “new mediocre”, the two main growth engines, international trade and economic bubbles (like the housing market bubble in the U.S.) seem to have run out of steam. The new nostrums tossed across for the present macroeconomic ills range from quantitative easing (QE) and helicopter money to inward-looking wage led growth and basic income grant. Of these myriad prescriptions, helicopter money and basic income grant have gained traction in recent times.
An exposition of helicopter money might force us to tread on the realm of monetary policy but in simple words, it is the printing of large sums of money and distributing it to the public to kick-start the economy. It was originally envisaged by Milton Friedman as a thought experiment and now it is considered an unconventional monetary policy tool. But it is the universal basic income idea that seems to have captured the imagination of many because of its simplicity and apparently non-market distorting nature. In developing countries like India, where bulk of the workers are in the informal sector and a substantial segment of the population suffers absolute deprivation, the basic income is seen as a sensible ameliorative step in the country’s poverty eradication journey.
A programme like the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) in a way offers the rural poor in India the right to employment, raises wages, enhances the bargaining power and reduces dependency on the local socio-economic elite. Can a guaranteed basic income empower the poor by giving them the right to turn down a job if it denies self-dignity and dignity of labour, thus providing them with a robust bargaining chip which is an important cog in the wheel of ‘development with dignity’?
By Raghunath Nageswaran