Let’s look at the five reasons given for implementing a universal basic income (UBI) and see how they would work in, say, Venezuela.
Reduce poverty
Poverty is not caused by a lack of money but by a lack of wealth. To illustrate the difference between money and wealth, let’s give every Venezuelan a check each month for a little over 2 million bolivars (about $1000 USD using the May 2017 Dicom exchange rate of 2010:1).
We’ve all seen the images of empty shelves in Venezuela’s shops. Imagine if Venezuelans now had their pockets brimming with cash. Can we say they are no longer poor? Will they have more to eat? Will they dress in finer clothes? By what metric can we consider them to be less poor?
Money is currency, not wealth. Wealth is what the money can buy, all the items that are missing from the shelves all over the country. You can have all the money in the world but you are still poor if there is nothing to buy.
Increase living standards
No matter where one’s living standard starts from, it increases when one has more or better food, more or better clothing, more or better entertainment, more or better anything that is life enhancing (so crack cocaine, for example, would not count). As we have already seen, just giving people more money cannot be considered as increasing their living standard.
Facilitate innovation, creativity, and entrepreneurialism
Is the problem with Venezuela created by a lack of innovation, creativity or entrepreneurship of its citizens? If so, why was Venezuela a relatively wealthy country not so long ago? Did some mysterious force suddenly turn off the innovation, creativity and entrepreneurship within its borders?
Oddly enough, there is plenty of innovation, creativity, and entrepreneurship in Venezuela today. However, it is the sizable black market that is the beneficiary of most of it. A black market is a free market operating without official government consent. So all exchanges are made without the interference of government regulations and participants are without the safety of government protections (enforcement of property rights and contracts among the most important).
It’s a given that whenever a community is relatively prosperous, most black markets are actively discouraged (the war on drugs, for example) and when a community is destitute, black markets are ignored (otherwise the resulting mass starvation would lead to riots and probably an overflow of the governing body).
Provide more leisure time
I would think this would be a part of an increase in living standards. In any event, why is this even a consideration? Wealthy people are known for having very little in the way of leisure time, typically working 50+ hour weeks and taking few vacations. Impoverished people have lots of leisure time. Indeed, most would admit they have way too much leisure time.
Stimulate the economy and create more jobs
Look again at the images linked above and imagine the Venezuelan people walking around with suitcases full of cash. How would this stimulate the economy? How would this create more jobs? Think back to any country where the citizens have carried around cash by the suitcase. Did all that money stimulate the economy and create new jobs? Has any program in any country where additional money was “injected” into the economy ever result in stimulating the economy and creating new jobs?
Then how in the world can anyone believe a UBI can accomplish it?
Admittedly, the Venezuelan economy is an outlier. However, it is precisely such countries that are most in need of the benefits supposedly gained by a UBI. Ironically, only rich countries will show some benefits of a UBI (at least over the short term before the economy adjusts back to “normal”) but rich countries, by definition, are least in need of these benefits.
Even more ironically, for economic basket cases such as Venezuela, it is black markets that are able to provide all the benefits listed above.
If a country were to find itself without bread, say, then a baker in a neighboring country would realize he could charge a much higher price for his bread by selling it on the black market in the “poorer” country. Maybe he could get a 1000% markup instead of the 25% markup in his own country. This baker would route most or even all of his product to the breadless country. In no time at all, other bakers in that and other neighboring countries would see how much more money they could make by exporting their bread. As more bread arrives at the formerly breadless country, the markups would be less and less, of course. Ultimately, the markups would reach the point where some bakers would ship less bread or stop shipping altogether. Finally, an equilibrium would be reached where the price and shipment of bread would stabilize. The final price might be twice the “normal” price — what a loaf of bread used to cost. But bread at twice the cost is better than no bread at all.
In fact, we can see that a thriving black market can accomplish all of the benefits given as requirements for a UBI (exempting the idiotic “leisure time” requirement).
Of course, if the government of the breadless country welcomed the importation of bread and placed no limits on the quantity imported or the price it sold for, then the same benefits would accrue from the white or official market. In fact, the benefits would be greater as the buyers and sellers of the bread would operate under the normal protections of government policing.
Poverty is not caused by lack of money. Poverty is caused by lack of free markets. All solutions that fail to recognize this basic fact are doomed to fail.
