A Capitalism Argument for Universal Basic Income
There is a growing argument for governments to provide Universal Basic Income (UBI) — an umbrella term for governments providing certain basic income to its citizens unconditionally. The idea has found support on both the “left” and “right” side of the ideological spectrum for different reasons. Some government-initiated trials are running or about to start in Finland, the Netherlands, Canada, New Zealand. Several countries including Switzerland and India are also considering it.
The arguments in favour of UBI range from compensation against growing job losses to automation, social security for all, consolidation of all benefits given out by government and thereby controlling the leakage, to not “forcing” people to work — right of survival with or without working.
In an interesting perspective, Tom Streithorst argues in this piece that UBI solves the last puzzle of capitalism — sustaining demand:
”Technology and capitalism have largely solved the problem of supply. We are able to make more stuff, with fewer inputs of labour and capital, than ever before. We have the knowhow, we have the resources, we have the trained labour, we have the money. The only thing businesses lack is customers. Making stuff has become easy. It is selling it that keeps entrepreneurs (and central bankers) awake at night. Stagnant wages tell us that the supply of labour exceeds demand. Microscopic interest rates tell us that we have more capital than we need. Since the Great Depression most economists have recognised that demand is the Achilles heel of the modern economy.”
With automation and resulting job elimination, there is an increased risk of collapsing demand. UBI solves the demand piece of the puzzle. It also offers an escape valve to the corrosive effects of inequality.
UBI sounds utopian, and it is, but it is the natural end-game scenario for all economic models including capitalism. While UBI may look impractical today — we still need to work out the economics, UBI certainly is the future.
