“I will give you a talisman. Whenever you are in doubt, or when the self becomes too much with you, apply the following test. Recall the face of the poorest and the weakest man [woman] whom you may have seen, and ask yourself, if the step you contemplate is going to be of any use to him [her]. Will he [she] gain anything by it? Will it restore him [her] to a control over his [her] own life and destiny? In other words, will it lead to swaraj [freedom] for the hungry and spiritually starving millions? Then you will find your doubts and your self melt away.”
– Mahatma Gandhi
“My ahimsa would not tolerate the idea of giving a free meal to a healthy person who has not worked for it in some honest way, and if I had the power I would stop every Sadavarta where free meals are given. It has degraded the nation and it has encouraged laziness, idleness, hypocrisy and even crime. Such misplaced charity adds nothing to the wealth of the country, whether material or spiritual, and gives a false sense of meritoriousness to the donor. How nice and wise it would be if the donor were to open institutions where they would give meals under healthy, clean surroundings to men and women who would work for them… only the rule should be: no labour, no meal.”
– Mahatma Gandhi
“Wiping every tear from every eye” based on the principles of universality, unconditionality, and agency—the hallmarks of a Universal Basic Income (UBI)—is a conceptually appealing idea. A number of implementation challenges lie ahead, especially the risk that UBI would become an add-on to, rather than a replacement of, current anti-poverty and social programs, which would make it fiscally unaffordable. But given their multiplicity, costs, and questionable effectiveness, and the real opportunities afforded by the rapidly improving “JAM” infrastructure, UBI holds the prospects of improving upon the status quo. This chapter provides some illustrative costs for a UBI (varying between 4 percent and 5 percent of GDP), and outlines a number of ideas to take UBI forward, highlighting the practical difficulties. UBI’s appeal to both ends of the political spectrum makes it an idea whose time has come perhaps not for immediate implementation but at least for serious public deliberation. The Mahatma would have been conflicted by the idea but, on balance, might have endorsed it.
9.1 Despite making remarkable progress in bringing down poverty from about 70 percent at independence to about 22 percent in 2011-12 (Tendulkar Committee), it can safely be said that “wiping every tear from every eye” is about a lot more than being able to imbibe a few calories. And the Mahatma understood that better, deeper, and earlier than all the Marxists, market messiahs, materialists and behaviouralists. He intuited that it is also about dignity, invulnerability, self-control and freedom, and mental and psychological unburdening. From that perspective, Nehru’s exhortation that “so long as there are tears and suffering, so long our work will not be over” is very much true nearly 70 years after independence.
9.2 Today, a radical option to realise Gandhiji’s objective presents itself and has entered the policy consciousness in India and around the world: Universal Basic Income, UBI for short. UBI has three components: universality, unconditionality, and agency (by providing support in the form of cash transfers to respect, not dictate, recipients’ choices). As the above two quotes suggest Gandhiji would have been conflicted by it. This chapter examines UBI in the form of a conversation with the Mahatma, and indeed a conversation that the Mahatma would have had with himself had such a proposal been put to him.
II. THE CONCEPTUAL/PHILOSOPHICAL CASE FOR UBI
9.3 Universal Basic Income is a radical and compelling paradigm shift in thinking about both social justice and a productive economy. It could be to the twenty first century what civil and political rights were to the twentieth. It is premised on the idea that a just society needs to guarantee to each individual a minimum income which they can count on, and which provides the necessary material foundation for a life with access to basic goods and a life of dignity. A universal basic income is, like many rights, unconditional and universal: it requires that every person should have a right to a basic income to cover their needs, just by virtue of being citizens. The time has come to think of UBI for a number of reasons:
Social Justice: UBI is, first and foremost, a test of a just and non-exploitative society. From Tom Paine to John Rawls, nearly every theory of justice has argued that a society that fails to guarantee a decent minimum income to all citizens will fail the test of justice. It should be evident to anyone that no society can be just or stable if it does not give all members of the society a stake.
A Universal Basic Income promotes many of the basic values of a society which respects all individuals as free and equal. It promotes liberty because it is anti-paternalistic, opens up the possibility of flexibility in labour markets. It promotes equality by reducing poverty. It promotes efficiency by reducing waste in government transfers. And it could, under some circumstances, even promote greater productivity. It is not an accident that Universal Basic Income has been embraced both by thinkers of the Left and of the Right.
Poverty Reduction: Conditional on the presence of a well-functioning financial system, a Universal Basic Income may simply be the fastest way of reducing poverty. UBI is also, paradoxically, more feasible in a country like India, where it can be pegged at relatively low levels of income but still yield immense welfare gains.
Agency: The poor in India have been treated as objects of government policy. Our current welfare system, even when well intentioned, inflicts an indignity upon the poor by assuming that they cannot take economic decisions relevant to their lives. An unconditional cash transfer treats them as agents, not subjects. A UBI is also practically useful. The circumstances that keep individuals trapped in poverty are varied; the risks they face and the shocks they face also vary. The state is not in the best position to determine which risks should be mitigated and how priorities are to be set. UBI liberates citizens from paternalistic and clientelistic relationships with the state. By taking the individual and not the household as the unit of beneficiary, UBI can also enhance agency, especially of women within households.
Employment: UBI is an acknowledgement that society’s obligation to guarantee a minimum living standard is even more urgent in an era of uncertain employment generation1. Moreover, UBI could also open up new possibilities for labour markets. It creates flexibility by allowing for individuals to have partial or calibrated engagements with the labour market without fear of losing benefits. They allow for more non-exploitative bargaining since individuals will no longer be forced to accept any working conditions, just so that they can subsist.
Administrative Efficiency: In India in particular, the case for UBI has been enhanced because of the weakness of existing welfare schemes which are riddled with misallocation, leakages and exclusion of the poor. When the trinity of Jan-Dhan, Aadhaar and Mobile (popularly referred to as JAM) is fully adopted the time would be ripe for a mode of delivery that is administratively more efficient. The administrative argument however has to be made with some care. While Aadhar is
designed to solve the identification problem, it cannot, on its own, solve the targeting problem. It is important to recognise that universal basic income will not diminish the need to build state capacity: the state will still have to enhance its capacities to provide a whole range of public goods. UBI is not a substitute for state capacity: it is a way of ensuring that state welfare transfers are more efficient so that the state can concentrate on other public goods.
III. THE CONCEPTUAL CASE AGAINST UBI
9.4 From an economic point of view there are three principal and related objections to a universal basic income. The first is whether UBI reduces the incentive to work – a worldview encapsulated in the quote by Gandhiji above; critics conjure up images of potential workers frittering away their productivity. This argument is vastly exaggerated (more evidence in Section I). For one thing, the levels at which universal basic income are likely to be pegged are going to be minimal guarantees at best; they are unlikely to crowd incentives to work. One school of thought would argue that it truly is a diminution of human dignity to suppose that the only motivation for which people work is necessity; take away the yoke of necessity and they will be lazy. The same kinds of arguments used to be made against high wages: that if wages rise beyond a certain level workers will choose leisure over work. There is very little evidence to sustain that proposition2.
9.5 The second concern is this: Should income be detached from employment? The honest economic answer to this concern is that society already does this, but largely for the rich and privileged. Any society where any form of inheritance or accepting non-work related income is allowed, already detaches income from employment. So, receiving a small unearned income as it were, from the state should be economically and morally less problematic than the panoply of “unearned” income our societies allow.
9.6 The third is a concern out of reciprocity. If society is indeed a “scheme of social cooperation”, should income be unconditional, with no regard to people’s contribution to society? The short answer is that individuals as a matter of fact will in most cases contribute to society, as stated above. In fact, UBI can also be a way of acknowledging non-wage work related contributions to society3. In the current social structure, for example, homemaking contributions of women are largely unacknowledged economically, since they do not take the form of wage or contract employment. It is important that UBI is not framed as a transfer payment from the rich to the poor. Its basis is rather different. UBI gives concrete expression to the idea that we have a right to a minimum income, merely by virtue of being citizens. It is the acknowledgment of the economy as a common project. This right requires that the basic economic structure be configured in a way that every individual gets basic income.
9.7 All these arguments require that UBI be indeed universal4, unconditional, and involve direct transfers.
9.8 Table 1 lays out succinctly the arguments – conceptual and practical – in favour of and against UBI. In what follows, evidence will be presented on some—not all—of the arguments mentioned above. One begins with the most compelling evidence for universalization, by furnishing numbers on the effectiveness of targeting of current programs. A discussion on the implication for financial inclusion follows. Subsequently, illustrative costs of a UBI are calculated. The chapter concludes by providing potential ideas for taking the idea forward, keeping in mind the two big challenges of costs and a political economy that impedes the phasing down of existing programs.
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