Henry Jeffery, Stabroek

A universal basic income for all Guyanese

By  stabroek news

‘I am now convinced that the simplest solution to poverty is to abolish it directly by a new widely discussed measure: the guaranteed income.’ Martin Luther King, 1967.

In a paper Why we should all have a basic income published in January this year by the World Economic Forum, Scott Santens defined Universal Basic Income  (UBI) as being a ‘an amount sufficient to secure basic needs as a permanent earnings floor no one could fall beneath, and would replace many of today’s temporary benefits, which are given only in case of emergency, and/or only to those who successfully pass the applied qualification tests. UBI would be a promise of equal opportunity, not equal outcome, a new starting line set above the poverty line.’ The question his essay sought to answer is ‘How does this firm foundation of economic security and positive freedom affect your present and future decisions, from the work you choose to the relationships you maintain, to the risks you take?’

As the starting quotation from Martin Luther indicates, the notion of a universal basic income is not new and can be traced to the pre-industrial work of Sir. Thomas More (1478-1535). Contemporarily, for many converging reasons, the idea has now become popular in usually opposing ideological circles: Milton Friedman, Mark Zuckerberg, President Obama, have all shown an interest, the literature is growing and many projects and pilot projects have established. Santens identified some of the reasons driving this increasing support for UBI in the developed world as ‘Rising inequality, decades of stagnant wages, the transformation of lifelong careers into sub-hourly tasks, exponentially advancing technology like robots and deep neural networks increasingly capable of replacing potentially half of all human labour, world-changing events like Brexit and the election of Donald Trump – all of these and more are pointing to the need to start permanently guaranteeing everyone at least some income.’

Apart from dealing with the usual objection that UBI makes people lazy, causes inflation, etc., Santens believes that a UBI is affordable in the United States if every adult individual and child is to be given US$12,000 and US$4,000 respectively annually.  He makes the important point that his proposal is not isolated from the present tax regime and claims that when all the existing welfare programmes are replaced and all the other burdens associated with the present status quo are factored in ‘the few hundred billion net additional cost of UBI pays for itself many times over.’

Guyana is one of the poorest countries in the hemisphere, and although on the face of it, UBI would appear to be more relevant to the developed nations, aspects of it are being tested in some of the poorest countries, e.g., India and Namibia. I became interested in the application of the idea of UBI for Guyana after considering how best our impending oil bonanza can contribute to ending poverty and ensure that the Guyanese people directly receive a reasonable portion of the impending wealth sufficient to motivate them to take interest in the process to prevent our suffering from the well-known ‘resource curse’, whereby the resource wealth of the country is drained away by corrupt politicians and their cronies. The study that best fits my intent was by the World Bank’s senior director for development economics, Shanta Devarjan, titled `Three reasons for universal basic income’ and published by Brookings last February.

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Devarjan stated that many oil-rich developing countries suffer from poor public spending outcomes and that one reason for this is that oil revenues go directly to the government without passing through the hands of the citizens, and thus many citizens do not know the magnitude of revenues or even believe that they belongs to them. As a result, there is little incentive to scrutinize how the monies are spent by the government. If the oil revenues are instead transferred directly to citizens, with government having to tax them to finance public spending, at least two changes can be expected. Citizens will now know the magnitude of oil revenues and will have a better incentive to monitor how they are being spent. ‘Even without these changes, a simple transfer of 10 percent of oil revenues could effectively eliminate poverty in several oil-exporting countries.’

Devarjan claimed that welfare projects for the poor in underdeveloped countries hardly ever reach them  in the intended quality or quantity, and that replacing these with direct cash transfers  will ensure that the poor are receiving the intended monetary benefits. A UBI will also be empowering for government programmes usually seek to subsidize consumables with the result that even when the quality of a product is substandard, the poor have to consume it. ‘By contrast, a cash transfer means that the poor person can choose how to spend the money. If the quality is poor, they have alternatives.’

Finally, Devarjan made the point already noted: advances in artificial intelligence, robotics, etc,. mean that productivity will increase but many people will lose their jobs which calls into question the nature of future work. While managing this situation will be complex, an arrangement whereby a  part of the increase in productivity is distributed as UBI could contribute to solving this difficulty. ‘The programs being piloted or proposed in Finland, Switzerland, and New Zealand are essentially aimed in this direction. They challenge the basic notion that you earn your income by working in a job. We could envision a society where productivity is high enough that everyone receives a basic minimum income, and people choose to work on whatever they’re good at (including not working at all).’

The discovery of oil has made it possible for us to look at development and citizenship differently and begin to work towards a UBI for every citizen of Guyana. For example, we have been told that initially the Government will receive revenue of about US$380m. 10% or US$38m of this could be set aside for direct cash grants starting with the most vulnerable. Assuming that we decide to give this as unemployment benefit to the 70,000 thousand or so persons now unemployed; bearing in mind the cost of administration, each unemployed person can immediately begin to receive about US$40 or G$8, 000 per month. Depending on where the poverty floor is set, by permanently maintaining 10% of revenue for this purpose, this small initial grant will gradually grow and could expand towards a UBI.

Morally I believe that every citizen in Guyana should have direct access to a proportion of the revenues flowing from our oil and gas resources. Added to this, nothing I have so far experienced suggests that this revenue will be optimally utilised if, apart from moralizing about the need for public vigilance, we do not find additional, material, ways to incentivize our citizens to take a more active interest in its acquirement and utilization. This is particularly important in our situation, where ethnic political alliances act to severely weaken government transparency and accountability. Therefore, I believe that from the inception a reasonable percent of the oil/gas revenue should be permanently set aside as direct cash grants to the most vulnerable but gradually, as revenue increases, reaching the level of a UBI for all Guyanese.

 

henryjeffrey@yahoo.com

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