Money for doing nothing: the economics of Utopia

I want citizenship in that blessed land.

Who doesn’t? So I guess Finland isn’t your idea of Utopia.

What’s Finland got to do with it?

Last week, newspapers around the world headlined the news that the Finnish government would wind down, by this year-end, an experiment, started in January 2017, under which it gave monthly stipends of €560 each to a random sample of 2,000 unemployed citizens between ages 25 and 58.

You mean a dole?

No. Unemployed people in Finland already qualify for generous benefits. This experiment was intended to test a social welfare policy that is a variant of a ‘universal basic income’ (UBI).

What’s that?

In a 2014 paper, ‘A Basic Income for All’, Belgian political philosopher Philippe Van Parijs, an articulate proponent of UBI, defined it as “an income paid by a government, at a uniform level and at regular intervals, to each adult member of society.” The grant is paid, and its level is fixed, irrespective of whether the person is rich or poor, lives alone or with others, is willing to work or not, he added.

Sounds like a Cuckoo Land of fiscal profligacy.

Far from it. The UBI idea has been endorsed by economists and political theorists and activists across the spectrum and down the ages. Renaissance humanist Thomas More wrote Utopia in 1516, in which he articulated the idea of a minimum income in the form of public assistance. In the 18th century, radical political theorist Thomas Paine published Agrarian Justice, a pamphlet championing a guaranteed minimum income.

Oh, those bleeding-heart liberals…

That characterisation sure doesn’t apply to libertarian economists Milton Friedman and Friedrich Hayek, both of whom endorsed a form of ‘basic income’. Nearer home, Chief Economic Adviser Arvind Subramanian had, in the 2016-17 Economic Survey, said the UBI was a “compelling idea” . Mark Zuckerberg and Elon Musk have been pitching for it. And remember it was a centre-right government in Finland that initiated the ‘money for nothing’ experiment.

What accounts for UBI’s appeal?

The different schools view it through different prisms and with varying motivations. Leftists see the UBI as a mechanism to move away from a world where our lives, and our identities and our economies revolve around work. Some others, like Paine and Van Parijs, root their advocacy of UBI by framing it in the context of social justice.

How so?

Paine argues that the earth “was, and ever would have continued to be, the common property of the human race”, making every individual “a joint life proprietor, with the rest, in the property of the soil, and in all its natural productions.” Every landowner “owes to the community a ground-rent” – which would fund the ‘basic income’ that the community ought to give its members.

What do conservative economists see in it?

They see the UBI as a way to reform (or cut back on) social welfare services such as healthcare, unemployment benefits and food assistance.

So why did Finland give up on Utopia?

Well, Finland is already pretty much a welfare state. This experiment was always intended to run for only two years, and its findings, which will come out in 2019, will direct future policy. But the UBI model is being actively tried out in other places: in Ontario province in Canada, in California, and even in Kenya. Arvind Subramanian expects to soon see experiments by States in India. Watch this space.

A weekly column that helps you ask the right questions