The idea of an unconditional basic income given to all citizens by the State, has caught on in the developed world. Does it make sense for India? To examine the issue, I4I Editor Parikshit Ghosh is hosting an e-Symposium on the idea of a universal basic income in the Indian context. Over the next week, economists Pranab Bardhan (University of California, Berkeley), Abhijit Banerjee (Massachusetts Institute of Technology), Maitreesh Ghatak (London School of Economics), Debraj Ray (New York University), Kalle Moene (University of Oslo) and T.N. Srinivasan (Yale University) will contribute to the e-Symposium.
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It sounds like a crazy idea. The State is to pay every citizen a universal basic income (UBI) – enough money to live on even if you don’t earn another penny. You don’t have to be poor, unemployed, disabled, sick or retired. It is universal. You don’t have to demonstrate good behaviour, like sending your child to school or looking for work or buying food instead of booze. It is unconditional. If deficits are ballooning from just paying salaries and repairing potholes, who will pay for this naani State – government as granny who bakes cookies for everyone?
Yet, the idea has caught on in the developed world, beset by decades of stagnant wages, rising inequality, closing factories and job-killing automation. There are pilot programmes or ballot proposals in Finland, Switzerland, Canada and the Netherlands. Even the Economist magazine
, not ordinarily enamoured of fiscal adventurism, has contemplated it in all seriousness. It has listed a motley crew of advocates and enthusiasts – union leaders, science fiction writers, eighteenth century French mathematicians, Silicon Valley, Paul Krugman and the Cato Institute. Vive la différence!
But surely such munificence can only be dreamt of by societies that can send a man to the moon or splurge on programmes designed to bring home dozens of Olympic gold medals? Can rickety, cash-strapped governments such as ours contemplate handing out enough cash to bring all citizens at least up to the official poverty line? Read the contributions to the e-symposium that we will serialise through this week. Some of our finest economists examine the idea of a universal basic income in the Indian context..
Can we raise the money by scrapping regressive subsidies and tax breaks for the rich? Should targeted welfare schemes like MNREGA (Mahatma Gandhi National Rural Employment Guarantee Act) and the food subsidy be converted to unconditional cash transfers? Even if it is economically affordable, is it politically feasible? Will a policy proposal like UBI forge new solidarities and converge our interests towards a shared prosperity? Or will it open up new political cleavages, say between a rising middle class and the working poor? What is the guarantee that opportunistic governments will not let the value of cash entitlements wither away in the face of inflation?
The history of economic policy is replete with examples where yesterday’s crackpot idea becomes today’s conventional wisdom. Leaving the gold standard, adopting the welfare State, Keynesianism, anti-Keynesianism, free trade – all belong to that list. There are also plenty of white elephant projects, which seemed sensible at the time, such as Montreal’s Big Owe
. Where does UBI belong?
Pranab Bardhan, Abhijit Banerjee, Maitreesh Ghatak, Debraj Ray, Kalle Moene, T.N. Srinivasan and Vijay Joshi will discuss these issues over the next few weeks, in that order. Stay tuned.