NOTE: I am resuming posting excerpts from my book World After Capital. The last post was the beginning of Part Three of the book. Today’s post is the the introduction to the concept of economic freedom and how universal basic income makes this freedom possible. Unfortunately the current online version is out of sync as I am experiencing issues with gitbook.
Economic Freedom
If you were to quit your job right now, could you still afford to take care of your basic needs? Could you pay for food, shelter, clothing, and so on? If you are retired, what if your company suddenly stopped paying your pension? If you are supported by a spouse or partner, what if you left that person?
If you could no longer meet your basic needs, then you are not economically free. Your decisions on how much of your labor to sell and whom to sell it to, whether to stay with your partner or not, which city or rural area to live in, are not free decisions. Many people in the U.S. today are not free in this fundamental sense.
A recent survey in the U.S. asked respondents if they had enough money to pay for a $1,000 emergency. Over two-thirds said they did not [59]. Other studies have found that about 75% of Americans over 40 are behind on saving for retirement and 31% of all non-retired adults have no savings at all [60] [61].
Crucially, if you are not economically free, you are not free to participate fully in the Knowledge Loop. Hence economic freedom is a cornerstone of the Knowledge Age. We must make people economically free so that they can participate fully in the Knowledge Loop. We want more people to be free to make music and create art that has the power to inspire. And we absolutely need people to have the time to learn new knowledge, from practical skills such as gardening to the latest theoretical physics. We need more people to create new knowledge using what they have learned. And finally we need more people to share their knowledge with the world for others to learn.
We have massive problems, such as climate change, to overcome and we need more participation in the Knowledge Loop than ever. To free us up to do so, we must be able to embrace automation, not fight it for fear of losing our livelihoods.
Universal Basic Income
Economic freedom is a reality today for some—those sufficiently wealthy, tenured professors, retirees with pensions and savings. How can we make it a reality for everyone? The answer is to provide everyone with a guaranteed ongoing income to cover basic needs, including housing, clothing, and food (see earlier chapter on Needs). This income would be unconditional, i.e. it would not depend on whether someone is married or single, employed or unemployed, rich or poor.
At first blush this idea of a so-called Universal Basic Income (or UBI) may seem crazy or outrageous. Getting money for having done nothing? Getting paid simply for being alive? Isn’t that communism? Or socialism? And where would this money come from? Won’t people simply descend into utter laziness and drug addiction? We will look at each of these objections to UBI in turn, but first let’s consider arguments for UBI as a way of achieving economic freedom.
Concerns about economic freedom are by no means new. When the American republic was in its infancy, economic freedom seemed well within everyone’s reach. There was plenty of land to be had (so long, of course, as one was willing to take it by force from Native Americans). As a result, any family could make ends meet by living off the land. Even back then, though, observers such as Thomas Jefferson and Thomas Paine understood that land would some day run out. They raised the specter of a time when citizens might be forced to trade labor to others in order to provide for their basic needs—when they would be economically unfree [62]. All the way back then they concluded that an alternative to land was to give everyone enough money to be free. The idea of a UBI in the U.S. thus goes back to the earliest days of the nation.
If you don’t find this historic argument for UBI compelling, consider the case of air. We all breathe air to solve our basic need for oxygen. We can all afford to breathe air because air is free and well distributed around the globe (important caveat: regulation is required to keep air clean, we had lots of trouble with air pollution during industrialization and in China right now it is estimated that more than one million people die every year from air pollution [63]). Our freedom is not restricted by having to find air. The power of UBI is to make us equally free when it comes to our other basic needs, by making food, housing, clothing (the solutions to our basic needs) affordable and accessible by everyone!
As I argued in the earlier chapter on Capital, as a species, we have developed our technologies enough so that we are now capable of meeting everyone’s basic needs. Farming can generate enough food for everyone. We can easily make enough clothing for the world. We can even provide everyone with shelter. All of this has been made possible by knowledge, the knowledge that humanity has created over millennia. And our technological progress is accelerating while global population growth is slowing down. So from here on out it will only get easier.
The question thus is not whether we have the ability to meet everyone’s basic needs, but rather whether an economy and a society that accomplishes the necessary resource distribution and allocation. That is exactly where UBI comes in. UBI enables the functioning of markets for basic needs such as food, clothing and shelter without forcing people into the Job Loop. UBI lets everyone freely participate in these markets. UBI thus frees up attention, frees up people to live where they want to and with whom they want to.
Industrial society presents us with two fundamentally different ways of distributing and allocating resources. One is individuals meeting their needs by participating in a market economy; the other is government providing solutions for people’s needs directly. Those options form the extreme ends of a spectrum with a variety of “hybrid” arrangements in the middle, such as government subsidized or rent-controlled housing for which people still need to pay some rent. UBI solve the allocation issue while avoiding reliance on an ever-expanding government sector. Put differently, UBI recognizes just how effective markets have been in the allocation of resources, and by contrast, how many distortions are introduced by direct government activity, such as government built housing. UBI is the opposite of communism and socialism in that regard. It is all about reducing the size of government activity.
After World War II in the U.S., only about 5% of people were employed by government, which in turn comprised about 42% of the economy [64] [65] [66]. In the Soviet Union, by contrast, nearly 100% of people were employed by the state, and the state owned close to 100% of the economy. We now know quite well which system was more effective at allocating resources. Nevertheless, the size and scope of government employment and the government sector have gradually expanded here in the U.S. and in Europe. In many European economies, the government sector now accounts for a half or more of the economy.
I have only mentioned food, clothing and shelter when talking about basic needs, but what about education and healthcare? Can UBI cover those as well? That might seem wishful thinking given how quickly education and healthcare costs have risen, especially in the U.S. Yet UBI can cover these basic needs as well, and to understand how, we need to look at how technology is driving down the prices of almost everything. Technology can make education and healthcare far more affordable than they are today.
