Friday, October 4, 2019


443. Freedom, economy and basic income

A virtue of liberal society is freedom of choice, or part of it. Such freedom requires two things: freedom to make a choice, selecting from options, with little constraint, in ‘negative freedom’. It also requires that one have a choice, options to choose from, and the means to realise them, in ‘positive freedom’.

A familiar idea of economics is ‘quid pro quo’: to get something you must give something. To have money one must earn it. There is no free lunch. The idea of an unconditional basic income (BI), with no condition of work and no obligations, seems to go against that principle.

That is no doubt part of the deeply rooted political resistance to a BI, as inimical to a market-based, liberal society. But it is not.

For poor people, however, the virtue of a BI is that it frees people from the stranglehold of poverty, with constant worry about food, ability to pay for bills, educate children, sapping opportunity. strength and initiative to get out of ‘the poverty trap’.

A BI increases negative freedom, from the shackles of poverty, as well as positive freedom, in lending some access to resources for improvement. But why not use the usual avenue of loans to set up enterprise? That should be promoted, as is happening with ‘micro credit’, but a problem remains that the poor lack ‘collateral’ to cover the loan, and in case of default the pit of poverty would deepen.

Time and again, experiments or practice of basic income, unconditional but often only for some, the trapped poor, and for some time, show that it works. There is evidence from Brazil, India, Rwanda, Ghana, Ethiopia, Kenia and Malawi. People receiving the benefit generally do not spend it on consumption but on some investment to improve their economic position. It is also used to get children to go to school who before had to contribute child labour for the family to survive. They use it to buy a sewing machine to make clothes to sell, a fishing net, or boat, or to sink a water well, together with others. So, here we have a non-economic thing with beneficial economic as well as social outcomes. A BI is a means to economic development.

But at the same time, there must also be economic freedom, in absence of corruption, access to markets, ownership rights, and fair legal process, for people not to robbed of the investments they make, and to earn their returns.

A BI is also an efficient means of development aid, more efficient than aid in the form of goods produced elsewhere and shipped and distributed in developing countries, often on the basis of ill-informed guesses about needs, costs of transport and distribution, and with spillage in corruption.

The BI can efficiently be allocated through cell phones that are now available everywhere, also in developing countries.

And concerning ideology: it is not that the recipients do not do something for the BI, it is just that they do it after, not before receiving it.

In sum, economy and basic income can go well together, complementing each other. Institutions of economic freedom are needed for BI to have its positive effect, with the negative freedom of preventing constraints for enterprise, while BI provides the positive fre

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