Coronavirus

The COVID-19 pandemic and the ensuing lockdowns have brought economic activity to a standstill. As a result, the livelihoods of people around the world have been threatened. To respond to the crisis, some governments have considered how to expand their social safety net. This is particularly because many people who work in the informal economy or those without jobs have been left with no financial support. In this context, the idea of a universal basic income (UBI) has resurfaced.

Until recently, UBI was a utopian proposal relegated to academic discussions. But the pandemic has led to a debate about UBI as a potential tool of public policy. Now, several basic income programs are running around the world. Advocates see in UBI an instrument to build more resilient societies in the face of economic crises, income inequality and automation. Critics argue that governments should strengthen existing social programs instead.

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In June 2020, Spain offered monthly payments of up to €1,015 ($1,200) to the poorest families. Germany has implemented a small-scale pilot study to take place over three years. As part of the program, 120 Germans will receive monthly payments of €1,200. In the United Kingdom, a motion to introduce UBI was signed last year by more than 100 parliamentarians from across the political spectrum. At the start of the pandemic, the US government paid up to $1,200 to adults earning below $99,000 a year; a second stimulus package meant Americans received even more money. Thus, it seems that the crisis has shifted the UBI debate, at least in some European countries and in the US.

However, in South and Central America, the debate on the desirability of UBI could “not take off, given the very severe fiscal constraints in most countries,” says Oscar Ugarteche, a Peruvian professor of economics. This is despite the Bolsa Familia (Family Allowance) experiment of Luiz Inacio Lula da Silva, the former Brazilian president. This indicates that the debate is partly country-specific and that the implementation of UBI may require “several national experiments, which are likely to influence corresponding variations in policy design,” according to counselor Andrew Cornford.

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Indeed, UBI is not a one-size-fits-all program. Many questions need to be considered. For example, should payments be issued per household or adult? Should everyone be eligible for UBI or only those receiving low salaries? Should a universal basic income be temporary or permanent? How will it affect the willingness of people to find a job or to continue working? How would UBI be financed?

The first step is to assess the feasibility and implications of UBI. To do so will require building on the experiences of small-scale studies, comparing their results and collecting further evidence. Thus, it could be a long time before governments and the wider population see such a program. That is unless the current health crisis can serve as a catalyst for socioeconomic change, contributing to make UBI part of the legacy of the pandemic. 

By Virgile Perret and Paul Dembinski

Author’s note: From Virus to Vitamin invites experts to comment on issues relevant to finance and the economy in relation to society, ethics and the environment. Below, you will find views from a variety of perspectives, practical experiences and academic disciplines. The topic of this discussion is: Where does the debate over a universal basic income stand in your region? Has the pandemic had an impact on discussions about UBI?

“…ensure that everyone has a floor on which to build [their] life…”

“World GDP in 2020 reached $90 trillion. To bring this number down to earth, it means that what we presently produce is equivalent to $3,800 a month per four-member family, amply sufficient for everyone on earth to live a dignified and comfortable life. A modest reduction in inequality and a flat redistribution to adults is sufficient to ensure that everyone has a floor on which to build [their] life. Huge financial resources lay idle in the world, growing not through productive investment, but financial rent. Taxing them might make these resources useful, stimulating demand and production at the bottom while drastically reducing poverty. Those who do not need the support might just be taxed back for the amount.”

Ladislau Dowbor — economist, professor at the Catholic University of Sao Paulo, consultant many international agencies

“…a certain confusion reigns here around the notion…”

“In France, the debate concerning a universal basic income remains confined to academic spheres and to a few militant groups. The issue was, however, put in the political agenda by the socialist candidate in the last presidential elections (spring 2017), that is to say before the outbreak of COVID-19. This candidate achieved a very poor score. The crisis itself does not seem to have brought the problem to the fore. It is true that a certain confusion reigns here around the notion: Is it a real universal basic income, a negative tax, aid to citizens without resources or a subsidy to all residents? The imagination is lost, which does not help the political inscription of this notion, nor the serene economic discussion.”

Etienne Perrot — Jesuit, economist and editorial board member of the Choisir magazine (Geneva) and adviser to the journal Etudes (Paris)

“…with the COVID crisis, the idea is resurfacing…”

“In June 2016, a proposal to introduce a universal basic income was rejected by three-quarters of Swiss voters and all Cantons. With the COVID crisis, the idea is resurfacing, but to gain traction, it will need to address two issues. The first is how to finance it, especially if UBI should be enough to live on, without having adverse incentives for work and the tax base. The second is why provide support to everyone instead of those in need? Even with the pandemic, the vast majority of the population have kept their income and thus do not need support.”

Cedric Tille — professor of macroeconomics at the Graduate Institute of International and Development Studies in Geneva

“…dissatisfaction with existing social-security systems…”

“Dissatisfaction with existing social-security systems has recently led to greater attention to the universal basic income. Perhaps the best-known experiment is that carried out on a limited sample of recipients in Finland. In the recent municipal elections in the UK, almost 300 candidates of the Green Party were declared supporters of the UBI. Supporters stress the automaticity and universality of the UBI, which are believed to contribute to wellbeing and the ease with which beneficiaries are able to handle other problems of their lives. Critics stress the undesirability of the delinking of financial benefits from particular welfare services owing to its likely impact on popular support for these services. This is a debate that requires several national experiments, which are likely to influence corresponding variations in policy design, including other solutions such as negative income taxes or simply strengthened social security.”

Andrew Cornford — counselor at Observatoire de la Finance, former staff member of the United Nations Conference on Trade and Development (UNCTAD), with special responsibility for financial regulation and international trade in financial services

“…the proposal could draw away people from the labor force…”

“During the pandemic, the Spanish left coalition government accelerated a plan called Ingreso Minimo Vital, expected to hand out between €462 and €1,015 per month according to the conditions of each household unit. This in part replaces or adds up to existing regional schemes. Until March 2021, 210,000 beneficiaries had their submission approved, of a total of 1.3 million requests. The unions and a few NGOs — some of them very efficient in relieving newly emergent poverty — denounced the slowness and administrative maze in the process. The Spanish unemployed still number 3.6 million (15.99%), plus about 750,000 in furlough schemes. The proposal, if successful, could draw away people from the labor force, whereas we need public-private policies aiming to the contrary.”

Domingo Sugranyes — director of a seminar on ethics and technology at Pablo VI Foundation, former executive vice-chairman of MAPFRE international insurance group

“…these measures would provide tangible help that women need right now…”

“For myriad women in economies of every size, along with trailing income, unpaid care and internal work burden have exploded. While all are facing unprecedented challenges, women continue bearing the brunt of the economic and social fallout of COVID-19. Pandemic-induced poverty flow will also widen the gender poverty gap, which means more women will be pushed into extreme poverty than men, thereby revealing women’s precarious economic security. Introducing direct income support to women would mean giving cash directly to women who are poor or lack income that can be a lifeline for those struggling to afford day-to-day necessities during the pandemic. Further, these measures would provide tangible help that women need right now.”

Archana Sinha — head of the Department of Women’s Studies at the Indian Social Institute in New Delhi, India

“In Central America, it has not even been considered…”

“In Mexico, the discussion went to Congress as a proposal in June 2020 and is unapproved with a cost of 1% of GDP. In Central America, it has not even been considered as it is too onerous for the limited public finances of those countries. In Brazil, Chile, Colombia and Argentina, among other countries in the region, there is public discussion on the desirability of UBI promoted by ECLAC and UNDP and has not taken off, given the very severe fiscal constraints in most countries. UBI would not reduce inequalities as people who do not need it would get it and families with many adults in one household would get a bigger share than those with children.”

Oscar Ugarteche — visiting professor of economics in various universities

“…at the center of the most dynamic debates…”

“The pandemic triggered a socioeconomic downturn — already sharpened by the 2008 debt crisis — that raised economic uncertainty and widened inequalities. Fundamental rights and basic life parameters are at risk, especially for the poorest of the poor. Scholars, experts and citizens feel that it’s surely the time to voice their support for a series of socioeconomic initiatives — the universal basic income being at the center of the most dynamic debates. The southern Mediterranean countries and Greece prioritized the pandemic effects and kept aside for a short period of time the austerity measures. However, Greece is expected to turn back to the economic stability narrative, as described during the debt crisis, a fact that disempowers a possible engagement to the UBI debate. If this becomes — as it should — an international matter, weaker economies will follow.”

Christos Tsironis — associate professor of social theory at the Aristotle University of Thessaloniki in Greece

“…popularizing the idea of universal basic income in the US…”

“Thanks, Andrew Yang, for popularizing the idea of universal basic income in the US. Yang ran in the 2020 Democratic presidential primaries, offering the “Freedom Dividend,” a UBI of $1,000 a month to every American adult, as a solution to the eventual replacement of (nearly all) humans with automation. He scarcely answered how his UBI was to be funded, a significant, but not insurmountable, problem for UBI’s proponents. UBI skeptics were somewhat silenced when the former and current administrations sent out modest checks to those who lost jobs in the pandemic, in a series of massive economic rescue packages. Maybe the rescue plans are a nascent solution to UBI funding: higher taxes, deficit spending and pump priming.”

Kara Tan Bhala — president and founder of the Seven Pillars Institute for Global Finance and Ethics

“Italy introduced two years ago the Reddito di cittadinanza…”

“Italy introduced two years ago the Reddito di cittadinanza, with 1.2 million Italians receiving this first attempt of universal basic income (€560 on average), at the condition of refusing no more than two job offers. In two years, only a small number of citizens actually signed a contract, as most offers were short-term. On the other hand, Italy just presented its Piano Nazionale di Ripresa e Resilienza )PNRR), consisting in €235.1 billion. Roughly 27% of the resources of the plan will be devoted to the digital agenda, 40% to investments to counteract climate change and 10% to social cohesion. Particular attention was paid to the historically disadvantaged Mezzogiorno of southern Italy (€82 billion, of which 36 in infrastructures), with projects involving young people and women, groups hit hard by the socioeconomic impact of the pandemic.

Valerio Bruno — researcher in politics and senior research fellow at the Centre for Analysis of the Radical Right (CARR).

*[A version of this article was originally published by From Virus to Vitamin and Agefi.]

The views expressed in this article are the author’s own and do not necessarily reflect Fair Observer’s editorial policy. More