Comment on page
Introduction
Digital technology has empowered billions of people in the 21st century with vastly expanded access to knowledge and dramatically improved modes of communication. Yet, despite this information revolution and explosion of digital banking and commerce, a large portion of the world’s population remains financially excluded. In 2018, The World Bank calculated that 1.7 billion adults had no access to a traditional bank, even though one billion of these have a mobile phone and nearly 500 million have an internet connection [5].
Meanwhile, wealth inequality continues to grow. The richest 1% of people are on course to control as much as two-thirds of the world’s wealth by 2030 [6]. We are also facing mass unemployment resulting from automation. The McKinsey Global Institute projects that by 2030, developments in robotics and artificial intelligence will have pushed some 800 million people – or one-fifth of the global workforce – out of their jobs by 2030. [7]
In simple terms, universal basic income is a model for providing every person with an unconditional sum of money, regardless of their employment status, income or resources. It is designed to enable a baseline standard of living and narrow the gap between rich and poor. The concept of basic income is not new; it has been theorized about, in one form or another, for at least five centuries, since it was introduced by London-born Renaissance humanist Sir Thomas More in his 1516 masterpiece Utopia.
The idea of a basic income has risen on the economic agenda in the past few decades, amid growing concerns about inequity in the global financial system. In 1969, the economist Milton Friedman coined the term “helicopter money”, suggesting this as a possible means for increasing aggregate demand [8]. Friedman proposed that central banks could make direct transfers to the private sector without the involvement of fiscal authorities to put more money in the hands of people, a solution former Federal Reserve Chairman Ben Bernanke famously advocated in 2002 as a preventative for deflation, when he was on the central bank’s board of governors [9]. In the wake of the 2008 financial crisis, Martin Wolf suggested that central banks make cash transfers directly to households financed with base money [10], while a growing number of economists and policy-makers have since 2012 made calls for “quantitative easing for the people”, arguing that conventional quantitative easing was adversely affecting wealth distribution.
Proposals such as these no longer seem radical. In recent years, indeed, they have entered mainstream political consciousness. Jeremy Corbyn, when leader of the United Kingdom’s Labour Party, promoted people’s quantitative easing as part of his 2015 manifesto [11]. Three years later, Corbyn’s Labour Party adopted a policy promoting basic income [12]. In the United States, 2020 Democratic presidential candidate Andrew Yang gained a small cult following running on a signature policy of US$1,000 for every American. Since dropping out of the presidential race, Yang has become a high-profile advocate of basic income, and his non-profit to support pilots and political candidates who promote basic income platforms has attracted media attention and millions of dollars in funding [13]. At the height of the pandemic, Spain became the first country to launch a nationwide basic income initiative that will stay in place when COVID-19 restrictions subside [14]. Many others – including Australia, Japan, New Zealand, Germany, Scotland and Brazil – have talked about deploying similar schemes. Basic income’s appeal has never been greater; a May 2020 survey by the University of Oxford revealed that 71% of Europeans now support the concept [15].
Whether motivated by a growing awareness of the need to combat poverty, concerns about job losses caused by technology, or an awareness of the need to redefine the meaning of work, basic income has moved from the fringes of political discourse to centre stage. And as the fallout from the coronavirus continues to re-shape economies around the world, it is more evident than ever that the time for a serious effort to implement a global basic income is now.
There have been approximately 30 basic income pilots in recent decades. Results from these demonstrate that, across impoverished and wealthy populations alike, basic income increases well-being and happiness, without resulting in reduced commitment to labour and income-producing work [16]. (For more information about the history of UBI and recent pilot projects, please consult our 2018 UBI positioning paper [17].)
Among other advantages it offers over other forms of stimulus, UBI:
- Is straightforward to understand and implement.
- Reduces compliance costs for individuals and operational costs for administrators.
- Is unconcerned with a receiver’s physical, personal, employment or relationship status.
- Empowers people, allowing recipients to make their own financial choices.
- Lifts more people out of the poverty trap and improves well-being.
- Does not necessarily rely on centralized sponsors/authorities.
Criticisms of UBI, on the other hand, have focused on the potential that regular payments could disincentivize recipients to seek work and reduce the labor supply. Critics also suggest that:
- The distribution of “free money” could encourage idleness.
- Since wealthy people still stand to receive funds, UBI is not equitable.
- UBI will be hard for most governments to finance through current systems.
- The value of UBI is hard to determine on a regional and national level.
Since governments and local authorities have funded most basic income pilots to date, affordability has been regarded as another of the main barriers to implementation. Estimates for the cost of a national basic income vary widely, ranging between 5-35% of a nation’s GDP [18]. However, among basic income advocates, cost is not seen as the primary inhibitor. To these groups, the greater barrier to a government-supported and implemented basic income program is political will, particularly given that any scheme would compete financially with existing social services and cash-transfer programs.
As to other concerns, pilots have so far shown that worries about basic income disincentivizing work are misplaced, while work related to economic measures such as the Gini Coefficient indicate that inequality is reduced even when wealthy people also receive a basic income [19].
There are additional challenges to using traditional organizations and structures to distribute a global basic income to all. These include:
- 1.How to determine an appropriate amount for global basic income, given differing economic levels and social norms between countries
- 2.How to develop a new payment mechanism that can reach all participating users directly
- 3.How to fairly manage and establish an entity that can act as a fund pool and entrusted to collect, store, and distribute basic income.
Perhaps most critically, no international governance or political-economic structures exist at the moment capable of delivering a worldwide basic income initiative.
Distributed digital asset technologies, however, allow us to envision a way forward.
While national authorities grapple with the logistics of deploying basic income to their citizens, the emerging DeFi ecosystem offers a faster, more efficient route. The GoodDollar model for a distributed, people-powered global basic income complements government work while reaching beyond national boundaries. Our vision is to leverage nascent blockchain and decentralized technologies to forge a sustainable infrastructure, according to three core principles:
- 1.People-Powered Governance: Individuals and/or organizations can participate and collaborate in a distributive, decentralized governing body (the GoodDAO) that manages monetary tools controlling the GoodDollar economy through transparent token ownership.
- 2.Value Creation and Distribution: Smart contracts enable transparent value creation and transfer, powering a unified system that allows people to generate and receive basic income from various endpoints.
- 3.Open Innovation: The tools and protocols that already exist today in the emerging DeFi ecosystem mean there is no need to wait for governments to launch a sustainable framework for global basic income.
Ultimately, and with adequate support, we believe that the GoodDollar protocol can become the industry-standard basic income infrastructure. It is worth noting that while we promote a distributed framework for GoodDollar that leverages new tools across the decentralized finance ecosystem, we firmly believe that centralized and decentralized financial systems can co-exist and assist one another. We believe in working with any financial and technology partners that similarly strive to boost financial access and reduce inequality. Through GoodDollar, any individual or organization who believes in the power of basic income can contribute to the cause.
[5] The World Bank, April 2018
[6] House of Commons Library, April 2018
[7] McKinsey Global Institute, November 2017
[8] Friedman, M., The Optimum Quantity of Money, 1969
[9] Brookings, April 2016
[10] Financial Times, December 2008
[11] Independent, July 2015
[12] Independent, July 2018
[13] Move Humanity Forward, ongoing
[14] Independent, April 2020
[15] University of Oxford, May 2020
[16] BBC, February 2019
[17] Assia, Y., Ross, O., Wealth Distribution Positioning Paper, November 2018
[18] Widerquist, K., The Cost of Basic Income: Back-of-the-Envelope Calculations, December 2017
[19] World Bank, Ongoing
Last modified 1yr ago