Background
In the 21st century, digital technology has granted billions of people access to knowledge and improved communication. Yet, despite this information revolution and explosion of digital networks, 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 have a mobile phone and nearly 500 million have an internet connection [9].
Meanwhile, wealth inequality continues to grow. The richest 1% are on course to control as much as two-thirds of the world’s wealth by 2030 [10]. We are also facing mass unemployment resulting from automation, with the McKinsey Global Institute projecting that by 2030 up to 800 million people – one-fifth of the global workforce – are likely to have their jobs eliminated due to developments in automation and artificial intelligence [11].
In simple terms, basic income is a model for providing every person with an unconditional sum of money, regardless of employment status, income or resources. It is designed to enable a baseline standard of living and improve wealth inequality. The concept is not new, having been theorized about in one form or another for at least five centuries, following its proposal by London-born Renaissance humanist Sir Thomas More in his 1516 masterpiece Utopia.
In the modern era, the concept of “helicopter money” was coined by Milton Friedman in 1969 as a means towards increasing aggregate demand [12]. Friedman proposed that the central bank make direct transfers to the private sector without the involvement of fiscal authorities to put more money in the hands of people, a solution Ben Bernanke famously suggested as a solution to prevent deflation in 2002 while leading the Federal Reserve [13]. In response to the financial crisis of 2008, Martin Wolf suggested that central banks make cash transfers directly to households financed with base money [14]. Since 2012, economists and several policymakers have issued calls for “quantitative easing for the people,” suggesting that conventional quantitative easing was adversely affecting wealth distribution.
In recent years, these economic proposals have entered political consciousness. Jeremy Corbyn, as leader of the United Kingdom’s Labour Party, promoted people’s quantitative easing as part of his 2015 manifesto [15]. Three years later Corbyn’s Labour Party adopted a policy promoting basic income [16]. In the United States, Democratic Presidential Candidate 2020 Andrew Yang gained a cult following running on a signature policy of $1,000 for every American. Since ending his presidential campaign, Yang has become a global advocate of basic income, launching a non-profit to advance pilots and political candidates that promote basic income platforms, which has attracted millions in funding and media attention [17].
Spain became the first country to promise a nationwide rollout of a basic income initiative that will stay in place when the COVID-19 pandemic subsides [18]. 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 universal basic income [19].
Whether the motivations are combating poverty, counteracting technological unemployment, or a need to redefine the meaning of work, basic income has gained significant momentum in 2020. As economies are destabilized and reshaped following the coronavirus outbreak, basic income has moved from the fringes of political discourse to take centre stage all around the world.
There have been around 30 basic income pilots to date. Conclusions show that across impoverished and wealthy populations alike, basic income increases wellbeing and happiness, without resulting in a reduced commitment to labour and income-producing work [20]. (For more information about recent UBI projects and history see our 2018 UBI positioning paper) [21].
Benefits of basic income include:
Straightforward to understand and implement
Reduces compliance costs for individuals and operational costs for administrators
Unconcerned with a receiver’s physical, personal, employment or relationship status
Empowers people, allowing receivers to make their own financial choices
Lifts more people out of the poverty trap and improves wellbeing
Not necessarily dependant on centralized sponsors/authorities
Criticisms against basic income have focused on affordability and disincentivizing desire to work. They include:
Concerns that distribution of “free money” could encourage idleness and reduce the labour supply
Wealthy people will be eligible to receive funds, therefore it is not equitable
Hard to finance through current systems
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 perceived as one of the barriers to adoption. Estimates for national basic income vary widely, ranging between 5-35% of a nation’s GDP [22]. However, among basic income advocates, the cost is not the primary inhibitor. The greater barrier to a government-supported and implemented basic income program seems to be political will. Any scheme would compete financially with existing social services and cash-transfer programs. Pilots to date have shown that concerns of basic income disincentivizing work have not proven to be true, and economic theories such as the Gini index show that inequality is reduced even when wealthy people receive a basic income, according to the World Bank [23].
There are additional challenges when considering using traditional organizations and structures to implement basic income to any global citizen. These include:
How to determine a global basic income, given the unequal economic levels and various social norms between countries
How to develop a new payment mechanism that can reach all participating users directly
How to fairly manage and establish the entity that acts as a fund pool and is entrusted to collect, store, and distribute basic income
No current international governance or political-economic structures are set up to deliver this. One possible solution is to use distributed ledger technologies and the digital assets they convey. Blockchain can automate the basic income distribution process and provide the transparency required to instill trust, resulting in a system that works to the benefit of all participants.
GoodDollar proposes a distributed, people-powered basic income that complements government initiatives while reaching beyond national boundaries. Our vision is to leverage nascent blockchain and decentralized technologies to create the following sustainable infrastructure:
People-Powered Governance: Individuals and organizations can participate and collaborate as a decentralized governing body that manages monetary tools controlling the GoodDollar economy through transparent token ownership.
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.
Open Innovation: Through leveraging decentralized finance (“DeFi”) tools and protocols, there is no need to wait for governments to launch a sustainable framework for global basic income.
Optimally implemented and fortified by the right support network, we believe that the GoodDollar protocol can become the industry-standard basic income infrastructure. It should be noted 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 complement one another. We believe in working with any financial and technology partners that share our goal of increasing financial access and reducing inequality. Our vision is that any individual or organization that believes in basic income will be able to contribute to the cause through the GoodDollar economy.
Decentralized finance (“DeFi”) describes a series of composable tools and protocols for transacting in a permissionless manner. Centered around the Ethereum network, DeFi utilises technology such as blockchain and smart contracts to facilitate peer-to-peer exchange, lending, borrowing, trading, and saving.
DeFi is built upon base and second layer protocols such as Ethereum and MakerDAO, which in turn support decentralized applications (dApps) that can support practical tools for administering social credit, disbursing basic income, swapping digital assets, and earning yield through providing liquidity to token pools. Composability – the notion that different DeFi products can be stacked together like blocks to create new products – is a key tenet of decentralized finance. This creates strong network effects, with each new innovation bolstering the resilience of the entire DeFi ecosystem.
Smart contracts provide the means for digital asset holders to lock their tokens into protocols in a process known as “liquidity mining” or “yield farming” without relinquishing custody of their funds. This capability is at the heart of the explosive growth in the DeFi market, whose total capitalization (based on the value of assets locked into DeFi protocols) increased by 400% between June and August 2020.
The ability for asset holders to earn a return without reliance on third parties for custody is at the heart of the basic income architecture proposed by GoodDollar. It provides a means for the GoodDollar monetary reserve to receive value from a wide variety of different endpoints across protocols. This creates a reserve-backed G$, which pays out interest payments to Supporters, while also setting aside a basic income pool.
Organisations that become GoodDollar Supporters and contribute to the reserve will have their contributions publicly acknowledged, incentivising participation, and providing a practical form of corporate social responsibility with directly transparent and measurable outcomes.
GoodDollar is an idea whose technology and timing have converged. Growing consensus over the need for a universal basic income has been complemented by advances in blockchain technology that make the global implementation of such a system possible for the first time.
[9] The World Bank, April 2018 [10] House of Commons Library, April 2018 [11] McKinsey Global Institute, November 2017 [12] Friedman, M., The Optimum Quantity of Money, 1969 [13] Brookings, April 2016 [14] Financial Times, December 2008 [15] Independent, July 2015 [16] Independent, July 2018 [17] Move Humanity Forward, ongoing [18] Independent, April 2020 [19] University of Oxford, May 2020 [20] BBC, February 2019 [21] Assia, Y., Ross, O., Wealth Distribution Positioning Paper, November 2018 [22] Widerquist, K., The Cost of Basic Income: Back-of-the-Envelope Calculations, December 2017 [23] The World Bank, ongoing
