Helicopter Money - Debunking Universal Basic Income
Trying times are upon us. As economies around the globe came to a sudden halt, exposing the instability of a system many thought infallible, the illusion of order began to crumble. Amid this unprecedented collapse, amid closing businesses, lost jobs, unpaid salaries, missed payments and shockingly revealing shortages, governments and institutions are hastily scrambling together solutions to remain afloat, writes Oliver Taylor.
The COVID-19 pandemic has demonstrated that even the world’s main superpower was ill prepared to withstand a pause in its money-making machine. The economy of debt was quick to fall apart the very moment people stopped spending money that was never truly theirs. Now, beyond even the perils of a deadly illness, those people are faced with a lack of funds and products, bills they cannot afford, and the shackles of quarantine that no one was ready for. With a large portion of the common folk, the working class, living paycheck to paycheck, the crash that was caused by the novel coronavirus lockdowns proved to be back-breaking.
Naturally, if consumers are unable to spend money on goods and pay their bills, everything else will quickly fall apart. Therefore, measures such as Donald Trump’s coronavirus relief bill, or Rishi Sunak’s rescue package, are surfacing to help offset the disastrous financial consequences of the pandemic. A thousand dollars in the hands of every citizen - like a bag of money dropped right out of a helicopter! The authorities in the USA, and other countries, plan to undertake such solutions in the fight against the economic crisis caused by the coronavirus. Yet, will such a recipe really help the citizens of affected countries and the entire world economy in the long run?
While the American plan has encountered obstacles in the senate, $250 billion was to be initially allocated to support the population in the form of direct targeted assistance. This suggests that for every adult American with an income of less than 75 thousand dollars a year, there will be about a thousand dollars. If the situation with the spread of COVID-19 does not improve before the end of April, the US authorities are ready to send another $500 billion to this end. Similar measures have already been submitted by the Hong Kong authorities, who are going to pay each citizen 10 thousand Hong Kong dollars (about $1,300 USD).
A STATE POWER MONOPOLY
While such rescue packages can be a welcome relief for many, Trump’s and Steve Mnuchin’s promises to hand out money directly to the people, immediately prompted widespread discussion far beyond the United States and its problems. The debate about the controversial idea that is universal basic income (UBI) is back in the spotlight, its flame reignited by the emergency pay-outs. If governments can give funds to cover the people’s essential needs during times of crisis, some believe they can and should do so on a regular basis, even when things even out...
The very notion of providing every citizen with the same amount of money fits well with the doctrine of universal basic income, which many left-wing economists have long been promoting in the West. It is believed that the state must provide everyone with regular guaranteed payments that cover basic necessities of life. In theory, this should be done so that most people don’t have to worry about their daily bread and devote their time to more productive activities than earning livelihoods at low-paying jobs. In theory again, it sounds lovely.
However, this measure seems popular only at first glance - in reality, it hides a number of systemic economic problems that continue to become ever more dire under the influence of the coronavirus situation. The idea of a universal basic income is not only of doubtful achievability, but it also opens the door for a dangerously empowered state and a system of ‘slavery through stipend’. Of course, in times of crisis, the distribution of money can benefit the economy, but it should never be considered as the norm for a long-term system.
A DANGEROUS PRECEDENT
On one hand, if this helps maintain and aggregate demand for some time, then this measure can only be welcomed - one-time payments in situations such as the current are not without merit. If people are quarantined and employers are unable or unwilling to pay their salaries, the state can and should come to the rescue. On the other hand, if such decisions are made on an ongoing basis, the perpetuation of government-issued paycheques can quickly lead to chaos and hyperinflation. While Rishi Sunak’s plan to pay UK self-employed workers £2,500 per month is a potent temporary solution, if it were to become a permanent fixture, such a measure would lay ruin to the prosperity of capitalism.
We should be wary of these ‘temporary solutions’, for if left unchecked, they can serve as the precedent to UBI, while their own value is hardly enough to cover a person’s basic needs: a thousand dollars for every American is a relatively small amount, and compared to the money that was given out to banks during the 2008 crisis, it’s nothing at all.
Applied long-term, the distribution of money will not help the economy, nor get rid of the problem of low inflation, the answer to which has not yet been found for several years, either in the USA or in the European Union. Increasing the money supply on hand with the help of emergency measures is not a systematic solution; investing in it will not lead to economic salvation. For the normal functioning of the economy in true, free capitalism, it is necessary that working people receive normal salaries, and not helicopter money.
In fact, there doesn’t need to be a debate on whether universal basic income works or not. We can skip the pros and cons, and simply look at what came of its 2017 attempt in Finland. The experiment failed. 2,000 Finns received €560 per month for two years. The control group was chosen randomly, but was subject to special requirements: the participants were unemployed, poor and not older than 28. The authorities hoped that unconditional payments would motivate able-bodied, but low-income citizens to seek out work. In the end, it turned out that they progressed only slightly more actively than other unemployed individuals.
Truthfully, €560 is a very small amount for Finland. The allowance is several times less than the cost of living, and it didn’t allow the project participants to get out of poverty, for they were forced to apply for ordinary benefits and other social assistance nonetheless. The same can be said about the helicopter money promised to Americans by Donald Trump. It may be a welcome present for some, which will temporarily (and artificially) increase spending in a stagnant economy, but it most certainly cannot take care of a person’s basic needs - in New York, for example, monthly rent alone is largely between $1,700 to $4,500 USD.
If the COVID-19 epidemic has shown us anything, it is that the global financial system of debt is heavily flawed and was not built to withstand serious challenges. Without fundamental structural reforms of the economy at its core, universal basic income will be naught more than a cosmetic measure.
For the left wing, UBI is too focused on the finances and purchasing power of the population, leaving aside the fact that companies produce too many unclaimed goods, forcing employees to work more and more. The program also threatens to lead to budget cuts in other social services. For the right, there are fears that such a system would be extremely costly for the budget, and could create a dependency syndrome for a culture in which people would expect money without doing anything. If material compensation isn’t based on creating added economic value, it erodes the worth of the economy altogether.
A THREAT TO FREEDOM & PROSPERITY
Those are all valid concerns, but worse yet, the implementation of a universal basic income threatens to pave the way for a system that is inherently dependent on the state. Kiss the freedoms of a capitalist society goodbye, for a government empowered to such extremes is nothing short of a communist dictatorship. UBI is more than a simple hand-out of money - it is a complex system that inevitably leads to a power monopoly of the state as every citizen’s welfare becomes bound to the rations allowed by central banks. Thus, any person that advocates universal basic income, or should we say permanent helicopter money, is calling for communism and a consolidation of power around a totalitarian government, whether they mean it or not.
Ironically (or perhaps hypocritically), the supporters of UBI like Tusli Gabbard, Steve Mnuchin and Andrew Yang have all built their wealth as beneficiaries of a free and open democratic society with free markets, a functioning economy and individual liberty - all things that such a system would shatter. If you do not identify as a devout socialist and you think of UBI as an adequate solution, consider the consequences, and think again. It is the complete opposite of capitalism and personal prosperity. EG