Universal Basic Income – The Free Market Version
I already talked about universal basic income here. In summary, the concept is that the government taxes everyone and then provides every citizen (who wants it) a basic “free” income to cover minimal expenses.
The bottom line is that it won’t work. Both fundamental human behavior and laws of economics would prevent such a thing from ever working in the long-term the same way it prevents things like communism from working long-term. I’m a small-government, minarchist libertarian, so I admit I’m biased on this issue, but it’s very clear to me that economically speaking, such a system could never work on a large scale or the long-term.
However, what if we could fundamentally transform the entire concept of UBI by removing government from the equation? Would it work then? I don’t know, but it’s interesting to think about. Here’s a thought experiment to get your brain working on this.
Predictions made by some in the intellectual community (including Sam Harris) and the business community (including Mark Cuban) state that at some point, because of things like robotics and AI, we are going to soon see trillionaires. Those men who are worth $1 trillion or more.
For purposes of illustration, the richest man in the world is Bill Gates, who’s worth about $82 billion. A trillionaire would be a guy worth $1000 billion or more. A multitrillionaire would be worth $2000 billion or more. That’s an unfathomable amount of money, but it’s somewhat likely we will see men worth this much in the relative near future.
These predictions go on to state that income disparity will heighten to the point that human beings have never seen before. You’ll have a few trillionaires at the very top (maybe 1%), a very tiny middle class (maybe 5%), and a massive horde of very poor people (the other 94%).
One theory is that the trillionaires aren’t going to be very happy watching millions of raving, poor barbarians constantly smashing against the gates of their castles, even if these poor people have high-tech conveniences like smartphones (as most poor people do today).
Left-wingers point to UBI as the answer; just have big government tax the shit out of these trillionaires and then hand over that cash to all the poor people. It’s a nice fantasy, but as longtime readers of this blog already know, it won’t work. As I already described here, US taxpayers have already spent $22 trillion (yes, that’s trillion with a “T”) on the poor since the 1960’s and the poverty rate hasn’t budged since then. Government also wastes at least 40% (and that’s being very nice) of all tax dollars collected on waste, fraud, abuse, and corruption.
A government-based UBI isn’t the answer.
But what about a UBI where the government had nothing to do with it? What about a capitalist, free market, 100% voluntary version of a UBI?
I still don’t know if it would work, and it probably wouldn’t, but at least now we get into the realm of something that might work (voluntary UBI) rather than something that we know won’t work (government-based UBI). Here’s one possible scenario.
The trillionaires all get together and decide that having a society filled with 94% of very poor people who are constantly at each other throats, trying to overthrow the trillionaires, and not purchasing as many products and services as the trillionaires would like is not a good idea for anyone.
Thus, they voluntarily decide to implement a UBI. Government has nothing to do with it. The trillionaires are going to do this completely in a voluntary, free market way. As a matter of fact, government likely tries to get involved, but the trillionaires tell it to fuck off (which they can, since such a society would be highly corporatist like the US is now).
The trillionaires tell everyone in the country that from now on, every adult in the nation (age 18 or over) will receive the equivalent of around $1000 to $1800 a month. This money would go to provide these basic items:
1. Basic groceries. There would be a focus on fruit, vegetables, dairy, bread/rice/pasta and meat. Things like sugar and alcohol would be minimal or not allowed at all.
2. Basic shelter. This means a studio apartment that you might have to share with one or two other people. The apartment would have water, electricity, heating, garbage and sewer services, and in warmer areas, air conditioning. Maybe it would have some kind of very slow wifi internet. It would not have any cable TV.
3. Basic clothing. Enough to get 2-3 pairs of pants, 3-4 shirts, one pair of good shoes, and one good jacket per year or two, in addition to socks and underwear. That’s it.
4. Basic healthcare. This means standard emergency room services for things like broken bones and cancer, plus perhaps one physical every 1-3 years. Crap like taking your kid to the emergency room for every little sniffle would not be covered.
5. Access to local mass transit if you live in a city. You’d get a monthly local bus/metro pass or similar.
That’s it. The trillionaires explain that if they will not give you a car, not provide you with any entertainment, and not provide you with any travel outside of a local bus, or anything else. The UBI would be there to cover minimal human needs only.
They also point out that children do not apply to any of this, so if you have a child, that’s fine, but any expenses for that kid (food, healthcare, etc) come out of your monthly UBI ($1000-$1800) per month. You don’t get any extra. The trillionaires wisely don’t want these poor people reproducing if they’re so damn poor that they need free money to live.
The trillionaires would then tell people that they are free to get jobs and/or start businesses if they want lifestyles beyond the shitty one the UBI would provide. In such a society, I’m assuming that this would be relatively easy to do since government regulation on this kind of thing would be low, or at least manageable. (Remember, I’m presenting a free-market scenario here.) If instead the government was highly oppressive (like Venezuela), bureaucratic (like India), or socialist (like Europe), the trillionaires would step in, slap the government around a little, and eliminate or mitigate most of those laws and red tape.
The trillionaires would explain to people that if they worked hard, they could indeed live much better and happier lifestyles than those who settle for UBI. The trillionaires might even offer free training courses on business startups, marketing, management, engineering, and other skills.
There would also be a policy that once you started making a certain amount of money per year, your UBI would end. (But if your income ever dropped back down for whatever reason, the UBI would kick in once again.)
The numerals work out something like this. Using the example of the United States, there are about 242 million adults. Taking the highest monthly number in my example ($1800 per month), it would require somewhere around $4.3 trillion dollars a year to pay all 242 million adults $1800 per month.
The actual number would be much less, since the trillionaires would be able to use economies of scale to get that $1800 down to $1000 or perhaps even less, not to mention new technologies will make things like houses very cheap in the future. This $1800 could actually be $500 or even less, bringing the $4.3 trillion figure down to around $1.2 trillion. This would be within the realm of possibility for the trillionaires, assuming they did all of this as a group and assuming the government wasn’t trying to tax them very much.
Again, since such a society would be largely corporatist, the trillionaires would be in de-facto control of the government already, just as the billionaires are today. So it would be unlikely the trillionaires would be facing a large tax burden anyway, just like the super rich don’t today. (Today, the people who pay the highest taxes as a percentage of their income are the “low-rich,” i.e. the upper-middle-class, i.e. people like me. Although, since I follow an Alpha 2.0 financial structure, I’m able to legally avoid most of these taxes. Most other guys who make the income I make aren’t so lucky, and are getting hammered with huge taxes far beyond what the poor or the rich pays.)
What would be the result of all this?
I don’t know, but I can give you my best guess. My guess is that a decent percentage of the 94% UBI receivers, anywhere from 30% to 60%, would do exactly what you’d expect; they’d just sit on their asses and do nothing. They’d spend their time watching TV in the wifi internet, smoke weed, play video games, jerk off, bitch on the internet, and do nothing productive.
Another percentage, I’d say about 30% to 40%, would be somewhat productive. They would do odd jobs to make a little extra cash from the tiny 5% middle class. They’d do things like help fix people’s cars, mow lawns, babysitting, housecleaning, sell drugs, and stuff like that. They would make a little extra money beyond the UBI and actually enjoy a slightly higher standard of living that would involve more entertainment and slightly larger apartments, but that’s about it.
The remaining small percentage is people who indeed would become moderately successful workers or entrepreneurs and would possibly join the middle or upper middle class. The middle class would still be very tiny, perhaps expanding from 5% to 10% or 15%, but probably no more than that. Much of these more successful folks would make just enough money to not lose their UBI, effectively cashing in on the system to its maximum degree without having to work too hard. A few other more motivated folks would keep making more money in pursuit of a better life, not caring if they lost their pathetic UBI.
Would a system like this work? I don’t know, but it’s certainly interesting to think about.