Davos Man, page 35
In the fall of 1983, a trio of researchers in Belgium had forged a collective around discussion of an idea they called allocation universelle. Three years later, they held an international conference that drew five dozen participants, including the British economist Guy Standing. The event yielded an institution now known as the Basic Income Earth Network, an online gathering place for those interested in the subject.
“Security is a precious asset,”1 Standing wrote in a 2017 book on the subject, Basic Income: And How We Can Make It Happen. “It should be a goal of everyone who genuinely wants to build a good society rather than one that facilitates the aggrandizement of a privileged elite who knowingly gain from the insecurities of others.”
Security was indeed in short supply, but basic income still struck me as an impractical goal for a political system dominated by Davos Man—a diversion from what might actually be achievable. In the United States, where the problems of the working poor were profound, anything that smacked of welfare was easy for lobbyists to defeat. And basic income was easily dismissed as a form of socialism—the ultimate idea-killing label in the world’s capitalist superpower.
Then, in 2016, just as I moved to London to cover the European economy, Finland announced that it was conducting a two-year trial of a basic income scheme.
Finland was a Nordic country in which taxpayers were already financing extensive social welfare programs, making basic income a realistic aspiration. Finland was also Scandinavia’s most market-oriented economy, a nation dedicated to ruthless competition in the business world. Whatever this experiment was, it could not be written off as woolly-headed socialism. Rather, it appeared to represent an attempt to reinvigorate capitalism.
I decided to go and explore Finland’s experiment up close at the same moment that a slice of the economics profession became infatuated with basic income. From Aspen to London, conferences about the future of work suddenly featured discussions on the merits of various basic income schemes. Labor had changed so fundamentally, the argument typically went, that the traditional idea of a job for every able-bodied person had gone the way of the fountain pen. Basic income would serve as a broad form of social insurance. Whatever happened—whether everyone became a part-time Uber driver, or Uber drivers were replaced by self-driving cars—people could count on sustenance.
At Davos in January 2017, Standing seemed to be everywhere. A moderator introduced him as “the moral conscience” of the Forum, based on his work on the Precariat—the growing class of people whose capacity to support themselves had been menaced by globalization.
The Precariat was growing because of excessive faith in market forces and “the commodification of everything,” along with “the systematic dismantling of all institutions and mechanisms of social solidarity,” Standing said. Basic income was a way to right the balance.
Davos Men like Benioff increasingly favored the idea, positing basic income as a form of compensation for how their lucrative technological innovations tended to destroy jobs. If the billionaires liked the idea, that raised the prospect that it was, like stakeholder capitalism, a calculated means to stave off a more meaningful transfer of wealth. But it also meant that basic income had greater potential to gain political support.
Chris Hughes, a Facebook cofounder, launched an advocacy and research group, the Economic Security Program, devoted to championing the idea. Its funds turned Stockton, California, a city decimated by the foreclosure crisis, into the testing ground for a basic income program2.
In Kenya, a group called GiveDirectly, overseen by an assortment of credentialed academics, began distributing payments to people in nearly two hundred villages, while studying what would happen over the ensuing dozen years. Tests were planned or underway in India, South Korea, and Canada.
By 2018, another tech entrepreneur, Andrew Yang, was putting basic income at the center of an improbable presidential campaign that would attract more support than anyone predicted, promising a “Freedom Dividend” of $1,000 a month for every American adult.
Yet even as basic income had clearly captured momentum, it was still hard to get around the price tag—not necessarily on the merits, but on the prospects for political passage.
If every American were to receive $10,000 a year, the tab would run nearly $3 trillion. That was about eight times what the government was spending on existing social service programs. Washington might just as well have committed to handing out unicorns.
But realpolitik can easily turn into cynicism. Only a few years earlier, the American labor movement’s “Fight for $15” campaign to double the federal minimum wage had been written off by many experts as unrealistic. That national effort had persuaded many states and localities to deliver on its goals.
And crises push out the parameters of political possibility. The pandemic jolted the usual calculus. In the name of preventing another Depression, governments from Washington to Brussels were throwing around numbers that would ordinarily seem preposterous. From unemployment benefits and wage subsidies to government-furnished health care, the bill was going to be enormous, justifying serious consideration of alternative ways to distribute public largesse.
The pandemic also reinforced the reality that, in many countries, ordinary people were but one misfortune away from catastrophe. Before the coronavirus, four in ten Americans struggled to come up with a mere $400 to deal with an unexpected event such as a car repair or fixing a broken appliance, according to a widely circulated survey from the Federal Reserve3. All at once, tens of millions of Americans were suffering far worse than a blown transmission.
As the coronavirus shut down American life in 2020, garishly lit hotels in Las Vegas were empty, just as thousands of homeless people were camped out on the city’s sidewalks. From Minneapolis to Madrid, shopping malls were abandoned, while food banks were packed.
European countries would pay to minimize suffering via automatic programs like unemployment insurance, housing support, and cash grants. American programs were relatively modest, but a surge of unemployment was certain to be accompanied by long-term issues that would drain taxpayers—through law enforcement and prisons, if crime spiked; via payments made to emergency rooms that attended to the tens of millions of people who lacked health insurance. Indeed, the cost of the pandemic relief programs produced in Washington—first under Trump, and then under Biden—exceeded $5 trillion by the middle of 2021.
Even among the hard-boiled pragmatists who tended to run governments, universal basic income suddenly looked like a potentially practical solution to problems that were manifest everywhere.
As a candidate, Biden had been dismissive of the idea, placing emphasis on creating quality jobs. But in May 2020, his soon-to-be vice president, Kamala Harris, then a senator from California, had sponsored a bill that looked like basic income—cash payments well above the level of the CARES Act that would last for the duration of the pandemic. Single people would receive $2,000 a month. Families would gain up to $10,000 a month4.
Nancy Pelosi, the Speaker of the House of Representatives, and a proud practitioner of realism, suggested that basic income deserved a place on the public agenda.
“We may have to think5 in terms of some different ways to put money in people’s pockets,” she said. “Others have suggested a minimum income, a guaranteed income for people. Is that worthy of attention now? Perhaps so.”
Pelosi was just the latest in a line of powerful figures to warm to the idea. Soon, Biden would take a step in that direction.
Throughout history, crises that revealed the pitfalls of inequality had prompted leading thinkers to embrace the notion of a government-furnished social-insurance system—a regular dollop of money for ordinary people. Some favored this concept on ethical grounds; others as a means of preventing unruly mobs from overrunning their gates.
The pandemic had laid bare the magnitude of inequality in modern times. Basic income was gaining credence as a potential solution.
Let us stipulate that there are other solutions that are also worthy of consideration.
The government could directly lift living standards by creating a federal job guarantee. Under this approach, the government would operate a job bank that would always have positions available for those in need, paying a so-called living wage—enough to finance the basics of life. When work was plentiful, the job bank would be a lonely place. When a downturn came, the government would become a mass employer in lieu of writing unemployment checks.
The job guarantee is an elegantly straightforward corrective to the dire shortage of work, and it, too, has been gaining adherents6. Its greatest virtue is its broad impact on labor conditions: The government could ensure that every able-bodied person could get a job that paid a living wage. That would force all private employers to meet the standard or suffer a shortage of workers.
If Amazon failed to provide enough protective gear in the midst of a pandemic, people could take refuge at the federal employment center. Amazon would be forced to improve its treatment of workers or watch its parcels pile up undelivered.
In one swoop, the job guarantee would neatly address a pair of profound American problems—the reality that many people need work at the same time that there is much work to be done.
In major cities across the United States, highways are crumbling for lack of upkeep, public schools are deteriorating, and public transportation links need expansion as part of the battle against climate change. Meanwhile, experienced construction workers sit in unemployment offices scanning listings for jobs that pay poverty-level wages. The job guarantee could create spending power for those suffering underemployment, while laying down infrastructure that could boost economic growth for everyone via improved education and transportation.
We need not engage in some progressive version of the Cosmic Lie—pretending that these investments will pay for themselves—to justify spending what it takes. We simply need to avoid falling for the usual deficit-spending fearmongering that comes from Davos Man collaborators like McConnell, forever ready to extend the next tax cut for billionaires while crying poverty when the subject is help for regular people.
But the job guarantee confronts far tougher political obstacles than basic income. It involves the creation of a large-scale bureaucracy, while substantially increasing the role of the state in regulating pay. Basic income removes bureaucracy. Instead of forcing people to satisfy complex rules for individual aid schemes—from housing vouchers to subsidized childcare—it entails simply handing everyone a regular sum of money and allowing them to decide for themselves how to use it.
This feature has been central to basic income’s appeal; the element that has allowed it to gain credibility across the political spectrum over centuries.
Half a millennium ago, Thomas More’s seminal novel, Utopia, included the suggestion that public assistance might better deter thieves than the threat of a death sentence.
By the middle of the eighteenth century, the American revolutionary agitator Thomas Paine was advocating the creation of a national pool of money, financed via inheritance taxes on landholdings, and distributed to every adult, as a means of ensuring what we now call social justice.
Paine posited that every person was born into the world with what he referred to as a “national inheritance”—the nourishment provided by the natural sphere. Private property ownership denied some people access to the soil, which limited their ability to feed themselves.
“The most affluent7 and the most miserable of the human race are to be found in the countries that are called civilized,” Paine wrote. “The contrast of affluence and wretchedness continually meeting and offending the eye, is like dead and living bodies chained together.”
Paine was no progenitor to Marxism. His loyalties were firmly with the wealthy cultivators of the soil. But he argued that everyone was entitled to a regular allotment of money as recompense for the disruption of national inheritance. It had to be paid universally, “to every person rich or poor,” so as “to prevent invidious distinctions.”
If Paine were around today, he would presumably favor some form of wealth tax to finance a comprehensive system of social insurance. And he would reject philanthropy and stakeholder capitalism as untenable substitutes for a meaningful redistribution of wealth.
“In advocating the case of the person thus dispossessed, it is a right8 and not a charity that I am pleading for,” Paine wrote. “There are, in every country, some magnificent charities established by individuals. It is, however, but little that any individual can do, when the whole extent of the misery to be relieved be considered. He may satisfy his conscience, but not his heart.”
Nearly two centuries later, the Rev. Martin Luther King Jr. promoted a form of basic income as part of the movement for civil rights. He described economic inequality as a fundamental injustice, one that was inseparable from overtly racist forms of discrimination like Jim Crow laws.
“Dislocations in the market operation of our economy and the prevalence of discrimination thrust people into idleness and bind them in constant or frequent unemployment against their will,” King wrote in his final book, published in 1967. “The time has come9 for us to civilize ourselves by the total, direct and immediate abolition of poverty.”
King advocated that the government furnish an allowance that ensured that everyone could live at “the median of society,” with increases tracking the standard of living. He cited an estimate from the economist John Kenneth Galbraith suggesting that such a program might run $20 billion10, which was only a smidgen more than the government that year planned to spend on the futile war in Vietnam.
Milton Friedman, the godfather of shareholder maximization, also embraced a variant of basic income—negative income taxes that put cash in the pockets of the poor. Ever disdainful of government bureaucracy, he viewed cash as a far more effective form of public aid than programs run by the dreaded state.
In its modern-day incarnation, basic income has gained currency as a malleable approach that can be tailored to widely divergent conceptions of society.
Progressives like Standing envision it as a means of emancipation from the meaninglessness of low-wage work. People stuck in minimum wage jobs at fast-food restaurants could gain freedom to abandon the fryolator, going home to play with their children, make music, and dig vegetable gardens.
Labor advocates embrace basic income as a way to increase bargaining power, enabling workers to refuse jobs at poverty-level wages.
Liberals envision basic income as a way to remove the stigma of public assistance. Instead of relying on food stamps at the grocery store while suffering the judgmental gazes of other shoppers—Shouldn’t she buy spinach instead of frozen pizza?—poor people would receive the same steady support as everyone else.
Conservatives, like the political commentator David Frum, are drawn to basic income for its simplicity, viewing it as an all-in-one replacement for the tangle of overlapping social welfare programs that are already on offer.
And Davos Man favors universal income as a means of unburdening himself of moral responsibility for profiting off technology that threatens jobs.
“As business leaders11, we have an obligation to ensure that the changes wrought by technology transcend our companies and benefit all of humanity,” Benioff wrote in Fortune in 2017. “For those who cannot be retrained, and even those traditionally not compensated for raising a family or volunteering to help others, we need to look at universal basic income.”
This sort of talk is why some economists—Stiglitz, among them—disdain basic income as an ersatz substitute for paychecks. People want to work for a living, he says. They don’t want perpetual handouts.
This is true, yet his critique is premised on the narrow conception of basic income that prevails in Silicon Valley: as a permanent welfare scheme for those displaced by automation.
This dystopian picture is indeed worthy of opposition—robots doing most of the work, while redundant humans live off government-furnished scraps. But there are other ways to harness basic income toward a different vision that involves expanding employment and encouraging economic growth.
When Finland launched its trial in 2017, it was looking to basic income not as a replacement for work, but as a means of spurring more of it.
Finland had never recovered from the global financial crisis, which had played out just as the rise of tablet computers and smartphones decimated one of the country’s largest industries—commercial paper manufacturing. Nokia, the Finnish company that had once ruled mobile telephones, had failed to cash in. For a decade, the Finnish economy had grown not at all. The unemployment rate was stuck above 8 percent.
Tending to the human cost of this misfortune was expensive, because Finland’s social welfare system was generous. As a share of its overall economy, Finland’s spending12 on unemployment benefits had increased by 70 percent between 2008 and 2015.
Finland’s leaders had reason to worry that their unemployment program was preventing people from moving on with their lives. As in many countries, Finland required that recipients of jobless benefits regularly visit unemployment offices to satisfy a confounding assortment of bureaucratic dictates. People had to prove that they were really looking for a job while attending training sessions. They had to continually disclose and verify their income.
Recipients were discouraged from accepting part-time jobs or launching their own businesses. Extra income risked undercutting their eligibility for benefits. So people passed up opportunities for fear of jeopardizing government support.
