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ISET Economist Blog

A blog about economics in the South Caucasus.

Universal Basic Income – a Utopian Dream that May Soon Become a Reality

Early next month, the eyes of the world will briefly turn to Switzerland. On June 5th, the citizens of this prosperous country will vote in an unprecedented referendum on the idea of guaranteeing each citizen a basic income equivalent to roughly 30,000 USD per year.

At first, the idea may sound completely crazy – after all, if a basic level of income is guaranteed for everyone, why would people want to work or study to acquire a profession? Wouldn’t the entire system collapse when economic activity stops and sources of income dry up? The opinion polls so far indicate that Swiss remain skeptical about the idea, and the basic income provision will not pass the vote. However, as a recent piece in the Financial Times points out, the very fact that Switzerland is voting on such a provision reflects the changing reality of our time: what was once regarded a ‘radical’ fantasy is now becoming part of the mainstream.

Perhaps the strongest argument for UBI (Universal Basic Income) so far is that the world is fast becoming more and more driven by technologies which are set to replicate increasingly complex human tasks – from driving and cooking to teaching children. The “technological disruption” is no longer the stuff of science fiction novels – it is becoming a reality. The evidence suggests that societies around the world will be paying for technological progress with increasing levels of inequality and unemployment.

One of the features of the “technological disruption” is that the demand for knowledge and skills currently taught in classrooms may be gradually disappearing. Creative, out of the box thinking, along with the ability to do sophisticated programming, may soon be the most desired qualities for employers. The so called “blue-collar” tasks, and perhaps many of the “white-collar” ones, would be done by computers and robots.

The proponents of the UBI in the West argue that unless the social welfare system adapts to the changing nature of the job market and provides a better mechanism for redistribution of resources within the society, social upheavals may be inevitable.

Perhaps we are already witnessing the early warning signs of the social consequences of technological disruption – in particular the radicalization of politics and the rise of populism in Europe and the United States. As the recent article in the Economist suggests, populist far-right parties are now becoming a prominent political force in Europe.

Arguably, universal basic income (at least in countries which can afford it) could pacify the popular anxiety about unemployment and inequality. That said, I would venture to predict that if and when the idea of UBI becomes a reality, it is likely to raise more questions than it could possibly answer.

One immediate consequence could be a worsening of refugee flows from poorer to richer countries which we already observe today. One might argue that in the eyes of the war- and poverty-stricken nations, Western Europe already provides a version of “basic income”, which is a about life in a secure, peaceful and regular environment – something that is still a luxury in many parts of today’s world.

One thing remains certain – the world of technology, the world of ideas, the very structure of our society, everything is changing fast before our eyes. As we rise up to the challenges of the new times that are upon us, I hope we will be guided not by fear, but by conscience, wisdom and humanity.

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Thursday, 06 August 2020

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