GBI: Guaranteed Basic Income

Photo: SSG Robert Stewart. Creative Commons License. 
Poverty is fundamentally about a lack of cash. It’s not about stupidity.
– Erin Anderssen, Globe and Mail

The idea of Guaranteed Basic Income (GBI) was debated in Canada in the 1970s. In fact, it was tested as “Mincome” for over four years in Dauphin, Manitoba, but it wasn’t until in 2008 that economist, Dr. Evelyn L. Forget, analyzed the data – stored in 1800 dusty boxes – to find “improvements in health outcomes over the four years. There was an 8.5% decline in hospitalisations  – primarily because there were fewer alcohol-related accidents and hospitalisations due to mental health issues – and a reduction in visits to family physicians.”¹⁾See David Cox, “Canada’s forgotten universal basic income experiment,” at WorkLife, June 24, 2020: https://www.bbc.com/worklife/article/20200624-canadas-forgotten-universal-basic-income-experiment. Accessed July 13, 2o20. These were not the only benefits Forget discovered – which included higher educational attainments and trips to the dentist – but the oil crisis, stagflation, and general pessimism meant that by the end of the 1970s, no one had any enthusiasm for GBI.

On a global scale, however, GBI is now something that is being tried again and again, in many places. And it seems to work.

There was a push again in Canada, in 2010, when the “House of Commons committee on poverty released a report proposing a guaranteed basic income for Canadians with disabilities, on the model already available to seniors.”²⁾See Arnold Lim, “To end poverty, guarantee everyone in Canada $20,000 a year. But are you willing to trust the poor?” in The Globe and Mail, November 19, 2010: https://www.theglobeandmail.com/news/national/to-end-poverty-guarantee-everyone-in-canada-20000-a-year-but-are-you-willing-to-trust-the-poor/article560885/?page=all. Accessed July 13, 2020. But once again, it didn’t come to be.

Why is the idea of GBI so controversial? Because for most people the getting and giving of money at the societal level is a moral issue. For some, it just doesn’t seem right that people should be given a GBI. For others, it doesn’t seem right that in such wealthy economies there isn’t some form of strong safety net for all. After all, any one of us who is doing fine today could tomorrow fall off the social and economic ladder.

Economic orthodoxy implies that GBI would likely work, because the orthodoxy tells us that:
1. If you set up a vast bureaucratic apparatus, it will be expensive to get money where money is needed; it’s simply more efficient economically to provide support in a simple way, even if some ‘undeserving’ people will receive cash. This was seen in Canada very recently when the global Covid-19 pandemic forced most Canadians into their homes for several months and the government set up a form of GBI for most people who could not make sufficient income. Had GBI been already in place, the massive and, at times, very confusing roll-out would not have been required, and Canadians would have seen their normally extra income become a viable subsistence living. This would have been excellent pandemic preparedness not only for the people but also for the economy, which might have had years of the economic advantages of GBI (lower health care costs, smaller poverty costs, etc.) in its pocket. We have no idea at time of writing how bad the second wave of this pandemic will be (we basically know just that it’s coming), so GBI should certainly be considered both for now and into the future, given that such global catastrophes are likely to increase rather than decrease.

2. Most people are highly rational, so most people will spend money on the right things to enhance their own welfare, with their primary investments being in their children and in their personal capacity to generate future income.

But there’s a more important line of reasoning that we think is most critical: whether or not GBI is a good idea depends not only on the effects of GBI, but also on what we are trying to accomplish – that is, what the economy and economic policies are for. For us, where the objective is to foster flourishing, it seems there’s no prima facie argument against GBI, because we want as many people as possible to flourish, regardless of their capacity to figure out the economic system for themselves.

It’s been intriguing to watch The Economist weigh in over the past 5 years.

In 2015, they had reached the facile and politically correct conclusion (for their own readers, at least) that “A generous basic income funded by very high taxes would be self-defeating, as it would reintroduce the sort of distortions that many of its advocates hope to banish from the welfare system.”³⁾This statement illustrates much of what is wrong with amateurish economics – the tendency simply to make things up with no facts. And The Economist has traditionally been a serial offender. See Economist on GBI. Accessed July 13, 2020. Almost certainly, this analysis – and the other short-term economic analyses – are not adequate. There might be some short-term effects as some people choose to work less – but these are most certainly inconsequential. What really matters is the impact of the GBI on children’s long-term welfare and on young adults’ investments in improving their skills.⁴⁾And, of course, the increase in comfort for those a little older. Indeed, GBI is likely to raise the overall productivity of the economy. For children, in particular, GBI is an investment in improved diet and security, as well as an opportunity for all parents to provide them a better life.

By May 31st, 2018, The Economist was seriously engaging in the debate, publishing two opposing articles on the same day, one in which universal basic income (as many call it) is “headed for the rocks” and likely to fail in every measure of what it is meant to do⁵⁾See Frank Field, “Universal basic income won’t fix problems but will create new ones,” in The Economist, May 31, 2018: https://www.economist.com/open-future/2018/05/31/universal-basic-income-wont-fix-problems-but-will-create-new-ones Accessed July 13, 2020. and one in which it is extolled as being worth a serious look:”If evidence emerges that leads us to believe the policy does indeed provide dignified financial security for all households, while increasing overall work incentives, maintaining tax revenues and increasing health and well-being in the population, then it could be an idea worth pursuing.”⁶⁾See Nicola Sturgeon, in The Economist, May 31, 2018: https://www.economist.com/open-future/2018/05/31/why-universal-basic-income-is-worth-a-serious-look. Accessed July 21, 2020.

But by the global pandemic of 2020 – the one that has locked us all down – The Economist has done a full 180, inviting Professor of Developmental Studies and co-founder of the Basic Income Earth Network, Guy Standing, to make the case for GBI, saying “[u]niversal basic income isn’t just a solution during the pandemic—it’s right for after it, too.”⁷⁾See Guy Standing, “Guy Standing on how lockdowns make the case for a basic income,” in The Economist, May 20, 2020: https://www.economist.com/by-invitation/2020/05/20/guy-standing-on-how-lockdowns-make-the-case-for-a-basic-income. Accessed July 21, 2020. Full article available to subscribers.

We believe that GBI is part of the core respect for human dignity that is required for a flourishing life. We urge Canadians to press for this important cornerstone of an ethical society.