Entrepreneur Andrew Yang is running for Presidential Candidate of the Democratic Party. Chris Soria takes a look at his Universal Basic Income proposal.
Andrew Yang, current Democratic party presidential candidate, is hoping you like freedom. The freedom Yang is selling, he claims, will allow you to pay your bills, educate yourself, start businesses, stay healthy, relocate for work, and many more things. He promises to enable all Americans over the age of 18 this freedom, something no other candidate is offering. And, if elected, how will he give you this freedom? By mailing you a check, no questions asked, every month.
Yang’s “Freedom Dividend,” a catchy name for universal basic income (UBI), would require the government to directly and consistently give its citizens money. Specifically, each US citizen would receive $12,000 a year. They then take this “dividend” and decide where, why, and how to spend it. And, they receive these funds regardless of their income or employment status so that, the argument goes, it doesn’t encourage people to stay poor in order to continue receiving payments.
The dividend is to be paid through a series of steps. First, the “value-added tax.” This tax is collected at each stage of the manufacturing-distribution-sales process and differs from a “sales tax” which is levied at the time the consumer purchases (160 countries around the globe have a similar tax in place). Second, by repurposing funds currently allocated to welfare and other social safety net programs. Third, by taxing theoretical new revenue which will result from the dividend. And lastly, with the theoretical savings of “$100–200 billion as people would take better care of themselves and avoid the emergency room, jail, and the street and would generally be more functional.”
The idea is that by giving regular people money you can help push many out of poverty while at the same time help stimulate the economy. Yang’s websiteestimates — based on a series of academic studies — that the economy under his proposed UBI will permanently grow “by 12.56 to 13.10 percent.” And, Yang says, mailing everyone a check will not encourage people to be unemployed but rather will actually increase the workforce by nearly 5 million people. He also cites a study by the Roosevelt Institute which argues that giving each adult citizen $1000 a month would grow the economy by $2.5 trillion in eight years. He argues it’ll be a “trickle up economy,” in which most people receiving money will spend it and pump it back into the economy, helping perpetuate more growth through demand.
Yet, Yang isn’t promising us all just money, but freedom. And, who doesn’t like freedom? The country’s founding document declares it to be one of its three inalienable rights alongside “life” and “happiness.” Entire wars have been fought for the pursuit, perseverance, and furthering of freedom. And, the love of freedom has led American historical figures, like Patrick Henry, to rebel against the forces which prohibit it. But, the word “freedom” in Yang’s dividend proposal means different things for different people.
Interestingly, UBI is one of the few areas where the ideas of economic far left have overlapped with those of the economic far right. Milton Friedman, who advocated for limited government, was for UBI as a way to empower the individual to participate in the “free market.” Government action which regulates what the market wants to do “naturally” not only limits the freedom of the market but the freedom of individuals to participate in it as they please. That is, for thinkers like Friedman, the free market is the source of human freedom. To prevent the market from taking its “natural course” is to prevent humans from being in their “natural” setting.
This Libertarian argument for UBI, backed by people like Friedrich Hayek, proposes it as an alternative for all other forms of government-funded social welfare. It says, “instead of telling the individual what is best for her, let’s give her a regular check and allow her to decide for herself what is best!” This way, they say, you remove the government’s role in markets and ensure the maintenance of freedom. At the same time, you put money into the hands of the poor. If they squander it, waste it on booze and gambling, that’s on them! But, where for Libertarians UBI allows for the freedom to participate inmarkets, for Marxists and leftists UBI allows for freedom from markets.
Marxist and leftist thinkers argue that the “free market” is not a source of freedom, not for everyone. As Hungarian socialist philosopher Karl Polanyi (the other Karl) would say, the free market is destructive to both man and nature. It converts human beings into commodities and subjects their labor to the laws of supply and demand. Their actions are not free, they are dictated by the people who purchase their labor and time, the owners of the means of production, who themselves are dictated by market forces. Under a free market, Polanyi wrote, all of society becomes unfree, and subordinate to the laws of the market.
An individual, said Polanyi in response to people like Hayek, is not free when her only choices for survival are to either work in an area she does not choose “freely” or to die from hunger. And, laissez-faire capitalism is anything but “natural.” The existence of a “free” market, ironically, requires heavy levels of government interference. Without government involved to make sure things like contracts are honored, and to prevent the formation of cartels and monopolies which break the market’s competitiveness, there can be no freedom in the market, let alone freedom for the individual. Thus, the government should step in to provide individuals with the freedom from becoming like plankton in a sea of market forces, having limited autonomy but mostly getting pushed around by the waves. UBI allows for some freedom from the forces of the free market by allowing employees to leave employers without fear of losing all income.
Further, Marxists argue that because capitalists are constantly in competition with another over market share and profitability, they must continually innovate the means of production. It’s this competition between capitalists which eventually leads to machinery so advanced, so perfect, that no human can compete with them. And, it is at this moment, when human labor becomes less efficient than machines at most things, that we begin to transition into “the end of history.” It was nearly 200 years ago that Karl Marx, as he watched the industrial revolution unfold, made this prediction. Today, it seems, it’s on the cusp of revealing itself as true.
But, where exactly does Andrew Yang fall on his ideological spectrum? Yang frequently lambasts government for what he claims it should have no role in. Take, for example, education. He argues that the government has been historically inept at preparing people for the demands of the market. He citesexcessive student loan debt and the shattered hopes of many a college student who meets the realization that they are not automatically owed a job after they graduate. He says, much like Friedman did, that the money is better spent by just giving it directly to citizens and letting them use it freely on the market, not the government.
Yet, his argument differs from those of Libertarians in key ways. He argues that UBI is necessary because capitalism has sowed the seeds of its own destruction. That is, the means of production are beginning to outgrow the current relations of production and the ability for many in the “proletariat” class to obtain a job will soon be impossible. It’s the government’s role, in this moment and time, to make sure that class conflict does not send all of society into disarray, as has been the case repeatedly throughout US Capitalist history. He’s tied up both ideological ends into a one coherent, data-backed, Marxist and Libertarian argument.
The argument for UBI today differs from Friedrich Hayek and Karl Polanyi’s debate on the nature of markets and the source of human freedom. Although Libertarian and Marxist circles still tend to argue for UBI on ideological grounds, both have failed at convincing the masses. Today, the mainstream argument, which is one Andrew Yang backs, is much more about the practical. That is, it’s not that we should adopt UBI, it’s that we must. Richard Branson, Bill Gates, Elon Musk, Mark Zuckerberg, and others, have argued that there will come a time when UBI will be a necessity. Failing to implement one, they say, could lead to the eventual collapse of society as we know it.
What exactly is the boogeyman so many fear will bring down our capitalist society? Ironically, it’s one of capitalism’s own creations (maybe its best): advanced automation. Technology is becoming so advanced, so intelligent, it threatens to render man’s role in the process of production as superfluous. Much like the horse, which in the early 1900s played a central role in the economy — delivering mail, riding into battle, helping plow fields, etc — was eventually phased out by cars and trucks, so too will man be phased out by machinery and artificial intelligence. UBI will ensure that those who will no longer have a place in production can still continue to exist and benefit from its fruits.
There are those who scoff at the idea of people receiving the benefit for something they didn’t work to create. You work for what you get and you get what you work for, they say. Yet, this way of thinking is based on today’s reality. It’s based on the possibility of finding work, something which will be nearly impossible to do in the future. In other words, humanity’s jobs exist within the gaps that robots and AI aren’t currently able to fill. Once they can, however, no human — and her need to take breaks, sleep, eat, and leisure — will be able to compete. Like John Henry, we can defeat the machines only for so long.
This is what Andrew Yang seeks to warn us about. On a recent podcast, Joe Rogan aptly nicknamed Yang as “the economic Paul Revere,” shouting, “The robots are coming! The robots are coming!” But, the robots are already here. “We’re in the middle of this problem,” says Yang. The fourth industrial revolution is in full swing, during which mass job displacement will be accompanied by riots and unrest. UBI is not the “silver bullet.” It’s the safety net cast out while society figures out how to restructure itself to accommodate, for example, the over 3 million truckers who will be left without an income to sustain themselves and their families.
“You’re an owner and shareholder of the richest country in the world,” he said to Joe in an attempt to frame his “freedom dividend” in the same way you would frame a corporate dividend. That is, under this perspective, the US government is like a corporation. Does that mean, then, that we should also expect the government to produce a profit? Does it mean that the population will then have an interest in shareholder value? How will framing the government as a sort of pseudo-corporation change our relation to it? Philosophers, sociologists, and economists will have their hands full trying to answer these questions.
Regardless, many will likely continue to view proposals like Andrew Yang’s “Freedom Dividend” as ridiculous. It is perhaps, as people like Bill Gates have said, an idea whose time has not yet come. After all, employment is still readily available to most who are willing and able. And, the ideological left and right remain relatively obscure and unable to convince the rest of society that its argument for UBI should be the one it adopts. Still, the economic Paul Revere’s shouts should not be taken lightly. Society is, indeed, in for a massive change and potential instability. The question is: Will UBI a source of alleviation or chaos?
In 1795 England, in a town called Speenhamland, the rising price of grain made it impossible, even for those who were employed, to feed their families. The magistrates decided to try an experiment which would, theoretically, prevent many from starving while at the same time keep the economy moving. All citizens of Speenhamland, they decided, would receive a regular income regardless of whether they worked or not. The size of their payments would depend on the size of their household. A man would receive enough money to buy around three gallon loaves a week and enough for an additional loaf and a half for every member of his household (his wife and kids). The bigger the family, the more they were given.
The Speenhamland system was so successful in accomplishing its goals that it soon spread across England. People were given the means to survive even without having to work. And, because payments were determined by how many people were in the household, families were encouraged to have more children. As a result, the population grew by nearly 100%. As time went on, many began to criticize the system for encouraging idleness, and the government actively punished people who refused to work, people who lived purely off of these payments. 39 years later, in 1834, the experiment ended. Markets were flooded with a new supply of laborers, many of which were unprepared and unskilled; sink or swim. The experiment was declared a failure.
Fast forward to today, and UBI implementation seems to be making a comeback. Many similar real-world experiments are beginning to pop up, with mixed results. Finland experimented with a program which delivered about $640 a month to a select few in order to observe how they would respond. The program ended suddenly, signaling that the $23 million experiment was perhaps a failure (although it did produce some evidence of positive outcomes). Stockton, a city in California which just a few years back declared bankruptcy, is piloting a program in which they’ll deliver $500 a month to all residents, “no strings attached.” And in India, it’s not a matter of if but rather when they will implement a UBI, delivering about 5% of their GDP to all citizens, which economists predict will serve to pull many out of poverty and generate a more robust economy.
More controlled research on UBI is also on the rise. Stanford University recently launched “The Basic Income Lab” dedicated to interpreting existing UBI research. Y Combinator, a silicon valley business accelerator, is running an experiment on UBI’s effects on poverty in which 3000 people are receiving a regular check for $1000 (which is proving to be more complicated than they expected). In a small village in Kenya, an experiment in giving people money instead of goods has produced encouraging results. The experiment seems to have spurred on infrastructure development in the village that otherwise wouldn’t have taken place as fast as it did. And in 2010, researchers tested the hypothesis that giving people free money will only encourage people to waste it on booze and gambling. They gave money exclusively to people struggling with addiction and criminality. They found that the majority of them spent the money on improving themselves.
These experiments are, generally, supportive of Andrew Yang’s argument that we’d be better off just giving people money rather than the government deciding on which goods they should receive. Yet, UBI has never been tested on a national scale. A dividend like the one Yang is proposing would cost the US around $3.9 trillion a year, according to a proponent of UBI, and Harvard graduate, Annie Lowrey. And, most of the statistics on Yang’s website are almost entirely based on theory. For example, he expects that UBI in the US, unlike in Speenhamland, will lead to an increase in labor force participation. However, what’s to stop a family of 6, or even a group of 10 friends, to get together and pool their dividends? These groups could comfortably live on 6 to 10 thousand dollars a month without ever having to work another job in their life (assuming inflation doesn’t skyrocket).
And, how will employers respond to the type of dividend Yang is proposing? In Speenhamland, these monthly payments were intended to stack on top of whatever they were already receiving from wages earned. But, employers quickly caught on and began to pay less. They knew that the Speenhamland system would take care of them, cover the rest, and provide citizens with a bottom. As a result, wages stagnated while profits rose for decades. The system received criticism from Karl Marx himself, and also Polanyi, who argued that it served to maintain an underclass to be exploited by the elite.
Although, some dispute that the Spreenhamland system was the failure many make it out to be, Yang is probably correct in framing his “Freedom Dividend” as an only temporary tool to help along during a major transition in society. UBI implementation is, perhaps, like patching up a leaky ship that keeps sprouting holes. It may help temporarily, but eventually, a more fundamental change will be needed. And, Andrew Yang’s proposal is probably a bit premature. Still, we all benefit from him helping bring the idea to the forefront. Perhaps doing so will make it more palatable for when it reallyneeds to be implemented.
As is always the case, history can help us make sense of the present, but it does not repeat itself. Each moment in history is unique. Speenhamland might’ve been a failure or a success, but society at that time didn’t have to confront the realities we‘re facing now. That is, there were no automated tellers, self-checkouts, or artificial intelligence in their days. Our crisis is not as simple as rising grain prices. And, in today’s globally connected economy, our problem won’t be contained within any one country or region. Unless we do something, the crisis will run both deep and wide. The robots are coming.