Money for nothing? Basic income style experiments could work alongside other services

Recent proposals from the Royal Society of Arts, the Institute for Public Policy Research and today the Resolution Foundation all involve a form of £10,000 handout, while others have prioritised 'Universal Basic Services' instead of cash to meet a changing economy's needs. Grace Blakeley argues both interventions are needed to transform our economy.

“I think we'll end up doing universal basic income. It’s going to be necessary.” – Elon Musk.

Universal Basic Income is the idea that everyone’s talking about. It is touted as a radical solution to all of our economic problems – simultaneously tackling poverty, inequality, and the threat of automation. This helps to explain its broad popularity – UBI supporters can be found in Silicon Valley, the City of London, and throughout Washington and Westminster. 

The appeal of the idea to tech billionaires and City traders is obvious. The automation of the labour process by private companies threatens to increase unemployment and dramatically increase the returns to capital over labour. This will create a number of problems for our economy. Firstly, high levels of inequality reduce the amount of income that is recycled back into the economy. Walking around a new Ford factory with a prominent union leader, Henry Ford is reported to have asked how the union would have robots pay their dues. The union leader replied ‘how are you going to get them to buy your cars?’

Aside from threatening the consumption-driven growth model that the UK has pursued for several decades, the popular reaction to unrestrained capitalist automation is likely to be strong. Absent some sort of palliative, citizens may start demanding greater public and collective ownership of the machines responsible for creating such huge wealth. 

But the idea also has a clear appeal to a more popular audience. Aside from the obvious fact that it literally involves giving people free money, UBI has the potential to radically transform power relations - from labour bargaining, to gender relationships, to the relationship between citizen and state. Providing people with an unconditional safety net could decommodify human labour and provide people with the means they need to flourish.  

The response from more conservative quarters is that UBI is unaffordable. Recent modelling from the IPR at the University of Bath suggests that the state would have to pay an extra £150bn extra per year for an even minimal UBI. In all likelihood, any UBI implemented with cross-party support would not be enough to support a family and may even exacerbate poverty amongst some households currently dependent upon benefits.

The idea of Universal Basic Services has recently been promoted as a more affordable alternative to UBI. This would involve the extension of the ‘NHS principle’ to cover housing, food, transport, and IT to counter the threat posed by automation. Again, this is an idea with widespread support. As well as providing people with a safety net to protect them from increasing inequality, expanding public services would counter the impact of automation on the labour market by providing more, and better jobs.

The most significant problem with this allegedly radical reform is that it is the bare minimum of what should be expected from a modern welfare state in an advanced economy. No modern economy can function without public services to educate, house, and heal its workforce. The fact that we don’t have universal basic services by default is a constant drag on our economy, and a shame on our society.

I would make the same argument when it comes to UBI. If we are moving into a world in which we can achieve the same levels of prosperity with much less use of labour in the production process, obviously we will need a UBI. The question is, is that all we will need?

Of course, the answer is no. Staring the threat of automation in the face and timidly asking for an annual payment in exchange is not radical, and it will not help us to build an economy and a society that works in the interests of the vast majority of people in this country, rather than the privileged few.

There is no reason why the fruits of automation should be concentrated in the hands of a tiny elite who voluntarily give a stipend to the rest of the population in return for their quiescence. The returns from automation belong to the people, not those who happen to own the robots.

Instead of demanding automation and universal basic income, we should be demanding what is rightfully ours: shared ownership of the assets that produce the huge amounts of wealth accumulated by private business owners today. The creation of these assets would not, after all, have been possible were it not for the provision of collective goods like the rule of law, physical infrastructure, and research and development.

Proposals such as a universal basic dividend, in which the state takes a majority equity stake in the private companies doing the automating and return a citizen’s dividend to the rest of the population, are much more radical than the libertarian version of UBI.

A potentially even more radical suggestion, echoed today by the Resolution Foundation, comes from my colleague Carys Roberts at IPPR: the UK should build on the growing consensus for a sovereign wealth fund, which undertakes strategic investments across the economy and pays out a dividend to all adults.

 There is no shortage of interventions to expand public ownership, rebalance economic power, and tackle the real challenges posed by technological change – but you’re not going to hear support for them coming from Elon Musk.

Grace Blakeley is a researcher at the Institute for Public Policy Research (IPPR)