Basic Income
March 13, 2019
Mr. Ryo Hatoh
CEO, XEED
We have witnessed the far-reaching impact and degree of neo-liberalism spread across the globalizing world, starting with the neoliberal policy sets adopted by Ronald Reagan and Margaret Thatcher in the early 1980s. The end of the Cold War in the 1990s further enhanced reorganization of the global market and rapid development of information and communications technologies. The Lehman Brothers crisis in 2008 had serious repercussions and more recently, growing tensions between the left and right wings in European countries as well as strong opposition against the Trump Administration in the U.S.A. have undermined stability and security of a nation. Against such a backdrop, there has recently been a surge of interest in the concept of Basic Income (BI) as a means to address inequality and instability so as to reorient the economic and political systems, especially among developed countries.
BI is a scheme to provide a set amount of cash to all citizens of a country without any conditions and for an indefinite period. Its concept is not new and dates back to 1796 when a political scientist Thomas Paine advocated for a social security net in his publication. It was discussed extensively among economists and sociologists in the U.K. later in the 19th century. Canada conducted a large-scale social experiment in the 1970s while more than 2,000 sociologists and economists in the U.S.A. declared support for BI that almost made a Bill presented to the Congress under the Nixon Administration. Over the past decade, BI has been discussed in the context of streamlining the multi-tiered social security administration that had become increasingly complicated. It is also worth noting that a number of IT game changers, including Bill Gates and Peter Thiel, have come to highlight how BI can serve to hedge the risk of social instability caused by extreme wealth gaps, which could be exacerbated in the coming years of Artificial Intelligence (AI) and technological innovations.
BI has a number of advantages both in terms of its system and its positive impact on the society. One is that its simple operating structure requires little administrative costs. For example, those applying for government welfare payment or in-kind assistance must fill in numerous documents and undergo cumbersome means-testing procedures. As many as 14,000 officials are in charge of public assistance duties on top of tens of thousands of subcontractors who undertake verification surveys and home visits. BI only requires verification of ID and then it will be paid automatically. Another advantage is that BI does not discourage people from working. As a set amount is provided equally to everyone regardless of one’s work status, you can keep your morals high and aim for a better life by working harder. The current welfare system, on the other hand, can adversely affect work incentives and fail to lift people out of poverty. In some cases, welfare recipients can feel ashamed and stigmatized as its application process can be humiliating.
I want to highlight two positive impacts brought by BI. One is that BI works to reduce poverty and rectify inequalities and disparities that are the leading cause of social unrest. It is no coincidence that Milton Friedman who was one of the originators of neoliberalism emphasized the need to redistribute wealth so as to fill the economic gaps that can widen through neoliberal economic activities, especially among developed capitalist countries. Another positive impact is that BI stimulates the economy and promotes growth. Japan has suffered from stagnation for two decades, with an average annual growth rate hovering at 0.1%. We keep hearing that low birth rate and declining population are to blame but countries with equally low fertility rates, including Germany and Italy, have achieved steady growth. If we take a closer look at our economy, corporate recurring profits have increased three-fold in 20 years, from 28 trillion yen to 84 trillion yen, while our per capita GDP has marked zero growth. I must say corporations in Japan have benefited from corporate and income tax reductions and achieved good performance, while living standards of middle-class ordinary citizens have regressed. In fact, 50% of the single-person households and 40% of the multi-person households in the middle and lower classes have no financial assets. We can boost demand and stimulate consumption by providing BI and redistributing wealth.
Having said that, I understand there are deep-rooted doubts and oppositions against BI. One is that BI will foster free riders and allow non-working citizens to take advantage of working citizens. But previous social experiments conducted in Canada and Finland concluded that there was no correlation between BI and increases in unemployment. The second issue is how to secure financial resources of BI that can total about 60 trillion yen, after offsetting pension and social welfare costs. I can say if we raise the national burden rate from the current 40% to 60%, we can afford to ensure stability of our economy and society. The last and biggest obstacle, I believe, will be the strong opposition by governmental officials. I must emphasize we have no time to lose as the rapid advancement of AI will make a significant portion of workers unemployed while creating enormous wealth, and eventually widen the wealth disparities to an alarming level that can undermine and fundamentally weaken our economic activities, capitalism and democracy itself. As I close my speech, let me highlight that a close linkage between BI and AI will be the key to achieve a truly affluent society in the coming years.