By Raghunath Nageswaran

The idea of Universal Basic Income (UBI) or Basic Income Grant (BIG) has once again begun to feature prominently in the policy discourse of economic and political circles, not just in the developed countries but in the developing ones as well.

A couple of weeks ago, one of the columns I follow very closely, the Economics Express in Mint, ran an elaborate piece titled, ‘Is it time for a universal basic income in India?’ The essay gave a panoramic view of the idea, explained its concomitant benefits and pitfalls by drawing upon the existing literature and situated its relevance in the Indian context. There even exists an entire website solely dedicated to debates and discussions on the idea of UBI called the Basic Income Earth Network (BIEN). Many renowned economists have thrown their weight behind this new magic bullet and presented a range of interesting and plausible arguments in favour of UBI, which they believe is both economically sound and politically canny.

UBI: A Western Notion?

In June, Switzerland held a referendum on a basic income plan and the idea was unequivocally rejected by its citizens. Recently, Finland decided to set the ball rolling by instituting the idea on a pilot basis. It comes as no surprise that Europe is spearheading the project, given its long-standing track record as the exemplar of the idea of ‘welfare state’ and the rising problem of unemployment especially since the global financial crisis of 2008. However, in recent times, even some developing countries seem to have latched on to the idea.  

In his most recent book, ‘Give a Man a Fish: Reflections on the New Politics of Distribution’, the anthropologist James Ferguson makes a compelling pitch for BIG, by presenting examples from African countries that have been making unconditional transfers to women, children, old-age people and unemployed men. He lays out detailed arguments for a shift to a “new politics of distribution”.

According to Ferguson, BIG has the potential to liberate people from their dependencies and empower them to claim their “rightful share” of the collectively produced social wealth.

Ferguson sincerely believes that by making the income transfer “unconditional” and “universal”, the cash transfer architecture will get a radical impetus, thus getting the approval of intellectuals, ideologues and politicians from across the spectrum.

It is relevant to recognise that while capitalism destroyed other forms of production as it arose in the European countries, it has not done the same in post-colonial societies. In these societies, capitalist and non-capitalist modes of production continue to coexist. While many see this as a failure of contemporary capitalism, it needs to be understood that this is a reflection of the spaces that capital has created outside its sphere in order to survive.

The Indian system, for instance, is a complex hegemonic order marked by heterogeneity and capital is the most influential and decisive of all the modes in this heterogeneous system.

The Indian system, for instance, is a complex hegemonic order marked by heterogeneity. As argued by Kalyan Sanyal in his book ‘Rethinking Capitalist Development: Primitive Accumulation, Governmentality and Post-colonial Capitalism’, capital is the most influential and decisive of all the modes in this heterogeneous system. Sanyal’s book is an elaborate critique of the dominant narratives of the transition to capitalism. It demonstrates that capital thrives in and expresses its superiority in this heterogeneous order. Furthermore, capital leverages this order to engage in ‘unequal exchange’.

The Difference between ‘Unequal Exchange’ and ‘Primitive Accumulation of Capital’

I prefer to use the term ‘unequal exchange’ rather than the ‘primitive accumulation of capital’ since the latter can be misleading due its relationship with the ideas put forward by Karl Marx. In the contemporary economic landscape, the former phrase is more appropriate because those lying outside the sphere of capital are dispossessed in both stock and flow terms as a result of the unfair terms of exchange. I use the term in the broadest possible sense, encompassing unequal exchange in international trade, capitalist production and other domains.

By extending the purview of the phrase to the nature of the exchange between the capitalist and non-capitalist spheres of production, we can understand how capital thrives in the heterogeneous order.  However, if the phrase ‘primitive accumulation of capital’ is used to refer to the exchange between the capitalist and non-capitalist sphere, it could be argued that in post-colonial societies, the welfare state exists to give political legitimacy to the capitalist mode of production by transferring a segment of the surplus to the dispossessed. This would, in turn, ameliorate the consequences of primitive accumulation.

The Idea of a Welfare State

Another important distinction that must be made is between the welfare state that emerged in the advanced capitalist societies and the one in the developing world. While the former emerged to provide safeguards to those who were within the logic of capital, the latter exists essentially to mitigate the material deprivations of those who lie outside the domain of capital.

The general argument is that giving people fish can have indirect and roundabout positive consequences at a time when teaching people to fish does not guarantee employment and consequently, a stable source of livelihood.

Today, because capital is not able to absorb enough labour, the transfers to those lying outside the sphere of capital are being called the new domains of political struggles. The general argument is that giving people fish can have indirect and roundabout positive consequences at a time when teaching people to fish does not guarantee employment and consequently, a stable source of livelihood.

Can BIG Solve the Underlying Problem of Capitalism?

Some proponents of BIG argue that it can potentially solve the underlying problem of capitalism, that is, a lack of aggregate demand. It is their contention that capital, technology and innovation have made it possible to produce enough goods for consumption by using as little inputs as possible. However, there simply is not enough purchasing power in the hands of people to consume all that is produced. Simply put, supply is not creating its own demand. This problem of a lack of aggregate demand was addressed decisively after the Great Depression by the Keynesian Multiplier. The literature on UBI suggests that increasing public spending to increase purchasing power, which can, in turn, increase the demand for goods in the market is an idea that is still relevant. Only the means and modus operandi have changed.

At a time when the world output is experiencing “secular stagnation” and the global economy is entering a phase of “new mediocre”, the two main growth engines, international trade and economic bubbles (like the housing market bubble in the U.S.) seem to have run out of steam.

The proposed remedies for these macroeconomic ills range from quantitative easing (QE) and helicopter money to inward-looking wage-led growth and of course, the BIG.

Of these myriad prescriptions, the ideas of helicopter money and BIG have gained traction in recent times. Put in simple words, helicopter money is the printing of large sums of money and distributing it to the public to kick-start the economy. It was originally envisaged by Milton Friedman as a thought experiment and now it is considered to be an unconventional monetary policy tool. This leaves us with UBI, an idea that seems to have captured the imagination of many because of its simplicity and apparent non-market distorting nature. 

Basic Income Grant (BIG) - a solution to our macroeconomic troubles?

Can Universal Basic Income grant development with dignity? | Photo Courtesy: Unsplash

UBI in the Indian Context

In developing countries like India, where a bulk of the workers are in the informal sector and a substantial segment of the population suffers absolute deprivation, UBI is seen as a sensible step in the country’s poverty eradication journey. Programmes such as the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) offer the rural poor the right to employment, increased wages, enhanced bargaining power and reduced dependency on the local socio-economic elite. 

Can a guaranteed basic income empower the poor by giving them the right to reject a job if it denies self-dignity and dignity of labour, thus providing them with a robust bargaining chip which is an important cog in the wheel of ‘development with dignity’?


Raghunath Nageswaran is a Junior Research Fellow in Development Studies at the Indian Statistical Institute (ISI), Bangalore. His principal area of research is the political economy of welfare.

Featured Image Source: Unsplash

 
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Posted by The Indian Economist