Background – The government is coming up with a report which is likely to endorse giving all Indian citizens a guaranteed Universal Basic Income (UBI). The said report will be released this month. Business Insider talked to Prof Guy Standing, one of the leading advocates of UBI, and he says the report by the government will term the idea as feasible and “basically the way forward.”
Is the Indian government really serious about implementing UBI? We don’t know for sure but it seems to be weighing the pros and cons of the idea. In an interview to Rediff in September last year, the chief economic advisor (CEA) to the government of India, Arvind Subramanian, had said that UBI would be one of the exciting themes of the next Economic Survey. This is due on 31 January. So, we will know the Finance Ministry’s assessment of the proposal by the end of the month.
Subramanian has said that “this is an idea that has a lot of promise, but also challenges. It will be an extension of JAM (Jan Dhan, Aadhar, Mobile Money) in that it will be based on cash transfers.” What the CEA is saying is that universal basic income is essentially a form of cash transfer. It doesn’t matter what you name it, but it is an alternative to providing subsidies in kind, are subject to leakages and corruption. In the Indian version of UBI, basic income may be a migration of subsidies to cash in the first instance. Between major subsidies and payments for the MGNREGA employment guarantee scheme, the government spends nearly Rs 3,00,000 crore per annum – roughly two percent of GDP.
Many people oppose UBI because they are against the idea of government giving doles. But the choice is not between giving subsidies and not giving. It is about picking between efficient cash transfers and an inefficient subsidy regime. UBI should be seen as redistribution of currently paid subsidies to enable people to eliminate market distortions and giving citizens a choice on what they will spend their subsidy money on.
With the JAM trio – Jan Dhan, Aadhaar and Mobile money – we have the system in place for providing everyone with a universal basic cash transfer.
The Pilot Project:-
A pilot project in eight villages of Madhya Pradesh that Standing was closely associated with provided every person with a guaranteed basic income for 18 months. “The most striking thing which we hadn’t actually anticipated is that the emancipatory effect was greater than the monetary effect. It enabled people to have a sense of control. They pooled some of the money to pay down their debts, (and) they increased decisions on escaping from debt bondage. The women developed their own capacity to make their own decisions about their own lives,” BI quoted Standing saying.
How do we finance UBI?
If we accept a ceiling of two percent of GDP on central subsidies, in 2016-17 some Rs 3,00,000 crore will be available for cash transfers. Assuming around 25 crore households (there is a similar number of Jan Dhan accounts) in the country, this money is enough to deliver an annual income of Rs 12,000 per household, or Rs 1,000 per month.
The government’s Economic Survey for 2014-15 estimates that subsidies for the following items amount to 4.2 percent of GDP (Gross Domestic Product): cereals, pulses, sugar, oil-related products, iron ore, fertilisers, electricity, water, and rail services. Now, if we increase the ceiling to say four percent of GDP, every household will get Rs 2,000 per month. If we halve the number of households to be targeted, the figure rises to Rs 4,000 per month. This is a very substantial amount for people living in abject poverty and can greatly impact their lives in a way that a leaky subsidy system can never do.
Apart from this there are government subsidy schemes too. A desirable thing for them to do would be to divert most of the spending from inefficient subsidies to areas like education and healthcare. While the latter is a state subject, the former is in the concurrent list and hence the joint responsibility of centre and states. In this way, both can complement each other in social spending.
A UBI – or an Indian variant of it – the universal subsidy cash transfer – is an idea whose time has come. All the necessary ingredients (JAM) to implement it are in place. However, a lot of groundwork is required before implementation. And once implemented,, it may take years before it can be made near perfect. But a start needs to be made.
The case for a universal basic income (UBI) in India is best approached indirectly by noting that one of the main requirements of inclusive growth is ‘deep fiscal adjustment’, in other words, a radical re-orientation of government expenditure and taxation. India spends far too much on dysfunctional price subsidies in the name of helping the poor. Some of the subsidies, for example those on food, fertilisers and oil-related products, are explicitly in the budget. Others, such as the subsidies on electricity, water, and rail travel, are implicit, and take the form of losses or low profits by government departments and enterprises.
There are many reasons why these subsidies are counterproductive. They raise fiscal deficits and crowd-out essential public spending. They distort resource allocation by cutting the link between prices and costs. They discourage investment in supply capacity for producing the subsidised items, and encourage over-consumption of them.
At the same time, the subsidies do not achieve their putative goal of poverty alleviation. They are badly targeted and regressive: though a small part of the benefits does percolate down to the poor, most of it goes to the well-off. (This is not surprising, since a price subsidy per unit consumed gives a larger benefit to those who consume more.) Moreover, they are accompanied by leakages and corruption on a large scale.
Setting the level of basic income
The primary purpose of UBI would be to provide an unconditional income floor/safety net that would prevent any citizen sinking below a basic minimum standard of living, irrespective of his or her earning capacity. To prevent possible untoward effects ,the minimum should be set at a relatively austere level, says the Tendulkar Poverty Line (TPL) . In 2011, 269 million people were below TPL, that is in extreme poverty. It is known that the average income of these people is about 80 per cent of TPL.
So an income supplement equal to 20 per cent of TPL, adjusted upwards suitably to compensate poor people for the subsidy elimination that would finance the programme, would go a long way towards abolishing ‘Tendulkar poverty’ . The requisite cash grant would amount to Rs. 3,500 per head per year (Rs. 17,500 per family per year) at 2014-15 prices, indexed to a relevant cost of living index.
If the ‘Tendulkar poor’ could be identified and accurately targeted, the fiscal cost of bringing them up to the poverty line would, on this basis, be less than one per cent of GDP. But perfect targeting is impossible. In practice, the basic income would have to be given to at least half the population, perhaps to two-thirds of the population, to be sure of reaching all poor people. (This would have to be done on the basis of rough justice, using criteria such as eligibility for income tax, ownership of land above five acres, ownership of houses with more than three rooms, and possession of relatively expensive consumer durables, bearing in mind that these categories overlap to an undetermined extent.)
However, there are several good reasons for going further and making the transfer a universal basic income that is paid to every citizen. Such a UBI would cost 3.5 per cent of GDP .As seen above, this would certainly be affordable, given ‘deep fiscal adjustment’. Note also that the technological means to make a universal income transfer are now available, or will be soon, because of the progress made in spreading Aadhaar and Aadhaar-seeded bank accounts.
Why should basic income be made universal?
Firstly, there is a huge bunching of people around the poverty line, with several hundred million people who are very poor (though not in extreme poverty) and continually in danger of falling below the poverty line due to misfortunes of one kind or another, such as ill health. A UBI would supplement their incomes. (But the income supplement would be a flat sum, so the proportionate benefit would fall progressively at higher incomes.)
Secondly, ‘deep fiscal adjustment’, especially abolition of ‘non-merit’ subsidies, is essential to improve economic efficiency as well as create the fiscal savings to pursue various desirable goals, as explained above. But this programme will imply real income losses for most of the population, at least for a time. UBI would cushion them wholly or partially against this damage, and thereby also prevent or dilute their resistance to both deep fiscal adjustment and the provision of a basic income for the poor. Importantly, it would also compensate people, wholly or partially, for adjustments that may be imposed on them by other desirable reforms (for example, liberalisation of the labour market, privatisation, and opening up agriculture to international trade.) UBI has been criticised as wasteful because it would give money to many people who are not poor. For the reason just given, this is a mistaken view. UBI would, instead, provide an essential underpinning for the acceptability of radical economic reform.
Thirdly, only a small proportion of the population is so well off as to make the above considerations irrelevant.
It is not worth the administrative trouble and expense to identify them and exclude them from the coverage of ‘basic income’. (Some of their basic incomes would in any case come back to the state in the form of income tax; and some well-off recipients would surely forego UBI voluntarily, if nudged by the government to do so.) Experience has shown that selection of deserving recipients brings a host of problems such as cheating and concealment to qualify for benefits, resentment on the part of those who are excluded, administrative high-handedness, and rampant politicisation. UBI would bypass these difficulties altogether.
Arguments against UBI
The arguments against a UBI are not convincing.
(i) ‘UBI would reduce the incentive to work and create dependence on doles’: Such an outcome is extremely unlikely given the modest level of the proposed income supplement. (Since UBI is a uniform, lump-sum income transfer, the substitution effect against work will be zero. And since the transfer is small, the income effect against work is likely to be negligible). Rather, UBI is likely to liberate poor people to achieve more than mere survival. A related argument is that UBI would lower the female labour force participation rate. But progress in this area depends mainly on advances in female education; and, in any case, would it be right to forego an opportunity to make a large dent in extreme poverty, and provide a robust safety net for all, in order to push more women into work outside the home, faster than otherwise?
(ii) ‘UBI would be frittered away on alcohol and gambling’: There is plenty of evidence from trials internationally, and in India (for example, see Davala et al. 2016), that this would not happen. Recipients of an income supplement tend to spend it on things such as food, clothing and footwear, education of children, healthcare, toilets, walls and roofs for houses, better seeds, and even investment of a rudimentary variety. Incidentally, a cash grant would also enable the poor to choose their consumption baskets (including spending on a more balanced diet than the cereals of inferior quality provided by the public distribution system (PDS)), which is surely a good thing.
(iii) ‘UBI would divert State spending from critical items such as infrastructure, education, and healthcare, which are essential requisites of long-run inclusive growth’: UBI is meant to complement desirable social spending, not replace it. The available fiscal potential is large enough to ensure that this kind of ‘crowding out’ is avoided. In practice, a programme of ‘deep fiscal adjustment’ would require careful sequencing and close Centre-state coordination (‘cooperative federalism’), and take several years to implement.
As extra resources become available, they could be divided between fiscal consolidation, extra public investment and enabling social expenditures, and UBI (which could be increased gradually in size until it reached the target level). The desirability of pursuing such a package requires only a weak value judgement that providing a safety net for the whole population quickly, and compensating them (at least partially) for real income losses imposed on them by liberalisation and reform, is as important as other social objectives. This principle would surely command wide support.
(iv) ‘UBI assumes that all benefits are best delivered in the form of unconditional cash grants that people are free to spend as they wish’: This is not so. It is true that paternalism may sometimes be justified, for example, it may be necessary to compel people to send children to school. In other cases, conditional cash transfers (CCTs) or conditional in-kind transfers may make sense. India has some good conditional programmes, for example, midday meals for schoolchildren, cash grants for pregnant women, conditional on attending health clinics and provision of income opportunities under the MNREGA (Mahatma Gandhi National Rural Employment Guarantee Act), conditional on work. As discussed in Joshi (2016), other areas where unconditional cash transfers may not be suitable are education and secondary healthcare.
UBI may not be a magic solution to all problems. But it is an essential component of a robust social protection framework. It does not in any way imply that the State should renege on its responsibility to finance, and where appropriate, produce and deliver, goods and services that the market would, for well-known reasons, fail to provide. It is true that while UBI will put purchasing power in the hands of people, it cannot guarantee that supplies will be forthcoming. But it is hard to see why supply would not respond, except in pockets of the country where markets are thin or non-existent. (For such areas, more conventional arrangements would have to continue for the time being.) For most of the country and for command over many ordinary goods and services, a UBI in cash would work well for poor people.
(v) The final argument against UBI is that ‘India’s political economy makes it infeasible or ruinous. Powerful lobbies and pressure groups will prevent dysfunctional subsidies being wound up. If UBI were introduced somehow, it would in practice be additional to existing subsidies. There would also be unstoppable demands to increase UBI year after year, a recipe for fiscal disaster’: This is a defeatist position that would negate any attempt at bold reform. Deep fiscal adjustment, in combination with UBI, has the potential to make a huge positive difference to people’s lives, present and future. It should not be taken for granted that India’s democracy is irremediably irresponsible. UBI could serve as a unifying and inspiring idea round which reformers, and the majority of the population, could coalesce to overcome vested interests .
In conclusion , UBI is politically rewarding, fiscally responsible and economically sensible.
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The United Nations has shaped so much of global co-operation and regulation that we wouldn’t recognise our world today without the UN’s pervasive role in it. So many small details of our lives – such as postage and copyright laws – are subject to international co-operation nurtured by the UN.
In its 75th year, however, the UN is in a difficult moment as the world faces climate crisis, a global pandemic, great power competition, trade wars, economic depression and a wider breakdown in international co-operation.
Still, the UN has faced tough times before – over many decades during the Cold War, the Security Council was crippled by deep tensions between the US and the Soviet Union. The UN is not as sidelined or divided today as it was then. However, as the relationship between China and the US sours, the achievements of global co-operation are being eroded.
The way in which people speak about the UN often implies a level of coherence and bureaucratic independence that the UN rarely possesses. A failure of the UN is normally better understood as a failure of international co-operation.
We see this recently in the UN’s inability to deal with crises from the ethnic cleansing of the Rohingya Muslims in Myanmar, to civil conflict in Syria, and the failure of the Security Council to adopt a COVID-19 resolution calling for ceasefires in conflict zones and a co-operative international response to the pandemic.
The UN administration is not primarily to blame for these failures; rather, the problem is the great powers – in the case of COVID-19, China and the US – refusing to co-operate.
Where states fail to agree, the UN is powerless to act.
Marking the 75th anniversary of the official formation of the UN, when 50 founding nations signed the UN Charter on June 26, 1945, we look at some of its key triumphs and resounding failures.
Five successes
1. Peacekeeping
The United Nations was created with the goal of being a collective security organisation. The UN Charter establishes that the use of force is only lawful either in self-defence or if authorised by the UN Security Council. The Security Council’s five permanent members, being China, US, UK, Russia and France, can veto any such resolution.
The UN’s consistent role in seeking to manage conflict is one of its greatest successes.
A key component of this role is peacekeeping. The UN under its second secretary-general, the Swedish statesman Dag Hammarskjöld – who was posthumously awarded the Nobel Peace prize after he died in a suspicious plane crash – created the concept of peacekeeping. Hammarskjöld was responding to the 1956 Suez Crisis, in which the US opposed the invasion of Egypt by its allies Israel, France and the UK.
UN peacekeeping missions involve the use of impartial and armed UN forces, drawn from member states, to stabilise fragile situations. “The essence of peacekeeping is the use of soldiers as a catalyst for peace rather than as the instruments of war,” said then UN Secretary-General Javier Pérez de Cuéllar, when the forces won the 1988 Nobel Peace Prize following missions in conflict zones in the Middle East, Africa, Asia, Central America and Europe.
However, peacekeeping also counts among the UN’s major failures.
2. Law of the Sea
Negotiated between 1973 and 1982, the UN Convention on the Law of the Sea (UNCLOS) set up the current international law of the seas. It defines states’ rights and creates concepts such as exclusive economic zones, as well as procedures for the settling of disputes, new arrangements for governing deep sea bed mining, and importantly, new provisions for the protection of marine resources and ocean conservation.
Mostly, countries have abided by the convention. There are various disputes that China has over the East and South China Seas which present a conflict between power and law, in that although UNCLOS creates mechanisms for resolving disputes, a powerful state isn’t necessarily going to submit to those mechanisms.
Secondly, on the conservation front, although UNCLOS is a huge step forward, it has failed to adequately protect oceans that are outside any state’s control. Ocean ecosystems have been dramatically transformed through overfishing. This is an ecological catastrophe that UNCLOS has slowed, but failed to address comprehensively.
3. Decolonisation
The idea of racial equality and of a people’s right to self-determination was discussed in the wake of World War I and rejected. After World War II, however, those principles were endorsed within the UN system, and the Trusteeship Council, which monitored the process of decolonisation, was one of the initial bodies of the UN.
Although many national independence movements only won liberation through bloody conflicts, the UN has overseen a process of decolonisation that has transformed international politics. In 1945, around one third of the world’s population lived under colonial rule. Today, there are less than 2 million people living in colonies.
When it comes to the world’s First Nations, however, the UN generally has done little to address their concerns, aside from the non-binding UN Declaration on the Rights of Indigenous Peoples of 2007.
4. Human rights
The Human Rights Declaration of 1948 for the first time set out fundamental human rights to be universally protected, recognising that the “inherent dignity and of the equal and inalienable rights of all members of the human family is the foundation of freedom, justice and peace in the world”.
Since 1948, 10 human rights treaties have been adopted – including conventions on the rights of children and migrant workers, and against torture and discrimination based on gender and race – each monitored by its own committee of independent experts.
The language of human rights has created a new framework for thinking about the relationship between the individual, the state and the international system. Although some people would prefer that political movements focus on ‘liberation’ rather than ‘rights’, the idea of human rights has made the individual person a focus of national and international attention.
5. Free trade
Depending on your politics, you might view the World Trade Organisation as a huge success, or a huge failure.
The WTO creates a near-binding system of international trade law with a clear and efficient dispute resolution process.
The majority Australian consensus is that the WTO is a success because it has been good for Australian famers especially, through its winding back of subsidies and tariffs.
However, the WTO enabled an era of globalisation which is now politically controversial.
Recently, the US has sought to disrupt the system. In addition to the trade war with China, the Trump Administration has also refused to appoint tribunal members to the WTO’s Appellate Body, so it has crippled the dispute resolution process. Of course, the Trump Administration is not the first to take issue with China’s trade strategies, which include subsidises for ‘State Owned Enterprises’ and demands that foreign firms transfer intellectual property in exchange for market access.
The existence of the UN has created a forum where nations can discuss new problems, and climate change is one of them. The Intergovernmental Panel on Climate Change (IPCC) was set up in 1988 to assess climate science and provide policymakers with assessments and options. In 1992, the UN Framework Convention on Climate Change created a permanent forum for negotiations.
However, despite an international scientific body in the IPCC, and 165 signatory nations to the climate treaty, global greenhouse gas emissions have continued to increase.
Under the Paris Agreement, even if every country meets its greenhouse gas emission targets we are still on track for ‘dangerous warming’. Yet, no major country is even on track to meet its targets; while emissions will probably decline this year as a result of COVID-19, atmospheric concentrations of greenhouse gases will still increase.
This illustrates a core conundrum of the UN in that it opens the possibility of global cooperation, but is unable to constrain states from pursuing their narrowly conceived self-interests. Deep co-operation remains challenging.
Five failures of the UN
1. Peacekeeping
During the Bosnian War, Dutch peacekeeping forces stationed in the town of Srebrenica, declared a ‘safe area’ by the UN in 1993, failed in 1995 to stop the massacre of more than 8000 Muslim men and boys by Bosnian Serb forces. This is one of the most widely discussed examples of the failures of international peacekeeping operations.
On the massacre’s 10th anniversary, then UN Secretary General Kofi Annan wrote that the UN had “made serious errors of judgement, rooted in a philosophy of impartiality”, contributing to a mass murder that would “haunt our history forever”.
If you look at some of the other infamous failures of peacekeeping missions – in places such as Rwanda, Somalia and Angola – it is the limited powers given to peacekeeping operations that have resulted in those failures.
2. The invasion of Iraq
The invasion of Iraq by the US in 2003, which was unlawful and without Security Council authorisation, reflects the fact that the UN is has very limited capacity to constrain the actions of great powers.
The Security Council designers created the veto power so that any of the five permanent members could reject a Council resolution, so in that way it is programmed to fail when a great power really wants to do something that the international community generally condemns.
In the case of the Iraq invasion, the US didn’t veto a resolution, but rather sought authorisation that it did not get. The UN, if you go by the idea of collective security, should have responded by defending Iraq against this unlawful use of force.
The invasion proved a humanitarian disaster with the loss of more than 400,000 lives, and many believe that it led to the emergence of the terrorist Islamic State.
3. Refugee crises
The UN brokered the 1951 Refugee Convention to address the plight of people displaced in Europe due to World War II; years later, the 1967 Protocol removed time and geographical restrictions so that the Convention can now apply universally (although many countries in Asia have refused to sign it, owing in part to its Eurocentric origins).
Despite these treaties, and the work of the UN High Commission for Refugees, there is somewhere between 30 and 40 million refugees, many of them, such as many Palestinians, living for decades outside their homelands. This is in addition to more than 40 million people displaced within their own countries.
While for a long time refugee numbers were reducing, in recent years, particularly driven by the Syrian conflict, there have been increases in the number of people being displaced.
During the COVID-19 crisis, boatloads of Rohingya refugees were turned away by port after port. This tragedy has echoes of pre-World War II when ships of Jewish refugees fleeing Nazi Germany were refused entry by multiple countries.
And as a catastrophe of a different kind looms, there is no international framework in place for responding to people who will be displaced by rising seas and other effects of climate change.
4. Conflicts without end
Across the world, there is a shopping list of unresolved civil conflicts and disputed territories.
Palestine and Kashmir are two of the longest-running failures of the UN to resolve disputed lands. More recent, ongoing conflicts include the civil wars in Syria and Yemen.
The common denominator of unresolved conflicts is either division among the great powers, or a lack of international interest due to the geopolitical stakes not being sufficiently high. For instance, the inaction during the Rwandan civil war in the 1990s was not due to a division among great powers, but rather a lack of political will to engage.
In Syria, by contrast, Russia and the US have opposing interests and back opposing sides: Russia backs the government of the Syrian dictator Bashar al-Assad, whereas the US does not.
5. Acting like it’s 1945
The UN is increasingly out of step with the reality of geopolitics today.
The permanent members of the Security Council reflect the division of power internationally at the end of World War II. The continuing exclusion of Germany, Japan, and rising powers such as India and Indonesia, reflects the failure to reflect the changing balance of power.
Also, bodies such as the IMF and the World Bank, which are part of the UN system, continue to be dominated by the West. In response, China has created potential rival institutions such as the Asian Infrastructure Investment Bank.
Western domination of UN institutions undermines their credibility. However, a more fundamental problem is that institutions designed in 1945 are a poor fit with the systemic global challenges – of which climate change is foremost – that we face today.