There is nothing progressive about a universal basic income

‘Capitalists will sell us the rope with which we will hang them.’ This colourful quote, sometimes attributed to Lenin, could well apply to the many free-market ideologues and tech oligarchs in the US, who are now pushing for increased welfare payouts and even a universal basic income (UBI). Through the expansion of welfarism at the expense of work, these capitalists could well be hastening the decline of the very economic system they profess to support.

Even devoted free-market advocates, like former senator Phil Gramm and economist John Early, now argue that increased welfare payouts, or ‘income transfer payments’, should be championed to reduce inequality in the US.

The welfarist solution may reduce income inequality on paper. But it does nothing to address the far more pernicious problems caused by the rapid concentration of assets in ever fewer hands. The top one per cent in the US has increased its share of assets by roughly 26 per cent since 2002.

There are further consequences to the expansion of welfare and the devaluation of work. It changes people’s character. The income you earn is empowering, whereas the dole nurtures dependence. Increasingly, the aspirational side of capitalism is being squelched by the rollout of ever more benefits.

Supporters of welfarism can point to the experience of Covid-19, when emergency pandemic aid cut poverty substantially in the US. But the Covid subsidy regime has not been a rollicking success for most. Indeed, for the past year, wages have grown, but not nearly as much as inflation.

One widely cited reason for the recent labour shortages relates to a post-pandemic reluctance to take low wages, or jobs in the ‘gig’ economy, where pay and hours are often uncertain. Indeed, according to one UK account, self-employment and gig work do not provide sustenance for anything like a middle-class lifestyle. Many jobs that could support families have disappeared, and so too has the motivation to work.

Under such conditions, what Karl Marx called the ‘reserve army of the unemployed’ is simply disengaging from the economy. Male labour-participation rates have fallen from over 80 per cent in 1950 to 68 per cent today. Almost one-third of American working-age males are not in the labour force, and are suffering from high rates of incarceration, drug, alcohol and other health issues.

This withdrawal from the labour force is happening amid a demographic downturn in the high-income world. The proportion of the US population aged between 16 and 64 grew by 21 per cent during the 1980s. During the 2010s, it grew by less than five per cent. The EU and East Asia are suffering even stronger declines in their working-age populations.

The idea of a post-work society, complete with a universal basic income, has support both from the progressive left and many tech oligarchs. The road to this future was presaged in the relief programme for Covid-19 and in Joe Biden’s proposed ‘Build Back Better’ programme – both of which provide benefits for those who could join the workforce but don’t care to. Many found state support during the pandemic to be more profitable than working.

In the Communist Manifesto, Marx denounced attempts to address poverty through the offering of a ‘proletarian alms bag’. Work, wrote Frederick Engels, ‘is the prime basic condition for all human existence, and this to such an extent that, in a sense, we have to say that labour created man himself’.

Encouraging disengagement from work also fits neatly with the de-growth philosophy pushed by climate activists – an increasingly dominant force on the left. Their goal is to ratchet down consumption among the masses, by reducing the size of homes and cars, and limiting travel, especially by air. This amounts to a curb on aspiration for the non-rich. Particularly hard hit would be millions of working-class people, especially those in well-paid manufacturing, construction and energy jobs. Expanded welfarism lays the ground for promoting a properly austere ecological lifestyle.

The problem with a universal basic income

It is not just climate activists who support UBI – so do many super-rich tech oligarchs, such as Mark Zuckerberg, eBay founder Pierre Omidyar, Elon Musk and Sam Altman, former president of Y Combinator. The likes of Zuckerberg have all signed up for the notion of a UBI as the way to deal with growing inequality, which they fear could stir unrest among the great unwashed.

Behind this lurks a dismal view of the usefulness of most humans. Greg Ferenstein, who interviewed 147 digital company founders, says most believe that ‘an increasingly greater share of economic wealth will be generated by a smaller slice of very talented or original people’. Everyone else will be left to ‘subsist on some combination of part-time entrepreneurial “gig work” and government aid’.

In the technocracy envisioned by the oligarchs, there will be little need for the labour of the lower classes or for the messiness of democracy. The New Yorker aptly called UBI ‘a futurist reply to the darker side of technological efficiency’.

An economy built around welfare dependency also has dubious prospects. In reality, we still need people doing things that robots and AI can’t. There is a clear need for workers in building houses and other infrastructure, providing medical care and constructing new industries, such as in space and biomedicine. Humans are necessary, as the current labour shortages demonstrate.

We already face a huge dearth of workers who can actually produce things. Even as automation removes some routine tasks, as many as 600,000 of the new manufacturing jobs expected to be generated in the US this decade are unlikely to be filled. The current shortage of welders, now 240,000, could grow to 340,000 by 2024. When the US economy grew slightly in May, there were an estimated 500,000 manufacturing jobs unfilled.

The costs to the economy of this post-work society are rarely discussed. A broad-based UBI, for example, would necessitate higher taxes on the already beleaguered middle class. Democratic presidential candidate Andrew Yang’s 2020 campaign was built around UBI. His plan was estimated to cost some $2.8 trillion annually. This would be paid for by a national value-added tax, and by higher capital-gains and social-security taxes.

We can already see the outlines of how this would play out in California. Currently, California spends roughly $100 billion annually on welfare. During the pandemic, California handed out cheques that exceeded anything ever seen on the state level. It’s all a bit of a shell game, however. California has far higher energy costs than almost all other states due to its ultra-green policies, and governor Gavin Newsom has started handing out $1,000 anti-inflation cheques.

In California today, traditional notions of economic development and upward mobility have been replaced by programmes of subsidised housing, a state bailout for renters and enhanced unemployment payments. The blue-collar economy, traditionally a key source of upward mobility, is the biggest loser. Eager to reduce carbon emissions generated within the state’s boundaries, despite the global nature of climate change, California now sources much of its oil from countries like Saudi Arabia, while it sets about annihilating its once large local fossil-fuel industry.

‘The culture for much of California, driven by state politics, is one of benefits (and now guaranteed income), not a jobs strategy or expectation’, says Michael Bernick, a former director of California’s Employment Development Department. The synergy between Silicon Valley wealth and the expansive welfare state is clear: the excess wealth of the oligarchs can fund ever more dysfunctional schools at a high level, pay enormous pensions and generally expand the role of a state government, all with the blessings of the state’s economic royalty.

Will a UBI leave life better for the working and the proletarianised middle class? As author Aaron Renn suggests, parts of American society where income transfers have become a way of life suffer shocking levels of drug abuse, alcoholism and idleness. Damon Linker, a progressive writing for the Week, describes UBI as the road to ‘spiritual ruin’, particularly for those most dependent on it. Some on the left even see it as a neoliberal ‘scam’ to hasten the end of productive work and upward mobility, while undermining the working class’s political and economic power.

The political prospects for UBI and welfarism are mixed. Most voters, according to a July 2021 Morning Consult poll, also oppose permanent income support. Yet Democratic strategists argue that such handouts will be hard to resist once offered, even for those who may be sceptical of federal largesse. Already, roughly half of all Americans support the idea of a guaranteed basic income of about $2,000 a month, if robots put them out of work. A UBI enjoys even stronger support in most European countries, particularly among younger people.

The welfarist tide benefits from growing anti-capitalist sentiment. Across 17 advanced economies surveyed in spring 2021 by Pew, 56 per cent believed their political system ‘needs major changes or needs to be completely reformed’. A recent Edelman survey of 28 countries reports that more and more people ‘believe capitalism does more harm than good’. It also showed that more than half worry about job losses, most particularly from automation. Support for expanded government has increased even in the US.

Ultimately, however, reliance on transfer payments could end up undermining the very oligarchs and free-market ideologues who embrace welfarism. Once the notion of dependence, as opposed to a reliance on work and initiative, becomes the guiding principle of economic life, there is no reason why the massive serf class would not seek ever more benefits. Already some on the left see the UBI as inadequate. Some leftists even envision a future where tech and Wall Street wealth is confiscated to fund ‘fully automated luxury communism’ – a leisure society paid for by Apple and its counterparts.

This is not a great prospect. Still, it would be justice of sorts if the ‘enlightened’ rich end up being taken down by their own callow embrace of welfarism.

Joel Kotkin is a spiked columnist, the presidential fellow in urban futures at Chapman University and executive director of the Urban Reform Institute. His latest book, The Coming of Neo-Feudalism, is out now. Follow him on Twitter: @joelkotkin