The trap of unconditional basic income: the dangers of mass distribution of money to the population

Back in the 16th century, one of the founders of the so-called utopian socialism, Thomas More, wrote that in the future states will begin to pay all citizens a minimum guaranteed income. In the 20th century, these ideas of Thomas More were transformed into very specific proposals by economists and politicians, mainly in the UK, Canada and the USA, regarding payments to all citizens of an unconditional basic income. This concept assumes that the state undertakes to pay free of charge once a month to each citizen of the country a sum of money sufficient to cover the costs of food and essential goods from the moment of birth until death, regardless of whether the person works and what amounts he can earn money himself. In the 40s and 50s of the 20th century, liberal economists, the American Milton Friedman and the Austrian Friedrich von Hayek living in Great Britain, developed the concept of an unconditional basic income, which could, in their opinion, help both the population improve their standard of living and the states themselves to reduce many items of social budget expenditures. Nevertheless, attempts to introduce an unconditional basic income in the UK and the USA stopped before they really began, as alternative proposals appeared in the form of, for example, food aid rather than cash, and not for the entire population, but only for the poorest citizens and families.

But already in the 21st century, attempts were made to put the concept of unconditional basic income into practice on a limited scale. In certain cities of the USA, Canada, and the Netherlands, experiments are being conducted in which either only low-income families, or even families whose addresses were selected at random, are invited to participate in the payment of certain amounts to each of these families. Such income, as a rule, is significantly lower than the average salary in the corresponding cities, but is paid to people without any conditions on the part of the state or non-governmental organizations making such payments.

For example, in the American city of Oakland (California), in 2017, a private investment fund randomly selected 100 families for an experiment and were paid an unconditional basic income of $2,000 per month, while the average salary in Oakland is about $3,200 per month, and the average salary in the USA is just over $4000. One of the founders of the fund, entrepreneur and philanthropist Sam Altman, stated when the experiment was just beginning that even if 90% of recipients of an unconditional basic income did not want to work, and the remaining 10% began to create “incredible products and new values,” payers of such income would still will benefit compared to “the state of affairs that exists now.” That is, according to Altman, the state will not waste money if it starts paying an unconditional basic income, but will receive a return in the form of new promising products and developments. And such products and developments will be created by those whom such payments will motivate, as Altman believes, not to get a job in order to survive, but to do the business that these people have always dreamed of.

However, the experiment, successful on the scale of one American city, has not yet spread even to the entire state of California, not to mention the United States as a whole. True, US President Donald Trump, with the approval of Congress, in 2020 paid all Americans earning less than $75,000 a year $600 per month per person to help citizens cope with the consequences of the coronavirus pandemic, and in 2021 this payment was increased to $2,000 per year. month. But after Covid ceased to pose a mortal threat to the US population, this “attraction of unheard-of generosity” also ended.

The same experiments on paying an unconditional basic income to a small number of families in individual cities are being carried out in Europe. In Switzerland and Finland, some politicians even insisted on holding referendums among the population on paying all citizens an unconditional basic income, but these ideas were later abandoned, as sociological surveys showed that there was no agreement among the population on this issue. Many citizens expected mass unemployment in the country, fearing that people either themselves, receiving a guaranteed income from the state, would begin to throw in the towel instead of creating new progressive products, or employers, taking advantage of this social initiative of the state, would begin to lay off employees en masse in order to reduce their costs. In addition, some rational Europeans feared an increase in the burden on the budget and a subsequent rise in inflation, which could depreciate this income.

In some African countries, such as Kenya, Uganda and Namibia, local authorities in selected small towns and villages are experimenting with paying a universal basic income to all local residents, but at the equivalent of only $20–30 per month. However, such payments by the standards of these countries, where a salary of $300 a month is considered very high, allows the population to meet their bare minimum needs for food and essential goods. Poor residents of other cities in these countries would be happy to receive such a benefit from the state every month, but local budgets are too meager to provide the entire population with an unconditional basic income. Moreover, in Kenya, to pay such benefits to the population participating in the experiment, even funds from private entrepreneurs are attracted on a voluntary basis, since states do not have enough money for even modest payments to a small number of citizens. And this shows that not every state is able to provide an unconditional basic income, even in a minimal amount, to the entire population – simply due to a lack of funds in the budget.

Is it worth introducing an unconditional basic income in Russia, building on the ideas of Sam Altman and Elon Musk? In our opinion, one should not be fooled by their initiatives and statements on forums. These entrepreneurs are supporters of the concept of an unconditional basic income, mainly in order to retain in their corporations a small part of the most talented and useful employees for business development, while the rest, no matter how professional they are, will be replaced by artificial intelligence, so that they will then be taken care of exclusively by the state . And the enthusiasm of economists, who, as a rule, are critical of increasing the role of the state in the economy, regarding an unconditional basic income is quite understandable, since such payments to the population from the authorities will be able to free up the hands of businesses, which will incur fewer unnecessary costs on salaries and bonuses for staff, simply by reducing the workforce and replacing them with machines or artificial intelligence.

In order to introduce, for example, in Russia the concept of an unconditional basic income, it is necessary that several conditions be met, the most important of which is the availability of funds in the budget sufficient for the state to actually support the entire population without defaulting. Today’s reality, both in many countries of the West and East, and in Russia, shows that high employment (in Russia, we recall, according to Rosstat, unemployment is at a historically low level of 3% of the working population) is becoming one of the sources of another problem — high inflation, which very quickly turns from an economic problem into a social one. A situation that is paradoxical from a socio-political point of view, but quite understandable economically, is being created – the more the state or even private entrepreneurs provide people with high salaries, bonuses or other benefits, the faster they begin to depreciate. And how can the state index the unconditional basic income paid to everyone on a permanent basis and not go bankrupt? No one is ready to answer this question today. Therefore, not only in developing, but also in many developed countries, experiments with an unconditional basic income can lead to negative consequences – that is, to turning the country into a debtor with a population barely making ends meet, and not to a society where everyone will be financially provided by the state, satisfied and happy.