Part of my preparation for Monday’s post (where I attempt to keep it current) is trawling through the back-history of business articles on the Daily Beast. This week’s “Best Long Business-reads of the week” linked to a New York Times article on Switzerland, somewhat glibly titled: “Switzerland’s Proposal To Pay People For Being Alive”.
Which did seem a bit rich coming from an American (how else would you describe the actions of a welfare state?). But I think that the principle of unconditional basic income is worth thinking about.
A Summary of Switzerland’s Proposed Social Policy, including a truck and some coins
- Meet Enno Schmidt, who is a German artist.
- Along with Swiss entrepreneur Daniel Häni, he founded “Initiative Grundeinkommen“, which is roughly translated as “Initiative for Unconditional Basic Income”. At least, that’s what Google Translate tells me.
- The Swiss branch of this “initiative” has collected 125,000 signatures to petition for an unconditional monthly payment of 2,500 swiss francs ($2,750) to each Swiss citizen.
- It dropped the petition off at Parliament last month, alongside 8 million 5-cent coins.
- So we can expect a referendum on it fairly soon.
- Here’s a video clip of the truck dumping the coins outside the Parliament Building in Bern.
On the face of it, the demand seems a bit brazen. Those coins represent all 8 million Swiss citizens, and these 125,000 signatures are arguing that all 8 million should receive 30,000 swiss francs a year for doing nothing but being alive (and being Swiss). That’s an annual cost of 240 billion francs, or 264 billion US dollars at today’s exchange rate.
To put this into perspective: Switzerland’s GDP in 2012 was 632 billion US dollars, so they’re demanding that 42% of the country’s economy be devoted to this welfare spend.
Well – do you remember my post on the Gini coefficient (a measure of income inequality, named after the statistician Corrado Gini)? If you have a look at the map found in that post, you’ll notice that the world’s most unequal countries in terms of income are mostly African and Latin American.
But income is not necessarily a measure of wealth inequality (although the two are linked). When you think about it, some of the wealthiest people in the world need not necessarily earn that much each year (Warren Buffett is famous for his $1 take-home salary from Berkshire Hathaway). Their “income” will mostly come from investments and capital appreciation (it’s how you’ll know that you’ve made it).
So the Gini Coefficient can be adapted to create a measure of wealth inequality; where a coefficient of 0 means that the wealth is evenly split to a mathematical perfection, and a coefficient of 1 means that all the wealth is held by one person.
The Top Four Most Unequal Countries By Wealth*
*here’s the link
- Namibia (with a coefficient of 0.847)
- Zimbabwe (with a coefficient of 0.845)
- Denmark (with a coefficient of 0.808)
- Switzerland (with a coefficient of 0.803)
Hence the general Swiss level of unhappiness with the status quo. And the desire to correct it.
So What Is Unconditional Basic Income?
A cash payment into your bank account, every month, without any need to justify why you should be getting it.
Why It’s Different
Most welfare states operate on the premise that only the poor need the welfare benefits (the Swiss proposal is for everyone). And in order to prevent free-riders that will live off the system indefinitely, you have to create strangleholds and disincentives to try and persuade people off welfare (the Swiss proposal will be nothing but a bank transfer).
The Argument Against Unconditional Basic Income
- People on welfare are lazy and free-load.
- They must get enough to survive, but not enough to live, and it must not be easy to get it.
- If you just give people money, you give them a really good reason not to work.
- So rather create requirements and programs for very specific welfare benefits (like “assisted housing”, “food stamps”, and “government hospitals”).
- Also, it would be very expensive to do too much of it.
The Argument in Favour of Unconditional Basic Income
- Is much like the argument of direct cash distributions for charity (I wrote about it here: Charity: Do It Directly. In Cash.)
- It is a broad generalisation to say that most people on welfare want to be on welfare. You’re more likely to find that most welfare recipients would choose to work if they could – and are better placed to make decisions as to how they can escape their welfare trap than the government officials that make the decisions for them.
- And actually, a lot of money is wasted by government departments that attempt to administrate the myriad of welfare programs.
- So why not just give the cash directly, and let the market itself manage the process?
The point is: I think that Switzerland should do it.
Perhaps they’ll come across as naive – but someone should try the “having a little more faith in people” thing. After all, the poor are people too.