Universal Basic Income is a very bad idea

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Free money sounds great, but the consequences could lead to economic catastrophe.

The idea of ‘Universal Basic Income’, a system where all adult citizens of a country are given a salary by the government for simply existing, is slowly making its way into public discourse. Mark Zuckerberg and other well-known figures like Elon musk have shown their support for such a system, but rarely are the realities of it explained. It could be argued that it is a ‘utopian vision’ which seeks to benefit everybody, but if you dig just a little bit into the consequences of such a scheme, you begin to realise how dangerous such a policy could be.

 

There have been several pilot schemes around the world involving Universal Basic Income, and all of them have run into difficulty. Finland was the most notable country who gave the idea a go. They gave 2,000 unemployed people an income of 560 euros a month, in a bid to make the country’s benefit system less complicated. However the trial was quickly ended, with the Finnish government showing no interest in returning to the scheme.

 

In Switzerland, a referendum was held in 2016 on whether to give every Swiss citizen an annual income. 77% of voters rejected the proposal, with all parliamentary parties opposing the introduction of UBI. The country feared that losing the connection between doing something and receiving money in return would damage the economy, and they were right.

 

A country’s economy, and indeed the world economy, work on the premise that you do something in return for something else. The most basic example of this is working in return for a salary or wage, or paying somebody money in return for a product. However if everybody was given a monthly wage for doing nothing, there would be no incentive to actually do anything.

 

Why would a farmer spend hours looking after his animals if the government gave him an income for doing nothing? Why would a miner dig for coal if the government gave him an income for doing nothing? Why would a nuclear power station technician do a night shift ensuring the safety of the plant, if the government gave him an income to do nothing? In short, free money ends the incentive for anybody to actually do work, or at the very least, it would encourage them to do less work. This in turn would leave them at the mercy of another nation’s economy that did have an incentive.

 

Printing money from nothing and giving it to people sounds great in the mind, but the reality is that such a scheme would cause widespread inflation. This is because the more common something is, the less value it has in the market place; and if you can print something for everybody on a monthly basis, it probably becomes the most common thing of all. It is true of course that Central Banks print money, and spread it into the economy in a practise known as quantitative easing; but this is only done in a limited form, which means it does not cause any serious inflation.

 

The only other option UBI supporters point to is borrowing money to pay for it. However the sheer amount of money the Government would need to borrow in order to give every citizen a salary, (on top of the nation’s already colossal debt) would be a suicidal move. Let’s hope a future government does not lead us down that road, though with Jeremy Corbyn’s poll ratings seeing an increase, I fear the worst.

 

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