India can pay ₹500 to each citizen every month: Economist Guy Standing
10 min read 04 Mar 2019, 05:54 AM ISTIn conversation with Guy Standing, economist at the School Of Oriental and African Studies, University of LondonNeither the Narendra Modi government nor Rahul Gandhi have gotten minimum income scheme right, he says
PremiumNew Delhi: Income support is the big economic idea of the season. While the ruling BJP government announced a limited money transfer scheme targeted at farmers in the recent interim budget, the Congress has proposed to solve the country’s chronic poverty with a minimum income guarantee for every Indian.
Some consider these pre-election proposals to be too ambitious. But, Guy Standing,71, an economist at the School Of Oriental and African Studies, University of London, thinks that the real concern may be that these schemes are not ambitious enough.
A proponent of giving people cash since the early 1980s, Standing has built himself a reputation as the global guru of universal basic income. He disapproves of words like “limited" and “targeted". India’s existing social welfare schemes must be completely overhauled in favour of a basic income for every citizen, Standing argues, and with such passion that he sometimes manages to send pens flying off from the interview desk.
Being the co-president of the Basic Income Earth Network, his ardent belief in the transformative power of a modest guaranteed monthly income is not that much of a surprise. What is somewhat of a surprise is that some of the world’s wealthiest people are buying into his idea.
"I keep getting invited to speak at Davos and multi-billionaire’s clubs in the US, as the superrich are keen to understand the consequences of rigging the system and find ways to avoid resentment," Standing quips.
Contrary to popular belief, income support does not make the poor lazy, but instead motivates them to improve their material and psychological well-being, he argues, based on evidence from India and elsewhere.
But how can a country like India, with its stretched finances, fund a basic income scheme that may cost over 5% of the GDP? By replacing a slew of regressive subsidies on food and fertilizers, Standing says, in a recent interview to Mint. Edited excerpts:
Why do you advocate a basic income?
The idea of basic income is that every individual would receive a regular cash payment, monthly or weekly, and it would be paid by the state... so it’s a right. The unconditional aspect is important because it is not paternalistic; in other words, it allows the person to use the money as they decide. That is different from many forms of conditional schemes—for instance Narendra Modi’s new scheme for Indian farmers or (Congress president) Rahul Gandhi’s proposed scheme for low income groups which requires targeting and selection. When you do that, you have high exclusion errors. Basic income involves direct transfer to an individual, which reduces a whole lot of administrative costs, is transparent and minimises corruption. The debate about welfare (policies) in India is intellectually corrupt due to the pretense that complex schemes can actually work.
You can think of basic income as a modest payment or as an alternative to social welfare schemes. My own preference is to see them as a matter of social justice: the reasoning is both ethical and philosophical. First of all, the wealth and income of all of us has far more to do with the efforts of generations before us than anything we did ourselves. We allow private inheritance of wealth, but in a sense this is also a public inheritance... the collective inheritance, the commons, (from where) everybody should earn an equal dividend. The second ethical reason is that it enhances the freedom of individuals to say no to exploitative and oppressive relationships. It also emancipates people to take control of their lives to a certain extent. The third ethical reason is that it provides basic security, a human right. Studies have shown that when people know that they won’t be starving tomorrow, their mental abilities increase, their capacity to be rational improves. There are also economic reasons—that it gives to the community and to individuals the capacity to make decisions about work, investments, and savings, and so on.
In a universal scheme, how can you justify a poor woman and well-off individual receiving the same income transfer? Where will the money come from?
I think there are good reasons that everybody should receive it… that’s part of the social inheritance and social justice argument. I think you can give it to someone well-off and then say, okay, we will also raise taxes, so, in effect, that person is not better or worse off. What I think is important is that you give it to an individual and not to a family because families change all the time. A household may have five or eight people and it is not fair to give the same amount to every household. On funding, we have calculated that India spends about 8% of its GDP on regressive subsidies. Most of that money does not reach the poor. So, potentially you have up to 8% without raising tax rates at all to reallocate toward a basic income scheme. However, I am not advocating the dismantling of social welfare schemes like health services and education. They are essential.
But why dismantle an existing welfare infrastructure in India which includes, among others, food subsidy and employment guarantee, in order to promote basic income?
I am an economist. I don’t like paternalism, whether it is from the state or anyone else. I don’t like schemes where the state implicitly decides what you need. I start from that presumption. What I don’t understand is why most of the subsidy schemes (in India) are chronically inefficient and regressive. I don’t believe the welfare state of Europe of the 1960s is the answer for India in the 21st century. You don’t have a full employed industrialized economy and you’re not going to have one. I think we are going to have a fundamentally different labour market in the next decade. With the growth of the precariat, cloud labour, the gig economy, and platform capitalism, where people are doing odd jobs with Uber and Amazon, we are seeing people without a regular full-time stable job. As incomes become volatile from one month to the next, how can you work out a support system based on income levels? In flexible and open labour markets, insecurities will increase dramatically and you cannot have the old welfare system.
Critics say that income security schemes will make the poor lazy. Is that an elitist argument?
The evidence shows the opposite. If you give people a basic income, they want to improve their lives, they have more energy and confidence, they invest, take more risks... they work more, not less. Our studies from Madhya Pradesh (2011) show that when people were provided a basic income, work increased. In particular, economic activities of women increased, by way of secondary activities like weaving. We were surprised to find that consumption of alcohol and tobacco went down slightly. Women explained that men have more work to do now and they are not sitting idle, smoking and drinking. The elite in India don’t trust people enough... else, why would they think the poor will squander away the basic income and not improve the lives of their children by investing in education and health.
Experiments and pilots around the world are very encouraging. In Finland, it improved people’s mental health, their state of well-being, but did not reduce employment. They did not live it up, as critics thought. Now a right-wing finance minister has discontinued the pilot, not because it failed.
What explains the millennial fascination with socialism?
I wrote a book in 2011 called The Precariat: The New Dangerous Class. I don’t like the term millennial because it neglects class. There are some people born after 2000 in rich and affluent societies who have totally different life challenges than those in the precariat. The precariat consists of millions of people around the world who are insecure; who don’t have an occupational identity or a narrative for their lives; they don’t have reliable incomes. This group is mainly young. These people are voting for populists. There is another part who are young and educated, stepping into a life of insecurity. This group is looking for a more progressive politics. Whether you call it socialism or something else, I don’t care. The second group tends to support basic income and ecological movements. In the first page of my book, I wrote that unless the problems of the precariat are addressed, we will see a political monster. In November 2016, a number of people wrote to me from around the world saying that your monster, Donald Trump, has arrived.
Ahead of the Indian general elections in May, direct cash transfer schemes have gained a lot of political currency. How do you view these schemes?
I think we are witnessing a transitional period in Indian social policies. I am not taking a political side but I think it is very interesting that there is a movement away from the very paternalistic type of policies represented by the PDS (food subsidy), MGNREGA (employment guarantee), etc. One has to realize that across India, at the moment, there are thousands of schemes. They are on paper and people do not know about them. They do not receive anything. Now, you have a new rhetoric about conditional transfers. If you have a scheme like Rahul Gandhi has proposed, you’re going to give a minimum guaranteed income to the lowest quarter. But how on earth are you going to identify who is down there? That is an incredibly difficult job. In addition, there is the poverty trap problem. If you make cash transfers conditional, you are giving the poor an incentive not to raise their incomes, or be dishonest and hide that new bicycle. The scheme proposed by Gandhi has obvious limitations but it is moving in the right direction because it is recognizing that you have to get people to have money in their pockets so they can have control over their lives. It’s a matter of giving people a sense of dignity and empowerment. Now, in the government scheme (for farmers), why should you give it to only low-income farmers? Why discriminate against other low-income groups?
Withdrawing subsidies on food and fertilizers would be like redistributing what is meant for the bottom of the pie: taking from the farmers and supporting others?
We did a pilot in west Delhi with 450 families. We asked if they would prefer to continue with subsidized rations or have a basic income of equivalent value. Interestingly, about half of the families chose to stay with the PDS. After six months, many people who continued with the PDS asked us if they can shift to the basic income instead, but nobody wanted to shift back to PDS. Secondly, in Madhya Pradesh, we found ration shops empty... these are realities. In some villages, women were given poor quality grains. They would have to sit in the hot sun and remove the stones. Don’t tell me these schemes work. Why are we pretending in 2019 that these schemes are what people want or what is good for them?
So, can India implement basic income by just withdrawing existing subsidies, or will there be a need to impose new taxes, like an inheritance tax?
To a certain extent, the costing by critics is a bit dishonest. The evidence shows that even with a small basic income of ₹300 per person (per month), the income of the community goes up. Health status of children improves due to higher investments in sanitation, which leads to lower public spending on health. Basic income also helps children attend schools more regularly... families can pay for shoes, for the bus which girls take to local secondary schools, and attendance rates go up since they had breakfast. That leads to more effective education. So, in a sense, the cost of a basic income scheme has to be looked in terms of the dynamics of what happens.
I would prefer a low initial amount paid to everybody. That could be ₹500 per person per month. It could be rolled out starting from low-income communities and gradually extended. In many parts of India, you have the capacity to create wealth funds from the proceeds from (sale of) natural resources. Then, you gradually phase out schemes like MGNREGA. It is a terrible mistake to have fuel subsidies when it should actually bring in carbon taxes. Fiscally, India is in a position to have a more effective tax system by bringing in an inheritance tax, which is essential because wealth has become grossly unequal due to rentier capitalism. Across the world, the plutocracy is benefiting from intellectual property rights and inheritance of vast wealth. This is unjustifiable from an economic point of view and also politically unsustainable. You can’t have a tiny minority of multi-billionaires in a country of 1.3 billion people without risking a social conflict down the road. At the moment, it is grotesque.
