Universal Basic Income: an Economic Apocalypse

in #economics7 years ago (edited)

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Universal Basic Income (UBI), as a concept, is not only unethical, it is wholly counterproductive.


" Give a man a fish, you feed him for a day. Teach a man to fish, you feed him for life."


This is particularly applicable to the issue of poverty. By taxing (robbing) the population at large - particularly the wealthy - to award the money to the poor, what you're doing is shackling investment capital, thereby stunting economic expansion. Economic expansion; the creation of new business and the growth of existing business, is the only thing that actually cures poverty. Creating a new business or growing an existing business creates more economic opportunities to enable people to increase their own wealth.

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Consider This Scenario

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Tom works at a bakery. He's a frugal fellow and saves his money, or perhaps borrows money, and using this startup capital, opens his own bakery. In order to bake cakes, cookies, breads, etc, Tom will need, among other things; ovens and flour. This creates economic opportunity for anybody willing to provide Tom with ovens or flour, in exchange for some of his scraped up investment capital. His need for ovens presents indirect economic opportunities for the providers of metal, plastic, wiring, and the other capital goods which go into the production of an oven. The miner of the metal can now earn more, and subsequently, so may the seller of mining equipment, and therefore so may the seller of the wood which goes into a pickaxe handle, and so on and so on, in a virtually endless chain of growth. Similarly, Tom's need for flour will create opportunity for the wheat farmer that provides said flour, as well as the manufacturer of combine machines, and the producer of rubber for the tires of said combine machines, and so on and so on, feeding into the creation and growth of thousands or even millions of jobs across all the countless affected industries. Not only has Tom benefitted the providers of his capital goods, but he has benefitted all the future potential workers he may hire. Tom's workers are better off, based on their own value judgements, otherwise they wouldn't be working for Tom. Additionally, all the other potential candidates for jobs at Tom's bakery, even those who declined to work for Tom, now have additional bargaining power, because their options are increased by Tom. Those people can now earn higher wages, to some degree, wherever they work, because their leverage of scarcity and the demand for their labor, have increased.

Keeping somebody unproductively dependent on a handout, which is funded by taking capital away from Tom and reducing their economic opportunities, isn't doing them any long term favors; creating said economic opportunities, is. By engaging in business, you're increasing the leverage of scarcity held by the working class. To put it simply, economic expansion awards more & more bargaining power to the workers, from the bottom up. This is how people rise out of poverty. The elements of this phenomenon which the state has not prevented, are the entire reason it's no longer commonplace to be homeless. In an entirely free society, devoid of taxation and other transgressive controls which limit economic expansion, there would be exponentially more businesses competing in wage for the labor of the poor. Automation actually exacerbates this effect, in the same fashion. Every increase in automation is an increase in business opportunities, which subsequently yield more economic opportunities for everybody. For every factory enabled to come about through the creation of automated factory machines, which reduce the amount of overhead capital needed to operate, there are countless more jobs created which reward the touch of humanity, such as marketing, sales, negotiation, and management, while entrepreneurship is rendered increasingly easy.

There is an even more sinister effect of UBI in particular. Imagine the UBI is $3,000 per month, for sake of example. The average construction worker makes $3,250 per month. Tim the construction worker comes home from a very hard day of work, and sees his neighbor, Fred, on Fred's porch. Fred invites him over for a beer. They get to talking. Tim discovers that Fred isn't working anymore, he's on the dole, getting $3,000 per month for not working. "Well what the hell?", Tim thinks to himself. "Why on earth am I working? I could be at home spending time with my family, and it would only mean $250 less per month. Tim quits his job and signs up for Universal Basic Income. Many of Tim's friends and coworkers discover this, and find it no less appealing, so now they're on the dole too. Those people's friends and families do the same, in another sort of endless chain reaction. If you want, you can replace that $3,000 per month dole with a smaller $1,000 per month dole, and suppose Tim is instead a gas station clerk. The same concept still applies. Every single one of those people now on the dole necessitates an increase in taxes, causing those that do work to be robbed for more and more of the fruits of their labor. That means the value of working is less and less. More and more people switch over to the dole, less and less people work, because more and more their income is going to support those on the dole. The more people go on the dole, the more people WILL go on the dole, in a vicious cycle of working becoming less and less desirable, starting with the bottom level ditch diggers & trash men, eventually working up to doctors and mortgage brokers. Business becomes unsustainable.

This is how you collapse an economy.

As for the version of UBI in which everybody, including those who make more than the UBI amount, gets paid the UBI, the futility should be self-evident.

Giving everybody $1000 per month, for example, can be funded only two ways:

  1. Taxing the productive by that much more.

  2. Creating more dollars to be allotted, thus devaluing the dollar to the exact same extent by increasing the supply by $1000 per month, per person. As Larken Rose eloquently put it:

"The amount of valuable stuff in the world—the amount of actual
wealth—won’t have changed at all. Only the supply of currency will
have changed, and the result of that is called “inflation.” The short
version is, if you have twice as many dollars as you did last week,
but each of your dollars only buys half of what they did last week,
then you are exactly where you started. You’re basically just changing
a unit of measurement, while not adding anything of actual value.
This would be a little like politicians promising to make everyone taller
by declaring that ten inches, instead of twelve, now counts as a foot.
Yay, now the vast majority of adults are over six feet tall! … Except
not really."

Let's address those rare people who genuinely cannot work.

Disregarding the influence of families, churches, and other community efforts, charity is an incredibly lucrative endeavor, as many consumers prefer to patronize philanthropic enterprises. Only the owner of the capital to be given away bears the personal incentive to efficiently calculate how much to give away, without losing the necessary investment capability which feeds the economy. Which business would you prefer to patronize, one that helps the needy, or one that doesn't? With the leverage of scarcity on your side, you'd have a lot more freed up capital to assist the poor through selective spending. Ever notice how many businesses spend millions to advertise their philanthropic antics? That's not for no reason; it increases their profits. That's why private companies have recently, and voluntarily, contributed over $100 million to helping victims of Hurricane Harvey; it makes them more money. In the absence of coercive restrictions on widespread capital amassment, such as taxation, and the corporate wielding of cronyistic regulatory power, there would be substantially more room for charity, as well as more profits to be reaped through charitable endeavors.

So for those of you who think supporting a universal basic income is helping others, and the charitable thing to do, recognize that what you're actually supporting is the degradation of the entire economy, and ultimately a further descent into the poverty we all seek to extinguish.

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I grew up on welfare. It sucks.

It trains you to be dependant and subservient. It trains you to feel entitled. And it prevents you from realizing your own potential.

UBI is just welfare, on a systemic level.

Thanks for this post.

I gather a lot of experience by this post.It's increase my skill.Thanks for sharing.

I wish the people who want to support UBI would support charity and deregulation instead!

UBI is flawed but so is the system you present.

In the UK where zero hour contracts are now the norm for many or perhaps in places where sweatshops exist and there is no minimum wage I do not believe that people can rise out of poverty. I think that they are in fact enslaved.

I do not purport to know the solutions.

And yet I know that in our world scarcity is a fallacy and poverty unnecessary.

Great article even though I oppose much of what you say.

Thanks.

xox

Places like China where you find sweatshop labor are always highly socialistic countries, in which the job market is greatly limited by the state. If they had economic freedom, nobody would settle for a sweatshop, because there would be no shortage of preferable options.

Your article really got me thinking which is always a good thing eh!

:)

I wrote a post about UBI from a spiritual perspective which you may find curious here: https://steemit.com/life/@ldacey-laforge/tomatoes-or-tomato-s-freewill-and-universal-basic-income

I welcome your thoughts.

xox

This is a great piece. Jake, I wonder if someone who attempts to live on UBI without earning any additional income would more or less be a parasite on the economy, receiving the short-term gains of inflation at the expense of productive actors in the economy.

If anything, the additional inflation that results from UBI would disincentivize saving ones FRNs for a rainy day. This is all the more reason why I think crypto is the way of the future.

Most people who are "in poverty" work jobs. So the idea that is someone is in or near the poverty level of income is just looking for a handout to be dependent is such nonsense. How dare people like jakemccauley defend what we have going on now.

Don't these people know that allowing poverty to exist is expensive and is costing the economy dearly? And a guaranteed basic income is a cheaper and more effective way of eliminating poverty and it's costly symptoms? Perhaps they do, but they don't care, they just want to preserve the status-quo for the sake of their demented ideology.

Ancappers are a joke-

Defend what we have going on now? No. I have zero interest in preserving the status quo. I aim to abolish the state entirely.

In the US the biggest medical problem "the poor" suffer is obesity. We have millions and millions of multi-generational fatherless families sucking off the welfare state. The "poverty" standard keeps getting higher, the "poor" of today have a life of abundance compared to average people in the recent past, in even my 80-year-old father's lifetime.

Giving low IQ people money stolen from higher IQ people--which we have been doing at full speed since 1965-- has proven a disaster.

You completely ignored Jake's arguments, you rebutted none of them.

I see a few issues. First a free market for jobs is good if there are correct market incentives. While i believe that they do exist in a free society, they do not exist currently. The entry barrier to work self-employed is high and often exclusive to social benefits. In addition we have strong social stigmatisation of the unemployed. This creates a situation where the demand for low end jobs is very high, resulting in bad pay and a system where most of the profit ends in the hands of the employer. A UBI could help to generate a better market equilibrium. It also is the freest form of social benefits possible. Therefore I advocate for a UBI to replace all other social services inside our current system. What happens when we exist the current corrupt system is of course a different question.

I absolutely agree and anyone who has a shred of care for liberty should as well.