Can Universal Basic Income End Poverty in Developing Countries?

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SEATTLE — Universal basic income (UBI) is a concept that has recently been gaining quite a bit of attention worldwide. So far, UBI has seen success in parts of India, Namibia and Canada, and is being tested in Kenya, Uganda, Brazil, Finland, the Netherlands and Italy. UBI has already been implemented in Alaska, and new pilot projects are currently being planned.

UBI entails a sum of money given periodically by the government to everyone unconditionally as a means of meeting basic needs. The government would provide each individual (or household) with the same amount of money, monthly or annually. UBI could mark the beginning of an effective policy to end widespread poverty.

UBI largely differs from other government welfare programs due to its universality. No means testing is necessary; everyone would receive UBI, regardless of employment or wealth. At first glance, UBI seems like just another unpopular idea. But it is important to explore its possibilities, good and bad.

The Case for UBI

Universal basic income has been tested in several developing nations, including Kenya, India and Namibia. Namibia has already found great success with UBI based on the Basic Income Grant pilot project that took place in the village of Otjivero. As a result of this experimental project, poverty rates dropped from 97 percent to 43 percent. Unemployment and crime rates decreased as well in addition to improved nutrition.

UBI is often unappealing, as it seems to lack any incentive for the unemployed to find work and benefit society. But Namibia proved this wrong; UBI seemed to have ended the vicious cycle of poverty for many. The pilot project in Namibia has gained attention from elsewhere. An experiment in Madhya Pradesh led India’s Ministry of Finance to propose a basic income.

The study showed improved housing, nutrition, health and education for the poor as a result of the basic income, in addition to an increase in labor. In November 2017, the charity known as GiveDirectly launched another universal basic income experiment in 120 Kenyan villages. These results may be crucial in determining whether a universal program is best for developing nations. Overall, it seems that experiments in developing nations have all pointed in one direction: UBI is beneficial.

With welfare programs that only provide minimum benefits to the poor and unemployed, there is no incentive to find work or advance from low wage jobs. Nations like the United States have found some success in means-tested welfare programs, but for developing nations, where poverty is almost universal, studies such as those in Namibia, India, and Kenya point toward a universal program.

UBI will likely increase work ethic (and, as seen in Madhya Pradesh, it increases hours worked) because people will be incentivized to find fulfilling work. It undoubtedly would also increase innovative and charitable work by opening up options. UBI, in this way, gives everyone a voice in a society where only the wealthy have spending power.

Everyone has the right to meet their basic needs, and UBI could do a better job of this. Welfare programs that are looked upon simply as “handouts” dehumanize the recipients. This is a bigger problem than it seems, as it breaks down the fabric of society. A universal program treats all members of society equally, providing a baseline income for all. This promotes a sense of equal opportunity, which leads to more trust and cooperation among the people. In addition, means-testing leaves many needy individuals cut off from welfare. UBI solves this problem.

The Case Against UBI

It seems that UBI might have a wide variety of benefits, but of course, it does not come without disadvantages. The most obvious problem is cost. The high price of UBI calls into question whether these benefits are truly possible. By definition, a universal basic income must be enough to meet basic needs. However, any amount would constitute a huge sum of money.

For developing nations and developed nations alike, the costs exceed the total revenue of the government itself, making it completely unsustainable. Experiments show several benefits from UBI, but experiments have been on a smaller scale and typically been funded by charities. As such, UBI provided by the government would be implausible. Spending for UBI would mean other cuts, which could cause an increase in poverty.

For instance, despite the success of the UBI pilot project, Namibia has yet to implement a basic income nationwide. Even after a recommendation from the minister Zephania Kameeta, Namibia still follows the path of other nations, implementing a conditional food bank program that hopes to eradicate poverty.

But if the purpose of UBI is to provide for those who truly need it, then why should the program be universal? Why should we waste resources that may be used to help the needy? These questions should be discussed before implementation. In fact, India is considering a basic income that is provided to everyone except the top 25 percent of India’s income distribution.

In this way, resources are targeted at the poor. Universality would not be beneficial in developing nations with a large income gap, so a conditional program may be preferable in these situations. Of course, many of the predicted benefits of UBI are hypothetical, as UBI has not been applied on a national scale in any country. Factors such as dependency, work ethic and solvency may vary when implemented at this level.

UBI raises many questions for policymakers to answer while this idea continues to gain attention. Although studies and pilot projects are able to answer some of these questions, this program has never been implemented on a large scale. Nevertheless, universal basic income does seem to have the potential to be explored further.

– Uma Menon

Photo: Flickr

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