Could a Basic Income Help Poor Countries?
The idea of providing a universal basic income has lately been capturing imaginations across the political spectrum. But, so far, the conversation has focused largely on the advanced countries, even though such programs may actually be more feasible – and more desirable – in the developing world.
BERKELEY – The old idea of recasting the welfare state by instituting an unconditional universal basic income has lately been capturing imaginations across the political spectrum. On the left, it is regarded as a simple and potentially comprehensive antidote to poverty. On the right, it is viewed as a means to demolish complex welfare bureaucracies while recognizing the need for some social transfer obligations in a way that doesn’t weaken incentives significantly. It also provides some assurance for the dreaded future when robots may replace workers in many sectors. But could it actually work?
So far, the question has been addressed primarily in advanced countries – and the figures do not look promising. Though Canada, Finland, and the Netherlands are reportedly now considering the idea of a basic income, some prominent advanced-country economists warn that it is blatantly unaffordable. In the United States, for example, an annual handout of $10,000 to every adult – less than the official poverty threshold for a single person – would exhaust almost all federal tax revenue, under the current system. Perhaps it was that kind of arithmetic that spurred Swiss voters to reject the idea overwhelmingly in a referendum earlier this month.
But what about low- or middle-income countries? In fact, a basic income may very well be fiscally feasible – not to mention socially desirable – in places where the poverty threshold is low and existing social safety nets are both threadbare and expensive to administer.
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