Swiss activists dumped 8 million five-cent coins in front of Parliament and submitted 130,000 signatures in favor of a UBI referendum. (Universal History Archive/UIG via Getty Images)

Do We Need a Universal Basic Income? A Debate.

Getting free money from the government is popular. But would it prop up capitalism?

June 19 | July Issue

The Case for a Universal Basic Income

By Matt Bruenig

In America today, around two-thirds of the national income is paid out to workers in the form of labor compensation: wages, salaries, tips and benefits. The remaining one-third is paid out to capitalists in the form of passive income: dividends, interest, rents and capital gains. The capitalists do not work for their share of the national income. They simply own things and, by virtue of that ownership, passively extract income.

This arrangement would not be so disequalizing if the ownership of passive income-generating capital was evenly distributed, but it is not. Federal Reserve data show that millionaires own 80 percent of the country’s capital while the bottom 38 percent of Americans own none. This means that a small group of people receives the overwhelming majority of the nation’s passive income, which is one of the reasons inequality is so high.

For the last hundred years or so, market socialists like Rudolf Hilfderding, Oskar Lange, Rudolf Meidner and John Roemer have argued that we should solve this problem by collectivizing the ownership of wealth into common pools. The Norwegian government made the idea work over the past few decades through nationalizing oil resources, creating dozens of state-owned enterprises, and just ordinary taxing and saving. Today, Norwegian citizens collectively own 59 percent of their wealth in these types of funds (and 76 percent if you exclude owner-occupied housing).

From the July 2018 issue

The main Norwegian social wealth fund is especially interesting because it does not invest in speculative real estate or coal, and is planning to divest from oil and gas. It also excludes companies from its portfolio if they violate human rights and labor rights or engage in environmentally destructive practices.

Once the wealth is collectively owned, that raises an interesting question: What to do with the income it generates? In Norway, the money goes into public spending, mostly on robust social welfare programs. Another answer is to fund a universal basic income, or UBI (also called a “universal basic dividend” or “social dividend”) for everyone in society. Such a program exists in Alaska and helps to ensure everyone benefits from the state’s wealth, not just the super-rich. In part because of this, Alaska is the most equal state in America.

Unlike a JG, this kind of UBI has been tried successfully. Since 1982, Alaska has used investment returns from the Alaska Permanent Fund to pay out a universal basic dividend to everyone who lives in the state. In some years, the dividend has been as high as $2,072 for a single person or $8,288 for a family of four. If Norway paid a dividend from its much larger fund, it would have been $23,970 per person last year or $95,880 for a family of four. Both the Alaskan and Norwegian programs are wildly popular, work as advertised and could easily be copied by our national government.

The Problem Is Profits

By Rohan Grey and Raúl Carrillo

Like Matt, we oppose the concentration of wealth and ownership. However, his approach of redistributing capital income, rather than reducing it, stands to make a bad situation worse.

Financial inequality is a symptom, not a cause, of capitalism. It exists because capitalists and managers control production while exploiting workers and the broader public for their own power and profit. This system scars communities and the environment in ways dividends cannot heal, causing death, disease and ecological collapse. Consequently, proposals that rely on ever-greater profits risk entrenching the current economy’s worst abuses.

In particular, we oppose linking the performance of stocks, bonds and real estate to poverty reduction, as Matt’s social wealth fund proposal would do. Goldman Sachs, Monsanto, Halliburton, Facebook, Amazon and the rest of the Fortune 500 are not merely money-making machines; they are sprawling private governance regimes that warp the lives of billions. What’s good for General Motors is rarely good for the country (or planet). Furthermore, the hostility of central bankers to the working class, especially workers of color, should cause leftists to balk at reforms featuring a technocracy of fund managers.

The Norwegian and Alaskan experiences also cause us concern rather than comfort. Norway’s sovereign wealth fund (SWF), for example, amassed its wealth by investing in fossil fuels. Today it invests in overseas real estate and earns passive income off the backs of workers in the Global South. The Alaska Permanent Fund (APF), still rakes in healthy profits from fossil fuel extraction, while Alaska remains plagued by poverty, unemployment and underinvestment in public services. Meanwhile, the highest dividend paid by the APF—$2,072 per person—is still far too low to provide substantial respite from work, the alleged advantage of a universal basic income (UBI) over a job guarantee (JG).

Regardless of the size of the payout, we are concerned that mailing everyone an identical check will increase inequality, rather than reduce it. Early social dividend proponents, such as C.H. Douglas, envisioned an “aristocracy of producers and a democracy of consumers.” A standalone UBI, financed by a wealth fund or otherwise, does not challenge the capitalist system of production. History demonstrates technocratic elites favor a standalone UBI precisely because it actually subsidizes corporate power, rather than threatens it.

Instead of a stock dividend, we should guarantee housing, healthcare, education, family and disability support, reparations, and other public goods through a full employment economy, undergirded by a JG. Rather than leaning into financialization, we should reduce our dependence on mega-corporations and money managers by establishing a right to a job, then building alternative systems of community-oriented production. The solution to capitalist-driven inequality is not making everyone a capitalist. It’s less capitalism.

Read next:
Do We Need a Federal Jobs Guarantee? A Debate.

Jobs Guarantee or Universal Basic Income? Why Not Both?

Matt Bruenig is the founder of the People’s Policy Project, a socialist-leaning think tank in Washington, D.C.

Rohan Grey is a doctoral candidate at Cornell Law School. He is a director of the National Jobs for All Coalition and the Modern Money Network.

Raúl Carrillo is an attorney fighting for economic justice in New York City. He is a director of the National Jobs for All Coalition and the Modern Money Network.

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