In 2009, Broadway, a London based charity, attempted a radical and novel way of dealing with homelessness. Instead of the usual offer of a hostel room, Broadway gave each of the 13 participants £3,000 (approx. AUD $5370) of unconditional spending money. The participant’s purchases varied from gardening classes to a telephone, and even a dictionary. None spent their money on alcohol, drugs or gambling. After one year the average participant had spent just under £800. After 18 months, seven of the 13 participants were no longer homeless, and another two were about to move into an apartment. All 13 participants had seen significant improvements in quality of life, with many attending rehab, reconnecting with family and making plans for the future. The most remarkable thing about this pilot social welfare program was how much it cut costs. The city of London spends an estimated £30,000 to £50,000 (approx. AUD $53,700 to $89,600) per homeless person per year, on expenses such as courts, police, and social security. However, Broadway managed to substantially decrease homelessness for just 6-10 percent of this cost.
There are two myths about poverty that have kept on keeping on in our modern welfare state. Firstly, that the poor can’t be trusted to make sensible financial decisions. Secondly, that free money makes people lazy and dependent. These myths are thousands of years old, with Paul the Apostle declaring in 58 AD “those unwilling to work will not get to eat” (2 Thessalonians 3:10). Based on these assertions, we have constructed a modern welfare state made up of large, complex and overbearing bureaucracies. These bureaucracies are designed to supervise, scrutinise, and educate their benefactors, requiring them to apply for jobs, perform volunteer work and be re-trained. The USA alone has an estimated 126 of such welfare programs, costing the US government an estimated $1 trillion per year (Michael Tanner, 2016). However, despite being specifically designed to reduce dependency and increase economic mobility, this is the exact area in which modern welfare has failed to deliver. As economist Michael Tanner argues “in recent years we have spent more and more money on more and more poverty reduction programs, but seen few, if any, additional gains”. One alternative to our current costly welfare system is comically simple, yet dramatically more effective: just give the poor more cash. Specifically, we should replace our current welfare system with a universal basic income.
In developing nations, direct cash transfers have proven highly effective at alleviating poverty. One study by the Massachusetts Institute of Technology analysed the impact of direct cash transfers of $274 implemented by the NGO GiveDirectly in Western Kenya. They found that the program increased household wealth by 58%, food consumption by 20%, improved the psychological well-being of recipients and their families and increased investment in livestock and local businesses. They also found no increase in spending on alcohol and tobacco.
A common theme amongst direct cash transfer research is that the money is seldom spent on goods such as alcohol or other drugs. One study in Liberia even gave $200 to alcoholics, addicts, and petty criminals. They found that the money was mostly spent on food, clothing, medicine, and small businesses. A review by the World Bank in 2014 concluded that in 82% of all researched cases involving direct cash transfers in developing nations, alcohol and tobacco consumption declined.
The evidence shows that the real ‘experts’ on how to alleviate poverty are the poor themselves. With a much greater understanding of their own needs and their communities, they can spend aid money more effectively than any social worker could. The University of Manchester has summed up the benefits of direct transfers as such: households put the money to good use, poverty declines, health improves, tax revenue increases, and the programs cost less than the alternatives.
Despite the success of one-time cash transfers, the question remains as to how people would respond if they were guaranteed a permanent income without having to lift a finger. Would the poor become lazy and dependent? Basic income experiments performed in North America in the 1960s and 70s suggest not. One basic income experiment in Dauphin, Canada, guaranteed that none of its 13,000 residents would fall below the poverty line. The study found several benefits from basic income, including children staying longer in school and performing better academically than previous cohorts. Hospitalisations and mental health complaints also decreased. In terms of work: those already acting as the main source of income for their family barely reduced work at all (dropping only one percent). Amongst women, many took the opportunity to spend more time looking after their children or receiving an education (reducing work by about three to five percent).
It’s clear that regardless of standard of living, people want to spend their time productively. As James Suzman outlines in his book Work (2020), even our leisure activities can be considered work in certain contexts. For example, to an ancient forager, hunting elk is work. Nowadays hunting elk is an expensive and time-consuming leisure activity. To a commercial artist, drawing is work, but to an amateur artist, it’s a fun and engaging hobby. Even video games simulate work that others get paid for, such as fighting in a war or managing a city. Anthropologist Jan Boersema argues that in ancient agricultural societies, our desire to overcome boredom and structure our day is the primary reason why early farmers created monuments such as the Moai on Easter Island and Göbekli Tepe in Turkey. The idea that people would become lazy if they were guaranteed a comfortable standard of living does not hold up to the evidence.
So how much would a universal basic income cost? The answer is: a lot less than what we currently spend on welfare. A study by Matt Bruenig, 2013, estimates that eliminating poverty through a basic income in the USA would cost just $175 billion – a fraction of the $1 trillion spent on current social welfare programs. Clearly a universal basic income is desperately needed to replace our present welfare system. As Bregman explains in Utopia For Realists,“the welfare state, which should foster people’s sense of security and pride, has degenerated into a system of suspicion and shame”. Instead of forcing people to prove how vulnerable and helpless they are (and thus reinforcing a mindset of learned helplessness), welfare should be a means to empower the less fortunate.
A universal basic income gives the poor the freedom they need to invest in their futures and make real differences in their lives. Instead of working two dead-end jobs to feed your children, a basic income can enable you to find the time to pursue a career with real opportunities for growth and advancement, without risking your starvation for your children. This is why countries with strong social safety nets such as Sweden also have the highest levels of social mobility and entrepreneurship. You can afford to take business risks and spend time on education when you aren’t living from paycheck to paycheck or running the risk of becoming homeless if you lose your job. As a different biblical narrative tells us, when God gave the Israelites manna from heaven whilst wandering through the desert, they did not become lazy and dependent. Instead, the manna gave them the ability to escape enslavement in Egypt and reach the promised land.
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