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Gaining Ground

The ultimate economic question of our time, and indeed in all other times, is the question of how may we best raise standards of living given our available resources. This was the question raised by Franklin Delano Roosevelt, and Lyndon Johnson, and Ronald Reagan, no matter how their answers differed. In general, the method has been growth. History has proven (Clark 2007) that it is the accumulation of capital (Mankiw, Romer, and Weil 1992), innovation of beneficial ideas (Lucas 1988), and the forging of inclusive institutions (Acemoglu and Robinson 2012) that has uplifted most of the world from poverty (Roser and Ortiz-Ospina 2013). As a rule, the relation between output growth and poverty reduction has been strong for the United States as well as most other developed nations. Yet, in recent years, real output growth has slowed, and poverty reduction has stagnated (Fox 2020). Instead, inequality has increased (Piketty 2014) as growth is carried on the cutting edge. It is clear we have reached a new paradigm, one where growth may not be the answer to poverty reduction.


If growth may not carry poverty reduction forward for the United States, what may? I believe the answer lies in a universal basic income. The reasoning is simple: if the gains from growth are close to exhausted for most people, if cutting edge growth leads to inequality, and if the best way to eliminate poverty is to raise income, then a basic income is the best way to reduce poverty in the United States.


America is no longer the open frontier it once was. No longer are there the boundless gains and exploding population that made the American Dream (Cowen 2011). Instead, we see a productivity slowdown, a real wage stagnation, and a land suffering years of hysteresis. Labour income share is down, as capital holds the gains from modern economic growth (Piketty 2014). This means that easy opportunities to escape poverty are scarce, whilst income inequality skyrockets. The solution to this, however, must not be regression to lower growth, but a reimagining of the way we address wealth and poverty in America.


Populistic policies may preserve jobs and redistribute wealth in the short term, but they would crush long-term growth. Attempts to limit trade and immigration, as favored by the right, or reduce corporate investment and business profit, as on the left, would destroy the innovation that keeps America thriving while throwing back the poor in the long term (Strain 2020). Protectionism and degrowth, though attractive on aesthetical grounds, cannot form the basis for the way we address our distributional issues.


Basic income policies, on the other hand, can reduce both poverty and inequality without cutting growth (Smith 2021). A deep study of cash transfers in Kenya (Egger et al. 2019) found a sizeable increase in personal incomes resulted from the programs, with a further corresponding increase in business profits. Multiple other studies have found this poverty reduction effect from basic incomes in other countries. This holds in the United States (Widerquist 2017; Hartley and Garfinkel 2020; Golden 2020). Even at moderate levels of spending, a basic income cuts poverty dramatically. This result is confirmed time and time again whenever the government does cash transfers. In fact, the most recent large reduction in poverty in the USA came from income transfers (Ghenis 2021). What is essentially happening is the emulsion of the cream of society, the excess income of the upper class, throughout all its citizens to create a more delicious milk.


Many more-utopian universal basic income advocates hope that universal basic income will lead to a post-work future. I am no such believer. In fact, I embrace the notion that universal basic income has little employment effect. Multiple studies into the effects of a universal basic income in America suggest there is little labour loss (Hoynes and Rothstein 2019; Jones and Marinescu 2018). This means that we can have both the fruits of labour and the fruits of transfer; our pie will be larger and last for years to come.


This also entails a further benefit of universal basic income: it would repair our welfare system. There’s a reason why Milton Friedman proposed a guaranteed income as a policy: it would remove structural incentives to unemployment and allow greater personal freedom for the recipient while still alleviating poverty (Friedman 1962, 191-194).


My case here is fundamentally liberal (in the classical sense): a universal basic income will provide the means to all citizens to more fully enjoy a free existence whilst still preserving the emergent order that has resulted in previous growth. It is a case Friedrich Hayek established (Hayek 1979, 54; Zwolinski 2019): to provide the basic poverty alleviation that suits a free and prosperous society. To tie back, the minimum income would be the complement, not the antithesis, to the modern economic system.

Universal basic income isn’t utopian, it’s practical. It’s built for a world where humans respond to incentives, taxes are distortionary, and labour productivity isn’t exponential. It’s built for a war on poverty, not work (Mieszkowski, Pechman, and Tobin 1967). It’s a plan by economists, not dreamers (Mankiw 2019). America should have a basic income, not because basic income will unmake society, but because it will greater accomplish the goals we set out as a society. It is even a goal deeply connected to the ideals of the Founding Fathers (Paine 1797). It is not “cultural backsliding”, as Oren Cass would claim. It is not an attempt to create a post-work America. It is a plan to create a post-poverty America.


If we are really committed to eradicating policy here and now and forever to come, we must take seriously the idea that direct gains from growth won’t cut it. We must appreciate that cash transfers are the best way for our society to at once preserve the prosperity of innovation and bring prosperity to the poor. We must be clear about what universal basic income can and cannot accomplish, and the economic realities of our time, and yet still wholeheartedly tout it as a serious solution to poverty and inequality in America. To echo William Lloyd Garrison: be in earnest, do not equivocate, do not excuse, do not retreat a single inch, and be heard!


Original essay (with references).


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