Universal Basic Income as an enabler for India’s Green Growth

The idea of a Universal Basic Income (UBI) – an unconditional cash payment to all citizens – is back on the policy agenda. Would a UBI result in more economic growth, employment and consumption? Or will it result in people engaging in less, consumeristic, material activities and thereby not willing to work?

Global GDP is more than 100 trillion dollars, yet 10 % of the world’s population still live in extreme poverty on less than $1.90 per day. Research by King’s College London and the Australian National University points to poverty increasing dramatically in middle-income developing countries, where millions of people live just above the poverty line. Due to the Corona pandemic, Global poverty is set to rise above 1 billion people once again. Bangladesh, India, Indonesia, Pakistan and the Philippines, are particularly vulnerable to the pandemic’s economic shockwaves with lockdowns severely curtailing activity. In the second week of April 2020, the International Labour Organization (ILO) claimed that about 400 million workers from India’s informal sector are likely to be pushed deeper into poverty due to Covid-19. If the gains of economic growth aren’t shared, like has been the case in the past decades then those at the bottom of society would enter into a vicious poverty cycle.


The idea of a Universal Basic Income (UBI) – an unconditional cash payment to all citizens – is back on the policy agenda. This renewed interest has grown alongside concerns that advances in digitalisation, coupled with shifts in demography and COVID 19 induced migration have altered and will continue to alter the structure and nature of work. An idea that has been going on for the past 200 years discussed by many well-regarded people—from Thomas Paine to Martin Luther King to Milton Friedman and Mark Zuckerberg—the idea of Universal Basic Income or Unconditional Basic Income (UBI) has come a long way.


A UBI could increase people’s capabilities to improve their own health through diet and lifestyle changes. This is because products which are local, sustainably grown fruits and vegetables tend to be more expensive than high calorie, pre-packaged, junk foods.

In his compelling Ted talk, historian Rutger Bregman clears a common misconception of poverty—that a lack of cash is the cause, not the symptom, of poverty. He proposes a simple but radical solution: give those in need a guaranteed basic income. Any person who has experienced or observed poverty would agree that it occurs not due to lack of opportunities, but rather lack of cash. It might seem counterintuitive to some based on the common thinking that the poor do not get the opportunity to have a good education or health services or nutritious quality food. Based on this understanding, many pro-poor schemes are designed to offer this opportunity by offering subsidised food, health services, and free education. These opportunities are often sub-standard (not the best quality) and its delivery marred by inefficiencies and corruption! Well if one rethinks the problem statement (poverty), the actual cause i.e. the lack of cash could easily be solved by just providing cash! Poverty is ultimately the lack of cash. Once people have cash, they could leverage the available opportunities.

The idea of UBI cures the disease of most social ills once and for all, instead of trying to treat its symptoms. The positive outcome of a UBI is manifold: it gives respect to all; it includes all; it liberates human creativity; it eliminates poverty; it empowers women; it reduces unnecessary government bureaucracy. And most importantly it reaches the poor and the needy ones!


The key question that arises here is whether a UBI would result in more economic growth, employment and consumption? Or will it result in people engaging in less, consumeristic, material activities and thereby not willing to work?[1]

OXFAM’s paper argues that poverty alleviation that is achieved without considering environmental consequences would push the biosphere beyond the limits necessary to sustain human civilization as we currently know it. It’s disappointing to notice that less than 1 % of published academic journal articles on basic income have addressed the natural environment, and none have since 2010.[2] While there is a significant amount of literature on basic income and basic income related studies. Research on environmental implications associated with a basic income guarantee are, however, severely limited.

Researchers also believe that a well thought out UBI would increase the ability of the poor to purchase higher quality, longer lasting, and sustainable goods. This may have positive environmental outcomes. Giving people more time with which to engage in sustainable practices, supporting social entrepreneurship aimed at sustainability, allowing people the ability to resist unsustainable business practices by refusing to take certain jobs and other possible positive outcomes associated with people having more time and security.

A UBI could increase people’s capabilities to improve their own health through diet and lifestyle changes. This is because products which are local, sustainably grown fruits and vegetables tend to be more expensive than high calorie, pre-packaged, junk foods. With more disposable income, studies have also shown that people tend to make better food choices and spend more time making themselves aware of nutritious food preparation. Farmers on the other hand with guaranteed income farmers could invest in sustainable production and allow them to avoid environmentally harmful practices that they may be compelled to follow due to the compulsion to avoid poverty. An increased supply of sustainably produced foods may reduce the prices of these goods to consumers, making environmentally sustainable food consumption more affordable. Zuckerberg spoke of the need for a “new social contract,” with ideas like a basic income to provide a “cushion” for everyone. Musk has described it as a “necessary” step as automation takes over human jobs.


When millions of people are losing their jobs to automation or to COVID 19, UBI is required so that they do not end in a poverty spiral. We will lose all the progress made in poverty alleviation over the last century. It is estimated that 30% of India’s urban population (around 139 million people) may deplete their lifetime savings by the end of June and would find it difficult to meet essential consumption[3]. We have been in a long phase of jobless growth and our spending on public infrastructure and services still needs more than $1.5 trillion by 2024-25.[4]


Tithi Bhattacharya in her article[5] argues that Jobs should be seen only as a means of creating wealth or ensuring economic “growth.” The regime of work under capitalism is such that the wage appears as an end in itself rather than a means to a life of dignity. But the worker is not really struggling for the wage, per se — but rather, for the life that the wage can afford. So when conditions of life worsen for working-class people, a struggle erupts. As stated by experts studying urban growth, this is a state of “accumulation without development”[6] lower-paid lower-skilled jobs are much more susceptible to replacement by automation on a large scale than higher-skilled ones, thus risking worsening income inequality between socio-economic groups.

If a UBI is implemented without any consideration of the environmental impacts caused by a surge in consumption from a sudden increase in aggregate demand, it is highly likely that environmental problems will worsen and that—without an innovative regulatory regime that protects critical ecological systems and promotes disruptive technological change. A green growth programme or a Circular Economy transition promises the conception of the job guarantee program provides such a model for a new labor ecology in which work and wages are actually in the service of saving the planet rather than counterposed to its future. A Circular Economy transition does not simply promise to create “green” jobs but would also link the jobs program to multiple forms of social sustainability in ways such that jobs can become tools to “counteract systemic injustices” rather than reproduce them.

The million-dollar or in this case the billion-dollar question is how could we go about financing the Universal Basic Programme? Herman E. Daly who is a leading proponent for steady-state economics and a pioneer of ecological economics advanced the idea of a maximum limit on both wealth and income. His arguments for both a minimum and a maximum were advanced in terms of equity and community, but the maximum limit was also supported by the need to curb the urge to expand the economy. “Since we would no longer be anxious to grow, the whole question of incentives would be less pressing”[7].

Oxfam’s report of 2020 stated that the wealth of 63 Indian billionaires was higher than the Union Budget of 2018-19 (which is around Rs 24,42,200 crore or more than 10% of the country’s GDP). The amount proposed for UBI is anchored at 7,620 rupees (US$100) per person per year. It falls below the minimum wage monthly payment in a city yet is presumed to bring extreme poverty down from 22% to less than 0.5% (The Economist, 2017a). The proposal seems simple, but is not without its challenges. First, there are doubts as to whether such a scheme could be adequately financed. Calculations have been done, and their results suggest that the money would largely come from funds freed up from approximately 950 existing welfare schemes. This includes ending in-kind benefits for the poor, as mentioned above, that equate to about 2% of GDP. Cutting additional subsidies to the middle class (e.g. on transport, cooking gas, loans) would save another 1% of GDP. However, adding up the two would not be enough, as 4.9% of GDP would be needed to cover a UBI that serves 75% of the population[8].


"I think the government would be well advised to introduce a basic income scheme, and more generally to develop a safety net in India[9]. I do not see how a lockdown can work without a system of income maintenance," Thomas Piketty


From an ethical perspective, those who consume or pollute more than the average should pay more, whereas those who consume and pollute less would be better off. Since the lives of the poor and vulnerable should not be threatened by measures taken to deal with environmental problems, high ecological taxes would be morally and politically acceptable only if combined with a compensating basic income transfer. As the European Union, South Korea and other economies release their respective New Green Deals, it is important for countries such as India to push for a more just Green Deal which shouldn’t put developing countries at a disadvantage. It has also been said that if global basic income programme that transferred $1 per day[10] from the rich world to each poor person then that would eliminate extreme poverty directly and at negligible cost. India received around $4.21 billion as foreign aid in 2017[11], noticing the amount of money that has been received by Indian in the past decades, it would be reasonable to argue whether a portion of this aid could be used for UBI.

In conclusion, the Old system is broken and outdated, as wages continue to decline, insecurity will continue to grow, and this would be a recipe for economic and social instability. A UBI has numerous merits, including its potential to enhance personal freedoms, particularly by providing a more diversified range of work arrangements. It also has the potential to empower people, especially the vulnerable (e.g. women) and the poor, and to improve the operational efficiency of welfare programmes. The argument presented here is not meant to suggest Basic Income is a panacea to all social and environmental challenges. Other social policies need to be developed to augment basic income in making a transition to a low- carbon and Circular Economy.

Footnotes

[1]MacNeill, T., & Vibert, A. (2019). Universal Basic Income and the Natural Environment: Theory and Policy, Basic Income Studies, 14(1), 20180026. doi:https://doi.org/10.1515/bis-2018-0026

[2] Ibid.

[3]https://bit.ly/30TAfZa

[4]https://bit.ly/37JTqGc

[5]Three Ways a Green New Deal Can Promote Life Over Capital by Tithi Bhattacharya https://bit.ly/2ANkrfX

[6]Heller, Patrick, Partha Mukhopadhyay, and Michael Walton. "Cabal City: Regime Theory and Indian Urbanization." June 2016.

[7]Daly 1992, p. 56, see also Daly & Cobb 1989, pp. 315-331

[8]Zhong, R. (2017). India Considers Fighting Poverty with a Universal Basic Income. The Wall Street Journal.

[9]Wells, T. R. (2019). Just End Poverty Now: The Case for a Global Minimum Income, Basic Income Studies, 14 (2), 20190009. doi: https://doi.org/10.1515/bis-2019-0009

[10]https://www.wristband.com/content/which-countries-provide-receive-most-foreign-aid/

[11]https://bit.ly/2YLZ4DZ

About the authors


Jessica Bernard works with Sustainability and Business Responsibility team of Grant Thornton India. She is an Urban Economist based in Mumbai with experience in public sector advisory and environmental consulting. 

 

Piyush Dhawan is the Cofounder of the Circular Collective was awarded the prestigious German Chancellor Fellowship last year to work on the topic of Circular Economy. He has for the past decade been working with Bilaterals and Multilaterals on a range of topics including business and biodiversity, Vision 2030 for Haryana and Future of Indian Cities.   

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