The Pitfalls of Basic Income

Public opinion on basic income is evenly divided. Before the COVID crisis, public perceptions of basic income were quite critical. It was mainly denounced as populism, or even a communist idea. But now, amid the outbreak of a plague and the proliferation of extraordinary policies, an atmosphere has formed in which basic income is seen as precisely the urgent task of our time. With most politicians, regardless of party, seeking to implement basic income, the foremost task in blocking bad law will be to reverse public opinion, which is still split roughly in half but is gradually tilting toward support. So how can the liberal camp persuade citizens who are favorable toward basic income or still undecided?

To begin with, people today seem at least somewhat aware that basic income is by no means free and must be financed through taxes or debt. Before all other discussion, society must come to a consensus on the immutable truth that the state has no independent resources of its own, and that for every kindly hand that gives something away, there must be another hand on the opposite side that forcibly takes something away. Naturally, the concept of “coercive plunder” here includes both taxation and monetary expansion.

Next come issues such as fiscal conditions and a decline in labor supply. These, too, are extremely important topics. When supporters of basic income advance distorted claims that public finances are sufficient or that there is no reason labor supply would decline, those claims must be rebutted rigorously on economic grounds. However, in one-on-one conversations aimed at persuading individual citizens, these themes are not especially suitable. No matter how rationally one explains economic realities, all it takes is a single retort—“So what? In this crisis, are you just going to let everyone with no money and no job starve to death?”—to render an impassioned lecture pointless. This is very much in line with one of Frédéric Bastiat’s laments: “In political economy, it is difficult to prove that two and two make four. And if you succeed in doing so, people cry out: ‘That is so obvious that it is boring.’ Then they vote as if you had proved nothing at all.” Truly, there could hardly be a complaint more fitting to the present situation.

What we therefore need is something more than the claim that basic income is merely “a policy with side effects or even a risk of bankruptcy.” We must argue that basic income stands on a deeply fundamental error, that it is a system wholly harmful and incapable from the outset of achieving the very goals it claims to pursue, and that behind its seemingly moral façade lie destructive properties that completely obliterate humane values. Its fundamental error, most notably, is that it severs income from labor. Is income, the means to make a living, something that can simply be obtained for free? Should it be society’s default setting? In a modern democratic state, must a minimum income be guaranteed even without labor? No.

This is not merely false under liberal philosophy. It is false because, in truth, someone must endure arduous labor in order to produce what we call “income.” As Bastiat said, man must necessarily choose one of two pains: the pain of want or the pain of labor. Basic income is wrong precisely because it overlooks this self-evident truth. Or rather, supporters of basic income know this better than anyone else; they simply do not say it aloud. Bastiat also acknowledged that there is one way to avoid both pains: to take the fruits of another person’s labor. In other words, the essence of basic income is this: the pain of labor is imposed on others, while the income that is the product of labor is claimed for oneself. We abandon the capitalist system in which each person works and earns his own income, and begin, quite literally, a game of hot potato in which everyone may receive a basic income, but only some unlucky people are saddled with the calamity of excess labor. We can say to citizens quite bluntly: “If you agree to a system that is effectively a form of slavery—one in which labor is shifted onto others while I embrace the income—then you are left-wing. And I consider that left-wing mode of thinking base and immoral.”

Next, the effectiveness and legitimacy of raising taxes on the rich can become subjects of discussion. People must first be made to understand that higher taxes on the rich inevitably undermine capital accumulation and reduce spending on employment, ultimately boomeranging back onto low-income groups. It may also help to add a discussion of the rich-get-richer, poor-get-poorer phenomenon, perhaps the ultimate left-wing cliché. At least in a pure free market, the rich do not become rich by exploiting the share of the poor, but by providing the best service to consumers; this argument is perfectly suited to undermining the philosophical foundation of basic income. As history shows, while Samsung and Hyundai grew into major conglomerates and amassed enormous wealth, the income level of all South Koreans also rose spectacularly. The point is to stress that the rich become rich not because of exploitation, but because of voluntary exchange and innovation in a free market.

Finally, we must discuss the actual treatment of the poor. Basic income presents itself as a means to prevent or eradicate severe poverty among the poor. If so, we must emphasize that basic income cannot accomplish that goal, and that what can truly drive out poverty is capitalism, along with “the voluntary good deeds of decent citizens.” In the end, the agents capable of helping the poor are individuals, not the state, which has no “private funds” of its own. Unlike state-led redistribution, private charity does not stifle capital and can fight poverty more efficiently.

Of course, many argue that in a fully free market without a coercive state redistribution system, donations would ultimately fail to materialize and the very concept of social welfare would disappear. One might even find such an implication in Ludwig von Mises: “What those demanding equality always have in mind is an increase in their own power to consume. While supporting the principle of equality as a political demand, no one wants to share his own income with those who have less.” People who hear this sharp admonition may reflect on themselves. If someone takes offense at Mises’s words and insists that he truly sought equality out of sincere concern for the weak, then all the better. He has fallen into the liberal midwife’s art. Let us say this to him: “Even without basic income, even without the state’s coercive redistribution, we still have you. You are a decent citizen so concerned about the plight of the poor that you have come to feel the urgent need for basic income. Therefore, someone like you would help the poor even without basic income, even without the state’s redistribution system. You will prove Mises wrong. And this society, as the sum of decent citizens like you, will in the end fight poverty with its own hands.”

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Original title: 기본소득의 맹점들

Author: Ji-won Kang

Date: 2020-07-06

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=free_opinion&pn=13&idx=22902