This essay attempts to explore the potential of non-conditional cash transfers — commonly, known as universal basic income.
INTRODUCTION
The right to a good quality of life underpins a free society. While what defines ‘good quality’ may be debated, financial security is an objective component in order to survive within the established global political economy. Various attempts have been made to establish income security by spurring economic development, typically based within a capitalist framework, in low-and middle-income countries over the last 75 years. Successes include the ‘Four Asian Tigers’ (Hong Kong, Taiwan, Singapore, and South Korea) – that underwent rapid development between the 1960s and 1990s – while some attempts have been underwhelming and undermined, like victims of the World Bank’s Structural Adjustment Programs (SAPs) such as Somalia; and there are those who are in limbo, like Argentina, who have experienced, and still are, a mixture of success and failure. However, regardless of their developmental status, most countries today are united by a common factor: the absence of sufficient social protection, primarily due to the persistence of income inequality (to varying degrees, of course). In fact, according to the World Bank (2018), 46% of the world’s population is living on less than $5.50 a day, and 26.2%, primarily in lower-middle-income countries, were living on less than $3.20 a day.
Therefore, in order to, simultaneously, encourage the inclusion of low-and middle-income countries and meet the demands of a rapidly evolving, post-industrialist world where labour market structures are more flexible and, simultaneously, positioned to succumb to technological advancements while the countries are vulnerable to environmental degradation, social security must come in a radical form. As the COVID-19 pandemic has demonstrated, comprehensive social security has yet to be implemented even in high-income countries, consequently forcing several governments, such as those of the United States, United Kingdom, and France, to provide their citizens periodic payments or stimulus packages to offset the economic damage done to livelihoods and respective economies. The ‘radical’ proposal in question is the “disarmingly simple idea” (Van Parijs, 1992) of Universal Basic Income (UBI). Recently, there has been an increased acknowledgement of a rejuvenated policy approach, like cash transfers, in low-income countries and international development organisations, like the World Bank; making up for neoliberal conventional economic development policy while combatting unfair international structures, such as predatory trade agreements that weaken domestic markets and social infrastructures, to reconfigure the core tenets of development practice. UBI has advocates spanning across various political philosophies connected by its fundamental tenets of liberalism and social justice; thus, arguments range from its potential for economic efficiency in “achieving the core objectives of social security: redistributing income, alleviating poverty, and managing risk” (Martinelli, 2017, pp.5) to it providing freedom. Naturally, however, such an egalitarian belief is opposed with critics questioning its feasibility, the most common argument being how this would be paid for.
This essay will discuss the case for Universal Basic Income, within an international development context, to understand its feasibility as an economic development policy by assessing the effectiveness of established methods, specifically foreign aid and how it can be repurposed to fund this policy, and compatibility with established cultural norms of labour using results from the largest Universal Basic Income pilot project taking place in Kenya’s Siaya and Bomet Counties. The project is being administered by a United States charity called GiveDirectly and aided by a team of researchers, who conduct periodical evaluations, from Massachusetts Institute of Technology’s Poverty Action Lab and independent non-profit Innovations for Poverty who will undertake surveying. It is a 12-year, £25 million randomised-controlled trial that began in 2016 consisting of 20,847 individuals from 295 villages with four treatment groups: 1. Long-term basic income recipients (12 years, £17 a month); 2. Short-term recipients (2 years, £17 a month); 3. A group receiving the same amount as the short-term group in a lump sum (£500); and a control group not receiving cash transfers.
EFFECTIVENESS OF FOREIGN AID
While foreign aid is a fundamental pillar of international development today, initially, industrialised countries, like the United States, had been reluctant to provide official assistance to their low-income counterparts, but the Cold War provided challenges that such foreign policy presented potentially significant benefit. Therefore, in 1960, alongside its allies, the US established the Development Assistance Committee within the newly reformed Organisation for Economic Co-operation and Development (formerly known as the Organisation for European Economic Co-operation to administer Harry S. Truman’s Marshall Plan after World War Two). This formation will come to be a reflective characteristic of foreign aid (i.e., the dichotomy of aid in that it, in part, serves self-interests) over the following decades.
The effectiveness of foreign aid on alleviating poverty and sufficiently facilitating economic growth is contested, demonstrated by the absence of a consensus within development; even the state of aid is questioned, for example Kimura et al. (2010) analysed the impact of aid proliferation on economic growth. The overbearing presence of programmes and donations could potentially hinder a recipient government’s ability to manage aid inflows due to the excessive transaction costs. Understanding the prominent intellectual sects informing foreign aid and the roots of aid provides a practical starting point for assessing the relationship between official assistance and developmental states, specifically in the case of Kenya. The legitimacy of aid has been debated, to paraphrase Edwards (2014), contemporary sects can be categorised into three groups: those who argue that it is insufficient and larger increases are better suited to combat poverty traps and spur growth (Sachs, 2009); critics, such as Dambisa Moyo (2010), William Easterly (2014), who argue aid is ineffective and has stifled development by destabilising economic sovereignty and fostering dependency; and a mixed camp of scholars who emphasise the need to revaluate conventional forms of aid and present new designs, such as Abhijit Banerjee and Esther Duflo (2011).
The reason for such divergent schools of thought reflects the inconsistent nature of aid; arguably, a consequence of the fact that it was, as Boone (1996, pp.1) said, “an unprecedented economic experiment” that had no compelling evidence to justify its efficiency, or even existence before its inception.
This inconsistency can be, summarily, contextualised by the literature assessing the effectiveness of aid with its respective bilateral (focused on economic growth) or multilateral (focused on poverty reduction) source. For example, as Guillaumount and Wagner (2014) stated, “while Alvi and Senbeta (2011) provide evidence that multilateral aid best serves goals of poverty reduction, Ram (2003) provides evidence that the opposite is true for economic growth” (pp.5).
Primarily, there is the case of institutional failure. Against the backdrop of inconsistent results of aid programs in low-income countries from proceeding decades in Africa and South America, externally impacted by the elections of Margret Thatcher in 1979 and Ronald Regan in 1981, there was a perspective shift in economic development in the 80s. In Africa, this was signified by the World Bank’s “Berg Report” in 1981, which emphasised domestic failures within African countries as the primary cause of underperformance, but failed to acknowledge external factors (Howell, 1985). However, in South America, the Mexican debt crisis of 1982 demonstrated states in the region were susceptible to external shocks (a culmination of the Iranian Revolution, which disrupted global oil supply, and contractionary monetary policy by G7 countries in response). Consequently, this period saw the emerging prominence of liberalisation, market-oriented growth, and macroeconomic stability dictate Western foreign policy; by extension, reshaping the issuance of aid, it was now deployed within a neoliberal framework. Shifting the paradigm away from the planning perspective that emphasised the role of the state because the primary goal was industrialisation and commercial agriculture (Edwards, 2014; Little, 1970) in preceding decades and inducing adverse, in some cases even disastrous, impacts on recipient countries. The perspective shift was spearheaded by global institutions, specifically the IMF and World Bank, and the effects are best understood through their introduction of Structural Adjustment Programmes. Structural Adjustment Programmes were loans to service debts and fuel economic reforms to mend the inconsistent development after the 60s, partly, a result of endogenous factors, like wasteful spending on military and cronyism (Geo-
Jaja and Mangum, 2001). Loans were provided to countries on the condition they accept specific requirements, such as minimised state in favour of privatisation of public enterprises, monetary austerity in the form of, if necessary, currency devaluation, liberalised economy focused on export-oriented growth (like the ‘Asian Tigers’), and deregulation.
Critics, such as Rodrik (1990) who argued the unsustainable design of SAPs made them illiberal, and Smith (1994, pp.129) who claimed that SAPs contributed to “the greatest peacetime transfer of wealth from the periphery to the imperial center in history,” and Stiglitz (2000), have emphasised how the IMF and World Bank’s insistence on aggressive liberalisation, while exhibiting some positive results like political stability, was ultimately a failure (Riddell, 1992). Firstly, the idea of austerity-inducing loans to repay billions in collective debt was ironic policy-making that inherently meant inefficiency (Williams, 1994), which even an internal World Bank report concluded that SAP lending “means that economic expansions benefit the poor less under structural adjustment” (Easterly, 2000), but it draws this conclusion from the implication the people had “neither the skills or financial resources to benefit from high-technology jobs and cheaper imports” (Bretton Woods Project, 2001). Additionally, eroding the progress in human development several African countries had made since the 60s from significant investment in public services (Cornia et al., 1987; Buckley, 2002) and imprisoning them into a debt crisis (Williams, 1994; Chabal and Daloz, 1999; Thomson, 2010) that persisted into the new millennium, further compounding economic instability (Adedeji et al., 1990; El badwi et al., 1992).
In Kenya, SAPs were introduced following the drought of 1979–80 which exacerbated the country’s economic crises, like inflating its debt balance due to food imports (World Bank, 1983). Government healthcare expenditure cuts following this event, inevitably, further devastated the already unstable healthcare system. The shift in focus on expenditures to service debts and establish fiscal balance instead of on public goods and sector subsidisation, specifically agriculture, via financial market liberalisation increased inflation which devalued the Kenya shilling and caused interest rates to rise (Rono, 2002); destabilising the pastoral domestic economy, which most Kenyans relied upon, was unable to compete with imported commodities. Additionally, SAPs stagnated per capita income growth which exacerbated the income gap between rural and urban populations (Rono, 2002). These adverse effects plunged Kenya into serve socioeconomic distress, stifling the momentum of gradual development it made in the two decades following independence.
Ultimately, although Kenya has persevered, its relationship with aid overall has been inconsistent. Within the same period, annual average nominal aid inflow between 1970–79 was $55 million and reached a high of $1 billion between 1980–89 and fell to $889 million in the following decade (OECD, 2019) before a re-emergence of donor confidence after 2002, which came as a result of increased government borrowing to finance development projects (Mwega, 2009). The drop during the 90s can be posited to the animosity towards aid following the failure of SAPs. Consequently, Kenya’s share of official development assistance (ODA) was relatively low in comparison to its contemporaries — averaging a 1.22% share of ODA from 1980 and 3.34% among African countries (Mwega, 2009). Additionally, Mwega (2004) found that the drop in aid came alongside a decline in public investment that may have hindered Kenya’s growth potential. This inconsistency decreased the Kenyan economy’s dependency on aid, but it exemplifies the nature of the policy during this period which was dictated by the Cold War, in which Kenya had aligned itself with the West — this explains why it received large amounts in the 70s and 80s (O’Brien and Ryan, 2001). Even though it had a “mixed record on economic policy reforms and macroeconomic outcomes in the 1980s, Kenya still performed better than most African countries” (Mwega, 2009, pp.6). However, following the end of the Cold War there was no geo-political justification for such a focus reinforcing the argument that conventional forms of aid is utilised to advance donor agendas. Since the late 90s, however, aid volatility has decreased Kenya’s aid dependence because of erratic donor behaviour, most evident by the focus on program aid, or aid tied to projects, that has had unpredictable materialisations due to aid freezes and disruptions.
To a lesser degree, the lack of a robust measurement of aid effectiveness on poverty reduction and economic development is also an issue. Consequently, as Guillaumount and Wagner (2014) demonstrate, available literature displays a fragmented state of research that inform the assessment of a larger picture. Some studies utilise the Human Development Index (Boone, 1995), others have assessed specific indicators of human development like mortality rates and school enrolment. However, the aggregate impact of aid is unclear, thus obfuscating the reality of the relationship between recipient states and aid sources on a macroeconomic level.
Therefore, the failure of conventional methods of aid in producing the necessary economic development low-income countries require provides an opportunity for, in comparison, radical approaches that also provide streamlined foundational, methods of measurement — it is important to note this position should be constantly and consciously separated from the paternalistic behaviour it exhibits in order to ensure policy-making is not tainted with bias.
UNIVERSAL BASIC INCOME
Kenya already has a cash transfer scheme called the National Safety Net Program, however, only 5.3% of the population participates in government-funded schemes (Banerjee et al., 2019). Therefore, an expansive scheme broadening the recipient-base would cover more citizens and potentially generate much more efficient results. Employing Van Parijs’ (1992) commonly-used and standard definition, a universal basic income is a policy that intendeds to provide non-means tested (i.e., regardless of income, employment status, or familial relations) periodic cash transfers to everyone individually irrespective of labour performance. The premise, in essence, is to provide everybody an unconditional, guaranteed means of living. It is a rare bipartisan concept with prominent proponents, such as Thomas Paine, Dr. Martin Luther King Jr., and Milton Friedman (Negative Income Tax), advocating various forms.
It is important to note that the ‘universal’ aspect is commonly referred to a defined population, thus payments are distributed based on citizenship or other residency criteria; political preferences may go further and implement age limits and bar convicted people based on design goals. Additionally, ‘the presence of ‘basic’ does not inherently mean it is a minimum level payment’ (Martinelli, 2017) nor is it necessarily “a link with so-called basic needs… a basic income can in principle fall short of as well as exceed whatever level of income is deemed sufficient to cover a person’s basic needs” (Van Parijs, 1992, pp.4). Although the topic is highly contested, Basic Income Earth Network’s (2016) description of ‘full’ and ‘partial’ UBI helps to understand the type of scheme that is currently underway in Kenya’s Siaya and Bomet Counties; ‘full’ means “high enough to be… part of a policy strategy to eliminate material poverty and enable the social and cultural participation of every individual” and ‘partial’ would provide a low basis supplementing other incomes and means-tested benefits. The project is a mixture of both.
Alleviating poverty by raising incomes is a fundamental policy of development economics, so it would seem natural for widespread support for UBI, however, that is not the case. Given the nature of aid, this proposal challenges conventions which, naturally, generates opposition. This is because, typically, welfare policies are packaged within restrictive frameworks, like labour participation requirements and means-testing (Krinsky, 2007; Peck, 2001), due to the emphasis on efficiency. Shortcomings of non-universal cash transfers include the inducement of poverty traps (low-income countries exhibit an unfortunate prevalence of inconsistent incomes, so cash transfers for poor or working-class people pegged to income levels risks restricting a person’s ability to engage in social mobility via employment or entrepreneurship), administrative costs (means-tested cash transfers, which often run concurrently but also overlap, require constant assessment to keep track of eligible recipients; the inconsistent nature of income in low-income countries thus makes the system too costly) and paternalism (conditionality breeds paternalistic supervision of recipients, often regarded as “beneficiaries”) (Perkiö, 2014). While cash transfers overall are supplemented by a breadth of literature demonstrating their effectiveness (Hanlon et al., 2010; Standing, 2012; Handa et al., 2016), it is ultimately the absence of conditionality that UBI offers that sets it apart from its contemporaries, to reiterate, delegitimising conventional approaches that, partly, put the burden of development on recipients.
Primary arguments in favour include the emphasis UBI’s potential to alleviate, or even eradicate, poverty, Arguably, the most idealist goal of UBI proposals is the commonly understood primary purpose. This belief is underpinned by the theory that giving people a consistent income will increase self-sufficiency, which in turn, can increase productive capacity because its periodical insurance mechanism plugs the income and consumption deficit allowing people to investment in themselves, like becoming entrepreneurs by incorporating themselves into or take on risky but potentially rewarding jobs in the growing gig economy. The COVID-19 pandemic and strict lockdowns imposed by the Kenyan government has, abruptly, disturbed the GiveDirectly experiment, but Banerjee et al. (2020) conducted a survey to understand the impact of a harsh economic crisis. They found that among those in study group not receiving any form of UBI, 68% of households reported food insecurity while recipients of UBI in all three groups were 4.9% to 10.8% less likely to report experiencing food insecurity. Relatedly, food prices did not dramatically increase although supply chains were disrupted due to lockdowns. Instead, the incomes allowed people in the villages to eat better (Banerjee et al., 2020); this supports existing literature (Heaslip et al., 2018) that suggests material outcomes like food security impacted by supply chain disruptions caused by disasters can withstand the shock thanks to demand side interventions like cash transfers.
Although empirical evidence is limited, literature on how UBI affects gender relations suggests the liberalising aspects of the policy are evident in this regard. Employing a gender analysis of the underlying patriarchal system that structures societies and determines the validity of the people who live in it provides an understanding of the issues at hand. Given women are relegated to the institution of the household and men are typically the sole breadwinner, reproductive labour becomes the responsibility of girls and women. This labour is unpaid and, ultimately, unrecognised — in that policies do not seek to legitimise it in a normative sense but rather address it as an obstacle to social mobility — by mainstream development economic indicators like Gross Domestic Product (GDP); it restricts opportunities for girls and women and participation within the country (Yeates, 2009); and by extension, dictates typical social security policies which are linked to remunerated labour, thus insufficiently addressing the gender inequality (Schulz, 2017). However, UBI’s individualised nature can improve gender relations by remunerating this labour and providing a buffer for the disadvantaged status of women in the labour market, thus decreasing the dependency that patriarchy breeds and imprisons girls and women and increasing their bargaining power by offering all them a guaranteed periodical income.
On the other hand, a main point of contention is the impact on labour market outcomes and policies. In essence, this argument believes UBI would disincentivise work; eventually, making work obsolete because people will have a guaranteed income to meet the needs of survival. Fundamental economic theory of labour supply predicts that people will work less if they gain a sudden cash injection. Critics believe as a result of this external income, people will make trade-offs which sees them trading more work, which means more income (a gain), for more leisure (a cost) (Baird et al., 2018). Inversely, it can be argued that time is valuable and spending that time earning an income is, equally, a cost. This potential scenario demonstrates the liberal characteristics of UBI. Other scenarios include the alleviation of liquidity and risk constraints, for example people will be endowed with access to capital that had been unattainable due to credit restrictions based on their socio-economic status, and thus will invest in themselves by starting their own businesses; and similarly, working-class people will be more likely to take risks to gain higher rewards because of the “access to a steady stream of cash transfers (Baird et al., 2018, pp.4) provides insurance. Banerjee et al. (2020) found that investment in small businesses made before the pandemic managed to, in general, withstand the economic shock. However, the researchers note that this does not make UBI a silver bullet but rather a cushion because overall incomes were hit harder in the recipient group than in the controlled group.
Moreover, while advocates of basic income argue that it would supplement existing labour protections, critics contend that it would instead increase the likelihood of subsidising low wages. To which advocates argue, a basic income would have an inverse effect: decreasing the vulnerability of workers by reducing the necessity of protections and market regulations because it would strengthen individual bargaining power (Groot, 2002). Relatedly, this is informed by the underlying cultural norms of societies that subscribe to the capitalist doctrine of the global political economy which determines how people are socialised to understand income. Literature investigating the negative reaction to the proposal of a UBI is sparse, but researchers, such as Andersson and Kangas (2005), Vlandas (2019), and Parolin and Siöland (2020), have investigated the impact of public support on the implementation of UBI. It suggests that public support for implementation could be stifled by the ideological contrast of UBI being post-productivist (Goodin 2001; Bauman 2005; Kozák, 2020), given it fundamentally delegitimises conventional understanding of income — that is, people should not be forced to work in order to survive (Offe 2001; De Wispelaere and Noguera 2012). The argument emphasises the reality of traditionality that prioritises paid work as a fundamental aspect of individuality in modern work-societies (Offe 1992), thus this socialisation makes the public less inclined to accept the normative legitimacy of a drastic proposal that would decouple income and benefits from income-earning activities (Offe et al. 1996; Kozák, 2020). However, there is no evidence to suggest that this would be a reality. In fact, there is no evidence to suggest cash transfers create a dependency on a guaranteed income or will negatively impact labour market structures, especially regarding supply (Banerjee et al., 2017).
A primary obstacle of UBI is cost. Naturally, while the promise of an economic foundation providing financial security for everyone is ideal, paying for it — on top, or instead, of other means-tested benefit systems — is a logical point of concern. Van Parijs (2004) clarifies that the definition of UBI does not include a specific funding system, rather guidance that “under some specifications — for example, ‘abolish all existing benefits and redistribute the corresponding revenues in the form of an equal low benefit for all’” (pp.18) UBI is, clearly, affordable, but under others like “keeping all existing benefits” is not. However, in this case, the funding would come as either a portion or all of foreign aid repurposed depending on what administers of the scheme deem appropriate. For example, Kenya received £2.3 billion in ODA in 2018 (OECD, 2018). In order to survive in rural areas, one needs Ksh3, 252 (£21.88) and Ksh5,600 (£37.67) in urban areas (KNBS, 2020). Therefore, even 1% of aid a year set aside to fund a UBI for all (population: 51.39 million (2018)) at Ksh6,500 (£43.64) every month is enough.
CONCLUSION
To conclude, this essay has attempted to demonstrate how Universal Basic Income can rejuvenate economic development practice by expanding the typical approach of the interplay of states and markets for social security, primarily via means-tested benefits and conditional insurance, that has dictated international development. UBI’s foundational principles of liberty and universalism may not fix everything, but it is a cost-effective method to generate social mobility and make life easier for people; it is also the best-suited policy currently available to accommodate gradual inclusion into the rapidly changing global political economy. It offers an opportunity to equip people with the tools necessary for strengthening social and economic relations both on a micro-level between each other and on a macro-level between the state and foreign actors (i.e., trade agreements). Although the Kenya experiment is ongoing, it has provided results that prove it is well-positioned to offer the most complete assessment of UBI yet.
