Political feasibility of a Global Basic Income: proposal for a global reimbursable tax credit

Many ideas for implementing a global basic income as a remedy for extreme poverty are attractive theoretically - but infeasible geopolitically. To move the world's antipoverty agenda forward, detailed proposals are needed for the design, administration and cost of viable guaranteed income programs. To be politically persuasive, such proposals need to emphasize how a guaranteed income approach is not only desirable but affordable.

Along these lines, a proposal I advocate is a global reimbursable tax credit (a form of negative income tax). Essentially developing countries could choose to make a reimbursable tax credit available to individuals whose income falls below $365 a year. Instead of being liable for a positive tax payment, qualifying tax filers would instead receive a payment equal to the difference between their actual income and the $365 threshold. The United Nations would provide support to participating countries through formula-based cost-sharing arrangements and technical assistance. To underpin its share of the total cost, the UN would establish a Global Tax Credit Fund, to which wealthier nations and others would contribute.

The program on a global scale would cost much less than more utopian approaches. First, the target population is the world's poorest people, not everyone on the planet. Second, the credit covers only the gap between an individual's actual annual income and $365. Participation in the program by developing countries will be very gradual (e.g. their tax systems would first have to meet UN standards). Also, take-up rates by poor people in participating countries will be low at first for a variety of reasons (e.g. lack of literacy, distrust of government). The program will benefit from such incremental expansion, as participating nations and the UN work to improve its administration, target-efficiency and financing based on early feedback.

Like other notions, a global reimbursable tax credit is not feasible in the world we know. Given the trends in globalization, however, it is likely to become so in the world we will be coming to know. Due in part to massive international capital flows, for example, developing countries are under increasing pressure to reform and modernize their tax systems. Building in a reimbursable tax credit would enable the world's poorest to benefit from such modernization.

As one (not the only) assault on extreme global poverty, a reimbursable tax credit is preferable to other guaranteed income schemes that are asymptotically long-term, never quite touching the axis of political feasibility.

Note: I am elaborating the tax credit approach in a book-in-progress provisionally titled Giving Credit: A Path to Global Poverty Reduction. An early draft of the manuscript is available for perusal and comment at: http://members.cox.net/rclark41/BobClark.htm.

Robert F. Clark

I would like to make a clear distinction between the economic affordability and the political feasibility of global basic income (GBI) proposals. Affordability is, I think, not an issue. When a single country wants to introduce a basic income, then possible negative consequences for the competitiveness of companies, such as higher wages and taxes, have to be considered. A lot will depend on how the basic income will be financed and on the basic income level. The introduction of a global basic income, however, will not have negative effects on the competitiveness of a particular country. A GBI will only level the playing field for all countries. Therefore, affordability is not really a problem.

The world community can decide that each country should contribute 0.7% of their GNI to finance a GBI - which now is the OECD target for Official Development Assistance -, but also less or more. Why not 1% or 2% or even 10%? It's all a matter of public opinion an political will. How much is the world community prepared to spend to make sure that every child and adult has enough for basic needs? Do we feel that this is more important than other desires and goals that we can spend our money on? That is the only decisive question that has to be answered.

Of course, when we're talking about the political feasibility of GBI proposals, then the costs will unfortunately play an important role in the discussions. Proposals that cost less have a greater chance of being accepted. Other aspects, however, will also be important such as the practicability. A big minus of the global reimbursable tax credit proposal is, that it will be much more complicated to implement than an unconditional GBI. An extensive bureaucracy will be needed to identify the 1.1 billion people in the world that are entitled to the tax credit, and it will be even more difficult to precisely determine their income and the difference with the threshold of $365 a year. Is this at all possible, given the fact that so many people in developing countries earn their small income in the informal economy?

A second disadvantage of the proposed tax credit is, of course, that the poor will profit less than in case of an unconditional GBI. They will only receive the difference between their actual income and the threshold. The 1.6 billion people who now have an income between $1 and $2 a day will get nothing. Moreover, the poorest people living in countries with a tax system that doesn't meet UN-standards will also receive nothing.

Another disadvantage of the proposed global reimbursable tax credit in comparison with an unconditional GBI is, that it doesn't change the present unequal relations between donor countries on the one hand and the receiving countries and individual recipients on the other. An unconditional GBI for everyone, rich and poor - preferably funded through global taxes, rents or dividends - would reduce or remove this inequality and the resulting dependency and stigmatisation.

To conclude, I think that we should not yet focus too much on details and political feasibility, because the concept of a GBI is still in an early stage of development. It is important to present the concept in a clear, understandable way and to discuss freely about all options, however infeasible they may seem. Both, the free exchange of ideas and debates about more detailed proposals, can help in spreading the idea and gaining support.

René Heeskens

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Viability of basic income in marginalised local economies: South Africa, Nigeria

Dear Director,

You will be aware that there is dispute over the Basic Income Grant (BIG) in South Africa where unemployment tops 40% and, in poor areas, some 75% to 84% of adults have no significant economic activity. The dispute is not just between its proponents and government, but also between the advocates of a BIG and a growing group of economists and planners and communities that believe that the expenditure pattern in the second, marginalised local economies makes social grants financially and economically inefficient. This is because, in these marginalised economies where the poor live, money given as social grants for mainly individual consumption purposes leaves the local area immediately because of the long, historical dependence on the global or first economy. This process is now reinforced by globalisation.

The alternative for a BIG is a "Social and Economic Rights programming" approach that sends all funds for social expenditure, except those for pensions and disabilities, not to individuals but to communities. Child, Health and Investment Rights are the cornerstone programmes 'on offer' to citizens who then mobilise and organise as various programme communities to fit programme purposes locally. Called 'The Community Investment Programme', it has the backing of church and civil society bodies and is being actively examined by government.

Such 'Rights' funding acts to form the village and street / neighbourhood as 'partners' of the state and, for investment in the community resource base, into what amounts to democratic property companies of equal owners (male and female). This creates a powerful renewal of the African traditions of Ubuntu, of 'living through each other' and of joint ownership of the resource base. It unlocks not just traditional cultural dynamics but the labour of the poor - their greatest asset - as investment. Modernisation takes the form of the best, democratically owned, modern and legal organisation.

The use of social grant monies first for public purposes keeps the funds 'working' locally. These monies first feed all the children with mainly locally grown food. This helps parents to earn the monies to pay school fees so that the community can guarantee the best for all its children. And it provides the investment resources to build the common productive base upon which adults and children can grow the food and other local needs. Health rights move citizens to a new responsibility beyond the state's struggle to provide medical services to an unhealthy population.

Together, these rights programmes act to mobilise and organise communities and to raise the local income multiplier, now around a pathetic 1.3, to 3.0 or higher, doubling and then tripling local effective demand within now differentiated local markets that seek primarily to reward local production of goods and of services. Later, the enlarged cash circulating emerges as private consumption monies earned by work, by the production and sale of goods and of services, or as a dividend from greatly enlarged ownership of productive resources. This is a vital corrective in countries where there is a historically developed high dependence by rural areas and townships on the now global economy for jobs, services and goods. It levels the field between the global and the marginalised economies by achieving the fundamental right of all citizens to live in 'Working Local Economies'.

For the formal sector, ownership should take the form of democratic employee ownership. There are now successful company models and an Employee Ownership Association Africa that promotes this dynamic model.

Between the Community Investment Programme (CIP) and Employee Ownership of a democratic type, there is every possibility that South Africa can re-emerge as an 'democratic' ownership society of competent citizens organised and resourced to care for each other within working local economies.

I have prepared a document on the Community Investment Programme, which has been approved by Civil Society in Kwa-Zulu Natal, the largest and poorest province, and consequently I have been asked to rewrite the national Local Economic Development policy. (Those who are interested can receive the document. Send your request to: Norman Reynolds, marketnr@iafrica.com.)

Perhaps the GBI Foundation, BIEN and other proponents of a Basic Income Grant might wish to add a new category to the BIG, one that fits conditions of inactivity, poverty and dependence far, far worse than those of Europe. An approach is needed that acknowledges that there are special conditions elsewhere that require more adapted methods to achieve citizen economic participation and economic security. The CIP renews African common ownership and action through community albeit within modern best practice institutions.

Do publicise this argument / movement as it applies to many countries.

Yours,

Norman Reynolds
The Peoples' Agenda, Johannesburg

Dear Sirs,

I would agree wholeheartedly with the viewpoint expressed by Dr. Norman Reynolds.

Regards,

(Prof.) Johan van Zuyl

Dear Norman,

First, I would like to thank you for your contribution. The question you raise, whether a basic income and other social grants are financially and economically the best solution in marginalised, local economies, is an important one. Especially in case of a global basic income, it is important to discuss if it can and should be implemented in all countries, despite differences in economic circumstances. Also other factors, like cultural habits and values, might make it difficult to introduce a GBI all over the world. But lets focus now on the economic issue that you commented upon.

I do think that your argumentation is sound: it would be a serious problem if a social grant is only used by people to consume goods from the global economy and if it does nothing to develop the local economy. Moreover, I am very positive about the Community Investment Programme that you are working on. Nevertheless, I think that we are talking about a very complex matter, and I allow myself to raise a number of critical questions.

First of all, I doubt that the introduction of a GBI would only boost consumption and would do little to improve the production and work opportunities in marginalised local economies. What the effects of the introduction of a real and substantial basic income are, still remains to be seen, because it has not yet been introduced anywhere in the world. The important difference between a basic income and other social grants is, that a basic income is unconditional. This will have an important impact on the self-image and the actual opportunities of people. Present social security grants often keep people imprisoned, because of all the rules and conditions and controls that people are subjected to when they receive a social grant. Moreover, people loose their unemployment grant or minimal social security payment, as soon as they start to work. This often discourages people to start working again.

A basic income frees people. It ensures them of the means they need for basic necessities, without bothering them with any conditions. People receive a basic income as a right, not as charity. I believe that a basic income can do a lot to free the potential in people. Moreover, I believe that most people have a desire to do productive work and contribute to society in one way or another, and they will positively act upon the freedom that a basic income gives them.

Secondly, I don't see the Community Investment Programme and Global Basic Income as opposing possibilities, that compete with each other for the same money. I think that what we need in the world today is a two-way approach, one starting from the bottom up, the other starting from the global level. Changes have to be rooted in the concrete, daily lives of people, in local circumstances, but we also need a global approach. There are many acute problems in the world that transcend national boundaries. We urgently need a stronger global consciousness and a stronger capacity of the international community to solve these problems. That is where a GBI comes in: if the world community agrees on the introduction of a GBI, even if it is just a small amount to start with, this would be a strong declaration of global consciousness and human solidarity. It would be an important step to bridge differences between countries and the ever increasing gap between rich and poor. In my opinion this gap is the most important obstacle for a concerted effort of the international community to solve global problems like global warming, migration or 'terrorist' violence.

Thirdly, the weakness of a basic income, as opposed to CIP, namely that it is an individual grant, is also its strength. The weakness is, that people might spend their basic income unwisely and not to the benefit of the local community. The strength is that a basic income frees everyone and ensures every individual the means for basic survival needs. My fear with CIP is, that if it succeeds in strengthening the local economy and improving the lives of a majority of people, there will still be people who will not profit. A first reason for this fear is my experience with living in a rich country: even in rich countries with flourishing economies, there are poor and excluded people. It's also based on the fact that collective decision making with an equal participation of everyone is difficult to achieve. There are so many examples of failure. How does CIP ensure that everyone is included? Is CIP only meant for smaller local communities, where everybody knows each other, or can it also be implemented in larger country communities and in cities?

A GBI is a radical, direct and simple solution for eradication of extreme poverty and hunger everywhere in the world, regardless of differences in circumstances. (I mean simple as a method. It will, of course, not be simple to gain enough support of the international community and world leaders for the introduction of a GBI.) There can be circumstances where the money could be invested in other ways with better results, but in my opinion the advantage of GBI as a solution for the eradication of poverty all over the world outweighs this disadvantage.

I think it's possible to combine CIP and GBI. As said before, both are not necessarily competing for the same funds. Moreover, I would like to discuss further the possibility and desirability of a differentiated implementation of GBI. If circumstances require it, part of a GBI can be spent collectively on education or health care, or could be invested through CIP's. Still, I do think that it is important to distribute at least a part of the GBI as an unconditional, individual grant in all circumstances. The fact that a GBI is an individual grant, does not reflect an individualistic ethic. On the contrary, it is a mutual recognition of all people of each others dignity, and as such it functions as a cornerstone for a strong sense of community.

What are your ideas about combining GBI and CIP in a two-way approach?

Regards,

René Heeskens

I agree that CIP and GBI are not competing ideas, that there are strengths and weaknesses both ways. When we - Earth Rights Institute - first began advocating for a Niger Delta Fund in partnership with our Nigerian colleagues, we had direct Citizen Dividends in mind. When we considered the situation more closely, knowing that the communities needed infrastructure and to develop local based economy, we geared into ecovillage development mode and now would rather have oil royalties go into funds for this.

What we also see in Africa is that when land does become a market commodity, there is tremendous land speculation and profiteering, and to solve this we urge full land value capture, as recommended by UN Action Agenda in 1996 at UN HABITAT conference. Local, state or federal level can set up land value capture mechanisms and distribute those funds for infrastructure development AND Citizen Dividends. People could decide through a Peoples Budget process how much goes where.

Alanna Hartzok

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