Liberia and Universal Basic Income

by William H. Benson

July 26, 2018

     According to the World Bank, of the world’s 872.3 million people who lived below the poverty line in 2014, 179.6 million, or 20% of the total, lived in India, and yet the ten poorest countries in the world lie with Africa. Officials in governments across Africa struggle with the rankest forms of poverty.

     For example, the west African country of Liberia ranks as the world’s fourth poorest country with a gross domestic product per capita of $934, or $2.65 earned per day for each of its 4.6 million people.

     Liberia, though, is one of the few countries in the world to experiment with “universal basic income,” a social program designed to help its ultra-poor.

     From 2009 until 2014, the European Union, plus Japan, deposited funds into Liberia’s “Social Cash Transfer Program.” Then, from it, Liberia’s officials issued monthly cash payments, equal to $200 in U.S. money, to slum residents in two of Liberia’s poorest counties: Bomi and Maryland.

     The results astonished officials, who expected people to squander the money on alcohol, drugs, trinkets, or gambling. Instead, the recipients spent the biggest share on food, no surprise there, but also on school, business enterprises, agricultural inputs, savings, and housing. Yes, even savings!

    One-third started their own businesses, and often they succeeded because their neighbors had the funds to spend, to purchase others’ products. The economy expanded with producers and consumers.

     Nathan Heller, author of a New Yorker article this month, said, “Universal Basic Income is, so far, a program that lives in people’s heads, untried on a national scale.” In addition to Liberia, officials in Kenya, Finland, Canada, the Netherlands, Namibia, Uganda, India, and Switzerland have dabbled with U.B.I. on a small and temporary scale, and the results in each are either similar to Liberia’s or mixed.

     Some economists and thinkers approve of U.B.I. They point to the reduced poverty, the participants’ improved health, the new business ventures, the created jobs, the reduced school dropout rate, and women’s expanded power.

     With U.B.I., boys and girls now attend school, whereas before, their parents insisted they help on the farm or in the garden or at a job to produce sufficient food for the family to prevent hunger and starvation. The African country of Namibia ran a “Basic Income Grant” from 2007 until 2012, and witnessed its school dropout rate fall from 40% to 5% and finally to near 0%.

     Because women receive a cash payment from U.B.I. also, they no longer feel helpless and dependent upon a man—father, boyfriend, husband, or lover—for money to buy food or clothing.

     Critics though denounce U.B.I., because the social program takes dollars from the “few” who pay taxes and redistributes it to “everyone.” Heller says, “People have a visceral reaction to the idea of U.B.I.,” and that some “find such payments monstrous, a model of waste and unearned rewards.”

     Critics also say that U.B.I. reduces men and women’s incentive to work, and that the temptation to squander the cash payments on alcohol or drugs remains strong.

     The major criticism though is the price tag. One U.B.I. proponent, Annie Lowrey, “thinks a U.B.I. in the United States should be a thousand dollars monthly. This means $3.9 trillion a year, close to the current expenditure of the entire federal government.”

     In other words, if implemented in the United States, U.B.I. would double the federal government’s current expenditures. How to pay for a social program of that size? Lowrey suggests “new taxes on income, carbon, estates, pollution, etc.”

     Andrew Yang, a Democrat, is running for U.S. President in 2020, and he suggests that the Federal government should adopt U.B.I. Yang is the forty-three-year old son of immigrant parents from Taiwan, and is the founder of the non-profit, Venture for America.

     To pay for U.B.I., Yang suggests a Value Added Tax. Most European countries have now initiated this new tax, that assesses a tax at each step along the production chain.

     In addition to new taxes, some U.B.I. proponents call for a rollback of all existing social programs. They “see U.B.I. as a clean, crisp way of replacing gnarled government bureaucracy.”

     In other words, match new taxes to monthly cash payments and eradicate current Federal programs. This all seems extreme, “a quantum leap in social policy.” Nathan Heller asks, “Will the public stand for such a bold measure—and if so, could it ever work?” He provides few answers.