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"It was the best of times, it was the worst of times."
This quote accurately describes 2020, when we first began grappling with the Covid pandemic.
Wait, how was it the best of times?
For billionaires it definitely was. While most of us struggled with job losses (200 million people have lost their jobs due to Covid), rent, and hospital bills during the pandemic, US billionaires added $1.2 trillion to their wealth!
Thankfully the government stepped in at the time.
To tackle the loss of livelihood caused by the pandemic, most developed nations introduced some kind of stimulus payments.
In fact, one in every six people worldwide received government assistance during the pandemic!
                                                  Source: Bloomberg.com
Even the tiny African country Togo, which had a GDP of $7.57 billion in 2020, gave $19.5 million to around 12% of its population. Not just that, the country managed to create a payment method to send this money directly to people digitally, in just 10 days!
Yes, when even major countries like the US were struggling to deliver stimulus cheques to people on time, Togo figured out a way to decide the who, what, and how of stimulus payments in little more than a week.
Togo's success shows us that if you remove bureaucracy from the equation and add some efficient planning, most countries (especially the wealthy ones) can easily introduce quick stimulus payments.
But were the stimulus payments enough? Did they actually help?
✊ Stimulus Paved Way for Financial Freedom
Absolutely! As people got free cash, those who had been scared of investing and trading, began to do so. You see, they weren't scared of losing their own money. Can’t really say if that is a good thing for everyone.
But thanks to the stimulus cheques and the increased unemployment payments, many were finally able to leave their low-paying jobs to study further or even look for better jobs.
All in all, these benefits highlighted the importance of universal basic income (UBI): a concept, whose feasibility many nations have been exploring, but haven’t really started implementing aggressively.
🤑 Cash with No Strings Attached
The idea of universal basic income proposes that everyone, yes everyone, should get free monthly cash payments from the government.Â
Sounds like a dream come true! But, how would something like this even be possible?
Just ask Alaskans! They've been getting free $1,000-$2,000 payments every year since 1982. But how can one survive with just $1,000-$2,000 (INR 70K-140K) each year?
Well, these payments are not supposed to allow you to quit your job and live your dream life. Otherwise, everyone would just do that.Â
UBI payments are just supposed to be saved up for rainy days when you desperately need money.
Or allow you to quit a toxic job before you can find a new one.
These regular cash inflows could also help housewives, who are usually dependent on others, gain a little financial freedom. It may give the oppressed some bargaining power.
Many cities and countries have realised this after the pandemic and are trying to implement universal basic income in some form. Los Angeles, for instance, began trials with a universal basic income program earlier this year.
🤔 Why Pay the Rich?
But why should everyone, even the rich and wealthy, get these payments? Why not just give them to the needy?
This is exactly why universal basic income has not become a reality. Even many cities which are hosting pilot programs are only focusing on giving money to a certain section of the society. They are trying to provide a guaranteed income for the poor instead of a universal basic income for all.Â
This is problematic.
While no one wants Jeff Bezos or Mark Zuckerberg to have more money, identifying exactly who is in need and who should get money is a very difficult process.Â
And chances are that if we pick and choose, someone will always be left out even though they need the money.
Think about it: many of us earn a mediocre salary. But on that, we have to pay huge taxes and handle countless expenses.
Ultimately you're hardly left with any money for savings or investment. So, even though on paper you're well off, the reality is much different.
Maybe it would be better if the amount is disbursed to everyone. It will anyway be like peanuts for the richie-richs. It won’t even matter.
And if we still feel the rich are still getting more, then we could just tax them more.
This would give the government more funds to distribute. So, problem solved?
🤨 Will UBI become the New Zero?
Well, hardly. If the solution was this simple it probably would have been implemented long back.
If universal basic income becomes a thing, everybody will start getting the same amount every month, and commodities will become more affordable.
So, demand will increase, while the supply remains the same.
Result? Demand-pull inflation.
Soon, the amount of UBI will be worth nothing.
While the above scenario sounds plausible, supporters of the scheme argue that UBI is merely a redistribution of resources. The age-old welfare schemes would give the poor direct access to goods, whereas UBI replaces those goodies with cash.
However, we’re operating under a major assumption. UBI may not be used for good. There’s always a possibility that the money will be used for gambling or drinking. That’s what the critics of UBI think.
And what do we think?
Today, we have only questions, no answers, just like the governments.Â
How to get to the answers? As more cities and states try out UBI programs, we’ll have clearer results.Â
India is already taking a step towards this. Chhattisgarh has launched a programme to provide monthly stipends for unemployed youth.Â
What’s your take on this? Should more states do this? Should India have a universal basic income programme?
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