Corona Daily 475: A Precedent is Set

The theory, not the practice, of Basic Income started five hundred years ago with Juan Vives’ book On Subsidies to the Poor (1526). Bertrand Russell argued in its favour one hundred years ago. Milton Friedman proposed negative taxation, where below a certain income level, the government pays you. Tesla’s Elon Musk and FB founder Mark Zuckerburg have been enthusiastic about its implementation. Just before the pandemic, Andrew Yang, a US democrat, had made it the backbone of his campaign. And last week, the Pope called for a universal basic wage.

Why should something that has not happened for five hundred years happen now? Once this nightmare is over, wouldn’t it be business as usual? Isn’t public memory short?

Two reasons why the basic income reform may actually happen.  

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Public memory is short. But pandemics can be long. Their devastating impact can drive the world to change the ways in which it operates. A pandemic underlines the fact that the health of a society depends on the health of the most vulnerable.

After Black Death, the 14^th century plague pandemic, public health was institutionalized and made a state responsibility. All wars were temporarily abandoned. (Currently, no news on Syria, Brexit, Kashmir, Ukraine etc). Viruses have checked imperialist projects. Napoleon’s transatlantic ambitions were halted by a yellow fever epidemic in today’s Haiti. His eastern ambitions were thwarted by dysentery and typhus.

Covid-19 pandemic, if it continues for two years, will be equivalent to a World War in terms of the resultant economic devastation. The Second World War, though a man-made event, gave birth to several reforms. Decolonisation was one of its biggest gifts. Global institutions such as the United Nations and International Court of Justice; and UK’s NHS - free health care for all, were all products of the Second World War.

A prolonged pandemic is likely to halt wars for a few years. But like the WWII, it may trigger reforms that could not happen in normal times.

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The second reason is the actions that have started. The USA has legislated a cash transfer of 1200 $ to people below a certain earning level. Another proposal to give 2000 $ for six months is under consideration. The UK govt has promised to pay 80% of salaries under certain conditions. Spain will start a basic income scheme for its poorest. The longer these rescue acts continue, the more difficult it becomes to withdraw them. Any HR manager will tell you that reducing somebody’s package is simply not done. These countries will need to have a rationale for stopping such direct transfers. They will also need to explain how they are funding the stimulus packages.

In a few months, poorer nations will be obliged to borrow, and institute similar basic income schemes for their citizens. Lockdowns will lose all meaning if starvation and bankruptcies kill the people saved from the virus.

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A precedent has been set. It can be binding in the future.

Ravi

Corona Daily 476: UBI: My Four Point Plan

There are two schools of the Universal Basic Income advocates. One wants to replace the existing social security with UBI. The other wants to retain all the current welfare measures and have UBI added on.

If social security were scrapped, financing UBI is easy. In the USA, by dismantling the current social security, 92% money needed for UBI (13000 $ a year) will be released. But this could make matters worse for many beneficiaries (maternal/disability). Switzerland rejected UBI because of this threat.

UBI as an incremental income stands a chance. It is more expensive, but beneficial for low-income countries with no social security. Following is my four-point plan.

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Start with 200 $ per annum: to every person in the world, to get the UBI ball rolling, to establish the principle. Americans looking for 13000 $ will be shocked at the 200 $ figure. But 200 $ per annum will overnight take entire Sub-Saharan Africa (more than 1 billion), and poorest Asian countries like Bangladesh, Nepal, Myanmar (more than 500 million) out of poverty. Remember it is 200 $ per head, so a family of five gets 1000 $, which is enough for survival in low-income countries.

The cost of paying 200 $ annually to everyone in the world is 7.8 billion x 200 $= 1.56 trillion $.

(To get a perspective, in 2009, G20 paid 9.6 trillion $ to rescue the financial sector, six times the above amount.)

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Moratorium on wars for 10 years: USA not engaging in a war would guarantee such a moratorium. Current military expenditure is at least 1.822 trillion $ per annum. Save and allocate 30% of this cost to UBI. = 546 billion $.

This is not a pipe dream. Costa Rica and Thailand reallocated military expenditure to social security. Costa Rica, in fact, abolished its army in 1948. Its constitution makes re-forming it illegal.   

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Start denuclearising the world: The pandemic has once again highlighted the utter uselessness of nuclear budgets. 190 states of the world have pledged in writing not to have nuclear weapons. Only 9 states have that white elephant in the name of deterrence. This undemocratic savagery must end. An estimated 70 billion $ are spent on nukes each year. Allocate 20% of that budget to UBI (and the rest to dismantling). = 14 billion $.

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Inheritance tax: Currently, the world’s 47 million $-millionaires hold a combined wealth of 160 trillion $. (44% of global wealth held by 0.6%). Their average age is above sixty, so by 2060 most of them will be dead. Charging 25% inheritance tax (net of exemptions) will produce 40 trillion dollars over the next forty years. = 1 trillion $ per annum.

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Cutting military expenditure (546 bn $), denuclearisation (14 bn $) and inheritance tax (1 trillion $) are able to finance paying 200 $ per annum to every citizen of the world, directly benefiting the poorest of the poor.  The four-point plan also triggers the building of infrastructure for cash transfers.

As to why any of this should or may happen just because of a small virus, I will answer tomorrow.

Ravi

Corona Daily 477: Don’t throw the UBI out with the bathwater

My definition of the ‘Universal’ in UBI is that every person in the world is given a survival salary. Like climate change, UBI is more meaningful if tackled globally. Of course, countries are so diverse, implementation will take a few years, but that is the destination. A body like the G-7 or G-20 can be made responsible. Contributions and payments are a matter of bookkeeping.

Why should America give free money to a woman in Africa, you may ask.

America should, because Nike shoes are made by the poor in Bangladesh or Vietnam, sometimes in sweat shops. (They just do it.) On the other hand, Nike Inc. pays dividends mainly to Americans.

More than 2 billion non-Americans keep creating content freely to keep Mark Zuckerberg in the top ten list.

Jeff Bezos, the world’s richest man, gets richer every time a Chinese or an Indian places online orders with Amazon. In the USA, Amazon has paid zero federal income tax in the last two years.

A Sovereign state or nation state are political concepts. Trade and money-making are global.  Stock markets of all countries move together like synchronised swimmers.

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In my view, UBI has been discussed or tried in the wrong countries. American economists discuss UBI for Americans, and the Swiss reject UBI in a referendum. Both were blunders. The sums became so astronomical; UBI was thrown out with the bathwater.

It’s like an 18-year old who wants a vehicle to travel to his university four miles away. His father looks at the price of the Mercedes, and says buying a vehicle is a bad idea. But a second-hand car could have been bought. Or a bicycle. A bicycle is all that the son needs, why even look at the Mercedes pricelist?

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My suggestion is to separate the principle and the amount. Establish the principle first. Don’t start with 1000 dollars; start with 100 dollars a month. That amount is in fact adequate for survival in many countries, including India. UBI is critical for poor countries, with little or no social security. Tomorrow I will give specific figures for a worldwide UBI system with suggestions on how to generate the funds required.

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How much should the basic income be in your country? Not as difficult a question as it sounds. Just take your current expense in the lockdown month. That figure is very close to what you need for survival.

Ravi                                                                  

Corona Daily 478: Opposition to UBI

UBI faces strong opposition – usually by those who don’t require any basic income.

The First worry is the abuse of the grant. It will encourage bad behaviour and tempt the recipients to spend it on alcohol, tobacco or drugs.

A detailed worldwide study found this concern to be unfounded. In most countries, this income was used for survival needs rather than temptation goods. Only in Peru, the research found a few instances of people buying roasted chicken or chocolates on the day they received money.

Secondly, it is argued basic income will make people lazy, and they would rather be idlers than work.

Again, no research supports this. In Canada, a study found only two groups who worked less as a result of getting a basic monthly income. New mothers were able to pay more attention to their babies. And working teenagers spent more time on education.  

If this is survival income, most people supplement it with a job. When a person must work for survival, his bargaining power with the employer is zero. He is forced to do jobs he doesn’t like, at wages he is unsatisfied with. This is a classic way of enslaving a poor person. Basic income improves his bargaining position, allowing him to look for a job of his choice. Many of us don’t realise this point, because we didn’t look for jobs when starving.

Thirdly, a worry population would grow further because citizens are getting guaranteed money. Well, without the existence of any UBI, we have added nearly 7 billion in the last 200 years. This concern is as meaningless as the concern about addiction. Most of those consuming temptation goods don’t get any basic income from the state.

Fourthly, critics point to Switzerland rejecting UBI in a referendum, and the end of the UBI experiment in Finland.

Switzerland is a rich country with strong social security. UBI was rejected mainly because the Swiss felt UBI replacing their current benefits or tax exemptions may make matters worse. In Finland, the pilot experiment was planned for just two years. Full analysis is expected or was expected in 2020, but the initial findings were positive.

Finally, the cost. In 2016, 60% of American economists disagreed UBI would be a better replacement for the current welfare measures (like in Switzerland).

Economists often express views as economists, not moralists.  In 2012, a set of eminent Chicago economists strongly defended price gouging, hiking prices and profits in disaster times (such as unreasonable prices for masks or sanitizers in some places).

But the concern about UBI being expensive is valid. It is very expensive. But so are nuclear weapons. So are the wars on Iraq and Syria. So is the beautiful wall to keep the Mexicans away.

Tomorrow, I will talk about how expensive it is, and how to finance it.

Ravi

Corona Daily 479: Why UBI

Guaranteeing a specified monthly income to everyone is justified on several grounds. I will mention only five.

The nature of work has been changing since the industrial revolution. Wherever possible, a man will be replaced by a machine or an app. Coronavirus will give an exponential boost to that process. China has started by opening its highly automated factories before others that require human intervention. Others are rushing to ‘employ’ robots on a large scale. Since the pandemic has hit the developed world hard, robotisation and AI will be a key to reopen business. By the time the pandemic ends, a few million of the current unemployed will become unemployable.  The poorest of the world usually lack the education to readapt to new work that evolves. Their ever-increasing number can survive only with an unconditional basic income.

UBI protects women and girls in two ways. The poorest girls and women put in 12.5 billion hours every day of care work without being paid. This phenomenon has been allowed to continue for ever. Secondly, many women are subjected to domestic abuse. That currently is the largest crime in lockdown times, even in developed nations. Most women tolerate the abuse for want of income or financial security.

Paying unconditional income expands the middle class, and is good for the economy. The incomes of the rich grow at a much faster rate than those of the poor. (Saez and Piketty show that between 1979 and 2014, in the income pie the bottom half went down from 20% to 13%. Share of the top 1% went from 11% to 20 %.)  

UBI is administratively an efficient system. Most developed countries have several welfare measures, subsidies, student grants. The cost of administering each of them is significant. Income tax allows several deductions and exemptions. The minimum salary where tax slabs begin is nothing but a form of basic income for a working person. This multitude of benefits can be merged into UBI to create an efficient welfare system.

Finally, it saves the soul of the society. Arts and literature, classical music and dance, other performing arts which satisfy the soul, decline in a consumerist society. This was one of the few advantages of communism.

Basic income allows poets to write cheerful poems.

Ravi

Corona Daily 480: The Lottery of Birth

Inequality is extensively researched and reported, but rarely acted upon.

In 2002, Queen Elizabeth’s mother died at a 101 years, leaving her daughter an estate worth 50 million pounds. It included works of art, jewels, antiques and thoroughbred horses. The law would have required a British citizen to pay 20 million pounds as inheritance tax. But the Queen is above the law and is tax-exempt. Queen Elizabeth’s current annual package is 50 million pounds.

The economics textbooks we studied told us that capitalism rewards ability, enterprising spirit and hard work. I tried to work out which of these the Queen would fit under. She didn’t. She was merely born in the right palace.

It’s not only about the queen. Donald Trump and Mukesh Ambani, India’s richest man, have built on what their fathers started. For that matter, each of us is an outcome of the family and the country we were born in. Warren Buffet calls it the ovarian lottery. And in most cases, our station in life remains largely unchanged.

Inheritance perpetuates inequality. India abolished estate duty in 1985, Russia in 2006. It exists in the USA, but 11.58 million USD worth of assets are totally exempt. An American child can inherit 11.58 million dollars, even if they were earned dishonestly. The current minimum federal wage in that country is 7.25 USD per hour. A poor American on minimum wage will need to work for 760 years, without spending a cent, to reach 11.58 million USD. 

You will find that the concept of giving a basic monthly income is usually questioned by those who live in a house their grandfather built, and run a business started by their father.

We accepted we are not all equal, as communism had propagated. But we didn’t know we can be so unequal. That the world’s 26 richest people should own as much as the world’s poorest 50%.

In a circus, the animal trainer feeds the animal after every trick performed. That’s both an incentive and a reward. The animal is fed just enough to be motivated, but not more lest it should refuse to obey. In today’s distorted world, most people are like those circus animals, ruled over by a few throwing minimum wages at them.

Yesterday, two miles north of my home in Mumbai, 2000 migrant workers gathered to protest defying orders, putting themselves at risk of getting infected. Most of them, taxi drivers, street vendors and others, have no money left for food. They have voting rights and freedom of expression, which are good things to have. But they can’t be eaten.

Hunger and thirst are so basic; satisfying them should be considered a human right. If the world learns how to satisfy this right, that could make a good change post crisis.

Ravi

Corona Daily 481: Mikhail Coronavirus

Universal basic income is a complex, controversial reform. It deserves a few articles by way of background and explanation.  

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The Soviet Union sent the first man, and before him the first dog, into space. While the USSR was conquering space, Soviet citizens started their day on earth with dogfights, queuing up for bread and meat. Soviets focused on military power at the cost of consumers. Patriotic wars, May parades or Sputnik missions were found to be poor substitutes for food, human dignity and life without queues. Communism as practised by the Soviet Union was not sustainable.

American capitalism, on the other hand, focused on the consumer. So much that America has more cars than people who can drive them and more guns than people who can fire them. America focused on building the strongest nuclear shields, state-of-the-art atom bombs, and now faces fatal shortages of masks and ventilators. The first world has focused on consumerism and defence at the cost of climate and health.

In 1991, Communism duly collapsed. The world celebrated.

In 2020, Capitalism as currently practised, collapsed. Of course there is no formal announcement. There are no CNN-moments like the fall of the Berlin wall or Yeltsin standing on a tank. But history will note 2020 as the year when unsustainable practises of western economies crumbled.

A system that gradually decays needs a trigger for a collapse. Mikhail Gorbachev was that trigger for communism. He highlighted the flaws in the system. He launched an attack on the system. Gorbachev wanted to reform it, but the system had so decayed it collapsed. Though Russia subsequently went downhill due to politics, the Communist Economics never returned.

What Gorbachev did to Communism is now done by a small, invisible virus. It is travelling the world highlighting the flaws of the anti-climate economic system. Suddenly the mighty nuclear weapons are silent, wondering how to defend against a virus. The world has woken up to the fact that on-line white collars can’t run the world without off-line blue collars. 

It is premature to celebrate the demise of the current system. Neither is this the right time. However, there is no doubt that the demands made by the Coronavirus for a ‘Perestroika’ are not an ounce weaker than Gorbachev’s.

Ravi

Corona Daily 482: We Are All In This Together

We are all in this together, said Donald Trump. We are all in this together, said Boris Johnson. Different world leaders said this to their populations in their respective languages. Why have we never heard this phrase from them in the past?

When the wealth, even inherited wealth, of many went up by 28% because of the stock market boom in 2019, why did nobody say we are all in this together?

Just before the Corona crisis, Oxfam issued its annual report which now shows 2153 billionaires with more wealth than 4.6 billion people. 22 richest men have more wealth than all the women in Africa. And women’s unpaid care work is valued at 10.8 trillion USD. Valued but not paid. These reports with startling facts are issued every year. None of the billionaires has ever said: ‘we are all in this together.’

The poorest of the world, (even America has at least 40 million people below the poverty line), have negative wealth. They have debts, not savings. They work for a meal tomorrow or for a meal today. The only reason they are not called slaves is because they live in constitutional democracies.

How can a homeless ‘work from home’? How can fifty labourers sharing a slum-room keep social distance? How can people wash hands with soap for twenty seconds, when it’s a struggle to get a bucket of water?

Now they are locked down, their jobs taken away, wages taken away, but not their debts, and not their hunger. When from the podium somebody says: We are all in this together, it is understood we are not. Those speakers want to prevent food riots and political revolutions in which they or their political careers may get killed, that’s all. They wish to comfort those who may eventually cause either.

Why should such slogans appear only in times of crisis? Why can’t we all be together in times of prosperity? Why not make provisions to prevent food riots and revolutions?

One good thing that will come out of this pandemic is to compel nations to implement the concept of the ‘Universal Basic Income’. More about that tomorrow.

Ravi

Corona Daily 483: The Hand-Face Distancing

I haven’t touched my face in weeks. I miss it. – Donald Trump  

Rubbing, scratching, caressing a beard, hair flicking, nose picking, chin stroking, pulling at your lip. Locked up in the house, social distancing is easier than keeping your hand away from your face.

Researchers are freaks. No subject is taboo for them. Spontaneous Facial Self-Touches (sFST) is the subject matter of several scientific studies. Ordinary monkeys rarely touch their face. But Gorillas, Orangutans and Chimpanzees touch faces as often as humans.  

A 2015 Australian study observed a group of medical students. Each student touched his/her face 23 times per hour. 36% touched their mouth, 31% nose, 27% eyes, and 6% a combination. Another study observed 249 randomly selected individuals in Brazil and Washington. In Brazil, the subjects touched common surfaces (like door handles or lift knobs) and then touched mouth/nose 3.3 times per hour, in Washington 3.6 times/hour.

The main reason seems to be emotional. You may have seen nervous speakers taking their hands to their face. Facial self-touches are soothing, a bit like a child’s thumb sucking. One study says the soothing mechanism involves some type of sensory stimulation of skin. Touch releases a hormone called Oxytocin. This allows us to reduce or avoid tension and stress. One study found people were prone to touch their face more often while lying.

How does one stop a spontaneous action? This month, several suggestions have sprung up: wear woolly gloves, wear masks, sit on your palms, scratch your elbows when you feel like scratching your nose. There is even a website that uses your webcam to train you how not to touch your face.

Handwashing and minimizing hand-face touching is recommended as a hygienic practice. In current times, it may make a difference between life and death.

In any case, this is a good habit to develop. Surely we don’t wish to contract the Coronavirus. But we would be happy to avoid even the flu if it can be done with water, soap, and keeping our face away from our hands.

Ravi

Corona Daily 484: In Search of a Vaccine

Across the USA, chickens lay millions of life-saving eggs at secret poultries. The eggs are so precious, they have bodyguards. For the past 80 years, most influenza vaccines rely on chicken eggs. The selected flu virus is injected into a hen’s egg, where it incubates and replicates just like it does inside a human host. Scientists then harvest fluid containing the virus from the egg. The virus is then purified to create the virus antigen, the critical element to create a vaccine. During the latest flu season, the USA used 140 million eggs, each egg producing one vaccine. But the Coronavirus doesn’t replicate inside an egg. This method won’t work.

For the novel Coronavirus, till date 116 treatments and 79 vaccine programmes have been proposed. Vaccine making is not a profitable business, so big pharma companies are not in the game. Bill Gates has invested billions to fund seven different vaccines, in the hope that one or two may work.

The race is frantic. Moderna, a ten year old biotech company, has gone from decoding the virus DNA to initial human trial in a record 63 days. (The injected woman had to sign a 45-page waiver). Two factors have helped vaccine creators. The Chinese sequenced the genetic material of the virus speedily, and shared the sequence with the world in early January. Secondly, SARS and MERS vaccines never materialized, but much work was done on their development. Now some of it is revisited to see if tweaking may help create something against the current virus.

Regulatory and approval process may be cut short in a crisis. However, following is the shortest flowchart to create a vaccine.

Sequencing the virus genes------ creating a vaccine ------ initial trial----- animal testing------ large scale trials ------ develop a proven vaccine----- manufacture it----- ship it----- inject it into people.

It is not a smooth process. Anything pumped into the arms of a billion people must ensure it doesn’t harm healthy people. During the 2009-10 swine flu pandemic, Pandemrix vaccine (GlaxoSmithKline) was administered to six million people. It had to be withdrawn from the market after thousands complained of Narcolepsy, a disorder causing the person to sleep many times a day.

The best case scenario, therefore, is a vaccine in the second half of 2021. Whenever it happens, one thing is certain. The world will look at vaccine-making far more seriously in the future.

Ravi