The Road to Utopia

Did you know that Richard Nixon almost introduced a basic income policy in 1969? In what he described as ‘the most significant piece of social legislation in our nation’s history,’ Nixon proposed guaranteeing all US citizens a modest amount of money with no strings attached. The Family Assistance Plan, which passed the House of Representatives before foundering in the Senate (in part because the left wing of the Democratic Party thought it wasn’t sufficiently generous), would have guaranteed a family of four $1,600 a year (roughly $10,000 in today’s money).

After this defeat, Nixon – egged on, bizarrely enough, by his advisor Milton Friedman, the doyen of neoliberal economists – didn’t give up on the policy. He presented a slightly tweaked proposal to Congress in 1970 – which again died a death in the Senate.

nixon friedman

Friedman (left) and Nixon: unlikely champions of universal basic income

Even after Watergate, plans for an income floor continued to float around Washington until 1978, when a statistical error finally put the kibosh on the whole thing. Data from a small-scale experiment in Seattle seemed to show that the introduction of a basic income had led to a 50% increase in the divorce rate. In an America in the grip of a conservative Christian revival, that was enough to seal the policy’s fate.

A decade later, researchers took another look at the data from the Seattle trial and discovered that an error had been made. Free money had in fact made no difference whatsoever to the divorce rate. But by then the ship had sailed. Reagan was in the White House and the ‘War on Poverty’ was a distant memory.

It’s an intriguing “what if…?” to ponder. Had Nixon and Friedman got their way, would the idea of the state handing out free money to its citizens now be commonplace in the US and elsewhere? What would the consequences have been for society – and for the economy? We live in an age of stagnant productivity anyway, but would it be a whole lot worse if we’d grown used to receiving a basic income from the state?

utopia for realistsRutger Bregman, in his brilliant new book, Utopia for Realists, gives a pretty emphatic answer to the last of these questions. The impact on productivity of a basic income policy – and also of a shorter working week, which is another of the ‘utopian’ policies Bregman espouses – has repeatedly been shown to be minimal. A trial in America in the 1960s, in which 8,500 people were provided with a basic income, found that, on average, it led to a reduction in paid work per family of 9%. But, once again, when researchers re-visited the data, they concluded that this was a significant over-estimate.

As for a shorter working week, that’s been trialled too – albeit inadvertently. When, in the face of relentless strike action, Edward Heath’s government implemented a three-day working week in January 1974, pundits predicted a catastrophic fall in output. The gloomiest forecasts said it might drop by as much as 50%. Once the dust had settled and the five-day workweek had been reinstated, officials totted up UK plc’s losses. A 40% reduction in working hours had led to a mere 6% of lost output.

Giving people more money and more leisure, it turns out, does not make them significantly less productive. Nor does it engender dependency. In fact, Bregman convincingly argues that when it comes to transferring money to poor people through the welfare state, it’s not the money that makes people dependent, it’s the strings attached to it. Having to constantly prove your inability to fend for yourself leads to a vicious downward spiral: it incentivises failure and helplessness. Much better, he argues, to abolish the Victorian distinction between the deserving and the undeserving poor – which, whether we like it or not, still informs most welfare policy – and simply guarantee everyone a basic income.

I know what you’re thinking. Poor people would just spend the free money on booze, drugs and crappy junk food, right? Wrong again. Bregman turns to psychology in order to address the question of why poor people make bad life choices. The answer, he concludes, is that we, as humans, have limited mental bandwidth. If too much of our mental bandwidth is being used up on questions like “where’s my next meal coming from?” or “how am I going to make it through to my next payday?”, that impairs our ability to think about the long term. Being poor, in other words, makes you do dumb things, not the other way round.

Though his views on basic income have garnered the most attention, Bregman covers an impressive range of other policy ideas. He argues for shifting the burden of taxation from labour to capital. Like Rana Foroohar in her 2016 book Makers and Takers, he argues for making a distinction between forms of enterprise that create (social) value and those that destroy it – and advocates using the tax system to promote the former and punish the latter. For example, a simple transactions tax would make high-frequency trading – an activity that he sees as totally socially useless – much less profitable. Externalities like carbon dioxide emissions would also be taxed in Bregman’s utopia.

Finally – and perhaps this is the greatest heresy of all in Bregman’s book (I mean that as a compliment) – he argues for totally open borders. Not just within a relatively socially and economically homogenous continent like Europe or North America, but globally. Indeed, he provocatively labels the current system of closed – or at least heavily regulated – borders as ‘apartheid on a global scale.’

He sensibly acknowledges that opening all borders is not a policy that could or should be enacted overnight. But it’s salutary to remember just how recent a phenomenon the regulation of cross-border migration is. Passports were a twentieth-century invention, necessitated by the outbreak of World War I (governments suddenly took a serious interest in controlling their borders because they wanted to keep spies out and potential recruits in). Three-quarters of all border walls and fences in the world today have been built since 2000.

***

I didn’t really expect to like Utopia for Realists. I appreciated the ‘for realists’ part, but even so, it sounded a bit too fluffy and, well, you know, utopian for my liking. But as soon as I began to read, I was completely engrossed – and, by the end, I was totally won over by Bregman’s vision of the promised land. A shorter working week was an easy sell – I’ve been a fan of the idea for years. But, prior to reading the book, I was more than a little sceptical about universal basic income.

Now, on the strength of Bregman’s argument, I’ve changed my mind. Needless to say, there are still many practical questions about the implementation of basic income to be addressed. What’s the right level to set it at? Should it be the same everywhere – or weighted to take into account regional differences in the cost of living? What about children? Do they get a basic income too? And how about newcomers? At what point do they qualify? (Concern on this last point seems to have been a significant factor in the Swiss voting to reject a universal basic income in a referendum last year. Many voters worried that being a first-mover on UBI would make Switzerland a magnet for immigrants – a fear that Bregman’s proposal to do away with borders entirely would only compound.)

So there’s work still to be done on the finer details, but of the overall direction I am completely convinced. And the point of Bregman’s book isn’t to offer up a fully worked out policy programme that could be implemented tomorrow; it’s to encourage us to raise our sights and imagine what a better future would actually look like. ‘The real crisis of our times, of my generation,’ he writes, ‘is not that we don’t have it good, or even that we might be worse off later on… [it’s] that we can’t come up with anything better.’

Why does this failure of imagination matter? Because, as Oscar Wilde wrote, ‘progress is the realisation of Utopias.’ Ideas can and do change the world. Just look at history.

For inspiration, Bregman points us in the direction of rather an unlikely model: the triumph of neoliberalism. It started with just forty people – a group of intellectuals – in a small village in Switzerland. Their leader was an uncharismatic, bespectacled Austrian economist. A man who’d spent much of his professional life trying to challenge Keynesian ideas – and who’d been roundly beaten at every turn. Appropriately enough, it was April Fools’ Day, 1947.

friedrich-von-hayek-2

Friedrich Hayek: founder of the Mont Pelerin Society

At the time, though Keynes himself had died the previous year, Keynesian ideas – redistributive welfare policies, state intervention in the economy to stimulate demand during recessions, strict limits on transnational flows of capital – were triumphant across the Western world. That first Mont Pèlerin meeting was the epitome of pissing into the wind.

And yet, the bespectacled Austrian economist, Friedrich Hayek, and his ‘naïve provincial’ (those are his own words) American sidekick, Milton Friedman, would have the last laugh. They spent 25 years pursuing their alternative vision of society in the intellectual wilderness, but when the crisis came in the mid-1970s, they were ready.

The oil “shock” of 1973 – the big oil producers in the Middle East hiked their prices up by 70% and imposed an embargo on the US in retaliation for its support of Israel in the Yom Kippur War – triggered a recession, accompanied by spiralling inflation. This was a combination the Keynesians had never foreseen. Into the intellectual void stepped the neoliberals – chief among them, Friedman himself.

The rest, as they say, is history. Friedman’s doctrine that ‘a corporation’s responsibility is to make as much money for [its] stockholders as possible’ rapidly took on the status of gospel amongst the leaders of American capitalism. By the end of the decade, Margaret Thatcher, a committed Hayekian, was in Downing Street. (In a Conservative Party policy meeting in the late 70s, Thatcher interrupted one of her colleagues who was busy espousing a ‘middle way’ approach, by pulling a copy of Hayek’s The Constitution of Liberty out of her bag and sternly declaring: “this is what we believe.”) And a year later, Ronald Reagan swept to victory in the US presidential election. (His famous quip – ‘the nine most terrifying words in the English language are: I’m from the government and I’m here to help’ – is perhaps the pithiest expression of neoliberal doctrine ever coined.)

The deficiencies of neoliberalism have been apparent for a long time – and in 2008 it failed even on its own terms. So why has it not been overthrown? ‘When we suddenly found ourselves facing the collapse of the entire banking sector [in 2008],’ writes Bregman, ‘there were no real alternatives available; all we could do was keep plodding down the same path.’

We had failed to lay the intellectual groundwork for a counter-revolution. We knew we didn’t like the existing order, but we hadn’t really thought through the kind of society we wanted to create in its place. We had no equivalent of the Mont Pèlerin Society to lead us into a different future.

We’ve wasted one crisis; we can’t afford to waste the next one too. Now is the time to start preparing. Perhaps one day in the future, the Prime Minister will pull a copy of Utopia for Realists from his/her bag, slam it down on the table and say: “this is what we believe.”

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One Response to The Road to Utopia

  1. Pingback: Breakthrough: inevitable or possible? - Atlas of the Future — Atlas of the Future

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